FORM 10-Q/A
                                  Amendment #1
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities  Exchange
Act of 1934 For quarterly period ended September 30, 1996

[ ] 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                           (IRS 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 November 14, 1996: 20,609,754

   The  registrant  hereby  amends  Item 1 and  Item 2 of its Form  10-Q,  dated
November 14, 1996, as set forth in the pages attached hereto.




<PAGE>



Item 1. Financial Statements (continued)

                     CORNERSTONE PROPERTIES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1996


 (1)  NATURE OF THE COMPANY'S BUSINESS
      --------------------------------
      AND SIGNIFICANT ACCOUNTING POLICIES
      -----------------------------------

   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.

Cornerstone  and/or its  subsidiaries  are parties to several interest rate swap
agreements used to hedge its interest rate exposure on floating rate debt (Notes
2 and 3). The  differential  to be paid or received is  recognized in the period
incurred  and  included  net  in  interest  expense.   Cornerstone   and/or  its
subsidiaries may be exposed to loss in the event of non-performance by the other
party to the  interest  rate  swap  agreements.  However,  Cornerstone  does not
anticipate non-performance by the counterparty.





















                                          5

<PAGE>

Item 2

       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996


RESULTS OF OPERATIONS
---------------------

Interest Rate Swaps
During the period  analyzed  the Company had the  following  interest  rate swap
agreements outstanding which it accounted for using the accrual method:

The $107 million  interest rate swap  agreement with a maturity date of July 30,
1998,  was  accounted  for on the accrual  method since it was  comprised of two
offsetting  swaps,  resulting  in  a  fixed  payment  from  Cornerstone  to  its
counterparties  through the term of the swaps.  These swaps were  terminated  in
August 1996 in conjunction with the extinguishment of the Interest Bearing Notes
they originally hedged, and the loss recognized as an extraordinary loss.

The $21  million  interest  rate  swap  agreement  was put in place to hedge the
interest rate risk on  Cornerstone's  $33 million  dollar  credit  facility with
Deutsche Bank. Since this was a floating rate facility, the Company used accrual
accounting  when  accounting for its swap payments.  Upon the refinancing of the
facility into a fixed rate facility in August 1995, this swap was terminated and
the loss recognized as an extraordinary loss.

The $120 million interest rate swap agreement maturing December 31, 2003 was put
in place to hedge the interest  rate risk on the $130  million  letter of credit
facility  with  Deutsche  Bank.  Since this was a floating  rate  facility,  the
Company used accrual accounting when accounting for its swap payments.  Upon the
refinancing of the facility into a fixed rate facility in September  1995,  this
swap was terminated and the loss recognized as an extraordinary loss.

The $110 million interest rate swap agreement maturing December 31, 2003 was put
in place to hedge the interest  rate risk on the $115  million  letter of credit
facility  with  Deutsche  Bank.  Since this was a floating  rate  facility,  the
Company used accrual accounting when accounting for its swap payments.  Upon the
refinancing of the facility into a fixed rate facility in April 1995,  this swap
was terminated and the loss recognized as an extraordinary loss.

For the nine month  periods  ended  September  30, 1996 and  September 30, 1995,
interest  expense  of the  Company  included  approximately  $467,000  and  $1.7
million,  respectively, of expense related to interest rate swap agreements. The
Company  no longer has any  accrual  method  swaps on its  books.  Since the $98
million swap is a forward swap and accounted  for on a mark to market basis,  it
had no effect on the reported interest expense of the Company.









                                          8

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

Cash Flow

                            For  the  nine  months   For  the  nine  months
Cash flow provided by       ended   September  30,   ended   September  30,
(used in):                                   1996                     1995
--------------------------------------------------------------------------
Operating activities                       $20,421                 $5,406
Investing activities                      (10,229)                (6,025)
Financing activities                         1,587                 73,184
Earnings  to fixed  charges ratio             1.30                      *


*For the nine months ended  September  30, 1995,  the  Company's  earnings  were
insufficient to cover its fixed charges by approximately $4.7 million.


Cash provided by operating  activities  increased from $5.4 million for the nine
months  ended  September  30, 1995 to $20.4  million  for the nine months  ended
September  30, 1996.  This increase was mainly due to the increase in net rental
revenues from the properties of $4.0 million, the increase in interest and other
income of $1.4 million and the decrease in the minority interest share of income
of $1.5 million due to the  Company's  purchase of the 10% minority  interest in
One Norwest  Center from Hines.  The large amount of prepaid rental income as of
December 31, 1994, reduced operating cash flow during 1995.

Cash used in investing activities increased to $10.2 million for the nine months
ended  September 30, 1996 from $6.0 for the nine months ended September 30, 1995
due to acquisition  costs relating to 125 Summer Street and Tower 56, as well as
leasing  costs  relating  to the renewal of a  significant  tenant at 125 Summer
Street.

Cash  provided by  financing  activities  decreased to $1.6 million for the nine
months  ended  September  30, 1996 from $73.2  million for the nine months ended
September 30, 1995. The decrease was due to the equity placement of $140 million
during the third quarter of 1995,  which was partially offset by a net repayment
of long term debt of approximately $47 million.

Earnings to fixed  charges  increased to 1.30 times at  September  30, 1996 from
0.79 times at September 30, 1995 due to the increased  equity  investment in the
Company of over $140 million  during the third quarter of 1995 which allowed the
Company to purchase assets at a lower level of leverage than had occurred in the
past. Also the refinancing of the $32.5 million term loan and the refinancing of
the mortgage debt on Washington  Mutual Tower has reduced the Company's  overall
cost of debt.

For the nine months  ended  September  30, 1995,  the  Company's  earnings  were
insufficient to cover its fixed charges by approximately $4.7 million.









                                       8-a

<PAGE>

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 realized gain
on interest rate swap previously discussed in accordance with its mark-to-market
accounting policy.

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.

For  comparability  purposes,  the amounts  reported in FFO for 1995 differ from
those  previously  reported  to adjust for the  changes  to the FFO  calculation
recently released by the Board of Governors of NAREIT. Additionally, 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 nine
months ended September 30, 1996 and 1995 is approximately $753,000 and $978,000,
respectively, of free and deferred rents.























                                          9

<PAGE>

The table  below  sets forth the  adjustments  which were made to the net income
(loss)  of the  Company  in the  calculation  of FFO for the nine  months  ended
September 30, 1996 and 1995, respectively (in thousands):

                                              Funds From Operations (A)
                                              ---------------------

                                             Nine Months      Nine Months
                                                Ended            Ended
                                            September 30,    September 30,
                                                1996             1995
                                                ----             ----

       Net income (loss) ........................   $  7,050    ($ 4,697)

       NAREIT Adjustments:
          Depreciation and amortization (B) .....      17,869     16,015
          Net gain on swap termination ..........     (5,401)        --
          Minority adjustments ..................     (1,393)       (974)
          Extraordinary loss ....................      3,786       4,527

       Other Adjustments:
          Amortization on rent notes ............        813         733
          Real estate tax adjustment ............      2,107        --
                                                    --------    --------
       Funds From Operations ....................     24,831      15,604
                                                    --------    --------

       Accrued Preferred Dividend ...............     (2,625)       (582)
                                                    --------    --------

       Funds From Operations
       Available For Common Shares ..............   $ 22,206    $ 15,022
                                                    ========    ========

              (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.

The increase in FFO is primarily  attributable  to net earnings  after  interest
expense on the  associated  debt from 125 Summer  Street of  approximately  $5.5
million and net earnings  after  interest  expense on the  associated  debt from
Tower 56 of  approximately  $1.8  million,  both of which were  acquired  in the
fourth  quarter of 1995;  an  increased  share of net  earnings  after  interest
expense on the associated debt from One Norwest Center in the amount of $636,000
due to the 10 percent partnership  interest purchase on January 1, 1996 and debt
refinancing  at  Washington  Mutual  Tower  which  reduced  interest  expense by
approximately $1.3 million.

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.

                                       9-a
<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:  February 21, 1997

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

                          Date:  February 21, 1997