Exhibit 99.3

ITEM 1--BUSINESS--THE COMPANY--RISK FACTORS
(from the Annual Report on Form 10-K of CarrAmerica Realty Corporation for the
year ended December 31, 1998)

RISK FACTORS
 
     In addition to the other information in this document, you should consider
carefully the following risk factors in evaluating an investment in our
securities.
 
OUR PERFORMANCE IS SUBJECT TO RISKS ASSOCIATED WITH REAL ESTATE INVESTMENT
 
     We are a real estate company that derives most of its income from the
ownership and operation of office buildings. There are a number of factors that
may adversely affect the income that our properties generate, including the
following:
 
     Economic Downturns.  Downturns in the national economy, or in regions or
localities where our properties are located, generally will negatively impact
the demand for office space.
 
     Oversupply of Office Space.  An oversupply of space in markets where we own
office properties making it more difficult for us to lease space at attractive
rental rates would typically cause rental rates and occupancies to decline.
 
     Competitive Properties.  If our properties are not as attractive to tenants
(in terms of rents, services or location) as other properties that are
competitive with ours, we could lose tenants to those properties, or could have
to reduce our rental rates to compensate for that disparity.
 
     Renovation Costs.  In order to maintain the quality of our office buildings
and successfully compete against other properties, we periodically have to spend
money to repair and renovate our properties.
 
     Tenant Risk.  Our performance depends on our ability to collect rent from
our tenants. While no tenant in our portfolio accounted for more than 5% of our
rental revenue as of December 31, 1998, the Company's financial position may be
adversely affected by financial difficulties experienced by a major tenant, or
by a number of smaller tenants, including bankruptcies, insolvencies or general
downturns in business.
 
     Reletting Costs.  As leases expire, we try to either relet the space to an
existing tenant or attract a new tenant to occupy the space. In either case, we
likely will incur significant costs in the process. In addition, if market rents
have declined since the time the expiring lease was entered into, the terms of
any new lease signed likely will not be as favorable to us as the terms of the
expiring lease, thereby reducing the income earned from that space.
 
     Regulatory Costs.  There are a number of government regulations, including
zoning and tax laws, that apply to the ownership and operation of office
buildings. Compliance with existing and newly adopted regulations often requires
us to spend a significant amount of money on our properties.
 
     Fixed Nature of Costs.  Most of the costs associated with owning and
operating an office building are not necessarily reduced when circumstances such
as market factors and competition cause a reduction in income from the property.
 
     Environmental Problems Are Possible and Can Be Costly.  Federal, state and
local laws and regulations relating to the protection of the environment may
require a current or previous owner or operator of real property to investigate
and clean up hazardous or toxic substances or petroleum product releases at the
property. The
 
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presence of or failure to clean up contamination may adversely affect our
ability to sell or lease a property or to borrow using a property as collateral.
 
     Competition.  A number of other major real estate investors with
significant capital compete with us. These competitors include publicly traded
REITs, private REITs, investment banking firms and private institutional
investment funds.
 
NEW DEVELOPMENTS AND ACQUISITIONS MAY FAIL TO PERFORM AS EXPECTED
 
     Over the last few years, we have embarked on a major acquisition and
development program. In deciding whether to acquire or develop a particular
property, we made certain assumptions regarding the expected future performance
of that property. If a number of these new properties do not perform as
expected, our financial performance will be adversely affected.
 
     While our acquisition pace has declined significantly, we remain very
active in developing office properties. New office property developments are
subject to a number of risks, including construction delays, complications in
obtaining necessary zoning, occupancy and other governmental permits, cost
overruns, financing risks, and the possible inability to meet expected occupancy
and rent levels. If any of these problems occur, development costs for a project
will increase, and there may be costs incurred for projects that are not
completed.
 
OUR USE OF DEBT SUBJECTS US TO VARIOUS FINANCING RISKS
 
     While we believe that we have a conservative borrowing policy, we do
regularly borrow money to finance our business, particularly the acquisition and
development of properties. We generally incur unsecured debt, although in many
cases we will incur mortgage debt that is secured by one or more of our office
buildings. There are certain risks inherent in borrowing money, including the
following:
 
     No Limitation on Debt Incurrence.  The Company's organizational documents
do not limit the amount of debt the Company can incur. The degree of leverage of
the Company could have important consequences, including making it more
difficult for us to obtain additional financing in the future for business
needs, as well as making us more vulnerable to an economic downturn.
 
     Possible Inability to Meet Scheduled Debt Payments.  If our properties do
not perform as expected, our cash flow from our properties may not be enough to
make required principal and interest payments. If a property is mortgaged to
secure payment of indebtedness and we are unable to meet mortgage payments, the
holder of the mortgage or lender could foreclose on the property, resulting in
loss of income and asset value. An unsecured lender could also attempt to
foreclose on some of the Company's assets in order to receive payment.
 
     Inability to Refinance Debt.  In almost every case, very little of the
principal amount that we borrow is repaid prior to the maturity of the loan. We
generally expect to refinance that debt when it matures, although in some cases
we may pay off the loan. If principal amounts due at maturity cannot be
refinanced, extended or paid with proceeds of other capital transactions, such
as new equity capital, our cash flow will be insufficient in all years to repay
all maturing debt. Prevailing interest rates or other factors at the time of a
refinancing (such as possible reluctance of lenders to make commercial real
estate loans) may result in higher interest rates and increased interest
expense.
 
     As a general matter, we use our line of credit and cash on hand received
from asset dispositions and joint ventures to finance our development and
acquisition activities, with the expectation that long-term permanent financing
will be obtained once the property is stabilized. If permanent debt or equity
financing is unavailable on acceptable terms in the future, it may significantly
restrict our development and acquisition programs.
 
     Financial Covenants Could Adversely Affect Our Financial Condition.  The
Company's credit facilities and the indentures under which the Company's senior
unsecured indebtedness is issued contain financial and operating covenants,
including coverage ratios and other limitations on the Company's ability to
incur secured and unsecured indebtedness, sell all or substantially all of its
assets and engage in mergers, consolidations and certain acquisitions. These
covenants may restrict the Company's ability to engage in transactions that
would otherwise be in the Company's best interests.
 
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OUR BUSINESS STRUCTURE HAS CERTAIN RISKS ASSOCIATED WITH IT
 
     A Major Stockholder Has Influence on Our Operations.  SC-USREALTY owned
approximately 39.9% of the outstanding shares of our common stock (36.2% on a
fully diluted basis) as of March 15, 1999. No other stockholder is permitted to
own more than 5% of our common stock, subject to certain exceptions. Under a
Stockholders Agreement with the Company, SC-USREALTY has the right to nominate
up to 40% of the directors. The Stockholders Agreement also gives SC-USREALTY
certain rights that limit our ability to take certain actions and limits our
ability to engage in certain transactions that may be in the best interests of
other stockholders. This situation results in SC-USREALTY having a substantial
influence over the affairs of the Company. This could potentially be
disadvantageous to other stockholders' interests, which may not converge with
the interests of SC-USREALTY.
 
     Certain Officers and Directors May Have Interests that Conflict with the
Interests of Stockholders.  Certain officers and members of the board of
directors of the Company own units of limited interest partnership in Carr
Realty, L.P., a partnership that owns some of the Company's properties. These
individuals may have personal interests that conflict with the interests of the
Company's stockholders with respect to business decisions affecting the Company
and Carr Realty, L.P., such as interests in the timing and pricing of property
sales or refinancings in order to obtain favorable tax treatment. The Company,
as the sole general partner of Carr Realty, L.P., has the exclusive authority to
determine whether and on what terms the partnership will sell or refinance an
individual property, but the effect of certain transactions on these unitholders
may influence decisions affecting these properties.
 
     We May Not Be Able to Sell Properties When Appropriate.  Real estate
property investments generally cannot be sold quickly. In addition, the tax laws
applicable to REITs restrict our ability to dispose of certain properties.
Therefore, we may be unable to vary our portfolio promptly in response to market
conditions, which may adversely affect our financial position.
 
     Lack of Voting Control Over Some of Our Affiliates.  While most of our
income is generated from the ownership and operation of our office buildings, we
own nonvoting interests in four affiliates that either currently produce or are
expected in the future to produce significant contributions to our income. Carr
Services, Inc. conducts management and leasing operations for third parties and
for office buildings in which we own less than a 100% interest. CarrAmerica
Development conducts fee-based development services for the Company and for
third parties. OmniOffices and Omni UK are engaged in the executive suites
business, providing short-term office space together with telephone answering,
data processing and other office support services. As of December 31, 1998, the
Company owned approximately 95% of the economic interest in each of these
companies through the ownership of nonvoting common stock. The voting stock of
each of these companies is owned by certain entities and individuals that have
some affiliation with the Company (or, in the case of Omni UK, by OmniOffices).
 
     The Company owns nonvoting stock in these companies because the tax laws
applicable to REITs prohibit the Company from owning more than a 10% voting
interest. As a result, the Company has no right to elect the directors of these
companies, and its ability to influence their operations is limited. These
companies may engage in business activities that are not in the Company's best
interests.
 
     We Depend On External Capital.  To qualify as a REIT, we generally must
distribute to our stockholders each year at least 95% of our net taxable income.
Because of these distribution requirements, we likely will not be able to fund
all future capital needs, including capital for property development and
acquisitions, with income from operations. We therefore will have to rely on
third-party sources of capital, which may or may not be available on favorable
terms, if at all. Our access to third-party sources of capital depends on a
number of things, including the market's perception of our growth potential and
our current and potential future earnings.
 
CERTAIN FACTORS MAY INHIBIT CHANGES IN CONTROL OF THE COMPANY
 
     Charter and By-law Provisions.  Certain provisions of our charter and
by-laws may delay or prevent a change in control of the Company or other
transactions that could provide our common stockholders with a premium over the
then-prevailing market price of their common stock or that might otherwise be in
the best interests of our stockholders. These include a staggered board of
directors and the ability of our board of directors to authorize the issuance of
preferred stock without stockholder approval. Also, any future series of
preferred
 
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stock may have voting provisions that could delay or prevent a change in control
or other transaction that might involve a premium price or otherwise be in the
best interests of our stockholders.
 
     Ownership Limit.  In order to assist the Company in maintaining its
qualification as a REIT, the Company's charter contains certain provisions
generally limiting the ownership of shares of capital stock by any single
stockholder to 5% of the Company's outstanding common stock and/or 5% of any
class or series of preferred stock. The federal tax laws include complex stock
ownership and attribution rules that apply in determining whether a stockholder
exceeds the ownership limits. These rules may cause a stockholder to be treated
as owning stock that is actually owned by others, including family members and
entities in which the stockholder has an ownership interest. The board of
directors of the Company could waive this restriction if it were satisfied that
ownership in excess of these ownership limits would not jeopardize our status as
a REIT and the board otherwise decides that a waiver would be in the Company's
interests. Capital stock acquired or transferred in breach of the ownership
limit will be automatically transferred to a trust for the benefit of a
designated charitable beneficiary.
 
     Maryland Law Provisions.  Certain provisions of Maryland law applicable to
the Company because it is a Maryland corporation prohibit 'business
combinations' with any person that beneficially owns ten percent or more of the
outstanding voting shares of the Company (an 'interested stockholder') or with
an affiliate of the interested stockholder. These prohibitions last for five
years after the most recent date on which the person became an interested
stockholder. After the five-year period, a business combination with an
interested stockholder must be approved by two super-majority stockholder votes
unless, among other conditions, the Company's common stockholders receive a
minimum price for their shares and the consideration is received in cash or in
the same form as previously paid by the interested stockholder for its common
shares. The Company's board of directors has opted out of these business
combination provisions. Consequently, the five-year prohibition and the
super-majority vote requirements will not apply to a business combination
involving the Company. The Company's board of directors may, however, repeal
this election in most cases and cause the Company to become subject to these
provisions in the future. Being subject to the provisions could delay or prevent
a change in control or other transaction involving the Company that might
involve a premium price or otherwise be in the best interests of the Company's
stockholders.
 
THE MARKET VALUE OF OUR SECURITIES CAN BE ADVERSELY AFFECTED BY MANY FACTORS
 
     As with any public company, a number of factors may adversely influence the
public market price of our common stock, many of which are beyond our control.
These factors include: the level of institutional interest in the Company; the
perception of REITs generally, and REITs with portfolios similar to ours in
particular, by market professionals, and the attractiveness of securities of
REITs in comparison to other companies; our financial condition and performance,
and the market's perception of our growth potential and potential future cash
dividends; increases in market interest rates, which may lead investors to
demand a higher annual yield from distributions by the Company in relation to
the price paid for our stock; and the relatively low trading volume of shares of
REITs in general, which tends to exacerbate a market trend with respect to our
stock.
 
     Sales of a substantial number of shares of our stock, or the perception
that such sales could occur, also could adversely affect prevailing market
prices for our stock. In addition to the possibility that we may sell shares of
our stock in a public offering at any time, we also may issue shares of common
stock upon redemption of units of interest held by third parties in affiliated
partnerships that we control, as well as upon exercise of stock options that we
grant to our employees and others. All of these shares will be available for
sale in the public markets from time to time. In addition, SC-USREALTY, our
largest stockholder (owning more than one-third of our shares), has the right to
sell its shares at any time, pursuant to registration rights granted to it in
connection with its original investment in the Company.
 
OUR STATUS AS A REIT MAY RESULT IN RISKS FOR INVESTORS
 
     We believe that the Company has qualified for taxation as a REIT for
federal income tax purposes, and we plan to continue to operate so that the
Company meets the requirements for taxation as a REIT. If we qualify as a REIT,
we generally will not be subject to federal income tax on our income that we
distribute currently to our shareholders. Many of the REIT requirements,
however, are highly technical and complex. The determination that the Company is
a REIT requires an analysis of various factual matters and circumstances that
may not be
 
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totally within our control. For example, to qualify as a REIT, at least 95% of
our gross income must come from certain sources that are itemized in the REIT
tax laws. We also are required to distribute to our stockholders at least 95% of
our REIT taxable income (excluding capital gains). The fact that we hold certain
of our assets through partnerships and their subsidiaries further complicates
the application of the REIT requirements. Even a technical or inadvertent
mistake could jeopardize the Company's REIT status. Furthermore, Congress and
the IRS might make changes to the tax laws and regulations, and the courts might
issue new rulings, that make it more difficult, or impossible, for us to remain
qualified as a REIT.
 
     If the Company fails to qualify as a REIT, it would be subject to federal
income tax at regular corporate rates. Also, unless the IRS granted the Company
relief under certain statutory provisions, it would remain disqualified as a
REIT for four years following the year it first failed to qualify. If we failed
to qualify as a REIT, we would have to pay significant income taxes and would
therefore have less money available for investments, debt service and dividends
to stockholders. This likely would have a significant adverse affect on the
value of our securities. In addition, we would no longer be required to pay any
dividends to stockholders.
 
     Even if we qualify as a REIT, we are required to pay certain federal, state
and local taxes on our income and property. For example, if the Company has net
income from 'prohibited transactions,' that income will be subject to a 100%
tax. In general, prohibited transactions are sales or other dispositions of
property held primarily for sale to customers in the ordinary course of
business. The determination as to whether a particular sale is a prohibited
transaction is dependent on the facts and circumstances related to that sale.
While we have recently undertaken a significant number of asset sales, we do not
believe that those sales should be considered prohibited transactions, but there
can be no assurance that the IRS would not contend otherwise. In addition, any
net taxable income earned directly by some of our affiliates, including
OmniOffices, Carr Services, Inc. and CarrAmerica Development, is subject to
federal and state corporate income tax. Similarly, the income of our affiliate,
Omni UK, is subject to some foreign taxes.
 
     Federal tax laws prohibit REITs from owning more than 10% of the
outstanding voting securities of any issuer that is not another REIT or a
'qualified REIT subsidiary.' The Clinton Administration's fiscal year 2000
budget proposal, announced February 1, 1999, includes a proposal that would
change the 10% voting securities test to a 10% vote or value test. Under the
proposal, a REIT would not be able to own more than 10% of the vote or value of
the outstanding securities of any corporation, except for a qualified REIT
subsidiary or another REIT. The proposal also contains an exception to the 5%
and 10% asset tests that would allow a REIT to have 'taxable REIT subsidiaries,'
including both 'qualified independent contractor subsidiaries,' which could
perform noncustomary and other currently prohibited services for tenants and
other customers, and 'qualified business subsidiaries,' which could undertake
third-party management and development activities as well as other non-real
estate related activities. Under the proposal, no more than 15% of a REIT's
total assets could consist of taxable REIT subsidiaries and no more than 5% of a
REIT's total assets could consist of qualified independent contractor
subsidiaries. Under the budget proposal, a taxable REIT subsidiary would not be
entitled to deduct any interest on debt funded directly or indirectly by the
REIT. This proposal would be effective after the date of enactment and a REIT
would be allowed to combine and convert existing corporate subsidiaries into
taxable REIT subsidiaries tax-free prior to a certain date. A transition period
would allow for conversion of existing corporate subsidiaries before the 10%
vote or value test would become effective. For the Company's taxable years after
the effective date of the proposal and after any applicable transition period,
the 10% vote or value test would apply to the Company's ownership in the
Company's operating subsidiaries, including OmniOffices not converted into
taxable REIT subsidiaries. It is presently uncertain whether any proposal
regarding REIT subsidiaries, including the budget proposal, will be enacted or,
if enacted, what the terms, including the effective date, of such proposal will
be.
 
OUR COMPANY IS NOT A SUITABLE INVESTMENT FOR FOREIGN INVESTORS
 
     Our charter contains provisions generally preventing foreign investors
(other than SC-USREALTY and its affiliates) from acquiring additional shares of
the Company's capital stock if the acquisition would cause us to fail to qualify
as a domestically controlled REIT under the federal tax code. The application of
such provisions could prevent a foreign investor from acquiring stock or cause
stock that has been acquired to be reacquired automatically from the foreign
investor by a designated charitable trust. Accordingly, acquisition of our
capital stock would not likely be a suitable investment for foreign investors
other than SC-USREALTY.
 
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FAILURE TO ACHIEVE YEAR 2000 COMPLIANCE MAY HAVE ADVERSE EFFECTS ON THE COMPANY
 
     The year 2000 issue results from a programming convention in which computer
programs use two digits rather than four to define the applicable year. Software
and hardware may recognize a date using '00' as the year 1900, rather than the
year 2000. Such an inability of computer programs to recognize a year that
begins with '20' could result in business or building system failures,
miscalculations or errors causing disruptions of operations or other business
problems, including, among other things, a temporary inability to process
transactions, send invoices or engage in other normal business activities. We
have undertaken a comprehensive program to address the year 2000 issue. Although
our year 2000 efforts are intended to minimize the adverse effects of the year
2000 issue on its business operations, the actual effects of the year 2000 issue
and the success or failure of our efforts may not be known until the year 2000
and later. Failure by the Company and its major vendors, other material service
providers and material clients to address adequately their respective year 2000
issues in a timely manner (insofar as such issues relate to the Company's
business) could have a material adverse effect on our business, results of
operations and financial condition.

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