FORM 10-Q

                        SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, D.C. 20549

(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities  Exchange
Act of 1934 For quarterly period ended June 30, 1997

[ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from _____to_____

                          Commission File Number 0-10421

                           CORNERSTONE PROPERTIES INC.
              (Exact name of registrant as specified in its charter)

                     Nevada                                       74-2170858
          (State or other jurisdiction                         (I.R.S. Employer
        of incorporation or organization)                    Identification No.)

                               126 East 56th Street
                             New York, New York 10022
                     (Address of principal executive offices)

                                  (212) 605-7100
               (Registrant's telephone number, including area code)

      Indicate by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]


Number of shares of Common Stock outstanding as of August 12, 1997: 48,856,742

Total pages = 15
Exhibit Index located on page 14



<PAGE>
<TABLE>


                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

                   CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                          (Dollar amounts in thousands)
<CAPTION>

                                                                                      June 30,         December 31,
                                                                                        1997               1996
                                                                                    -----------        ------------
                                                                                    (Unaudited)
<S>                                                                                 <C>               <C>
ASSETS
Investments, at cost:
     Land                                                                            $  89,835        $  68,395
     Buildings and improvements                                                        659,323          612,567
     Deferred lease costs                                                              124,053          118,700
                                                                                     ---------        ---------
                                                                                       873,211          799,662
     Less: Accumulated depreciation and amortization                                   212,745          198,686
                                                                                     ---------        ---------
          Total investments                                                            660,466          600,976

Cash and cash equivalents                                                              222,574          114,803
Restricted cash (Note 3)                                                                40,107            4,426
Other deferred costs, net of accumulated amortization of $1,449 and $1,140               3,992            3,562
Deferred tenant receivables                                                             35,899           34,747
Tenant and other receivables                                                             3,220            2,405
Notes receivable                                                                         2,354            2,911
Other assets                                                                             4,329            2,350
                                                                                     ---------        ---------
Total Assets                                                                         $ 972,941       $  766,180
                                                                                     =========        =========

LIABILITIES AND STOCKHOLDERS' INVESTMENT

Long-term debt (Note 4)                                                              $ 367,103        $ 400,142
Short-term debt (Note 3)                                                                35,000                0
Accrued interest payable                                                                 1,590            1,082
Accrued real estate taxes payable                                                       12,451           13,222
Common Stockholders' distribution payable                                               11,159           12,366
Accounts payable and accrued expenses                                                    8,526            6,468
Unearned revenue and other liabilities                                                   9,369            9,095
                                                                                     ---------        ---------
Total Liabilities                                                                      445,198          442,375
                                                                                     ---------        ---------

Minority Interest                                                                      (17,510)         (17,478)
                                                                                     ----------       ----------


Redeemable Preferred Stock, $166,500,000 redemption value (Note 6)                     162,515          162,743
                                                                                     ---------        ---------

Stockholders' Investment (Note 7)
7% Cumulative Convertible Preferred Stock, $16.50 stated value                          50,000           50,000
     15,000,000 shares authorized; 3,030,303 shares issued and outstanding
Common stock, no par value; 100,000,000 authorized shares;
     shares issued and outstanding (1997-37,198,186; 1996-20,609,754)
Paid-in capital                                                                        352,419          160,577
Accumulated deficit                                                                    (17,199)         (17,478)
Deferred Compensation                                                                   (2,482)          (1,248)
                                                                                     ---------        ----------
Total Stockholders' Investment                                                         382,738          178,540
                                                                                     ---------        ---------
Total Liabilities and Stockholders' Investment                                       $ 972,941      $   766,180
                                                                                     =========        =========
<FN>


              The accompanying notes are an integral part of these
                       consolidated financial statements
</FN>
</TABLE>

<PAGE>
<TABLE>

Item 1. Financial Statements (continued)

                  CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
            (Dollar amounts in thousands, except per share amounts)
                                      (Unaudited)
<CAPTION>




                                                       Three Months   Three Months    Six Months     Six Months
                                                          Ended           Ended         Ended          Ended
                                                         June 30,        June 30,      June 30,       June 30,
                                                          1997             1996          1997           1996
                                                       -----------    ------------    -----------    -----------
<S>                                                    <C>            <C>             <C>            <C>
Revenues
       Office and parking rentals                      $  35,213       $  26,994       $  68,691      $  52,913
       Interest and other income                           3,055           1,344           4,564          2,849
                                                        ---------      ----------      ----------      ---------
           Total Revenues                                 38,268          28,338          73,255         55,762
                                                        ---------      ----------      ----------      ---------

Expenses
       Building operating expenses                         7,658           5,781          15,033         11,448
       Real estate taxes                                   5,957           5,425          11,620          9,316
       Interest expense                                    7,205           8,055          14,748         15,870
       Depreciation and amortization                       7,317           6,123          14,097         12,114
       General and administrative                          1,605           1,527           3,218          2,936
                                                        ---------      ----------      ----------      ---------
           Total Expenses                                 29,742          26,911          58,716         51,684
                                                        ---------      ----------      ----------      ---------
                                                           8,526           1,427          14,539          4,078
                                                        ---------     ----------       ----------      ---------
Other income (expenses)
      Net gain on interest rate swaps (Note 1)                 -             671              99          5,465
      Minority Interest                                     (518)           (222)           (994)          (686)
                                                        ---------      ----------      ----------      ---------
Income before extraordinary item                           8,008           1,876          13,644          8,857

Extraordinary loss                                           (28)              -             (54)             -
                                                        ---------      ----------      ----------      ---------

Net income                                              $  7,980        $  1,876        $ 13,590       $  8,857
                                                        =========      ==========      ==========      =========

Net income applicable to common stock                   $  3,775        $  1,001        $  5,180       $  7,107
                                                        =========      ==========      ==========      =========
Income before extraordinary
item per common share (Note 1)                          $   0.12        $   0.05        $   0.19       $   0.35
                                                        =========      ==========      ==========      =========

Net income per common share (Note 1)                    $   0.12        $   0.05        $   0.19       $   0.35
                                                        =========      ==========      ==========      =========

<FN>
              The accompanying notes are an integral part of these
                       consolidated financial statements
</FN>
</TABLE>

<PAGE>
<TABLE>

     Item 1. Financial Statements (continued)

                  CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
                         (Dollar amounts in thousands)
                                   (Unaudited)

<CAPTION>

                                                                                  Six Months        Six Months
                                                                                    Ended             Ended
                                                                                   June 30,          June 30,
                                                                                     1997              1996
                                                                                  ----------        ----------
<S>                                                                               <C>               <C>
Cash flows from operating activities:
     Net income                                                                   $  13,590         $   8,857
     Adjustments to reconcile net income to net cash
        provided by operating activities:
           Depreciation and amortization                                             14,097            12,114
           Deferred compensation amortization                                           404               423
           Net gain on interest rate swaps                                              (99)           (5,465)
           Extraordinary loss                                                            54                 -
           Unbilled rental revenue                                                     (829)           (1,172)
           Increase in accrued interest payable                                         508               347
           Minority interest share of income                                            994               686
           Increase in tenant and other receivables and other assets                 (2,763)           (2,510)
           Increase in accounts payable, accrued expenses and other liabilities       1,022             1,325
                                                                                    --------          --------
           Total adjustments                                                         13,388             5,748
                                                                                    --------          --------

           Net cash provided by operating activities                                 26,978            14,605
                                                                                    --------          --------

Cash flows from investing activities:
     Additions to investment property                                               (72,781)           (3,603)
     Repayment of notes receivable                                                      557               502
                                                                                    --------          --------

           Net cash used in investing activities                                    (72,224)           (3,101)
                                                                                    --------          --------

Cash flows from financing activities:
     Proceeds from common stock offering                                            225,400                 -
     Borrowings under mortgage loan                                                  35,000            18,000
     Repayment of term loan                                                         (32,500)                -
     Repayments under mortgage loans                                                   (539)              (11)
     Proceeds from dividend reinvestment plan                                         5,945                 -
     Net payments for swap terminations and prepayment costs                           (216)           (3,125)
     (Increase) decrease in restricted cash                                         (35,681)               35
     Stock/debt issue costs                                                         (18,053)             (310)
     Distribution to minority partners                                               (1,026)             (977)
     Distribution to preferred stockholders                                          (6,660)                -
     Distribution to common stockholders                                            (18,653)                -
                                                                                    --------          --------

           Net cash provided by financing activities                                153,017            13,612
                                                                                    --------          --------

Increase in cash and cash equivalents                                               107,771            25,116
Cash and cash equivalents, beginning of period                                      114,803             7,740
                                                                                    --------          --------
Cash and cash equivalents, end of period                                          $ 222,574         $  32,856
                                                                                    ========          ========
<FN>
              The accompanying notes are an integral part of these
                       consolidated financial statements

</FN>
</TABLE>

<PAGE>



Item 1. Financial Statements (continued)

                   CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1997


1. NATURE OF COMPANY'S BUSINESS
   AND SIGNIFICANT ACCOUNTING POLICIES

   Nature of the Company's Business
   Cornerstone   Properties   Inc.   ("Cornerstone"   or  the  "Company")  is  a
   self-advised   equity  real  estate  investment  trust  which  owns,  through
   subsidiaries,  interests  in eight Class A office  properties  ("Properties")
   encompassing  approximately 4.9 million rentable square feet. The Company was
   formed in May 1981 as ARICO America Realestate  Investment  Company, a Nevada
   corporation,  to invest in major  commercial  real  estate  projects in North
   America.

   General
   The consolidated  financial  statements included herein have been prepared by
   the Company,  without  audit,  pursuant to the rules and  regulations  of the
   Securities  and  Exchange   Commission.   Certain  information  and  footnote
   disclosures  normally included in consolidated  financial statements prepared
   in accordance with generally accepted accounting principles have been omitted
   pursuant to such rules and  regulations,  although the Company  believes that
   the  disclosures   are  adequate  to  make  the  information   presented  not
   misleading.  In the opinion of  management of the Company,  all  adjustments,
   consisting only of normal recurring  accruals,  necessary to summarize fairly
   the unaudited results of operations for the three month and six month periods
   presented  have been  included.  Results  for the three and six months  ended
   June 30,  1997 are not  necessarily  indicative  of  results  which  may be
   expected  for any other  interim  periods  or for the year as a whole.  It is
   suggested that these  financial  statements be read in  conjunction  with the
   audited  financial  statements  and notes  thereto  included in the Company's
   latest annual report on Form 10-K.

   Principles of Consolidation
   The accompanying  financial  statements  include the accounts of Cornerstone,
   its wholly-owned qualified REIT subsidiaries and controlled partnerships. All
   significant  intercompany  balances and transactions  have been eliminated in
   consolidation.

   Interest rate swap agreements
   The Company  accounts  for its  interest  rate swap  agreements  as hedges in
   accordance with SFAS No. 80 "Accounting for Futures Contracts" if the swap is
   designated as a hedge and effectively  reduces the exposure to the Company of
   market  interest rate changes.  Changes in the market value of these interest
   rate swap  agreements are deferred and recognized in income at the expiration
   or termination of the underlying debt.  Forward interest rate swap agreements
   that do not meet  hedge  criteria  are  accounted  for  using  mark-to-market
   accounting,  recognizing any unrealized gain or loss on the instrument in the
   period in which it is  outstanding.  When swaps are  extinguished at the same
   time as the underlying  debt  instrument,  the cost to extinguish the swap is
   treated as extraordinary gain or loss. When a swap remains in place after the
   underlying instrument matures, it is accounted for on a mark-to-market basis.
   The swap  termination  is accounted  for as ordinary  gain or loss when it is
   extinguished  with no underlying  debt  instrument in place.  Currently,  the
   Company is party to no interest rate swap agreements.

   Income per share
   Income per share is computed  based on the weighted  average number of common
   shares  outstanding  of 27,237,452 for 1997 and 20,309,165 for 1996. For 1997
   and  1996,   dividends  applicable  to  preferred  stock  of  $8,410,000  and
   $1,750,000 respectively,  have been deducted from the net income in computing
   income per share.

   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 at the date of the financial statements and
   the reported  amounts of revenues and expenses  during the reporting  period.
   The  most   significant   estimates  and   assumptions  are  related  to  the
   recoverability   and  depreciable  lives  of  investment   property  and  the
   recoverability  of deferred tenant  receivables.  Actual results could differ
   from those estimates.

<TABLE>
   2. PROPERTIES
   The  following  schedule  summarizes  Cornerstone's  interest  in real estate
   investments at June 30, 1997:
<CAPTION>

                                                                 Net
                                                  Completed/     Rentable                 Ownership
Property                 Location                 Acquired       square feet  %Leased      Interest      Notes 
---------------------------------------------------------------------------------------------------------------
<C>                      <C>                      <C>            <C>          <C>          <C>           <C>
One Norwest Center       Denver, CO                    1983      1,188,000       98%        100%
Norwest Center           Minneapolis, MN               1988      1,118,000      100%         50%
Washington Mutual Tower  Seattle, WA                   1988      1,155,000       98%         50%
125 Summer Street        Boston, MA               1989/1995        464,000       90%        100%
Tower 56                 New York, NY             1983/1996        162,000       95%        100%
One Lincoln Centre       Oakbrook Terrace, IL     1986/1996        297,000       94%        100%
The Frick Building       Pittsburgh, PA           1902/1996        341,000       87%        100%
527 Madison Avenue       New York, NY             1986/1997        216,000       96%        100%            A
<FN>

   (A)Effective  February  14,  1997,  Cornerstone,   through  its  wholly-owned
      qualified REIT subsidiary, CStone-527 Madison, Inc., purchased 527 Madison
      Avenue in Midtown Manhattan,  New York for approximately $67 million.  527
      Madison Avenue is a twenty-six story, 96% leased,  Class A office building
      with approximately  211,000 square feet of office space, 5,000 square feet
      of first  floor  retail  space and an  underground  parking  facility  for
      approximately 50 vehicles.  The acquisition was financed with the proceeds
      from the  Company's  offering of  Preferred  Stock,  completed in November
      1996. Louis Dreyfus Property Group manages the building under a management
      agreement that expires December 31, 1998.
</FN>
</TABLE>


3.  RESTRICTED CASH
   The existing $35,000,000 mortgage on 527 Madison Avenue was kept in place and
   assigned to Bankers  Trust  Company as part of the purchase of the  property.
   The mortgage has a maturity of September 30, 1997.  Restricted  cash is being
   held by escrow  agents  for  interest  and 105% of the  principal  on the 527
   Madison  loan and for real  estate  taxes and  insurance  on the One  Norwest
   Center and Washington Mutual Tower loans.
<TABLE>

4. LONG-TERM DEBT
<CAPTION>

           Principal Balance
     6/30/97          12/31/96  Collateral                    Interest Rate       Maturity   Amortization       Notes
---------------------------------------------------------------------------------------------------------------------
<C>              <C>            <C>                           <C>                 <C>        <C>                <C>
$  12,926,000    $  12,926,000  Rent Notes                    Lesser of 8.11%     01/01/01   None                   A
                                                              or LIBOR + 50 bp
   97,252,000       97,706,000  One Norwest Center            7.50%               08/01/01   30 years
  110,000,000      110,000,000  Norwest Center                8.74%               12/31/05   None
   79,100,000       79,100,000  Washington Mutual Tower       7.53%               11/01/05   None
   50,000,000       50,000,000  125 Summer Street             7.20%               01/01/03   25 years beginning
                                                                                             02/01/01
   17,825,000       17,910,000  Tower 56                      7.67%               04/24/03   30 years
            -       32,500,000  Cornerstone Properties Inc.   5.0%                                                 B
------------------------------
$ 367,103,000    $ 400,142,000
<FN>

   (A)At maturity of the debt,  Cornerstone  has the right to redeem the note in
      exchange for common  shares of the Company at the lower of market price or
      $14.30 per share.
   (B)On March 19, 1997, the  $32,500,000  term loan was repaid to Deutsche Bank
      AG.
</FN>
</TABLE>




<PAGE>


5. LINE OF CREDIT
   Bankers Trust Company has provided  Cornerstone with a $10,000,000  revolving
   credit line which is available for general corporate and acquisition purposes
   at a rate equivalent to an Adjusted Eurodollar Rate (as defined),  as well as
   for the issuance of standby  letters of credit at a rate of 0.15 percent.  At
   June 30,  1997,  none of the credit line had been  drawn.  The line of credit
   expires on November 7, 1997.

   The Company has received a  commitment  from  Bankers  Trust  Company and The
   Chase   Manhattan  Bank  for  a  $200  million  line  of  credit  for  future
   acquisitions.  The interest rate on the line of credit will be at a spread of
   1.25% to 1.625% over the Adjusted  Eurodollar Rate (as defined)  depending on
   the Company's leverage ratio.


<TABLE>

6. REDEEMABLE PREFERRED STOCK
<CAPTION>
                                   Redemption/           Shares           Shares        Carrying Value        Common Stock
  Title                            Stated Value        Authorized       Outstanding    Net of Issue Costs    Conversion Price
  ----------------------------------------------------------------------------------------------------------------------------
  <S>                              <C>                 <C>              <C>            <C>                    <C>
  8% Cum. Convertible              $145.00/Share       1,034,483         689,655          $97,609,000              $14.50
  8% Cum. Convertible, Series A    $145.00/Share         458,621         458,621          $64,906,000              $14.50
                                                                                        --------------
                                                                                         $162,515,000
<FN>

   Each holder of the 8% Cumulative  Convertible and 8% Cumulative  Convertible,
   Series A,  Preferred  Stock,  has the right to require the  redemption of its
   stock by the Company at the stated value upon the  occurrence of a "Change in
   Control"(as defined).

   On July 25,  1997,  the  Redeemable  Preferred  shares  were  converted  into
   11,482,760 common shares. The contractual conversion was based upon meeting a
   $16.00 twenty day average common share price.
</FN>
</TABLE>

7. STOCKHOLDERS' INVESTMENT
   On April 16, 1997,  Cornerstone  Properties  Inc.  announced its initial U.S.
   public  offering of 16.1 million shares of common stock at a price of $14 per
   share for gross proceeds of $225.4 million. Cornerstone's stock began trading
   on the New York Stock Exchange under the symbol CPP.

   The  offering was  underwritten  by Merrill  Lynch & Co. and included  Lazard
   Freres & Co. LLC, Lehman  Brothers,  Morgan Stanley & Co., Inc., Smith Barney
   Inc., and BT Securities  Corporation as  co-managers.  The Company intends to
   use the net proceeds of this  offering for  potential  acquisitions,  working
   capital and other general corporate purposes.

   The 7% Cumulative  Convertible  Preferred  Stock is  convertible  into common
   stock at $16.50 per share at any time after August 4, 2000.



<PAGE>


   The following  tables  summarize the  long-term  incentive  plans for certain
   officers of the Company as of June 30, 1997:

   Stock Options
              Options       Exercise
Date of       Granted (No.  Price                        Options       Options
Grant         of shares)    (per share)   Vesting      Exercisable    Exercised
--------------------------------------------------------------------------------
June, 1995    787,500       $14.30        20%/yr,         315,000        0
                                          10yr term
March, 1997   880,000       $14.50        20%/yr,               0        0
                                          10 yr term


     Restricted Stock Grants
     
               Shares          Value at
Date of        Granted (No.    Grant Date
Grant          of shares)      (per share)      Vesting (A)
--------------------------------------------------------------------------------
August, 1995    167,622         $14.30      The  grant will  fully  vest with  
                                            respect to 13.333% on June 30, 1996,
                                            1997, 1998, 1999 and with respect to
                                            46.668% on June 30, 2000.
March, 1997     100,000         $16.40      The  grant  will  fully  vest with  
                                            respect to 13.333% on June 30, 1998,
                                            1999, 2000, 2001 and with respect to
                                            46.668% on June 30, 2002.

(A)Deferred   compensation  of  approximately   $4,037,000  is  being  amortized
   according to the  respective  amortization  schedule for each vesting  period
   noted  above,  with  the  unamortized  balance  shown  as  a  deduction  from
   stockholders' investment. Regular dividends are paid on restricted stock.


   Stockholders' Distributions
   Dividends  of $0.30 per share were  declared  for the first  quarter of 1997,
   paid on April  30,  1997,  to Common  Stockholders  of record as of March 21,
   1997.  Dividends of $0.30 per share were  declared for the second  quarter of
   1997, paid on July 31, 1997, to Common  Stockholders of record as of June 20,
   1997.


8. NEW PRONOUNCEMENTS
   During 1997, the Financial  Accounting  Standards Board issued  Statements of
   Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS 128"), No.
   129 "Disclosure of Information About Capital Structure" ("SFAS 129"), No. 130
   "Reporting Comprehensive Income" ("SFAS 130"), and No. 131 "Disclosures About
   Segments of an Enterprise and Related Information" ("SFAS 131"). All of these
   statements are effective for fiscal years beginning after December 15, 1997.

   SFAS  128   specifies  the   computation,   representation   and   disclosure
   requirements  for  earnings per share.  SFAS 129  established  standards  for
   disclosing   information   about  an  entity's  capital   structure  such  as
   information about securities,  liquidation  preference of preferred stock and
   redeemable   stock.  SFAS  130  specifies  the  presentation  and  disclosure
   requirement  for reporting  comprehensive  income which  includes those items
   which have been  formerly  reported as a component of  shareholders'  equity.
   SFAS 131  establishes  the  disclosure  requirements  for  reporting  segment
   information.

   Management  believes that, when adopted,  SFAS 128, 129, 130 and 131 will not
   have a significant impact on the Company's financial statements.



<PAGE>


Item 2

     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
          OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997


RESULTS OF OPERATIONS

Consolidation
Cornerstone's principal source of income is rental revenues received through its
investment in six fee simple  investments and two real estate  partnerships held
by nine  wholly-owned  subsidiaries:  1700 Lincoln  Limited  owned 90 percent by
ARICO-Denver,  Inc. and 10 percent by 1700 Lincoln Inc., NWC Limited Partnership
owned by ARICO-Minneapolis, Inc., Third and University Limited Partnership owned
by ARICO-Seattle,  Inc., 125 Summer Street owned by CStone-Boston Inc., Tower 56
owned by  CStone-New  York Inc.,  One Lincoln  Centre owned by  CStone-Oakbrook,
Inc.,  527  Madison  Avenue  owned by  CStone-527  Madison,  Inc.  and the Frick
Building owned by CStone-Pittsburgh Trust, respectively. NWC Limited Partnership
and Third and  University  Limited  Partnership  have  been  consolidated  since
Cornerstone has a majority  interest in the economic  benefits and has the right
to become managing general partner at its sole discretion.
<TABLE>

Property Results
For the three and six months ended June 30, 1997 and 1996 property results can
be summarized as follows (000's):
<CAPTION>

                                         For the         For the       For the six        For the
                                       three months    three months     six months       six months
                                          ended           ended           ended            ended
                                       June 30, 1997   June 30, 1996   June 30, 1997    June 30, 1996
------------------------------------------------------------------------------- --------------------
<S>                                    <C>             <C>             <C>              <C>
Office and Parking Rentals                $ 35,213        $ 26,994        $ 68,691       $ 52,913
Less:
  Building Operating Expenses                7,658           5,781          15,033         11,448
  Real Estate Taxes                          5,957           5,425          11,620          9,316
  Depreciation and Amortization              7,146           5,972          13,808         11,801
                                           -------         -------         -------        -------
Total Operating Expenses                    20,761          17,178          40,461         32,565
                                           -------         -------         -------        -------
Total Property Income                     $ 14,452        $  9,816        $ 28,230       $ 20,348
                                           =======         =======         =======        =======
</TABLE>

The  increase in  property  income for the three  months  ended June 30, 1997 as
compared to the same period in 1996 of $4.6  million was due to the  acquisition
of Tower 56 ($0.2  million),  One Lincoln Centre ($0.9  million),  and the Frick
Building  ($0.4  million)  during 1996 and 527 Madison  Avenue ($1.7 million) in
early  1997.  At the  existing properties, property income at One Norwest Center
increased  $0.7  million due to a lease  buyout of a portion of the Norwest Bank
space in order to allow for Gulf Canada expansion. Norwest Center increased $1.1
million  due to the  recovery  of the  increased  real  estate  taxes which were
incurred  in  1996.  Washington  Mutual  Tower  increased  $0.3  million  due to
increased rental rates and higher parking revenues. The decrease of $0.7 million
at 125 Summer Street was due to the vacancy  caused by the  expiration of Gadsby
and Hannah and the reduction of rent in the BTM Capital Corporation lease.

The  increase  in  property  income  for the six months  ended June 30,  1997 as
compared to the same period in 1996 of $7.9  million was due to the  acquisition
of Tower 56 ($0.6  million),  One Lincoln Centre ($1.9  million),  and the Frick
Building  ($1.0  million)  during 1996 and 527 Madison  Avenue ($2.5 million) in
early  1997.  At the existing properties, property  income at One Norwest Center
increased  $0.9  million due to a lease  buyout of a portion of the Norwest Bank
space in order to allow for Gulf Canada expansion. Norwest Center increased $1.5
million  due to the  recovery  of the  increased  real  estate  taxes which were
incurred  in  1996.  Washington  Mutual  Tower  increased  $0.7  million  due to
increased rental rates and higher parking revenues. The decrease of $1.2 million
at 125 Summer Street was due to the vacancy  caused by the  expiration of Gadsby
and Hannah and the reduction of rent in the BTM Capital Corporation lease.



Interest and Other Income
Interest and other income was  $3,055,000  and  $1,344,000  for the three months
ended June 30, 1997 and 1996. These amounts primarily consist of interest earned
from  short-term  investments,  interest  earned on the Tower 56 mortgage  notes
receivable in 1996, notes receivable from partners, and income from the advisory
contracts  in  1997  and  1996.  The  increase  was due to the  additional  cash
available for short-term investment as a result of the initial public offering.

Year to date interest and other income was  $4,564,000 in 1997 and $2,849,000 in
1996.  These  amounts  primarily  consist of  interest  earned  from  short-term
investments,  interest earned on the Tower 56 mortgage notes receivable in 1996,
notes receivable from partners,  and income from the advisory  contracts in 1997
and 1996. The increase was due to the  additional  cash available for short-term
investment as a result of the initial public offering.

Interest Expense
Interest  expense incurred by Cornerstone  relating to its financing  activities
was $7,205,000 and $8,055,000 for the three months ended June 30, 1997 and 1996,
respectively.  The decrease was mainly due to the refinancing of the One Norwest
Center debt resulting in savings of $551,000,  which is offset by the $90,000 of
interest  expense on Tower 56 which was financed in the second  quarter of 1996.
Additionally,  the Company had approximately  $406,000 of savings resulting from
the repayment of the $32.5 million term loan.

Interest  expense incurred by Cornerstone  relating to its financing  activities
was $14,748,000 and $15,870,000 for the six months ended June 30, 1997 and 1996,
respectively.  The decrease was mainly due to the refinancing of the One Norwest
Center debt resulting in savings of $1,103,000,  which is offset by the $427,000
of  interest  expense on Tower 56 which was  financed  in the second  quarter of
1996. Additionally,  the Company had approximately $428,000 of savings resulting
from the repayment of the $32.5 million term loan.

Interest Rate Swaps
During the period  analyzed the Company had the  following  interest  rate swaps
outstanding:

The $107 million  interest rate swap  agreement with a maturity date of July 30,
1998,  was  accounted  for as a hedge since it was  comprised of two  offsetting
swaps,  resulting in a fixed  payment  from  Cornerstone  to its  counterparties
through the term of the swaps.  Upon the  refinancing  of the One Norwest Center
debt in August 1996,  the swap was terminated and the cost to terminate the swap
was recorded as an extraordinary loss.

For the six month period June 30, 1996, interest expense of the Company included
approximately  $402,000  of expense  related to interest  rate swap  agreements.
Since the $98 million  swap was a forward  swap and  accounted  for on a mark to
market basis, it had no effect on the reported  interest expense of the Company.
This swap was  terminated  during the first quarter of 1997 at a gain of $99,000
compared  to the mark to market  gain in the first two  quarters of 1996 of $5.5
million. The Company currently is party to no interest rate swap agreements.

General and Administrative Expenses
The aggregate amount of Cornerstone's  general and administrative  expenses have
increased to $1,605,000 for the three months ended June 30, 1997 from $1,527,000
for the same period in 1996.  The  increase in 1997 from 1996 of $78,000 was due
to the payment of public relations and shareholder costs related to the IPO.

The aggregate amount of Cornerstone's  general and administrative  expenses have
increased to $3,218,000  for the six months ended June 30, 1997 from  $2,936,000
for the same period in 1996.  The increase in 1997 from 1996 of $282,000 was due
to the write off of certain  expenses  related to the State Street Bank Building
of $115,000, and increased salaries and benefits due to the hiring of additional
staff of $71,000 and the hiring of public relations consultants of $61,000.



<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

Cash Flow


Cash Flow provided by               For the six months       For the six months
(used in):                          ended June 30, 1997      ended June 30, 1996
--------------------------------------------------------------------------------
Operating activities                    $26,978                   $14,605
Investing activities                    (72,224)                   (3,101)
Financing activities                    153,017                    13,612
Earnings  to fixed  charges ratio          1.22                      1.40

Cash provided by operating  activities  increased from $14.6 million for the six
months ended June 30, 1996 to $27.0  million for the six months ended June 30,
1997.  This  increase  was mainly  due to the  increase  in net rental  revenues
(before  depreciation  and  amortization)  from the  properties of $9.9 million,
interest  expense  savings of $1.2 million and  increased  interest  income from
higher cash reserves of $1.7 million;  these amounts are offset by approximately
$300,000 of general and administrative expenses.

Cash used in investing  activities increased to $72.2 million for the six months
ended June 30, 1997 from  $3.1 million for the six months ended June 30, 1996 
due to the acquisition of 527 Madison Avenue during 1997 for a total cost of $67
million and approximately $2 million increase in tenant leasing costs.

Cash providing by financing  activities  increased to $153.0 million for the six
months ended June 30, 1997 as compared to $13.6 million as of June 30, 1996. The
increase  was mainly  due to the  placement  proceeds  from the  initial  public
offering which is offset by common and preferred  stockholder  distributions and
the repayment of the $32.5 million term loan.

Earnings  to fixed  charges  decreased  to 1.22 times at June 30, 1997 from 1.40
times at June 30, 1996 due to the recognition of a large  unrealized gain on the
forward  swap  during the first  quarter of 1996,  and the large  fixed  payment
relating to the preferred dividend on the 8% Preferred Stock.

Funds From Operations
The Company  calculates Funds from Operations (FFO) based upon guidance from the
National  Association of Real Estate Investment Trusts (NAREIT).  FFO is defined
as net income,  excluding gains or losses from debt  restructuring  and sales of
property,  plus  depreciation  and  amortization,   and  after  adjustments  for
unconsolidated  joint ventures.  The Company has adjusted FFO by the net gain on
interest rate swap previously discussed due to the non-cash nature of this item.
Since the Company is no longer a party to any interest rate swap agreements, the
adjustment  in the first quarter of 1997 will be the final  adjustment  for this
item.

Industry  analysts  generally  consider  FFO  to be an  appropriate  measure  of
performance  of  an  equity  Real  Estate   Investment   Trust  (REIT)  such  as
Cornerstone.  FFO does not represent cash generated from operating activities in
accordance with generally accepted accounting principles and, therefore,  should
not be considered a substitute for net income as a measure of performance or for
cash flow from  operations  as a measure of liquidity  calculated  in accordance
with generally accepted accounting principles.

The  Company  believes  that FFO is  helpful  to  investors  as a measure of the
performance  of an equity  REIT  because,  along with cash flows from  operating
activities, financing activities and investing activities, it provides investors
an  understanding of the ability of the Company to incur and service debt and to
make  capital  expenditures.  For  cash  flows  from  operating,  financing  and
investing activities,  see the Consolidated Statements of Cash Flows included in
the Consolidated Financial Statements which are part of this report.

The Company no longer  reports free and deferred  rents as an  adjustment to FFO
since this is not part of the industry standard.  Therefore, included in FFO for
the three months  ended June 30, 1997 and 1996,  is  approximately  $378,000 and
$351,000,  respectively,  of free  and  deferred  rents  (after  adjustment  for
minority  interest).  Included in FFO for the six months ended June 30, 1997 and
1996, is approximately $659,000 and $666,000, respectively, of free and deferred
rents (after adjustment for minority  interest).  The table below sets forth the
adjustments  which were made to the net income of the Company in the calculation
of FFO for the three and six month periods ended June 30, 1997 and 1996,
respectively (in thousands):
<PAGE>

<TABLE>

                                                       Funds From Operations (A)
                                                       ---------------------
<CAPTION>

                                        Three Months     Three Months      Six Months       Six Months
                                           Ended            Ended            Ended            Ended
                                          June 30,         June 30,         June 30,         June 30,
                                            1997             1996             1997            1996
                                            ----             ----             ----            ----
<S>                                     <C>               <C>              <C>              <C>
Net income                                $ 7,980          $ 1,876          $13,590          $ 8,857

NAREIT Adjustments:
   Depreciation and amortization (B)        7,146            5,972           13,808           11,801
   Realized/Unrealized gain                     0             (671)             (99)          (5,465)
   Minority adjustments                      (366)            (652)            (737)          (1,021)
   Extraordinary Losses/Swap Losses            28                0               54                0

Other Adjustments:
   Amortization on rent notes                 337              304              557              502
   Real estate tax adjustment                   0            1,350                0            1,412
                                         ---------         ---------       ---------         --------
Funds From Operations                      15,125            8,179           27,173           16,086
                                         ---------         ---------       ---------         --------

Accrued Preferred Dividend                 (4,205)            (875)          (8,410)           (1,750)
                                         ---------         --------        ---------         ---------

Funds From Operations
Available For Common Shares               $10,920          $ 7,304          $18,763           $14,336
                                         =========        =========       ==========         =========
<FN>

(A)  Although  the  Company  believes  that  this  table  is  a  full  and  fair
presentation  of the Company's  FFO,  similarly  captioned  items may be defined
differently  by  other  REITs,  in  which  case  direct  comparisons  may not be
possible.

(B) The depreciation and amortization  adjustment does not include  amortization
of  deferred  financing  costs and  depreciation  of non-real  estate  assets in
accordance with guidance from NAREIT.
</FN>

</TABLE>

The increase in FFO  available  for common  shares for the six months ended June
30, 1997 as compared to the same period in 1996 is due to the items described in
cash provided by operating  activities  offset by the real estate tax adjustment
of $1.4 million in 1996 and the $6.7 million increase in preferred dividends.

The  increase in FFO for the three months ended June 30, 1997 as compared to the
same period in 1996 is due to a $5.8  million  increase in property  NOI, a $1.7
million  increase in interest/  other income,  an $800,000  decrease in interest
expense,  which is offset by the $1.4 million real estate tax adjustment in 1996
and a $3.7 million increase in preferred dividends.

The Company will seek to continue  increasing  FFO and the value of its property
portfolio by acquiring  additional  properties  that the Company  believes  will
produce  favorable  returns.  As  part  of its  ongoing  business,  the  Company
periodically engages in discussions with public and private real estate entities
regarding possible portfolio or asset acquisitions or business combinations.

Capital Stock Transactions
On April 22, 1997, the Company completed its initial public offering in the U.S.
of 16.1 million  shares at a price of $14.00 per share.  The  proceeds  from the
offering will be used to acquire new assets and for general corporate  purposes.
The Company is listed on the New York Stock Exchange under the symbol CPP.


Long Term Debt
The Company was  required  under the terms of its $32.5  million  term loan with
Deutsche  Bank AG to repay the loan upon the  completion  of its Initial  Public
Offering (IPO) in the United States.  In  anticipation of the IPO and listing on
the New York Stock Exchange, the Company repaid this loan on March 19, 1997. The
Company has no long-term  debt maturing  until 2001 when the debt on One Norwest
Center and the note from Hines matures.

Other Matters
The Company is not aware of any  environmental  issues at any of its properties.
The  Company  believes  it has  sufficient  insurance  coverage  at  each of its
properties.  The Company's  leases with the majority of its tenants  require the
tenants to pay most operating  expenses and increase in common area  maintenance
expenses,  which  reduces  the  Company's  exposure  to  increases  in costs and
operating expenses resulting from inflation.

Stockholders' Distributions
Cornerstone  intends to distribute at least 95 percent of its taxable  income to
maintain  its  qualification  as a  Real  Estate  Investment  Trust.  Currently,
Cornerstone  anticipates that FFO will exceed taxable income for the foreseeable
future.  Cornerstone's  distribution  policy is to pay distributions  based upon
FFO, less prudent reserves.  The Company declared a dividend of $0.30 per common
share,  payable to all  stockholders  of record as of June 20,  1997 on July 31,
1997.

At the  present  time the  Company is current  in the  payment of all  preferred
stockholder dividends.

Liquidity
At June 30, 1997, the Company had  $222,574,000 in cash and cash equivalents and
$40,107,000 in restricted  cash.  Restricted cash is being held by escrow agents
for the One Norwest  Center,  527 Madison  Avenue and  Washington  Mutual  Tower
loans. Cornerstone also had available $10 million under its working capital line
of credit for general corporate purposes. In addition,  Cornerstone  anticipates
it will  receive  distributions  from its real  estate  partnerships  and rental
income from its fee owned  properties  on a monthly  basis which will be used to
cover normal operating expenses and pay distributions to its stockholders. Based
upon its cash reserves and other sources of funds,  Cornerstone  has  sufficient
liquidity to meet its cash requirements for the foreseeable future.

New Pronouncements  
During 1997,  the  Financial  Accounting  Standards  Board issued  Statements of
Financial  Accounting  Standards No. 128 "Earnings Per Share" ("SFAS 128"),  No.
129 "Disclosure of Information  About Capital  Structure"  ("SFAS 129"), No. 130
"Reporting  Comprehensive  Income" ("SFAS 130"), and No. 131 "Disclosures  About
Segments of an Enterprise and Related  Information"  ("SFAS 131").  All of these
statements are effective for fiscal years beginning after December 15, 1997.

SFAS 128 specifies the computation,  representation and disclosure  requirements
for  earnings  per  share.   SFAS  129  established   standards  for  disclosing
information  about an  entity's  capital  structure  such as  information  about
securities, liquidation preference of preferred stock and redeemable stock. SFAS
130  specifies  the  presentation  and  disclosure   requirement  for  reporting
comprehensive  income  which  includes  those  items  which  have been  formerly
reported  as a component  of  shareholders'  equity.  SFAS 131  establishes  the
disclosure requirements for reporting segment information.
   
Management believes that, when adopted, SFAS 128, 129, 130 and 131 will not have
a significant impact on the Company's financial statements.



<PAGE>




                           PART II - OTHER INFORMATION

Item 6.   EXHIBITS AND REPORTS ON FORM 8-K

(a)       Exhibits:
          1) Exhibit 11.1: Statement of Computation of Earnings Per Share

          2) For EDGAR filing  purposes only, this report contains  Exhibit 27,
             Financial Data Schedule.

(b)       Reports on Form 8-K:

          1) Form 8-K/A dated January 22, 1997
             Item 7 - Financial Statements and Exhibits:  Financial statements
             reflecting the acquisition of Tower 56 and One Lincoln Centre

          2) Form 8-K dated January 29, 1997
             Item 5 - Other Events:  Board of Directors approval to acquire 527
             Madison for approximately $67 million 
             Item 7 - Financial Statements and Exhibits: Agreement of Sale and
             Purchase of 527 Madison

         3) Form 8-K/A dated February 21, 1997
            Item 2 - Acquisition or Disposition of Assets:  Clarification on the
            Frick Building acquisition.
            Item 7 - Financial Statements and Exhibits:  Clarification on the 
            pro forma  financial statements of One Lincoln Centre and Tower 56.
         
         4) Form 8-K/A dated February 24, 1997
            Item 7 - Financial Statements and Exhibits:  Financial statements 
            reflecting the acquisition of 527 Madison
         
         5) Form 8-K dated July 28, 1997
            Item 5 - Other Events: Conversion of NYSTERS and RODAMCO preferred
            stock.
            Item 7 - Financial Statements and Exhibits:  Press release 
            announcing conversion of NYSTERS and RODAMCO preferred stock.



<PAGE>



                                    SIGNATURES


      Pursuant to the  requirements of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.


                                          CORNERSTONE PROPERTIES INC.
                                          (Registrant)


                                          By: /s/ John S. Moody.
                                             John S. Moody, President and CEO

                                          Date:  August 12, 1997


                                          By: /s/ Thomas P. Loftus.
                                             Thomas P. Loftus, Vice President
                                             and Controller
                                             (Principal Financial Officer)

                                          Date:  August 12, 1997