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, 1999

                                       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,             New York Stock Exchange
          $.001 par value

        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 July 31,  1999,  31,324,351  shares of Common  Stock ($.001 par value) and
11,500,000  shares of 7.75%  Series A  Convertible  Preferred  Stock  ($.001 par
value) were outstanding.




                                                           1
<PAGE>






                                      INDEX
                      GLENBOROUGH REALTY TRUST INCORPORATED

                                                                 Page No.
PART I    FINANCIAL INFORMATION

Item  1.  Consolidated   Financial  Statements  of
          Glenborough  Realty  Trust  Incorporated
          (Unaudited  except for the  Consolidated
          Balance Sheet at December 31, 1998):

               Consolidated Balance Sheets at June
               30, 1999 and December 31, 1998                       3

               Consolidated      Statements     of
               Operations for the six months ended
               June 30, 1999 and 1998                               4

               Consolidated      Statements     of
               Operations  for  the  three  months
               ended June 30, 1999 and 1998                         5

               Consolidated      Statement      of
               Stockholders'  Equity  for  the six
               months ended June 30, 1999                           6

               Consolidated   Statements  of  Cash
               Flows for the six months ended June
               30, 1999 and 1998                                  7-8

               Notes  to  Consolidated   Financial
               Statements                                        9-20

Item 2.   Management's  Discussion and Analysis of
          Financial   Condition   and  Results  of
          Operations                                            21-29

PART II   OTHER INFORMATION

Item 1.   Legal Proceedings                                        30

Item 4.   Submission of Matters to a Vote of Security Holders      30

Item 6.   Exhibits and Reports on Form 8-K                         31

SIGNATURES                                                         32

EXHIBIT INDEX                                                      33



                                                           2
<PAGE>





Part I.           FINANCIAL INFORMATION

Item 1.           Financial Statements
<TABLE>
<CAPTION>


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

                                                                                  June 30,               December 31,
                                                                                    1999                     1998
                                                                                 (Unaudited)              (Audited)
                                                                               ----------------        -----------------
ASSETS
<S>                                                                            <C>                     <C>
     Rental property, net of accumulated depreciation of
       $83,713 and $72,951 in 1999 and 1998, respectively                      $    1,584,220          $     1,720,579
     Real estate held for sale                                                         48,641                   21,860
     Investments in Development                                                        39,293                   35,131
     Investments in Associated Companies                                                7,960                    8,807
     Mortgage loans receivable                                                         43,982                   42,420
     Cash and cash equivalents                                                          2,001                    4,357
     Other assets                                                                      61,881                   45,862
                                                                               ----------------        -----------------

         TOTAL ASSETS                                                          $    1,787,978          $     1,879,016
                                                                               ================        =================

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
     Mortgage loans                                                            $      692,384          $       708,578
     Unsecured Series A Senior Notes                                                  132,890                  150,000
     Unsecured bank line                                                               21,247                   63,519
     Other liabilities                                                                 28,309                   28,921
                                                                               ----------------        -----------------
       Total liabilities                                                              874,830                  951,018
                                                                               ----------------        -----------------

Commitments and contingencies                                                               --                       --

Minority interest                                                                      98,115                   99,465

Stockholders' Equity:
     Common stock, 31,593,251 and 31,758,915 shares issued
       and outstanding at June 30, 1999 and
       December 31, 1998, respectively                                                     32                       32
     Preferred stock, 11,500,000 shares issued and outstanding
       at June 30, 1999 and December 31, 1998                                              11                       11
     Additional paid-in capital                                                       862,823                  865,692
     Deferred compensation                                                               (685)                    (181)
     Retained earnings (deficit)                                                      (47,148)                 (37,021)
                                                                               ----------------        -----------------
       Total stockholders' equity                                                     815,033                  828,533
                                                                               ----------------        -----------------

           TOTAL LIABILITIES AND STOCKHOLDERS'
              EQUITY                                                           $    1,787,978          $     1,879,016
                                                                               ================        =================

                              See accompanying notes to consolidated financial statements
</TABLE>



                                                           3
<PAGE>



<TABLE>
<CAPTION>

                                        GLENBOROUGH REALTY TRUST INCORPORATED
                                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                   For the six months ended June 30, 1999 and 1998
                                      (in thousands, except per share amounts)
                                                     (Unaudited)

                                                                                1999                        1998
                                                                           ---------------             ---------------
REVENUE
<S>                                                                        <C>                         <C>
     Rental revenue                                                        $     129,193               $      97,582
     Fees and reimbursements from affiliates                                       1,874                       1,232
     Interest and other income                                                     3,437                         603
     Equity in earnings (loss) of Associated Companies                              (565)                      1,061
     Net gain on sales of real estate assets                                       7,093                       2,139
                                                                           ---------------             ---------------
       Total revenue                                                             141,032                     102,617
                                                                           ---------------             ---------------

EXPENSES
     Property operating expenses                                                  43,861                      30,589
     General and administrative                                                    4,773                       4,825
     Depreciation and amortization                                                29,312                      20,943
     Interest expense                                                             32,958                      18,852
                                                                           ---------------             ---------------
       Total expenses                                                            110,904                      75,209
                                                                           ---------------             ---------------

Income from operations before minority interest and
     extraordinary item                                                           30,128                      27,408
   Minority interest                                                              (2,196)                     (1,274)
                                                                           ---------------             ---------------
   Net income before extraordinary item                                           27,932                      26,134
Extraordinary item:
Net loss on early extinguishment of debt                                            (303)                         --
                                                                           ---------------             ---------------
Net income                                                                        27,629                      26,134
Preferred dividends                                                              (11,140)                     (9,480)
                                                                           ---------------             ---------------
Net income available to Common Stockholders                                $      16,489               $      16,654
                                                                           ===============             ===============


Basic Per Share Data:
Net income available to Common Stockholders before
     extraordinary item                                                    $        0.53               $        0.53
Extraordinary item                                                                (0.01)                          --
                                                                           ===============             ===============
Net income available to Common Stockholders                                $        0.52               $        0.53
                                                                           ===============             ===============
Basic weighted average shares outstanding                                     31,714,274                  31,598,648
                                                                           ===============             ===============

Diluted Per Share Data:
Net income available to Common Stockholders before
     extraordinary item                                                    $        0.53               $        0.52
Extraordinary item                                                                (0.01)                          --
                                                                           ===============             ===============
Net income available to Common Stockholders                                $        0.52               $        0.52
                                                                           ===============             ===============
Diluted weighted average shares outstanding                                   36,040,578                  34,612,985
                                                                           ===============             ===============

                              See accompanying notes to consolidated financial statements
</TABLE>



                                                           4
<PAGE>


<TABLE>
<CAPTION>


                                        GLENBOROUGH REALTY TRUST INCORPORATED
                                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                  For the three  months  ended June 30, 1999 and 1998
                                        (in  thousands, except per share amounts)
                                                       (Unaudited)

                                                                                1999                        1998
                                                                           ---------------             ---------------
REVENUE
<S>                                                                        <C>                         <C>
     Rental revenue                                                        $      64,552               $      51,619
     Fees and reimbursements from affiliates                                         743                         759
     Interest and other income                                                     1,778                         246
     Equity in earnings (loss) of Associated Companies                              (874)                        709
     Net gain on sales of real estate assets                                       5,742                         693
                                                                           ---------------             ---------------
       Total revenue                                                              71,941                      54,026
                                                                           ---------------             ---------------

EXPENSES
     Property operating expenses                                                  21,860                      16,265
     General and administrative                                                    2,551                       2,603
     Depreciation and amortization                                                14,220                      10,934
     Interest expense                                                             16,418                       9,707
                                                                           ---------------             ---------------
       Total expenses                                                             55,049                      39,509
                                                                           ---------------             ---------------

Income from operations before minority interest and
     extraordinary item                                                           16,892                      14,517
   Minority interest                                                              (1,529)                       (596)
                                                                           ---------------             ---------------
   Net income before extraordinary item                                           15,363                      13,921
Extraordinary item:
Net gain on early extinguishment of debt                                           1,688                          --
                                                                           ---------------             ---------------
Net income                                                                        17,051                      13,921
Preferred dividends                                                               (5,570)                     (5,570)
                                                                           ---------------             ---------------
Net income available to Common Stockholders                                $      11,481               $       8,351
                                                                           ===============             ===============


Basic Per Share Data:
Net income available to Common Stockholders before
     extraordinary item                                                    $        0.31               $        0.26
Extraordinary item                                                                  0.05                          --
                                                                           ===============             ===============
Net income available to Common Stockholders                                $        0.36               $        0.26
                                                                           ===============             ===============
Basic weighted average shares outstanding                                     31,664,269                  31,648,041
                                                                           ===============             ===============

Diluted Per Share Data:
Net income available to Common Stockholders before
     extraordinary item                                                    $        0.31               $        0.26
Extraordinary item                                                                  0.05                          --
                                                                           ===============             ===============
Net income available to Common Stockholders                                $        0.36               $        0.26
                                                                           ===============             ===============
Diluted weighted average shares outstanding                                   35,984,107                  34,868,905
                                                                           ===============             ===============

                              See accompanying notes to consolidated financial statements
</TABLE>


                                                           5
<PAGE>


<TABLE>
<CAPTION>

                                               GLENBOROUGH REALTY TRUST INCORPORATED
                                           CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                               For the six months ended June 30, 1999
                                                           (in thousands)
                                                            (Unaudited)

                                           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, 1998              31,759      $  32     11,500     $  11   $   865,692    $    (181)   $ (37,021)   $828,533

Exercise of stock options                     63         --         --        --           920           --           --         920

Conversion of Operating Partnership
    units into common stock
                                              35         --         --        --            --           --           --         --

Issuance of common stock to officers
                                              30          --        --        --           550         (550)          --         --

Common stock repurchases                    (294)        --         --        --        (4,339)          --           --     (4,339)

Amortization of deferred compensation
                                              --         --         --        --            --           46           --          46

Unrealized gain on marketable
    securities                                --         --         --        --            --           --           34          34

Distributions                                 --         --         --        --            --           --      (37,790)   (37,790)

Net income                                    --         --         --        --            --           --       27,629      27,629
                                       --------- ---------- ---------- ---------- ------------- ------------- ------------- --------

Balance at June 30, 1999                  31,593      $  32     11,500     $  11   $   862,823    $    (685)   $ (47,148)   $815,033
                                       ========= ========== ========== ========== ============= ============= ============= ========

                              See accompanying notes to consolidated financial statements
</TABLE>


                                                           6
<PAGE>


<TABLE>
<CAPTION>

                                      GLENBOROUGH REALTY TRUST INCORPORATED
                                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 For the six months ended June 30, 1999 and 1998
                                                 (in thousands)
                                                   (Unaudited)



                                                                            1999                        1998
                                                                       ---------------             ---------------
<S>                                                                    <C>                        <C>
Cash flows from operating activities:
     Net income                                                        $       27,629              $       26,134
     Adjustments to reconcile net income
       to net cash provided by operating
       activities:
         Depreciation and amortization                                         29,312                      20,943
         Amortization of loan fees, included in
           interest expense                                                       993                         592
         Minority interest in income from operations                            2,196                       1,274
         Equity in (earnings) loss of Associated
           Companies                                                              565                      (1,061)
         Net gain on sales of real estate assets                               (7,093)                     (2,139)
         Net loss on early extinguishment of debt                                 303                          --
         Amortization of deferred compensation                                     46                          46
         Changes in certain assets and liabilities, net                        (2,527)                        833
                                                                       ---------------             ---------------

           Net cash provided by operating activities                           51,424                      46,622
                                                                       ---------------             ---------------

Cash flows from investing activities:
     Net proceeds from sales of real estate assets                            111,027                      37,804
     Additions to rental properties                                           (22,833)                   (570,536)
     Investments in Development                                                (4,162)                     (6,882)
     Investment in Joint Ventures                                              (3,176)                         --
     Additions to mortgage loans receivable                                    (1,562)                    (38,084)
     Investments in marketable securities                                          --                     (26,006)
     Principal receipts on mortgage loans receivable                               --                         507
     Payments from affiliates                                                     400                          --
     Distributions from Associated Companies                                      282                         875
                                                                       ---------------             ---------------

           Net cash provided by (used for) investing
                activities                                                     79,976                    (602,322)

                                                                       ---------------             ---------------


                                                       continued

                               See accompanying notes to consolidated financial statements
</TABLE>






                                                           7
<PAGE>


<TABLE>
<CAPTION>




                                     GLENBOROUGH REALTY TRUST INCORPORATED
                               CONSOLIDATED STATEMENTS OF CASH FLOWS -continued
                                For the six months ended June 30, 1999 and 1998
                                                (in thousands)
                                                  (Unaudited)


                                                                            1999                      1998
                                                                       ---------------            --------------
<S>                                                                     <C>                        <C>
Cash flows from financing activities:
     Proceeds from borrowings                                          $      83,480              $     530,321
     Repayment of borrowings                                                (156,046)                  (207,741)
     Draws from (payments into) lender impound accounts, net
                                                                                 873                     (7,137)
     Retirement of Series A Senior Notes                                     (15,282)                         --
       Prepayment penalties on loan payoffs                                   (2,026)                         --
     Distributions to minority interest holders                               (3,546)                    (2,000)
     Distributions to stockholders                                           (37,790)                   (30,410)
     Exercise of stock options                                                   920                         10
     Repurchases of common stock                                              (4,339)                        --
     Proceeds from issuance of preferred stock, net of
         offering costs                                                            --                    274,615
                                                                       ---------------            --------------

         Net cash (used for) provided by financing
             activities                                                     (133,756)                   557,658
                                                                       ---------------            --------------

Net (decrease) increase in cash and cash equivalents                          (2,356)                     1,958

Cash and cash equivalents at beginning of period                               4,357                      5,070
                                                                       ---------------            --------------

Cash and cash equivalents at end of period                             $       2,001              $       7,028
                                                                       ===============            ==============

Supplemental disclosure of cash flow information:

     Cash paid for interest (net of capitalized interest of
         $1,330 in 1999)                                               $      30,262              $      12,165
                                                                       ===============            ==============

Supplemental disclosure of Non-Cash Investing and Financing
     Activities:

     Acquisition of real estate through assumption of first
         trust deed notes payable                                      $      14,100              $     317,527
                                                                       ===============            ==============

     Acquisition of real estate through issuance of shares
         of common stock and Operating Partnership units               $          --              $      41,365
                                                                       ===============            ==============

                              See accompanying notes to consolidated financial statements
</TABLE>



                                                           8
<PAGE>


                     GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1999



Note 1.      ORGANIZATION

Glenborough Realty Trust Incorporated (the "Company") was organized in the State
of  Maryland  on August 26,  1994.  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 Company completed a consolidation with certain public
California limited partnerships and other entities (the "Consolidation") engaged
in real estate activities (the "GRT Predecessor  Entities")  through an exchange
of assets of the GRT Predecessor  Entities for 5,753,709  shares of Common Stock
of the Company. The Consolidation occurred on December 31, 1995, and the Company
commenced operations on January 1, 1996.

Subsequent to the Consolidation on December 31, 1995, and through June 30, 1999,
the following Common Stock  transactions  occurred:  (i) 67,250 shares of Common
Stock  were  issued  to  officers  and  directors  as stock  compensation;  (ii)
25,446,000  shares were issued in four separate public equity  offerings;  (iii)
448,172 shares were issued in connection with various acquisitions;  (iv) 85,207
shares were issued in connection  with the exercise of employee  stock  options;
(v) 86,188  shares  were issued in  connection  with the  exchange of  Operating
Partnership  units;  (vi) 293,216  shares were  repurchased  by the Company (see
discussion below) and (vii) 59 shares were retired, resulting in total shares of
Common Stock issued and  outstanding at June 30, 1999, of  31,593,251.  Assuming
the issuance of 4,184,314  shares of Common Stock  issuable  upon  redemption of
4,184,314  partnership  units  in the  Operating  Partnership,  there  would  be
35,777,565 shares of Common Stock outstanding as of June 30, 1999.

In January 1998, the Company completed a public offering of 11,500,000 shares of
7 3/4% Series A  Convertible  Preferred  Stock (the  "January  1998  Convertible
Preferred Stock Offering"). The shares are 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. Shares of Preferred Stock issued
and outstanding at June 30, 1999, totaled 11,500,000.

In July 1998, the Company's Board of Directors adopted a stockholder rights plan
which is intended to protect the Company's stockholders in the event of coercive
or unfair takeover tactics,  or an unsolicited attempt to acquire control of the
Company in a  transaction  the Board of  Directors  believes  is not in the best
interests of the  stockholders.  Under the plan, the Company declared a dividend
of  Rights  on its  Common  Stock.  The  rights  issued  under  the plan will be
triggered, with certain exceptions, if and when any person or group acquires, or
commences a tender offer to acquire, 15% or more of the Company's shares.

In January 1999,  the  Company's  Board of Directors  authorized  the Company to
repurchase  up to 3.1  million  shares of its  outstanding  Common  Stock.  This
represents  approximately 10% of the Company's total  outstanding  Common Stock.
Such  purchases  will be made from time to time in the open market or  otherwise
and the timing will depend on market  conditions and other  factors.  As of June
30, 1999, 293,216 shares have been repurchased.

To maintain the Company's  qualification as a REIT, no more than 50% in 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
87.30% limited  partner  interest at June 30, 1999, is  Glenborough  Properties,
L.P.  (the  "Operating  Partnership").  As  of  June  30,  1999,  the  Operating
Partnership,  directly and through the  subsidiaries in which it and the Company
own  100% of the  ownership  interests,  controls  a total  of 167  real  estate


                                       9
<PAGE>
                     GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1999

projects.  As of June 30, 1999, the Operating Partnership also holds 100% of the
non-voting  preferred  stock of the  following  two  Associated  Companies  (the
"Associated Companies"):

     Glenborough   Corporation  ("GC") is the  general  partner of several  real
     estate limited  partnerships and provides asset and property management and
     development  services for these partnerships (the "Managed  Partnerships").
     It also provides  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 significant real estate
     assets in the Inland  Empire  region of Southern  California  (the  "Rancon
     Partnerships").

     Glenborough  Hotel  Group ("GHG") owns an approximate  36% limited  partner
     interest in a real estate joint venture.


Note 2.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
The  accompanying   financial  statements  present  the  consolidated  financial
position of the Company as of June 30, 1999,  and  December  31,  1998,  and the
consolidated  results of  operations  and cash flows of the  Company for the six
months ended June 30, 1999 and 1998. All 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, 1999, and for the period then ended.

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

Use of Estimates
The preparation of financial  statements in conformity  with generally  accepted
accounting principles 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 quarters
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.   Management  is  evaluating   the  effects,   if  any,  that  this
pronouncement  will  have  on the  Company's  consolidated  financial  position,
results of operations and financial statement position.

Rental Property
Rental  properties  are stated at cost unless  circumstances  indicate that cost
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  rental  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


                                       10
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1999

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


Real Estate Held for Sale
Real estate held for sale consists of rental  properties that are under contract
or in active  negotiations  to be disposed of. The  fulfillment of the Company's
plans to dispose of property is dependent upon, among other things, the presence
of economic  conditions  which will enable the Company to hold the  property for
eventual sale. The Company discontinues  depreciation of rental property once it
is classified as held for sale.

Investments in 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 investment  during the period in which the projects are under
development. See Note 6 for further discussion.

Investments in Associated Companies
The Company's  investments in the  Associated  Companies are accounted for using
the equity method, as discussed further in Note 4.

Mortgage Loans Receivable
The  Company  monitors  the  recoverability  of its loans  and notes  receivable
through  ongoing contact with the borrowers to ensure timely receipt of interest
and principal  payments,  and where appropriate,  obtains financial  information
concerning  the  operation  of the  properties.  Interest on  mortgage  loans is
recognized as revenue as it accrues  during the period the loan is  outstanding.
Mortgage loans 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 operations
of 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 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 these receivables will be
different than the recorded amounts.

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.

Marketable Securities
The Company records its marketable  securities at fair value.  Unrealized  gains
and losses on securities are reported as a separate  component of  stockholders'
equity and realized gains and losses are included in net income.

Fair Value of Financial Instruments
Statement of Financial  Accounting  Standards No. 107 requires  disclosure about
fair value for all financial instruments. Based on the borrowing rates currently
available to the Company,  the carrying amount of debt  approximates fair value.
Certain assumed debt  instruments have been recorded at a premium based upon the
stated rate on the  instrument and the then  available  borrowing  rates for the
Company.  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  loans   receivable   described  above,
approximates fair value.

                                       11
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1999

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  anticipated  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.  The cost of terminated  instruments  not  qualifying as
hedges  will  be  recorded  in  earnings  in the  period  they  are  terminated.
Instruments  which  qualify as hedges upon  obtaining  the related  debt will be
recorded as a premium or discount on the related debt  principal  and  amortized
into earnings over the life of the debt instrument.  If the hedged instrument is
retired  early,  the  unamortized  discount  or premium  will be  included  as a
component of the calculation of gain or loss on retirement.

At June  30,  1999,  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  11.70%  limited  partner  interests  in the
Operating Partnership not held by the Company.

Revenues
All leases are classified as operating  leases.  Rental revenue is recognized as
earned over the terms of the related leases.

For the six months ended June 30, 1999,  no tenants  represented  10% or more of
rental revenue of the Company.

Fees 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  an
unconsolidated affiliate.

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

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.

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 95% of its REIT
taxable  income  to  its  stockholders.   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 1998 Audited Financial Statements
These  unaudited  financial  statements  should be read in conjunction  with the
Notes  to  Consolidated  Financial  Statements  included  in  the  1998  audited
financial statements.

Note 3.   INVESTMENTS IN REAL ESTATE

Acquisitions
In the second quarter of 1999, the Company  expanded its existing  holdings near
Los Angeles  International Airport by purchasing a 41,709 square foot industrial
building which is the second phase of the project purchased in the first quarter


                                       12
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1999

(see  below).  This second phase has been leased on a long term triple net basis
to  the  tenant  currently  occupying  phase  one  of  the  project.  The  total
acquisition cost, including capitalized costs, was approximately $5.6 million.

In the first  quarter  of 1999,  the  Company  acquired  a 285 unit  multifamily
property  ("Springs of Indian Creek") located in Carrolton,  Texas. The property
is the first phase of a two phase project  comprising a total of 519 units.  The
234 unit second phase of the project is currently under construction through one
of the  Company's  development  alliances and is expected to be completed in the
first  quarter  of  the  year  2000.  The  total  acquisition  cost,   including
capitalized costs of Phase I was  approximately  $20.8 million  comprising:  (i)
approximately  $14.1 million in assumption of debt and (ii) the balance in cash.
In addition,  the Company acquired a 1.45-acre parcel  containing  34,500 square
feet of industrial  buildings in Los Angeles,  California,  near the Los Angeles
International  Airport. This property is the first phase of a two phase project.
The total acquisition cost, including  capitalized costs, was approximately $3.1
million,  which was paid  entirely in cash.  The  property  has been leased to a
single tenant under a 15-year triple-net lease.

Dispositions
In the second quarter of 1999, the Company sold fourteen  properties,  including
five office, four office/flex,  one retail, two industrial,  one multifamily and
one hotel.  The assets were sold for an aggregate  sales price of  approximately
$109,135,000 and generated an aggregate net gain of approximately $5,742,000.

In the first quarter of 1999, the Company sold seven properties,  including five
office/flex  properties and two retail  properties,  and a partial interest in a
REIT. These assets were sold for an aggregate sales price of approximately $27.3
million and generated an aggregate net gain of approximately $1,351,000.

These  transactions are reflected as the net gain on sales of real estate assets
on the  accompanying  consolidated  statement of  operations  for the six months
ended June 30, 1999.

Prospective Acquisitions and Dispositions
The Company has entered into a short-term  lease agreement on the hotel property
located in Arlington,  Texas with the  prospective  purchaser of this  property.
This  prospective  purchaser  has  entered  into a purchase  agreement  for this
property,  with an  anticipated  closing  date of  August  31,  1999.  The lease
terminates on the closing date of the sale of the  property.  The net book value
of the hotel property  totals  $4,112,000 at June 30, 1999. Net income earned by
the Company (before  depreciation)  from the hotel totaled $178,000 and $202,000
for the six months ended June 30, 1999 and 1998, respectively.

The  Company has  entered  into  separate  definitive  agreements  to sell eight
properties,  including two office properties,  two office/flex  properties,  two
industrial properties and two retail properties. The sales are expected to close
in the third quarter of 1999 for an aggregate sales price of approximately $44.9
million,   however,  they  are  subject  to  certain  contingencies,   including
satisfactory completion of due diligence and customary closing conditions.  As a
result,  there can be no  assurance  that these sales will be  completed.  These
properties  are  reflected  as Real  Estate  Held For  Sale on the  accompanying
consolidated  balance sheet as of June 30, 1999.  See Note 12 for  discussion of
sales subsequent to June 30, 1999.

Note 4.   INVESTMENTS IN ASSOCIATED COMPANIES

The Company accounts for its investments in the Associated Companies (as defined
in Note 1) using the equity  method as a substantial  portion of their  economic
benefits flow to the Company by virtue of its 100%  non-voting  preferred  stock
interest in each of them, which interests constitute  substantially all of their
capitalization.  Two of the holders of the voting  common stock of GC and one of
the  holders of the voting  common  stock of GHG are  officers  of the  Company;
however,  the Company has no direct voting or management control of either GC or
GHG. The Company records earnings on its investments in the Associated Companies
equal to its cash flow preference,  to the extent of earnings, plus its pro rata
share  of  remaining  earnings,  based  on  cash  flow  allocation  percentages.
Distributions received from the Associated Companies are recorded as a reduction
of the Company's investments.

                                       13
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1999

As of June 30, 1999, the Company had the following investments in the Associated
Companies (in thousands):

                                              GC             GHG          Total
Investment at December 31, 1998         $    6,800      $   2,007      $   8,807
Distributions                                (267)           (15)          (282)
Equity in earnings (loss)                    (535)           (30)          (565)
                                        ----------      ---------      ---------
Investment at June 30, 1999             $    5,998      $   1,962      $   7,960
                                        ==========      =========      =========
Note 5.   MORTGAGE LOANS RECEIVABLE

The Company's  mortgage loans receivable consist of the following as of June 30,
1999, and December 31, 1998 (dollars in thousands):

                                                         1999            1998
                                                     ------------    -----------
Note secured by an office property in Phoenix, AZ,
with a fixed  interest  rate of 7% (until  May 31,
2000,  at which  time the rate  shall  change to a
fixed rate of 9%) and a maturity  date of May 2001    $  3,728        $  3,484


Note  secured by a hotel  property in Dallas,  TX,
with  a  fixed   interest  rate  of  9%,   monthly
interest-only  payments  and a  maturity  date  of
August 31, 1999                                          3,600           3,600

Note  secured  by  Gateway  Park land  located  in
Aurora,  CO, with a stated fixed  interest rate of
13%,  quarterly   interest-only   payments  and  a
maturity  date of July 2005 (see below for further
discussion)                                             36,654          35,336
                                                     ------------     ----------

Total                                                 $ 43,982        $ 42,420
                                                     ============     ==========

In 1998,  the  Company  entered  into a  development  alliance  with  The  Pauls
Corporation (see Note 6). In addition to this development alliance,  the Company
loaned approximately $34 million ($36.7 million,  including accrued interest, at
June 30,  1999),  secured by a First  Mortgage,  to continue  the  build-out  of
Gateway  Park.  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 2.2 million  square  feet of office,  office/flex  and  industrial
space and 1,600 multifamily units over the next ten years.

Note 6.   INVESTMENTS IN DEVELOPMENT AND OTHER ASSETS

The  Company  has  formed  4  development   alliances  for  the  development  of
approximately  713,000  square  feet of  office,  office/flex  and  distribution
properties and 1,710 multifamily units in North Carolina,  Colorado,  Texas, New
Jersey,  Kansas and  Michigan.  As of June 30,  1999,  the Company has  advanced
approximately $39 million.  Under these development  alliances,  the Company has
certain rights to purchase the properties  upon  completion of development  over
the next five years. The Company entered into a joint venture in which it sold a
90% interest in Rockwall I & II, a 340,252 square foot office complex located in
Rockville,  Maryland.  The Company  maintains a 10%  interest in the asset along
with a contract for property  management  services.  The proceeds  from the sale
were used to paydown the Credit Facility  (discussed  below) and to reduce other
secured debt. The value of this 10% interest is  approximately  $1.3 million and
is included in Other Assets on the accompanying consolidated balance sheet as of
June 30, 1999. This investment will be accounted for using the equity method.

The Company also purchased a 10% interest in the fee simple interest in the land
under Rincon Center I & II in San Francisco,  California. The land was purchased
from the United States Post Office for a purchase  price of $80.5  million.  The
land has a triple  net  ground  lease  with a  remaining  term of 51 years  with
minimum 30% rental  increases every six years.  Occupying a full city block near


                                       14
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1999

the waterfront in the Financial District,  Rincon Center I & II contains 476,709
square feet of commercial office and retail space, 320 multifamily units and 381
subterranean  parking spaces. The value of this 10% interest is approximately $2
million and is included in Other Assets on the accompanying consolidated balance
sheet as of June 30,  1999.  This  investment  will be  accounted  for using the
equity method.

Note 7.   SECURED AND UNSECURED LIABILITIES

The Company had the following  mortgage loans,  bank lines,  unsecured notes and
notes payable outstanding as of June 30, 1999, and December 31, 1998 (dollars in
thousands):
                                                            1999          1998
                                                         ---------     ---------
Secured  loans  with  various   lenders,   net  of
unamortized  discount of $5,828 and $6,140 at June
30, 1999 and December 31, 1998, 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 35  properties  with an
aggregate  net  carrying  value  of  $404,157  and
$408,439 at June 30, 1999 and  December  31, 1998,
respectively.                                            $ 233,858     $ 234,871

Secured  loan  with a bank  with a fixed  interest
rate of  7.50%,  monthly  principal  and  interest
payments of $443 and a maturity date of October 1,
2022. The loan is secured by ten  properties  with
an aggregate  net  carrying  value of $108,707 and
$110,129 at June 30, 1999 and  December  31, 1998,
respectively.                                               58,561        58,942

Secured loan with an investment  bank with a fixed
interest  rate of  7.57%,  monthly  principal  and
interest    payments   (based   upon   a   25-year
amortization)  of  $103  and a  maturity  date  of
January 1,  2006.  This loan was paid off in March
1999 with the  proceeds  from a $26  million  loan
discussed below.                                                --        13,220

Secured  loans  with  various   lenders,   bearing
interest  at fixed rates  between  6.95% and 9.25%
(approximately  $53,042 of these loans  include an
unamortized  premium of  approximately  $445 which
reduces  the  effective  interest  rate  on  those
instruments to 6.75%),  with monthly principal and
interest payments ranging between $14 and $371 and
maturing at various  dates  through  July 1, 2008.
These  loans are  secured  by  properties  with an
aggregate  net  carrying  value  of  $430,143  and
$447,444 at June 30, 1999 and  December  31, 1998,
respectively.                                               255,030      261,938







                                       15
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1999

                                                          1999            1998
                                                       ----------      ---------
Secured loans with various banks bearing  interest
at variable rates ranging  between 7.44% and 8.18%
at June 30, 1999 (approximately  $114,458 of these
loans   include   an   unamortized    premium   of
approximately  $1,258 which  reduces the effective
interest  rate on  those  instruments  to  6.75%),
monthly  principal and interest  payments  ranging
between $16 and $790 and maturing at various dates
through December 22, 2000. These loans are secured
by properties with an aggregate net carrying value
of  $187,123  and  $179,438  at June 30,  1999 and
December 31, 1998, respectively.                       $ 130,613       $ 125,230

Secured loans with a lender,  bearing  interest at
fixed rates between 7.60% and 7.85%,  with monthly
principal and interest  payments  ranging  between
$11 and $22.  All of these  loans  have a maturity
date of December 1, 2030.  These loans are secured
by  multifamily  properties  with an aggregate net
carrying  value of $17,961 and $19,060 at June 30,
1999 and December 31, 1998,  respectively.                14,322          14,377

Unsecured  $100,000  line  of  credit  with a bank
("Credit  Facility") with a variable interest rate
of LIBOR plus  1.625%  (6.690%  and 7.401% at June
30, 1999 and  December  31,  1998,  respectively),
monthly interest only payments and a maturity date
of December  22,  2000,  with one option to extend
for 10 years.  In June 1999,  the Credit  Facility
was  modified.  See below for further  discussion.         21,247         63,519

Unsecured  Series  A  Senior  Notes  with a  fixed
interest   rate  of   7.625%,   interest   payable
semiannually  on March 15 and  September 15, and a
maturity  date of March  15,  2005.  Approximately
$17.1  million of the notes  were  retired in June
1999 as discussed below.                                  132,890        150,000
                                                        ---------      ---------
Total                                                   $ 846,521      $ 922,097
                                                        =========      =========

In March 1999, the Company  obtained a $26 million loan from a commercial  bank.
The loan was non-recourse and was secured by seven properties and had a maturity
date of December 22, 1999, with an option to extend for six months. The proceeds
were  used  to pay  off a loan  which  was  previously  secured  by  these  same
properties  and to reduce  other debt.  This loan was paid off in June 1999 with
proceeds generated from the sales of four properties.

In June 1999,  the Company  retired  approximately  $17.1  million of  unsecured
Series A Senior Notes at a discount. As a result of this transaction,  a gain on
early extinguishment of debt of approximately $1.8 million was recorded which is
included  in the net loss on early  extinguishment  of debt on the  accompanying
consolidated  statements of  operations  for the six and three months ended June
30, 1999, as discussed below.

In June 1999,  in order to increase the  Company's  financial  flexibility,  the
Credit  Facility was modified to increase  the  commitment  from $100 million to
$142.5  million.  The interest rate,  monthly  payments and maturity date remain
unchanged.

In  connection  with the loan  payoffs  discussed  above and the payoff of other
mortgage debt, the Company incurred a net loss on early  extinguishment  of debt
of  $303,000  for the six months  ended June 30,  1999.  This loss  consists  of
$2,026,000 of losses due to prepayment penalties and $105,000 of losses upon the
writeoff of unamortized loan fees, offset by a gain on payoff of Series A Senior
Notes of $1,828,000 (as discussed above).

                                       16
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1999

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  Generally  Accepted  Accounting
Principles ("GAAP").

The required  principal  payments on the Company's  debt for the next five years
and thereafter, as of June 30, 1999, are as follows (in thousands):
                  Year Ending
                  December 31,
                     1999                  $  119,093
                     2000                     100,167
                     2001                      15,435
                     2002                      14,301
                     2003                      37,891
                     Thereafter               559,634
                                           ----------
                     Total                 $  846,521
                                           ==========
Note 8.   RELATED PARTY TRANSACTIONS

Fee and reimbursement  income earned by the Company from related parties totaled
$1,874,000  and  $1,232,000  for the six months  ended  June 30,  1999 and 1998,
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  $734,000  and  $608,000 for the six months
ended June 30, 1999 and 1998,  respectively,  for  management  of a portfolio of
residential  properties  owned by the  Company,  which is  included  in property
operating expenses on the accompanying consolidated statements of operations.

The Company acquired from a Managed  Partnership an option to acquire all of its
rights  under a Lease with  Option to  Purchase  Agreement,  to acquire  certain
undeveloped  land located in  Burlingame,  California.  Upon  expiration  of the
option  period,  the  independent  members of the  Company's  Board of Directors
concluded  that  proceeding  with the  development  of the  property  would have
required that the Company incur  substantial debt.  Accordingly,  on February 1,
1999,  the  Company  elected  not to  proceed  with the  development  and not to
exercise  the  option in  return  for the  Managed  Partnership's  agreement  to
reimburse the Company for  $2,309,000 of  predevelopment  costs,  $462,000 to be
paid in cash with the balance in a promissory  note bearing  interest at 10% and
due on the earlier of sale,  refinance or March 31, 2002. The note also contains
a  participation  in  profits  realized  by the  Managed  Partnership  from  the
development  and sale of the  property.  The  principal  balance  of the note is
included in Other Assets on the  accompanying  consolidated  balance sheet as of
June 30, 1999.

Note 9.   EARNINGS PER SHARE

In March 1997,  the Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards No. 128 (SFAS 128),  "Earnings Per Share." SFAS
No. 128 requires  the  disclosure  of basic  earnings per share and modified the
guidance for computing  diluted earnings per share.  Basic earnings per share is
computed as earnings divided by weighted average shares,  excluding the dilutive
effects of stock options and other potentially dilutive securities. Earnings per
share are as follows (in thousands,  except for weighted  average shares and per
share amounts):



                                       17
<PAGE>
                     GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1999

<TABLE>
<CAPTION>


                                                            Three months ended                    Six months ended
                                                                 June 30,                             June 30,
                                                      -------------------------------      -------------------------------
                                                          1999              1998               1999              1998
                                                      -------------     -------------      -------------     -------------
<S>                                                  <C>               <C>                <C>               <C>
Net income available to common
     Stockholders - Basic                             $     11,481      $      8,351       $     16,489      $     16,654
Minority interest                                            1,529               596              2,196             1,274
                                                                                           -------------
                                                      -------------     -------------                        -------------
Net income available to common
     Stockholders - Diluted                           $     13,010      $      8,947       $     18,685      $     17,928
                                                      -------------     -------------      -------------     -------------

Weighted average shares:
Basic                                                   31,664,269        31,648,041         31,714,274       31,598,648
Stock options                                              109,092           438,686            111,759          438,686
Convertible Operating Partnership Units                  4,210,746         2,782,178          4,214,545        2,575,651
                                                      -------------     -------------      -------------    --------------
Diluted                                                 35,984,107        34,868,905         36,040,578       34,612,985
                                                      -------------     -------------      -------------    --------------

Basic earnings per share                              $       0.36      $       0.26       $       0.52     $       0.53
Diluted earnings per share                            $       0.36      $       0.26       $       0.52     $       0.52
</TABLE>

Note 10.  STOCK COMPENSATION PLAN

In May 1996, the Company  adopted an employee stock  incentive plan (the "Plan")
to provide  incentives to attract and retain high quality executive officers and
key employees.  Certain amendments to the Plan were ratified and approved by the
stockholders   of  the  Company  at  the  Company's   1997  Annual   Meeting  of
Stockholders.  The Plan,  as  amended,  provides  for the grant of (i) shares of
Common Stock of the Company, (ii) options, stock appreciation rights ("SARs") or
similar  rights with an exercise or conversion  privilege at a fixed or variable
price related to the Common Stock and/or the passage of time,  the occurrence of
one or more  events,  or the  satisfaction  of  performance  criteria  or  other
conditions, or (iii) any other security with the value derived from the value of
the Common Stock of the Company or other securities  issued by a related entity.
Such awards include,  without  limitation,  options,  SARs,  sales or bonuses of
restricted  stock,  dividend  equivalent  rights ("DERs"),  Performance Units or
Preference  Shares.  The total number of shares of Common Stock  available under
the Plan is equal to the  greater  of  1,140,000  shares or 8% of the  number of
shares  outstanding  determined  as of the day  immediately  following  the most
recent issuance of shares of Common Stock or securities  convertible into shares
of Common Stock;  provided that the maximum aggregate number of shares of Common
Stock available for issuance under the Plan may not be reduced.  For purposes of
calculating  the number of shares of Common Stock  available under the Plan, all
classes  of  securities  of the  Company  and  its  related  entities  that  are
convertible  presently  or in the future by the  security  holder into shares of
Common Stock or which may  presently or in the future be exchanged for shares of
Common Stock pursuant to redemption  rights or otherwise,  shall be deemed to be
outstanding shares of Common Stock. Notwithstanding the foregoing, the aggregate
number of shares  as to which  incentive  stock  options,  one type of  security
available under the Plan, may be granted under the Plan may not exceed 1,140,000
shares.  The Company accounts for the fair value of the options and bonus grants
in  accordance  with APB Opinion No. 25. As of June 30, 1999,  67,250  shares of
bonus  grants  have been  issued  under the Plan.  The fair  value of the shares
granted  have  been  recorded  as  deferred  compensation  in  the  accompanying
financial statements and will be charged to earnings ratably over the respective
vesting  periods  that  range  from 2 to 5 years.  As June 30,  1999,  3,753,993
options to purchase shares of Common Stock were outstanding.  The exercise price
of each incentive stock option granted is greater than or equal to the per-share
fair market  value of the Common Stock on the date the option is granted and, as
such, no compensation expense has been recognized. The options vest over periods
between 1 and 6 years, and have a maximum term of 10 years.

                                       18
<PAGE>

                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1999

Note 11.  SEGMENT INFORMATION

The Company owns a diverse portfolio of properties comprising six product types:
office, office/flex,  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  office/flex  portfolio  consists of  properties  designed for a
combination of office and warehouse uses. 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 are limited  service
"all-suite"  properties  leased to and  operated  by third  parties.  One of the
Company's hotels is in contract to be sold.

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,  1999  and  1998  is as  follows  (in
thousands):
<TABLE>
<CAPTION>
                                                                                        Multi-
1999                             Office     Office/Flex    Industrial     Retail        family        Hotel         Total
                               -----------  -------------  -----------  -----------  ------------ ------------  -------------
<S>                            <C>           <C>            <C>          <C>          <C>           <C>          <C>
Rental revenue                 $   59,957    $   18,716     $   9,519    $   6,043    $  33,970     $     988    $   129,193
Property operating expenses        23,270         5,479         2,259        2,057       14,654           205         47,924
                               ===========  =============  ===========  ===========  ============ ============  =============
Net operating income (NOI)     $   36,687    $   13,237     $   7,260    $   3,986    $  19,316     $     783    $    81,269
                               ===========  =============  ===========  ===========  ============ ============  =============

1998
Rental revenue                 $   56,339    $   17,594     $   6,772    $   5,431    $   8,438     $   3,008    $    97,582
Property operating expenses        20,818         5,250         1,642        1,928        3,302           705         33,645
                               ===========  =============  ===========  ===========  ============ ============  =============
Net operating income (NOI)     $   35,521    $   12,344     $   5,130    $   3,503    $   5,136     $   2,303    $    63,937
                               ===========  =============  ===========  ===========  ============ ============  =============
</TABLE>

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

                                       19
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1999
<TABLE>
<CAPTION>
                                                           1999                 1998
                                                      ----------------     ----------------
<S>                                                    <C>                  <C>
Revenues
Total revenue for reportable segments                   $    129,193         $     97,582
Other revenue (1)                                             11,839                5,035
                                                      ================     ================
Total consolidated revenues                             $    141,032         $    102,617
                                                      ================     ================

Net Income
NOI for reportable segments                             $     81,269         $     63,937
Elimination of internal property management fees               4,063                3,056
Unallocated amounts:
   Other revenue (1)                                          11,839                5,035
   General and administrative expenses                        (4,773)              (4,825)
   Depreciation and amortization                             (29,312)             (20,943)
   Interest expense                                          (32,958)             (18,852)
                                                      ================     ================
Income from operations  before minority interest and
   extraordinary items                                  $     30,128         $     27,408
                                                      ================     ================
</TABLE>

(1) Other  revenue  includes fee income,  interest and other  income,  equity in
earnings  (loss) of  Associated  Companies  and net gain on sales of real estate
assets.

Note 12.  SUBSEQUENT EVENTS

Subsequent  to June 30, 1999,  and through the date of this filing,  the Company
sold two  office/flex  properties.  These  properties were sold for an aggregate
sales price of $9,340,000  and generated an aggregate net gain of  approximately
$1,523,000.

In  July  1999,  the  Company   acquired  all  of  the  real  estate  assets  of
Prudential-Bache/Equitec   Real  Estate   Partnership,   a  California   limited
partnership  in  which  the  managing   general   partner  is   Prudential-Bache
Properties, Inc., and in which GC and Robert Batinovich, Chief Executive Officer
of the Company,  have served as co-general partners since March 1994, but do not
hold a material  equity or economic  interest (the "Pru-Bache  Portfolio").  The
acquisition was  unanimously  approved by the Company's  independent  directors,
with Robert Batinovich and Andrew Batinovich  abstaining.  The total acquisition
cost,  including  capitalized  costs,  was  approximately  $49.1 million,  which
consisted  of (i)  approximately  $15.2  million  of  assumed  debt and (ii) the
balance in cash. The cash was funded with proceeds from the sales of real estate
assets  and an  advance  under the  Credit  Facility.  The  Pru-Bache  Portfolio
consists of four office  buildings  and one  office/flex  property,  aggregating
550,592  total  square  feet  and  located  in  Rockville,   Maryland,  Memphis,
Tennessee, Sacramento, California and Seattle, Washington.




                                       20
<PAGE>

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,
1999,  the Company  owned and  operated  167  income-producing  properties  (the
"Properties," and each a "Property").  The Properties are comprised of 49 office
Properties,  40  office/flex  Properties,  29 industrial  Properties,  10 retail
Properties,  37  multifamily  Properties and 2 hotel  Properties,  located in 23
states.

The Company was  incorporated  in the State of Maryland on August 26,  1994.  On
December 31, 1995, the Company completed a consolidation  (the  "Consolidation")
in which Glenborough  Corporation,  a California  corporation,  and eight public
limited  partnerships (the  "Partnerships")  collectively,  the "GRT Predecessor
Entities",  merged with and into the Company.  The Company (i) issued  5,753,709
shares  (the  "Shares")  of $.001 par value  Common  Stock of the Company to the
Partnerships  in exchange  for the net assets of the  Partnerships;  (ii) merged
with Glenborough Corporation, with the Company being the surviving entity; (iii)
acquired an interest in three  companies (the  "Associated  Companies"),  two of
which  merged on June 30,  1997,  that  provide  asset and  property  management
services,  as well as other  services;  and (iv) through a subsidiary  operating
partnership,   Glenborough  Properties,   L.P.  (the  "Operating  Partnership"),
acquired interests in certain warehouse distribution  facilities from GPA, Ltd.,
a California limited partnership  ("GPA"). A portion of the Company's operations
are  conducted  through the Operating  Partnership,  of which the Company is the
sole general  partner,  and in which the Company holds a 87.30% limited  partner
interest at June 30,  1999.  The  Company  operates  the assets  acquired in the
Consolidation and in subsequent  acquisitions (see further discussion below) and
intends to continue to invest in income-producing  property directly and through
joint  ventures.  In addition,  the  Associated  Companies  may acquire  general
partner  interests in other real estate  limited  partnerships.  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.

Since the  Consolidation,  and  consistent  with its  strategy  for growth,  the
Company has completed the following transactions:

          Acquired 20  properties  in 1996, 90 properties in 1997, 69 properties
          in 1998  and 2  properties  in 1999.  The  total  acquired  Properties
          consist of an aggregate of approximately  15.8 million rentable square
          feet of  office,  office/flex,  industrial  and  retail  space,  9,638
          multifamily  units and 227 hotel suites and had aggregate  acquisition
          costs, including capitalized costs, of approximately $1.8 billion.

          From  January 1, 1996 to the date of this filing,  sold 52  properties
          which were comprised of six office  properties,  thirteen  office/flex
          properties,  eight industrial  properties,  19 retail properties,  two
          multifamily properties and four hotel properties,  to redeploy capital
          into properties the Company believes have  characteristics more suited
          to its overall  growth  strategy and operating  goals.  Completed four
          offerings of Common Stock in October 1996,  March 1997,  July 1997 and
          October 1997  (respectively,  the "October 1996  Offering," the "March
          1997  Offering,"  the "July  1997  Offering,"  and the  "October  1997
          Offering"),  resulting in aggregate  gross  proceeds of  approximately
          $562 million.

          Completed an offering of 7 3/4% Series A Convertible  Preferred  Stock
          (the "January 1998  Convertible  Preferred Stock  Offering") for total
          gross proceeds of $287.5 million.

          Issued $150  million of unsecured  7.625%  Series A Senior Notes which
          mature on March 15, 2005.  In June 1999,  $17.1  million of the Senior
          Notes were  retired at a discount  which  resulted  in a gain on early
          extinguishment of debt of approximately $1.8 million.

          Entered  into 4  development  alliances  to which the Company has made
          advances of  approximately  $39 million and a loan (including  accrued
          interest) of $36.7 million as of June 30, 1999.

                                       21
<PAGE>

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

Results of Operations

Comparison  of the six months  ended June 30, 1999 to the six months  ended June
30, 1998.

Rental Revenue.  Rental revenue increased  $31,611,000,  or 32%, to $129,193,000
for the six months  ended June 30,  1999,  from  $97,582,000  for the six months
ended June 30, 1998.  The increase  included  growth in revenue from the office,
industrial,  office/flex,  retail  and  multifamily  Properties  of  $3,618,000,
$2,747,000, $1,122,000, $612,000 and $25,532,000,  respectively. These increases
were  partially  offset  by a  $2,020,000  decrease  in  revenue  from the hotel
Properties due to the 1998 and 1999 sales of four hotels.  Excluding  properties
that have been sold,  rental  revenue  for the six months  ended June 30,  1999,
included $11,165,000 generated from the 1996 Acquisitions, $43,863,000 generated
from the 1997 Acquisitions, $65,830,000 generated from the 1998 Acquisitions and
$1,200,000  generated  from the 1999  Acquisitions.  In addition,  $7,135,000 of
rental  revenue was generated  from 21 properties  that were sold during the six
months ended June 30, 1999.

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 Managed  Partnerships.  This  revenue  increased  $642,000,  or 52%, to
$1,874,000 for the six months ended June 30, 1999,  from  $1,232,000 for the six
months ended June 30, 1998.  The increase was primarily due to  transaction  and
management fees from GC.

Interest and Other  Income.  Interest and other income  increased  $2,834,000 to
$3,437,000  for the six months  ended June 30, 1999,  from  $603,000 for the six
months ended June 30, 1998. The increase primarily  consisted of interest income
on a mortgage loan receivable secured by land located in Aurora,  Colorado which
originated on June 30, 1998,  and interest  earned on lender  impound  accounts,
invested cash balances and notes receivable for tenant improvements.

Equity in Earnings (Loss) of Associated Companies.  Equity in earnings (loss) of
Associated Companies decreased $1,626,000 or 153%, to a loss of $565,000 for the
six months ended June 30, 1999,  from earnings of $1,061,000  for the six months
ended June 30, 1998.  The  decrease is  primarily  due to a decrease in earnings
from GC resulting  from a provision to reduce the carrying  value of  management
contracts with certain of the Managed Partnerships. This decrease is also due to
a decrease in earnings  from GHG  resulting  from the sales and pending sales of
the Company's hotel properties which resulted in the June 30, 1998, cancellation
of GHG's hotel leases with the Company.

Net Gain on  Sales of Real  Estate  Assets.  A net gain on sales of real  estate
assets of  $7,093,000  during the six months ended June 30, 1999,  resulted from
the sale of five office properties,  nine office/flex properties, two industrial
properties,  three retail properties,  one multifamily property, one hotel and a
small interest in real estate securities from the Company's  portfolio.  The net
gain on sales of real estate  assets of  $2,139,000  during the six months ended
June  30,  1998,  resulted  from  the  sale  of one  multifamily  property,  two
industrial properties,  two office/flex properties and two hotel properties from
the Company's portfolio.

Property Operating Expenses.  Property operating expenses increased $13,272,000,
or 43%, to $43,861,000 for the six months ended June 30, 1999, from  $30,589,000
for the six months ended June 30, 1998.  This increase  represents  increases in
property operating  expenses  attributable to the 1998 Acquisitions and the 1999
Acquisitions  offset by decreases in property operating expenses due to the 1998
and 1999 sales of properties.

General and Administrative Expenses. General and administrative expenses did not
change  significantly  with a decrease of $52,000,  or 1%, to $4,773,000 for the
six months ended June 30, 1999,  from  $4,825,000  for the six months ended June
30, 1998. However, as a percentage of rental revenue, general and administrative
expenses decreased from 4.9% for the six months ended June 30, 1998, to 3.7% for
the six months ended June 30, 1999.

Depreciation  and   Amortization.   Depreciation   and  amortization   increased
$8,369,000,  or 40%, to $29,312,000 for the six months ended June 30, 1999, from


                                       22
<PAGE>

$20,943,000  for the six months ended June 30,  1998.  The increase is primarily
due to depreciation and amortization  associated with the 1998  Acquisitions and
1999 Acquisitions.

Interest Expense.  Interest expense increased $14,106,000 or 75%, to $32,958,000
for the six months  ended June 30,  1999,  from  $18,852,000  for the six months
ended June 30, 1998.  Substantially all of the increase was the result of higher
average borrowings during the six months ended June 30, 1999, as compared to the
six  months  ended June 30,  1998,  due to new debt and the  assumption  of debt
related to the 1998 Acquisitions and 1999 Acquisitions.

Net Loss on Early  Extinguishment  of Debt. Net loss on early  extinguishment of
debt of  $303,000  during the six  months  ended June 30,  1999,  consists  of a
$1,828,000  gain on the  retirement  of Senior  Notes at a  discount,  offset by
$2,026,000 of prepayment penalties and $105,000 for the write-off of unamortized
loan fees upon the early payoff of four loans.  These loans were paid-off  early
when more favorable terms were obtained through new financing  (discussed below)
and upon the sale of the properties securing the loans.

Comparison  of the three  months  ended June 30, 1999 to the three  months ended
June 30, 1998.

Rental Revenues.  Rental revenues increased $12,933,000,  or 25%, to $64,552,000
for the three months ended June 30, 1999, from  $51,619,000 for the three months
ended  June  30,  1998.  The  increase  included  growth  in  revenues  from the
industrial,  office/flex and multifamily Properties of $1,276,000, $168,000, and
$12,623,000, respectively. These increases were partially offset by decreases in
revenue from the office,  retail and hotel Properties of $161,000,  $241,000 and
$732,000, respectively. Excluding properties that have been sold, rental revenue
for the three months ended June 30, 1999, included $5,630,000 generated from the
1996 Acquisitions, $21,951,000 generated from the 1997 Acquisitions, $33,084,000
generated  from the  1998  Acquisitions  and  $743,000  generated  from the 1999
Acquisitions.  In addition,  $3,144,000 of rental  revenue was generated from 14
properties that were sold during the three months ended June 30, 1999.

Fees and Reimbursements.  Fees and reimbursements  revenue consists primarily of
property  management fees,  asset management fees and lease  commissions paid to
the Company under property and asset management agreements. This revenue did not
change  significantly  with a decrease  of $16,000,  or 2%, to $743,000  for the
three months ended June 30, 1999,  from $759,000 for the three months ended June
30, 1998.

Interest and Other  Income.  Interest and other income  increased  $1,532,000 to
$1,778,000  for the six months  ended June 30, 1999,  from  $246,000 for the six
months ended June 30, 1998. The increase primarily  consisted of interest income
on a mortgage loan receivable secured by land located in Aurora,  Colorado which
originated on June 30, 1998,  and interest  earned on lender  impound  accounts,
invested cash balances and notes receivable for tenant improvements.

Equity in Earnings (Loss) of Associated Companies.  Equity in earnings (loss) of
Associated  Companies decreased  $1,583,000,  or 223%, to a loss of $874,000 for
the three months ended June 30,  1999,  from  earnings of $709,000 for the three
months  ended June 30,  1998.  The  decrease is  primarily  due to a decrease in
earnings  from GC resulting  from a provision  to reduce the  carrying  value of
management contracts with certain of the Managed Partnerships.  This decrease is
also due to a decrease in earnings from GHG resulting from the sales and pending
sales of the Company's  hotel  properties  which  resulted in the June 30, 1998,
cancellation of GHG's hotel leases with the Company.

Net Gain on Sales of Real  Estate  Assets.  The net gain on sales of real estate
assets of $5,742,000 during the three months ended June 30, 1999,  resulted from
the sales of five office properties, four office/flex properties, two industrial
properties, one retail property, one multifamily property and one hotel property
from the  Company's  portfolio.  The net gain on sales of rental  properties  of
$693,000 during the three months ended June 30, 1998, resulted from the sales of
one office/flex property and two hotel properties from the Company's portfolio.

Property Operating Expenses.  Property operating expenses increased  $5,595,000,
or 34%,  to  $21,860,000  for  the  three  months  ended  June  30,  1999,  from
$16,265,000 for the three months ended June 30, 1998.  This increase  represents
increases in property operating  expenses  attributable to the 1998 Acquisitions
and the 1999 Acquisitions offset by decreases in property operating expenses due
to the 1998 and 1999 sales of properties.

                                       23
<PAGE>

General and Administrative Expenses. General and administrative expenses did not
change  significantly  with a decrease of $52,000,  or 2%, to $2,551,000 for the
three  months ended June 30, 1999,  from  $2,603,000  for the three months ended
June  30,  1998.  However,  as a  percentage  of  rental  revenue,  general  and
administrative  expenses  decreased  from 5% for the three months ended June 30,
1998, to 4% for the three months ended June 30, 1999.

Depreciation  and   Amortization.   Depreciation   and  amortization   increased
$3,286,000,  or 30%, to  $14,220,000  for the three  months ended June 30, 1999,
from  $10,934,000  for the three  months  ended June 30,  1998.  The increase is
primarily  due  to  depreciation  and  amortization  associated  with  the  1998
Acquisitions and 1999 Acquisitions.

Interest Expense.  Interest expense increased $6,711,000, or 69%, to $16,418,000
for the three months ended June 30, 1999,  from  $9,707,000 for the three months
ended June 30, 1998.  Substantially all of the increase was the result of higher
average  borrowings  during the three months ended June 30, 1999, as compared to
the three months ended June 30, 1998, due to new debt and the assumption of debt
related to the 1998 Acquisitions and 1999 Acquisitions.

Net Gain on Early  Extinguishment  of Debt. Net gain on early  extinguishment of
debt of  $1,688,000  during the three months ended June 30, 1999,  consists of a
$1,828,000  gain on the  retirement  of Senior Notes at a discount,  offset by a
$35,000  prepayment  penalty and $105,000 for the write-off of unamortized  loan
fees upon the early  payoff of two  mortgage  loans.  These loans were  paid-off
early with proceeds from the sales of properties.

Liquidity and Capital Resources

Cash Flows
For the six months ended June 30, 1999,  cash  provided by operating  activities
increased by $4,802,000 to $51,424,000  as compared to $46,622,000  for the same
period in 1998.  The  increase  is  primarily  due to an  increase in net income
(before depreciation and amortization,  minority interest,  net gain on sales of
real estate assets and net loss on early  extinguishment  of debt) of $6,536,000
due  to the  1998  Acquisitions  and  1999  Acquisitions.  Cash  from  investing
activities  increased  by  $682,298,000  to  $79,976,000  of  cash  provided  by
investing  activities  for the six months  ended June 30,  1999,  as compared to
$602,322,000 of cash used for investing  activities for the same period in 1998.
The increase is primarily due to a decrease in property  acquisitions in 1999 as
compared to the same period in 1998.  During the six months ended June 30, 1998,
the Company acquired 58 properties as compared to two properties  during the six
months ended June 30, 1999. This decrease is partially  offset by an increase in
proceeds from sales of properties  during 1999.  Cash from financing  activities
decreased by $691,414,000 to $133,756,000 of cash used for financing  activities
for the six months  ended June 30,  1999,  as compared to  $557,658,000  of cash
provided by financing  activities  for the same period in 1998.  This change was
primarily  due to a decrease  in net  proceeds  from the  issuance  of stock and
proceeds from new debt. In 1998, the Company  completed an offering of Preferred
Stock;  there have been no offerings in 1999. In addition,  in 1998, the Company
issued $150,000,000 of unsecured Series A Senior Notes.

The Company  expects to meets 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.

The  Company's  principal  sources of  funding  for  acquisitions,  development,
expansion and renovation of properties  include the unsecured  Credit  Facility,
permanent  secured debt financing,  public unsecured 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.

Mortgage Loans Receivable
Mortgage loans  receivable  increased from  $42,420,000 at December 31, 1998, to
$43,982,000  at June 30,  1999.  This  increase  was  primarily  due to  accrued
interest on a loan made by the Company under a development alliance.

                                       24
<PAGE>

Secured and Unsecured Financing
Mortgage  loans payable  decreased  from  $708,578,000  at December 31, 1998, to
$692,384,000  at June 30,  1999.  This  decrease  resulted  from the  payoff  of
approximately  $51.6 million of mortgage loans in connection  with 1999 sales of
properties  and  refinancing  of  debt,  and  scheduled  principal  payments  of
approximately $4.7 million.  This decrease is partially offset by the assumption
of a $14.1 million  mortgage loan in connection with a 1999  Acquisition and new
financing of $26 million (as discussed below).

In March 1999, the Company  obtained a $26 million loan from a commercial  bank.
The loan was non-recourse and was secured by seven properties and had a maturity
date of December 22, 1999, with an option to extend for six months. The proceeds
were  used  to pay  off a loan  which  was  previously  secured  by  these  same
properties  and to reduce  other debt.  This loan was paid off in June 1999 with
proceeds from the sales of four properties.

In June 1999, the Company retired  $17,110,000 of the Series A Senior Notes at a
discount,  which  resulted  in  a  gain  on  early  extinguishment  of  debt  of
approximately $1,828,000.

The Company has an unsecured line of credit  provided by a commercial  bank (the
"Credit Facility").  Outstanding  borrowings under the Credit Facility decreased
from  $63,519,000  at December 31, 1998, to $21,247,000 at June 30, 1999, due to
pay downs  from  proceeds  from the sales of  properties  and  refinancing  of a
mortgage loan.

At June 30, 1999, the Company's total indebtedness  included  fixed-rate debt of
$694,661,000 and floating-rate  indebtedness of $151,860,000.  Approximately 64%
of the Company's total assets,  comprising 101 properties, is encumbered by debt
at June 30, 1999.

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, 1999, approximately 18% 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,  1999,  the Company was not a party to any open  interest
rate protection agreements.

Equity and Debt Offerings
In  January  1999,  the  Operating  Partnership  and the  Company  filed a shelf
registration  statement  with  the SEC (the  "January  1999  Shelf  Registration
Statement")  to  register  $300  million  of debt  securities  of the  Operating
Partnership  and 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 Operating Partnership and the Company have the capacity pursuant
to the January 1999 Shelf Registration  Statement to issue up to $300 million in
debt  securities  and $801.2  million in equity  securities,  respectively.  The
Company  currently  has no plans to  issue  equity  or debt  under  these  shelf
registrations.

Development Alliances
The  Company  has  formed  4  development   alliances  for  the  development  of
approximately  713,000  square  feet of  office,  office/flex  and  distribution
properties and 1,710 multifamily units in North Carolina,  Colorado,  Texas, New
Jersey,  Kansas and  Michigan.  As of June 30,  1999,  the Company has  advanced
approximately $39 million.  Under these development  alliances,  the Company has
certain rights to purchase the properties  upon  completion of development  over
the next five years.  In addition,  the Company has loaned  approximately  $36.7
million  (including  accrued  interest)  under another  development  alliance to
continue the  build-out of a 1,200 acre  master-planned  development  in Denver,
Colorado.

Inflation

Substantially  all of the  leases  at the  office/flex,  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.


                                       25
<PAGE>

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

Funds from  Operations,  as defined by NAREIT,  represents  income (loss) before
minority  interests and  extraordinary  items,  adjusted for real estate related
depreciation   and   amortization  and  gains  (losses)  from  the  disposal  of
properties.  The  Company  believes  that FFO is an  important  and widely  used
measure of the financial  performance  of equity REITs which provides a relevant
basis for comparison among other REITs. Together with net income and cash flows,
FFO provides  investors  with an  additional  basis to evaluate the ability of a
REIT to incur and service debt and to fund acquisitions,  developments and other
capital  expenditures.  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. The Company  calculates  FFO in  accordance  with the White
Paper on FFO approved by the Board of Governors of NAREIT in March 1995.

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.

                                       26
<PAGE>

The following table sets forth the Company's  calculation of FFO and CAD for the
three months  ended March 31 and June 30, 1999 (in  thousands,  except  weighted
average shares and per share amounts):

<TABLE>
<CAPTION>


                                                       March 31,         June 30,              YTD
                                                          1999             1999               1999
                                                      -------------    -------------     ----------------
<S>                                                   <C>              <C>               <C>
Net income before minority interest                   $    13,236      $    16,892       $      30,128
Preferred dividend requirement                             (5,570)          (5,570)            (11,140)
Net gain on sales of rental properties                     (1,351)          (5,742)             (7,093)
Depreciation and amortization (1)                          14,947           14,075              29,022
Adjustment to reflect FFO of Associated
    Companies (2)                                             253            2,170               2,423
                                                      -------------    -------------     ----------------
FFO                                                   $    21,515      $    21,825       $      43,340
                                                      =============    =============     ================

Amortization of deferred financing fees                       485              508                 993
Capital reserve                                            (1,465)             994                (471)
Capital expenditures                                       (2,573)          (5,392)             (7,965)
                                                      -------------    -------------     ----------------
CAD                                                   $    17,962      $    17,935       $      35,897
                                                      =============    =============     ================

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

Diluted weighted average shares outstanding             36,098,374       35,984,107           36,040,578
                                                      =============    =============     ================
</TABLE>

(1) Excludes depreciation of corporate office fixed assets.
(2) Reflects  the  adjustments  to  FFO  required  to  reflect  the  FFO  of the
    Associated Companies allocable to the Company. The Company's  investments in
    the  Associated  Companies  are  accounted  for using the  equity  method of
    accounting.
(3) The  distributions  for the three months  ended June 30, 1999,  were paid on
    July 15, 1999.

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


                                       27
<PAGE>

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, 1998, 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.

Impact of Year 2000 Compliance Costs on Operations

State of Readiness.  The Company uses a number of computer software programs and
operating  systems  across the entire  organization.  These programs and systems
primarily  comprise (i)  information  technology  systems ("IT Systems")  (i.e.,
software  programs  and  computer   operating  systems)  that  serve  management
operations,  and (ii) embedded systems such as devices used to control,  monitor
or assist the operation of equipment and machinery  systems  (e.g.,  HVAC,  fire
safety and security) at the Company's properties  ("Property  Systems").  To the
extent that the  Company's  software  applications  contain  source code that is
unable to appropriately  interpret the upcoming calendar year "2000" and beyond,
some  level  of  modification  or  replacement  of  these  applications  will be
necessary.

          IT  Systems.  Employing  a team  made  up of  internal  personnel  and
          third-party consultants,  the Company has completed its identification
          of IT Systems,  including hardware  components,  that are not yet Year
          2000  compliant.  To the  best of the  Company's  knowledge,  based on
          available   information   and  a  reasonable   level  of  inquiry  and
          investigation,  the  Company  has  completed  such  upgrading  of such
          systems that it believes are called for under the  circumstances,  and
          in  accordance  with  prevailing  industry  practice.  The Company has
          commenced a testing  program  which it  anticipates  will be completed
          during 1999. In addition, the Company is currently  communicating with
          third  parties  with  whom  it  does  significant  business,  such  as
          financial  institutions,  tenants  and  vendors,  to  determine  their
          readiness for Year 2000 compliance.

          Property Systems.  Employing a team made up of internal  personnel and
          third-party   consultants,   the  Company  has  also   completed   its
          identification of Property  Systems,  including  hardware  components,
          that are not yet Year 2000  compliant.  The Company has commenced such
          upgrading  of such  systems  that it believes are called for under the
          circumstances,  based on available  information and a reasonable level
          of  inquiry  and  investigation,  and in  accordance  with  prevailing
          industry practice. Upon completion of such upgrading, the Company will
          initiate a testing  program  which it  anticipates  will be  completed
          during  1999.  To the best of the  Company's  knowledge,  there are no
          Property Systems, the failure of which would have a material effect on
          operations.

Costs of Addressing the Company's Year 2000 Issues.  Given the information known
at this time about the Company's  systems that are  non-compliant,  coupled with
its ongoing,  normal  course-of-business  efforts to upgrade or replace critical
systems, as necessary, the Company does not expect Year 2000 compliance costs to
have any material  adverse impact on liquidity or ongoing results of operations.
The  costs  of such  assessment  and  remediation  will be paid as an  operating
expense.

Risks of the Company's  Year 2000 Issues.  In light of the Company's  assessment
and upgrading  efforts to date, and assuming  completion of the planned,  normal
course-of-business  upgrades and subsequent  testing,  the Company believes that
any  residual  Year  2000  risk  will  be  limited  to   non-critical   business
applications and support  hardware,  and to short-term  interruptions  affecting
Property  Systems  which,  if they occur at all, will not be material to overall
operations.  The  Company  believes  that all of its  systems  will be Year 2000
compliant and that  compliance will not materially  adversely  affect its future
liquidity or results of operations  or ability to service debt,  but the Company
cannot give absolute assurance that this is the case.

                                       28
<PAGE>

The  Company's  Contingency  Plans.  The  Company is  currently  developing  its
contingency plans for all operations to address the most reasonably likely worst
case  scenarios  regarding  Year 2000  compliance.  Such  plans,  however,  will
recognize  material  limitations  on the  Company's  ability  to plan for  major
regional or industrial  failures  such as regional  power outages or regional or
industrial communications breakdowns. The Company expects such contingency plans
to be completed during 1999.

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.



                                       29
<PAGE>



PART II. OTHER INFORMATION

Item 1.       Legal Proceedings

Blumberg.  On July 24, 1999,  the Supreme Court of the United  States,  denied a
petition for a writ of certiorari to review the Company's  settlement of a class
action  complaint  originally  filed on February 21, 1995 in connection with the
Consolidation.  No further appeals are possible in this case, and the settlement
amount has been paid in full.  Under the  settlement,  the Company agreed to pay
$855,000  to settle  certain  claims by Anthony  E.  Blumberg,  and others  (the
"Blumberg  Action"),  that the  Company  and others  had,  among  other  things,
breached  their  fiduciary  duty and duty of good  faith  and  fair  dealing  to
investors in the  Partnerships  involved in the  Consolidation.  Certain parties
objected to the  settlement,  but the settlement was approved (or review denied)
by the Superior  Court of the State of  California  in and for San Mateo County,
the  California  state court of appeals,  the  California  Supreme Court and the
Supreme Court of the United States.

BEJ Equity  Partners.  On  December 1, 1995,  a second  class  action  complaint
relating  to the  Consolidation  was  filed in  Federal  District  Court for the
Northern  District of California  (the "BEJ Action").  The plaintiffs in the BEJ
Action voluntarily stayed the action pending resolution of the Blumberg Action.

The  plaintiffs in the BEJ Action are BEJ Equity  Partners and others,  who as a
group held limited partner interests in certain of the Partnerships  included in
the  Consolidation,  on behalf of themselves and all others similarly  situated.
The defendants are the Company and other  Glenborough  entities  involved in the
Consolidation,   as  well  as  Robert  Batinovich  and  Andrew  Batinovich.  The
Partnerships are named as nominal defendants.

This action alleges certain  disclosure  violations and  substantially  the same
breaches of fiduciary duty as were alleged in the Blumberg Action. The complaint
sought injunctive relief, which was denied at a hearing on December 22, 1995. At
that hearing, the court also deferred all further proceedings in this case until
after the scheduled  January 17, 1996 hearing in the Blumberg Action.  Following
several  stipulated  extensions  of  time  for the  Company  to  respond  to the
complaint, the Company filed a motion to dismiss the case. Plaintiffs in the BEJ
Action  voluntarily stayed the action pending resolution of the Blumberg Action;
such plaintiffs can revive their lawsuit.

It is management's position that the BEJ Action is without merit, and management
intends to pursue a vigorous defense.  However, given the inherent uncertainties
of litigation,  there can be no assurance  that the ultimate  outcome in the BEJ
Action will be in the Company's favor.

Certain other claims and lawsuits have arisen  against the Company in its normal
course of  business.  The Company  believes  that such other 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, 1999.




                                       30
<PAGE>



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:

                  On April 22, 1999, the Company filed a report on Form 8-K with
                  respect to  Supplemental  Information  for the  quarter  ended
                  March 31, 1999.

                  On July 28, 1999,  the Company filed a report on Form 8-K with
                  respect to Supplemental Information for the quarter ended June
                  30, 1999.




                                       31
<PAGE>





                                   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 13, 1999                    /s/ Andrew Batinovich
                                               Andrew Batinovich
                                               Director, President
                                               and Chief Operating Officer
                                               (Principal Operating Officer)





      Date: August 13, 1999                    /s/ Stephen Saul
                                               Stephen Saul
                                               Executive Vice President
                                               and Chief Financial Officer
                                               (Principal Financial Officer)





      Date: August 13, 1999                     /s/ Terri Garnick
                                               Terri Garnick
                                               Senior Vice President,
                                               Chief Accounting Officer,
                                               Treasurer
                                               (Principal Accounting Officer)





                                       32
<PAGE>



                                  EXHIBIT INDEX



Exhibit No.    Exhibit Title

11.1           Statement re:  Computation of Per Share Earnings is shown in Note
               9 of the Consolidated Financial Statements of the Company in Item
               1.

12.1           Computation  of Ratio of Earnings  to Fixed  Charges and Ratio of
               Earnings to Fixed Charges and Preferred Dividends.

27.1           Financial Data Schedule.




                                       33
<PAGE>

<TABLE>
<CAPTION>



Exhibit 12.1

GLENBOROUGH REALTY TRUST INCORPORATED  Computation of Ratio of Earnings to Fixed
Charges and Ratio of Earnings to Fixed Charges and  Preferred  Dividends For the
five years ended December 31, 1998 and the three months ended March 31, 1999 and
June 30, 1999 (in thousands)
                                  GRT Predecessor
                                      Entities,
                                      Combined                                              The Company
                               -----------------------   ---------------------------------------------------------------------------
                                                                                               Three Months  Three Months
                                                                                                  Ended         Ended       Year To
                                                  Year Ended December 31,                        March 31,     June 30,       Date
                               -------------------------------------------------------------  ------------   -----------  ----------

                                  1994        1995        1996         1997         1998          1999          1999          1999
                               ----------  ----------  ----------   ----------  ------------  ------------   -----------  ----------
EARNINGS, AS DEFINED

<S>                            <C>         <C>         <C>           <C>       <C>            <C>            <C>          <C>
   Preferred Dividends(2)      $  1,580    $     524   $  (1,609)     $19,368   $    44,602    $  10,578      $  17,051    $  27,629
Extraordinary items                  --           --         186          843         1,400        1,991         (1,688)         303
Federal & State income taxes        176          357          --           --            --           --             --           --
Minority Interest                    43           --         292        1,119         2,550          667          1,529        2,196
Fixed Charges                     1,140        2,129       3,913        9,668        53,289       16,540         16,418       32,958
                               ----------  ----------  ----------   ----------  ------------  -------------   -----------  ---------

                               $  2,939    $   3,010   $   2,782      $30,998   $   101,841    $  29,776      $  33,310    $  63,086
                               ----------  ----------  ----------   ----------  ------------  -------------   -----------  ---------

FIXED CHARGES AND PREFERRED
     DIVIDENDS, AS DEFINED

Interest Expense               $  1,140    $   2,129   $   3,913     $  9,668   $    53,289    $  16,540      $  16,418    $  32,958
Capitalized Interest                 --           --          --           --         1,108          643            687        1,330
Preferred Dividends                  --           --          --           --        20,620        5,570          5,570       11,140
                               ----------  ----------  ----------   ----------  ------------  -------------   -----------  ---------
                               $  1,140    $   2,129   $   3,913     $  9,668   $    75,017    $  22,753      $  22,675    $  45,428

RATIO OF EARNINGS TO FIXED
     CHARGES(3)                    2.58         1.41        0.71 (1)     3.21          1.87         1.73           1.95         1.84
                               ----------  ----------  ----------   ----------  ------------  -------------   -----------  ---------

RATIO OF EARNINGS TO FIXED
     CHARGES AND PREFERRED
     DIVIDENDS(3)                  2.58         1.41        0.71 (1)     3.21          1.36         1.31           1.47         1.39
                               ----------  ----------  ----------   ----------  ------------  -------------   -----------   --------

</TABLE>
(1) For the twelve months ended December 31, 1996, earnings were insufficient to
cover fixed charges by $1,131. (2) Net Income (Loss) before Preferred  Dividends
includes depreciation and amortization expense as a deduction.
(3) Ratio of  Earnings to Fixed  Charges and Ratio of Earnings to Fixed  Charges
and Preferred  Dividends  includes  depreciation and  amortization  expense as a
deduction from earnings.

                                       34