UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q

            [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997

                                       or

            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                      For the transition period from ______ to ______.

                          COMMISSION FILE NO. 33-98136

                      CHELSEA GCA REALTY PARTNERSHIP, L.P.
             (Exact name of registrant as specified in its charter)

   DELAWARE                                                    22-3258100
(State or other jurisdiction                                  (I.R.S. Employer
 of incorporation or organization)                          Identification No.)

               103 EISENHOWER PARKWAY, ROSELAND, NEW JERSEY 07068
               (Address of principal executive offices - zip code)

                                 (201) 228-6111
              (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 __ .

There are no outstanding shares of Common Stock or voting securities.

<PAGE>

                      CHELSEA GCA REALTY PARTNERSHIP, L.P.

                                      INDEX

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited)                         Page

         Condensed Consolidated Balance Sheets
         as of March 31, 1997 and December 31, 1996...........      3

         Condensed Consolidated Statements of Income
         for the three months ended March 31, 1997 and 1996...      4

         Condensed Consolidated Statements of Cash Flows
         for the three months ended March 31, 1997 and 1996...      5

         Notes to Condensed Consolidated Financial Statements.      6

Item 2.  Management's Discussion and Analysis of Financial 
         Condition and Results of Operations..................      9

Signatures....................................................     13
<PAGE>

ITEM 1.  FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                      CHELSEA GCA REALTY PARTNERSHIP, L.P.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      (In thousands, except per share data)

                                                                         March 31,           December 31,
                                                                            1997                  1996
                                                                       ---------------       ---------------
                                                                         (Unaudited)
<S>                                                                      <C>                  <C>    
Assets:
Rental properties:
     Land........................................................       $ 107,030          $  80,312
     Depreciable property........................................         499,927            432,042
                                                                       --------------    ---------------
Total rental property............................................         606,957            512,354
Accumulated depreciation.........................................         (63,250)           (58,054)
                                                                       ---------------   ---------------
Rental properties, net...........................................         543,707            454,300
Cash and equivalents.............................................           9,802             13,886
Notes receivable-related parties.................................           8,023              8,023
Deferred costs, net..............................................          10,883             10,321
Other assets.....................................................          12,102             15,682
                                                                       ---------------    --------------
TOTAL ASSETS.....................................................      $  584,517            502,212
                                                                       ===============       ===============

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
     Unsecured bank debt.........................................         $85,035               $ -
     7.75% Unsecured Notes due 2001..............................          99,688             99,668
     Remarketed Floating Rate Reset Notes due 2001...............         100,000            100,000
     Construction payables.......................................           9,643             14,473
     Accounts payable and accrued expenses.......................          10,075             12,257
     Obligation under capital lease..............................           9,786              9,805
     Distribution payable to stockholders........................           8,695                 -
     Distribution payable to unitholders.........................           2,156              3,038
     Rent payable................................................           1,643              1,637
                                                                      ---------------     ---------------
TOTAL LIABILITIES................................................         326,721            240,878

Commitments and contingencies

Minority interest................................................           5,747              5,698

Partners' capital:
General partner units outstanding, 13,805 in                                                        
  1997 and 12,402 in 1996........................................         202,101            185,340
Limited partners units outstanding, 3,436 in 
  1997 and 4,808 in 1996.........................................          49,948             70,296
                                                                       ---------------   ---------------
Total partners' capital..........................................         252,049            255,636
                                                                       ---------------   ---------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL                                  $584,517           $502,212
                                                                       ===============   ===============

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

                                           CHELSEA GCA REALTY PARTNERSHIP, L.P.
                                       CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                    FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
                                                       (UNAUDITED)
                                          (In thousands, except per share data)

                                                                        1997                  1996
                                                                   ---------------      ---------------
<S>                                                                    <C>                  <C> 
REVENUES:
   Base rental...................................................      $15,563               $12,677
   Percentage rental.............................................        1,298                   798
   Expense reimbursements........................................        5,364                 5,145
   Other income..................................................          424                   435
                                                                     --------------       ---------------
TOTAL REVENUES...................................................       22,649                19,055
                                                                     ---------------       ---------------

EXPENSES:
   Interest......................................................        3,157                 1,578
   Operating and maintenance.....................................        5,890                 5,523
   Depreciation and amortization.................................        5,778                 3,639
   General and administrative....................................          707                   641
   Other.........................................................          630                   538
                                                                       ---------------     ---------------
TOTAL EXPENSES...................................................       16,162                11,919
                                                                       ---------------     ---------------

Income before minority interest and extraordinary item...........        6,487                 7,136

Minority interest................................................          (50)                  (65)
                                                                       ---------------       ---------------

Net income before extraordinary item.............................        6,437                 7,071

Extraordinary item-loss on early extinguishment of debt..........          -                    (902)  
                                                                       ---------------      ---------------
NET INCOME.......................................................       $6,437                $6,169
                                                                       ===============      ===============
NET INCOME:
   General partner...............................................       $5,140                $4,154
   Limited partners..............................................        1,297                 2,015
                                                                      ---------------      ---------------
Total............................................................       $6,437                $6,169
                                                                     ===============       ===============

NET INCOME PER UNIT:
  General partner (including $0.05 net loss per unit from                                  
     extraordinary item in 1996)..........................               $0.37                $ 0.36
  Limited partners (including $0.05 net loss per unit from                                  
     extraordinary item in 1996)..........................               $0.37                $ 0.36

WEIGHTED AVERAGE UNITS OUTSTANDING:
   General partner........................................              13,749                11,648
   Limited partners.......................................               3,469                 5,574
                                                                    ---------------       ---------------
Total.....................................................              17,218                17,222


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                      CHELSEA GCA REALTY PARTNERSHIP, L.P.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
                                   (UNAUDITED)
                                 (In thousands)

                                                                       1997                  1996
                                                                  ---------------       ---------------
<S>                                                                    <C>                  <C>
Cash flows from operating activities
     Net income.............................................           $6,437                $6,169
     Adjustments to reconcile net income to net cash
        provided by operating activities:
           Depreciation and amortization....................            5,778                 3,639
           Minority interest in net income..................               50                    65
           Loss on early extinguishment of debt.............               -                    902
           Additions to deferred lease costs................             (314)                 (174)
           Other operating activities.......................               20                    49
          Changes in assets and liabilities:
            Straight line rent receivable...................             (322)                 (430)
            Other assets....................................            3,902                 1,114
            Accounts payable and accrued expenses...........           (2,195)                  183
                                                                    ---------------       ---------------
Net cash provided by operating activities...................           13,356                11,517
                                                                   ---------------       ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to rental properties..............................          (99,392)              (24,993)
Additions to deferred development costs.....................             (146)               (1,891)
Advances to related parties.................................              -                     (67)
                                                                   ---------------       ---------------
Net cash used in investing activities.......................          (99,538)              (26,951)
                                                                   ---------------       ---------------
                                                                                              
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from sale of common stock.....................              327                   540
Distributions..............................................           (3,039)               (9,791)
Debt proceeds..............................................           85,035                117,582
Repayments of debt.........................................             -                   (89,000)
Additions to deferred financing costs......................             (225)                (3,110)
                                                                   ---------------       ---------------
 Net cash provided by financing activities.................           82,098                 16,221
                                                                   ---------------       ---------------
Net (decrease) increase in cash and equivalents............           (4,084)                   787
Cash and equivalents, beginning of period..................            13,886                 3,987
                                                                   ---------------       ---------------
Cash and equivalents, end of period........................            $9,802                $4,774
                                                                   ===============       ===============

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: During
1997 and 1996, 1.4 million and 0.5 million Operating Partnership units with a
book value of approximately $20.0 million and $7.9 million, respectively, were
converted to common shares. On March 31, 1997, the Company issued units having a
market value of $0.5 million as partial consideration to acquire Waikele Factory
Outlets. Additionally, during 1996, the Company acquired property valued at $1.6
million through the issuance of units in the Operating Partnership.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>

                      CHELSEA GCA REALTY PARTNERSHIP, L.P.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.    ORGANIZATION AND BASIS OF PRESENTATION

Chelsea GCA Realty Partnership, L.P. (the "Operating Partnership"), which
commenced operations on November 2, 1993, is engaged in the development,
ownership, acquisition, leasing and operation of manufacturers' outlet centers.
As of March 31, 1997, the Operating Partnership operated 19 centers in 11 states
(the "Properties") containing approximately 3.8 million square feet of gross
leasable area ("GLA"). The Properties are located near large metropolitan areas
including New York, Los Angeles, San Francisco, Sacramento, Atlanta, Portland
(Oregon), Kansas City and Cleveland, or at or near tourist destinations
including Honolulu, the Napa Valley, Palm Springs and the Monterey Peninsula.
The Operating Partnership also has a number of properties under development and
expansion. The sole general partner in the Operating Partnership, Chelsea GCA
Realty, Inc. (the "Company"), is a self-administered and self-managed Real
Estate Investment Trust.

Ownership of the Operating Partnership as of March 31, 1997 was as follows:

     General Partner                  80.1%               13,805,000   units
     Limited Partners                 19.9%                3,436,000   units
                                  ----------------      -------------------
                     TOTAL           100.0%               17,241,000

The condensed consolidated financial statements of the Operating Partnership
include the accounts of Solvang Designer Outlets ("Solvang"), a limited
partnership in which the Operating Partnership has a 50% interest and is the
sole general partner. As the sole general partner, the Operating Partnership has
the ability to exercise both financial and operational control over the
partnership. Solvang is not material to the operations or financial position of
the Operating Partnership.

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
notes 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 fair presentation have
been included. Operating results for the three month period ended March 31, 1997
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. These financial statements should be read in
conjunction with the consolidated financial statements and accompanying notes
included in the Operating Partnership's Annual Report on Form 10-K for the year
ended December 31, 1996.

In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. Management does not believe the adoption of
Statement No. 128 will have a material impact on earning, per share.

Certain prior period balances have been reclassified to conform with current
period presentation.

2. WAIKELE ACQUISITION

Pursuant to a Subscription Agreement dated as of March 31, 1997, the Operating
Partnership acquired Waikele Factory Outlets, a manufacturers' outlet shopping
center located in Hawaii. The consideration paid by the Operating Partnership
consisted of the assumption of $70.7 million of indebtedness outstanding with
respect to the property (which indebtedness was repaid in full by the Operating
Partnership immediately after the closing) and the issuance of special
partnership units in the Operating Partnership, having a fair market value of
$0.5 million. Immediately after the closing, the Operating Partnership paid a
special cash distribution of $5.0 million on the special units. The cash used by
the Operating Partnership in the transaction was obtained through borrowings
under the Operating Partnership's Unsecured Facility (see note 3). Waikele was
not included in the Operating Partnership's operating results for the first
quarter.

3. DEBT

In March 1996, the Operating Partnership replaced its secured revolving credit
facility (the "Secured Facility") with a new unsecured $100 million revolving
credit facility (the "Unsecured Facility") which expires March 29, 1998. In
connection with the termination of the Secured Facility, the Operating
Partnership expensed as an extraordinary item the unamortized deferred financing
costs of $0.6 million (net of minority interest of $0.3 million) which had been
incurred. In March 1997, the Operating Partnership entered into a $50 million
unsecured revolving credit facility in addition to the $100 million Unsecured
Facility with the same terms and conditions except the additional facility
expires on September 30, 1997 unless extended for six months. Interest on the
outstanding balance of the unsecured facilities is payable monthly at a rate
equal to the London Interbank Offered Rate ("LIBOR") plus 1.45%, or the prime
rate, at the Operating Partnership's option. Fees on the unused portion of the
unsecured facilities are payable quarterly at a rate of 0.25% per annum. The
outstanding balance at March 31, 1997 was $85.0 million, which approximates fair
value, leaving $65.0 million of borrowing availability.

The unsecured facilities require compliance with certain loan covenants relating
to debt service coverage, tangible net worth, cash flow, earnings, occupancy
rate, new development and dividends. The Operating Partnership has remained in
compliance with these covenants since inception of the facilities.

In January 1996, the Operating Partnership completed a $100 million public debt
offering of 7.75% unsecured term notes due January 2001 (the "Term Notes"),
which are guaranteed by the Company. The five-year non-callable Term Notes were
priced at a discount of 99.952 to yield 7.85% to investors. Net proceeds from
the offering were used to pay down substantially all of the borrowings under the
Secured Facility.

In October 1996, the Operating Partnership completed a $100 million offering of
Remarketed Floating Rate Reset Notes (the "Reset Notes"), which are guaranteed
by the Company. The interest rate will reset quarterly and will equal LIBOR plus
75 basis points during the first year. The spread and the spread period for
subsequent periods will be adjusted in whole or part at the end of the first
year, pursuant to an agreement with the underwriters. Unless previously
redeemed, the Reset Notes will have a final maturity of October 23, 2001. Net
proceeds from the offering were used to repay all of the borrowings under the
Unsecured Facility and for working capital. The carrying amount of the Reset
Notes approximates their fair value.

Interest and loan costs of approximately $0.8 million and $1.1 million were
capitalized as development costs during the three months ended March 31, 1997
and 1996, respectively.

4. DISTRIBUTIONS

On March 13, 1997, the Board of Directors of the Company declared a $0.63 per
unit cash distribution to unitholders of record on March 28, 1997. The
distribution, totaling $10.8 million, was paid on April 18, 1997.

5. INCOME TAXES

No provision has been made for income taxes in the accompanying consolidated
financial statements since such taxes, if any, are the responsibility of the
individual partners.

6. NET INCOME PER PARTNERSHIP UNIT

Net income per partnership unit is determined by allocating net income to the
general partner and the limited partners based on their weighted average
partnership units outstanding during the respective periods presented.

7. COMMITMENTS AND CONTINGENCIES

The Operating Partnership is not presently involved in any material litigation
nor, to its knowledge, is any material litigation threatened against the
Operating Partnership or its properties, other than routine litigation arising
in the ordinary course of business. Management believes the costs, if any,
incurred by the Operating Partnership related to this litigation will not
materially affect the financial position, operating results or liquidity of the
Operating Partnership.

8. RELATED PARTY INFORMATION

The Operating Partnership recognized lease settlement income of approximately
$99,000 from a related party during the three months ended March 31, 1996. This
amount is included in other income in the accompanying condensed consolidated
financial statements.

9. EXTRAORDINARY ITEM

Deferred financing costs of $0.6 million (net of minority interest of $0.3
million) related to the Secured Facility replaced in March 1996 were expensed
and are reflected in the accompanying financial statements as an extraordinary
item.

<PAGE>

                      CHELSEA GCA REALTY PARTNERSHIP, L.P.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion should be read in conjunction with the accompanying
unaudited condensed consolidated financial statements and notes thereto. These
financial statements include all adjustments which, in the opinion of
management, are necessary to reflect a fair statement of results for the interim
periods presented, and all such adjustments are of a normal recurring nature.

GENERAL OVERVIEW

The Operating Partnership has grown by increasing rent at its existing centers,
expanding its existing centers, developing new centers and acquiring and
redeveloping centers. The Operating Partnership operated 19 manufacturers'
outlet centers at March 31, 1997 compared to 16 at the end of the same quarter
in the prior year. The Operating Partnership's operating gross leasable area
(GLA) at March 31, 1997, increased 30.3% to 3.8 million square feet from 2.9
million square feet at March 31, 1996. GLA added since April 1, 1996 is detailed
as follows:
<TABLE>
<CAPTION>

                                                     12 mos ended           3 mos ended         9 mos ended
                                                     March 31,              March 31,            December 31,
                                                       1997                  1997                  1996
                                                 ----------------       ----------------       ---------------
<S>                                                    <C>                  <C>                     <C> 
GLA added (in 000's):
NEW CENTERS OPENED:
    North Georgia................................      292                    -                      292
    Clinton Crossing.............................      272                    -                      272
                                                   ------------           ------------           ------------
TOTAL NEW  CENTERS...............................      564                    -                      564

CENTERS EXPANDED:
    Desert Hills.................................      11                     11                     -
    Camarillo....................................      54                     -                      54
    Petaluma.....................................      28                     -                      28
    Folsom.......................................      22                     -                      22
    Other........................................      (2)                    (4)                     2
                                                  ------------           ------------           ------------
TOTAL CENTERS EXPANDED...........................      113                    7                      106

CENTER ACQUIRED:
    Waikele (1)..................................      214                    214                    -
                                                   ------------           ------------           ------------

Net GLA added during the period..................      891                    221                    670

GLA at end of period.............................    3,831                  3,831                  3,610

-----------------------------------------------------------------------------------------------------------------
(1)  Waikele Factory Outlets was acquired on March 31, 1997, and is not 
     included in the Operating Partnership's operating results for the first 
     quarter.
</TABLE>

<PAGE>

RESULTS OF OPERATIONS

Comparison of the three months ended March 31, 1997 to the three months ended
March 31, 1996.

Net income before minority interest and extraordinary item decreased $0.6
million to $6.5 million for the three months ended March 31, 1997 from $7.1
million for the three months ended March 31, 1996. Increases in revenues were
offset by interest on borrowings and increases in depreciation and amortization.

Base rentals increased $2.9 million, or 22.8%, to $15.6 million for the three
months ended March 31, 1997 from $12.7 million for the three months ended March
31, 1996 due to expansions, new center openings and higher average rents.

Percentage rents increased $0.5 million to $1.3 million for the three months
ended March 31, 1997, from $0.8 million for the three months ended March 31,
1996. The increase was primarily due to increases in tenant sales at the
Operating Partnership's larger centers and an increase in tenants contributing
percentage rents.

Expense reimbursements, representing contractual recoveries from tenants of
certain common area maintenance, operating, real estate tax, promotional and
management expenses, increased $0.2 million, or 4.3%, to $5.3 million for the
three months ended March 31, 1997 from $5.1 million for the three months ended
March 31, 1996, due to the recovery of operating and maintenance costs at new
and expanded centers. The average recovery of reimbursable expenses was 91.1% in
the first quarter of 1997, compared to 93.2% in the first quarter of 1996.

Interest in excess of amounts capitalized increased $1.6 million to $3.2 million
for the three months ended March 31, 1997 from $1.6 million for the three months
ended March 31, 1996 due to higher debt balances and the opening of centers and
expansions financed during 1996.

Operating and maintenance expenses increased $0.4 million, or 6.6%, to $5.9
million for the three months ended March 31, 1997 from $5.5 million for the
three months ended March 31, 1996. The increase was primarily due to costs
related to expansions and new centers offset by a decrease in expenses due to
the severe weather in the northeast during the three months ended March 31,
1996.

Depreciation and amortization expense increased $2.2 million, or 58.8%, to $5.8
million for the three months ended March 31, 1997 from $3.6 million for the
three months ended March 31, 1996. The increase was primarily related to
expansions and new centers.

Other expenses increased $0.1 million to $0.6 million for the three months ended
March 31, 1997 from $0.5 million for the three months ended March 31, 1996. The
increase included additional reserves for bad debts.

LIQUIDITY AND CAPITAL RESOURCES

The Operating Partnership believes it has adequate financial resources to fund
operating expenses, distributions, and planned development and construction
activities. Operating cash flow during 1997 is expected to increase with a full
year of operations of the 676,000 square feet of GLA added during 1996, the
acquisition of Waikele Factory Outlets, scheduled openings of one new center and
expansions in 1997, subject to market demand. In addition, at March 31, 1997 the
Operating Partnership had $65.0 million available under its unsecured
facilities, access to the public markets through the Company's $200 million
equity shelf registration, and cash equivalents of $9.8 million.

Operating cash flow is expected to provide sufficient funds for distributions.
In addition, the Operating Partnership anticipates retaining sufficient
operating cash to fund re-tenanting and lease renewal tenant improvement costs,
as well as capital expenditures to maintain the quality of its centers.

Distributions declared and recorded during the three months ended March 31, 1997
were $10.8 million, or $0.63 per unit. The Operating Partnership's distribution
payout ratio as a percentage of net income before depreciation and amortization,
exclusive of amortization of deferred financing costs, minority interest and
extraordinary item ("FFO") was 91.8% during the three months ended March 31,
1997. The Unsecured Facility limits aggregate distributions to the lesser of (i)
90% of FFO on an annual basis or (ii) 100% of FFO for any two consecutive
quarters.

In March 1997, the Operating Partnership entered into a $50 million unsecured
revolving credit facility in addition to the $100 million Unsecured Facility
with the same terms and conditions except the additional facility expires on
September 30, 1997 unless extended for six months. Interest on the outstanding
balance is payable monthly at a rate equal to LIBOR plus 1.45%, or the prime
rate, at the Operating Partnership's option. Fees on the unused portion of the
unsecured facilities are payable quarterly at a rate of 0.25% per annum.

The Operating Partnership is in the process of planning development for 1997 and
beyond which includes a new project in Wrentham, Massachusetts (located near the
junction of Interstates 95 and 495 between Boston, MA and Providence, RI) with
an expected initial phase of 230,000 square feet of GLA and expansions at
Woodbury Common (270,000 square feet), North Georgia (111,000 square feet),
Desert Hills (36,000 square feet), Liberty Village (13,000 square feet), Folsom
(32,000 square feet) and Camarillo (82,000 square feet). These projects are in
various stages of development and there can be no assurance that any of these
projects will be completed or opened, or that there will not be delays in the
opening or completion of any of them. The Operating Partnership anticipates
development and construction costs of $75 million to $115 million annually.

To achieve planned growth and favorable returns in both the short and long term,
the Operating Partnership's financing strategy is to maintain a strong, flexible
financial position by: (i) maintaining a conservative level of leverage; (ii)
extending and sequencing debt maturity dates; (iii) managing exposure to
floating interest rates; (iv) maintaining a significant level of unencumbered
assets; and (v) maintaining liquidity. Management believes these strategies will
enable the Operating Partnership to access a broad array of capital sources,
including bank or institutional borrowings and secured and unsecured debt and
equity offerings, subject to market conditions.

It is the Operating Partnership's policy to limit its borrowings to less than
40% of total market capitalization (defined as the value of outstanding shares
of common stock of the Company on a fully diluted basis including conversion of
partnership units to common stock, plus total debt). Using a March 31, 1997
closing price of $35.875 per share of stock of the Company, the Operating
Partnership's ratio of debt to total market capitalization was approximately
32%.

Net cash provided by operating activities was $13.4 million and $11.5 million
for the three months ended March 31, 1997 and 1996, respectively. The increase
was primarily due to the growth of the Operating Partnership's GLA to 3.8
million square feet in 1997 from 2.9 million square feet in 1996 and decreases
in accounts receivable offset by decreases in accrued interest on borrowings.
Net cash used in investing activities increased $72.6 million for the three
months ended March 31, 1997 compared to the corresponding 1996 period, primarily
as a result of the Waikele Factory Outlets acquisition. Net cash provided by
financing activities increased $65.9 million primarily due to borrowings for the
Waikele Factory Outlets acquisition.

FUNDS FROM OPERATIONS

Management believes that funds from operations ("FFO") should be considered in
conjunction with net income, as presented in the statements of operations
included elsewhere herein, to facilitate a clear understanding of the operating
results of the Operating Partnership. Management considers FFO an appropriate
measure of performance for an equity real estate investment trust. FFO, as
defined by the National Association of Real Estate Investment Trusts ("NAREIT"),
is net income (computed in accordance with generally accepted accounting
principles), excluding gains (or losses) from debt restructuring and sales of
property, exclusive of outparcel sales, plus real estate related depreciation
and amortization and after adjustments for unconsolidated partnerships and joint
ventures. Adjustments for unconsolidated partnerships and joint ventures are
calculated to reflect FFO on the same basis. FFO does not represent net income
or cash flow from operations as defined by generally accepted accounting
principles and should not be considered an alternative to net income as an
indicator of operating performance or to cash from operations, and is not
necessarily indicative of cash flow available to fund cash needs.

                                               Three Months Ended March 31,
                                                1997                   1996
                                           --------------        -------------

    Net income before extraordinary item...   $6,437                 $7,071
    Add back:
    Depreciation and amortization (1)......    5,720                  3,587
    Amortization of deferred financing 
    costs and depreciation of non-real                               
    estate assets.........................      (335)                  (387)
                                            --------------       -------------
    FFO..................................    $11,822                $10,271
                                            ==============       =============
---------------------------------------
(1) Excludes depreciation and minority interest attributed to a third-party
    limited partner's interest in a partnership.
<PAGE>
                      CHELSEA GCA REALTY PARTNERSHIP, L.P.


                                   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.


                                   CHELSEA GCA REALTY PARTNERSHIP, L.P.

                                   By:  CHELSEA GCA REALTY, INC.
                                        Its General Partner

                                   By:  /S/  LESLIE T. CHAO
                                        Leslie T. Chao
                                        President and Chief Financial Officer

Date: May 14, 1997