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| | Maryland |  | 22-3251332
| | -------- |  | ----------

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

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 .

The number of shares outstanding of the registrants common
stock, $0.01 par value was 15,935,572 at May 8, 2000.

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Part I.   Financial Information

| | Condensed Consolidated Balance Sheets
         as of March 31, 2000 and December 31, 1999 | 3
| | ----------------------------------------------------------------------------------------- | -

| | Condensed Consolidated Statements of Income
         for the three months ended March 31, 2000 and 1999 | 4
| | ------------------------------------------------------------------------------------------------------- | -

| | Condensed Consolidated Statements of Cash Flows
         for the three months ended March 31, 2000 and 1999 | 5
| | ----------------------------------------------------------------------------------------------------------- | -

| | Notes to Condensed Consolidated Financial Statements | 6
| | ---------------------------------------------------- | -

|Item 2. | Management's Discussion and Analysis of Financial Condition
         and Results of Operations | 10
|------- | ---------------------------------------------------------------------------------------------- | --

|Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 15
|------- | ---------------------------------------------------------- | --

Part II.   Other Information

|Item 6. | Exhibits and Reports on Form 8-K | 16
|------- | -------------------------------- | --

|Signatures |  | 17
|---------- |  | --

Item 1. Financial Statements

`March 31,         December 31,
                                                                                 2000                1999
                                                                           --------------     ---------------
                                                                           (Unaudited)            (Note 1)

Assets
Rental properties:
     Land.................................................................. $ 119,040           $ 118,494
     Depreciable property..................................................   741,442             730,319
                                                                            -------------      -------------
Total rental property......................................................   860,482             848,813
Accumulated depreciation...................................................  (147,166)           (138,221)
                                                                            -------------      -------------
Rental properties, net.....................................................   713,316             710,592
Cash and cash equivalents..................................................    20,806               8,862
Notes receivable-related party.............................................     2,201               2,213
Deferred costs, net........................................................    13,285              14,290
Property held for sale.....................................................         -               3,388
Other assets...............................................................    59,229              66,710
                                                                            -------------      -------------
Total assets............................................................... $ 808,837           $ 806,055
                                                                            =============      =============

Liabilities and stockholders' equity
Liabilities:
     Unsecured bank debt................................................... $ 131,035           $ 131,035
     7.75% Unsecured Notes due 2001........................................    99,925              99,905
     Construction loan due 2003............................................     1,319                   -
     7.25% Unsecured Notes due 2007........................................   124,752             124,744
     Construction payables.................................................     9,432               9,277
     Accounts payable and accrued expenses.................................    23,977              27,127
     Obligation under capital lease........................................     3,039               3,233
     Accrued dividend and distribution payable.............................    15,862               3,813
     Other liabilities.....................................................    24,631              27,064
                                                                            -------------      -------------
Total liabilities..........................................................   433,972             426,198

Commitments and contingencies

Minority interest..........................................................   101,683             102,561

Stockholders' equity:
     8.375% series A cumulative redeemable preferred stock, $0.01 par
     value, authorized 1,000 shares, issued and outstanding 1,000
     shares in 2000 and 1999 (aggregate liquidation preference $50,000)            10                  10
     Common stock, $0.01 par value, authorized 50,000 shares,
     issued and outstanding 15,935 in 2000 and 15,932 in 1999..............       159                 159
     Paid-in-capital.......................................................   347,782             347,725
     Distributions in excess of net income.................................   (74,769)            (70,598)
                                                                            -------------      ------------
Total stockholders' equity.................................................   273,182             277,296
                                                                            -------------      ------------
Total liabilities and stockholders' equity................................. $ 808,837           $ 806,055
                                                                            =============      ============`

The accompanying notes are an integral part of the financial statements.

`2000                1999
                                                               ------------      --------------
Revenues:
   Base rent..............................................       $26,251             $24,555
   Percentage rent........................................         2,566               2,371
   Expense reimbursements.................................         8,774               8,192
   Other income...........................................         2,003               1,845
                                                               ------------      --------------
Total revenues............................................        39,594              36,963
                                                               ------------      --------------
Expenses:
   Interest...............................................         5,637               6,283
   Operating and maintenance..............................         9,855               9,151
   Depreciation and amortization..........................        10,878               9,924
   General and administrative.............................           758               1,139
   Other..................................................           538                 418
                                                               ------------      --------------
Total expenses............................................        27,666              26,915
                                                               ------------      --------------

Income before minority interest...........................        11,928              10,048

Minority interest.........................................        (3,101)             (1,621)
                                                               ------------      --------------

Net income................................................         8,827               8,427

Preferred dividend requirement............................        (1,047)             (1,047)
                                                               ------------      --------------
Net income to common shareholders.........................        $7,780              $7,380
                                                               ============      ==============
Earnings per share
Basic:
Net income per common share...............................         $0.49               $0.47
Weighted average common shares outstanding................        15,934              15,608

Diluted:
Net income per common share...............................         $0.49               $0.47
Weighted average common shares outstanding................        16,011              15,760`

The accompanying notes are an integral part of the financial statements.

`2000                1999
                                                                            --------------      -------------

   Cash flows from operating activities
   Net income.......................................................           $8,827              $8,427
   Adjustments to reconcile net income to net cash
      provided by operating activities:
       Depreciation and amortization................................           10,878               9,924
       Minority interest in net income..............................            3,101               1,621
       Proceeds from non-compete receivable.........................            4,600               4,600
       Amortization of non-compete revenue..........................           (1,284)             (1,284)
       Additions to deferred lease costs............................              -                  (101)
       Other operating activities...................................              185                 29
       Changes in assets and liabilities:
         Straight-line rent receivable..............................             (401)               (335)
         Other assets...............................................            4,582               6,142
         Accounts payable and accrued expenses......................           (3,426)             (2,936)
                                                                            -------------      -------------
   Net cash provided by operating activities........................           27,062              26,087
                                                                            -------------      -------------
   Cash flows used in investing activities
   Additions to rental properties...................................          (12,433)            (13,803)
   Additions to deferred development costs..........................               89                (359)
   Proceeds from sale of center.....................................            3,372               4,483
   Payments from related party......................................               12               4,500
   Additions to investments in joint ventures.......................           (2,180)            (13,153)
                                                                            --------------      -------------
   Net cash used in investing activities............................          (11,140)            (18,332)
                                                                            --------------      -------------

   Cash flows from financing activities
   Distributions....................................................           (4,928)             (3,414)
   Debt proceeds....................................................            1,319               4,000
   Additions to deferred financing costs............................             (426)                (90)
   Net proceeds from sale of common stock...........................               57                  37
                                                                            --------------      -------------
   Net cash (used in) provided by financing activities..............           (3,978)                533
                                                                            --------------      -------------

   Net increase in cash and cash equivalents........................           11,944               8,288
   Cash and cash equivalents, beginning of period...................            8,862               9,631
                                                                            --------------      -------------
   Cash and cash equivalents, end of period.........................           $20,806            $17,919
                                                                            ==============      =============`

The accompanying notes are an integral part of the financial statements.

1.    Organization and Basis of Presentation

Chelsea GCA Realty, Inc. (the Company) is a
self-administered and self-managed real estate investment trust
(REIT). The Company is the managing general partner of Chelsea GCA
Realty Partnership, L.P. (the Operating Partnership or
OP), an operating partnership which at March 31, 2000 owned and
provided development, leasing, marketing and management services for 19 upscale
and fashion-oriented manufacturers outlet centers (the
Properties) containing approximately 5.3 million square feet of
gross leasable area (GLA). The Properties are located near large
metropolitan areas including New York City, Los Angeles, San Francisco,
Sacramento, Boston, Atlanta, Washington DC, Portland (Oregon) and Cleveland, or
at or near tourist destinations including Honolulu, the Napa Valley, Palm
Springs and the Monterey Peninsula. The Company also has a number of properties
under development and expansion.

All of the Companys assets are held by, and all of its
operations are conducted through, the OP. Due to the Companys ability, as
the sole general partner, to exercise both financial and operational control
over the OP, it is consolidated in the accompanying financial statements. All
significant intercompany transactions and accounts have been eliminated in
consolidation. The Company accounts for its non-controlling investments under
the equity method. Such investments are included in other assets in the
financial statements.

Common ownership of the OP as of March 31, 2000 was approximately as follows:

| | Company
                            Unitholders
      Total |  | 82.6%17.4%100.0% |  | 15,935,000   units3,356,000   units19,291,000
| | ----------------------------------------------------------- |  | ---------------- |  | ---------------------------------------------

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, 2000 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000. The balance sheet at December
31, 1999 has been derived from the audited financial statements at that date but
does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. These
financial statements should be read in conjunction with the consolidated
financial statements and accompanying notes included in the Companys
Annual Report on Form 10-K for the year ended December 31, 1999.

The Company is engaged in the development, ownership,
acquisition and operation of manufacturers outlet centers and has one
reportable segment, retail real estate. The Company evaluates real estate
performance and allocates resources based on net operating income and weighted
average sales per square foot. The primary sources of revenue are generated from
tenant base rents, percentage rents and reimbursement revenue. Operating
expenses primarily consist of common area maintenance, real estate taxes and
promotional expenses. The retail real estate business segment meets the
quantitative threshold for determining reportable segments. The Companys
investment in foreign operations is not material to the consolidated financial
statements.

In June 1998, the Financial Accounting Standards Board issued
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities
(as amended by FASB Statement No. 137), which is required to be adopted in years
beginning after June 15, 2000. Statement 133 permits early adoption as of the
beginning of any fiscal quarter after its issuance. The Company expects to adopt
the new Statement effective January 1, 2001. The Statement will require the
Company to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If a derivative is a hedge, depending on the nature of the hedge, changes in the
fair value of the derivative will either be offset against the change in fair
value of the hedged asset, liability, or firm commitment through earnings, or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivatives change in fair value
will be immediately recognized in earnings. The Company does not anticipate that
the adoption of the Statement will have a significant effect on its results of
operations or financial position.

2.   Property Held for Sale

As of December 31, 1999, property held for sale represented the
fair value, less estimated costs to sell, of Solvang Designer Outlets
(Solvang). On January 4, 2000, Solvang was sold for a net selling
price of $3.3 million. For the quarter ended March 31, 2000, Solvang accounted
for less than 1% of the Companys revenues and net operating income.

3.   Non-Compete Agreement

In October 1998, the Company signed a definitive agreement to
terminate the development of Houston Premium Outlets, a joint venture project
with Simon Property Group, Inc. (Simon). Under the terms of the
agreement, the Company withdrew from the Houston development partnership and
agreed to certain restrictions on competing in the Houston market through 2002.
The Company will receive non-compete payments totaling $21.4 million from The
Mills Corporation; $3.0 million was received at closing, and four annual
installments of $4.6 million will be received on each January 2, 1999 through
2002. The Company was reimbursed for its share of land costs, development costs
and fees related to the project. The revenue is being recognized on a
straight-line basis over the term of the non-compete agreement and $1.3 million
has been recognized as other income in each of the three month periods ended
March 31, 2000 and 1999.

4.   Debt

The OP has a $160 million senior unsecured bank line of credit
(the Senior Credit Facility) and has an annual right to request a
one-year extension which may be granted at the option of the lenders. The
Companys lenders have agreed to extend the Facility until March 30, 2003.
The Facility bears interest on the outstanding balance, payable monthly, at a
rate equal to the London Interbank Offered Rate (LIBOR) plus 1.05%
(7.19% at March 31, 2000) or the prime rate, at the OPs option. The LIBOR
rate spread ranges from 0.85% to 1.25% depending on the Companys Senior
Debt rating. A fee on the unused portion of the Senior Credit Facility is
payable quarterly at rates ranging from 0.15% to 0.25% depending on the balance
outstanding. At March 31, 2000, $94 million was available under the Senior
Credit Facility.

The OP also has a $5 million term loan (the "Term Loan") which
carries the same interest rate and maturity as the Senior Credit Facility.

In November 1998, the OP obtained a $60 million term loan which
expired April 2000 and bore interest on the outstanding balance at a rate equal
to LIBOR plus 1.40% (7.59% at March 31, 2000).

In April 2000 a subsidiary of the Company entered into a $70
million mortgage loan secured by four of its properties which matures April 2010
and bears interest, payable quarterly, at a rate equal to LIBOR plus 1.50% or
prime rate plus 1.00%. Net proceeds were used to retire the $60 million term
loan and to repay borrowings under the Companys Senior Credit Facility.

In February 2000, a subsidiary of the Company entered into a $40
million construction loan facility that will be used to fund the Allen Premium
Outlets project. The loan which matures February 2003 bears interest on the
outstanding balance at a rate equal to LIBOR plus 1.625% (7.70% at March 31,
2000) and is guaranteed by the Company and the OP. At March 31, 2000, $1.3
million was outstanding.

In January 1996, the OP completed a $100 million offering of
7.75% unsecured term notes due January 2001 (the 7.75% Notes), which
are guaranteed by the Company. The five-year non-callable 7.75% Notes were
priced to yield 7.85% to investors.

In October 1997, the OP completed a $125 million debt offering
of 7.25% unsecured term notes due October 2007 (the 7.25% Notes).
The 7.25% Notes were priced to yield 7.29% to investors, 120 basis points over
the 10-year U.S. Treasury rate.

Interest and loan costs of approximately $1.1 million and $0.6
million were capitalized as development costs during the three months ended
March 31, 2000 and 1999, respectively.

5.   Preferred Units

On September 3, 1999, the OP completed a private sale of $65
million of Series B Cumulative Redeemable Preferred Units (Preferred
Units) to an institutional investor. The private placement took the form
of 1.3 million Preferred Units at a stated value of $50 each. The Preferred
Units may be called at par on or after September 3, 2004, have no stated
maturity or mandatory redemption and pay a cumulative quarterly dividend at an
annualized rate of 9.0%. The Preferred Units are exchangeable into Series B
Cumulative Redeemable Preferred Stock of the Company after ten years. Proceeds
from the sale were used to pay down borrowings under the Senior Credit Facility.
Activity related to the Preferred Units is included in Minority Interest.

6.   Preferred Stock

In October 1997, the Company issued 1.0 million shares of
non-voting 8.375% Series A Cumulative Redeemable Preferred Stock (the
Preferred Stock), par value $0.01 per share, having a liquidation
preference of $50 per share. The Preferred Stock has no stated maturity and is
not convertible into any other securities of the Company. The Preferred Stock is
redeemable on or after October 15, 2027 at the Companys option. Net
proceeds from the offering were used to repay borrowings under the
Companys Credit Facilities.

7.   Dividends

On March 9, 2000, the Board of Directors of the Company declared
a $0.75 per share dividend to shareholders of record on March 31, 2000. The
dividend, totaling $12.0 million, was paid on April 17, 2000. The OP
simultaneously paid a $0.75 per unit cash distribution, totaling $2.5 million,
to its unitholders.

8.   Income Taxes

The Company is taxed as a REIT under Section 856(c) of the
Internal Revenue Code of 1986, as amended, and generally will not be subject to
federal income tax to the extent it distributes at least 95% of its REIT taxable
income to its stockholders and meets certain other requirements. If the Company
fails to qualify as a REIT in any taxable year, the Company will be subject to
federal income tax on its taxable income at regular corporate rates. The Company
may also be subject to certain state and local taxes on its income and property
and federal income and excise taxes on its undistributed taxable income. At
March 31, 2000 and 1999, the Company was in compliance with all REIT
requirements and was not subject to federal income taxes.

9.   Net Income Per Common Share

Basic earnings per common share is computed using the weighted
average number of shares outstanding. Diluted earnings per common share is
computed using the weighted average number of shares outstanding adjusted for
the incremental shares attributed to outstanding options to purchase common
stock of 0.1 million for the three months ended March 31, 2000 and 0.2 million
for the three months ended March 31, 1999.

10.   Commitments and Contingencies

The Company has minority interests ranging from 5% to 15% in
several outlet centers and outlet development projects in Europe. Two outlet
centers, Bicester Village outside of London, England and La Roca Company Stores
outside of Barcelona, Spain, are currently open and operated by Value Retail PLC
and its affiliates. Three new European projects and expansions of the two
existing centers are in various stages of development and are expected to open
within the next two years. The Companys total investment in Europe as of
March 31, 2000 was approximately $4.6 million. The Company has also agreed under
a standby facility to provide up to $22 million in limited debt service
guarantees for loans provided to Value Retail PLC, an affiliate, to construct
outlet centers in Europe. The term of the standby facility is three years and
guarantees shall not be outstanding for longer than five years after project
completion. As of March 31, 2000, the Company has provided guarantees of
approximately $20 million for three projects.

In June 1999, the Company entered into an agreement with
Mitsubishi Estate Co., Ltd. and Nissho Iwai Corporation to jointly develop, own
and operate premium outlet centers in Japan. The joint venture, known as Chelsea
Japan Co., Ltd. (Chelsea Japan) is nearing completion of its initial
project, in the city of Gotemba. In conjunction with the agreement, the Company
contributed $1.7 million in equity. In addition, an equity investee of the
Company entered into a 4 billion yen (US $40 million) line of credit guaranteed
by the Company and OP to fund its share of construction costs. At March 31,
2000, no amounts were outstanding under the loan. In March 2000, Chelsea Japan
entered into a 3.6 billion yen (US $36 million) loan with a Japanese bank to
fund construction costs. As of March 31, 2000, 1.6 billion yen was outstanding.
The loan is secured by the property under construction and is 40% guaranteed by
the Company and the OP. In December 1999, construction began on the 220,000 square-foot
first phase of Gotemba Premium Outlets with opening scheduled for mid-2000.
Gotemba is located on the Tomei Expressway, approximately 60 miles west of Tokyo
and midway between Mt. Fuji and the Hakone resort area. Chelsea Japan has also started
construction on a second project outside Osaka, the second-largest city in Japan, to open in
late 2000.

Construction is nearly complete on Orlando Premium Outlets
(OPO), a 430,000 square foot 50/50 joint venture project between the
Company and Simon. OPO is located on Interstate 4, midway between Walt Disney
World/EPCOT and Sea World in Orlando, Florida and is scheduled to open the end
of May 2000. In February 1999, the joint venture entered into an $82.5 million
construction loan agreement. The loan is 50% guaranteed by each of the Company
and Simon and as of March 31, 2000, $35.4 million was outstanding.

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

11.   Related Party Information

During the second quarter of 1999, the OP established a $6
million secured loan facility for the benefit of certain unitholders. At March
31, 2000, loans made to two unitholders totaled $2.2 million. Each unitholder
issued a note that is secured by OP units, bears interest at a rate of LIBOR
plus 200 basis points per annum, payable quarterly and is due June 2004.

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 Company has grown by increasing rent at its existing
centers, expanding its existing centers, developing new centers and acquiring
and redeveloping centers. The Company operated 19 manufacturers outlet
centers at March 31, 2000 and March 31, 1999. The Companys operating gross
leasable area (GLA) at March 31, 2000, increased 7.3% to 5.3 million square feet
from 4.9 million square feet at March 31, 1999. Net GLA added since April 1,
1999 is detailed as follows:

`12 mos ended           3 mos ended            9 mos ended
                                             March 31,             March 31,             December 31,
                                               2000                   2000                   1999
                                           -------------          -------------          -------------
Changes in GLA (sf in 000's):

Centers expanded:
    Wrentham Village.......................       120                      -                    120
    North Georgia..........................       103                      -                    103
    Leesburg Corner........................        89                     34                     55
    Camarillo..............................        45                      -                     45
    Other (net)............................         2                      -                      2
                                           -------------          -------------          -------------
Total centers expanded.....................       359                     34                    325

Net GLA added during the period............       359                     34                    325

GLA at end of period.......................     5,250                  5,250                  5,216`

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Results of Operations

Comparison of the three months ended March 31, 2000 to the three months ended
March 31, 1999.

Income before minority interest increased $1.9 million to $11.9
million for the three months ended March 31, 2000 from $10.0 million for the
three months ended March 31, 1999. Increases in revenues, primarily the result
of expansions, were offset by increased depreciation and amortization.

Base rentals increased $1.7 million, or 6.9%, to $26.3 million
for the three months ended March 31, 2000 from $24.6 million for the three
months ended March 31, 1999 due to expansions and higher average rents on new
leases and renewals.

Percentage rents increased $0.2 million to $2.6 million for the
three months ended March 31, 2000, from $2.4 million for the three months ended
March 31, 1999. The increase was primarily due to expansions.

Expense reimbursements, representing contractual recoveries from
tenants of certain common area maintenance, operating, real estate tax,
promotional and management expenses, increased $0.6 million, or 7.1%, to $8.8
million for the three months ended March 31, 2000 from $8.2 million for the
three months ended March 31, 1999, due to the recovery of operating and
maintenance costs from increased GLA. The average recovery of reimbursable
expenses was 89.0% in the first quarter of 2000, compared to 89.5% in the first
quarter of 1999. Other income increased $0.2 million to $2.0 million for the
three months ended March 31, 2000, from $1.8 million for the three months ended
March 31, 1999. The increase is primarily the result of income from center
ancillary operations, including vending and kiosks.

Interest in excess of amounts capitalized decreased $0.7 million
to $5.6 million for the three months ended March 31, 2000 from $6.3 million for
the three months ended March 31, 1999 primarily due to lower debt balances in
the first quarter 2000.

Operating and maintenance expenses increased $0.7 million, or
7.7%, to $9.9 million for the three months ended March 31, 2000 from $9.2
million for the three months ended March 31, 1999. The increase was primarily
due to costs related to expansions.

Depreciation and amortization expense increased $1.0 million, or
9.6%, to $10.9 million for the three months ended March 31, 2000 from $9.9
million for the three months ended March 31, 1999. The increase was due to
depreciation of expansions.

General and administrative expense decreased $0.4 million to
$0.7 million for the three months ended March 31, 2000 from $1.1 million for the
three months ended March 31, 1999 primarily due to decreased accrual for
deferred incentive compensation.

Other expenses increased $0.1 million to $0.5 million for the
three months ended March 31, 2000 from $0.4 million for the three months ended
March 31, 1999. The increase was primarily due to the impact of legal fee
recoveries in 1999.

Liquidity and Capital Resources

The Company believes it has adequate financial resources to fund
operating expenses, distributions, and planned development and construction
activities. Operating cash flow of $87.6 million in 1999 is expected to increase
in 2000 with a full year of operations of the 340,000 square feet of GLA added
during 1999 and scheduled openings of approximately 1.3 million square feet in
2000, which includes the Companys 50% ownership share in the 430,000
square foot Orlando Premium Outlets and 40% ownership share each in the 220,000
square foot Gotemba Premium Outlets, outside Tokyo, Japan and the 175,000 square foot
Rinku Premium Outlets, outside Osaka, Japan.The Company has adequate funding
sources to complete and open all of its current development projects through the
use of available cash of $20.8 million; construction loans for the Orlando and
Allen projects; a yen-denominated line of credit for the Companys share of
project costs in Japan; and approximately $94 million available under its Senior
Credit Facility. Chelsea also has the ability to access the public markets, if
market conditions become favorable, through its $175 million debt shelf
registration and its $200 million equity shelf registration.

Operating cash flow is expected to provide sufficient funds for
dividends and distributions in accordance with REIT federal income tax
requirements. In addition, the Company 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.

Common distributions declared and recorded during the three
months ended March 31, 2000 were $14.5 million, or $0.75 per share or unit. The
Companys dividend payout ratio as a percentage of net income before
minority interest, depreciation and amortization (exclusive of amortization of
deferred financing costs (FFO)) was 73.1% for the three months
ended March 31, 2000. The Senior Credit Facility limits aggregate dividends and
distributions to the lesser of (i) 90% of FFO on an annual basis or (ii) 100% of
FFO for any two consecutive quarters.

In September, 1999, the OP completed a private sale of $65
million of Series B Cumulative Redeemable Preferred Units (Preferred
Units) to an institutional investor. The private placement took the form
of 1.3 million Preferred Units at a stated value of $50 each. The Preferred
Units may be called at par on or after September 3, 2004, have no stated
maturity or mandatory redemption and pay a cumulative quarterly dividend at an
annualized rate of 9.0%. The Preferred Units are not convertible to any other
securities of the OP or Company. Proceeds from the sale were used to pay down
borrowings under the Senior Credit Facility.

The OP has a $160 million senior unsecured bank line of credit
(the Senior Credit Facility) and has an annual right to request a
one-year extension of the Senior Credit Facility which may be granted at the
option of the lenders. The Companys lenders have agreed to extend the
Facility until March 30, 2003. The Facility bears interest on the outstanding
balance, payable monthly, at a rate equal to the London Interbank Offered Rate
(LIBOR) plus 1.05% (7.19% at March 31, 2000) or the prime rate, at
the OPs option. The LIBOR rate spread ranges from 0.85% to 1.25% depending
on the Companys Senior Debt rating. A fee on the unused portion of the
Senior Credit Facility is payable quarterly at rates ranging from 0.15% to 0.25%
depending on the balance outstanding.

In November 1998, the OP obtained a $60 million term loan which
expired April 2000 and bore interest on the outstanding balance at a rate equal
to LIBOR plus 1.40% (7.59% at March 31, 2000). In April 2000 a subsidiary of the
Company entered into a $70 million mortgage loan secured by four of its
properties which matures April 2010 and bears interest, payable quarterly, at a
rate equal to LIBOR plus 1.50% or prime rate plus 1.00%. Net proceeds were used
to retire the $60 million term loan and to repay borrowings under the
Companys Senior Credit Facility. This mortgage loan strengthened the
Company's balance sheet by extending and sequencing debt maturities.

In February 2000, a subsidary of the Company entered into a $40
million construction loan facility that will be used to fund the Allen Premium
Outlets project. The loan which matures February 2003 bears interest on the
outstanding balance at a rate equal to LIBOR plus 1.625% (7.70% at March 31,
2000) and is guaranteed by the Company and the OP. At March 31, 2000, $1.3
million was outstanding.

Development activity during the year includes the 430,000
square-foot Orlando Premium Outlets scheduled to open at the end of May 2000;
the 220,000 square-foot first phase of Gotemba Premium Outlets (outside Tokyo,
Japan), a Chelsea Japan Co. project scheduled to open in mid-July 2000; the
230,000 square-foot first phase of Allen Premium Outlets (Allen, Texas),
scheduled to open in the fourth quarter; and the 175,000 square-foot first phase
of Rinku Premium Outlets (near Osaka, Japan), Chelsea Japans second
project, also scheduled to open in the fourth quarter. Additionally, expansions
totaling approximately 285,000 square feet of GLA are under construction and
scheduled to open in the next 12 months, including 125,000 square feet at
Wrentham Village Premium Outlets (Wrentham, Massachusetts); 105,000 square feet
at Leesburg Corner Premium Outlets (Leesburg, Virginia); and 55,000 square feet
at Folsom Premium Outlets (Folsom, California). These projects are under
development and there can be no assurance that they will be completed or opened,
or that there will not be delays in opening or completion. All current
development activity is fully financed either through project specific secured
construction financing or through the Senior Credit Facility. The Company will seek to
obtain permanent financing once the projects are completed and income has been
stabilized.

Construction is nearly complete on Orlando Premium Outlets
(OPO), a 430,000 square-foot upscale outlet center located on
Interstate 4 midway between Walt Disney World/EPCOT and Sea World in Orlando,
Florida. OPO is a joint venture project between the Company and Simon and is
scheduled to open as a single phase in mid-2000. In February 1999, the joint
venture entered into a $82.5 million construction loan agreement. The loan is 50%
guaranteed by each of the Company and Simon and as of March 31, 2000, $35.4
million was outstanding.

In June 1999, the Company entered into an agreement with
Mitsubishi Estate Co., Ltd. and Nissho Iwai Corporation to jointly develop, own
and operate premium outlet centers in Japan. The joint venture, known as Chelsea
Japan Co., Ltd. (Chelsea Japan) is nearing completion of its initial
project, in the city of Gotemba. In conjunction with the agreement, the Company
contributed $1.7 million in equity. In addition, an equity investee of the
Company entered into a 4 billion yen (US $40 million) line of credit guaranteed
by the Company and OP to fund its share of construction costs. At March 31,
2000, no amounts were outstanding under the loan. In March 2000, Chelsea Japan
entered into a 3.6 billion yen (US $36 million) loan with a Japanese bank to
fund construction costs. As of March 31, 2000, 1.6 billion yen was outstanding.
The loan is secured by the property under construction and is 40% guaranteed by
the Company and the OP. In December 1999, construction began on the 220,000 square-foot
first phase of Gotemba Premium Outlets with opening scheduled for mid-2000.
Gotemba is located on the Tomei Expressway, approximately 60 miles west of Tokyo
and midway between Mt. Fuji and the Hakone resort area. Chelsea Japan has also started
construction on a second project outside Osaka, the second-largest city in Japan, to open in
late 2000.

The Company has minority interests ranging from 5% to 15% in
several outlet centers and outlet development projects in Europe. Two outlet
centers, Bicester Village outside of London, England and La Roca Company Stores
outside of Barcelona, Spain, are currently open and operated by Value Retail PLC
and its affiliates. Three new European projects and expansions of the two
existing centers are in various stages of development and are expected to open
within the next two years. The Companys total investment in Europe as of
March 31, 2000 was approximately $4.6 million. The Company has also agreed under
a standby facility to provide up to $22 million in limited debt service
guarantees for loans provided to Value Retail PLC, an affiliate, to construct
outlet centers in Europe. The term of the standby facility is three years and
guarantees shall not be outstanding for longer than five years after project
completion. As of March 31, 2000, the Company has provided guarantees of
approximately $20 million for three projects.

The Company announced in October 1998 that it sold its interest
in and terminated the development of Houston Premium Outlets, a joint venture
project with Simon. Under the terms of the agreement, the Company will receive
non-compete payments totaling $21.4 million from The Mills Corporation; $3.0
million was received at closing, and four annual installments of $4.6 million
will be received on each January 2, 1999 through 2002. The Company has also been
reimbursed for its share of land costs, development costs and fees related to
the project.

To achieve planned growth and favorable returns in both the
short and long term, the Company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; and (iv) maintaining liquidity. Management
believes these strategies will enable the Company 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.

Net cash provided by operating activities increased $1.0 million
for the three months ended March 31, 2000 compared to the corresponding 1999
period, primarily due to the growth of the Companys GLA to 5.3 million
square feet in 2000 from 4.9 million square feet in 1999. Net cash used in
investing activities decreased $7.2 million for the three months ended March 31,
2000 compared to the corresponding 1999 period, as a result of decreased equity
requirements of joint venture activities offset by the receipt of payment on a
note receivable in 1999. At March 31, 2000, net cash used in financing
activities increased by $4.5 million primarily due to higher distributions paid
and lower borrowings during 2000.

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 clearer
understanding of the operating results of the Company. 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 applicable to common shareholders
(computed in accordance with generally accepted accounting principles),
excluding gains (or losses) from debt restructuring and sales or writedowns 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,
                                                                                 2000              1999
                                                                           -------------     ------------

Net income to common shareholders ..................................           $7,780            $7,380
Add back:
  Depreciation and amortization.....................................           10,878             9,924
  Amortization of deferred financing costs and depreciation
    of non-rental real estate assets................................             (508)             (435)
  Preferred unit distribution.......................................           (1,462)                -
  Minority interest.................................................            3,101             1,621
                                                                           -------------     ------------
FFO.................................................................          $19,789           $18,490
                                                                           =============     ============
Average diluted shares/units outstanding............................           19,368            19,189
Dividends declared per share........................................            $0.75             $0.72`

Item 3.   Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to changes in interest rates primarily
from its floating rate debt arrangements. The Company currently does not use
interest rate derivative instruments to manage exposure to interest rate
changes. A hypothetical 100-basis point adverse move (increase) in interest
rates along the entire rate curve would adversely affect the Companys
annual interest cost by approximately $1.3 million annually.

The Company did not file any reports on Form 8-K during the
three months ended March 31, 2000.

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, INC.
                          By: /s/ Michael J. Clarke
                                Michael J. Clarke
                                Chief Financial Officer
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date:  May 12, 2000