<PAGE>   1
                       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 June 30, 2001

                                       OR

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

                        COMMISSION FILE NUMBER: 001-14162


                      GLENBOROUGH REALTY TRUST INCORPORATED
                      -------------------------------------
             (Exact name of registrant as specified in its charter)

                 Maryland                              94-3211970
                 --------                              ----------
       (State or other jurisdiction                 (I.R.S. Employer
     of incorporation or organization)             Identification No.)


        400 South El Camino Real,
    Suite 1100, San Mateo, California
             (650) 343-9300                             94402-1708
        ------------------------                        ----------
 (Address of principal executive offices                (Zip Code)
          and telephone number)

              Securities registered under Section 12(b) of the Act:

                                                       Name of Exchange
            Title of each class:                     on which registered:
            --------------------                     --------------------
      Common Stock, $.001 par value                New York Stock Exchange
7.75% Series A Convertible Preferred Stock,
      $.001 par value                              New York Stock Exchange

        Securities registered pursuant to Section 12(g) of the Act: None

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 [ ]

As of August 8, 2001, 26,989,534 shares of Common Stock ($.001 par value) and
10,097,800 shares of 7.75% Series A Convertible Preferred Stock ($.001 par
value) were outstanding.



                                       1
<PAGE>   2

                                      INDEX
                      GLENBOROUGH REALTY TRUST INCORPORATED
<TABLE>
<CAPTION>
                                                                           PAGE NO.
                                                                           --------
<S>      <C>                                                               <C>
PART I   FINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements of Glenborough Realty Trust
         Incorporated (Unaudited):

            Consolidated Balance Sheets at June 30, 2001 and December 31,
            2000                                                                3

            Consolidated Statements of Income for the six months ended
            June 30, 2001 and 2000                                              4

            Consolidated Statements of Income for the three months ended
            June 30, 2001 and 2000                                              5

            Consolidated Statement of Stockholders' Equity for the six
            months ended June 30, 2001                                          6

            Consolidated Statements of Cash Flows for the six months ended
            June 30, 2001 and 2000                                            7-8

            Notes to Consolidated Financial Statements                       9-18

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations                                              19-26

PART II  OTHER INFORMATION

Item 1.  Legal Proceedings                                                     26

Item 4.  Submission of Matters to a Vote of Security Holders                   26

Item 6.  Exhibits and Reports on Form 8-K                                      27

SIGNATURES                                                                     28

EXHIBIT INDEX                                                                  29
</TABLE>



                                    2
<PAGE>   3

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                   GLENBOROUGH REALTY TRUST INCORPORATED
                        CONSOLIDATED BALANCE SHEETS
                   (in thousands, except share amounts)
                                (Unaudited)

<TABLE>
<CAPTION>
                                                                                     June 30,        December 31,
                                                                                       2001              2000
                                                                                   -----------       ------------
<S>                                                                                <C>               <C>
ASSETS
    Rental properties, gross                                                       $ 1,342,117       $ 1,208,566
    Accumulated depreciation                                                          (129,377)         (115,061)
                                                                                   -----------       -----------
    Rental properties, net                                                           1,212,740         1,093,505

    Investments in Land and Development                                                 71,604            86,286
    Investments in Operating Joint Ventures                                              7,912             9,119
    Mortgage loan receivable                                                            38,716            37,250
    Cash and cash equivalents                                                            4,035           102,195
    Other assets                                                                        50,830            42,803
                                                                                   -----------       -----------

        TOTAL ASSETS                                                               $ 1,385,837       $ 1,371,158
                                                                                   ===========       ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
    Mortgage loans                                                                 $   526,887       $   450,624
    Unsecured term debt                                                                     --           125,000
    Unsecured bank line                                                                111,274            31,053
    Other liabilities                                                                   23,890            26,871
                                                                                   -----------       -----------
      Total liabilities                                                                662,051           633,548
                                                                                   -----------       -----------

Commitments and contingencies                                                               --                --

Minority interest                                                                       67,526            68,754

Stockholders' Equity:
    Common stock, 26,989,534 and 26,991,770 shares issued and outstanding
      at June 30, 2001 and December 31, 2000, respectively                                  27                27
    Preferred stock, 10,097,800 shares issued and outstanding at June 30,
      2001 and December 31, 2000                                                            10                10
    Additional paid-in capital                                                         763,137           763,974
    Deferred compensation                                                               (1,029)           (1,143)
    Retained earnings (deficit)                                                       (105,885)          (94,012)
                                                                                   -----------       -----------
      Total stockholders' equity                                                       656,260           668,856
                                                                                   -----------       -----------
         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                $ 1,385,837       $ 1,371,158
                                                                                   ===========       ===========
</TABLE>

                 The accompanying notes are an integral part of
                    these consolidated financial statements



                                        3
<PAGE>   4

                      GLENBOROUGH REALTY TRUST INCORPORATED
                        CONSOLIDATED STATEMENTS OF INCOME
                 For the six months ended June 30, 2001 and 2000
               (in thousands, except share and per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                     2001               2000
                                                                                 ------------       ------------
<S>                                                                              <C>                <C>
REVENUE
    Rental revenue                                                               $     91,614       $    123,978
    Fees and reimbursements from affiliates                                             3,516              2,362
    Interest and other income                                                           2,751              4,643
    Equity in earnings of Associated Company                                               --                622
    Equity in earnings (losses) of unconsolidated operating joint ventures                 51               (171)
    Net loss on sales of real estate assets                                              (124)            (3,042)
                                                                                 ------------       ------------
      Total revenue                                                                    97,808            128,392
                                                                                 ------------       ------------

EXPENSES
    Property operating expenses                                                        27,796             41,847
    General and administrative                                                          6,051              6,373
    Depreciation and amortization                                                      22,814             30,213
    Interest expense                                                                   18,363             32,370
                                                                                 ------------       ------------
      Total expenses                                                                   75,024            110,803
                                                                                 ------------       ------------

Income from operations before minority interest and extraordinary item                 22,784             17,589
Minority interest                                                                      (1,218)              (656)
                                                                                 ------------       ------------
Net income before extraordinary item                                                   21,566             16,933
Extraordinary item:
  Net loss on early extinguishment of debt                                             (1,025)              (550)
                                                                                 ------------       ------------
Net income                                                                             20,541             16,383
Preferred dividends                                                                    (9,782)           (10,931)
                                                                                 ------------       ------------
Net income available to Common Stockholders                                      $     10,759       $      5,452
                                                                                 ============       ============

Basic Per Share Data:
  Net income before extraordinary item                                           $       0.44       $       0.20
  Extraordinary item                                                                    (0.04)             (0.02)
                                                                                 ------------       ------------
Net income available to Common Stockholders                                      $       0.40       $       0.18
                                                                                 ============       ============
Basic weighted average shares outstanding                                          26,990,921         29,842,924
                                                                                 ============       ============

Diluted Per Share Data:
  Net income before extraordinary item                                           $       0.43       $       0.20
  Extraordinary item                                                                    (0.04)             (0.02)
                                                                                 ------------       ------------
Net income available to Common Stockholders                                      $       0.39       $       0.18
                                                                                 ============       ============
Diluted weighted average shares outstanding                                        30,471,843         33,602,425
                                                                                 ============       ============

</TABLE>

                 The accompanying notes are an integral part of
                    these consolidated financial statements



                                       4
<PAGE>   5

                     GLENBOROUGH REALTY TRUST INCORPORATED
                       CONSOLIDATED STATEMENTS OF INCOME
               For the three months ended June 30, 2001 and 2000
               (in thousands, except share and per share amounts)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                     2001               2000
                                                                                 ------------       ------------
<S>                                                                              <C>                <C>
REVENUE
    Rental revenue                                                               $     47,710       $     60,817
    Fees and reimbursements from affiliates                                             1,206              1,894
    Interest and other income                                                             799              3,427
    Equity in earnings of Associated Company                                               --                576
    Equity in losses of unconsolidated operating joint ventures                            (1)              (140)
    Net loss on sales of real estate assets                                              (182)            (2,347)
                                                                                 ------------       ------------
      Total revenue                                                                    49,532             64,227
                                                                                 ------------       ------------

EXPENSES
    Property operating expenses                                                        13,703             20,290
    General and administrative                                                          2,968              4,064
    Depreciation and amortization                                                      11,976             15,084
    Interest expense                                                                    9,487             16,023
                                                                                 ------------       ------------
      Total expenses                                                                   38,134             55,461
                                                                                 ------------       ------------

Income from operations before minority interest and extraordinary item                 11,398              8,766
Minority interest                                                                        (631)              (350)
                                                                                 ------------       ------------
Net income before extraordinary item                                                   10,767              8,416
Extraordinary item:
  Net loss on early extinguishment of debt                                               (262)               (84)
                                                                                 ------------       ------------
Net income                                                                             10,505              8,332
Preferred dividends                                                                    (4,891)            (5,443)
                                                                                 ------------       ------------
Net income available to Common Stockholders                                      $      5,614       $      2,889
                                                                                 ============       ============

Basic Per Share Data:
  Net income before extraordinary item                                           $       0.22       $       0.10
  Extraordinary item                                                                    (0.01)                --
                                                                                 ------------       ------------
Net income available to Common Stockholders                                      $       0.21       $       0.10
                                                                                 ============       ============
Basic weighted average shares outstanding                                          26,989,534         29,330,163
                                                                                 ============       ============

Diluted Per Share Data:
  Net income before extraordinary item                                           $       0.21       $       0.10
  Extraordinary item                                                                    (0.01)                --
                                                                                 ------------       ------------
Net income available to Common Stockholders                                      $       0.20       $       0.10
                                                                                 ============       ============
Diluted weighted average shares outstanding                                        30,467,322         33,111,493
                                                                                 ============       ============

</TABLE>

                 The accompanying notes are an integral part of
                    these consolidated financial statements



                                       5
<PAGE>   6

                      GLENBOROUGH REALTY TRUST INCORPORATED
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                     For the six months ended June 30, 2001
                                 (in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                     Common Stock   Preferred Stock
                                   ---------------  ---------------
                                                                     Additional   Deferred  Retained
                                              Par              Par    Paid-in     Compen-   Earnings
                                   Shares    Value  Shares    Value   Capital     sation    (Deficit)    Total
                                   ------    -----  ------    -----   --------    --------  ---------   --------
<S>                                <C>       <C>    <C>       <C>     <C>         <C>       <C>         <C>
Balance at December 31, 2000       26,982     $27   10,098     $10    $763,974    $(1,143)   $(94,012)  $668,856

Exercise of stock options              10      --       --      --         298         --          --        298

Cancellation of stock grants           (3)     --       --      --          --         --          --         --

Conversion of Operating
   Partnership units into
   common stock                         1      --       --      --      (1,135)        --          --     (1,135)

Amortization of deferred
   compensation                        --      --       --      --          --        114          --        114

Unrealized Gain on Marketable
   Securities                          --      --       --      --          --         --          35         35

Dividends                              --      --       --      --          --         --     (32,449)   (32,449)

Net income                             --      --       --      --          --         --      20,541     20,541
                                   ------     ---   ------     ---    --------    -------   ---------   --------
Balance at June 30, 2001           26,990     $27   10,098     $10    $763,137    $(1,029)  $(105,885)  $656,260
                                   ======     ===   ======     ===    ========    =======   =========   ========

</TABLE>

                  The accompanying notes are an integral part
                   of these consolidated financial statements


                                       6
<PAGE>   7


                     GLENBOROUGH REALTY TRUST INCORPORATED
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                For the six months ended June 30, 2001 and 2000
                                 (in thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>

                                                                                          2001            2000
                                                                                       ---------       ---------
<S>                                                                                    <C>             <C>
Cash flows from operating activities:
    Net income                                                                         $  20,541       $  16,383
    Adjustments to reconcile net income to net cash provided by operating
      activities:
        Depreciation and amortization                                                     22,814          30,213
        Amortization of loan fees, included in interest expense                              734           1,249
        Minority interest in income from operations                                        1,218             656
        Equity in earnings of Associated Company                                              --            (622)
        Equity in (earnings) losses of unconsolidated operating joint ventures               (51)            171
        Net loss on sales of real estate assets                                              124           3,042
        Net loss on early extinguishment of debt                                           1,025             550
        Amortization of deferred compensation                                                114              58
        Changes in certain assets and liabilities, net                                   (12,611)         (6,205)
                                                                                       ---------       ---------
         Net cash provided by operating activities                                        33,908          45,495
                                                                                       ---------       ---------

Cash flows from investing activities:
    Net proceeds from sales of real estate assets                                         33,040         108,782
    Additions to real estate assets                                                      (57,612)        (25,851)
    Deposits on prospective acquisitions                                                  (1,587)             --
    Investments in Land and Development, net                                             (23,310)           (810)
    Investments in Operating Joint Ventures                                                   --          (3,328)
    Additions to mortgage loans receivable                                                (1,938)         (1,176)
    Principal receipts on mortgage loans receivable                                          472           1,141
    Repayments of notes receivable                                                            --           1,025
    Payments from affiliates                                                                  --             200
    Distributions from Associated Company                                                     --             682
                                                                                       ---------       ---------
         Net cash provided by (used for) investing activities                            (50,935)         80,665
                                                                                       ---------       ---------

Cash flows from financing activities:
    Proceeds from borrowings                                                             191,319         191,832
    Repayment of borrowings                                                             (237,791)       (142,855)
    Retirement of Series A Senior Notes (less loss on retirement of $512 in 2000)             --         (91,662)
    Prepayment penalties on loan payoffs                                                     (64)            (38)
    Distributions to minority interest holders                                            (2,556)         (3,032)
    Dividends to stockholders                                                            (32,449)        (36,351)
    Contributions from minority interest partners                                            110              --
    Exercise of stock options                                                                298             203
    Repurchases of common stock                                                               --         (29,196)
    Repurchases of preferred stock                                                            --         (18,519)
                                                                                       ---------       ---------
        Net cash used for financing activities                                           (81,133)       (129,618)
                                                                                       ---------       ---------

</TABLE>

                                   continued

                  The accompanying notes are an integral part
                   of these consolidated financial statements


                                       7
<PAGE>   8

                     GLENBOROUGH REALTY TRUST INCORPORATED
               CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
                For the six months ended June 30, 2001 and 2000
                                 (in thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                          2001            2000
                                                                                       ---------       ---------
<S>                                                                                    <C>             <C>
Net decrease in cash and cash equivalents                                                (98,160)         (3,458)

Cash and cash equivalents at beginning of period                                         102,195           6,482
                                                                                       ---------       ---------

Cash and cash equivalents at end of period                                             $   4,035       $   3,024
                                                                                       =========       =========

Supplemental disclosure of cash flow information:

    Cash paid for interest (net of capitalized interest of $2,569 and $1,559
        in 2001 and 2000, respectively)                                                $  18,155       $  32,443
                                                                                       =========       =========

Supplemental disclosure of Non-Cash Investing and Financing Activities:
    Assumption of first trust deed notes payable in acquisition of real estate         $  82,203       $   4,300
                                                                                       =========       =========

    Disposition of real estate involving buyer's assumption of first trust
        deed notes payable                                                             $   4,248       $  25,347
                                                                                       =========       =========

    Acquisition of real estate assets from development alliances and
        unconsolidated operating joint ventures                                        $  39,250       $     161
                                                                                       =========       =========

    Conversion of Operating Partnership units into common stock, at current
        market value of common stock                                                   $  (1,135)      $     196
                                                                                       =========       =========

</TABLE>

                  The accompanying notes are an integral part
                   of these consolidated financial statements


                                       8
<PAGE>   9

                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 2001

NOTE 1. ORGANIZATION

Glenborough Realty Trust Incorporated (the "Company") was incorporated in the
State of Maryland on August 26, 1994. The Company commenced operations on
January 1, 1996. The Company has elected to qualify as a real estate investment
trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code").
The common and preferred stock of the Company (the "Common Stock" and the
"Preferred Stock", respectively) are listed on the New York Stock Exchange
("NYSE") under the trading symbols "GLB" and "GLB Pr A", respectively.

As of June 30, 2001, 26,989,534 shares of Common Stock and 10,097,800 shares of
Preferred Stock were issued and outstanding. Common and preferred shares
authorized are 188,000,000 and 12,000,000, respectively. Under the Company's
Common and Preferred Stock repurchase authorizations which were approved by the
Company's Board of Directors in 1999, 6,086,816 shares of Common Stock and
1,402,200 shares of Preferred Stock have been repurchased as of June 30, 2001.

The Company's Preferred Stock is convertible at any time at the option of the
holder thereof into shares of Common Stock at an initial conversion price of
$32.83 per share of Common Stock (equivalent to a conversion rate of 0.7615
shares of Common Stock for each share of Series A Convertible Preferred Stock),
subject to adjustment in certain circumstances. Except in certain instances
relating to the preservation of the Company's status as a REIT, the 7 3/4%
Series A Convertible Preferred Stock is not redeemable prior to January 16,
2003. On and after January 16, 2003, the Series A Preferred Stock may be
redeemed at the option of the Company, in whole or in part, initially at 103.88%
of the liquidation preference per share, and thereafter at prices declining to
100% of the liquidation preference on and after January 16, 2008, plus in each
case accumulated, accrued and unpaid dividends, if any, to the redemption date.

To maintain the Company's qualification as a REIT, no more than 50% of the value
of the outstanding shares of the Company may be owned, directly or indirectly,
by five or fewer individuals (defined to include certain entities), applying
certain constructive ownership rules. To help ensure that the Company will not
fail this test, the Company's Articles of Incorporation provide for certain
restrictions on the transfer of the Common Stock to prevent further
concentration of stock ownership.

The Company, through its majority owned subsidiaries, is engaged primarily in
the ownership, operation, management, leasing, acquisition, expansion and
development of various income-producing properties. The Company's major
consolidated subsidiary, in which it holds a 1% general partner interest and a
88.77% limited partner interest at June 30, 2001, is Glenborough Properties,
L.P. (the "Operating Partnership"). Each of the holders of the remaining
interests in the Operating Partnership ("OP Units") has the option to redeem its
OP Units and to receive, at the option of the Company, in exchange for each OP
Unit, either (i) one share of common stock of the Company, or (ii) cash equal to
the fair market value of one share of common stock of the Company. As of June
30, 2001, the Operating Partnership, directly and through the subsidiaries in
which it and the Company own 100% of the ownership interests, controls a
portfolio of 85 real estate projects.

Prior to October 2000, the Operating Partnership held 100% of the non-voting
preferred stock of Glenborough Corporation ("GC" or the "Associated Company). GC
was the general partner of several real estate limited partnerships and provided
asset and property management services for these partnerships. It also provided
partnership administration, asset management, property management and
development services to a group of unaffiliated partnerships, which include
three public partnerships sponsored by Rancon Financial Corporation, an
unaffiliated corporation which has real estate assets in the Inland Empire
region of Southern California (the "Rancon Partnerships").

Effective October 24, 2000, GC merged with the Company. In the merger, the
Company received the net assets of GC, including the contract to manage the
Rancon Partnerships, in exchange for its preferred stock of GC. In addition, the
Company redeemed GC's OP units and issued shares of common stock to GC's common
stock holders.



                                       9
<PAGE>   10

                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 2001

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying financial statements present the consolidated financial
position of the Company and its subsidiaries as of June 30, 2001 and December
31, 2000, and the consolidated results of operations and cash flows of the
Company and its subsidiaries for the six months ended June 30, 2001 and 2000.
All significant intercompany transactions, receivables and payables have been
eliminated in consolidation.

In the opinion of management, the accompanying unaudited financial statements
contain all adjustments (consisting of only normal accruals) necessary to
present fairly the financial position and results of operations of the Company
as of June 30, 2001, and for the period then ended.

RECLASSIFICATION

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

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the results of operations during the reporting period. Actual
results could differ from those estimates.

NEW ACCOUNTING PRONOUNCEMENTS

Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities" was issued in June 1998. SFAS No.
133 was originally effective for fiscal years beginning after June 15, 1999,
with early adoption permitted. In June 1999, SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133 - an amendment of FASB Statement No. 133" was issued
which, among other things, deferred the final implementation to fiscal years
beginning after June 15, 2000. SFAS No. 133 provides comprehensive guidelines
for the recognition and measurement of derivatives and hedging activities and
specifically requires all derivatives to be recorded on the balance sheet at
fair value. Upon implementation, this pronouncement did not have a material
effect on the Company's consolidated financial position, results of operations
and financial statement presentation.

RENTAL PROPERTIES

Rental properties are stated at cost, net of accumulated depreciation, unless
circumstances indicate that cost, net of accumulated depreciation, cannot be
recovered, in which case, the carrying value of the property is reduced to
estimated fair value. Estimated fair value: (i) is based upon the Company's
plans for the continued operation of each property; and (ii) is computed using
estimated sales price, as determined by prevailing market values for comparable
properties and/or the use of capitalization rates multiplied by annualized net
operating income based upon the age, construction and use of the building. The
fulfillment of the Company's plans related to each of its properties is
dependent upon, among other things, the presence of economic conditions which
will enable the Company to continue to hold and operate the properties prior to
their eventual sale. Due to uncertainties inherent in the valuation process and
in the economy, it is reasonably possible that the actual results of operating
and disposing of the Company's properties could be materially different than
current expectations.

Depreciation is provided using the straight line method over the useful lives of
the respective assets. The useful lives are as follows:

           Buildings and Improvements        10 to 40 years
           Tenant Improvements               Term of the related lease
           Furniture and Equipment           5 to 7 years



                                       10
<PAGE>   11

                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 2001

INVESTMENTS IN LAND AND DEVELOPMENT

The Company, through mezzanine loans and equity contributions, invests in
various development alliances with projects currently under development. The
interest on advances and other direct project costs incurred by the Company are
capitalized to the investments during the period in which the projects are under
development. See Note 4 for further discussion.

INVESTMENTS IN OPERATING JOINT VENTURES

The Company's investments in operating joint ventures are accounted for using
the equity method. The Company does not hold a controlling interest in any
operating joint ventures. See Note 5 for further discussion.

MORTGAGE LOAN RECEIVABLE

The Company monitors the recoverability of its mortgage loan receivable through
ongoing contact with the borrower to ensure timely receipt of interest and
principal payments, and where appropriate, obtains financial information
concerning the property. Interest on the mortgage loan is recognized as revenue
as it accrues during the period the loan is outstanding. The mortgage loan
receivable will be evaluated for impairment if it becomes evident that the
borrower is unable to meet its debt service obligations in a timely manner and
cannot satisfy its payments using sources other than the property securing the
loan. If it is concluded that such circumstances exist, then the loan will be
considered to be impaired and its recorded amount will be reduced to the
estimated fair value of the collateral securing it. Interest income will also
cease to accrue under such circumstances. Due to uncertainties inherent in the
valuation process, it is reasonably possible that the amount ultimately realized
from the Company's collection on its mortgage loan receivable will be different
than the recorded amount.

CASH AND CASH EQUIVALENTS

The Company considers short-term investments (including certificates of deposit)
with a maturity of three months or less at the time of investment to be cash
equivalents.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Based on the borrowing rates currently available to the Company, the carrying
amount of debt approximates fair value. Cash and cash equivalents consist of
demand deposits and certificates of deposit with financial institutions. The
carrying amount of cash and cash equivalents as well as the mortgage loan
receivable described above, approximates fair value.

DERIVATIVE FINANCIAL INSTRUMENTS

The Company may use derivative financial instruments in the event that it
believes such instruments will be an effective hedge against fluctuations in
interest rates on a specific borrowing. Derivative financial instruments such as
forward rate agreements or interest rate swaps may be used in this capacity. To
the extent such instruments do not qualify as hedges, they will be accounted for
on a mark-to-market basis and recorded in earnings each period as appropriate.

At June 30, 2001, the Company was not a party to any open interest rate
protection agreements.

DEFERRED FINANCING AND OTHER FEES

Fees paid in connection with the financing and leasing of the Company's
properties are amortized over the term of the related notes payable or leases
and are included in other assets.

MINORITY INTEREST

Minority interest represents the 10.23% and 10.24% limited partner interests in
the Operating Partnership not held by the Company at June 30, 2001 and December
31, 2000, respectively.



                                       11
<PAGE>   12

                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 2001

REVENUES

All leases are classified as operating leases. Rental revenue is recognized as
earned over the terms of the related leases, net of estimated allowances for
uncollectable amounts.

For the six months ended June 30, 2001 and 2000, no tenants represented 10% or
more of rental revenue of the Company.

Fee and reimbursement revenue consists of property management fees, overhead
administration fees, and transaction fees from the acquisition, disposition,
refinancing, leasing and construction supervision of real estate for
unconsolidated affiliates.

Revenues are recognized only after the Company is contractually entitled to
receive payment, after the services for which the fee is to be received have
been provided, and after the ability and timing of payments are reasonably
assured and predictable.

Some scheduled rent increases are based primarily on the Consumer Price Index or
a similar factor. Material incentives paid, if any, by the Company to a tenant
are amortized as a reduction of rental income over the life of the related
lease.

The Company's portfolio of leases turns over continuously, with the number and
value of expiring leases varying from year to year. The Company's ability to
release the space to existing or new tenants at rates equal to or greater than
those realized historically is impacted by, among other things, the economic
conditions of the market in which a property is located, the availability of
competing space, and the level of improvements which may be required at the
property. No assurance can be given that the rental rates that the Company will
obtain in the future will be equal to or greater than those obtained under
existing contractual commitments.

INCOME TAXES

The Company has made an election to be taxed as a REIT under Sections 856
through 860 of the Code. As a REIT, the Company generally will not be subject to
Federal income tax to the extent that it distributes at least 90% of its REIT
taxable income to its shareholders. REITs are subject to a number of
organizational and operational requirements. If the Company fails to qualify as
a REIT in any taxable year, the Company will be subject to Federal income tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate tax rates. Even if the Company qualifies for taxation as a
REIT, the Company may be subject to certain state and local taxes on its income
and property and to Federal income and excise taxes on its undistributed income.

REFERENCE TO 2000 AUDITED FINANCIAL STATEMENTS

These unaudited financial statements should be read in conjunction with the
Notes to Consolidated Financial Statements included in the 2000 audited
financial statements.

NOTE 3. RENTAL PROPERTY

Acquisitions

In the second quarter of 2001, the Company acquired its venture partner's
interest in Canyons I and Santa Fe Ranch, two multifamily properties with a
combined total of 706 units located in Fort Worth, Texas and Irving, Texas,
respectively. The aggregate acquisition costs of approximately $41.5 million
consisted of approximately $1 million in cash and the assumption of
approximately $40.5 million in debt.

In the second quarter of 2001, from another one of its development alliances,
the Company acquired Gateway 19, a 166,000 square foot industrial property
located in Aurora, Colorado. The total acquisition cost of $6.8 million
consisted of proceeds from a tax deferred exchange, a draw on the Credit
Facility (as defined in Note 8) and the assumption of approximately $4.7 million
in debt.




                                       12
<PAGE>   13

                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 2001

In the second quarter of 2001, the Company acquired, from a joint venture
partner, Rockwall I and II, a two-building, 343,000 square foot office property
located in Rockville, Maryland. The total acquisition cost of approximately
$58.8 million consisted of proceeds from tax deferred exchanges, a draw on the
Credit Facility (as defined in Note 8) and the assumption of $37 million in
debt.

In the first quarter of 2001, the Company acquired Creekside Business Park, a
171,000 square foot office property located in Dublin, California. The total
acquisition cost of approximately $30 million consisted primarily of proceeds
from tax deferred exchanges and a draw on the Credit Facility (as defined in
Note 8).

Dispositions

In the second quarter of 2001, the Company sold four properties, including one
office, one industrial and two retail, for an aggregate sales price of $17.2
million. Proceeds from the sales, of approximately $12.1 million, were used to
pay down the Company's Credit Facility (as defined in Note 8) and to fund second
quarter tax-deferred exchange acquisitions as discussed above.

In the first quarter of 2001, the Company sold two retail properties known as
Westbrook Commons and Woodfield Center, located in Westchester, Illinois and
Indianapolis, Indiana, respectively, for an aggregate sale price of $20.3
million. Proceeds from the sale of Westbrook Commons, of approximately
$14,827,000, were used to pay down the Company's Credit Facility (as defined in
Note 8). Proceeds from the sale of Woodfield Center, of approximately
$4,842,000, were used to fund second quarter tax-deferred exchange acquisitions
as discussed above.

NOTE 4. INVESTMENTS IN LAND AND DEVELOPMENT

The Company is independently developing approximately 416,000 square feet of
commercial property in California, Colorado and New Jersey. As of June 30, 2001,
the Company had invested approximately $31.1 million in these projects.
Additionally, the Company has approximately 755,000 of proposed square feet,
with a book value of approximately $10.4 million, available for future
development as of June 30, 2001. The loans secured by certain development
properties contain recourse provisions to the Company in the event of default.

The Company is currently involved in a number of alliances for the development
of approximately 654,000 square feet of commercial properties in California and
Colorado. The alliances grant the Company certain rights to purchase the
properties upon completion of development over the next five years. As of June
30, 2001, the Company had invested approximately $8.7 million in these alliances
and had acquired properties from them aggregating approximately $114.2 million.
As of June 30, 2001, the Company has provided guarantees on $24.3 million of
related debt.

Additionally, in 2000, the Company formed a new joint venture with the Pauls
Corporation ("Pauls"), Glenborough Pauls Development LLC ("Development LLC").
The Company and Pauls each own an equal 50% interest in Development LLC. The
Company accounts for its investment in Development LLC using the equity method.
In the fourth quarter of 2000, Development LLC acquired two sites aggregating
33.5 acres in the San Francisco Bay Area for mixed use development. As of June
30, 2001, the Company had advanced approximately $21.4 million to Development
LLC and had provided guarantees on $21.6 million of related debt.

NOTE 5. INVESTMENTS IN OPERATING JOINT VENTURES

The Company's investments in operating joint ventures are accounted for using
the equity method. The Company records earnings on its investments equal to its
ownership interest in the venture's earnings (losses). Distributions are
recorded as a reduction of the Company's investment.



                                       13
<PAGE>   14

                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 2001

The Company's investments in operating joint ventures consist of the following
as of June 30, 2001 and December 31, 2000 (dollars in thousands):

<TABLE>
<CAPTION>
                            Ownership        Property         Square         Property
Joint Venture                Interest        Location         Footage          Type           2001        2000
----------------------      ---------        -----------      -------        ---------      -------      ------
<S>                         <C>              <C>              <C>            <C>            <C>          <C>
Rincon Center I & II           10%           San Francisco,   686,000        Mixed-Use       $4,013      $3,952
                                             California
Rockwall I & II                10%           Rockville,       343,000          Office            --(1)    1,326
                                             Maryland
2000 Corporate Ridge           10%           McLean,          256,000          Office         3,899       3,841
                                             Virginia
                                                                                             ------      ------
                                                                                             $7,912      $9,119
                                                                                             ======      ======
</TABLE>

(1)   In the second quarter of 2001, the Company acquired 100% of Rockwall I and
      II, a two-building, 343,000 square foot office property located in
      Rockville, Maryland from the joint venture. See Note 3 for further
      discussion.

NOTE 6. MORTGAGE LOAN RECEIVABLE

The Company holds a first mortgage of approximately $38.7 million, including
accrued interest, at June 30, 2001, secured by land at Gateway Park in Aurora,
Colorado. The loan bears interest at a fixed rate of 13% and matures in July,
2005. Gateway Park is a development project where the Company and the Pauls
Corporation have an alliance and where the Company has also acquired property.
In this arrangement, the Company has rights under certain conditions and subject
to certain contingencies to purchase the properties upon completion of
development and, thus, through this arrangement, the Company could acquire up to
5 million square feet of office and industrial space over the next ten years.

NOTE 7. OTHER ASSETS

As of June 30, 2001 and December 31, 2000, other assets on the consolidated
balance sheets consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                      2001         2000
                                                    -------      -------
<S>                                                <C>          <C>
            Accounts receivable, net                $ 4,530      $ 2,463
            Prepaid expenses                          9,378        6,632
            Impound accounts                          4,310        7,792
            Deferred leasing and financing costs     20,779       18,837
            Investment in management contracts        3,266        3,567
            Corporate office fixed assets, net        3,084        2,822
            Marketable securities                     3,308           --
            Other                                     2,175          690
                                                    -------      -------

            Total other assets                      $50,830      $42,803
                                                    =======      =======
</TABLE>

NOTE 8. SECURED AND UNSECURED LIABILITIES

The Company had the following mortgage loans, bank lines, and notes payable
outstanding as of June 30, 2001, and December 31, 2000 (dollars in thousands):



                                       14
<PAGE>   15

                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 2001

<TABLE>
<CAPTION>
                                                           2001           2000
                                                         --------       --------
<S>                                                      <C>            <C>
Secured loans with various lenders, net of
unamortized discount of $3,294 and $3,518 at June
30, 2001 and December 31, 2000, respectively. All
loans have a fixed interest rate of 6.125% and a
November 10, 2008 maturity date. Monthly principal
and interest payments range between $296 and $458.
These loans are secured by properties with an
aggregate net carrying value of $318,860 and
$322,067 at June 30, 2001 and December 31, 2000,
respectively.                                            $169,926       $170,899

Secured loans with various lenders, bearing
interest at fixed rates between 6.83% and 9.25%,
with monthly principal and interest payments
ranging between $19 and $443 and maturing at
various dates through July 1, 2008. These loans
are secured by properties with an aggregate net
carrying value of $312,094 and $303,532 at June
30, 2001 and December 31, 2000, respectively.             183,125        171,144

Secured loans with various banks bearing interest
at variable rates ranging between 5.41% and 6.36%
at June 30, 2001 and 8.11% and 9.06% at December
31, 2000, maturing at various dates through
November 28, 2003. These loans are secured by
properties with an aggregate net carrying value of
$250,885 and $150,968 at June 30, 2001 and
December 31, 2000, respectively.                          173,836        108,581

Unsecured $180,000 line of credit with a group of
commercial banks ("Credit Facility") with a
variable interest rate of LIBOR plus 1.625% (5.48%
and 8.19% at June 30, 2001 and December 31, 2000,
respectively), monthly interest only payments and
a maturity date of June 10, 2003, with one option
to extend for 10 years.                                   111,274         31,053

Unsecured $125,000 term loan with a group of
commercial banks with a variable interest rate of
LIBOR plus 1.75%, monthly interest only payments
and a maturity date of June 10, 2002. This loan
was paid off in the second quarter of 2001 (see
below).                                                        --        125,000

                                                         --------       --------
Total                                                    $638,161       $606,677
                                                         ========       ========
</TABLE>

In the second quarter of 2001, through the acquisition of Canyons I (see Note
3), the Company assumed a $19.1 million loan. The loan has a maturity date of
March 31, 2002 and bears interest at the floating rate of LIBOR plus 2.25%. The
interest rate on this loan at June 30, 2001 was 6.11%.

In the second quarter of 2001, through the acquisition of Santa Fe Ranch (see
Note 3), the Company assumed a $21.4 million loan. The loan has a maturity date
of March 31, 2002 and bears interest at the floating rate of LIBOR plus 2%. The
interest rate on this loan at June 30, 2001 was 5.86%.

In the second quarter of 2001, through the acquisition of Gateway 19 (see Note
3), the Company assumed a $4.7 million loan. The loan has a maturity date of
December 1, 2001 and bears interest at the floating rate of LIBOR plus 1.55%.
The interest rate on this loan at June 30, 2001 was 5.41%.



                        15
<PAGE>   16

                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 2001

In the second quarter of 2001, through the acquisition of Rockwall I and II (see
Note 3), the Company assumed a $37 million loan. The loan has a maturity date of
June 30, 2004 and bears interest at the floating rate of LIBOR plus 2.5%. The
interest rate on this loan at June 30, 2001 was 6.36%.

In the first and second quarters of 2001, the Company paid off its unsecured
term loan with the proceeds from the sale of its multifamily portfolio on
December 29, 2000 and a draw on the Credit Facility, as discussed below.

In the first quarter of 2001, the Company obtained a $14 million construction
loan to build a 96,000 square foot office property in Bridgewater, New Jersey.
Approximately $5.1 million was outstanding at June 30, 2001. The loan has a
maturity date of January 5, 2003 and bears interest at the floating rate of
LIBOR plus 2.35%. The interest rate on this loan at June 30, 2001 was 6.21%.

Outstanding borrowings under the Credit Facility increased from $31,053,000 at
December 31, 2000, to $111,274,000 at June 30, 2001. The increase was due to
draws of $161,117,000 for the pay off of the unsecured term loan and
acquisitions, offset by pay downs of $80,896,000 generated from proceeds from
the sales of properties and cash from operations. In May 2001, the maturity date
on the Credit Facility was extended from June 2002 to June 2003. In addition,
the amount of the Credit Facility was increased to $180 million from $142
million, with the additional proceeds applied to pay off the unsecured term
loan, as discussed above. The Credit Facility requires, among other things, the
Company to be in compliance with certain financial covenants and ratios. The
Company is in compliance at June 30, 2001.

Some of the Company's properties are held in limited partnerships and limited
liability companies in order to facilitate financing. Such limited partnerships
and limited liability companies are included in the consolidated financial
statements of the Company in accordance with accounting principles generally
accepted in the United States.

The required principal payments on the Company's debt for the next five years
and thereafter, as of June 30, 2001, are as follows (in thousands). Included in
the year ending December 31, 2003, is the Credit Facility balance of
$111,274,000 which has an initial maturity of June 10, 2003.

<TABLE>
<CAPTION>
                           Year Ending
                           December 31,
                           -----------
                           <S>                  <C>
                              2001              $ 49,929
                              2002                70,400
                              2003               215,634
                              2004                 8,708
                              2005                27,670
                              Thereafter         265,820
                                                 -------
                              Total             $638,161
                                                 =======
</TABLE>

NOTE 9. NET LOSS ON EARLY EXTINGUISHMENT OF DEBT

In connection with the pay off of the unsecured term loan, as discussed above,
the Company recorded a net loss on early extinguishment of debt of $1,025,000
for the six months ended June 30, 2001. This loss consists of losses due to the
writeoff of unamortized original issuance costs.

In connection with the retirement of the Company's unsecured Series A Senior
Notes, the Company recorded a net loss on early extinguishment of debt of
$550,000 for the six months ended June 30, 2000. This loss consists of $931,000
of discounts on retirement offset by $1,481,000 of losses due to the writeoff of
unamortized original issuance costs.



                                       16
<PAGE>   17

                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 2001

NOTE 10. RELATED PARTY TRANSACTIONS

Fee and reimbursement income earned by the Company from related parties totaled
$3,516,000 and $2,362,000 for the six months ended June 30, 2001 and 2000,
respectively, and consisted of property management fees, asset management fees
and other fee income. In addition, the Company paid GC property management fees
and salary reimbursements totaling $505,000 for the six months ended June 30,
2000, for management of a portfolio of residential properties owned by the
Company, which is included in property operating expenses and general and
administrative expenses on the accompanying consolidated statements of income.
As discussed in Note 1, effective October 24, 2000, GC merged with the Company.

NOTE 11. EARNINGS PER SHARE

Earnings per share are as follows (in thousands, except for weighted average
shares and per share amounts):

<TABLE>
<CAPTION>
                                                       Three months ended                 Six months ended
                                                            June 30,                          June 30,
                                                  ----------------------------      ----------------------------
                                                      2001             2000             2001             2000
                                                  -----------      -----------      -----------      -----------
<S>                                               <C>              <C>              <C>              <C>
Net income available to common
    Stockholders - Basic                          $     5,614      $     2,889      $    10,759      $     5,452
Minority interest                                         631              350            1,218              656
                                                  -----------      -----------      -----------      -----------
Net income available to common
    Stockholders - Diluted                        $     6,245      $     3,239      $    11,977      $     6,108
                                                  -----------      -----------      -----------      -----------

Weighted average shares:
Basic                                              26,989,534       29,330,163       26,990,921       29,842,924
Stock options                                         405,055          226,745          408,058          178,346
Convertible Operating Partnership Units             3,072,733        3,554,585        3,072,864        3,581,155
                                                  -----------      -----------      -----------      -----------
Diluted                                            30,467,322       33,111,493       30,471,843       33,602,425
                                                  -----------      -----------      -----------      -----------

Basic earnings per share                          $      0.21      $      0.10      $      0.40      $      0.18
Diluted earnings per share                        $      0.20      $      0.10      $      0.39      $      0.18
</TABLE>

The preferred stock has been excluded from the calculation of diluted earnings
per share as it is anti-dilutive in all periods presented.

NOTE 12. SEGMENT INFORMATION

During the six months ended June 30, 2001, the Company owned a portfolio of
properties comprising four product types: office, industrial, retail and
multifamily. During the six months ended June 30, 2000, the Company's portfolio
was comprised of five product types: office, industrial, retail, multifamily and
hotels. Each of these product types represents a reportable segment with
distinct uses and tenant types which require the Company to employ different
management strategies. Each segment contains properties located in various
regions and markets within the United States. The office portfolio consists
primarily of suburban office buildings. The industrial portfolio consists of
properties designed for warehouse, distribution and light manufacturing for
single-tenant or multi-tenant use. The retail portfolio consists primarily of
community shopping centers anchored with national or regional supermarkets or
drug stores. The properties in the multifamily portfolio are apartment buildings
with units rented to residential tenants on either a month-by-month basis or for
terms of one year or less. The Company's hotel operations during the six months
ended June 30, 2000, were from one 227 room property leased to and operated by a
third party. In December 2000, 36 of the Company's 37 multifamily properties and
the one remaining hotel property were sold.



                                       17
<PAGE>   18

                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 2001

The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. The Company evaluates performance of
its property types based on net operating income derived by subtracting rental
expenses and real estate taxes (operating expenses) from rental revenues.
Significant information used by the Company for its reportable segments as of
and for the six months ended June 30, 2001 and 2000 is as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                             Multi-
2001                               Office      Industrial      Retail        family         Hotel         Total
----                              --------      --------      --------      --------      --------      --------
<S>                               <C>           <C>           <C>           <C>           <C>           <C>
Rental revenue                    $ 66,482      $ 19,791      $  2,072      $  3,269      $     --      $ 91,614
Property operating expenses         24,063         4,827           429         1,092            --        30,411
                                  --------      --------      --------      --------      --------      --------
Net operating income (NOI)        $ 42,419      $ 14,964      $  1,643      $  2,177      $     --      $ 61,203
                                  ========      ========      ========      ========      ========      ========

                                                                             Multi-
2000                               Office      Industrial      Retail        family         Hotel         Total
----                              --------      --------      --------      --------      --------      --------
<S>                               <C>           <C>           <C>           <C>           <C>           <C>
Rental revenue                    $ 64,199      $ 19,890      $  5,203      $ 34,136      $    550      $123,978
Property operating expenses         23,714         5,060         1,677        15,083           115        45,649
                                  --------      --------      --------      --------      --------      --------
Net operating income (NOI)        $ 40,485      $ 14,830      $  3,526      $ 19,053      $    435      $ 78,329
                                  ========      ========      ========      ========      ========      ========
</TABLE>

The following is a reconciliation of segment revenues and income to consolidated
revenues and income for the periods presented above (in thousands):

<TABLE>
<CAPTION>
                                                                                          2001            2000
                                                                                       ---------       ---------
<S>                                                                                    <C>             <C>
REVENUES
Total revenue for reportable segments                                                  $  91,614       $ 123,978
Other revenue(1)                                                                           6,194           4,414
                                                                                       ---------       ---------
Total consolidated revenues                                                            $  97,808       $ 128,392
                                                                                       =========       =========

NET INCOME
NOI for reportable segments                                                            $  61,203       $  78,329
Elimination of internal property management fees                                           2,615           3,802

Unallocated amounts:
  Other revenue(1)                                                                         6,194           4,414
  General and administrative expenses                                                     (6,051)         (6,373)
  Depreciation and amortization                                                          (22,814)        (30,213)
  Interest expense                                                                       (18,363)        (32,370)
                                                                                       ---------       ---------
Income from operations before minority interest and extraordinary items                $  22,784       $  17,589
                                                                                       =========       =========

</TABLE>

(1)   Other revenue includes fee income, interest and other income, equity in
      earnings (losses) of unconsolidated operating joint ventures and net gain
      (loss) on sales of real estate assets.

NOTE 13. SUBSEQUENT EVENT

Dispositions

Subsequent to June 30, 2001, the Company sold a 138,157 square foot industrial
property located in Kent, Washington, for a sale price of $7.6 million. This
resulted in a gain on sale of approximately $1.7 million to be recognized in the
third quarter of 2001.



                                       18
<PAGE>   19

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

BACKGROUND

Glenborough Realty Trust Incorporated (the "Company") is a self-administered and
self-managed real estate investment trust ("REIT") engaged primarily in the
ownership, operation, management, leasing, acquisition, expansion and
development of various types of income-producing properties. As of June 30,
2001, the Company owned and operated 85 income-producing properties (the
"Properties," and each a "Property"), including 2 joint ventures.

The Company was incorporated in the State of Maryland on August 26, 1994 and
commenced operations on January 1, 1996. The Company has elected to qualify as a
REIT under the Internal Revenue Code of 1986, as amended. The common and
preferred stock of the Company (the "Common Stock" and the "Preferred Stock",
respectively) are listed on the New York Stock Exchange ("NYSE") under the
trading symbols "GLB" and "GLB Pr A", respectively.

The Company's principal business objective is to achieve a stable and increasing
source of cash flow available for distribution to stockholders. By achieving
this objective, the Company will seek to raise the value of its shares over
time.

RESULTS OF OPERATIONS

COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2001 TO THE SIX MONTHS ENDED JUNE
30, 2000.

Rental Revenue. Rental revenue decreased $32,364,000, or 26%, to $91,614,000 for
the six months ended June 30, 2001 from $123,978,000 for the six months ended
June 30, 2000. The decrease consisted of declines in revenue from the
industrial, retail, multifamily and hotel Properties of $99,000, $3,131,000,
$30,867,000 and $550,000, respectively. These decreases were primarily due to
the sales of eight industrial, seven retail, thirty-six multifamily and one
hotel Property since June 30, 2000. These decreases were slightly offset by an
increase in revenue from the office Properties of $2,283,000, which is primarily
due to acquisitions and increases in occupancy and rental rates.

Fees and Reimbursements from Affiliates. Fees and reimbursements from affiliates
consist primarily of property management fees, asset management fees and lease
commissions paid to the Company under property and asset management agreements
with the unconsolidated operating joint ventures and the Rancon Partnerships.
This revenue increased $1,154,000, or 49%, to $3,516,000 for the six months
ended June 30, 2001, from $2,362,000 for the six months ended June 30, 2000,
primarily due to property management and asset management fees received from the
Rancon Partnerships and development, acquisition and financing fees relating to
three development projects. Certain of these fees were previously earned by GC,
prior to its merger with the Company, and were recognized as equity in earnings
of Associated Company. This increase is offset by transaction fees received from
an affiliate in the second quarter of 2000.

Interest and Other Income. Interest and other income decreased $1,892,000, or
41%, to $2,751,000 for the six months ended June 30, 2001, from $4,643,000 for
the six months ended June 30, 2000. The decrease was primarily due to interest
income earned on two development projects sold by a development alliance in the
second quarter of 2000, offset by interest income earned on a development
project, which was sold by a development alliance, in the first quarter of 2001.

Equity in Earnings of Associated Company. Equity in earnings of Associated
Company decreased $622,000, or 100%, to $0 for the six months ended June 30,
2001, from $622,000 for the six months ended June 30, 2000. The decrease is due
to the merger of GC into the Company in the fourth quarter of 2000.

Equity in Earnings (Losses) of Unconsolidated Operating Joint Ventures. Equity
in earnings (losses) of unconsolidated operating joint ventures increased
$222,000, or 130%, to $51,000 for the six months ended June 30, 2001, from a
loss of $171,000 for the six months ended June 30, 2000. This increase is due to
an increase in net operating income at one joint venture, which began operations
in October of 2000.

Net Loss on Sales of Real Estate Assets. The net loss on sales of real estate
assets of $124,000 during the six months ended June 30, 2001, primarily resulted
from the sale of one office Property, one industrial Property and four retail
Properties from the Company's portfolio in 2001. The net loss on sales of real
estate assets of $3,042,000 during the six months ended June 30,



                                       19
<PAGE>   20


2000, resulted from the sales of six office Properties, four industrial
Properties and three retail Properties from the Company's portfolio in 2000.

Property Operating Expenses. Property operating expenses decreased $14,051,000,
or 34%, to $27,796,000 for the six months ended June 30, 2001, from $41,847,000
for the six months ended June 30, 2000. This decrease corresponds to the 26%
decrease in rental revenues resulting from the sale of properties.

General and Administrative Expenses. General and administrative expenses
decreased $322,000, or 5%, to $6,051,000 for the six months ended June 30, 2001,
from $6,373,000 for the six months ended June 30, 2000. This decrease is
primarily due to a reduction in staff and overhead expenses resulting from the
sale of 36 multifamily Properties in December 2000, offset by an increase in
general and administrative costs as a result of the merger of the Company and GC
in October 2000.

Depreciation and Amortization. Depreciation and amortization decreased
$7,399,000, or 24%, to $22,814,000 for the six months ended June 30, 2001, from
$30,213,000 for the six months ended June 30, 2000. This decrease is primarily
due to the sales of eight industrial, seven retail, thirty-six multifamily and
one hotel Property since June 30, 2000.

Interest Expense. Interest expense decreased $14,007,000, or 43%, to $18,363,000
for the six months ended June 30, 2001, from $32,370,000 for the six months
ended June 30, 2000. This decrease is primarily due to payoffs of loans in
connection with property sales, retirement of the Senior Notes and decreases in
variable interest rates.

Net Loss on Early Extinguishment of Debt. Net loss on early extinguishment of
debt of $1,025,000 during the six months ended June 30, 2001, consists of losses
due to the writeoff of unamortized original issuance costs in connection with
the pay off of the unsecured term loan as discussed below. Net loss on early
extinguishment of debt of $550,000 during the six months ended June 30, 2000,
consists of $931,000 of gains on retirement of Series A Senior Notes at a
discount, offset by the related write-off of unamortized loan fees in the amount
of $1,481,000.

COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2001 TO THE THREE MONTHS ENDED
JUNE 30, 2000.

Rental Revenue. Rental revenue decreased $13,107,000, or 22%, to $47,710,000 for
the three months ended June 30, 2001 from $60,817,000 for the three months ended
June 30, 2000. The decrease consisted of declines in revenue from the
industrial, retail, multifamily and hotel Properties of $13,000, $1,796,000,
$14,980,000 and $175,000, respectively. These decreases were primarily due to
the sales of eight industrial, seven retail, thirty-six multifamily and one
hotel Property since June 30, 2000. These decreases were slightly offset by an
increase in revenue from the office Properties of $3,857,000, which is primarily
due to acquisitions and increases in occupancy and rental rates.

Fees and Reimbursements from Affiliates. Fees and reimbursements from affiliates
consist primarily of property management fees, asset management fees and lease
commissions paid to the Company under property and asset management agreements
with the unconsolidated operating joint ventures and the Rancon Partnerships.
This revenue decreased $688,000, or 36%, to $1,206,000 for the three months
ended June 30, 2001, from $1,894,000 for the three months ended June 30, 2000,
primarily due to one-time transaction fees received from an affiliate in the
second quarter of 2000. This decrease is offset by property management and asset
management fees received from the Rancon Partnerships in the second quarter of
2001 and development fees earned in the second quarter of 2001 relating to one
development project. Certain of these fees were previously earned by GC, prior
to its merger with the Company, and were recognized as equity in earnings of
Associated Company.

Interest and Other Income. Interest and other income decreased $2,628,000, or
77%, to $799,000 for the three months ended June 30, 2001, from $3,427,000 for
the three months ended June 30, 2000. The decrease was primarily due to interest
income earned on two development projects sold by a development alliance in the
second quarter of 2000.

Equity in Earnings of Associated Company. Equity in earnings of Associated
Company decreased $576,000, or 100%, to $0 for the three months ended June 30,
2001, from $576,000 for the three months ended June 30, 2000. The decrease is
due to the merger of GC into the Company in the fourth quarter of 2000.

Equity in Losses of Unconsolidated Operating Joint Ventures. Equity in losses of
unconsolidated operating joint ventures decreased $139,000, or 99%, to $1,000
for the three months ended June 30, 2001, from a loss of $140,000 for the three
months



                                       20
<PAGE>   21

ended June 30, 2000. This decrease is due to an increase in net operating income
at one joint venture, which began operations in October of 2000.

Net Loss on Sales of Real Estate Assets. The net loss on sales of real estate
assets of $182,000 during the three months ended June 30, 2001, primarily
resulted from the sale of one office, one industrial and two retail Properties
from the Company's portfolio in 2001. The net loss on sales of real estate
assets of $2,347,000 during the three months ended June 30, 2000, primarily
resulted from the sales of five office, three industrial and three retail
Properties from the Company's portfolio in 2000.

Property Operating Expenses. Property operating expenses decreased $6,587,000,
or 32%, to $13,703,000 for the three months ended June 30, 2001, from
$20,290,000 for the three months ended June 30, 2000. This decrease corresponds
to the 22% decrease in rental revenues resulting from the sale of properties.

General and Administrative Expenses. General and administrative expenses
decreased $1,096,000, or 27%, to $2,968,000 for the three months ended June 30,
2001, from $4,064,000 for the three months ended June 30, 2000. This decrease is
primarily due to a reduction in staff and overhead expenses resulting from the
sale of 36 multifamily Properties in December 2000, offset by an increase in
general and administrative costs as a result of the merger of the Company and GC
in October 2000. The decrease is also due to the timing of incentive
compensation costs which were recognized in the second quarter of 2000 as
compared to the first and second quarters of 2001.

Depreciation and Amortization. Depreciation and amortization decreased
$3,108,000, or 21%, to $11,976,000 for the three months ended June 30, 2001,
from $15,084,000 for the three months ended June 30, 2000. This decrease is
primarily due to the sales of eight industrial, seven retail, thirty-six
multifamily and one hotel Property since June 30, 2000.

Interest Expense. Interest expense decreased $6,536,000, or 41%, to $9,487,000
for the three months ended June 30, 2001, from $16,023,000 for the three months
ended June 30, 2000. This decrease is primarily due to payoffs of loans in
connection with property sales, retirement of the Senior Notes and decreases in
variable interest rates.

Net Loss on Early Extinguishment of Debt. Net loss on early extinguishment of
debt of $262,000 during the three months ended June 30, 2001, consists of losses
due to the writeoff of unamortized original issuance costs in connection with
the pay off of the unsecured term loan as discussed below. Net loss on early
extinguishment of debt of $84,000 during the three months ended June 30, 2000,
consists of the writeoff of unamortized loan fees upon the retirement of Series
A Senior Notes.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

For the six months ended June 30, 2001, cash provided by operating activities
decreased by $11,587,000 to $33,908,000 as compared to $45,495,000 for the same
period in 2000. The decrease is due primarily to the sales of eight industrial,
seven retail, thirty-six multifamily and one hotel Property since June 30, 2000.
Cash used for investing activities was $50,935,000 for the six months ended June
30, 2001, as compared to $80,665,000 provided by investing activities for the
same period in 2000. The change is primarily due to an increase in cash used for
real estate acquisitions and investments in land and development and a decrease
in net proceeds from sales of real estate assets in the first six months of 2001
as compared to the same period in 2000. During the six months ended June 30,
2001, the Company sold six Properties as compared to 13 Properties during the
six months ended June 30, 2000. Cash used for financing activities decreased by
$48,485,000 to $81,133,000 for the six months ended June 30, 2001, as compared
to $129,618,000 for the same period in 2000. This change was primarily due to a
decrease in cash used for the retirement of the Series A Senior Notes and the
repurchase of Common and Preferred Stock, offset by an increase in cash used for
the repayment of debt.

The Company expects to meet its short-term liquidity requirements generally
through its working capital, its Credit Facility (as defined below) and cash
generated by operations. The Company believes that its cash generated by
operations will be adequate to meet operating requirements and to make
distributions in accordance with REIT requirements in both the short and the
long-term. In addition to cash generated by operations, the Credit Facility
provides for working capital advances. However, there can be no assurance that
the Company's results of operations will not fluctuate in the future and at
times affect (i) its ability to meet its operating requirements and (ii) the
amount of its distributions.



                                       21
<PAGE>   22


The Company's principal sources of funding for acquisitions, development,
expansion and renovation of properties and stock repurchases include the
unsecured Credit Facility, permanent secured debt financing, public and private
equity and debt issuances, the issuance of partnership units in the Operating
Partnership, proceeds from property sales and cash flow provided by operations.

Investments in Land and Development

The Company is independently developing approximately 416,000 square feet of
commercial property in California, Colorado and New Jersey. As of June 30, 2001,
the Company had invested approximately $31.1 million in these projects.
Additionally, the Company has approximately 755,000 of proposed square feet,
with a book value of approximately $10.4 million, available for future
development as of June 30, 2001. The loans secured by certain development
properties contain recourse provisions to the Company in the event of default.

The Company is currently involved in a number of alliances for the development
of approximately 654,000 square feet of commercial properties in California and
Colorado. The alliances grant the Company certain rights to purchase the
properties upon completion of development over the next five years. As of June
30, 2001, the Company had invested approximately $8.7 million in these alliances
and had acquired properties from them aggregating approximately $114.2 million.
As of June 30, 2001, the Company has provided guarantees on $24.3 million of
related debt.

Additionally, in 2000, the Company formed a new joint venture with the Pauls
Corporation ("Pauls"), Glenborough Pauls Development LLC ("Development LLC").
The Company and Pauls each own an equal 50% interest in Development LLC. The
Company accounts for its investment in Development LLC using the equity method.
In the fourth quarter of 2000, Development LLC acquired two sites aggregating
33.5 acres in the San Francisco Bay Area for mixed use development. As of June
30, 2001, the Company had advanced approximately $21.4 million to Development
LLC and had provided guarantees on $21.6 million of related debt.

Investments in Operating Joint Ventures

Investments in operating joint ventures decreased from $9,119,000 at December
31, 2000, to $7,912,000 at June 30, 2001. This decrease was due to the Company's
acquisition of one of the joint venture Properties, slightly offset by the
Company's 2001 equity interest in the joint ventures' earnings.

Mortgage Loan Receivable

Mortgage loan receivable increased from $37,250,000 at December 31, 2000, to
$38,716,000 at June 30, 2001. This increase was due to accrued interest on a
loan made by the Company under a development alliance.

Secured and Unsecured Financing

Mortgage loans payable increased from $450,624,000 at December 31, 2000, to
$526,887,000 at June 30, 2001. This increase resulted from $82,203,000 of new
mortgage loans in connection with acquisitions (see below), $22,000,000 of new
mortgage loans due to new financing, $1,429,000 of draws on existing
construction loans and $5,147,000 of draws on a new construction loan (discussed
below) offset by decreases of $4,248,000 due to property sales, $15,120,000 due
to new refinancing, $13,254,000 due to debt maturities and $3,520,000 due to
scheduled principal payments on other debt.

In the second quarter of 2001, through the acquisition of a multifamily property
from a development alliance, the Company assumed a $19.1 million loan. The loan
has a maturity date of March 31, 2002 and bears interest at the floating rate of
LIBOR plus 2.25%. The interest rate on this loan at June 30, 2001 was 6.11%.

In the second quarter of 2001, through the acquisition of a multifamily property
from a development alliance, the Company assumed a $21.4 million loan. The loan
has a maturity date of March 31, 2002 and bears interest at the floating rate of
LIBOR plus 2%. The interest rate on this loan at June 30, 2001 was 5.86%.

In the second quarter of 2001, through the acquisition of an industrial property
from a development alliance, the Company assumed a $4.7 million loan. The loan
has a maturity date of December 1, 2001 and bears interest at the floating rate
of LIBOR plus 1.55%. The interest rate on this loan at June 30, 2001 was 5.41%.



                                       22
<PAGE>   23

In the second quarter of 2001, through the acquisition of a two-building office
property from a joint venture partner, the Company assumed a $37 million loan.
The loan has a maturity date of June 30, 2004 and bears interest at the floating
rate of LIBOR plus 2.5%. The interest rate on this loan at June 30, 2001 was
6.36%.

In the first and second quarters of 2001, the Company paid off its unsecured
term loan with the proceeds from the sale of its multifamily portfolio on
December 29, 2000 and a draw on the Credit Facility, as discussed below.

In the first quarter of 2001, the Company obtained a $14 million construction
loan to build a 96,000 square foot office property in Bridgewater, New Jersey.
Approximately $5.1 million was outstanding at June 30, 2001. The loan has a
maturity date of January 5, 2003 and bears interest at the floating rate of
LIBOR plus 2.35%. The interest rate on this loan at June 30, 2001 was 6.21%.

The Company has an unsecured line of credit provided by a group of commercial
banks (the "Credit Facility"). Outstanding borrowings under the Credit Facility
increased from $31,053,000 at December 31, 2000, to $111,274,000 at June 30,
2001. The increase was due to draws of $161,117,000 for the pay off of the
unsecured term loan and acquisitions, offset by pay downs of $80,896,000
generated from proceeds from the sales of properties and cash from operations.
In May 2001, the maturity date on the Credit Facility was extended from June
2002 to June 2003. In addition, the amount of the Credit Facility was increased
to $180 million from $142 million, with the additional proceeds applied to pay
off the unsecured term loan, as discussed above. The Credit Facility bears
interest at a floating rate of LIBOR plus 1.75%. The interest rate on the Credit
Facility at June 30, 2001, was 5.48%. The Credit Facility requires, among other
things, the Company to be in compliance with certain financial covenants and
ratios. The Company is in compliance at June 30, 2001.

Some of the Company's properties are held in limited partnerships and limited
liability companies in order to facilitate financing. Such limited partnerships
and limited liability companies are included in the consolidated financial
statements of the Company in accordance with accounting principles generally
accepted in the United States.

At June 30, 2001, the Company's total indebtedness included fixed-rate debt of
$353,051,000 and floating-rate indebtedness of $285,110,000. Approximately 61%
of the Company's total assets, comprising 46 properties, are encumbered by debt
at June 30, 2001.

It is the Company's policy to manage its exposure to fluctuations in market
interest rates through the use of fixed rate debt instruments to the extent
possible. At June 30, 2001, approximately 45% of the Company's outstanding debt,
including amounts borrowed under the Credit Facility, were subject to variable
rates. The Company may, from time to time, enter into interest rate protection
agreements intended to hedge the cost of new borrowings that are reasonably
assured of completion. It is not the Company's policy to engage in hedging
activities for previously outstanding debt instruments or for speculative
purposes. At June 30, 2001, the Company was not a party to any open interest
rate protection agreements.

Equity and Debt Offerings

In January 1999, the Company filed a shelf registration statement with the SEC
(the "January 1999 Shelf Registration Statement") to carry forward the remaining
$801.2 million in equity securities of the Company from a November 1997 shelf
registration statement (declared effective by the SEC on December 18, 1997). The
January 1999 Shelf Registration Statement was declared effective by the SEC on
January 25, 1999. Therefore, the Company has the capacity pursuant to the
January 1999 Shelf Registration Statement to issue up to $801.2 million in
equity securities. The Company currently has no plans to issue equity under this
shelf registration.

Stock Repurchases

In 1999, the Company's Board of Directors authorized the Company to repurchase
up to 6.2 million shares of its outstanding Common Stock. This represented
approximately 20% of the Company's total outstanding Common Stock. In connection
with the sale of 36 multifamily Properties in December 2000, the repurchase
authorization was increased to approximately 8.2 million shares, representing
approximately 26% of Common Stock outstanding when the repurchase program began.
As of June 30, 2001, 6,086,816 common shares have been repurchased for a total
cost of approximately $101,195,000; this represents approximately 76% of the
expanded repurchase authorization and approximately 20% of Common Stock
outstanding when the repurchase program began. In addition, during 1999, the
Company announced that its Board of Directors had approved the repurchase of up
to 15% of its Preferred Stock, or 1,725,000 shares. In May 2000, the Preferred
Stock repurchase authorization was increased to 3,450,000 shares, representing
approximately 30% of Preferred Stock outstanding



                                       23
<PAGE>   24

when the repurchase program began. As of June 30, 2001, 1,402,200 preferred
shares have been repurchased for a total cost of approximately $21,037,000; this
represents approximately 41% of the expanded repurchase authorization and
approximately 12% of Preferred Stock outstanding when the repurchase program
began. Future stock repurchases will be made from time to time in the open
market or otherwise and the timing will depend on market conditions and other
factors.

INFLATION

Substantially all of the leases at the industrial and retail Properties provide
for pass-through to tenants of certain operating costs, including real estate
taxes, common area maintenance expenses, and insurance. Leases at the
multifamily Properties generally provide for an initial term of one month or one
year and allow for rent adjustments at the time of renewal. Leases at the office
Properties typically provide for rent adjustment and pass-through of certain
operating expenses during the term of the lease. All of these provisions may
permit the Company to increase rental rates or other charges to tenants in
response to rising prices and therefore, serve to reduce the Company's exposure
to the adverse effects of inflation.

FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION

In October 1999, the Board of Governors of NAREIT issued `White Paper on
FFO-October 1999' to clarify its definition of Funds from Operations ("FFO").
The clarification is effective January 1, 2000 and requires restatement for all
periods presented in financial statements or tables. FFO, as clarified by
NAREIT, represents "net income excluding gains (or losses) from sales of
property, plus depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. Adjustments for unconsolidated
partnerships and joint ventures will be calculated to reflect FFO on the same
basis." The Company believes that FFO is helpful to investors as a measure of
performance of an equity REIT because, along with cash flow from operating
activities, FFO provides investors with an indication of our ability to incur
and service debt, to make capital expenditures and to fund other cash needs. The
Company computes FFO in accordance with the clarified definition except that we
eliminate straight-line rent from the calculation, which may not be comparable
to FFO reported by other REITs that interpret the clarified definition
differently than we do. FFO does not represent net income or cash flows from
operations as defined by GAAP, and should not be considered as an alternative to
net income (determined in accordance with GAAP) as an indicator of the Company's
operating performance or as an alternative to cash flows from operating,
investing and financing activities (determined in accordance with GAAP) as a
measure of liquidity. FFO does not necessarily indicate that cash flows will be
sufficient to fund all of the Company's cash needs including principal
amortization, capital improvements and distributions to stockholders. Further,
FFO as disclosed by other REITs may not be comparable to the Company's
calculation of FFO.

Cash available for distribution ("CAD") represents net income (loss) before
minority interests and extraordinary items, adjusted for depreciation and
amortization including amortization of deferred financing costs and gains
(losses) from the disposal of properties, less lease commissions and recurring
capital expenditures, consisting of tenant improvements and normal expenditures
intended to extend the useful life of the property such as roof and parking lot
repairs. CAD should not be considered an alternative to net income (computed in
accordance with GAAP) as a measure of the Company's financial performance or as
an alternative to cash flow from operating activities (computed in accordance
with GAAP) as a measure of the Company's liquidity, nor is it necessarily
indicative of sufficient cash flow to fund all of the Company's cash needs.
Further, CAD as disclosed by other REITs may not be comparable to the Company's
calculation of CAD.

The following table sets forth the Company's calculation of FFO and CAD for the
three and six months ended June 30, 2001 (in thousands, except weighted average
shares and per share amounts):



                                       24
<PAGE>   25

<TABLE>
<CAPTION>
                                                                March 31,          June 30,             YTD
                                                                  2001               2001               2001
                                                              ------------       ------------       ------------
<S>                                                           <C>                <C>                <C>
Income from operations before minority interest,
  extraordinary items and preferred dividends                 $     11,386       $     11,398       $     22,784
Preferred dividends                                                 (4,891)            (4,891)            (9,782)
Net (gain) loss on sales of real estate assets                         (58)               182                124
Depreciation and amortization(1)                                    10,579             11,617             22,196
Adjustment for straight-line rents                                      --               (793)              (793)
Adjustment to reflect FFO of Unconsolidated JV's(2)                    247                158                405
                                                              ------------       ------------       ------------
FFO                                                           $     17,263       $     17,671       $     34,934
                                                              ============       ============       ============

Amortization of deferred financing fees                                387                347                734
Capital expenditures                                                (2,966)            (2,924)            (5,890)
                                                              ------------       ------------       ------------
CAD                                                           $     14,684       $     15,094       $     29,778
                                                              ============       ============       ============

Distributions per share(3)                                    $       0.42       $       0.42       $       0.84
                                                              ============       ============       ============

Diluted weighted average shares outstanding                     30,476,401         30,467,322         30,471,843
                                                              ============       ============       ============

</TABLE>

(1)   Excludes non-real estate depreciation and amortization.

(2)   Reflects the adjustments to FFO required to reflect the FFO of the
      unconsolidated joint ventures allocable to the Company. The Company's
      investments in the joint ventures are accounted for using the equity
      method of accounting.

(3)   The distributions for the three months ended June 30, 2001, were paid on
      July 16, 2001.


The following table sets forth the Company's calculation of FFO and CAD for the
three and six months ended June 30, 2000 (in thousands, except weighted average
shares and per share amounts):

<TABLE>
<CAPTION>
                                                                March 31,         June 30,              YTD
                                                                  2000              2000                2000
                                                              ------------       ------------       ------------
<S>                                                           <C>                <C>                <C>
Income from operations before minority interest,
  extraordinary items and preferred dividends                 $      8,823       $      8,766       $     17,589
Preferred dividends                                                 (5,488)            (5,443)           (10,931)
Net loss on sales of real estate assets                                695              2,347              3,042
Depreciation and amortization(1)                                    14,915             14,871             29,786
Adjustment to reflect FFO of Unconsolidated JV's(2)                    190                264                454
Adjustment to reflect FFO of Associated Company(3)                     164                 22                186
                                                              ------------       ------------       ------------
FFO(4)                                                        $     19,299       $     20,827       $     40,126
                                                              ============       ============       ============

Amortization of deferred financing fees                                639                610              1,249
Capital reserve                                                         --                 --                 --
Capital expenditures                                                (4,989)            (6,319)           (11,308)
                                                              ------------       ------------       ------------
CAD                                                           $     14,949       $     15,118       $     30,067
                                                              ============       ============       ============

Distributions per share                                       $       0.42       $       0.42       $       0.84
                                                              ============       ============       ============

Diluted weighted average shares outstanding                     34,096,464         33,111,493         33,602,425
                                                              ============       ============       ============
</TABLE>

(1)   Excludes non-real estate depreciation and amortization.

(2)   Reflects the adjustments to FFO required to reflect the FFO of the
      unconsolidated joint ventures allocable to the Company. The Company's
      investments in the joint ventures are accounted for using the equity
      method of accounting.

(3)   Reflects the adjustments to FFO required to reflect the FFO of the
      Associated Company allocable to the Company. The Company's investment in
      the Associated Company is accounted for using the equity method of
      accounting.

(4)   In accordance with NAREIT's `White Paper on FFO-October 1999' as discussed
      above, FFO includes a $406 gain from the sale of an incidental parcel of
      land by the Associated Company in June 2000.


                                       25
<PAGE>   26

FORWARD LOOKING STATEMENTS; FACTORS THAT MAY AFFECT OPERATING RESULTS

This Report on Form 10-Q contains forward looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
and Exchange Act of 1934, including statements regarding the Company's
expectations, hopes, intentions, beliefs and strategies regarding the future
including the Company's belief that cash generated by operations will be
adequate to meet operating requirements and to make distributions, the Company's
expectations as to the timing of the completion of the development projects
through its development alliances and the acquisition by the Company of
properties developed through its development alliances. There can be no
assurance that the actual outcomes or results will be consistent with such
expectations, hopes, intentions, beliefs and strategies. Forward looking
statements include statements regarding potential acquisitions, the anticipated
performance of future acquisitions, recently completed acquisitions and existing
properties, and statements regarding the Company's financing activities. All
forward looking statements included in this document are based on information
available to the Company on the date hereof. It is important to note that the
Company's actual results could differ materially from those stated or implied in
such forward-looking statements.

Factors which may cause the Company's results to differ include the inability to
complete anticipated future acquisitions, defaults or non-renewal of leases,
increased interest rates and operational costs, failure to obtain necessary
outside financing, difficulties in identifying properties to acquire and in
effecting acquisitions, failure to qualify as a real estate investment trust
under the Internal Revenue Code of 1986, environmental uncertainties, risks
related to natural disasters, financial market fluctuations, changes in real
estate and zoning laws, increases in real property tax rates and other factors
discussed under the caption "Forward Looking Statements; Factors That May Affect
Operating Results" in the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section of the Company's Annual Report on
Form 10-K for the year ended December 31, 2000, and other risk factors set forth
in the Company's other Securities and Exchange Commission filings. In addition,
past performance of the Company's Common Stock is not necessarily indicative of
results that will be obtained in the future from an investment in the Company's
Common Stock. Furthermore, the Company makes distributions to stockholders if,
as and when declared by its Board of Directors, and expects to continue its
policy of paying quarterly distributions, however, there can be no assurance
that distributions will continue or be paid at any specific level.

RISK FACTORS

Stockholders or potential stockholders should read the "Risk Factors" section of
the Company's latest annual report on Form 10-K filed with the Securities and
Exchange Commission ("SEC") in conjunction with this quarterly report on Form
10-Q to better understand the factors affecting the Company's results of
operations and the Company's common stock share price. The fact that some of the
risk factors may be the same or similar to the Company's past filings means only
that the risks are present in multiple periods. The Company believes that many
of the risks detailed here and in the Company's other SEC filings are part of
doing business in the real estate industry and will likely be present in all
periods reported. The fact that certain risks are endemic to the industry does
not lessen the significance of the risk.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Certain claims and lawsuits have arisen against the Company in its normal course
of business. The Company believes that such claims and lawsuits will not have a
material adverse effect on the Company's financial position, cash flow or
results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the quarter
ended June 30, 2001.



                                       26
<PAGE>   27

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

      (a)   Exhibits:

            The Exhibit Index attached hereto is hereby incorporated by
            reference to this item.

      (b)   Reports on Form 8-K:

            None.



                                       27
<PAGE>   28

                                   SIGNATURES


Pursuant to the requirements of Section l3 or l5(d) of the Securities Exchange
Act of l934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                      GLENBOROUGH REALTY TRUST INCORPORATED



                                      By: Glenborough Realty Trust Incorporated,



      Date: August 14, 2001               /s/ Andrew Batinovich
                                          --------------------------------------
                                          Andrew Batinovich
                                          Director, President and
                                          Chief Operating Officer



      Date: August 14, 2001               /s/ Stephen Saul
                                          --------------------------------------
                                          Stephen Saul
                                          Chief Financial Officer
                                          (Principal Financial Officer)



      Date: August 14, 2001               /s/ Brian Peay
                                          --------------------------------------
                                          Brian Peay
                                          Vice President,
                                          Finance and Accounting
                                          (Principal Accounting Officer)



                                       28
<PAGE>   29

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit No.                       Exhibit Title
-----------                       -------------
<S>            <C>
   11.01       Statement re: Computation of Per Share Earnings is shown in Note
               11 of the Consolidated Financial Statements of the Company in
               Item 1.

   12.01       Computation of Ratio of Earnings to Fixed Charges and Ratio of
               Earnings to Fixed Charges and Preferred Dividends.
</TABLE>



                                       29