CB COMMERCIAL HOLDINGS INC, 424B4, 1996-11-26

CB COMMERCIAL HOLDINGS INC
424B4, 1996-11-26
REAL ESTATE

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<PAGE>

FILED PURSUANT TO RULE 424(b)(4)
REGISTRATION NO. 333-12757

PROSPECTUS
4,347,000 SHARES

[LOGO OF CB COMMERCIAL]

CB COMMERCIAL REAL ESTATE SERVICES GROUP, INC.

COMMON STOCK

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

All of the 4,347,000 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. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price of the Common
Stock. The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "CBCG."

The Company has been a reporting company under the Securities Exchange Act
of 1934, as amended, since 1989 as a result of an offering to its employees
registered under the Securities Act of 1933, as amended, of shares of its B-2
common stock, which are currently held of record by 1,467 holders. See "The
Recapitalization."

SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES.

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

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.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.................................. $20.00 $1.40 $18.60
- --------------------------------------------------------------------------------
Total(3)................................... $86,940,000 $6,085,800 $80,854,200
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
(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 $911,000.
(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 652,050 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
$99,981,000, $6,998,670 and $92,982,330, respectively. See "Underwriting."

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

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 December 2, 1996.

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

MERRILL LYNCH & CO. MONTGOMERY SECURITIES

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

The date of this Prospectus is November 25, 1996.
<PAGE>

[MAP OF U.S. WITH LOCATION OF OFFICES AND BAR CHART]

A bar graph which depicts 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 NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

2
<PAGE>

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 believes that it 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 107
locations. In addition, the Company has established exclusive alliances with
international commercial real estate service firms which have offices in an
additional 109 locations in 30 countries. These relationships are reciprocal
referral arrangements whereby the Company's clients who require services in a
geographic region serviced by its alliance partners must be referred by the
Company to its alliance partner operating in that region. Conversely, the
Company's alliance partners are obligated to refer their clients with
commercial real estate needs in the United States to the Company. These
alliances have not generated significant revenues to date. 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 (mortgage 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
mortgage origination businesses are the largest such businesses in the United
States, and that the Company is among the top ten providers of commercial
property management, investment management and advisory services and commercial
mortgage 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 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 and 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
almost 2,000 sales professionals in Property and User Services who have an
average tenure of more than eight 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;

. Experienced management team, the members of which have an average tenure of
more than 16 years with the Company and will own approximately 15.2% of the
Company's Common Stock (including exercisable stock options and shares held
through the Company's Deferred Compensation Plan) after the Offering; and

. Employees who will own more than 40% of the Company's Common Stock after the
Offering.

3
<PAGE>

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 deal flow in its 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 has moved the Company into a business area
which the Company believes has the potential for significant growth. In April
1995, the Company acquired Langdon Rieder Corporation ("Langdon Rieder"), a
nationally-known tenant representation firm, for $1.5 million in cash and a
deferred payment of $1.9 million payable over three years. The deferred payment
is subject to forfeiture under certain circumstances. The Langdon Rieder
acquisition strengthened the Company's ability to provide sophisticated tenant
representation services to its corporate clients. See "Business--Acquisitions."

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, which are summarized
below, create an opportunity for the Company to leverage its experience, multi-
discipline integrated services, multi-market presence and brand equity to its
competitive advantage--

. CHANGING COMPOSITION AND NEEDS OF INVESTORS AND OWNERS. Investors in and
owners of commercial real estate assets have become increasingly
institutional (including pension funds, life insurance companies, banks and
publicly-held REITs) with geographically diverse portfolios. With respect to
institutions other than REITs, 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. As REITs are
internally managed and therefore tend to outsource only their brokerage
services, their demand for the Company's other real estate services is
expected to be less than that of other institutional investors.

. CONTINUING OUTSOURCING TREND. The Company believes that the combination of
corporate managements' heightened awareness that corporate real estate
assets are a major component of corporate net worth and competitive
pressures encouraging a greater focus on core businesses has caused
corporations to downsize and, as a result, outsource their non-core
activities to third-parties. As a consequence, the demand for multi-
disciplined, multi-market professional real estate services firms that
provide integrated services capable of supplementing a corporate real estate
department has increased significantly.

. ONGOING INDUSTRY CONSOLIDATION. The Company also 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 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

4
<PAGE>

markets by issuing commercial mortgage-backed securities ("CMBS") in order
to securitize their portfolios and avoid holding mortgage loans for the
long-term, resulting in increasing liquidity in the real estate markets.
The Company's access to real estate transaction deal flow and national
mortgage origination capabilities enable it to benefit from this expansion
of the CMBS market which creates demand for mortgage originations.

. 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 leasing and sale activity in many 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.

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 leasing and sale
of office space, industrial buildings, retail properties, multifamily
residential properties and unimproved land. Brokerage employs approximately
1,640 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 $4.0 billion in
1995, the Company believes that it is one of the largest providers of
investment properties sales services in the United States.

Corporate Services. Corporate services, which generally 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, 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.

5
<PAGE>

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. The Company was recently ranked the eighth largest property management
firm in the United States by National Real Estate Investor's 1996 Annual Survey
based on square footage under management during 1995. As of September 30, 1996,
the Company managed 792 properties aggregating approximately 104 million square
feet.

Real Estate Market Research. The Company provides its research and
forecasting services to its other businesses 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 (mortgage 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 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 approximately
$2.3 billion, $2.0 billion and $1.1 billion of mortgage loans in 1995, 1994 and
1993, respectively. As part of these origination activities, the Company
originates mortgages through special conduit arrangements with affiliates of
Merrill Lynch, Citicorp, and Lehman Brothers which permit it to service the
mortgage loans that it originates and is currently negotiating a similar
arrangement with an affiliate of NationsBank. In addition, the Company is a
major mortgage originator for insurance companies having originated, on a
combined basis, mortgage loans in the names of the insurance companies valued
at approximately $1.6 billion in 1995, of which it serviced $891.4 million. As
of December 31, 1995, 1994 and 1993, the Company, on a combined basis, serviced
mortgage loan portfolios of approximately $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 independent commercial mortgage
originator in the United States (originating mortgage loans for others, as
opposed to originating mortgage loans for its own account). As of December 31,
1995, the Company, on a combined basis, was the eighth largest commercial
mortgage loan servicer in the United States. The Company believes it will have
a significant competitive advantage in the commercial mortgage 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 100 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 $3.7 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
September 30, 1996, the

6
<PAGE>

Company represented more than 180 investors in 13 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
approximately 50% of its professionals holding the Member Appraisal Institute
("MAI") professional designation. Valuation and appraisal services operates
nationally through 21 regional offices, and its clients are generally portfolio
owners, both corporate and institutional. The Company believes it is among the
leading commercial real estate appraisal firms in the United States.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Compa- 4,347,000 shares(1)
ny................................
Common Stock to be outstanding af- 13,258,091 shares(1)(2)
ter the Offering..................
Use of proceeds.................... The net proceeds from the Offering will be
used 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.
Any remaining net proceeds will be used for
general corporate purposes, including to
fund acquisitions. See "Use of Proceeds."
Listing............................ The Common Stock has been approved for
listing on the Nasdaq National Market under
the symbol "CBCG."
</TABLE>
- --------
(1) Does not include up to 652,050 shares subject to an over-allotment option
granted to the Underwriters by the Company. See "Underwriting."
(2) Excludes (i) 1,046,890 shares issuable upon exercise of stock options under
the Company's stock option plans as of September 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) 4,000,000
shares of Preferred Stock convertible into a lesser number of shares of
Common Stock at the option of the holder after the Offering, which number
will not exceed 3,120,000 (assuming there are no dilutive issuances
requiring adjustment under the Certificates of Designation for such
Preferred Stock). Includes 436,364 shares of Common Stock issuable upon
conversion of the 800,000 shares of the Company's Class C-1 common stock.
See "Capitalization" and "Description of Capital Stock--Preferred Stock"
and "--The Recapitalization."

7
<PAGE>

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 nine month periods ended September 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 is affected by the Westmark acquisition
completed in June 1995 and the L.J. Melody acquisition completed in July 1996.
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 and net income 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 nine months ended September 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
Offering and the Recapitalization had occurred as of September 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.

8
<PAGE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------
1996 1996 1996 1995
----------- ----------- ---------- ----------
PRO FORMA
------------------------
ACQUISITION
ACQUISITION AND
ONLY OFFERING
----------- -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS
DATA:
Revenue......... $ 394,280 $ 394,280 $ 390,863 $ 324,890
Costs and
expenses:
Commissions,
fees and other
incentives..... 198,240 198,240 195,465 167,569
Operating,
administrative
and other...... 160,741 160,741 159,196 134,839
Depreciation and
amortization (1). 10,267 10,267 9,749 8,173
Non-recurring
charges........ -- -- -- --
---------- ---------- ---------- ----------
Operating income
(loss)......... 25,032 25,032 26,453 14,309
Interest income. 1,180 1,180 1,035 1,228
Interest
expense........ 18,099 14,166 17,883 16,944
---------- ---------- ---------- ----------
Income (loss)
before
provision
(benefit) for
income tax..... 8,113 12,046 9,605 (1,407)
Provision for
income tax..... 4,323 5,896 4,610 238
Reduction of
valuation
allowances..... (40,400) (40,400) (40,400) --
---------- ---------- ---------- ----------
Net provision
(benefit) for
income tax (2). (36,077) (34,504) (35,790) 238
---------- ---------- ---------- ----------
Net income
(loss)......... $ 44,190 $ 46,550 $ 45,395 $ (1,645)
========== ========== ========== ==========
Net income
(loss) per
common and
common
equivalent
share
outstanding.... $ 3.20 $ 3.35 $ 3.28 $ (0.14)
Number of shares
used in
computing per
share
amounts (3).... 13,820,721 13,004,083 13,820,721 11,858,116
OTHER DATA:
EBITDA (4)...... $ 36,202 $ 22,482
Ratio of
earnings to
fixed
charges (5).... 1.42 --
Deficiency of
earnings to
fixed charges
(5)............ -- $ (1,407)
Net cash
provided by
(used in)
operating
activities..... $ 24,170 $ 551
Net cash (used
in) investing
activities..... $ (9,517) $ (21,960)
Net cash
provided by
(used in)
financing
activities..... $ (12,795) $ 3,481
Investments
under
management at
period end (6). $3,730,226 $3,918,825
Loans originated
(7)............ $1,715,467 $ 603,097
Loans serviced
(7)............ $7,498,905 $3,671,532
Total
consideration
of properties
sold ......... $6,393,389 $4,517,550
Number of sale
transactions... 2,758 2,491
Number of lease
transactions... 12,521 12,733
---------- ----------
Total sale and
lease
transactions... 15,279 15,224
========== ==========
Square feet
under
management (8). 103,754 95,406

<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------
1995 1995 1995 1994 1993 1992 1991
------------ ------------ ---------- ---------- ---------- ---------- ----------
PRO FORMA
-------------------------
ACQUISITIONS
ACQUISITIONS AND
ONLY OFFERING
------------ ------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS
DATA:
Revenue......... $ 489,684 $ 489,684 $ 468,460 $ 428,988 $ 392,037 $ 360,223 $ 338,119
Costs and
expenses:
Commissions,
fees and other
incentives..... 245,564 245,564 239,018 225,085 206,070 187,582 175,142
Operating,
administrative
and other...... 200,341 200,341 187,968 170,234 160,073 152,402 159,791
Depreciation and
amortization (1). 14,502 14,502 11,631 8,091 49,606 45,855 51,946
Non-recurring
charges........ -- -- -- -- -- 4,500 12,030
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income
(loss)......... 29,277 29,277 29,843 25,578 (23,712) (30,116) (60,790)
Interest income. 1,926 1,926 1,674 1,109 915 1,083 1,349
Interest
expense........ 26,080 20,837 23,267 17,362 14,240 15,516 24,805
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss)
before
provision
(benefit) for
income tax..... 5,123 10,366 8,250 9,325 (37,037) (44,549) (84,246)
Provision for
income tax..... 220 2,317 841 152 112 12 135
Reduction of
valuation
allowances..... -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net provision
(benefit) for
income tax (2). 220 2,317 841 152 112 12 135
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income
(loss)......... $ 4,903 $ 8,049 $ 7,409 $ 9,173 $ (37,149) $ (44,561) $ (84,381)
========== ========== ========== ========== ========== ========== ==========
Net income
(loss) per
common and
common
equivalent
share
outstanding.... $ 0.36 $ 0.32 $ 0.55 $ 0.69 $ (3.23) $ (3.89) $ (7.42)
Number of shares
used in
computing per
share
amounts (3).... 13,540,541 12,723,903 13,540,541 13,305,118 11,504,644 11,445,377 11,348,088
OTHER DATA:
EBITDA (4)...... $ 41,474 $ 33,669 $ 25,894 $ 15,739 $ (8,844)
Ratio of
earnings to
fixed
charges (5).... 1.28 1.40 -- -- --
Deficiency of
earnings to
fixed charges
(5)............ -- -- $ (37,037) $ (44,549) $ (84,246)
Net cash
provided by
(used in)
operating
activities..... $ 30,632 $ 31,418 $ 19,609 $ 10,911 $ (25,307)
Net cash (used
in) investing
activities..... $ (24,888) $ (3,865) $ (5,629) $ (4,821) $ (3,715)
Net cash
provided by
(used in)
financing
activities..... $ (11,469) $ (4,923) $ (14,662) $ (2,157) $ 16,012
Investments
under
management at
period end (6). $3,901,727 $ 879,809 $ 760,554 $ 883,761 $ 776,010
Loans originated
(7)............ $ 989,872 $ 874,159 $ 613,071 $ 458,792 $ 135,022
Loans serviced
(7)............ $3,779,069 $3,578,962 $3,140,635 $3,787,941 $3,830,502
Total
consideration
of properties
sold ......... $6,549,861 $6,521,451 $4,995,234 $4,478,472 $3,986,576
Number of sale
transactions... 3,503 3,693 3,249 3,042 2,590
Number of lease
transactions... 17,476 17,930 18,338 17,909 17,431
---------- ---------- ---------- ---------- ----------
Total sale and
lease
transactions... 20,979 21,623 21,587 20,951 20,021
========== ========== ========== ========== ==========
Square feet
under
management (8). 105,356 92,311 76,065 70,707 71,156

</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, AS OF DECEMBER 31,
------------------------------- ----------------------------------------------------
1996 1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- --------- --------
PRO FORMA
OFFERING
---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equiva-
lents.................. $ 24,903 $ 24,903 $ 10,842 $ 23,045 $ 28,770 $ 6,140 $ 6,822 $ 2,889
Total assets............ 246,597 232,575 180,038 190,954 150,100 128,914 173,274 212,249
Total long-term debt.... 152,032 231,986 252,468 250,142 233,571 239,853 239,473 240,401
Total liabilities....... 259,515 339,469 344,184 345,642 314,648 303,774 311,630 306,123
Total stockholders'
equity (deficit)....... (12,918) (106,894) (164,146) (154,688) (164,548) (174,860) (138,356) (93,874)
</TABLE>
(footnotes on following page)

9
<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) Net provision (benefit) for income tax on a consolidated basis for the nine
months ended September 30, 1996 was a benefit of ($35.8) million, a change
of $36.0 million from a $0.2 million provision for the nine months ended
September 30, 1995. During the quarter ended September 30, 1996, the
Company projected, on a more likely than not basis, that a portion of its
net operating loss carryforwards ("NOLs") would be realized in current and
future periods and, accordingly, reduced existing deferred tax asset
valuation allowances by $45.7 million, of which $5.3 million has been
allocated to the purchase price of L.J. Melody, based on its estimated
future potential to generate taxable income, and the remaining $40.4
million has been recorded as a tax benefit (a reduction in income taxes
provision). With the recognition of the deferred tax asset, current and
future provisions for income tax will be recorded at the full effective tax
rate. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Net Operating Losses."
(3) Includes the dilutive effect of 1,046,890 shares issuable upon exercise of
stock options outstanding as of September 30, 1996 under the Company's
stock option plans. Acquisitions and offering 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 436,364 shares of Common Stock issuable
upon conversion of the 800,000 shares of the Company's Class C-1 common
stock. 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, consisting of depreciation and the amortization of intangible
assets relating to acquisitions. Management believes that the presentation
of EBITDA will enhance a reader's understanding of the Company's operating
performance and ability to service debt as it provides a measure of cash
generated that can be used by the Company to service its debt and for other
required or discretionary purposes. Management has used EBITDA as one of
the primary measures of operating performance in evaluating its recent
acquisitions. Net cash available to the Company for discretionary purposes
represents remaining cash, after debt service and other cash requirements,
such as capital expenditures are deducted from EBITDA. EBITDA should not be
considered as an alternative either (i) to operating income (determined in
accordance with generally accepted accounting principles ("GAAP")) or (ii)
operating cash flow (determined in accordance with GAAP).
(5) The ratio of earnings to fixed charges represents earnings before income
taxes and fixed charges divided by fixed charges. Fixed charges include
interest expense, one-third of rent expense relating to operating leases,
and, for purposes of the pro forma ratios, preferred stock dividends. For
purposes of this calculation preferred stock dividends are computed to
demonstrate earnings required on a pre-tax basis. Deficiency of earnings to
fixed charges is presented for periods when the Company's earnings were not
sufficient to cover its fixed charges requirement. Earnings included non-
cash depreciation and amortization charges of $9.7 million, $8.2 million,
$11.6 million, $8.1 million, $49.6 million, $45.9 million and $51.9 million
for the nine month periods ended September 30, 1996 and 1995, and for the
years ended December 31, 1995, 1994, 1993, 1992 and 1991, respectively.
(6) Investments under management represent the market value of the assets
managed as of the end of the period shown.
(7) Mortgage 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. The increase in mortgage loans originated and serviced primarily
reflects the acquisition of L.J. Melody on July 1, 1996.
(8) 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 period shown.

10
<PAGE>

THE RECAPITALIZATION

Immediately prior to the closing of 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"). The term Recapitalization as used herein
refers to the above-described changes in the Company's capital structure and
corporate governance, but does not include the Offering. After the
Recapitalization, the holders of the 1,000,000 shares of Series A-1 Preferred
Stock and the 2,000,000 shares of Series A-2 Preferred Stock will continue to
have two votes and one vote per share, respectively, for such shares on all
matters submitted to a vote of stockholders of the Company, and the 1,000,000
shares of Series A-3 Preferred Stock will continue to have no right to vote on
matters unless otherwise entitled by statute. The Company is effecting the
Recapitalization in order to simplify the Company's capital structure, whereas
the Offering is being effected in order to enable the Company to pay down a
portion of its outstanding secured debt and help to provide liquidity to the
Company's stockholders. See "Description of Capital Stock--Preferred Stock" and
"--The Recapitalization."

RECENT LITIGATION

In August 1993, a former commissioned salesperson of the Company filed a
lawsuit against the Company in the Superior Court of New Jersey, Bergen County,
alleging gender discrimination and wrongful termination by the Company. On
November 20, 1996 a jury returned a verdict against the Company, awarding $6.5
million in general and punitive damages to the plaintiff. The Company has been
advised by its in-house counsel that it has grounds to file motions for a new
trial and a reversal of the verdict and, if these motions are not granted, to
pursue an appeal of the verdict. Included in the Company's September 30, 1996
financial statements is an accrual of $800,000 with respect to this case. This
accrual was initially established at $250,000 in 1994 and increased to $800,000
in 1995 and represented the Company's estimate of its loss exposure for this
matter based on its assessment and analysis as of those dates. As a result of
the verdict and the Company's intention to file such motions or pursue such
appeal, management is in the early stages of gathering information to reassess
its estimate of loss exposure. At this early stage of reassessment, management
cannot make a reasonable estimate of the ultimate loss amount, if any, other
than to estimate that the loss exposure as a result of the damage award ranges
from no loss to a maximum of $6.5 million. At $6.5 million the loss could have
a material impact on the Company's 1996 consolidated financial statements.
Based on available cash and anticipated cash flows, the Company believes that
such a charge would not have an impact on the Company's ability to carry on its
operations.

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 and
expectations as to levels of expenditures, 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.

11
<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 sale and lease revenue of $382.4 million 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 the geographic concentration in California, any negative
performance of the commercial real estate markets and the local economies in
various areas within California could materially adversely 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 and decreased investment advisory
fees 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."

12
<PAGE>

RISKS INHERENT IN ACQUISITION GROWTH STRATEGY

Lack of Availability of Acquisition Candidates

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 (tenant advisory services). The Company expects to continue
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."

Difficulty of Integration

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. The Company believes that most acquisitions will have an
adverse impact on operating income and net income during the first six months
following the acquisition. 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.

Lack of Available Financing

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 and net income 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. In
the first quarter of the calendar year, the Company has historically sustained
a loss. 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 and net income 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."

13
<PAGE>

THE COMPANY'S LEVERAGE AND INTANGIBLE NATURE OF ITS ASSETS

Following the Offering, the Company will have indebtedness of approximately
$176.6 million as to which it will have annual principal and interest
obligations of more than $35.0 million which must be paid regardless of the
Company's operating cash flow. Any material downturn in the Company's revenue
or increase in its costs and expenses could result in the Company's being
unable to meet its debt obligations.

After giving effect to the Offering, the Company will have total assets of
$246.6 million on a pro forma basis, approximately $73.7 million of which will
be goodwill and other intangible assets which would not be realizable at their
carrying amounts in liquidation.

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. Of the approximately 13.26 million shares to be outstanding after the
Offering, approximately 6.8 million shares will be eligible for sale in the
public market immediately following the Offering. The Company's directors,
executive officers and certain other officers and certain stockholders,
including the trustee of the Company's 401(k) plan on behalf of the Company's
employee plan participants holding approximately 6.8 million shares of Common
Stock (including exercisable stock options and excluding shares held by the
Company as fiduciary on behalf of its Deferred Compensation Plan participants)
have agreed not to sell such shares or options convertible into such shares
for a period of 180 days after the date of this Prospectus without the prior
written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated. After
such 180 day period, approximately 5 million shares (including exercisable
stock options and excluding shares held by the Company as fiduciary on behalf
of its Deferred Compensation Plan participants) will become eligible for sale
without any volume restriction, and approximately 1.8 million shares will
become eligible 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. Thereafter, for an additional six months, such
holders are contractually bound to sell such shares within the volume
limitations of Rule 144 if the sale is 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 the Common Stock has been approved for listing on the Nasdaq National
Market, 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."

14
<PAGE>

RETAINED RISKS OF MORTGAGE LOANS SOLD

In connection with the Company's origination and sale of certain mortgage
loans in its mortgage banking business, the Company must make certain
representations and warranties concerning mortgages 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 sales,
including sales of undeveloped land (which would benefit the Company's
brokerage business). There can be no assurance that any such increase in the
sale of undeveloped land will coincide with any decline in the number of lease
transactions.

STOCK OWNERSHIP BY OFFICERS AND EMPLOYEES

Upon completion of this Offering, the present executive officers and
employees of the Company will beneficially own more than 40% of the
outstanding shares of Common Stock. These stockholders will have significant
influence over the election of directors of the Company. Additionally, such a
concentration of ownership may have the effect of delaying or preventing a
change in control of the Company and may allow significant influence and
control over board decisions and corporate actions. See "Management" and
"Principal Stockholders."

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

15
<PAGE>

"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 and expectations as to levels
of expenditures, 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.

16
<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 4,347,000 shares of Common
Stock offered by the Company hereby are estimated to be approximately $80.0
million ($92.1 million if the Underwriters' over-allotment option is exercised
in full), after deducting the estimated underwriting discount and offering
expenses payable by the Company.

The Company intends to use approximately $74.7 million of the net proceeds
($80.7 million if the Underwriter's over-allotment option is exercised in
full) to repay a portion of the Company's senior secured indebtedness and
$5.3 million ($9.0 million if the Underwriter's over-allotment option is
exercised in full) to pay accrued and unpaid interest on the Company's senior
subordinated indebtedness. If the Underwriters' over-allotment option is
exercised in full, the remaining $2.4 million of net proceeds 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 September 30, 1996, the balance of the Company's outstanding senior
secured indebtedness was $139.8 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 September 30, 1996, the
balance of the Company's senior subordinated indebtedness was $71.0 million
and bore interest at a rate of 5.875% 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."

17
<PAGE>

PRICE RANGE OF COMMON STOCK AND 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 holders of the Company's Series A-1, Series A-2 and
Series A-3 Preferred Stock (collectively, the "Preferred Stock") are entitled
to quarterly dividends of $0.25 per share. Until the Company has completed its
acquisition program, it does not intend to pay the dividend on the Preferred
Stock. As a consequence, such dividend will accumulate and bear interest which
will be paid on a current basis, and the Company will be prohibited from
voluntarily prepaying long-term debt until such accumulated dividend and
interest have been paid in full. 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."

Prior to the Offering, there has been no established public market for the
Company's Common Stock. As of September 30, 1996, there were 1,467 holders of
record of the Company's Class B-2 Common Stock, nine holders of record of the
Company's Class B-1 Common Stock, two holders of record of the Company's Class
C-R Common Stock, three holders of record of the Company's Class C-1 Common
Stock and two holders of record of the Company's Class J Common Stock. As of
September 30, 1996, there was one holder of record of the Company's Series A-1
Preferred Stock, two holders of record of the Company's Series A-2 Preferred
Stock and one holder of record of the Company's Series A-3 Preferred Stock.

18
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
September 30, 1996 and as adjusted to give effect to the Offering 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>
AS OF SEPTEMBER 30, 1996
------------------------------
ACTUAL AS ADJUSTED(1)
------------ ----------------
(IN THOUSANDS)
<S> <C> <C>
Long-term obligations, less current portion...... $ 231,986 $ 152,032
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 adjusted(2)................... 40 40
Common Stock, $.01 par value;--100,000,000
shares authorized; 10,074,729 shares issued
and outstanding; 13,258,091 shares issued and
outstanding, as adjusted...................... 101 133
Additional paid-in capital..................... 117,826 197,748
Notes receivable from sale of stock............ (5,109) (5,109)
Accumulated deficit............................ (219,752) (205,730)
------------ ------------
Total stockholders' equity (deficit)......... $ (106,894) $ (12,918)
------------ ------------
Total capitalization............................. $ 125,092 $ 139,114
============ ============
</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 800,000 shares of the Class C-1 common stock
of the Company into 436,364 shares of Common Stock 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 nine-month periods ended
September 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 is affected by the
Westmark acquisition completed in June 1995 and the L.J. Melody acquisition
completed in July 1996. 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 and net income 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 nine months ended
September 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 Offering and the Recapitalization had occurred as of September 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>

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) Net provision (benefit) for income tax on a consolidated basis for the
nine months ended September 30, 1996 was a benefit of ($35.8) million, a
change of $36.0 million from a $0.2 million provision for the nine months
ended September 30, 1995. During the quarter ended September 30, 1996, the
Company projected, on a more likely than not basis, that a portion of its
NOLs would be realized in current and future periods and, accordingly,
reduced existing deferred tax asset valuation allowances by $45.7 million,
of which $5.3 million has been allocated to the purchase price of L.J.
Melody, based on its estimated future potential to generate taxable
income, and the remaining $40.4 million has been recorded as a tax benefit
(a reduction in income taxes provision). With the recognition of the
deferred tax asset, current and future provisions for income tax will be
recorded at the full effective tax rate. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Net Operating
Losses."
(3) Includes the dilutive effect of 1,046,890 shares issuable upon exercise of
stock options outstanding as of September 30, 1996 under the Company's
stock option plans. Acquisitions and offering 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 436,364 shares of Common Stock issuable
upon conversion of the 800,000 shares of the Company's Class C-1 common
stock. 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, consisting of depreciation and the amortization of intangible
assets relating to acquisitions. Management believes that the presentation
of EBITDA will enhance a reader's understanding of the Company's operating
performance and ability to service debt as it provides a measure of cash
generated that can be used by the Company to service its debt and for
other required or discretionary purposes. Management has used EBITDA as
one of the primary measures of operating performance in evaluating its
recent acquisitions. Net cash available to the Company for discretionary
purposes represents remaining cash, after debt service and other cash
requirements, such as capital expenditures are deducted from EBITDA.
EBITDA should not be considered as an alternative either (i) to operating
income (determined in accordance with GAAP) or (ii) operating cash flow
(determined in accordance with GAAP).
(5) The ratio of earnings to fixed charges represents earnings before income
taxes and fixed charges divided by fixed charges. Fixed charges include
interest expense, one-third of rent expense relating to operating leases,
and, for purposes of the pro forma ratios, preferred stock dividends. For
purposes of this calculation preferred stock dividends is computed to
demonstrate earnings required on a pre-tax basis. Deficiency of earnings
to fixed charges is presented for periods when the Company's earnings were
not sufficient to cover its fixed charges requirement. Earnings included
non-cash depreciation and amortization charges of $9.7 million, $8.2
million, $11.6 million, $8.1 million, $49.6 million, $45.9 million and
$51.9 million for the nine month periods ended September 30, 1996 and
1995, and for the years ended December 31, 1995, 1994, 1993, 1992 and
1991, respectively.
(6) Investments under management represent the market value of the assets
managed as of the end of the period shown.
(7) Mortgage 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. The increase in mortgage loans originated and serviced primarily
reflects the acquisition of L.J. Melody on July 1, 1996.
(8) 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 period 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 (mortgage
loan origination and servicing) through L.J. Melody, investment management and
advisory services through Westmark, and valuation and appraisal services.

During the third quarter of 1996, the Company projected, on a more likely
than not basis, that a portion of its net operating loss carryforwards ("NOL")
would be realizable in future periods and, accordingly, reduced its existing
deferred tax asset valuation allowances by $45.7 million of which $5.3 million
has been allocated to the purchase price of L.J. Melody based on its estimated
future potential to generate taxable income, and the remaining $40.4 million
has been recorded as a tax benefit (a reduction in income tax provision). With
the recognition of deferred tax assets, the current and future period
provisions for income tax will be recorded at the full effective tax rate
excluding the impact of other adjustments, if any, to valuation allowances.
For the nine months ended September 30, 1996, a $4.6 million provision for
income taxes has been recorded. Net income for the nine months ended
September 30, 1996 was $45.4 million ($3.28 per share of common stock), which
includes the net benefit for income tax of $35.8 million. If the Company had
not recorded tax benefits related to projected future taxable income for the
nine months ended September 30, 1996, the Company's net income for such period
would have been $8.8 million ($0.64 per share of common stock). The provision
for income tax would have consisted of current and deferred state tax
provisions and provision for Federal alternative minimum tax. Provision for
regular Federal taxes would have been offset by reductions in valuation
allowances to the extent of such regular Federal taxes. The $40.4 million
recognized tax benefit has a material effect on the reported net income for
the nine months ended September 30, 1996. This $40.4 million tax benefit is a
non-recurring item and is unrelated to the Company's performance and should
not be used in evaluating the Company's prospects or future performance. An
additional $15.5 million reduction of valuation allowances and related tax
benefit is expected to be recorded in the fourth quarter of 1996 as a result
of the Offering and related reduction in future interest expense. See "Net
Operating Losses" below and "Unaudited Pro Forma Balance Sheet."

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 and net income 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 nine months ended September 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, diversity of services offered and
large client base tend to reduce the impact on annual revenue caused by
economic cycles. 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. 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

23
<PAGE>

and rationalizing personnel levels. Management's strategy is to pursue
acquisitions that are expected to be accretive to income before interest
expense and provision for amortization of goodwill and intangibles, if any,
resulting from the acquisitions, and to operating cash flows after all
integration costs.

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. 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.

Upon consummation of the Offering, the Company's total outstanding
indebtedness will be reduced from $256.5 million to $176.6 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 savings in interest expense to the Company of
approximately $5.2 million per year. See "The Company's Credit Agreements--
Senior Subordinated Debt Amendments." The $0.25 per share 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 acquisition program, it does not intend to pay
dividends on the Preferred Stock. As a consequence, such dividends will
accumulate and bear interest which will be paid on a current basis and the
Company will be prohibited from voluntarily prepaying long-term debt until
such accumulated dividend has been paid in full. 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>
NINE MONTHS ENDED SEPTEMBER 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................. $390,863 100.0 % $324,890 100.0 % $468,460 100.0% $428,988 100.0% $392,037 100.0 %
Costs and Expenses:
Commissions, fees and
other incentives...... 195,465 50.1 167,569 51.6 239,018 51.0 225,085 52.5 206,070 52.6
Operating,
administrative and
other................. 159,196 40.7 134,839 41.5 187,968 40.1 170,234 39.7 160,073 40.8
Depreciation and
amortization.......... 9,749 2.4 8,173 2.5 11,631 2.5 8,091 1.9 49,606 12.7
--------- ------ --------- ------ -------- ----- -------- ----- -------- -----
Operating income (loss). 26,453 6.8 14,309 4.4 29,843 6.4 25,578 5.9 (23,712) (6.1)
Interest income......... 1,035 0.2 1,228 0.3 1,674 0.4 1,109 0.3 915 0.2
Interest expense........ 17,883 4.5 16,944 5.2 23,267 5.0 17,362 4.0 14,240 3.6
--------- ------ --------- ------ -------- ----- -------- ----- -------- -----
Income (loss) before
provision (benefit) for
income tax............. 9,605 2.5 (1,407) (0.5) 8,250 1.8 9,325 2.2 (37,037) (9.5)
Provision for income
tax.................... 4,610 1.2 238 0.0 841 0.2 152 0.0 112 0.0
Reduction of valuation
allowances............. (40,400) (10.3) -- -- -- -- -- -- -- --
--------- ------ --------- ------ -------- ----- -------- ----- -------- -----
Net provision (benefit)
for income tax......... (35,790) (9.1) 238 0.0 841 0.2 152 0.0 112 0.0
--------- ------ --------- ------ -------- ----- -------- ----- -------- -----
Net income (loss)....... $ 45,395 11.6 % $ (1,645) (0.5)% $ 7,409 1.6% $ 9,173 2.2% $(37,149) (9.5)%
========= ====== ========= ====== ======== ===== ======== ===== ======== =====
</TABLE>

24
<PAGE>

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

NINE MONTHS ENDED SEPTEMBER 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.............. $227,756 66.7% $208,913 70.8% $294,290 69.6% $284,775 71.1% $270,063 74.2%
Investment Properties.. 80,406 23.5 58,520 19.9 87,576 20.7 81,394 20.4 67,388 18.5
Corporate Services..... 17,436 5.1 13,524 4.6 21,723 5.1 15,631 3.9 9,640 2.6
Property Management(1)
...................... 14,705 4.3 13,139 4.5 18,332 4.4 17,692 4.4 16,432 4.5
Real Estate Market
Research.............. 1,198 0.4 627 0.2 912 0.2 758 0.2 649 0.2
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
341,501 100.0 294,723 100.0 422,833 100.0 400,250 100.0 364,172 100.0
Costs and expenses:
Commissions, fees and
other incentives...... 183,951 53.9 159,475 54.1 227,387 53.8 215,506 53.8 196,425 53.9
Operating,
administrative and
other................. 130,764 38.3 116,085 39.4 160,415 37.9 152,141 38.0 143,394 39.4
Depreciation and
amortization.......... 6,830 2.0 6,617 2.2 8,889 2.1 7,485 1.9 44,268 12.2
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Operating income
(loss)................ $ 19,956 5.8% $ 12,546 4.3% $ 26,142 6.2% $ 25,118 6.3% $(19,915) (5.5)%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
INVESTOR SERVICES
Mortgage Banking
Revenue................ $ 14,035 100.0% $ 6,533 100.0% $ 10,417 100.0% $ 9,488 100.0% $ 7,218 100.0%
Costs and expenses:
Commissions, fees and
other
incentives............ 5,611 40.0 2,663 40.8 4,209 40.4 3,914 41.3 2,805 38.9
Operating,
administrative and
other................. 6,409 45.6 4,823 73.8 6,338 60.8 5,538 58.4 4,521 62.6
Depreciation and
amortization.......... 386 2.8 184 2.8 268 2.6 195 2.1 1,372 19.0
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Operating income....... $ 1,629 11.6% $ (1,137) (17.4)% $ (398) (3.8)% $ (159) (1.8)% $ (1,480) (20.5)%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
Investment Management
and Advisory
Revenue................ $ 22,239 100.0% $ 11,575 100.0% $ 18,610 100.0% $ 5,902 100.0% $ 5,091 100.0%
Costs and expenses:
Operating,
administrative and
other................. 16,351 73.5 8,451 73.0 13,745 73.9 5,580 94.5 5,103 100.2
Depreciation and
amortization.......... 2,207 9.9 1,126 9.7 2,148 11.5 149 2.5 1,245 24.5
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Operating income
(loss)................ $ 3,681 16.6% $ 1,998 17.3% $ 2,717 14.6% $ 173 3.0% $ (1,257) (24.7)%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
Valuation and Appraisal
Services
Revenue................ $ 13,088 100.0% $ 12,059 100.0% $ 16,600 100.0% $ 13,348 100.0% $ 15,556 100.0%
Costs and expenses:
Commissions, fees and
other incentives...... 5,903 45.1 5,431 45.1 7,422 44.7 5,665 42.4 6,840 44.0
Operating,
administrative and
other................. 5,672 43.3 5,480 45.4 7,470 45.0 6,975 52.3 7,055 45.4
Depreciation and
amortization.......... 326 2.5 246 2.0 326 2.0 262 2.0 2,721 17.5
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Operating income
(loss)................ $ 1,187 9.1% $ 902 7.5% $ 1,382 8.3% $ 446 3.3% $ (1,060) (6.9)%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
TOTAL INVESTOR SERVICES
Revenue................ $ 49,362 100.0% $ 30,167 100.0% $ 45,627 100.0% $ 28,738 100.0% $ 27,865 100.0%
Costs and expenses:
Commissions, fees and
other incentives...... 11,514 23.3 8,094 26.8 11,631 25.5 9,579 33.3 9,645 34.6
Operating,
administrative and
other................. 28,432 57.6 18,754 62.2 27,553 60.4 18,093 63.0 16,679 59.9
Depreciation and
amortization.......... 2,919 5.9 1,556 5.2 2,742 6.0 606 2.1 5,338 19.2
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Operating income
(loss)................ $ 6,497 13.2% $ 1,763 5.8% $ 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>

NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995

REVENUE on a consolidated basis for the nine months ended September 30, 1996
was $390.9 million, an increase of $66.0 million or 20.3% from $324.9 million
for the nine months ended September 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 many 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 $341.5 million for the nine months
ended September 30, 1996, an increase of $46.8 million or 15.9% from $294.7
million for the nine months ended September 30, 1995. Brokerage revenue
accounted for $227.8 million, an increase of $18.8 million or 9.0% from $208.9
million, and investment properties revenue accounted for $80.4 million, an
increase of $21.9 million or 37.4% from $58.5 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 nine months
ended September 30, 1996 compared to transactions closed during the nine
months ended September 30, 1995. Although the number of lease transactions
declined from the nine months ended September 30, 1995 to the nine months
ended September 30, 1996, the average commission amount for lease transactions
increased from the nine months ended September 30, 1995 to the nine months
ended September 30, 1996, resulting in an increase in revenue from leasing.
Property management revenue was $14.7 million, an increase of $1.6 million or
11.9% from $13.1 million and corporate services revenue was $17.4 million, an
increase of $3.9 million or 28.9% from $13.5 million.

Investor Services revenue was $49.4 million for the nine months ended
September 30, 1996, an increase of $19.2 million or 63.6% from $30.2 million
for the nine months ended September 30, 1995. This increase was primarily due
to an increase in investment management and advisory revenue to $22.2 million
from $11.6 million, resulting from the Westmark acquisition. Valuation and
appraisal services revenue accounted for $13.1 million, an increase of
$1.0 million or 8.5% from $12.1 million, and mortgage banking revenue was
$14.0 million, an increase of $7.5 million or 114.8% from $6.5 million,
primarily as a result of the Melody acquisition together with increased sales
and refinancing activity.

COMMISSIONS, FEES AND OTHER INCENTIVES on a consolidated basis for the nine
months ended September 30, 1996 were $195.5 million, an increase of $27.9
million or 16.6% from $167.6 million for the nine months ended September 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 51.6% to 50.0%. 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 53.0% for the nine months ended September 30, 1996 from
53.5% for the nine months ended September 30, 1995.
Property and User Services commissions, fees and other incentives were
$184.0 million for the nine months ended September 30, 1996, an increase of
$24.5 million or 15.3% from $159.5 million for the nine months ended
September 30, 1995 and a decrease as a percentage of revenue from 54.1% to
53.9%.
Investor Services commissions, fees and other incentives were $11.5 million
for the nine months ended September 30, 1996, an increase of $3.4 million or
42.3% from $8.1 million for the nine months ended September 30, 1995 and a
decrease as a percentage of revenue from 26.8% to 23.3%.

OPERATING, ADMINISTRATIVE AND OTHER on a consolidated basis for the nine
months ended September 30, 1996 was $159.2 million, an increase of $24.4
million or 18.1% from $134.8 million for the nine months ended September 30,
1995, and decreased as a percentage of revenue for such periods from 41.5% to
40.7%.
Property and User Services operating, administrative and other was $130.8
million for the nine months ended September 30, 1996, an increase of $14.7
million or 12.6% from $116.1 million for the nine months ended September 30,
1995. This increase was primarily associated with increased operating
activities.
Investor Services operating, administrative and other was $28.4 million for
the nine months ended September 30, 1996, an increase of $9.7 million or 51.6%
from $18.8 million for the nine months ended September 30, 1995, primarily
resulting from the Westmark acquisition.

26
<PAGE>

DEPRECIATION AND AMORTIZATION on a consolidated basis for the nine months
ended September 30, 1996 was $9.7 million, an increase of $1.5 million or
19.3% from $8.2 million for the nine months ended September 30, 1995,
resulting primarily from the Westmark and Melody acquisitions.
Property and User Services depreciation and amortization was $6.8 million
for the nine months ended September 30, 1996, an increase of $0.2 million or
3.2% from $6.6 million for the nine months ended September 30, 1995.
Investor Services depreciation and amortization was $2.9 million for the
nine months ended September 30, 1996, an increase of $1.4 million or 87.6%
from $1.6 million for the nine months ended September 30, 1995.

OPERATING INCOME on a consolidated basis for the nine months ended September
30, 1996 was $26.5 million, an increase of $12.2 million or 84.9% from $14.3
million for the nine months ended September 30, 1995. The increase in
operating income resulted from an increase in revenue of $66.0 million or
20.3% partially offset by a related increase in commission expense of
$27.9 million or 16.6%, a $24.4 million or 18.1% increase in operating
expenses and a $1.5 million or 19.3% increase in depreciation and amortization
as described above.
Property and User Services operating income was $20.0 million for the nine
months ended September 30, 1996, an increase of $7.4 million or 59.1% from
$12.5 million for the nine months ended September 30, 1995. The increase in
Property and User Services operating income resulted from an increase in
Property and User Services revenue of $46.8 million or 15.9% partially offset
by a related increase in commission expense of $24.5 million or 15.3%, a $14.7
million or 12.6% increase in operating expenses and a $0.2 million or 3.2%
increase in depreciation and amortization as described above.
Investor Services operating income was $6.5 million for the nine months
ended September 30, 1996, an increase of $4.7 million or 268.5% from $1.8
million for the nine months ended September 30, 1995. The increase in Investor
Services operating income resulted from an increase in Investor Services
revenue of $19.2 million or 63.6% partially offset by a related increase in
commission expense of $3.4 million or 42.3%, a $9.7 million or 51.6% increase
in operating expenses and a $1.4 million or 87.6% increase in depreciation and
amortization as described above.

INTEREST INCOME on a consolidated basis for the nine months ended September
30, 1996 was $1.0 million, a decrease of $0.2 million or 15.7% from $1.2
million for the nine months ended September 30, 1995.

INTEREST EXPENSE on a consolidated basis for the nine months ended September
30, 1996 was $17.9 million, an increase of $1.0 million or 5.5% from $16.9
million for the nine months ended September 30, 1995, primarily resulting from
additional debt incurred with respect to the Westmark and Melody acquisitions,
offset by reduced average bank borrowing levels on other Company indebtedness
and a decline in interest rates on bank debt.

NET PROVISION (BENEFIT) FOR INCOME TAX on a consolidated basis for the nine
months ended September 30, 1996 was a benefit of ($35.8) million, compared to
a $0.2 million provision for the nine months ended September 30, 1995. During
the third quarter of 1996, the Company projected, on a more likely than not
basis, that a portion of its NOL would be realizable in future periods and,
accordingly, reduced its existing deferred tax asset valuation allowances by
$45.7 million of which $5.3 million has been allocated to the purchase price
of L.J. Melody based on its estimated future potential to generate taxable
income, and the remaining $40.4 million has been recorded as a tax benefit (a
reduction in income tax provision). With the recognition of deferred tax
assets, the current and future period provisions for income tax will be
recorded at the full effective tax rate excluding the impact of other
adjustments, if any, to valuation allowances. For the nine months ended
September 30, 1996, a $4.6 million provision for income taxes has been
recorded. Net income for the nine months ended September 30, 1996 was
$45.4 million ($3.28 per share of common stock), which includes the net
benefit for income tax of $35.8 million. If the Company had not recorded tax
benefits related to projected future taxable income for the nine months ended
September 30, 1996, the Company's net income for such period would have been
$8.8 million ($0.64 per share of common stock). The provision for income tax
would have consisted of current and deferred state tax provisions and
provision for Federal alternative minimum tax. Provision for regular Federal
taxes would have been offset by reductions in valuation allowances to the
extent of such regular Federal taxes. The $40.4 million recognized tax benefit
has a material effect on the reported net income for the nine months ended
September 30, 1996. This $40.4 million tax benefit is a non-recurring item and
is unrelated

27
<PAGE>

to the Company's performance and should not be used in evaluating the
Company's prospects or future performance. An additional $15.5 million
reduction of valuation allowances and related tax benefit is expected to be
recorded in the fourth quarter of 1996 as a result of the Offering and related
reduction in future interest expense.

NET INCOME on a consolidated basis for the nine months ended September 30,
1996 was $45.4 million ($3.28 per share of common stock), after giving effect
to the tax benefit resulting from the reduction of valuation allowances of
$40.4 million ($2.92 per share of common stock) an improvement of
$47.0 million from a net loss of $1.6 million ($0.14 loss per share of common
stock) for the nine months ended September 30, 1995. The improvement also
resulted from a revenue increase of $66.0 million or 20.3% which was partially
offset by a related increase in commission expense of $27.9 million or 16.6%,
a $24.4 million or 18.1% increase in operating expenses and a $1.5 million or
19.3% increase in depreciation and amortization as described above.

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. 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.

28
<PAGE>

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 $29.9 million, an
increase of $4.3 million or 16.7% from $25.6 million in 1994. The increase in
operating income resulted from an increase in revenue of $39.5 million or 9.2%
partially offset by a related increase in commission expense of $13.9 million
or 6.2%, a $17.8 million or 10.4% increase in operating expenses and a $3.5
million or 43.8% increase in depreciation and amortization as described above.

Property and User Services operating income was $26.1 million in 1995, an
increase of $0.9 million or 4.1% from $25.2 million in 1994. The increase in
Property and User Services operating income resulted from an increase in
Property and User Services revenue of $22.5 million or 5.6% partially offset
by a related increase in commission expense of $11.9 million or 5.5%, an $8.3
million or 5.4% increase in operating expenses and a $1.4 million or 18.8%
increase in depreciation and amortization as described above.

Investor Services operating income was $3.7 million in 1995, an increase of
$3.3 million or 704.6% from $0.4 million in 1994. The increase in Investor
Services operating income resulted from an increase in Investor Services
revenue of $16.9 million or 58.8% partially offset by a related increase in
commission expense of $2.0 million or 21.4%, a $9.5 million or 52.3% increase
in operating expenses and a $2.1 million or 352.5% increase in depreciation
and amortization primarily as a result of the Westmark acquisition as
described above.

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 ($0.55 per share
of common stock), a decrease of $1.8 million or 19.2% from $9.2 million ($0.69
per share of common stock) in 1994. The decrease in net income resulted from
an increase in commission expense of $13.9 million or 6.2%, a $17.8 million or
10.4% increase in operating expenses, a $3.5 million or 43.8% increase in
depreciation and amortization and an increase in interest expense of
$5.9 million or 34.0% partially offset by an increase in revenue of $39.5
million or 9.2% as described above.

29
<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.

30
<PAGE>

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
improvement of $49.3 million from an operating loss of $23.7 million in 1993.
The improvement in operating income resulted from an increase in revenue of
$37.0 million or 9.4% partially offset by a related increase in commission
expense of $19.0 million or 9.2%, a $10.2 million or 6.3% increase in
operating expenses and a $41.5 million or 83.7% decrease in depreciation and
amortization as a result of the write-off of intangibles in 1993 as described
above.

Property and User Services operating income was $25.2 million in 1994, an
improvement of $45.1 million from $(19.9) million in 1993. The improvement in
Property and User Services operating income resulted from an increase in
Property and User Services revenue of $36.1 million or 9.9% partially offset
by a related increase in commission expense of $19.1 million or 9.7%, an $8.7
million or 6.1% increase in operating expenses and a $36.8 million or 83.1%
decrease in depreciation and amortization as a result of the write-off of
intangibles in 1993 as described above.

Investor Services operating income was $0.4 million in 1994, an improvement
of $4.2 million from an operating loss of $3.8 million in 1993. The
improvement in Investor Services operating income resulted primarily from a
$4.7 million or 88.7% decrease in depreciation and amortization as a result of
the write-off of intangibles in 1993 as described above.

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 ($0.69 per share
of common stock), an improvement of $46.4 million from a net loss of
$37.2 million ($3.23 loss per share of common stock) in 1993. The improvement
in net income resulted from an increase in revenue of $37.0 million or 9.4%
partially offset by a related increase in commission expense of $19.0 million
or 9.2%, a $10.2 million or 6.3% increase in operating expenses, a $41.5
million or 83.7% decrease in depreciation and amortization as a result of the
write-off of intangibles in 1993 and an increase in interest expense of $3.3
million or 21.9% as described above.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically financed its operations and non-acquisition
related capital expenditures primarily with internally generated funds,
operating leases and, to a much lesser extent, capital leases, and borrowings
under a revolving credit facility. In order to finance the acquisition of CB
Commercial Real Estate Group, Inc. 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 September 30, 1996, the
Company had outstanding $139.8 million, including $4.8 million of deferred
interest, under the Senior Secured Credit Agreement and $8.0 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 $71.0 million (including $9.0 million of deferred
interest) under the Senior Subordinated Credit Agreement. The outstanding
amount under the Senior Secured Credit Agreement reflects principal repayments
of $41.3 million since June 30, 1994.

31
<PAGE>

In addition, as of September 30, 1996 the Company had outstanding other long-
term indebtedness, consisting primarily of acquisition debt, totaling
approximately $45.7 million. Consistent with the seasonality of the Company's
revenue, as of October 31, 1996 all outstanding borrowings under the Revolving
Credit Facility A have been repaid.

Of the net proceeds of the Offering, approximately $74.7 million will be
used to repay a portion of the indebtedness outstanding under the Senior
Secured Credit Agreement and $5.3 million will be used to pay accrued and
unpaid interest on the indebtedness outstanding under the Senior Subordinated
Credit Agreement. As proposed, effective upon completion of the Offering, the
Revolving Credit Facility B will be converted into a facility that can be used
for acquisitions and will bear interest at LIBOR plus 300 basis points. The
Company has begun discussions to increase Revolving Credit Facility B from
$10.0 million to $20.0 million sometime in 1997, although there can be no
assurance that such discussions will be successful or if successful that
$20.0 million will be adequate to finance the Company's acquisition program.

In connection with and conditional upon 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 $4.8 million on December 31, 2001. Revolving
Credit Facility A permits maximum borrowings of $20.0 million which 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 and conditional upon 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 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........................................................... $ 13,841
1997........................................................... 22,470
1998........................................................... 18,516
1999........................................................... 12,827
2000........................................................... 26,283
2001........................................................... 13,795
2002........................................................... 65,660
Thereafter..................................................... 3,181
--------
$176,573
========
</TABLE>

The Company expects to have capital expenditures of approximately $4.0
million in 1997 exclusive of acquisitions. 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.

32
<PAGE>

Effective October 1996 and conditional upon the Offering, a dividend on the
Company's Preferred Stock will be reinstated. The $0.25 per share 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.
The Company currently expects to pay dividends on the Preferred Stock out of
working capital generated from operating cash flow after it has completed its
acquisition program.

The Company anticipates that its existing sources of liquidity, including
cash flow from operations, will be sufficient to fund its operations for at
least the next twelve months.

The Company's earnings before interest, income taxes, depreciation and
amortization ("EBITDA") was $36.2 million, $22.5 million, $41.5 million, $33.7
million and $25.9 million for the nine months ended September 30, 1996, and
September 30, 1995, and the years ended December 31, 1995, December 31, 1994
and December 31, 1993, respectively. The improvement in EBITDA in the nine
months ended September 30, 1996 and the years ended December 31, 1995 and 1994
reflects the overall period to period revenue growth discussed above.

EBITDA effectively removes the impact of certain non-cash charges on income
such as depreciation and the amortization of intangible assets relating to
acquisitions and Federal income taxes (to the extent they are offset by NOLs).
Management believes that the presentation of EBITDA will enhance a reader's
understanding of the Company's operating performance and ability to service
debt as it provides a measure of cash generated that can be used by the
Company to service its debt and other required or discretionary purposes. Net
cash that will be available to the Company for discretionary purposes
represents remaining cash, after debt service and other cash requirements,
such as capital expenditures, are deducted from EBITDA. EBITDA should not be
considered as an alternative to (i) operating income determined in accordance
with GAAP or (ii) operating cash flow determined in accordance with GAAP.

Ratio of earnings to fixed charges was 1.42, 1.28 and 1.40 for the nine
months ended September 30, 1996, and for the years ended December 31, 1995 and
1994, respectively. Fixed charges exceeded earnings by $1.4 million for the
nine months ended September 30, 1995 and $37.0 million for the year ended
December 31, 1993. Earnings included non-cash depreciation and amortization
charges of $9.7 million, $8.2 million, $11.6 million, $8.1 million and $49.6
million for the nine months ended September 30, 1996 and 1995 and the years
ended December 30, 1995, 1994 and 1993, respectively.

RECENT LITIGATION

In August 1993, a former commissioned salesperson of the Company filed a
lawsuit against the Company in the Superior Court of New Jersey, Bergen
County, alleging gender discrimination and wrongful termination by the
Company. On November 20, 1996 a jury returned a verdict against the Company,
awarding $6.5 million in general and punitive damages to the plaintiff. The
Company has been advised by its in-house counsel that it has grounds to file
motions for a new trial and a reversal of the verdict and, if these motions
are not granted, to pursue an appeal of the verdict. Included in the Company's
September 30, 1996 financial statements is an accrual of $800,000 with respect
to this case. This accrual was initially established at $250,000 in 1994 and
increased to $800,000 in 1995 and represented the Company's estimate of its
loss exposure for this matter based on its assessment and analysis as of those
dates. As a result of the verdict and the Company's intention to file such
motions or pursue such appeal, management is in the early stages of gathering
information to reassess its estimate of loss exposure. At this early stage of
reassessment, management cannot make a reasonable estimate of the ultimate
loss amount, if any, other than to estimate that the loss exposure as a result
of the damage award ranges from no loss to a maximum of $6.5 million. At $6.5
million the loss could have a material impact on the Company's 1996
consolidated financial statements. Based on available cash and anticipated
cash flows, the Company believes that such a charge would not have an impact
on the Company's ability to carry on its operations.

33
<PAGE>

CASH FLOWS

Net cash provided by operating activities for the nine months ended
September 30, 1996 was $24.2 million, an increase of $23.6 million from $0.6
million for the nine months ended September 30, 1995. The increase resulted
primarily from an improvement in net income, excluding the tax benefit from
the reduction of valuation allowances. See "Net Operating Losses" below.
Additionally, non-cash charges, consisting of depreciation, amortization and
deferred compensation and interest, included in net income for the nine months
ended September 30, 1996, were $3.6 million higher than for the nine months
ended September 30, 1995. Net cash provided by operating activities was also
impacted by changes in components of other operating assets and liabilities
which provided a net increase to net cash provided by operating activities of
$9.5 million.

Net cash used in investing activities was $9.5 million for the nine months
ended September 30, 1996, compared to $22.0 million for the nine months ended
September 30, 1995 as a result of the Westmark acquisition in June 1995 and
the L. J. Melody acquisition in July 1996.

Net cash provided by (used in) financing activities was $(12.8) million for
the nine months ended September 30, 1996, compared to $3.5 million for the
nine months ended September 30, 1995. The $16.3 million difference between
periods resulted from $18.2 million repayment of amounts outstanding under the
Senior Secured Credit Agreement as compared to $14.8 million repayment for the
nine months ended September 30, 1995, $21.0 million proceeds offset by $13.0
million repayment from the Revolving Credit Facility A during the nine months
ended September 30, 1996 as compared to $14.0 million proceeds offset by $4.0
million repayment for the nine months ended September 30, 1995, a $0.7 million
reduction in capital lease repayments and $10.0 million proceeds from senior
subordinated loans in connection with the Westmark acquisition during the nine
months ended September 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.

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 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 were reserved through valuation allowances.
The valuation allowances were 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.

34
<PAGE>

Management evaluates the appropriateness of all or part of these valuation
allowances 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 September 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, during the third
quarter of 1996, the Company projected, on a more likely than not basis, that
a portion of its NOL would be realizable in future periods and, accordingly,
reduced its existing deferred tax asset valuation allowances by $45.7 million
of which $5.3 million has been allocated to the purchase price of L.J. Melody
based on its estimated future potential to generate taxable income, and the
remaining $40.4 million has been recorded as a tax benefit (a reduction in
income tax provision). With the recognition of deferred tax assets, the
current and future period provisions for income tax will be recorded at the
full effective tax rate excluding the impact of other adjustments, if any, to
valuation allowances. For the nine months ended September 30, 1996, a $4.6
million provision for income taxes has been recorded. Net income for the nine
months ended September 30, 1996 was $45.4 million ($3.28 per share of common
stock), which includes the net benefit for income tax of $35.8 million. If the
Company had not recorded tax benefits related to projected future taxable
income for the nine months ended September 30, 1996, the Company's net income
for such period would have been $8.8 million ($0.64 per share of common
stock). The provision for income tax would have consisted of current and
deferred state tax provisions and provision for Federal alternative minimum
tax. Provision for regular Federal taxes would have been offset by reductions
in valuation allowances to the extent of such regular Federal taxes. The
$40.4 million recognized tax benefit has a material effect on the reported net
income for the nine months ended September 30, 1996. This $40.4 million tax
benefit is a non-recurring item and is unrelated to the Company's performance
and should not be used in evaluating the Company's prospects or future
performance. The Company would have to generate future taxable income of
approximately $110 million to realize the deferred tax assets recorded on the
consolidated balance sheet as of September 30, 1996. The Company's taxable
income has historically been higher than pretax income for financial reporting
primarily due to certain charges in the financial statements that were not
deductible for tax purposes. The Company expects its full year 1996 taxable
income to be higher than its full year pretax earnings for financial reporting
purposes. The Company believes that its future taxable income will be adequate
to realize the deferred tax assets on the September 30, 1996 balance sheet.

In addition, the Company believes that when the Offering is completed, it
will be able to generate additional taxable income in the future through
interest savings 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 estimated additional reduction in the deferred
tax asset valuation allowances of $15.5 million upon completion of the
Offering.

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

35
<PAGE>

INFLATION

The Company's operations are directly affected by various national and
economic conditions, including interest rates, the availability 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, SFAS No. 122, Accounting for Mortgage Servicing Rights and SFAS No. 123,
Accounting for Stock-Based Compensation. These standards did not have a
material impact on the Company's financial statements.

In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities." This
statement is required to be adopted by the Company in 1997 and only applies to
the operations of L.J. Melody. Under SFAS No. 125, the Company will be
required to recognize, at fair value, financial and servicing assets it has
acquired control over and related liabilities it has incurred and amortize
them over the period of estimated net servicing income or loss. Write-off of
the asset is required when control is surrendered and of the liability when
extinguished. The Company does not currently recognize the value of financial
and servicing assets when loans are originated. The adoption of the new
statement will result in the recognition of amortization cost along with
income from servicing as services are performed and the recognition of gains
or losses at the time servicing rights are sold. Management of the Company has
not yet determined the impact, if any, that the adoption of this standard will
have on the Company's financial position or results of operations.

36
<PAGE>

QUARTERLY RESULTS OF OPERATIONS AND OTHER FINANCIAL DATA

The following table sets forth certain unaudited consolidated statement of
operations data for each of the Company's last eleven 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.

<TABLE>
<CAPTION>
1996 1995 1994
---------------------------- -------------------------------------- --------------------------------------
SEPT. 30 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> <C>
Results of
Operations:
Revenue.......... $147,168 $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..... 74,196 66,262 55,007 71,449 57,804 57,370 52,395 67,919 59,645 54,367 43,154
Operating,
administrative
and other....... 56,042 53,594 49,560 53,129 47,803 44,206 42,830 46,316 42,675 42,487 38,756
Depreciation and
amortization... 3,431 3,038 3,280 3,458 3,546 2,297 2,330 2,562 1,797 1,783 1,949
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Operating income
(loss).......... 13,499 8,060 4,894 15,534 7,450 4,488 2,371 12,108 8,726 5,093 (349)
Interest income.. 286 354 395 446 345 393 490 370 270 255 214
Interest expense. 6,196 5,759 5,928 6,323 6,428 5,313 5,203 4,747 5,383 3,790 3,442
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Income (loss)
before provision
(benefit) for
income tax...... 7,589 2,655 (639) 9,657 1,367 (432) (2,342) 7,731 3,613 1,558 (3,577)
Provision
(benefit) for
income tax...... 4,220 438 (48) 603 138 26 74 (73) 75 75 75
Reduction of
valuation
allowances...... (40,400) -- -- -- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net provision
(benefit) for
income tax...... (36,180) 438 (48) 603 138 26 74 (73) 75 75 75
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net income
(loss).......... $ 43,769 $ 2,217 $ (591) $ 9,054 $ 1,229 $ (458) $ (2,416) $ 7,804 $ 3,538 $ 1,483 $ (3,652)
======== ======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Other Financial
Data:
EBITDA........... $ 16,930 $ 11,098 $ 8,174 $ 18,992 $ 10,996 $ 6,785 $ 4,701 $ 14,670 $ 10,523 $ 6,876 $ 1,600
Net cash provided
by (used in)
operating
activities...... $ 22,150 $ 13,865 $(11,845) $ 30,082 $ 8,143 $ 6,890 $(14,483) $ 21,911 $ 13,817 $ 5,894 $(10,204)
Net cash (used
in) investing
activities...... $ (9,401) $ 1,768 $ (1,884) $ (2,928) $ (595) $(18,887) $ (2,478) $ (1,321) $ (1,006) $ (748) $ (790)
Net cash provided
by (used in)
financing
activities...... $(15,297) $ (4,306) $ 6,808 $(16,002) $ (8,098) $ 15,391 $ (2,760) $ (4,369) $ (5,114) $ (5,407) $ 9,967
</TABLE>

<TABLE>
<CAPTION>
AS A PERCENTAGE OF REVENUES
--------------------------------------------------------------------------------------------------
1996 1995 1994
-------------------------- ---------------------------------- ----------------------------------
SEPT. 30 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> <C>
Revenue................ 100.0 % 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..... 50.4 50.6 48.8 49.8 49.6 52.9 52.4 52.7 52.9 52.4 51.7
Operating,
administrative and
other................ 38.1 40.9 44.0 37.0 41.0 40.8 42.9 35.9 37.8 41.0 46.4
Depreciation and
amortization......... 2.3 2.3 2.9 2.4 3.0 2.1 2.3 2.0 1.6 1.7 2.3
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Operating income
(loss)................ 9.2 6.2 4.3 10.8 6.4 4.2 2.4 9.4 7.7 4.9 (0.4)
Interest income........ 0.2 0.3 0.3 0.3 0.3 0.3 0.5 0.3 0.3 0.3 0.2
Interest expense....... 4.2 4.4 5.2 4.4 5.5 4.9 5.2 3.7 4.8 3.7 4.1
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income (loss) before
provision (benefit)
for income tax........ 5.2 2.1 (0.6) 6.7 1.2 (0.4) (2.3) 6.0 3.2 1.5 (4.3)
Provision for income
tax................... 2.9 0.3 (0.0) 0.4 0.1 0.0 0.1 (0.1) 0.1 0.1 0.1
Reduction of valuation
allowances............ (27.5) -- -- -- -- -- -- -- -- -- --
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net provision (benefit)
for income tax........ (24.6) 0.3 (0.0) 0.4 0.1 0.0 0.1 (0.1) 0.1 0.1 0.1
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net income (loss)...... 29.7 % 1.8% (0.6)% 6.3% 1.1% (0.4)% (2.4)% 6.1 % 3.1% 1.4% (4.4)%
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>

37
<PAGE>

BUSINESS

COMPANY OVERVIEW

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, investment properties 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 approximately 2,000 sales professionals in Property and User
Services who have an average tenure of more than eight 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;

. Experienced management team, the executive and key employees of which have
an average tenure of more than 16 years with the Company and will own
collectively approximately 15.2% of the Company's Common Stock (including
exercisable stock options and shares held through the Company's Deferred
Compensation Plan) after the Offering; and

. Employees who will own more than 40% of the Common Stock of the Company
after 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 to its competitive advantage.

38
<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 (including pension funds, life insurance companies,
banks and publicly-held REITs). 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. With respect to institutions other
than REITs, 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. As REITs are internally managed and therefore tend
to outsource only their brokerage service needs, their demand for the
Company's other real estate services is expected to be less than that of other
institutional investors.

. 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, companies have emphasized leaner staffing in non-
core activities and, as a result, outsourced certain non-core activities to
third-parties. As a consequence, the demand for multi-discipline, multi-market
professional real estate service firms that provide integrated services
capable of supplementing a corporate real estate department has increased
significantly.

. ONGOING INDUSTRY CONSOLIDATION.

The Company believes that the combination of more intense institutional and
corporate real estate service needs and demands, together with the real estate
"depression" of the early 1990s, has made it imperative that real estate
service firms (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 current 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 mortgage loans they originated to the maturity date of the mortgage 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 CMBs in order to securitize
their portfolios and avoid holding mortgage 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 mortgage 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
mortgage loans that it originates, and the profit margin potential for
servicing an increasing volume of mortgage 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. The Company
does not currently securitize loans and has no present intention of doing so.

. 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
many product types and geographic market areas. This has been particularly
true in California, where the Company has a significant market presence.
National office and industrial building occupancy levels have generally been
rising, rental rates are beginning to increase, and correspondingly, property
values are increasing.

39
<PAGE>

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, the
Company believes market activity levels in Chicago, Philadelphia, Seattle, and
Atlanta have increased.

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 national provider of multi-
discipline, integrated commercial real estate services, 37% of its total sale
and lease revenue in 1995 was generated from transactions originated in the
state of California. Through strategic acquisitions and partnerships, the
Company intends to continue to strengthen, not only the range and quality, but
also the geographic coverage of its services. 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 fees 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.

40
<PAGE>

. 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 to outsource their real estate
needs. 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.

41
<PAGE>

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--

L.J. MELODY. In July 1996, the Company acquired L.J. Melody for $15.0
million, including $6.0 million in seller financing, of which $2.3 million is
contingent upon the continued employment by the Company of the former owner of
L.J. Melody. The combined pre-acquisition mortgage originations of the Company
and L.J. Melody for 1995 were $2.3 billion, and the combined pre-acquisition
mortgage 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 mortgage 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 loan 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 (the "Supplemental Purchase Price") and $4.0 million of bonuses
over a six-year period based upon Westmark's adjusted operating income. The
sellers' notes and the Supplemental Purchase Price are secured by a pledge of
the Company's interests in Westmark. By early 1996, the Company had combined
its investment management and advisory business with that of Westmark to
create a company with approximately $3.7 billion in tax-exempt assets under
management. The Westmark acquisition has moved the Company into 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, and a deferred payment of $1.9 million payable over
three years ($633,333 payable on each of January 2, 1997, 1998 and 1999) plus
interest on the entire outstanding deferred portion of the deferred payment at
an annual rate of 8%. The deferred payment is subject to forfeiture under
certain circumstances, including any breach of representations and warranties
under the purchase agreement, violation of a non-compete agreement and
termination of employment. This acquisition strengthened the Company's ability
to provide sophisticated tenant representation services to its corporate
clients. Langdon Rieder has been combined with the Company's CBC/Madison
Advisory Group, enhancing the Company's corporate services capabilities.

The Company expects to continue 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
result in a decrease in 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 income before
interest expense and provision for amortization of goodwill and intangibles,
if any, resulting from the acquisitions, and to operating cash flows after all
integration costs.

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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 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 $8.1 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 September 30, 1996 the Company employed approximately
1,640 brokerage professionals in 79 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 September 30, 1996, the average
tenure of sales professionals in Property and User Services was over eight
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 70
markets on which it intends to focus during the next three years. To date, the
Company has established such partnership-type arrangements in Buffalo and
Rochester, New York, Pittsburgh, Pennsylvania, Memphis, Tennessee and
Milwaukee, Wisconsin. Revenue anticipated from this program will be a
combination of an initial fee, 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 typically range from approximately 1%
to 6% 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

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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.

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
investment property transactions with an aggregate value over $4.0 billion,
generating total revenues of $87.6 million, exceeding the transaction volume
of most of its major competitors, including investment banking firms in the
United States. Based upon these results, the Company believes that it is one
of the largest providers 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 September 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 September 30, 1996, the average
tenure of brokerage and investment properties sales professionals with the
Company was more than eight 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. On larger and more complex assignments,
the Company's financial consulting professionals provide sophisticated
financial and analytical resources to the client, the marketing team and the
investor. 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 1% to 6% 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 up to 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

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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 estate department and supports 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, IBM, John Hancock Mutual
Life Insurance Co. Inc., and Prudential Insurance Co.

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
September 30, 1996, managed approximately 104 million square feet of
commercial space.

According to National Real Estate Investor's 1996 Annual Survey of property
managers, the Company's property management business was ranked the eighth
largest in the United States based on square footage under management during
1995. Property management services include maintenance, marketing and leasing
services for investor-owned properties, including office, industrial, retail
and multi-family residential 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., and Westmark Realty Advisors L.L.C.

Operations. The Company employs approximately 130 property management
professionals in 31 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

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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.

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 September 30, 1996, the average
duration of the Company's tenure as property manager for properties under
contract was approximately 2.5 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 other businesses
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 mortgage loan servicing
through L.J. Melody, which was acquired in July 1996 and is based in Houston,
Texas. The Company, on a combined basis with L.J. Melody, originated
approximately $2.3 billion, $2.0 billion and $1.1 billion of mortgages in
1995, 1994 and 1993, respectively. 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 mortgage
loans which it originates, and is currently negotiating a similar arrangement
with an affiliate of NationsBank. Under these arrangements, the Company
generally originates mortgages 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 mortgages into other conduit programs where it does not have
servicing rights. In addition, the Company is a major mortgage originator for
insurance companies having originated on a combined basis with L.J. Melody,
mortgages in the names of the insurance companies valued at approximately $1.6
billion in 1995. The Company has correspondency arrangements with various life
insurance companies which entitle it to service the mortgage loans it
originates. As of December 31, 1995, 1994 and 1993, the Company, on a combined
basis with L.J. Melody, serviced mortgage loan portfolios of approximately
$7.3 billion, $7.1 billion and $6.3 billion, respectively. Based upon
available statistics, the Company believes

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that it is the largest independent commercial mortgage originator (originating
mortgage loans for others as opposed to originating mortgage loans for its own
account), in general, as well as through conduits, in the United States. As of
December 31, 1995, the Company was, on a combined basis with L.J. Melody, the
eighth largest commercial mortgage loan servicer in the United States. The
Company's life insurance and pension plans clients on whose behalf it both
originates and services mortgage loans include AETNA, Allstate Life Insurance
Co., CIGNA, Lincoln National Life, Massachusetts Mutual Life, Phoenix Home
Life and New York State Teachers' Retirement System. For 1995, CIGNA accounted
for approximately 29.6% of the Company's mortgage origination business on a
combined basis with L.J. Melody.

Operations. The Company employs approximately 90 mortgage banking
professionals in 21 offices in the United States. The Company's mortgage loan
originations take place throughout the United States, with support from L.J.
Melody's headquarters in Houston, Texas. All of the Company's mortgage 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 5% of the Company's property sales were
financed by its commercial mortgage origination capabilities.

Compensation. The Company typically receives origination fees, ranging from
0.5% for large insurance company mortgage loans to 1.0% for most conduit
mortgage loans. In situations where the Company services the mortgage loans
which it originates, it also receives a servicing fee between .03% and .25%,
calculated as a percentage of the outstanding mortgage 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 mortgage loan origination
revenue, on a combined basis with L.J. Melody, was from agreements which
entitle it to both originate and service mortgage loans. The Company also
originates mortgage 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 with L.J. Melody, was 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 typically 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 13 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
Benefit Trust, Eastman Kodak Retirement Income Plan, GTE Service Corporation
Plan for Employees' Pensions, Utah State Retirement Fund, Pacific Telesis
Group Master Pension Trust and McDonnell Douglas Corporation Master Retirement
Trust.

Operations. Westmark operates as a separate and independent subsidiary of
the Company, providing advisory services and managing approximately $3.7
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. Westmark's headquarters are located in
Los Angeles and it maintains regional offices in Boston, 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

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approximately 100 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.

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. Because Westmark must conduct its
operations in compliance with ERISA, where applicable, Westmark maintains both
internal and external control mechanisms to assure compliance.

While Westmark has experienced significant growth in its separate accounts
business, it has been impacted by the industry's adverse investor response to
non-property specific commingled funds. The Company believes that this lack of
investor interest in non-property specific commingled funds has been replaced
with interest in new, more narrowly focused investment vehicles. The Company
believes that the consolidation of the industry combined with the development
of these new investment vehicles should reduce pressures on fees and margins
in the second half of 1997.

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
specified real (adjusted for inflation) rate of return of 8% to 12% and is a
percentage of value in excess of that return. In recent years, Westmark has
experienced reduced rates of asset management and acquisition fees.

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
approximately 50% of the staff holding the MAI professional designation. The
business is operated nationally through 21 regional offices and its clients
are generally corporate and institutional portfolio owners and lenders. 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

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significantly strengthen its client relationships in the United States. These
relationships are reciprocal referral arrangements whereby the Company's
clients who require services in a geographic region serviced by its alliance
partners must be referred by the Company to its alliance partner operating in
that region. Conversely, the Company's alliance partners are obligated to
refer their clients with commercial real estate needs in the United States to
the Company. 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 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 one of the nation's largest databases
of commercial properties in the United States. The CB Commercial proprietary
property information database contains over 20 years of comprehensive data on
over 17 billion square feet of office, industrial and retail space. 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.

Local Area Networks (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.

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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 39 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, the Company added courses to the CBCU
curriculum which involve its clients. In 1995, more than 450 employees and
clients took courses at CBCU.

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.

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.

Westmark competes with a significant number of investment advisors, banks
and insurance companies in attracting investor money. Over the last several
years, Westmark experienced growth in its separate accounts and its commingled
debt funds, but not in its commingled equity funds.

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 September 30, 1996, the Company had approximately 4,000 employees,
approximately 66% 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.

50
<PAGE>

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
2006. 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

In August 1993, a former commissioned salesperson of the Company filed a
lawsuit against the Company in the Superior Court of New Jersey, Bergen
County, alleging gender discrimination and wrongful termination by the Company
(the "Mogull case"). On November 20, 1996 a jury returned a verdict against
the Company, awarding $6.5 million in general and punitive damages to the
plaintiff. The Company has been advised by its in-house counsel that it has
grounds to file motions for a new trial and a reversal of the verdict and, if
these motions are not granted, to pursue an appeal of the verdict. Included in
the Company's September 30, 1996 financial statements is an accrual of
$800,000 with respect to this case. This accrual was initially established at
$250,000 in 1994 and increased to $800,000 in 1995 and represented the
Company's estimate of its loss exposure for this matter based on its
assessment and analysis as of those dates. As a result of the verdict and the
Company's intention to file such motions or pursue such appeal, management is
in the early stages of gathering information to reassess its estimate of loss
exposure. At this early stage of reassessment, management cannot make a
reasonable estimate of the ultimate loss amount, if any, other than to
estimate that the loss exposure as a result of the damage award ranges from no
loss to a maximum of $6.5 million. At $6.5 million the loss could have a
material impact on the Company's 1996 consolidated financial statements. Based
on available cash and anticipated cash flows, the Company believes that such a
charge would not have an impact on the Company's ability to carry on its
operations.

There are no other cases with respect to gender discrimination similar to
the Mogull case pending or threatened against the Company. However, the
Company is involved in a case instituted in October 1994, in Los Angeles
Superior Court in which the plaintiff, a former employee who resigned to
accept a position with another company, alleged claims against the Company and
two of its employees of (1) sexual harassment by a Company salesperson,
(2) pregnancy discrimination and harassment by a Company executive in charge
of the regional office which employed plaintiff, (3) intentional infliction of
emotional distress and (4) violation of public policy resulting in the
constructive discharge of the plaintiff. At trial, the jury ruled in the
Company's favor on the sexual harassment and pregnancy discrimination charges,
and the violation of public policy claim was dismissed as this cause of action
cannot be sustained in the absence of liability on the claims of harassment
and discrimination. The jury found in favor of the plaintiff on her claim of
intentional infliction of emotional distress and awarded her damages of
$500,000 in her claim against the Company and $500,000 in her claim against
the Company executive. Post-trial motions in the case are currently pending
(including motions by plaintiff and defense for judgment notwithstanding the
verdict) and are scheduled for hearing on December 3, 1996.

In addition, 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. Management believes that any liability to the Company, net
of insurance proceeds, that may result from proceedings to which it is
currently a party will not have a material adverse effect on the consolidated
financial position or results of operations of the Company, except that the
Mogull case could have a material impact on the Company's 1996 consolidated
financial statements.

As part of its process of minimizing, to the extent possible, potential
litigation, the Company requires its sales professionals to agree to
contribute each month toward a "Reserve Account" to be used whenever a claim
of professional liability is asserted. In addition, each sales professional
contractually agrees to be responsible for a portion of any amount paid to
defend or settle a claim against that professional or for any resulting
judgment.

51
<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....... 42 Senior Vice President/Director
Ronald J. Platisha...... 49 Executive Vice President and Principal Accounting Officer
Richard A. Pogue........ 54 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........ 55 President--CB Commercial Investment Properties
Richard C. Clotfelter... 59 President--Westmark Realty Advisors L.L.C./Director
Lawrence J. Melody...... 58 President--L.J. Melody & Company/Director
Stanton D. Anderson(2).. 56 Director
Richard C. Blum(1)(2)(3) 61 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. Ueberroth(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 member and current trustee 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
and serves on the University's Advisory Board for the Haas School of Business.

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. Mr. Beban has also been the
President of CB Commercial Brokerage Services since 1987. 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

52
<PAGE>

Corporation and its wholly-owned subsidiary, First American Title Insurance,
Inc. Mr. Beban holds a B.A. degree from the University of California, Los
Angeles.

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 January 1996 and a Director of the Company since
1996. From 1994 to 1995 he was Senior Executive Vice President (Brokerage
Division) of the Company and 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 the Urban Land
Institute. Mr. Pogue holds a B.A. degree from the University of Oklahoma.

53
<PAGE>

Kenneth D. Sandstad. Mr. Sandstad has been the Company's Senior Executive
Vice President--Brokerage Eastern U.S. since 1991. He has also held the
following positions with the Company: Institutional Services Manager from 1994
to 1996, Division Manager (Central Division) from 1990 to 1994 and Regional
Manager (South Central) from 1985 to 1990. Mr. Sandstad was also a Director of
the Company from 1992 to 1994. Mr. Sandstad joined the Company in 1974,
beginning at the Minneapolis office in the brokerage division. He holds 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 1993 as President--Capital Markets, Asset Valuation and
Management Activities. From April 1977 through 1992, 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. Mr. Clotfelter holds a B.A. degree from
Stanford University.

Lawrence J. Melody. Mr. Melody has served as a Director since August 1996.
He is also 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 the 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 served as
Deputy Director of the Republican Convention in 1980, 1984 and 1988, as
counsel to the Reagan-Bush Campaign in 1980 and as 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, Inc., a
merchant banking firm he founded in 1975. 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. Mr.
Blum holds a B.A. from the University of California, Berkeley, a graduate
degree from the University of Vienna and an M.B.A. degree from the University
of California, Berkeley.

54
<PAGE>

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., 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 August 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 Chairman of
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 1992.
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. From September 1992 to April 1996, he was Executive Vice President, Chief
Financial Officer and Director of Kajima Capital of America, Inc. Since April
1996 he has been President, Chief Executive Officer, Chief Financial Officer
and Director 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 has served as Chairman of Thayer Capital Partners, a merchant banking firm
he founded since 1993. He was President of Marriott Hotels and Resorts 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 served as Campaign Manager for the 1992
Bush/Quayle presidential

55
<PAGE>

campaign. He also serves on the Board of Directors of American Management
Systems, Inc.; Automatic Data Processing Corp.; Avis, Inc.; FPL Group Inc.;
ICF Kaiser International, 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.

Gary L. Wilson. Mr. Wilson has been a Director of the Company since 1989.
Since 1991, he has been Co-Chairman of Northwest Airlines, Inc., Northwest
Airlines Corporation and NWA, Inc. From 1985 until January 1990, Mr. Wilson
was an Executive Vice President and Chief Financial Officer and Director for
The Walt Disney Company and remains a Director of The Walt Disney Company.
From 1974 until 1985, he was Executive Vice President and Chief Financial
Officer of Marriott Corporation. 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. Currently 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. Effective upon the closing of the Offering, the Compensation
Committee will determine the salaries of the Chairman and Chief Executive
Officer and, upon the recommendation of the Chief Executive Officer, the
salaries and incentive compensation of the President and the Chief Financial
Officer. The salaries and incentive compensation of all other officers are
determined by the Chief Executive Officer.

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.

56
<PAGE>

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." In October 1996, the
Compensation Committee (Messrs. Blum, Ueberroth and Wilson abstaining) granted
each of Messrs. Blum, Ueberroth and Wilson a 10,000 share stock option under
the Company's Service Providers Stock Option Plan exercisable at the initial
public offering price and vesting over three years. The Company is considering
the adoption of a longer term stock option program for its independent
directors.

57
<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
COMPEN- STOCK STOCK COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) SATION(2) AWARDS(3) OPTIONS SATION(4)
--------------------------- ---- -------- -------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
James J. Didion............. 1995 $390,000 $279,160 $51,212 -- -- $1,520
Chairman of the Board and 1994 390,000 300,000 82,005 -- -- 1,105
Chief Executive Officer 1993 375,000 250,000 -- $90,000 -- 978
Gary J. Beban............... 1995 300,000 190,527 -- -- -- 1,520
President 1994 300,000 236,118 -- -- 10,000 273
1993 270,000 233,899 -- 60,000 -- --
Richard C. Clotfelter....... 1995 250,000 174,475 -- -- -- --
President--Westmark Realty 1994 225,000 123,192 3,506 32,500 20,000 --
Advisors L.L.C. 1993(5) 183,334 106,671 -- 150,000 40,000 --
David A. Davidson...........
Senior Executive Vice 1995 225,000 109,919 19,295 -- -- 1,291
President, Chief Financial 1994 215,000 112,660 16,032 -- 20,000 1,105
Officer and Treasurer 1993 185,000 72,730 -- 60,000 -- 978
Thaddeus W. Jones........... 1995 210,000 173,079 -- -- -- --
Senior Executive Vice 1994 210,000 177,259 -- -- 20,000 --
President 1993 210,000 140,514 -- -- -- --
Senior Executive Director--
CBC/Madison Advisory Group
George J. Kallis............
Senior Executive Vice 1995 200,000 153,538 8,770 -- -- --
President--Brokerage 1994 200,000 177,944 10,129 32,500 -- 747
Western U.S. 1993 170,000 140,805 -- -- -- 876
Charles O. McBride.......... 1995 194,479 134,345 4,760 -- -- 1,520
Senior Executive Vice 1994 189,000 137,735 5,722 -- -- 1,105
President/ 1993 183,750 76,366 -- -- -- 978
Chief Operating Officer--
Property Management Services
Richard A. Pogue............ 1995 192,000 143,767 -- -- -- 1,520
Senior Executive Vice 1994 177,708 158,780 4,431 97,500 40,000 254
President--Brokerage 1993 125,000 72,035 -- -- -- --
Kenneth D. Sandstad.........
Senior Executive Vice 1995 200,000 139,580 1,328 -- -- 1,520
President--Brokerage 1994 200,000 162,887 -- -- -- 1,105
Eastern U.S. 1993 185,000 116,367 -- -- -- 978
John L. Stanfill............ 1995 197,600 142,581 -- -- -- --
President--CB Commercial 1994 190,000 146,485 -- 32,500 -- --
Investment Properties 1993 175,000 120,253 -- -- -- --
</TABLE>

58
<PAGE>

- --------
(1) 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 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.
(2) 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
1994, 1995 or 1996 for investment in shares of the Company's Common Stock
was credited with such shares based on the appraised value of such shares
at the time the election to defer was 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.
(3) 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); Mr. McBride--0; Mr. Pogue--15,000
($149,100); Mr. Sandstad--0; and Mr. Stanfill--5,000 ($49,700). 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.
(4) 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.
(5) 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. At
December 31, 1995 all options listed below had exercise prices which exceeded
the value of the underlying stock and, therefore, had no value.

<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.

59
<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
920,000 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 Stock Option 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 1996 and 1995
options to purchase 467 and 4,106 shares, respectively, of Common Stock were
exercised. As of September 30, 1996, options to purchase 36,140 shares of
Common Stock are outstanding. In October 1996, the Compensation Committee
(Messrs. Blum, Ueberroth and Wilson abstaining) granted each of Messrs. Blum,
Ueberroth and Wilson a 10,000 share option under the Service Providers Plan.
Each option is exercisable at the initial public offering price and vests over
a three year period.

1996 Equity Incentive Plan. In November 1995 the Board of Directors
authorized, and in January 1996 the Compensation Committee of the Board
adopted, a restricted stock purchase plan (the "Equity Incentive Plan") for
the purpose of retaining selected executives by offering them 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. In January 1996, the Compensation Committee awarded ten
senior executives a total of approximately 540,000 shares under the Equity
Incentive Plan, subject to the authority of Chief Executive Officer to reduce
any grants. After reductions a total of 510,906 shares were purchased. The
following amounts of shares were purchased by the individuals named in the
Summary Compensation Table above: James J. Didion--175,027; Gary J. Beban--
53,910; Richard C. Clotfelter--33,750; George J. Kallis--42,750; Richard A.
Pogue--35,750; Kenneth D. Sandstad--44,586; and John L. Stanfill--54,383. 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, and the shares previously
acquired were purchased at $10.00 per share. 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 any 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 30, 1996, Cap Plan held
2,842,775 shares of the Company's Common Stock.

60
<PAGE>

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 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 September 30, 1996 are approximately $1.5 million in cash
(including interest) and $2.8 million in stock for a total of $4.3 million.

L.J. Melody Stock Option Acquisition Plan. A total of 90,750 shares of Class
B-2 Common Stock have been reserved for issuance under the L.J. Melody
Acquisition Stock Option Plan, which was adopted by the Board of Directors in
September 1996. Options for all of such shares have been issued at an exercise
price of $10.00 per share and vest over a period of five years at the rate of
5% per quarter. Options for 90,750 were outstanding as of September 30, 1996.

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"). Delaware Law provides that a
corporation may eliminate or limit the personal liability of a director to the
corporation or its stockholders, 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.

61
<PAGE>

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 "Westmark Senior
Subordinated Loan") from 399 Venture Partners, Inc., which owns 427,750 shares
of the Company's common stock, to the Acquisition Partnership. See "Principal
Stockholders." In November 1996, the terms of the Westmark Senior Subordinated
Loan were amended to provide for interest to be payable quarterly on a current
basis at a rate of 11%, effective June 30, 1995, and to provide for quarterly
amortization payments by the Company of $500,000. As amended, interest will
accrue on the Westmark Senior Subordinated Loan at the original interest rate
of 20%, but interest in excess of 11% will be forgiven upon the payment of the
Westmark Senior Subordinated Loan in full. If the Company defaults on its
payment obligations under the loan at any time, such excess interest will not
be forgiven and the Westmark Senior Subordinated Loan will bear interest at
the rate of 20% from June 30, 1995 plus 2% default interest. The terms of the
Westmark Senior Subordinated Loan originally provided for the interest to be
deferred until the debt payable to the Westmark sellers was paid or cash
collateralized in full.

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 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. If the
termination occurs prior to July 1, 1997, the severance benefit is $43,750 per
month multiplied by 36 less the number of months elapsed since June 30, 1996.
If the termination occurs on or after July 1, 1997, the severance benefit is
equal to approximately two years of salary and two years of 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."

62
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Company's voting capital stock as of September 30, 1996,
assuming the completion of the Recapitalization and the conversion of the
Class C-1 common stock 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
THE OFFERING THE OFFERING
----------------------- ------------
TITLE OF CLASS 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
Mellon Family
Investment
Company V (3)
Mill Street Extension
Laughlintown, PA 15655. Common 466,300 5.23% 3.51%
Gary J. Beban (6)....... Common 193,959 2.16% 1.46%
Richard C. Clotfelter
(4)(6)................. Common 113,835 1.27% *
David A. Davidson
(4)(6)................. Common 93,055 1.04% *
James J. Didion
(4)(5)(6).............. Common 403,067 4.48% 3.02%
Thaddeus Jones (6)...... Common 77,233 * *
George J. Kallis (4).... Common 114,864 1.28% *
Charles O. McBride
(4)(6)................. Common 56,631 * *
</TABLE>

63
<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>

Lawrence J. Melody (6).. Common 1,513 * *
Richard A. Pogue (4)(6). Common 71,468 * *
Kenneth D. Sandstad
(4)(6)................. Common 117,756 1.31% *
John L. Stanfill (6).... Common 94,822 1.06% *
Stanton D. Anderson
(6)(7)................. Common 27,351 * *
Richard C. Blum (6)(8).. Common 437,500 4.91% 3.30%
Frank C. Carlucci (6)... Common 2,287 * *
Daniel A. D'Aniello
(6)(9)................. Common 306,734 3.44% 2.31%
Hiroaki Hoshino (10).... -- -- -- --
Takayuki Kohri (11)..... -- -- -- --
Paul C. Leach........... -- -- -- --
Frederic V. Malek
(6)(12)................ Common 318,808 3.58% 2.40%
Jeffrey S. Morgan....... Common 9,837 * *
Peter V. Ueberroth...... Common 10,000 * *
Gary L. Wilson.......... -- -- -- --
All directors and
executive officers as a
group
(24 persons) (13)...... Common 2,552,145 27.27% 18.62%
</TABLE>
- --------
* Less than 1%.
(1) Represents options to purchase 2,609 shares of Common Stock exercisable
on or before November 30, 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 225,000 shares of Common Stock issued in the name of Richard
King Mellon Foundation.
(4) 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.
(5) Includes 6,000 shares held by a trust for the benefit of three members of
Mr. Didion's immediate family.
(6) 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 30, 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--65,000; Carlucci--2,287;
Clotfelter--50,000; D'Aniello--4,235 (options issued to Carlyle);
Davidson--50,000; Didion--75,000; Jones--30,000; Kallis--40,000; Malek--
5,934; McBride--40,000; Melody--1,513; Pogue--20,000; 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.

64
<PAGE>

(7) Includes shares of Class C-1 common stock which will convert into 23,116
shares of Common Stock upon consummation of the Offering.
(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 30, 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 165,299
shares of Common Stock upon the consummation of the Offering.
(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 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 206,624
shares of Common Stock upon the consummation of the Offering.
(13) Includes 448,204 shares of Common Stock subject to outstanding options
exercisable on or before November 30, 1996.

65
<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, as of September 30, 1996, there were 8,911,091 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, subject to the payment of any
amounts which holders of Preferred Stock are entitled to receive in preference
to holders of Common Stock, to the extent any assets of the Company remain
available for distribution to stockholders, the holders of Common Stock and
Preferred Stock are entitled to receive $10.00 per share, reduced by any prior
payments to such holder in connection with any liquidation, dissolution or
winding up of the Company (not including accrued and unpaid dividends and
accrued interest thereon). The holders of Common Stock will be entitled to
share in the remaining assets of the Company legally available for
distribution. 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. Subject to certain limitations set forth in the
Certificate of Incorporation, 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 $0.25
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. Until the Company has completed its acquisition program, it
does not intend to pay the dividend on the Preferred Stock. As a consequence,
such dividend will accumulate and bear interest which will be paid on a
current basis, and the

66
<PAGE>

Company will be prohibited from voluntarily pre-paying long-term debt until
such accumulated dividend and interest have been paid in full.

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, for amounts comparable to the amount of any
unpaid dividend, plus 2 1/2%. 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. Until all
accrued and unpaid Preference Dividends are paid, no shares of Common Stock
will be redeemed by the Company (other than in connection with the
Recapitalization and other than shares issued pursuant to stock option, stock
purchase or similar plans), and no dividends will be paid on any shares of
Preferred Stock (other than the Series A-1, Series A-2 and Series A-3
Preferred Stock) or Common Stock.

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 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 Series A-1 Preferred 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.

67
<PAGE>

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 immediately 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,
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 certain transactions, including the
Offering, 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 by
operation of law.

68
<PAGE>

THE RECAPITALIZATION

The Company has obtained stockholder approval for the Recapitalization
pursuant to which, among other things, the Company's Certificate of
Incorporation and Bylaws will be amended. The Company's Certificate of
Incorporation which was in effect prior to the Offering will be amended 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 the holders of a majority 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, the Company's Bylaws 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 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.

TRANSFER AGENT AND REGISTRAR

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

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<PAGE>

THE COMPANY'S CREDIT AGREEMENTS

The following summary is a description of certain provisions of the
Company's Senior Secured Credit Agreement and Senior Subordinated Credit
Agreement that will be in effect after 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 such agreements. Copies of the Senior Secured Credit
Agreement and the Senior Subordinated Credit Agreement are filed as exhibits
to the Registration Statement of which this Prospectus forms a part.

Senior Secured Debt Repayment and Amendments

After the consummation of the Offering, approximately $57.2 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. Effective upon consummation of the Offering,
the Senior Secured Credit Agreement will be amended and restated to contain
substantially the terms and conditions described below. All indebtedness
outstanding under the Senior Secured Credit Agreement other than that
outstanding under Revolving Credit Facility B 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. Amounts outstanding on Revolving Credit Facility B
will bear interest at a rate equal to, at the Company's option, LIBOR plus 300
basis points or the prime rate plus 200 basis points. Principal payments on
the Term Debt of $2.625 million each will be due quarterly, commencing March
31, 1997, with final payment of $4.8 million on December 31, 2001. The
availability period of Revolving Credit Facility A ends December 31, 2001. As
proposed, effective upon completion of the Offering, Revolving Credit Facility
B will be converted into a facility that can be used for acquisitions. As
proposed, principal payments on amounts outstanding under such facility will
be paid quarterly at the rate of 5% of the outstanding balance. All amounts of
principal which are prepaid may be reborrowed until the December 31, 1999
expiration date of such facility. The Company has begun discussions to
increase Revolving Credit Facility B from $10 million to $20 million sometime
in 1997 and to extend the due date until December 31, 2001.

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. 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 as well as the stock of certain of the Company's
subsidiaries.

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,

70
<PAGE>

payment of taxes, maintenance of properties, maintenance of insurance, the
granting or existence of certain liens, incurrence 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 incurrence of
indebtedness or regarding limitations on liens 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
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 (other than the Company's Capital Accumulation
Plan), of more than 25% of the total voting power of all classes of the
Company's equity securities (excluding the acquisition by the Underwriters of
Common Stock in the Offering) or (ii) a change in the board of directors of
the Company such that board members at the beginning of any one-year period no
longer constitute a majority of the board at the end of such period, or (iii)
the Company ceases to own 100% of the outstanding common stock of the
Company's primary operating subsidiary. 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.

Senior Subordinated Debt Amendments

After the consummation of the Offering, approximately $65.7 million of
indebtedness will be outstanding under the Company's Senior Subordinated
Credit Agreement. Effective upon consummation of the Offering the Senior
Subordinated Credit Agreement will be amended and restated. As so amended such
credit agreement will contain financial and other covenants and events of
default no more restrictive than those under the Senior Secured Credit
Agreement. Interest on the senior subordinated debt, will be LIBOR plus
125 basis points from January 1, 1997 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 principal outstanding under the Senior Subordinated
Credit Agreement will be due and payable in full on July 23, 2002 and may not
be prepaid while any amount is unpaid under the Senior Secured Credit
Agreement.

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 Common Stock has been approved for listing
on the Nasdaq National Market, 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

71
<PAGE>

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
13,258,091 shares of Common Stock, of which approximately 6.8 million shares
will be freely tradable without restriction.

The Company's directors, executive officers and certain other officers and
certain stockholders, including the trustee of the Company's 401(k) plan, on
behalf of its employee plan participants, who collectively hold an aggregate
of approximately 6.8 million shares of Common Stock (including shares
represented by exercisable stock options and excluding shares held by the
Company as fiduciary on behalf of its Deferred Compensation Plan
participants), have agreed subject 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 180 days from the date of this Prospectus (the "Lockup Period").
Following the expiration of the Lockup Period, approximately 1.8 million
shares of Common Stock, including shares issuable upon the exercise of certain
options and excluding shares held by the Company as fiduciary on behalf of its
Deferred Compensation Plan participants, will be available for sale in the
public market subject to compliance with Rule 144, and approximately 5 million
shares will be eligible for sale without restriction. 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 Preferred
Stock or 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. 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 133,000 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.

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<PAGE>

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.

73
<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 OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................................... 1,373,500
Montgomery Securities.............................................. 1,373,500
Alex. Brown & Sons Incorporated.................................... 100,000
Dean Witter Reynolds Inc. ......................................... 100,000
Dillon, Read & Co. Inc. ........................................... 100,000
Donaldson, Lufkin & Jenrette Securities Corporation................ 100,000
A.G. Edwards & Sons, Inc. ......................................... 100,000
Hoefer & Arnett Incorporated....................................... 100,000
Lehman Brothers Inc. .............................................. 100,000
J.P. Morgan Securities Inc. ....................................... 100,000
Morgan Stanley & Co. Incorporated.................................. 100,000
PaineWebber Incorporated........................................... 100,000
Prudential Securities Incorporated................................. 100,000
Robertson, Stephens & Company LLC.................................. 100,000
Crowell, Weedon & Co. ............................................. 50,000
Genesis Merchant Group Securities.................................. 50,000
Legg Mason Wood Walker, Incorporated............................... 50,000
Ragen MacKenzie Incorporated....................................... 50,000
The Seidler Companies Incorporated................................. 50,000
Sutro & Co. Incorporated........................................... 50,000
Van Kasper & Company............................................... 50,000
Wedbush Morgan Securities.......................................... 50,000
---------
Total.............................................................. 4,347,000
=========
</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 $.80 per share. The
Underwriters may allow, and such dealers may re-allow, a discount not in
excess of $.10 per share to certain other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
The Underwriters have agreed to reimburse certain expenses of the Company in
connection with the Offering.

The Company has granted the several Underwriters an option, exercisable
within 30 days after the date hereof, to purchase up to an aggregate of
652,050 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.

74
<PAGE>

The Company's executive officers and certain other officers, directors and
certain other stockholders of the Company, including the trustee of the
Company's 401(k) plan on behalf of its employee plan participants, who
collectively hold in the aggregate approximately 6.8 million shares of Common
Stock (including shares represented by exercisable stock options and excluding
shares held by the Company as fiduciary for its Deferred Compensation Plan
participants), 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 180 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.

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 LLP, 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 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

75
<PAGE>

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 balance sheet as of September 30, 1996 and
statements of operations for the nine months ended September 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
Offering and the Recapitalization as if they occurred as of September 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 BALANCE SHEET
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
AS OF SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
CB COMMERCIAL ADJUSTMENTS OFFERING
------------- ----------- ---------
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents............. $ 24,903 $ -- $ 24,903
Receivables, net...................... 30,741 -- 30,741
Deferred taxes........................ 3,983 -- 3,983
Prepaid expense and other............. 7,498 -- 7,498
--------- -------- ---------
Total current assets................ 67,125 -- 67,125
Property and equipment, net............. 41,795 -- 41,795
Goodwill, net........................... 62,999 -- 62,999
Other intangibles, net.................. 12,138 (1,478)(a) 10,660
Inventoried property.................... 7,355 -- 7,355
Deferred tax asset...................... 34,562 15,500 (b) 50,062
Other assets, net....................... 6,601 -- 6,601
--------- -------- ---------
Total assets........................ $ 232,575 $ 14,022 $ 246,597
========= ======== =========
Current Liabilities:
Compensation and employee benefits.... $ 28,489 $ -- $ 28,489
Accounts payable and accrued expenses. 17,931 -- 17,931
Senior revolving credit lines......... 8,000 -- 8,000
Reserve for bonus and profit sharing.. 11,292 -- 11,292
Current maturities of long-term debt.. 16,541 -- 16,541
Current portion of capital lease obli-
gations.............................. 2,669 -- 2,669
--------- -------- ---------
Total current liabilities........... 84,922 -- 84,922
--------- -------- ---------
Long-term debt, less current maturities
Senior term loans..................... 142,101 (74,652)(c) 67,449
Senior subordinated term loans........ 78,462 (5,302)(c) 73,160
Inventoried property loan............. 7,470 -- 7,470
Other long-term debt.................. 3,953 -- 3,953
--------- -------- ---------
Total long-term debt................ 231,986 (79,954) 152,032
--------- -------- ---------
Other long-term liabilities............. 22,561 -- 22,561
--------- -------- ---------
Total liabilities................... 339,469 (79,954) 259,515
--------- -------- ---------
Stockholders' Equity (Deficit)
Preferred stock, $.01 par value....... 40 -- 40
Common stock, $.01 par value.......... 101 32 (c) 133
Additional paid-in capital............ 117,826 79,922 (c) 197,748
Notes receivable from sale of stock... (5,109) -- (5,109)
Accumulated deficit................... (219,752) 15,500 (b) (205,730)
(1,478)(a)
--------- -------- ---------
Total stockholders' equity (defi-
cit)............................... (106,894) 93,976 (12,918)
--------- -------- ---------
Total liabilities and stockholders'
equity (deficit)................... $ 232,575 $ 14,022 $ 246,597
========= ======== =========
</TABLE>
- -------
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(a) Reflects pro-rata write-off of unamortized debt costs related to the
portion of debt to be extinguished.
(b) Reflects deferred tax asset that will be recognized as a result of the
Offering due to the estimated increase in taxable income resulting from
reduced interest expense from the repayment, in part, of the Company's
indebtedness.
(c) Reflects the Recapitalization and the Offering, net of estimated
underwriting discount and Offering expenses, and use of proceeds from the
Offering to repay, in part, the Company's indebtedness. The
Recapitalization largely involves the conversion of various classes of the
Common Stock into a single class, the addition of a convertibility feature
to the preferred stock and the repurchase of 800,000 shares of Class C-R
and 2 shares of Class J common stock for $.01 per share. The
Recapitalization will not have a material effect on the Company's balance
sheet and results only in reclassifications within the Common Stock
accounts.

P-2
<PAGE>

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

L.J.
MELODY
CB COMMERCIAL SIX MONTHS PRO FORMA PRO FORMA
NINE MONTHS ENDED ENDED ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA
SEPTEMBER 30, JUNE 30, ----------- ACQUISITION ----------- ACQUISITION
1996 1996 ACQUISITION ONLY OFFERING AND OFFERING
----------------- ---------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue................. $ 390,863 $ 3,417 $ -- $ 394,280 $ -- $ 394,280
Costs and Expenses:
Commissions, fees and
other incentives ..... 195,465 3,612 (1,070)(a) 198,240 -- 198,240
233 (b)
Operating,
administrative and
other................. 159,196 1,545 -- 160,741 -- 160,741
Depreciation and amor-
tization ............. 9,749 163 355 (c) 10,267 10,267
---------- ------- ------- ---------- ------- ----------
Operating income (loss). 26,453 (1,903) 482 25,032 -- 25,032
Interest income......... 1,035 145 -- 1,180 -- 1,180
Interest expense........ 17,883 -- 216 (d) 18,099 (4,582)(f) 14,166
(436)(g)
1,085 (h)
---------- ------- ------- ---------- ------- ----------
Income (loss) before
provision (benefit) for
income tax............. 9,605 (1,758) 266 8,113 3,933 12,046
---------- ------- ------- ---------- ------- ----------
Provision (benefit) for
income tax ............ 4,610 -- (287)(e) 4,323 1,573 (i) 5,896
Reduction of valuation
allowances............. (40,400) -- -- (40,400) -- (40,400)
---------- ------- ------- ---------- ------- ----------
Net provision (benefit)
for income tax......... (35,790) -- (287) (36,077) 1,573 (34,504)
---------- ------- ------- ---------- ------- ----------
Net income (loss)....... $ 45,395 $(1,758) $ 553 $ 44,190 $ 2,360 $ 46,550
========== ======= ======= ========== ======= ==========
Per share data:
Net income per common
and common equivalent
share outstanding..... $ 3.28 $ 3.20 $ 3.35 (j)
========== ========== ==========
Weighted average common
and common equivalent
shares outstanding.... 13,820,721 13,820,721 13,004,083 (k)
========== ========== ==========
</TABLE>
- -------
NOTES TO UNAUDITED PRO FORMA 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.
(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 $80.0
million of the total indebtedness, bearing interest estimated at 8.2% for
senior secured debt and 6.2% for senior subordinated debt. 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.
Does not reflect the $15.5 million benefit attributable to a reduction in
valuation allowances since it is a nonrecurring item.

P-3
<PAGE>

(j) Reflects the effect of a $0.25 per quarter dividend on shares of Preferred
Stock.

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

<TABLE>
<S> <C>
Weighted average common and common equivalent shares--
historical.................................................... 13,820,721
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
conversion of Class C-1 common stock.......................... (363,636)
Reduction in shares of common stock resulting from the
repurchase of Class C-R and Class J common stock.............. (800,002)
Shares issued in the Offering.................................. 4,347,000
----------
Weighted average common and common equivalent shares--pro
forma......................................................... 13,004,083
==========
</TABLE>

P-4
<PAGE>

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

<TABLE>
<CAPTION>
WESTMARK
CB COMMERCIAL SIX MONTHS L.J. MELODY PRO FORMA PRO FORMA
YEAR ENDED ENDED YEAR ENDED ADJUSTMENTS ADJUSTMENTS
DECEMBER 31, JUNE 30, DECEMBER 31, ------------ PRO FORMA ----------- PRO FORMA
1995 1995 1995 ACQUISITIONS ACQUISITIONS OFFERING COMBINED
------------- ---------- ------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $ 468,460 $10,887 $10,337 $ -- $ 489,684 $ -- $ 489,684
Costs and Expenses:
Commissions, fees and
other incentives...... 239,018 -- 6,546 -- 245,564 -- 245,564
Operating,
administrative and
other................. 187,968 9,285 2,393 50 (a) 200,341 -- 200,341
178 (b)
467 (c)
Depreciation and
amortization.......... 11,631 163 438 17 (d) 14,502 14,502
2,253 (e)
----------- ------- ------- ------- ----------- ------- -----------
Operating income........ 29,843 1,439 960 (2,965) 29,277 -- 29,277
Interest income......... 1,674 36 216 -- 1,926 -- 1,926
Interest expense........ 23,267 19 -- 2,794 (f) 26,080 (6,109)(i) 20,837
1,447 (j)
(581)(k)
----------- ------- ------- ------- ----------- ------- -----------
Income (loss) before
provision (benefit) for
income tax............. 8,250 1,456 1,176 (5,759) 5,123 5,243 10,366
Provision (benefit) for
income tax............. 841 -- -- 2 (g) 220 2,097 (l) 2,317
(623)(h)
----------- ------- ------- ------- ----------- ------- -----------
Net income (loss)....... $ 7,409 $ 1,456 $ 1,176 $(5,138) $ 4,903 $ 3,146 $ 8,049
=========== ======= ======= ======= =========== ======= ===========
Per share data:
Net income per common
and common equivalent
share outstanding..... $ 0.55 $ 0.36 $ 0.32(m)
=========== =========== ===========
Weighted average common
and common equivalent
shares outstanding.... 13,540,541 13,540,541 12,723,903(n)
=========== =========== ===========
</TABLE>
- -------
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
ACQUISITIONS:

(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 $80.0
million of the total indebtedness, bearing interest estimated at 8.2% for
the senior secured debt and 6.2% for senior subordinated debt, 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.
Does not reflect the $15.5 million benefit attributable to a reduction in
valuation allowances since it is a nonrecurring item.
(m) Reflects the effect of a $0.25 per quarter dividend on shares of Preferred
Stock.
(n) Reflects the effect of the Recapitalization as follows:

<TABLE>
<S> <C>
Weighted average common and common equivalent shares--
historical.................................................... 13,540,541
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
conversion of Class C-1 common stock.......................... (363,636)
Reduction in shares of common stock resulting from the
repurchase of Class C-R and Class J common stock.............. (800,002)
Shares issued in the Offering.................................. 4,347,000
----------
Weighted average common and common equivalent shares--pro
forma......................................................... 12,723,903
==========
</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 September 30, 1996 (Unaudited),
December 31, 1995 and 1994............................................. F-4
Consolidated Statements of Operations for the nine months ended
September 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 nine months ended
September 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 nine
months ended September 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-25
Statements of Changes in Owners' Equity (Deficit) for the six months
ended June 30, 1995 and 1994........................................... F-26
Statements of Cash Flows for the six months ended June 30, 1995 and
1994................................................................... F-27
Notes to Financial Statements........................................... F-28
DECEMBER 31, 1994 AND 1993
Independent Auditors' Report............................................ F-30
Balance Sheets as of December 31, 1994 and 1993......................... F-31
Statements of Income for the years ended December 31, 1994 and 1993..... F-32
Statements of Changes in Partners' Capital for the years ended December
31, 1994 and 1993...................................................... F-33
Statements of Cash Flows for the years ended December 31, 1994 and 1993. F-34
Notes to Financial Statements........................................... F-35
L.J. MELODY & COMPANY
JUNE 30, 1996 (UNAUDITED)
Consolidated Balance Sheet as of June 30, 1996.......................... F-38
Consolidated Statement of Operations and Retained Earnings for the six
months ended June 30, 1996............................................. F-39
Consolidated Statement of Cash Flows for the six months ended June 30,
1996................................................................... F-40
Notes to Consolidated Financial Statements.............................. F-41
DECEMBER 31, 1995
Report of Independent Public Accountants................................ F-45
Consolidated Balance Sheet as of December 31, 1995...................... F-46
Consolidated Statement of Operations and Retained Earnings for the year
ended December 31, 1995................................................ F-47
Consolidated Statement of Cash Flows for the year ended December 31,
1995................................................................... F-48
Notes to Consolidated Financial Statements.............................. F-49
</TABLE>

F-1
<PAGE>

INDEX TO FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
L.J. MELODY & COMPANY OF CALIFORNIA
JUNE 30, 1996 (UNAUDITED)
Balance Sheet as of June 30, 1996...................................... F-53
Statement of Operations for the six months ended June 30, 1996......... F-54
Statement of Shareholders' Equity for the six months ended June 30,
1996.................................................................. F-55
Statement of Cash Flows for the six months ended June 30, 1996......... F-56
Notes to Financial Statements.......................................... F-57
DECEMBER 31, 1995
Report of Independent Public Accountants............................... F-60
Balance Sheet as of December 31, 1995.................................. F-61
Statement of Operations for the year ended December 31, 1995........... F-62
Statement of Shareholders' Equity for the year ended December 31, 1995. F-63
Statement of Cash Flows for the year ended December 31, 1995........... F-64
Notes to Financial Statements.......................................... F-65
</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 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
certain matters discussed in Notes 1, 2
and 13, as to which the date is November 11, 1996)

F-3
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, --------------------
1996 1995 1994
------------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................. $ 24,903 $ 23,045 $ 28,770
Receivables, less allowance of $3,959,
$4,400 and $4,544 for doubtful accounts
at September 30, 1996, December 31, 1995
and 1994, respectively................... 30,741 28,322 23,723
Deferred taxes............................ 3,983 765 --
Prepaid expenses and other................ 7,498 4,889 3,682
--------- --------- ---------
Total current assets..................... 67,125 57,021 56,175
Property and equipment, net................ 41,795 44,500 47,140
Goodwill, net of accumulated amortization
of $6,949, $5,194 and $3,672 at September
30, 1996, December 31, 1995 and 1994...... 62,999 59,491 22,251
Other intangible assets, net of accumulated
amortization of $251,690, $249,726 and
$245,722 at September 30, 1995 and 1994... 12,138 10,783 6,192
Inventoried property....................... 7,355 7,355 7,355
Deferred taxes............................. 34,562 -- --
Other assets, net.......................... 6,601 11,804 10,987
--------- --------- ---------
Total assets............................. $ 232,575 $ 190,954 $ 150,100
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Compensation and employee benefits........ $ 28,489 $ 28,324 $ 26,989
Accounts payable and accrued expenses..... 17,931 19,245 19,429
Senior revolving credit lines............. 8,000 -- --
Reserve for bonus and profit sharing...... 11,292 12,997 11,573
Current maturities of long-term debt...... 16,541 8,250 4,500
Current portion of capital lease obliga-
tions.................................... 2,669 2,592 1,493
--------- --------- ---------
Total current liabilities................ 84,922 71,408 63,984
--------- --------- ---------
Long-term debt, less current maturities:
Senior term loans......................... 142,101 160,394 160,390
Senior subordinated term loans............ 78,462 78,963 63,694
Inventoried property loan................. 7,470 7,470 7,470
Other long-term debt...................... 3,953 3,315 2,017
--------- --------- ---------
Total long-term debt..................... 231,986 250,142 233,571
--------- --------- ---------
Other long-term liabilities................ 22,561 24,092 17,093
--------- --------- ---------
Total liabilities........................ 339,469 345,642 314,648
--------- --------- ---------
Commitments and contingencies
Stockholders' Equity (Deficit):
Preferred stock, $.01 par value........... 40 40 40
Common stock, $.01 par value.............. 101 93 89
Additional paid-in capital................ 117,826 110,326 108,002
Notes receivable from sale of stock....... (5,109) -- --
Accumulated deficit....................... (219,752) (265,147) (272,679)
--------- --------- ---------
Total stockholders' equity (deficit)..... (106,894) (154,688) (164,548)
--------- --------- ---------
Total liabilities and stockholders' eq-
uity (deficit).......................... $ 232,575 $ 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>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
---------------------- --------------------------------
1996 1995 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue................. $ 390,863 $ 324,890 $ 468,460 $ 428,988 $ 392,037
Costs and Expenses:
Commissions, fees and
other incentives...... 195,465 167,569 239,018 225,085 206,070
Operating,
administrative and
other................. 159,196 134,839 187,968 170,234 160,073
Depreciation and
amortization.......... 9,749 8,173 11,631 8,091 49,606
---------- ---------- ---------- ---------- ----------
Operating income (loss). 26,453 14,309 29,843 25,578 (23,712)
Interest income......... 1,035 1,228 1,674 1,109 915
Interest expense........ 17,883 16,944 23,267 17,362 14,240
---------- ---------- ---------- ---------- ----------
Income (loss) before
provision for income
tax.................... 9,605 (1,407) 8,250 9,325 (37,037)
Provision for income tax
....................... 4,610 238 841 152 112
Reduction of valuation
allowances............. (40,400) -- -- -- --
---------- ---------- ---------- ---------- ----------
Net provision (benefit)
for income tax......... (35,790) 238 841 152 112
---------- ---------- ---------- ---------- ----------
Net income (loss)....... $ 45,395 $ (1,645) $ 7,409 $ 9,173 $ (37,149)
========== ========== ========== ========== ==========
Per share data:
Net income (loss) per
common and common
equivalent share
outstanding........... $ 3.28 $ (0.14) $ 0.55 $ 0.69 $ (3.23)
========== ========== ========== ========== ==========
Weighted average common
and common equivalent
shares outstanding.... 13,820,721 11,858,116 13,540,541 13,305,118 11,504,644
========== ========== ========== ========== ==========
</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>
NINE MONTHS
ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- ----------------------------
1996 1995 1995 1994 1993
--------- --------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)......... $ 45,395 $ (1,645) $ 7,409 $ 9,173 $(37,149)
Adjustments to reconcile
net income (loss) to net
cash provided by
operating activities:
Depreciation and amorti-
zation excluding de-
ferred financing fees... 9,749 8,173 11,631 8,091 49,606
Amortization of deferred
financing costs......... 1,065 1,018 1,392 1,551 1,784
Equity interest in (earn-
ings) loss of unconsoli-
dated subsidiaries...... -- -- 180 (44) (35)
Provision for (reversal
of) doubtful accounts... (44) 71 306 696 3,525
Deferred interest........ 6,515 4,946 7,738 2,338 --
Deferred compensation.... 1,672 1,286 1,762 877 --
Deferred taxes........... (36,906) -- -- -- --
(Decrease) increase in re-
ceivables................ (2,242) (1,110) (1,778) 1,534 (6,319)
Decrease (increase) in
prepaid expenses and
other assets............. (158) 236 396 (885) 1,179
(Decrease) increase in
compensation and employee
benefits payable......... (147) (5,537) 3,276 7,222 5,841
(Decrease) increase in
other operating liabili-
ties..................... (729) (6,887) (1,680) 865 1,177
--------- --------- -------- -------- --------
Net cash provided by op-
erating activities...... 24,170 551 30,632 31,418 19,609
--------- --------- -------- -------- --------
Cash flows from investing
activities:
Purchases of property and
equipment................ (2,302) (1,798) (2,143) (4,250) (4,841)
Proceeds from collections
on notes receivable...... 2,721 205 215 445 121
Disposition of property
and equipment............ 10 94 128 195 107
Acquisitions of businesses
including net assets ac-
quired, intangibles and
goodwill................. (8,625) (20,049) (22,376) -- --
Other investing activi-
ties, net................ (1,321) (412) (712) (255) (1,016)
--------- --------- -------- -------- --------
Net cash used in invest-
ing activities.......... (9,517) (21,960) (24,888) (3,865) (5,629)
--------- --------- -------- -------- --------
Cash flows from financing
activities:
Proceeds from senior re-
volving credit line...... 21,000 14,000 14,000 11,000 9,038
Repayment of senior re-
volving credit line...... (13,000) (4,000) (14,000) (11,000) (23,038)
Repayment of senior term
loans.................... (18,233) (14,797) (18,997) (4,100) --
Proceeds from inventoried
property loan............ -- -- -- -- 270
Repayment of capital
leases................... (2,167) (1,524) (2,167) -- --
Proceeds from senior sub-
ordinated loan........... -- 10,000 10,000 -- --
Other financing activi-
ties, net................ (395) (198) (305) (823) (932)
--------- --------- -------- -------- --------
Net cash provided by
(used in) financing ac-
tivities................ (12,795) 3,481 (11,469) (4,923) (14,662)
--------- --------- -------- -------- --------
Net increase (decrease) in
cash and cash equivalents. 1,858 (17,928) (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.......... $ 24,903 $ 10,842 $ 23,045 $ 28,770 $ 6,140
========= ========= ======== ======== ========
Supplemental disclosures of
cash flow information:
Cash paid during the pe-
riod for:
Interest (none capital-
ized)................... $ 9,981 $ 9,585 $ 14,410 $ 12,172 $ 12,610
Federal and state income
taxes................... $ 622 $ 364 $ 497 $ 152 $ 162
Non-cash investing and fi-
nancing activities:
Portion of Westmark ac-
quisition financed by
notes payable........... $ -- $ 20,283 $ 20,283 $ -- $ --
Portion of L.J. Melody
acquisition financed by
notes payable........... $ 3,667 $ -- $ -- $ -- $ --
Equipment acquired under
capital leases.......... $ 1,255 $ 2,658 $ 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>
NOTES
COMMON STOCK ADDITIONAL RECEIVABLE
PREFERRED COMMON OPTIONS PAID-IN FROM SALE ACCUMULATED
STOCK STOCK OUTSTANDING CAPITAL OF STOCK DEFICIT TOTAL
--------- ------ ------------ ---------- ---------- ----------- ---------
<S> <C> <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
translation
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
translation
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
translation
adjustment............ -- -- -- -- -- 123 123
---- ---- ---- -------- ------- --------- ---------
Balance, December 31,
1995................... 40 93 263 110,063 -- (265,147) (154,688)
Net income (unaudited). -- -- -- -- -- 45,395 45,395
Common stock issued for
deferred compensation,
bonuses and profit
sharing (unaudited)... -- 8 -- 7,404 -- -- 7,412
Common stock options
exercised............. -- -- (4) 100 -- -- 96
Notes receivable from
sale of stock......... -- -- -- -- (5,109) -- (5,109)
---- ---- ---- -------- ------- --------- ---------
Balance, September 30,
1996
(unaudited)............ $ 40 $101 $259 $117,567 $(5,109) $(219,752) $(106,894)
==== ==== ==== ======== ======= ========= =========
</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 NINE MONTHS ENDED SEPTEMBER 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 IPO (as
defined in Note 13, below), 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 on behalf of investors), corporate services,
property management, and real estate market research (collectively,
"Property and User Services"), and (ii) mortgage banking (mortgage 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.

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 and net income 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 nine months ended September
30, 1996 are not necessarily indicative of results to be expected for the
entire year ending December 31, 1996 or for any future period.

ACQUISITIONS. 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
("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 mortgage 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 to the sellers. 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 as 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, 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 resulting
from the acquisition 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.

F-8
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

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 an investment management and 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 $1.0 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"). In November 1996, the terms of the Westmark
Senior Subordinated Loan were amended to provide for interest to be payable
quarterly on a current basis at a rate of 11.0%, effective June 30, 1995,
and to provide for quarterly amortization payments by the Company of
$500,000. As amended, interest will accrue on the Westmark Senior
Subordinated Loan at the original interest rate of 20.0%, but interest in
excess of 11.0% will be forgiven upon the payment of the Westmark Senior
Subordinated Loan in full. If the Company defaults on its payment
obligations under the loan at any time, such excess interest will not be
forgiven and the Westmark Senior Subordinated Loan will bear interest at
the rate of 20.0% from June 30, 1995. The terms of the Westmark Senior
Subordinated Loan originally provided for the interest to be deferred until
the debt payable to the Westmark sellers was paid or cash collateralized in
full.

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 of 6 years, 5 years, and 10 years,
respectively. 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
30 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).

On April 11, 1995, the Company acquired certain assets of Langdon Rieder
Corporation ("Langdon Rieder"), a tenant advisory business. The purchase
price consisted of a closing payment of $1.5 million cash and a deferred
payment of $1.9 million payable over three years ($633,333 payable on each
of January 2, 1997, 1998 and 1999), plus interest on the entire outstanding
portion of the deferred payment at an annual rate of 8.0%. The deferred
payment is subject to forfeiture under certain circumstances. 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 Westmark and Langdon Rieder, along with the
related goodwill, intangibles and indebtedness resulting from the
acquisitions, 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 nine months ended September 30, 1996 and 1995 and for the
years ended December 31, 1995 and 1994,

F-9
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

assuming the Westmark and Langdon Rieder acquisitions had occurred on
January 1, 1994, and the L.J. Melody acquisition had occurred on January 1,
1995 would have been as follows:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- -----------------------
1996 1995 1995 1994
-------- -------- ----------- -----------
(UNAUDITED)
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C>
Revenue.......................... $394,280 $337,041 $ 489,684 $ 452,284
Net income (loss)................ 44,190 (5,681) 4,903 4,092
Net income (loss) per common and
common equivalent share
outstanding..................... 3.20 (0.48) 0.36 0.31
</TABLE>

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INTERIM FINANCIAL INFORMATION

The accompanying unaudited consolidated financial statements as of
September 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 nine
months ended September 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, 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 September 30, 1996
include approximately $3.7 million of deferred financing costs and $8.5
million of intangibles stemming from the Westmark, Langdon Rieder and L.J.
Melody acquisitions.

Goodwill of $63.0 million and $59.5 million at September 30, 1996 and
December 31, 1995, respectively, consists of $21.1 million and $21.6
million, respectively, related to the Acquisition and $41.9 million and
$37.9 million, respectively, related to Westmark and other acquisitions.
Goodwill related to the Acquisition

F-10
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995
is being amortized over an estimated useful life of 40 years. Goodwill
related to the Westmark and other acquisitions is being amortized over an
estimated useful life of 30 years.

The Company periodically evaluates the recoverability of the carrying
amount of goodwill and other intangible assets. In this assessment, the
Company considers macro market conditions and trends in the Company's
relative market position, its capital structure, lender relationships and
the estimated undiscounted future cash flows associated with these assets.
If any of the significant assumptions inherent in this assessment change in
a material way due to market, economic and/or other factors, the
recoverability is assessed based on the revised assumptions and resultant
undiscounted cash flows. If such analysis indicates impairment, it would be
recorded in the period such changes occur based on the fair value of the
goodwill and other intangible assets.

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, 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)

F-11
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

PER SHARE INFORMATION

Earnings per share is calculated based on weighted average common shares
and dilutive stock options outstanding. This calculation includes all
issuances of stock and stock options made within the last twelve months as
promotional shares for all periods presented. 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>
NINE MONTHS ENDED
SEPTEMBER 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........... 1,854,113 1,850,000 1,850,034 1,850,000 1,850,000
Class B-2........... 6,079,259 5,636,550 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 --
Promotional shares... 250,749 371,566 371,566 371,566 371,566
Stock options........ 36,600 -- 40,679 40,713 --
---------- ---------- ---------- ---------- ----------
13,820,721 11,858,116 13,540,541 13,305,118 11,504,644
========== ========== ========== ========== ==========
</TABLE>

NEW ACCOUNTING PRONOUNCEMENTS

The Company adopted 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," SFAS No. 122, "Accounting for Mortgage
Servicing Rights" and SFAS No. 123, "Accounting for Stock-Based
Compensation," on January 1, 1996. These statements did not have a material
impact on the financial statements (see Note 13).

In June 1996, the Financial Accounting Standards Board issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities." This statement is required to be adopted by
the Company in 1997 and applies only to the operations of L.J. Melody.
Under SFAS No. 125, the Company will be required to recognize, at fair
value, financial and servicing assets it has acquired control over and
related liabilities it has incurred and amortize them over the period of
estimated net servicing income or loss. Write-off of the asset is required
when control is surrendered and of the liability when extinguished. The
Company does not currently recognize the value of financial and servicing
assets when loans are originated. The adoption of the new statement will
result in the recognition of amortization cost along with income from
servicing as services are performed and the recognition of gains or losses
at the time servicing rights are sold. Management of the Company has not
yet determined the impact, if any, that the adoption of this standard will
have on the Company's financial position or results of operations.

F-12
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

RESTATEMENT

Certain reclassifications, which do not have any effect on net income, have
been made to the 1994 and 1993 financial statements to conform to the 1995
presentation and to the September 30, 1995 financial statements and to the
December 31, 1995 balance sheet to conform to the September 30, 1996
presentation.

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-13
<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 common 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 at various dates through September 2001. Options for
960,000 Class B-2 shares were outstanding as of December 31, 1995. Options
for 920,000 Class B-2 shares were outstanding as of September 30, 1996.

A total of 600,000 shares of Class B-1 common 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 1996 and 1995, options
to purchase 467 and 4,106 shares, respectively, of Class B-1 common stock
were exercised. As of December 31, 1995, options to purchase 36,607 shares
of Class B-1 common stock were outstanding at $262,500. As of September 30,
1996, options to purchase 36,140 shares of Class B-1 common stock were
outstanding at $258,750. In October 1996, options to purchase 30,000 shares
were granted to certain directors at the IPO price and vest over a three-
year period (see Note 13).

A total of 90,750 shares of Class B-2 common stock have been reserved for
issuance under the L.J. Melody Acquisition Stock Option Plan, which was
adopted by the Board of Directors in September 1996. Options for all such
shares have been issued at an exercise price of $10 per share and vest over
a period of five years at the rate of five percent per quarter. Options for
90,750 shares of Class B-2 common stock were outstanding as of September
30, 1996.

F-14
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

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 common 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. As of September 30, 1996, the Company issued 510,906
shares of Class B-2 stock to certain key employees at $10 per share. The
related promissory notes are also included in stockholders' equity.

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 common 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 September
30, 1996 were approximately $1.5 million in cash (including interest) and
$2.8 million in stock, for a total of $4.3 million all of which was charged
to expense in the period of deferral.

F-15
<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-16
<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. As of December 31, 1995, the Company did not have any
dividend payment capacity based on the terms of its loan covenants. 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 to the Company 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-17
<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 10.0% 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 12.0% if
such thresholds were met. Effective January 1, 1991 the Preferred
Stockholders waived their rights to dividends and agreed that no dividends
would accrue 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 60.0% of a share.

F-18
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

The Company's Class J common 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 common 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 common 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 common 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 common 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 September 30, 1996, 6,620,154 shares of Class B-2 common stock were
outstanding.

9. INCOME TAXES

The regular federal tax return loss carryforward is $202.5 million as of
September 30, 1996, expiring in the years 2004 through 2008 as follows:
$11.6 million--2004; $61.9 million--2005; $76.2 million--2006;
38.0 million--2007; and $14.8 million--2008. The loss carryforward for
federal alternative tax purposes is $196.0 million as of September 30, 1996
due to depreciation differences. Use of the federal alternative 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 current federal tax includes alternative minimum tax
paid, for which credit carryforwards are available, totaling $0.6 million
as of September 30, 1996. Loss carryforwards for state income tax purposes
expire in various states beginning in 1995.

The tax provision for the nine months ended September 30, 1996 and the
years ended December 31, 1995, 1994 and 1993 consisted of the following:

<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, -------------------------
1996 1995 1994 1993
-------------- ------- ------- -------
<S> <C> <C> <C> <C>
Federal:
Current......................... $ 388 $ 503 $ 47 $ --
Deferred tax.................... 3,549 1,231 (3,563) 7,758
Reduction of valuation
allowances..................... (40,400) (1,231) 3,563 (7,758)
-------- ------- ------- -------
$(36,463) $ 503 $ 47 $ --
State:
Current......................... 419 338 105 112
Deferred........................ 254 209 (773) 1,683
Reduction of valuation
allowances..................... -- (209) 773 (1,683)
-------- ------- ------- -------
673 338 105 112
-------- ------- ------- -------
$(35,790) $ 841 $ 152 $ 112
======== ======= ======= =======
</TABLE>

F-19
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

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:

<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED DECEMBER
ENDED 31,
SEPTEMBER 30, --------------------------
1996 1995 1994 1993
------------- ------ ------ ------
<S> <C> <C> <C> <C>
Federal statutory tax rate......... 35 % 34 % 35 % (35)%
Permanent differences, including
goodwill, meals and entertainment. 8 14 9 1
State taxes, net of federal bene-
fit............................... 5 3 6 (4)
Utilization of previously unrecog-
nized net operating losses........ -- (41) (48) --
Valuation allowance for net operat-
ing losses and other deferred tax
assets............................ (421) -- -- 38
---- ------ ------ ------
Effective tax rate................. (373)% 10 % 2 % 0 %
==== ====== ====== ======
</TABLE>

Beginning in 1992 the Company implemented Statement of Financial Accounting
Standards No. 109, the modified liability method of accounting for income
taxes. Until the third quarter of 1996, the resulting net deferred tax
asset had been fully reserved except for utilization against earnings as
realized. Such asset was being recognized to the extent of the tax effect
of current taxable earnings. Cumulative tax effects of temporary
differences are shown below as of September 30, 1996, December 31, 1995 and
December 31, 1994 (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------------
1996 1995 1994
------------- -------- --------
<S> <C> <C> <C>
ASSET (LIABILITY)
Property and equipment.................... $ 2,823 $ 1,289 $ 1,655
Reserves for bad debts, building write
down, legal expenses..................... 3,785 3,860 3,628
Intangible amortization................... 75 1,213 4,211
Bonus, unexercised restricted stock, de-
ferred compensation...................... 2,047 1,901 1,819
Partnership income........................ 608 608 705
Debt modification......................... 1,599 1,549 1,470
Net operating loss carryforwards.......... 71,169 77,600 79,832
-------- -------- --------
Total deferred tax assets................ 82,106 88,020 93,320
Unconsolidated affiliates................. (218) (218) (218)
All other, net............................ 1,170 (273) (200)
-------- -------- --------
Total deferred tax liabilities........... (952) (491) (418)
-------- -------- --------
Net deferred tax assets................... 83,058 87,529 92,902
Valuation allowances...................... (44,513) (87,529) (92,902)
-------- -------- --------
$ 38,545 $ -- $ --
======== ======== ========
</TABLE>

F-20
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

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 should 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 net operating loss carryforwards ("NOLs") are
realizable on a more likely than not basis. During the third quarter of
1996, the Company projected, on a more likely than not basis, that a
portion of the NOLs would be realizable in future periods and, accordingly,
reduced its existing deferred tax asset valuation allowances by $45.7
million of which $5.3 million has been allocated to the purchase price of
L.J. Melody based on its estimated future potential to generate taxable
income, and the remaining $40.4 million has been recorded as a tax benefit
(a reduction in income tax provision). With the recognition of deferred tax
assets, the current and future period provisions for income tax will be
recorded at the full effective tax rate excluding the impact of other
adjustments, if any, to valuation allowances. For the nine months ended
September 30, 1996, a $4.6 million provision for income taxes has been
recorded. Net income for the nine months ended September 30, 1996 was
$45.4 million, which includes the $40.4 million tax benefit. The
$40.4 million recognized tax benefit has a material effect on the reported
net income for the nine months ended September 30, 1996.

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

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, including
their respective maturities, are discussed in Note 6. Estimated fair values
for these liabilities are not presented because the Company believes that
the unique circumstances that include the Company's leverage, the terms of
its loans, the timing of the interest and principal payments, the relative
priorities of the senior and subordinated indebtedness and other terms and
conditions associated with these loans require the expertise of an
investment banker to determine the fair values. The Company does not
consider it practicable to incur the excessive costs to engage an
investment banker to perform a fair value analysis of these liabilities.

The effective interest rates associated with these loans at December 31,
1995 were: 7.8% for the Senior Term Loans, 6.4% for the Senior Subordinated
Term Loan and 12.0% for the Westmark Senior Notes. No balances were
outstanding under the Senior Revolving Credit Lines.

F-21
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

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.

<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>

F-22
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

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

STOCK OFFERING. During September 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 and subordinated indebtedness. The Company also
announced a recapitalization which will be contingent upon and executed in
conjunction with the IPO and which will help to provide liquidity to its
common stockholders. The following summarizes the terms of the
recapitalization:

. Class B-1 and B-2 common 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 common stock of the Company will be converted into 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 common stock at $.01 per share;

. The Preferred Stock will be convertible into Common Stock at the
holder's option after the completion of the IPO 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 and conditional upon 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
$4.8 million on December 31, 2001. A $10.0 million line of credit will be
established that can be used to fund acquisitions. It will bear interest at
a rate equal to, at the Company's option, LIBOR plus 300 basis points or
the prime rate plus 200 basis points payable quarterly. Quarterly principal
payments are required but may be borrowed back in full until the line
expires on December 31, 1999, at which time it must be repaid in full.

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

F-23
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995
maturity date of July 23, 2002. The senior subordinated indebtedness may be
prepaid at any time without penalty.

PRO FORMA INFORMATION (UNAUDITED)

If the IPO had occurred at January 1, 1995, together with the acquisitions,
the Company's earnings per share, on a pro forma basis, would have been
$3.35 per share for the nine months ended September 30, 1996 and $0.32 per
share for the year ended December 31, 1995.

RECENT LITIGATION (UNAUDITED)

In August 1993, a former commissioned salesperson of the Company filed a
lawsuit against the Company in the Superior Court of New Jersey, Bergen
County, alleging gender discrimination and wrongful termination by the
Company. On November 20, 1996 a jury returned a verdict against the
Company, awarding $6.5 million in general and punitive damages to the
plaintiff. The Company has been advised by its in-house counsel that it has
grounds to file motions for a new trial and a reversal of the verdict and,
if these motions are not granted, to pursue an appeal of the verdict.
Included in the Company's September 30, 1996 financial statements is an
accrual of $800,000 with respect to this case. This accrual was initially
established at $250,000 in 1994 and increased to $800,000 in 1995 and
represented the Company's estimate of its loss exposure for this matter
based on its assessment and analysis as of those dates. As a result of the
verdict and the Company's intention to file such motions or pursue such
appeal, management is in the early stages of gathering information to
reassess its estimate of loss exposure. At this early stage of
reassessment, management cannot make a reasonable estimate of the ultimate
loss amount, if any, other than to estimate that the loss exposure as a
result of the damage award ranges from no loss to a maximum of $6.5
million. At $6.5 million the loss could have a material impact on the
Company's 1996 consolidated financial statements.

F-24
<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-25
<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-26
<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-27
<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.

F-28
<PAGE>

WESTMARK REALTY ADVISORS L.L.C.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

JUNE 30, 1995 AND 1996
(UNAUDITED)

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

(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-29
<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-30
<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-31
<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-32
<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-33
<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-34
<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-35
<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>

F-36
<PAGE>

WESTMARK REALTY ADVISORS
(A PARTNERSHIP)

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1993

(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.

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-37
<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-38
<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-39
<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-40
<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 PRONOUNCEMENTS

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." In May 1995, the FASB issued SFAS No. 122, "Accounting for
Mortgage Servicing Rights." Effective January 1, 1996, the Company adopted
SFAS No. 121 and 122. The adoption of these standards did not have a
material effect on the Company's financial position or results of
operations.

F-41
<PAGE>

L.J. MELODY & COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

JUNE 30, 1996
(UNAUDITED)

and amortize them over the period of estimated net servicing income or
loss. Write-off of the asset is required when control is surrendered and of
the liability when extinguished. The Company does not currently recognize
the value of financial and servicing assets when loans are originated. The
adoption of the new statement will result in the recognition of
amortization cost along with income from servicing as services are
performed and the recognition of gains or losses at the time servicing
rights are sold. 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 standard 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-42
<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.

F-43
<PAGE>

L.J. MELODY & COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

JUNE 30, 1996
(UNAUDITED)

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
$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-44
<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-45
<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 authorized,
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-46
<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-47
<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-48
<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 PRONOUNCEMENTS

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-49
<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-50
<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-51
<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-52
<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
authorized, $1,000 shares issued and outstanding................. 1,000
Non-voting common stock, par value $1 per share, 1,000 shares
authorized, 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-53
<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-54
<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-55
<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-56
<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 PRONOUNCEMENTS

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. In May 1995, the
FASB issued SFAS No. 122, "Accounting for Mortgage Servicing Rights."
Effective January 1, 1996, the Company adopted SFAS No. 121 and 122. The
adoption of these standards did not have a material effect on the Company's
financial position or results of operations.

In June 1996 the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities." Under
SFAS No. 125, the Company will be required to recognize, at fair value,
financial and servicing assets it has acquired control over and related
liabilities it has incurred and amortize them over the period of estimated
net servicing income or loss. Write-off of the asset is required when
control is surrendered and of the liability when extinguished. The Company
does not currently recognize the value of financial and servicing assets
when loans are originated. The adoption of the new statement will result in
the recognition of amortization cost along with income from servicing as
services are performed and the recognition of gains or losses at the time
servicing rights are sold. This

F-57
<PAGE>

L.J. MELODY & COMPANY OF CALIFORNIA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

JUNE 30, 1996
(UNAUDITED)

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 standard 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. 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

F-58
<PAGE>

L.J. MELODY & COMPANY OF CALIFORNIA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

JUNE 30, 1996
(UNAUDITED)

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.

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-59
<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-60
<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-61
<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-62
<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-63
<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-64
<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 PRONOUNCEMENTS

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. 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. Effective January
1, 1996, the Company adopted SFAS No. 121 and 122. The adoption of these
standards did not have a material effect 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

PURCHASED LOAN SERVICING RIGHTS

F-65
<PAGE>

L.J. MELODY & COMPANY OF CALIFORNIA

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

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>

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.

F-66
<PAGE>

L.J. MELODY & COMPANY OF CALIFORNIA

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 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-67
<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>

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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.............................................................. 12
The Company............................................................... 17
Use of Proceeds........................................................... 17
Price Range of Common Stock and 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.................................................................. 38
Management................................................................ 52
Certain Transactions...................................................... 61
Principal Stockholders.................................................... 63
Description of Capital Stock.............................................. 66
The Company's Credit Agreements........................................... 70
Shares Eligible For Future Sale........................................... 71
Underwriting.............................................................. 74
Legal Matters............................................................. 75
Experts................................................................... 75
Additional Information.................................................... 75
Pro Forma Financial Statements............................................ P-1
Financial Statements...................................................... F-1
</TABLE>

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4,347,000 SHARES

[LOGO OF CB COMMERCIAL REAL ESTATE SERVICES GROUP, INC.]

CB COMMERCIAL REAL ESTATE
SERVICES GROUP, INC.

COMMON STOCK

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

PROSPECTUS

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

MERRILL LYNCH & CO.
MONTGOMERY SECURITIES

NOVEMBER 25, 1996

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