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, 1999

                                       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. 1-12328

                            CHELSEA GCA REALTY, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

     MARYLAND                                                 22-3251332
(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)

                                 (973) 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 __.

The number of shares outstanding of the registrant's common stock, $0.01 par
value was 15,682,171 at May 7, 1999.

<PAGE>


                            CHELSEA GCA REALTY, INC.

                                      INDEX


PART I.  FINANCIAL INFORMATION


Item 1.  Financial Statements (Unaudited)                                Page

         Condensed Consolidated Balance Sheets
           as of March 31, 1999 and December 31, 1998................      3

         Condensed Consolidated Statements of Income
           for the three months ended March 31, 1999 and 1998........      4

         Condensed Consolidated Statements of Cash Flows
           for the three months ended March 31, 1999 and 1998........      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

<PAGE>

ITEM 1.  FINANCIAL STATEMENTS

                            CHELSEA GCA REALTY, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>

                                                                                  March 31,           December 31,
                                                                                    1999                  1998
                                                                                -------------       ----------------
                                                                                  (Unaudited)           (NOTE 1)
Assets
Rental properties:
<S>                                                                              <C>                  <C>      
     Land..................................................................      $ 109,031            $ 109,318
     Depreciable property..................................................        692,520              683,408
                                                                                ------------        --------------
Total rental property......................................................        801,551              792,726
Accumulated depreciation...................................................       (111,367)            (102,851)
                                                                                ------------        ---------------
Rental properties, net.....................................................        690,184              689,875
Cash and equivalents.......................................................         17,919                9,631
Notes receivable-related party.............................................           -                   4,500
Deferred costs, net........................................................         15,222               17,766
Properties held for sale...................................................          4,125                8,733
Other assets...............................................................         47,407               42,847
                                                                                ------------        ---------------
TOTAL ASSETS...............................................................      $ 774,857           $  773,352
                                                                                ============        ===============

LIABILITIES AND STOCKHOLDERS' EQUITY 
Liabilities:
     Unsecured bank debt...................................................      $ 155,035           $  151,035
     7.75% Unsecured Notes due 2001........................................         99,845               99,824
     7.25% Unsecured Notes due 2007........................................        124,720              124,712
     Construction payables.................................................          8,367                12,927
     Accounts payable and accrued expenses.................................         16,808               19,769
     Obligation under capital lease........................................          9,571                9,612
     Accrued dividend and distribution payable.............................         14,615                3,274
     Other liabilities.....................................................         27,624               29,257
                                                                                -------------      ---------------
TOTAL LIABILITIES..........................................................        456,585             450,410

Commitments and contingencies

Minority interest..........................................................         41,703              42,551

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 1999 and 1998 (aggregate liquidation preference $50,000)                 10                  10
     Common stock, $0.01 par value, authorized 50,000 shares,
     issued and outstanding 15,609 in 1999 and 15,608 in 1998..............            156                 156
     Paid-in-capital.......................................................        339,527             339,490
     Distributions in excess of net income.................................        (63,124)            (59,265)
                                                                                -------------       ---------------
TOTAL STOCKHOLDERS' EQUITY.................................................        276,569             280,391
                                                                                -------------       ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................................     $ 774,857            $ 773,352
                                                                                =============       ===============

</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

<PAGE>


                            CHELSEA GCA REALTY, INC.
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
               FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
                                   (UNAUDITED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>

                                                           1999                1998
                                                      ----------------    ----------------
 REVENUES:
<S>                                                       <C>                 <C>    
    Base rent......................................       $24,555             $19,266
    Percentage rent................................         2,371               1,786
    Expense reimbursements.........................         8,192               6,800
    Other income...................................         1,845                 654
                                                       ---------------     ----------------
TOTAL REVENUES.....................................        36,963              28,506
                                                       ---------------     ----------------

EXPENSES:
    Interest.......................................         6,283               4,125
    Operating and maintenance......................         9,151               7,590
    Depreciation and amortization..................         9,924               7,278
    General and administrative.....................         1,139                 886
    Other..........................................           418                 628
                                                       ----------------    ----------------
TOTAL EXPENSES                                             26,915              20,507
                                                       ----------------    ----------------

NET INCOME BEFORE MINORITY INTEREST.................       10,048               7,999

    Minority interest                                      (1,621)             (1,270)
                                                       ----------------    ----------------

NET INCOME                                                  8,427               6,729

    Preferred dividend                                     (1,047)             (1,047)
                                                      ----------------    ----------------

NET INCOME TO COMMON SHAREHOLDERS                          $7,380              $5,682
                                                      ================    ================

BASIC:
Net income per common share                                 $0.47               $0.37
Weighted average common shares outstanding                 15,608              15,353

DILUTED:
Net income per common share                                 $0.47               $0.36
Weighted average common shares outstanding                 15,760              15,611
</TABLE>


  THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.


                            CHELSEA GCA REALTY, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
                                   (UNAUDITED)
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                            1999               1998
                                                                         ------------       ------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                        <C>                <C>   
    Net income...................................................          $8,427             $6,729
    Adjustments to reconcile net income to net cash 
     provided by operating activities:
    Depreciation and amortization................................           9,924              7,278
    Minority interest in net income..............................           1,621              1,270
    Proceeds from non-compete receivable.........................           4,600                -
    Amortization of non-compete revenue..........................          (1,284)               -
    Additions to deferred lease costs............................            (101)              (978)
    Other operating activities...................................              29                 97
    Changes in assets and liabilities:
      Straight-line rent receivable..............................            (335)              (329)
      Other assets...............................................           6,142              5,762
      Accounts payable and accrued expenses......................          (2,936)              (200)      
                                                                       ------------        ------------
Net cash provided by operating activities........................          26,087             19,629
                                                                       ------------        ------------

CASH FLOWS USED IN INVESTING ACTIVITIES
Additions to rental properties...................................         (13,803)           (27,238)
Additions to deferred development costs..........................            (359)              (890)
Proceeds from sale of center.....................................           4,483                -
Payments from related party......................................           4,500                -
Additions to investments in joint ventures.......................         (13,153)               -
Other investing activities.......................................            -                  (285)
                                                                        -----------        ------------
Net cash used in investing activities............................         (18,332)           (28,413)
                                                                        ------------       ------------

CASH FLOWS FROM FINANCING ACTIVITIES
Distributions....................................................          (3,414)            (3,414)
Debt proceeds....................................................           4,000             12,000
Repayments of debt...............................................            -                (4,000)
Additions to deferred financing costs............................             (90)            (1,083)
Net proceeds from sale of common stock...........................              37                 25
Other financing activities.......................................            -                   (57)
                                                                        ------------       ------------
Net cash provided by financing activities........................             533              3,471
                                                                        ------------       ------------
Net increase (decrease) in cash and equivalents..................           8,288             (5,313)
Cash and equivalents, beginning of period........................           9,631             14,538
                                                                        ------------       ------------
Cash and equivalents, end of period..............................         $17,919             $9,225
                                                                        ============       ============
</TABLE>

       THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

<PAGE>


                            CHELSEA GCA REALTY, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

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, 1999 owned and provided
development, leasing, marketing and management services for 19 upscale and
fashion-oriented manufacturers' outlet centers (the "Properties") containing
approximately 4.9 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 intercompany transactions have
been eliminated in consolidation.

Ownership of the OP as of March 31, 1999 was as follows:

         Company                82.0%                  15,609,000   units
         Unitholders            18.0%                   3,429,000   units
                            ----------------       ----------------
                  TOTAL        100.0%                  19,038,000


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, 1999
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1999. The balance sheet at December 31, 1998 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, 1998.

Effective January 1, 1998, the Company adopted the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information ("Statement
131"). Statement 131 superseded FASB Statement No. 14, Financial Reporting for
Segments of a Business Enterprise. Statement 131 establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports.
Statement 131 also establishes standards for related disclosures about products
and services, geographic areas, and major customers. The adoption of Statement
131 did not affect results of operations, financial position or disclosure of
segment information as 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, which is required
to be adopted in years beginning after June 15, 1999. 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, 2000. 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.    PROPERTIES HELD FOR SALE

As of March 31, 1999, properties held for sale represented the fair value, less
estimated costs to sell, of Solvang Designer Outlets ("Solvang"). As of December
31, 1998, Lawrence Riverfront Plaza was also included in properties held for
sale and was sold on March 26, 1999 with no additional loss recognized.

During the second quarter of 1998, the Company decided to sell Solvang, a 51,000
square foot center in Solvang, California, for a net selling price of $5.6
million. The center had a book value of $10.5 million, resulting in a writedown
of $4.9 million in the second quarter of 1998. During the fourth quarter, the
initial purchase offer was withdrawn and the Company received another offer for
a net selling price of $4.1 million, requiring a further writedown of $1.6
million. For the quarter ended March 31, 1999, 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. Under the terms of the agreement, the Company will receive
payments totaling $21.4 million from The Mills Corporation, to be made over four
years, as well as immediate reimbursement 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 agreement. The Company
received a payment of $4.6 million and recognized income of $1.3 million during
the 1999 first quarter. The Company has withdrawn from the Houston development
partnership and agreed to certain restrictions on competing in the Houston
market through the year 2002.

4.    DEBT

On March 30, 1998, the OP replaced its two unsecured bank revolving lines of
credit, totaling $150 million (the "Credit Facilities"), with a new $160 million
senior unsecured bank line of credit (the "Senior Credit Facility"). The Senior
Credit Facility expires on March 30, 2001 and bears interest on the outstanding
balance, payable monthly, at a rate equal to the London Interbank Offered Rate
("LIBOR") plus 1.05% (6.05% at March 31, 1999) 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. The OP 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. Lenders representing 84% of the Senior Credit Facility have agreed
to extend the Facility until March 30, 2002. At March 31, 1999, $70 million was
available under the Senior Credit Facility.

Also on March 30, 1998, the OP entered into 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 expires April
2000 and bears interest on the outstanding balance at a rate equal to LIBOR plus
1.40% (6.40% at March 31, 1999). Proceeds from the loan were used to pay down
borrowings under the Senior Credit Facility.

In January 1996, the OP completed a $100 million public debt offering of 7.75%
unsecured term notes due January 2001 (the "7.75% Notes"), which are guaranteed
by the Company. The 7.75% Notes were priced at a discount of 99.592 to yield
7.85% to investors.

In October 1997, the OP completed a $125 million public 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 $0.5 million and $1.6 million were
capitalized as development costs during the three months ended March 31, 1999
and 1998, respectively.

5.    PREFERRED STOCK

In October 1997, the Company issued 1.0 million shares of 8.375% Series A
Cumulative Redeemable Preferred Stock (the "Preferred Stock"), par value $0.01
per share, having a liquidation preference of $50.00 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.

6.    DIVIDENDS

On March 11, 1999, the Board of Directors of the Company declared a $0.72 per
share dividend to shareholders of record on March 31, 1999. The dividend,
totaling $11.2 million, was paid on April 19, 1999. The OP simultaneously paid a
$0.72 per unit cash distribution, totaling $2.5 million, to its unitholders.

7.    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, 1999 and 1998, the Company was in compliance with all REIT requirements and
was not subject to federal income taxes.

8.    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 0.2
million for the three months ended March 31, 1999 and 0.3 million for the three
months ended March 31, 1998.

9.    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, 1999
was approximately $3.5 million. The Company has also agreed to provide up to $22
million in limited debt service guarantees under a standby facility for loans
arranged by Value Retail PLC 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, 1999, the
Company has provided limited debt service guaranties of approximately $14
million for two projects.

During 1998, the Company entered into a memorandum of understanding (expiring in
June 1999) with two partners to study the feasibility of developing new outlet
centers in Japan. The partners are currently researching potential development
sites and intend to organize a formal joint venture when viable projects are
located and approved. The Company's current financial commitment is not
material.

Construction has commenced 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 in the first half of 2000. In February
1999, the joint venture entered into a $82.5 million construction loan agreement
that is expected to fund approximately 75% of the costs of the project. The loan
is 50% guaranteed by the Company and as of March 31, 1999, there were no amounts
outstanding. The balance of construction costs will be funded equally by the
Company and Simon.

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.

10.        RELATED PARTY INFORMATION

In September 1995, the Company transferred property with a book value of $4.8
million to its former President (a current unitholder) in exchange for a $4.0
million note secured by units in the Operating Partnership (the "Secured Note")
and a $0.8 million unsecured note receivable (the "Unsecured Note"). In January
1999, the Company received $4.5 million as payment in full for the two notes.
The remaining $0.3 million write off was recognized in December 1998.

<PAGE>

                            CHELSEA GCA REALTY, INC.

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, 1999 compared
to 20 at the end of the same quarter in the prior year. The Company's operating
gross leasable area (GLA) at March 31, 1999 (which excludes properties held for
sale), increased 10.3% to 4.9 million square feet from 4.4 million square feet
at March 31, 1998. Net GLA added since April 1, 1998 is detailed as follows:

<TABLE>
<CAPTION>

                                                  12 mos ended           3 mos ended            9 mos ended
                                                   March 31,             March 31,             December 31,
                                                     1999                   1999                   1998
                                                  ------------           ------------           ------------
Changes in GLA (sf in 000's):
NEW CENTER DEVELOPED:
<S>                                                   <C>                                           <C>
    Leesburg Corner..............................     270                     -                     270
                                                   ------------           ------------           ------------
TOTAL NEW CENTER.................................     270                     -                     270

CENTERS EXPANDED:
    Woodbury Common..............................     145                     -                     145
    Wrentham Village.............................     126                     -                     126
    Camarillo....................................      45                     -                      45
    North Georgia................................      31                     -                      31
    Folsom.......................................      19                     -                      19
    Columbia Gorge...............................      16                     -                      16
    Other (net)..................................       2                    15                     (13)
                                                   ------------           ------------           ------------
TOTAL CENTERS EXPANDED...........................     384                    15                     369

CENTERS HELD FOR SALE/SOLD:
    Lawrence Riverfront..........................    (146)                    -                    (146)
    Solvang Designer Outlets.....................     (52)                    -                     (52)
                                                   ------------           ------------           ------------
TOTAL CENTERS HELD FOR SALE/SOLD                     (198)                    -                    (198)

NET GLA ADDED DURING THE PERIOD                       456                    15                     441

GLA AT END OF PERIOD.............................   4,891                 4,891                   4,876
--------------------------------------------------------------------------------------------------------------
</TABLE>

RESULTS OF OPERATIONS

COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1999 TO THE THREE MONTHS ENDED
MARCH 31, 1998.

Net income before minority interest increased $2.0 million to $10.0 million for
the three months ended March 31, 1999 from $8.0 million for the three months
ended March 31, 1998. Increases in revenues, primarily the result of expansions,
and a new center opening, were offset by higher interest on borrowings and
depreciation and amortization.

Base rentals increased $5.3 million, or 27.5%, to $24.6 million for the three
months ended March 31, 1999 from $19.3 million for the three months ended March
31, 1998 due to expansions, a new center opened, and higher average rents on new
leases and renewals.

Percentage rents increased $0.6 million to $2.4 million for the three months
ended March 31, 1999, from $1.8 million for the three months ended March 31,
1998. The increase was primarily due to the opening of one new center in 1998,
expansions, increased tenant sales and a higher number of 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 $1.4 million, or 20.5%, to $8.2 million for the
three months ended March 31, 1999 from $6.8 million for the three months ended
March 31, 1998, due to the recovery of operating and maintenance costs from
increased GLA. The average recovery of reimbursable expenses was 89.5% in the
first quarter of 1999, compared to 89.6% in the first quarter of 1998.

Other income increased $1.2 million to $1.8 million for the three months ended
March 31, 1999, from $0.6 million for the three months ended March 31, 1998. The
increase is primarily the result of income from the agreement not to compete
with the Mills Corporation in the Houston, Texas area.

Interest in excess of amounts capitalized increased $2.2 million to $6.3 million
for the three months ended March 31, 1999 from $4.1 million for the three months
ended March 31, 1998 primarily due to higher debt balances from increased GLA in
operation.

Operating and maintenance expenses increased $1.6 million, or 20.6%, to $9.2
million for the three months ended March 31, 1999 from $7.6 million for the
three months ended March 31, 1998. The increase was primarily due to costs
related to expansions and a new center opening.

Depreciation and amortization expense increased $2.6 million, or 36.4%, to $9.9
million for the three months ended March 31, 1999 from $7.3 million for the
three months ended March 31, 1998. The increase was due to depreciation of
expansions and a new center opening in 1998.

General and administrative expenses increased $0.2 million to $1.1 million for
the three months ended March 31, 1999 from $0.9 million for the three months
ended March 31, 1998 primarily due to increased personnel, overhead costs and
accrual for deferred compensation.

Other expenses decreased $0.2 million to $0.4 million for the three months ended
March 31, 1999 from $0.6 million for the three months ended March 31, 1998. The
decrease was primarily due to reduced legal expenses.

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 during 1999 is expected to increase with a full year of
operations of the 776,000 square feet of GLA added during 1998, including the
opening of Leesburg Corner Premium Outlets in October 1998 and expansions of
approximately 310,000 square feet in 1999. In addition, at March 31, 1999 the
Company and the OP had $70.0 million available under the Senior Credit Facility,
access to the public markets through shelf registrations covering $200 million
of equity and $175 million of debt, and cash equivalents of $17.9 million.

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.

<PAGE>

Common distributions declared and recorded during the three months ended March
31, 1999 were $13.7 million, or $0.72 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 74.1% during the three months ended March 31, 1999. 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.

On March 30, 1998, the OP replaced its two unsecured bank revolving lines of
credit, totaling $150 million (the "Credit Facilities"), with a new $160 million
senior unsecured bank line of credit (the "Senior Credit Facility"). The Senior
Credit Facility expires on March 30, 2001 and bears interest on the outstanding
balance, payable monthly, at a rate equal to the London Interbank Offered Rate
("LIBOR") plus 1.05% (6.05% at March 31, 1999) or the prime rate, at the OP's
option. The LIBOR spread ranges from 0.85% to 1.25% depending on the Operating
Partnership'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. The OP 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. Lenders representing 84% of the Senior Credit Facility
have agreed to extend the Facility until March 30, 2002.

Expansions totaling more than 300,000 square feet of GLA are currently under
construction and scheduled to open in 1999. These include the 120,000
square-foot third phase of Wrentham Village Premium Outlets (Wrentham,
Massachusetts); the 100,000 square-foot fourth phase of North Georgia Premium
Outlets (Dawsonville, Georgia); and the 90,000 square-foot second phase of
Leesburg Corner Premium Outlets. 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. Excluding joint venture projects with
Simon Property Group, Inc. ("Simon"), the Company anticipates 1999 development
and construction costs of $50 million to $60 million. Funding is currently
expected from borrowings under the Senior Credit Facility, additional debt
offerings, and/or equity offerings.

Construction is also underway 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 that is expected to fund approximately 75% of the
costs of the project. The loan is 50% guaranteed by the Company and as of March
31, 1999, there were no amounts outstanding on the loan. The balance of
construction costs will be funded equally by the Company and Simon.

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, the first of four annual installments of $4.6
million was received in January 1999 and the remaining installments are to be
received on each January 2, through 2002. The Company has also been reimbursed
for its share of land costs, development costs and fees related to the project.

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, 1999
was approximately $3.5 million. The Company has also agreed to provide up to $22
million in limited debt service guarantees under a standby facility for loans
arranged by Value Retail PLC 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, 1999, the
Company has provided limited debt service guaranties of approximately $14
million for two projects.

<PAGE>

During 1998, the Company entered into a memorandum of understanding (expiring in
June 1999) with two partners to study the feasibility of developing new outlet
centers in Japan. The partners are currently researching potential development
sites and intend to organize a formal joint venture when viable projects are
located and approved. The Company's current financial commitment is not
material.

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 $6.5 million for the three
months ended March 31, 1999 compared to the corresponding 1998 period, primarily
due to the growth of the Company's GLA to 4.9 million square feet in 1999 from
4.4 million square feet in 1998 and receipt of payment on a non-compete
receivable. Net cash used in investing activities decreased $10.1 million for
the three months ended March 31, 1999 compared to the corresponding 1998 period,
as a result of proceeds from sale of a center and receipt of payment on a note
receivable. At March 31, 1999, net cash provided by financing activities
decreased by $2.9 million primarily due to higher borrowings for construction
during the 1998 first quarter.

YEAR 2000 COMPLIANCE

The year 2000 ("Y2K") issue refers generally to computer applications using only
the last two digits to refer to a year rather than all four digits. As a result,
these applications could fail or create erroneous results if they recognize "00"
as the year 1900 rather than the year 2000. The Company has taken Y2K
initiatives in three general areas which represent the areas that could have an
impact on the Company: information technology systems, non-information
technology systems and third-party issues. The following is a summary of these
initiatives:

INFORMATION TECHNOLOGY: The Company has focused its efforts on the high-risk
areas of the corporate office computer hardware, operating systems and software
applications. The Company's assessment and testing of existing equipment
revealed that its hardware, network operating systems and most of the software
applications are Y2K compliant. The exception is the DOS-based accounting
systems which were upgraded and replaced at the beginning of 1999 to make them
compatible with Windows applications primarily used by the Company.

NON-INFORMATION TECHNOLOGY: Non-information technology consists mainly of
facilities management systems such as telephone, utility and security systems
for the corporate office and the outlet centers. The Company has reviewed the
corporate facility management systems and made inquiry of the building
owner/manager and concluded that the corporate office building systems including
telephone, utilities, fire and security systems are Y2K compliant. The Company
is in the process of identifying date-sensitive systems and equipment including
HVAC units, telephones, security systems and alarms, fire and flood warning
systems and general office systems at its outlet centers. Assessment and testing
of these systems is approximately 75% complete and expected to be completed by
June 30, 1999. Critical non-compliant systems will be replaced when identified.
Based on preliminary assessment, the cost of replacement is not expected to be
significant.

THIRD PARTIES: The Company has third-party relationships with approximately 400
tenants and 4,000 suppliers and contractors. Many of these third parties are
publicly-traded corporations and subject to disclosure requirements. The Company
has begun assessment of major third parties' Y2K readiness including tenants,
key suppliers of outsourced services including stock transfer, debt servicing,
banking collection and disbursement, payroll and benefits, while simultaneously
responding to their inquiries regarding the Company's readiness. The majority of
the Company's vendors are small suppliers that the Company believes can manually
execute their business and are readily replaceable. Management also believes
there is no material risk of being unable to procure necessary supplies and
services. Third-party assessment is approximately 50% complete and expected to
be completed by June 30, 1999. The Company continues to monitor Y2K disclosures
in SEC filings of publicly-owned third parties.

COSTS: The accounting software upgrade and conversion is being executed under
maintenance and support agreements with software vendors. The total cost of the
accounting conversion which the Company had previously commenced during the 1998
third quarter is estimated at approximately $200,000 including the Y2K portion
of the conversion that cannot be readily identified and is not material to the
operating results or financial position of the Company.

The identification and remediation of systems at the outlet centers is being
accomplished by in-house business systems personnel and outlet center general
managers whose costs are recorded as normal operating expense. The assessment of
third-party readiness is also being conducted by in-house personnel whose costs
are recorded as normal operating expenses. The Company is not yet in a position
to estimate the cost of third-party compliance issues, but has no reason to
believe, based upon its evaluations to date, that such costs will exceed
$100,000.

RISKS: The principal risks to the Company relating to the completion of its
accounting software conversion is failure to correctly bill tenants by December
31, 1999 and to pay invoices when due. Management believes it has adequate
resources, or could obtain the needed resources, to manually bill tenants and
pay bills until the systems became operational.

The principal risks to the Company relating to non-information systems at the
outlet centers are failure to identify time-sensitive systems and inability to
find a suitable replacement system. The Company believes that adequate
replacement components or new systems are available at reasonable prices and are
in good supply. The Company also believes that adequate time and resources are
available to remediate these areas as needed.

The principal risks to the Company in its relationships with third parties are
the failure of third-party systems used to conduct business such as tenants
being unable to stock stores with merchandise, use cash registers and pay
invoices; banks being unable to process receipts and disbursements; vendors
being unable to supply needed materials and services to the centers; and
processing of outsourced employee payroll. Based on Y2K compliance work done to
date, the Company has no reason to believe that key tenants, banks and suppliers
will not be Y2K compliant in all material respects or can not be replaced within
an acceptable timeframe. The Company will attempt to obtain compliance
certification from suppliers of key services as soon as such certifications are
available.

CONTINGENCY PLANS: The Company intends to deal with contingency planning during
1999 as results of the above assessments are known.

The Company's description of its Y2K compliance issue is based upon information
obtained by management through evaluations of internal business systems and from
tenant and vendor compliance efforts. No assurance can be given that the Company
will be able to address the Y2K issues for all its systems in a timely manner or
that it will not encounter unexpected difficulties or significant expenses
relating to adequately addressing the Y2K issue. If the Company or the major
tenants or vendors with whom the Company does business fail to address their
major Y2K issues, the Company's operating results or financial position could be
materially adversely affected.
<PAGE>

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,
                                                          1999            1998
                                                        ----------      -------

Net income to common shareholders ................       $7,380          $5,682
Add back:
  Depreciation and amortization...................        9,924           7,278
  Amortization of deferred financing costs and 
    depreciation of non-rental real estate assets..        (435)           (400)
  Minority interest................................       1,621           1,270
                                                       ----------      --------
FFO................................................     $18,490         $13,830
                                                       ==========      ========
Average diluted shares/units outstanding...........      19,189          19,042
Dividends declared per share.......................       $0.72           $0.69


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 $1.2 million annually.

<PAGE>

                            CHELSEA GCA REALTY, INC.

PART II.              OTHER INFORMATION

ITEM 6.               EXHIBITS AND REPORTS ON FORM 8-K

The Company did not file any reports on Form 8-K during the three months ended
March 31, 1999.

<PAGE>


                            CHELSEA GCA REALTY, INC.


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 11, 1999