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, 1998

                                       OR

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

                        Commission File Number: 001-14162


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

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

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

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

                                                      Name of Exchange
      Title of each class:                          on which registered:
Common Stock, $.001 par value                      New York Stock Exchange
7.75% Series A Convertible 
Preferred Stock, $.001 par value                   New York Stock Exchange
 
        Securities registered pursuant to Section 12(g) of the Act: None


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                   Yes X No___


As of August 14, 1998,  31,702,947  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, 1997):

            Consolidated Balance Sheets at June 30, 1998 and 
            December 31, 1997                                                  4

            Consolidated Statements of Operations for the six months
            ended June 30, 1998 and 1997                                       5

            Consolidated Statements of Operations for the three months
            ended June 30, 1998 and 1997                                       6

            Consolidated Statement of Stockholders' Equity for the six
            months ended June 30, 1998                                         7

            Consolidated Statements of Cash Flows for the six months
            ended June 30, 1998 and 1997                                     8-9

            Notes to Consolidated Financial Statements                     10-21

          Consolidated Financial Statements of Glenborough Hotel Group
          (Unaudited except for the Consolidated Balance Sheet at 
          December 31, 1997):

            Consolidated Balance Sheets at June 30, 1998 and 
            December 31, 1997                                                 22

            Consolidated Statements of Income for the six months ended
            June 30, 1998 and 1997                                            23

            Consolidated Statements of Income for the three months ended
            June 30, 1998 and 1997                                            24

            Consolidated Statement of Stockholders' Equity for the six 
            months ended June 30, 1998                                        25

            Consolidated Statements of Cash Flows for the six months 
            ended June 30, 1998 and 1997                                      26

            Notes to Consolidated Financial Statements                     27-29



                                       2
<PAGE>

Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations:

            Glenborough Realty Trust Incorporated                          30-36

            Glenborough Hotel Group                                        37-38

PART II   OTHER INFORMATION

Item 1.   Legal Proceedings                                                39-40

Item 2.   Changes in Securities                                            40-41

Item 4.   Submission of Matters to a Vote of Security Holders                 41

Item 5.   Other Information                                                   41

Item 6.   Exhibits and Reports on Form 8-K                                    42

SIGNATURES                                                                    43

EXHIBIT INDEX                                                                 44


                                       3
<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,
                                                                                 1998                  1997
                                                                             (Unaudited)             (Audited)
                                                                            --------------         -------------
ASSETS
<S>                                                                         <C>                    <C>
     Rental property, net of accumulated depreciation of
       $61,182 and $41,213 in 1998 and 1997, respectively                   $   1,698,554          $    825,218
     Investments in Associated Companies                                           11,134                10,948
     Mortgage loans receivable                                                     41,269                 3,692
     Cash and cash equivalents                                                      7,028                 5,070
     Other assets                                                                  77,790                20,846
                                                                            ---------------        -------------

         TOTAL ASSETS                                                       $   1,835,775          $    865,774
                                                                            ===============        =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
     Mortgage loans                                                         $     451,084          $    148,139
     Unsecured senior notes                                                       150,000                    --
     Unsecured loan                                                               142,170                    --
     Unsecured bank line                                                          125,152                80,160
     Other liabilities                                                             29,786                11,091
                                                                            ---------------        -------------
       Total liabilities                                                          898,192               239,390
                                                                            ---------------        -------------

Commitments and contingencies                                                          --                    --

Minority interest                                                                  89,992                46,261

Stockholders' Equity:
     Common stock, 31,685,322 and 31,547,256 shares issued
       and outstanding at June 30, 1998 and
       December 31, 1997, respectively                                                 31                    31
     Preferred stock, 11,500,000 shares issued and outstanding
       at June 30, 1998                                                                11                    --
     Additional paid-in capital                                                   865,286               593,702
     Deferred compensation                                                           (226)                 (210)
     Retained earnings (deficit)                                                  (17,511)              (13,400)
                                                                            ---------------        -------------
       Total stockholders' equity                                                 847,591               580,123
                                                                            ---------------        -------------

           TOTAL LIABILITIES AND STOCKHOLDERS'
              EQUITY                                                        $   1,835,775          $    865,774
                                                                            ===============        =============

           See accompanying notes to consolidated financial statements
</TABLE>



                                       4
<PAGE>

<TABLE>
<CAPTION>

                                       GLENBOROUGH REALTY TRUST INCORPORATED
                                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                  For the six months ended June 30, 1998 and 1997
                                      (in thousands, except per share amounts)
                                                    (Unaudited)

                                                                               1998                        1997
                                                                           --------------              -------------
REVENUE
<S>                                                                        <C>                         <C>         
     Rental revenue                                                        $      97,582               $     19,691
     Fees and reimbursements from affiliate                                        1,232                        367
     Interest and other income                                                       603                        613
     Equity in earnings of Associated Companies                                    1,061                        603
     Net gain on sales of rental properties                                        2,139                        570
     Gain on collection of mortgage loan receivable                                   --                        652
                                                                           --------------              -------------
       Total revenue                                                             102,617                     22,496
                                                                           --------------              -------------

EXPENSES
     Property operating expenses                                                  30,589                      6,045
     General and administrative                                                    4,825                      1,374
     Depreciation and amortization                                                20,943                      4,044
     Interest expense                                                             18,852                      3,800
                                                                           --------------              -------------
       Total expenses                                                             75,209                     15,263
                                                                           --------------              -------------

Income from operations before minority interest                                   27,408                      7,233

   Minority interest                                                              (1,274)                      (629)
                                                                           ---------------             -------------

Net income                                                                 $      26,134               $      6,604
                                                                           --------------              -------------

Preferred dividend requirement                                                   (9,480)                         --
                                                                           --------------              -------------

Net income available to Common Stockholders                                $     16,654                $      6,604
                                                                           ==============              =============

Basic Earnings Per Share Data:

Net income available to Common Stockholders                                $       0.53                $      0.57
                                                                           ==============              =============

Basic weighted average shares outstanding                                    31,598,648                 11,647,479
                                                                           ==============              =============

Diluted Earnings Per Share Data:

Net income available to Common Stockholders                                $       0.52                $      0.56
                                                                           ==============              =============

Diluted weighted average shares outstanding                                  34,612,985                 11,852,810
                                                                           ==============              =============

           See accompanying notes to consolidated financial statements
</TABLE>

                                       5
<PAGE>

<TABLE>
<CAPTION>

                                       GLENBOROUGH REALTY TRUST INCORPORATED
                                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                 For the three months ended June 30, 1998 and 1997
                                      (in thousands, except per share amounts)
                                                    (Unaudited)

                                                                               1998                        1997
                                                                           --------------              -------------
REVENUE
<S>                                                                        <C>                         <C>         
     Rental revenue                                                        $      51,619               $     11,784
     Fees and reimbursements from affiliate                                          759                        180
     Interest and other income                                                       246                        269
     Equity in earnings of Associated Companies                                      709                        458
     Net gain on sales of rental properties                                          693                        570
     Gain on collection of mortgage loan receivable                                   --                        498
                                                                           --------------              -------------
       Total revenue                                                              54,026                     13,759
                                                                           --------------              -------------

EXPENSES
     Property operating expenses                                                  16,265                      3,663
     General and administrative                                                    2,603                        723
     Depreciation and amortization                                                10,934                      2,507
     Interest expense                                                              9,707                      2,227
                                                                           --------------              -------------
       Total expenses                                                             39,509                      9,120
                                                                           --------------              -------------

Income from operations before minority interest                                   14,517                      4,639

   Minority interest                                                                (596)                      (398)
                                                                           ---------------             -------------

Net income                                                                 $      13,921               $      4,241
                                                                           --------------              -------------

Preferred dividend requirement                                                   (5,570)                         --
                                                                           --------------              -------------

Net income available to Common Stockholders                                $      8,351                $     4,241
                                                                           ==============              =============

Basic Earnings Per Share Data:

Net income available to Common Stockholders                                $       0.26                $      0.32
                                                                           ==============              =============

Basic weighted average shares outstanding                                    31,648,041                 13,188,504
                                                                           ==============              =============

Diluted Earnings Per Share Data:

Net income available to Common Stockholders                                $       0.26                $      0.32
                                                                           ==============              =============

Diluted weighted average shares outstanding                                  34,868,905                 13,432,442
                                                                           ==============              =============

           See accompanying notes to consolidated financial statements
</TABLE>

                                       6
<PAGE>

<TABLE>
<CAPTION>
                                               GLENBOROUGH REALTY TRUST INCORPORATED
                                           CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                               For the six months ended June 30, 1998
                                                           (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, 1997            31,547     $  31    $    --     $  --   $   593,702    $    (210)   $  (13,400)  $  580,123

Issuance of preferred stock, net of
    offering costs of $12,885               --        --     11,500        11       274,604           --            --      274,615

Issuance of common stock related to
acquisitions                                --        --         --        --         3,389           --            --        3,389

Exercise of stock options                    1        --         --        --            10           --            --           10

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

Issuance of common stock to director         2        --         --        --            62          (62)           --           --

Unrealized gain on marketable
    securities                              --        --         --        --            --           --           165          165

Adjustment to fair value of minority
    interest                                --        --         --        --        (6,481)          --            --       (6,481)

Distributions                               --        --         --        --            --           --       (30,410)     (30,410)

Net income                                  --        --         --        --            --           --        26,134       26,134
                                       ---------------------------------------------------------------------------------------------

Balance at June 30, 1998                31,550     $  31     11,500     $  11   $   865,286    $    (226)   $  (17,511)  $  847,591
                                       =============================================================================================

           See accompanying notes to consolidated financial statements
</TABLE>

                                       7
<PAGE>

<TABLE>
<CAPTION>
                                      GLENBOROUGH REALTY TRUST INCORPORATED
                                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 For the six months ended June 30, 1998 and 1997
                                                 (in thousands)
                                                   (Unaudited)



                                                                            1998                        1997
                                                                       ---------------             ---------------
Cash flows from operating activities:
<S>                                                                    <C>                         <C>           
     Net income                                                        $       26,134              $        6,604
     Adjustments to reconcile net income
       to net cash provided by operating
       activities:
         Depreciation and amortization                                         20,943                       4,044
         Amortization of loan fees, included in
           interest expense                                                       592                         128
         Minority interest in income from operations                            1,274                         629
         Equity in earnings of Associated
           Companies                                                           (1,061)                       (603)
         Gain on collection of mortgage loan receivable                            --                        (652)
         Net gain on sales of rental properties                                (2,139)                       (570)
         Amortization of deferred compensation                                     46                          95
         Changes in certain assets and liabilities, net                       (13,186)                     (1,102)
                                                                       ---------------             ---------------

           Net cash provided by operating activities                           32,603                       8,573
                                                                       ---------------             ---------------

Cash flows from investing activities:
     Net proceeds from sales of rental properties                              37,804                      11,889
     Additions to rental property                                            (570,536)                   (144,157)
     Additions to mortgage loans receivable                                   (38,084)                     (2,344)
     Principal receipts on mortgage loans receivable                              507                       9,354
     Distributions from Associated Companies                                      875                       1,178
     Other investments (included in other assets)                             (26,006)                         --
                                                                       ---------------             ---------------

           Net cash used for investing activities                            (595,440)                   (124,080)
                                                                       ---------------             ---------------




                                    continued

           See accompanying notes to consolidated financial statements
</TABLE>


                                       8
<PAGE>

<TABLE>
<CAPTION>
                                     GLENBOROUGH REALTY TRUST INCORPORATED
                               CONSOLIDATED STATEMENTS OF CASH FLOWS -- continued
                                For the six months ended June 30, 1998 and 1997
                                                (in thousands)
                                                  (Unaudited)


                                                                            1998                      1997
                                                                       ---------------            --------------
Cash flows from financing activities:
<S>                                                                    <C>                        <C>          
     Proceeds from borrowings                                          $     530,321              $     166,675
     Repayment of borrowings                                                (207,741)                  (107,371)
     Distributions to minority interest holders                               (2,000)                      (525)
     Distributions                                                           (30,410)                    (7,314)
     Exercise of stock options                                                    10                         --
     Proceeds from issuance of preferred stock, net of
         offering costs                                                      274,615                     66,039
                                                                       ---------------            --------------

         Net cash provided by financing activities                           564,795                    117,504
                                                                       ---------------            --------------

Net increase in cash and cash equivalents                                      1,958                      1,997

Cash and cash equivalents at beginning of period                               5,070                      1,355
                                                                       ---------------            --------------

Cash and cash equivalents at end of period                             $       7,028              $       3,352
                                                                       ===============            ==============

Supplemental disclosure of cash flow information:

     Cash paid for interest                                            $      12,165              $       3,539
                                                                       ===============            ==============

Supplemental disclosure of Non-Cash Investing and Financing
     Activities:

     Acquisition of real estate through assumption of first
         trust deed notes payable                                      $     317,527              $      17,486
                                                                       ===============            ==============

     Acquisition of real estate through issuance of shares
         of common stock and Operating Partnership units               $      41,365              $       7,351
                                                                       ===============            ==============

           See accompanying notes to consolidated financial statements
</TABLE>

                                       9
<PAGE>

                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1998

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  through an exchange of assets 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, 1998,
the following Common Stock  transactions  occurred:  (i) 37,000 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) 500
shares were issued in connection  with the exercise of employee  stock  options;
and (v) 59 shares were retired, resulting in total shares of Common Stock issued
and  outstanding  at June 30, 1998, of  31,685,322.  Fully  converted  shares of
common stock issued and outstanding  (including  3,843,956  partnership units in
the Operating Partnership) totaled 35,529,278 at June 30, 1998.

In January 1998, the Company completed a public offering of 11,500,000 shares of
7.75%  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, 1998 totaled 11,500,000.

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  several  subsidiaries,   is  engaged  primarily  in  the
ownership,   operation,   management,   leasing,   acquisition,   expansion  and
development  of  various  income-producing   properties.   The  Company's  major
consolidated  subsidiary,  in which it holds a 1% general partner interest and a
88.15% limited  partner  interest at June 30, 1998, is  Glenborough  Properties,
L.P.  (the  "Operating  Partnership").  As  of  June  30,  1998,  the  Operating
Partnership,  directly  and  through  various  subsidiaries  in which it and the
Company own 100% of the ownership interests, controls a total of 179 real estate
projects.

As of June 30,  1998,  the Company 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
     services for these  partnerships (the "Controlled  Partnerships").  It also
     provides partnership administration,  asset management, property management
     and  development  services  under  a  long  term  contract  to a  group  of
     unaffiliated  partnerships which include five 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").   The  services  to  the  Rancon
     Partnerships  were  previously   provided  by  Glenborough   Inland  Realty
     Corporation  ("GIRC"),  a  California  corporation,  which  merged  with GC
     effective June 30, 1997. GC also provides property  management services for
     a limited portfolio of property owned by other  unaffiliated third parties.
     In the merger between GC and GIRC, the Company received  preferred stock of
     GC in exchange for its preferred  stock of GIRC,  on a  one-for-one  basis.
     Following the merger,  the Company holds the same  preferences with respect
     to dividends and liquidation distributions paid by GC as it previously held
     with respect to GC and GIRC combined.

                                       10
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1998

     Glenborough Hotel Group ("GHG"), through June 1998, leased the five Country
     Suites by Carlson hotels owned by the Company and operated them for its own
     account.  In June 1998, as discussed  further below, two of the hotels were
     sold and three of the hotels have been leased to another operator. GHG also
     operated two Country  Suites by Carlson  hotels  through June 30, 1998, and
     two resort  condominium  hotels  through  April 30,  1998,  under  separate
     contracts.

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, 1998,  and  December  31,  1997,  and the
consolidated  results of  operations  and cash flows of the  Company for the six
months ended June 30, 1998 and 1997. 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, 1998, and for the period then ended.

Reclassification
Certain  1997  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
In June 1997,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting  Standards No. 131 (SFAS 131),  "Disclosures about Segments
of an Enterprise and Related Information," which will be effective for financial
statements  issued for fiscal years  beginning after December 15, 1997. SFAS 131
will require the Company to report certain financial and descriptive information
about its reportable  operating segments,  segments for which separate financial
information is available  that is evaluated  regularly by management in deciding
how to allocate resources and in assessing performance. For these segments, SFAS
131 will require the Company to report profit and loss, certain specific revenue
and expense items and assets. It also requires  disclosures about each segment's
products and services,  geographic areas of operation and major  customers.  The
Company  will  adopt  the  disclosures  required  by SFAS  131 in the  financial
statements for the year ended December 31, 1998.

Investments in Real Estate
Investments in real estate 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
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.

                                       11
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1998

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

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
In accordance  with  Statement of Financial  Accounting  Standards No. 115 (SFAS
115),  "Accounting for Certain  Investments in Debt and Equity  Securities," the
Company records its marketable securities at fair value. Accordingly, unrealized
gains and losses on these  securities  are  reported as a separate  component of
stockholders'  equity and realized  gains and losses are included in net income.
As of June 30, 1998,  marketable  securities with a fair value of  approximately
$26,000,000  were  included  in other  assets on the  accompanying  consolidated
balance sheet.

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.
Cash and cash equivalents  consist of demand  deposits,  certificates of deposit
and short-term investments with financial  institutions.  The carrying amount of
cash and cash  equivalents  as well as the mortgage notes  receivable  described
above, approximates fair value.

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

Minority Interest
Minority  interest  represents  the  10.85%  limited  partner  interests  in the
Operating Partnership not held by the Company.

                                       12
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1998

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, 1998,  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.

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.

The Company  recognizes  contingent  rental  income after the related  target is
achieved,  consistent with EITF 98-9, "Accounting for Contingent Rent in Interim
Financial Periods."

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  shareholders.   REITs  are  subject  to  a  number  of
organizational and operational requirements.  If the Company fails to qualify as
a REIT in any taxable  year,  the Company will be subject to Federal  income tax
(including  any  applicable  alternative  minimum tax) on its taxable  income at
regular  corporate  tax rates.  Even if the Company  qualifies for taxation as a
REIT,  the Company may be subject to certain state and local taxes on its income
and property and to Federal income and excise taxes on its undistributed income.

Earnings Per Share
In 1997,  the  Company  adopted  the  disclosure  requirements  of SFAS No. 128,
"Earnings  per Share." SFAS 128 requires the  disclosure  of basic  earnings per
share and modified  existing  guidance for computing diluted earnings per share.
Earnings per share for all periods  presented  have been  restated to conform to
the new standard. For additional required disclosures, see Note 8.

Reference to 1997 Audited Financial Statements
These  unaudited  financial  statements  should be read in conjunction  with the
Notes  to  Consolidated  Financial  Statements  included  in  the  1997  audited
financial statements.

Note 3.   INVESTMENTS IN REAL ESTATE

In June 1998, the Company  acquired a portfolio of multi-family  properties (the
"Galesi Portfolio") from the Galesi Group, a privately owned company. The Galesi
Portfolio  includes 21 properties with 6,536 units located primarily in Houston,
Austin,  Dallas and San Antonio.  Four  properties are located outside of Texas:
two in  Atlanta,  one in  Nashville  and  one in  Colorado  Springs.  The  total
acquisition cost, including capitalized costs, was approximately $275.8 million,
comprising:  (i) approximately  $169.4 million of net assumed debt (including an
unamortized  premium totaling  approximately  $3.1 million,  which results in an
effective interest rate on these instruments of 6.75%); (ii) approximately $21.2
million  of equity in the form of  806,393  partnership  units in the  Operating
Partnership  (based  on an agreed  per unit  value of  $26.2315);  and (iii) the
balance in cash.  The cash portion was financed  through  advances  under a $150
million Bridge Loan from a commercial bank as discussed in Note 6.

                                       13
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1998

In June 1998, the Company  acquired a 133,090 square foot office  property and a
229,352  square foot  industrial  property,  both located in northern New Jersey
(the "Donau/Gruppe Portfolio") from a German partnership.  The total acquisition
cost,  including  capitalized costs, was approximately $28.5 million,  which was
comprised of: (i)  approximately  $10.5  million of assumed  debt;  and (ii) the
balance in cash.  The cash portion was financed  through  advances  under a $150
million  Bridge Loan from a commercial  bank. In addition,  the Company is under
contract to acquire from the seller another  85,765 square foot office  building
for $12.4 million. This acquisition is expected to close in August 1998.

In June 1998, the Company  acquired a 263,610 square foot  office/flex  property
located in  Indianapolis,  Indiana (the "Covance  Property") from Eaton & Lauth.
The total acquisition cost, including capitalized costs, was approximately $16.5
million,  comprising:  (i)  approximately  $4  million  of equity in the form of
161,492  partnership units in the Operating  Partnership (based on an agreed per
unit value of  $25.00);  (ii)  approximately  $220,000  of equity in the form of
8,802 shares of Common Stock of the Company  (based on an agreed per share value
of $25.00); and (iii) the balance in cash. The cash portion was financed through
advances under the Acquisition Credit Facility.

In June 1998, the Company sold two hotel  properties for  $6,100,000.  The sales
generated a net gain of approximately $253,000 and net proceeds of approximately
$2,327,000.  In  conjunction  with the sale of one of the  hotels,  the  Company
agreed  to loan  $3,600,000  to the  buyer  for a term of six  months at a fixed
interest rate of 9% (see Note 5). As the buyer  contributed cash  (approximately
$460,000) to the purchase of this hotel, the historical  operations of the hotel
are  sufficient  to service  the loan and the  Company  has no other  continuing
obligations or involvement with this property,  the Company  recognized the sale
under the full accrual method of accounting.

In May 1998, the Company  acquired a 125,507  square foot office  building and a
5.45 acre parcel of land located in Omaha,  Nebraska  ("One and Three  Pacific")
from Shorenstein Company, L.P. The total acquisition cost, including capitalized
costs,  was  approximately  $20.1  million  which  was  paid  entirely  in cash,
including  cash  from  borrowings  under the  Acquisition  Credit  Facility  and
proceeds from the sales of two office/flex properties as discussed above.

In April 1998, the Company  acquired a portfolio of three office  properties and
four retail properties  aggregating  417,745 square feet and three  multi-family
properties containing 670 units (the "Eaton & Lauth Portfolio") from a number of
partnerships in which affiliates of Eaton & Lauth serve as general partners. The
total acquisition cost,  including  capitalized  costs, was approximately  $70.0
million,  comprising:  (i) approximately $32.0 million of net assumed debt; (ii)
approximately  $15.9 million of equity which consisted of (a) approximately $3.2
million in the form of 126,764  shares of Common Stock of the Company  (based on
an agreed per share value of $25.00); and (b) approximately $12.7 million in the
form of 506,788  partnership  units in the  Operating  Partnership  (based on an
agreed  per unit  value of  $25.00);  and (iii) the  balance  in cash.  The cash
portion was financed through advances under the Acquisition Credit Facility. The
Eaton & Lauth Portfolio properties are located in Indiana.

In April 1998, the Company sold an office/flex property for $3,600,000. The sale
generated a net gain of approximately $452,000 and net proceeds of approximately
$1,571,000.  The proceeds from the sale were deposited into a deferred  exchange
account  and were  applied  to the  acquisition  of One and Three  Pacific  on a
tax-deferred basis pursuant to Section 1031 of the Internal Revenue Code.

In March 1998, the Company  acquired a portfolio of seven  properties  (the "BGK
Portfolio") from BGK Development. The BGK Portfolio properties aggregate 515,445
net rentable  square  feet,  located in Boston,  Massachusetts  and Kansas City,
Kansas, and consist of four office properties, two industrial properties and one
office/flex  property.  The total acquisition cost, including capitalized costs,
was approximately $50.2 million, comprised of (i) approximately $13.3 million in
assumption of debt; and (ii) the balance in cash, including cash from borrowings
under the Acquisition Credit Facility.

In March 1998, the Company  acquired a 15-story office  property  located in San
Mateo, California ("400 El Camino Real"), which contains 139,109 square feet and
currently houses the Company's  corporate  headquarters in approximately  30,000
square feet, from Prudential Insurance Company of America. The total acquisition
cost,

                                       14
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1998

including  capitalized  costs, was  approximately  $34.7 million and was paid in
cash, including cash from borrowings under the Acquisition Credit Facility.

In March 1998, the Company sold an office/flex property for $1,368,000. The sale
generated a net gain of approximately $106,000 and net proceeds of approximately
$696,000.  The proceeds from the sale were  deposited  into a deferred  exchange
account and were applied to the acquisition of One and Three Pacific (as defined
below) on a tax-deferred  basis pursuant to Section 1031 of the Internal Revenue
Code.

In February  1998,  the Company  acquired a 161,468  square foot office  complex
("Capitol  Center")  located in Des Moines,  Iowa. The total  acquisition  cost,
including  capitalized costs, was approximately $12.3 million,  comprising:  (i)
$116,000 in the form of 3,874  partnership  units in the  Operating  Partnership
(based on an agreed per unit value of $30.00) and (ii) the balance in cash.

In February 1998, the Company sold an industrial property for $930,000. The sale
generated a net gain of approximately $246,000 and net proceeds of approximately
$359,000.  The proceeds from the sale were  deposited  into a deferred  exchange
account  and  were  applied  to  the  acquisition  of 400 El  Camino  Real  on a
tax-deferred basis pursuant to Section 1031 of the Internal Revenue Code.

In 1997, the Company issued  approximately  $14.1 million in the form of 433,362
partnership units in the Operating Partnership and 72,564 shares of Common Stock
(based on an agreed per unit and per share value of $27.896, respectively, which
was equal to the average closing price of the Company's Common Stock for the ten
business days preceding the closing) and paid approximately  $200,000 in cash to
acquire all of the limited partnership  interests of GRC Airport  Associates,  a
California limited  partnership  ("GRCAA").  GRCAA's sole asset consisted of one
industrial  property  ("Skypark") that was subject to a binding sales agreement.
By virtue of interests held directly or indirectly in GRCAA,  Robert  Batinovich
received  consideration of approximately $2.2 million and GC (as defined in Note
1) received  consideration of  approximately  $1.7 million for the GRCAA limited
partnership  interests  in the  form  of  partnership  units  in  the  Operating
Partnership.  Consistent with the Company's Board of Directors' policy,  neither
Robert  Batinovich  nor  Andrew  Batinovich  voted  when the Board of  Directors
considered and acted to approve this transaction.  In February 1998, the sale of
the  Skypark  property  was  completed  for a price of $22  million.  This  sale
generated a net gain of approximately $134,000 and net proceeds of approximately
$14.1 million.  The proceeds from the sale of the property were deposited into a
deferred  exchange  account and were applied to the acquisition of 400 El Camino
Real on a tax-deferred  basis  pursuant to Section 1031 of the Internal  Revenue
Code.

In  January  1998,  the  Company  acquired a  portfolio  of 13  suburban  office
properties and one  office/flex  property (the "Windsor  Portfolio")  located in
eight states.  The Company  acquired the Windsor  Portfolio  from Windsor Realty
Fund II, L.P., of which Windsor  Advisor,  LLC is the general partner and DuPont
Pension Fund Investments and Gid/S&S Limited  Partnership are limited  partners,
and other  entities  affiliated  with  Windsor  Realty Fund II, L.P. The Windsor
Portfolio  properties  aggregate  3,383,240 net rentable square feet, located in
the eastern  and  mid-western  United  States and are  concentrated  in suburban
Washington,  D.C., Chicago,  Atlanta, Boston,  Philadelphia,  Tampa, Florida and
Cary, North Carolina.  The total acquisition cost, including  capitalized costs,
was approximately $423.2 million,  comprised of (i) approximately $167.2 million
in assumption of debt;  (ii) $150.0  million in borrowings  under a $150 million
loan agreement with a commercial bank (the "Interim Loan" as defined in Note 6);
and  (iii)  the  balance  in cash,  including  cash  from  borrowings  under the
Acquisition   Credit  Facility  (as  defined  in  Note  6).  Subsequent  to  the
acquisition,  approximately  $68 million of the  assumed  debt was paid off with
proceeds from the January 1998 Convertible  Preferred Stock Offering (as defined
in Note 1).

In January 1998,  the Company sold a  multi-family  property for $4.95  million.
This sale  generated a net gain of  approximately  $948,000  and net proceeds of
approximately  $2.1 million.  The proceeds from the sale were  deposited  into a
deferred  exchange  account and were applied to the acquisition of 400 El Camino
Real (as defined below) on a tax-deferred  basis pursuant to Section 1031 of the
Internal Revenue Code.

                                       15
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1998

The Company has entered into a definitive agreement to sell the Shannon Crossing
retail  property for $9.3 million.  The property is currently  undergoing a $6.2
million renovation and expansion.  As of the date of this filing,  approximately
$2.6 million of the project  budget for the  renovation  and  expansion has been
funded.  The sale of  Shannon  Crossing  will not be  completed  until the first
quarter of 1999.

The Company has entered  into three  short-term  lease  agreements  on the hotel
properties located in Arlington, Texas, Tucson, Arizona and Ontario, California,
with  three  prospective  purchasers  of  these  properties.  These  prospective
purchasers  have entered into purchase  agreements  for these  properties,  with
closing  dates of December 30, 1998.  These leases all terminate on that closing
date for the sale of the properties.

Note 4.   INVESTMENTS IN ASSOCIATED COMPANIES

The Company owns 100% of the non-voting  preferred  stock and none of the voting
stock  of  each  of the  Associated  Companies  (as  defined  in  Note  1).  The
investments  in the  Associated  Companies  are  accounted  for using the equity
method as the  Company  does not  control  the  entities.  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.

As of June 30, 1998, the Company had the following investments in the Associated
Companies (in thousands):

                                            GC             GHG           Total 
                                        ---------      ----------     ---------
Investment at December 31, 1997         $   8,519      $   2,429      $  10,948

Distributions                                (758)          (117)          (875)

Equity in earnings                            850            211          1,061
                                        ---------      ----------     ----------
Investment at June 30, 1998             $   8,611      $   2,523      $  11,134
                                        =========      ==========     ==========

Note 5.   MORTGAGE LOANS RECEIVABLE

The Company's  mortgage loans receivable consist of the following as of June 30,
1998, and December 31, 1997 (dollars in thousands):
<TABLE>
<CAPTION>

                                                                                     1998                    1997
                                                                                ---------------        ---------------
<S>                                                                                <C>                    <C>
Note  secured by an  industrial  property  in Los  Angeles,  CA,  with a fixed
interest rate of 9% and a maturity  date of June 2001.  This note was paid off
early in June 1998.                                                                $        --            $       507

Note secured by an office property in Phoenix,  AZ, with a fixed interest rate
of 11% and a maturity date of November 1999.  The  Partnership is committed to
additional   advances   totaling  $530  as  of  June  30,  1998,   for  tenant
improvements and other leasing costs.                                                    3,320                  3,185

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 December 1998.                 3,600                     --

Note  secured by land  located in Aurora,  CO, with a fixed  interest  rate of
13%, quarterly interest-only payments and a maturity date of July 2005.                 34,349                     --
                                                                                ---------------        ---------------

Total                                                                              $    41,269            $     3,692
                                                                                ===============        ===============
</TABLE>



                                       16
<PAGE>

                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1998

Note 6.   SECURED AND UNSECURED LIABILITIES

The Company had the following  mortgage loans,  bank lines,  unsecured notes and
notes payable outstanding as of June 30, 1998, and December 31, 1997 (dollars in
thousands):

                                                          1998           1997
                                                       ----------    -----------

Unsecured  $250,000  line  of  credit  with a bank
("Acquisition  Credit  Facility")  with a variable
interest rate ranging between LIBOR plus 1.10% and
LIBOR plus 1.30% (6.89% and 7.07% at June 30, 1998
and  December  31,  1997,  respectively),  monthly
interest  only  payments  and a  maturity  date of
December 22,  2000,  with one option to extend for
10 years.                                              $ 125,152     $  80,160

Unsecured  loan with a bank ("$150  Million Bridge
Loan") with a variable interest rate of LIBOR plus
1.3% (6.99% at June 30,  1998),  monthly  interest
only  payments and a maturity date of December 31,
1998. See below for further discussion.                  142,170            --

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 $110,933 and
$111,372 at June 30, 1998 and  December  31, 1997,
respectively.                                             59,394        59,724

Secured loan with an investment  bank with a fixed
interest rate of 7.57%,  monthly  principal (based
upon a 25-year amortization) and interest payments
of $149 and a  maturity  date of  January 1, 2006.
The loan is  secured  by nine  properties  with an
aggregate  net  carrying   value  of  $38,998  and
$37,711 at June 30, 1998 and  December  31,  1997,
respectively.                                             19,285        19,444

Secured  loans  with  various   lenders,   bearing
interest  at fixed rates  between  7.25% and 9.25%
(approximately $169,440 of these loans includes an
unamortized premium of approximately  $3,118 which
reduces  the  effective  interest  rate  on  those
instruments to 6.75%),  with monthly principal and
interest  payments ranging between $8 and $371 and
maturing at various dates through October 1, 2010.
These  loans are  secured  by  properties  with an
aggregate  net  carrying  value  of  $397,128  and
$66,353 at June 30, 1998 and  December  31,  1997,
respectively.                                            223,560        30,519

Secured loans with various banks bearing  interest
at variable rates (ranging between 6.75% and 8.18%
at June 30, 1998),  monthly principal and interest
payments  ranging between $4 and $773 and maturing
at various dates through May 1, 2017.  These loans
are secured by  properties  with an aggregate  net
carrying value of $170,877 and $17,246 at June 30,
1998 and December 31, 1997, respectively.                118,389         7,806


                                       17
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1998

                                                          1998           1997
                                                       ----------    -----------

Secured  loans  with  various   lenders,   bearing
interest at fixed rates  between  7.25% and 7.85%,
with  monthly   principal  and  interest  payments
ranging between $5 and $55 and maturing at various
dates  through  December 1, 2030.  These loans are
secured  by   multi-family   properties   with  an
aggregate  net  carrying   value  of  $41,773  and
$41,862 at June 30, 1998 and  December  31,  1997,
respectively.                                           $ 30,456      $ 30,646

Unsecured  Senior Notes with a fixed interest rate
of 7.625%,  interest payable semiannually on March
15 and  September  15,  commencing  September  15,
1998,  and a maturity date of March 15, 2005.  See
below for further discussion.                            150,000            --
                                                       ----------    -----------
Total                                                 $  868,406    $  228,299
                                                       ==========    ===========

In January  1998,  the  Company  closed a $150  million  loan  agreement  with a
commercial  bank (the  "Interim  Loan").  The  Interim  Loan had a term of three
months with interest at LIBOR plus 1.75%. The purpose of the Interim Loan was to
fund the  acquisition  of the  Windsor  Portfolio  as  discussed  in Note 3. The
Interim Loan was paid off in March 1998 with  proceeds  from the $150 million of
unsecured Senior Notes as discussed below.

In March 1998, the Operating Partnership issued $150 million of 7 5/8% unsecured
Senior Notes (the "Notes") in an unregistered 144A offering. The Notes mature on
March 15,  2005,  unless  previously  redeemed.  Interest  on the Notes  will be
payable  semiannually  on March 15 and  September 15,  commencing  September 15,
1998.  The  Notes may be  redeemed  at any time at the  option of the  Operating
Partnership,  in whole or in part, at a redemption price equal to the sum of (i)
the principal  amount of the Notes being  redeemed plus accrued  interest to the
redemption date and (ii) the Make-Whole  Amount,  as defined,  if any. The Notes
will be  general  unsecured  and  unsubordinated  obligations  of the  Operating
Partnership,   and  will  rank  pari   passu  with  all  other   unsecured   and
unsubordinated  indebtedness  of the  Operating  Partnership.  The Notes will be
subordinated to secured borrowing  arrangements  that the Operating  Partnership
has and from time to time may enter into with various  banks and other  lenders,
and to the prior claims of each secured mortgage lender to any specific property
which  secures  any  lender's  mortgage.  As of  June  30,  1998,  such  secured
arrangements and mortgages aggregated approximately $451.1 million.

In June  1998,  the  Company  obtained  a $150  million  unsecured  loan  from a
commercial  bank (the "Bridge  Loan") which bears interest at a variable rate of
LIBOR plus 1.3%, and has a maturity date of December 31, 1998. As of the date of
this filing,  approximately  $147.7 million has been drawn under the Bridge Loan
to fund  acquisitions,  including  the  Galesi  Portfolio  and the  Donau/Gruppe
Portfolio (as discussed in Note 3) and the Pauls Portfolio (as discussed in Note
12), and to fund development advances.

The required  principal  payments on the Company's  debt for the next five years
and thereafter, as of June 30, 1998, are as follows (in thousands):

                 Year Ending
                 December 31,
                     1998                  $  148,078
                     1999                     123,822
                     2000                     186,249
                     2001                      12,841
                     2002                      11,503
                     Thereafter               385,913
                     Total                 $  868,406

                                       18
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1998

Note 7.   RELATED PARTY TRANSACTIONS

Fee and reimbursement  income earned by the Company from related parties totaled
$1,232,000  and  $367,000  for the six  months  ended  June 30,  1998 and  1997,
respectively,  and consisted of property  management fees, asset management fees
and other fee income.  In addition,  for the six months ended June 30, 1998, the
Company paid GC property  management fees and salary  reimbursements of $608,000
for management of a portfolio of residential properties owned by the Company.

Note 8.   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  modifies
existing  guidance  for  computing  diluted  earnings  per share.  Under the new
standard,  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.  The effective date of SFAS No. 128 is December
15, 1997.  Earnings per share for all periods  presented  have been  restated to
conform  to the new  standard  as follows  (in  thousands,  except for  weighted
average shares and per share amounts):
<TABLE>
<CAPTION>

                                                            Three months ended                    Six months ended
                                                                 June 30,                             June 30,
                                                      --------------------------------     --------------------------------
                                                          1998              1997               1998              1997
                                                      -------------     --------------     --------------    --------------

<S>                                                   <C>               <C>                <C>               <C>
Net income available to common
     stockholders - Basic                                    8,351             4,241             16,654             6,604
Minority interest                                              596                -- (1)          1,274                -- (1)
                                                      -------------     --------------     --------------    --------------
Net income available to common
     stockholders - Diluted                                  8,947             4,241             17,928             6,604
                                                      -------------     --------------     --------------    --------------

Weighted average shares:
Basic                                                   31,648,041        13,188,504         31,598,648        11,647,479
Stock options                                              438,686           243,938            438,686           205,331
Convertible Operating Partnership Units                  2,782,178                -- (1)      2,575,651                -- (1)
                                                      -------------     --------------     --------------    --------------
Diluted                                                 34,868,905        13,432,442         34,612,985        11,852,810
                                                      -------------     --------------     --------------    --------------

Basic earnings per share                                      0.26              0.32               0.53              0.57
Diluted earnings per share                                    0.26              0.32               0.52              0.56
</TABLE>


(1) Diluted earnings per share for the three and six months ended June 30, 1997,
does not include  the  conversion  of units of the  Operating  Partnership  into
common  stock  (930,522  and  788,112   weighted   average  units   outstanding,
respectively) as the effect is anti-dilutive.

Note 9.   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  

                                       19
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1998

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, 1998,  37,000  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 of June 30,  1998,  2,070,700
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.  To
date, all incentive  stock options granted have been at exercise prices equal to
or higher  than the fair market  value of the shares on the grant  date,  and as
such,  no  compensation  expense has been  recognized as accounted for under APB
Opinion No. 25. The options vest over periods between 1 and 6 years,  and have a
maximum term of 10 years.

Note 10.  DISTRIBUTIONS

                                Common Stock        Preferred Stock
                              ----------------     ----------------
Distributions per share:
First Quarter                    $    0.42          $     0.34 (1)
Second Quarter                        0.42                0.48

                              ================     ================
Year-to-Date Total               $    0.84          $     0.82
                              ================     ================


(1)  Distribution  was prorated for the number of days the stock was outstanding
during the first quarter of 1998.

Note 11.  PUBLIC STOCK OFFERING

In January 1998, the Company completed a public offering of 11,500,000 shares of
7.75%  Series A  Convertible  Preferred  Stock (the  "January  1998  Convertible
Preferred Stock Offering"). The 11,500,000 shares were sold at a per share price
of $25.00  for net  proceeds  of  approximately  $276  million.  The  shares are
convertible  at any time at the option of the  holders  thereof  into  shares of
Common Stock at an initial  conversion price of $32.83 per share of Common Stock
(equivalent to a conversion rate of 0.7615 shares of Common Stock for each share
of Series A  Convertible  Preferred  Stock),  subject to  adjustment  in certain
circumstances.  Except in certain instances  relating to the preservation of the
Company's  status as a REIT, the 7.75% Series A Convertible  Preferred  Stock is
not  redeemable  prior to January 16, 2003. On and after  January 16, 2003,  the
Series A Preferred Stock may be redeemed at the option of the Company,  in whole
or in part,  initially at 103.88% of the liquidation  preference per share,  and
thereafter  at prices  declining to 100% of the  liquidation  preference  on and
after  January  16,  2008,  plus in each case  accumulated,  accrued  and unpaid
dividends,  if any, to the redemption date. A portion of this additional capital
was used to repay the outstanding balance under the Company's Acquisition Credit
Facility (as defined in Note 6). The  remaining  proceeds  were used to fund the
acquisitions   discussed  in  Note  3  and  for  general   corporate   purposes.
Approximately  $705,000 in other costs have been incurred in connection with the
January 1998 Convertible Preferred Stock Offering.

                                       20
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                  June 30, 1998

Note 12.  SUBSEQUENT EVENTS

In July 1998,  the Company  acquired a portfolio of ten  properties  (the "Pauls
Portfolio")  from  The  Pauls   Corporation,   a  premier   national   developer
headquartered  in Denver,  Colorado.  The Pauls Portfolio  properties  aggregate
1,128,785  square feet located in Aurora,  Colorado,  and consist of one office,
three  office/flex and six industrial  buildings.  The total  acquisition  cost,
including  capitalized costs, was approximately $54.9 million,  comprising:  (i)
approximately  $41.3  million of net  assumed  debt;  (ii)  approximately  $11.3
million  of equity in the form of  423,843  partnership  units in the  Operating
Partnership  (based  on an  agreed  per unit  value of  $26.556);  and (iii) the
balance in cash. The cash portion was financed through advances under the Bridge
Loan  from a  commercial  bank  as  discussed  in Note  6.  In  addition  to the
acquisition of the Pauls  Portfolio,  the Company has entered into a development
alliance  with The Pauls  Corporation.  Under  this  development  alliance,  the
Company has  committed  approximately  $34 million to continue the  build-out of
Gateway Park,  including 1.6 million square feet of office space, 945,000 square
feet of office/flex  space,  395,000  square feet of industrial  space and 1,600
apartment  units.  Additionally,  the Company has  committed  $20 million to the
development  alliance for the following  Class A office building  properties:  a
292,000  square  foot  project in Kansas  City,  Kansas;  an 84,000  square foot
project in Auburn Hills,  Michigan;  a 158,000 square foot project in Farmington
Hills,  Michigan; a 168,000 square foot project in Southfield,  Michigan,  and a
209,000 square foot project in Troy, Michigan. In this development alliance, the
Company has  certain  rights  under  certain  conditions  and subject to certain
contingencies  to purchase the properties  upon  completion of development  and,
thus, through this alliance,  the Company could acquire up to 3.8 million square
feet of office,  office/flex,  industrial and  multi-family  properties over the
next five years.

In July 1998, the Company's Board of Directors adopted a shareholder rights plan
(the "Plan"). The Plan is intended to protect the Company's  shareholders 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  shareholders.  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 August  1998,  the Company  acquired a 85,765  square  foot  office  building
located in northern New Jersey ("3 Executive Drive") from a German  partnership.
The total acquisition cost, including capitalized costs, was approximately $12.4
million which was paid entirely in cash.  The cash portion was financed  through
advances under the Acquisition Credit Facility.

In October  1997,  the Company  entered into an agreement to purchase all of the
real estate  assets of  Prudential-Bache/Equitec  Real Estate  Partnership  (the
"Partnership"),  in which  the  managing  general  partner  is  Prudential-Bache
Properties,  Inc.,  and in  which  GC  and  Robert  Batinovich  have  served  as
co-general  partners  since 1994 but do not hold a material  equity or  economic
interest.  The  agreed  purchase  price  was  $47,145,000,  subject  to  certain
adjustments,  and the  Company  made an earnest  money  deposit of $1 million in
cash. In July 1998, the Company  received notice that the sale had been approved
by the requisite majority of the Partnership's limited partners. In June 1998, a
class  action  lawsuit  was  filed on  behalf  of all  limited  partners  in the
Partnership,  alleging  among  other  things  that  the  price  to be  paid  was
inadequate  and that the sale  violated the terms of the  Partnership  Agreement
prohibiting  transactions with affiliates of the Partnership's general partners.
The class action named all the general partners, as well as certain officers and
directors of the corporate general partners, as defendants;  the Company was not
named as a  defendant.  GC and Robert  Batinovich  have advised the Company that
they  believe  the  allegations  in the action  are  completely  without  merit.
However,  in light of the  uncertainties  created by the  litigation,  in August
1998, the Company  notified the Partnership in writing that it had exercised its
right not to proceed  with the  purchase of the  Partnership's  properties.  The
Company has requested a return of the earnest money deposit.


                                       21
<PAGE>

<TABLE>
<CAPTION>

                                                      GLENBOROUGH HOTEL GROUP
                                                    CONSOLIDATED BALANCE SHEETS
                                                (in thousands, except share amounts)
 
                                                                              June 30,              December 31,
                                                                                1998                    1997
                                                                             (Unaudited)              (Audited) 
ASSETS
<S>                                                                        <C>                     <C>       
Cash and cash equivalents                                                  $    2,742              $    2,632
Accounts receivable                                                               214                     472
Investments in management contracts, net                                           --                     354
Rental property and equipment, net of
   accumulated depreciation of $120 and $129
   in 1998 and 1997, respectively                                                  94                     154
Prepaid expenses                                                                  220                     119
Other assets                                                                      307                       4

     TOTAL ASSETS                                                          $    3,577              $    3,735

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
   Accrued lease expense                                                   $      429              $      557
   Mortgage loan                                                                   --                      37
   Other liabilities                                                              556                     405

     Total liabilities                                                            985                     999


Stockholders' Equity:
   Common stock (1,000 shares authorized,
     issued and outstanding)                                                       20                      20
   Non-voting preferred stock (50 shares
     authorized, issued and outstanding)                                           --                       --
   Additional paid-in capital                                                   1,568                   1,568
   Retained earnings                                                            1,004                   1,148

     Total stockholders' equity                                                 2,592                   2,736

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $    3,577              $    3,735



                                    See accompanying notes to consolidated financial statements


</TABLE>

                                       22
<PAGE>

<TABLE>
<CAPTION>
                                                      GLENBOROUGH HOTEL GROUP
                                                 CONSOLIDATED STATEMENTS OF INCOME
                                          For the six months ended June 30, 1998 and 1997
                                                           (in thousands)
                                                             (Unaudited)

                                                                                 1998                   1997  
REVENUE
<S>                                                                         <C>                    <C>        
     Hotel revenue                                                          $      6,904           $     6,137
     Fees and reimbursements                                                         645                 1,113
     Other revenue                                                                    62                    --
 
             Total revenue                                                         7,611                 7,250
 
EXPENSES
     Leased Hotel Properties:
        Room expenses                                                              1,508                 1,473
        Lease payments to affiliates                                               2,520                 2,207
        Sales and marketing                                                          717                   619
        Property general and administrative                                          511                   578
        Other operating expenses                                                     904                   675

     Managed Hotel Properties:
        Salaries and benefits                                                        445                   743

     Other Expenses:
        General and administrative                                                   520                   525
        Depreciation and amortization                                                 34                    49
        Interest expense                                                               1                     2
 
             Total expenses                                                        7,160                 6,871
 
Income from operations before extraordinary item
     and provision for income taxes                                                  451                   379

Loss on sale of investment                                                          (261)                   --
Provision for income taxes                                                          (183)                 (162)
 
Net income                                                                  $          7           $       217




                                    See accompanying notes to consolidated financial statements


</TABLE>

                                       23
<PAGE>

<TABLE>
<CAPTION>
                                                      GLENBOROUGH HOTEL GROUP
                                                 CONSOLIDATED STATEMENTS OF INCOME
                                         For the three months ended June 30, 1998 and 1997
                                                           (in thousands)
                                                             (Unaudited)

                                                                                 1998                   1997  
                                                                            -------------          -------------
REVENUE
<S>                                                                         <C>                    <C>        
     Hotel revenue                                                          $      3,100           $     3,219
     Fees and reimbursements                                                         255                   546
     Other revenue                                                                    26                    --
 
             Total revenue                                                         3,381                 3,765
 
EXPENSES
     Leased Hotel Properties:
        Room expenses                                                                760                   836
        Lease payments to affiliates                                               1,121                 1,159
        Sales and marketing                                                          361                   347
        Property general and administrative                                          280                   346
        Other operating expenses                                                     476                   389

     Managed Hotel Properties:
        Salaries and benefits                                                        203                   343

     Other Expenses:
        General and administrative                                                   246                   255
        Depreciation and amortization                                                 10                    25
        Interest expense                                                              --                     1
 
             Total expenses                                                        3,457                 3,701
 
Income (loss) from operations before extraordinary item
     and provision for income taxes                                                 (76)                    64
 
Loss on sale of investment                                                          (261)                   --
Benefit (provision) for income taxes                                                  28                   (26)
 
Net income   (loss)                                                         $       (309)          $        38

                                    See accompanying notes to consolidated financial statements

</TABLE>

                                       24
<PAGE>

<TABLE>
<CAPTION>
                                                           GLENBOROUGH HOTEL GROUP
                                               CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                                   For the six months ended June 30, 1998
                                                        (in thousands, except shares)
                                                                 (Unaudited)


                                                                                        Addi-
                                        Preferred Stock         Common Stock            tional      Retained
                                                   Par                     Par         Paid-in      Earnings
                                      Shares       Value      Shares       Value       Capital      (Deficit)        Total
<S>                                       <C>    <C>            <C>       <C>         <C>           <C>          <C>
BALANCE at
 December 31, 1997                        50     $     --       1,000     $    20     $   1,568     $   1,148    $   2,736

Dividends                                 --           --          --          --            --          (151)        (151)

Net income                                --           --          --          --            --             7            7
 
BALANCE at
 June 30, 1998                            50     $     --       1,000     $    20     $   1,568     $   1,004    $   2,592


                                    See accompanying notes to consolidated financial statements
</TABLE>

                                       25
<PAGE>

<TABLE>
<CAPTION>
                                                      GLENBOROUGH HOTEL GROUP
                                               CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          For the six months ended June 30, 1998 and 1997
                                                           (in thousands)
                                                            (Unaudited)

                                                                                  1998                1997   
Cash flows from operating activities:
<S>                                                                          <C>                  <C>        
   Net income                                                                $         7          $       217
   Adjustments to reconcile net income to net cash
      provided by operating activities:
         Depreciation and amortization                                                34                   49
         Loss on sale of investment                                                  261                   --
         Changes in certain assets and liabilities                                  (124)                 280
 
         Net cash provided by operating activities                                   178                  546
 
Cash flows from investing activities:
   Sale of RGI's net assets                                                          157                   --
   Additions to equipment                                                            (74)                  (2)

         Net cash provided by (used for) investing activities                         83                   (2)
 
 
Cash flows from financing activities:
   Dividends                                                                        (151)                 (68)
   Repayment of borrowings                                                            --                  (12)
 
         Net cash used for financing activities                                     (151)                 (80)
 
   Net increase in cash and cash equivalents                                         110                  464

   Cash and cash equivalents at beginning of period                                2,632                  461
 
   Cash and cash equivalents at end of period                               $      2,742         $        925
 
Supplemental disclosure of cash flow information:

         Cash paid for interest                                             $          1         $          2



                                    See accompanying notes to consolidated financial statements

</TABLE>


                                       26
<PAGE>

                             GLENBOROUGH HOTEL GROUP

                   Notes to Consolidated Financial Statements
                                  June 30, 1998


Note 1.       ORGANIZATION
 
Glenborough  Hotel  Group  ("GHG")  was  organized  in the  State of  Nevada  on
September 23, 1991.  Through June 1998, GHG operated hotel  properties  owned by
Glenborough  Realty Trust  Incorporated  ("GLB")  under six separate  percentage
leases and managed  one hotel  property  owned by an  unaffiliated  company.  It
should be noted that effective April 1998, one hotel that was previously under a
management  contract with GHG, was involved in an exchange  transaction  between
its owner and GLB. Simultaneous with the exchange,  the hotel was leased by GHG.
In June 1998, two of the hotel  properties  owned by GLB were sold. In addition,
the four remaining  hotel  properties  owned by GLB were leased to  unaffiliated
entities.  These unaffiliated  entities will manage the hotel properties through
the end of 1998, at which time they will purchase three of the  properties  from
GLB.  One hotel will  continue to be held by GLB and leased by the  unaffiliated
company.

GLB owns 100% of the 50 shares of  non-voting  preferred  stock of GHG and three
individuals,  including Terri Garnick,  an executive officer of GLB, each own 33
1/3% of the 1,000 shares of voting common stock of GHG.

Through April 30, 1998, GHG also owned  approximately 80% of the common stock of
Resort Group, Inc. ("RGI").  GHG consolidated its financial  statements with RGI
and recognized its joint venture partner's  interest as minority  interest.  RGI
manages  homeowners  associations  and rental  pools for two  beachfront  resort
condominium hotel properties and owns six units at one of the properties.  As of
May 1, 1998, GHG sold its interest in RGI to a partnership affiliated with GLB.

In the opinion of management,  the accompanying  unaudited financial  statements
contain  all  adjustments  (consisting  only of normal  accruals)  necessary  to
present fairly, the consolidated  financial position and consolidated results of
operations of GHG as of June 30, 1998, and for the period then ended.

Note 2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Basis of  Presentation  - The  accompanying  financial  statements  present  the
consolidated  financial  position of GHG and RGI as of December 31, 1997, and of
GHG only as of June 30, 1998.  The  consolidated  results of operations and cash
flows of GHG and RGI are presented for the six months ended June 30, 1997, while
for the six months ended June 30, 1998, the results of operations and cash flows
include RGI amounts only through April 30, 1998. All intercompany  transactions,
receivables and payables have been eliminated in the consolidation.

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.

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.

Depreciation is provided using the straight line method over the useful lives of
the respective assets.

Cash Equivalents - GHG 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.

Income  Taxes -  Provision  for income  taxes is based on  financial  accounting
income.  Certain  items are reported in different  periods for tax and financial
reporting  purposes.  Timing differences arising from such items are recorded as
deferred tax assets,  net of related  valuation  reserves,  or  liabilities,  as
appropriate.

                                       27
<PAGE>
                             GLENBOROUGH HOTEL GROUP

                   Notes to Consolidated Financial Statements
                                  June 30, 1998

Note 3.       INVESTMENTS IN MANAGEMENT CONTRACTS, NET
 
At  December  31,  1997,  investments  in  management  contracts  reflected  the
unamortized portion of the management contracts RGI held with the two beachfront
resort  condominium  hotel  properties  for both  management  of the  homeowners
associations and the rental pool programs. As of June 30, 1998, the RGI balances
are no longer consolidated.

Note 4.       RENTAL PROPERTY

Rental  property  and  equipment  represents  furniture  and  fixtures  in GHG's
corporate offices, as well as, as of June 30, 1997, interests in six condominium
hotel units owned by RGI.  The six units  owned by RGI  participate  in a resort
rental  program  on an "at  will"  basis,  whereby  there  is no  fixed  term of
participation.  Such participation generated approximately $6,000 and $11,000 of
cash flow after  deductions  for capital  reserves for the six months ended June
30, 1998 and 1997, respectively.

Note 5.       MORTGAGE LOAN
 
The mortgage loan of $37,000 at June 30, 1997,  represented  the debt secured by
the six  condominium  hotel  units owned by RGI.  As of June 30,  1998,  the RGI
balances are no longer consolidated.

Note 6.       THE PERCENTAGE LEASES
 
GHG was leasing the six hotels owned by GLB for a term of five years pursuant to
individual percentage leases ("Percentage Leases") which provided for rent equal
to the  greater  of the Base  Rent (as  defined  in the  lease)  or a  specified
percentage of room revenues (the "Percentage  Rent").  Each hotel was separately
leased to GHG (the "lessee"). The lessee's ability to make rent payments has, to
a large  degree,  depended  on its  ability  to  generate  cash  flow  from  the
operations  of the  hotels.  Each  Percentage  Lease  contained  the  provisions
described below.

Each  Percentage  Lease had a  non-cancelable  term of five  years,  subject  to
earlier  termination upon the occurrence of certain  contingencies  described in
the Percentage  Lease.  The lessee under the Percentage  Lease had one five-year
renewal option at the then current fair market rent.

During the term of each  Percentage  Lease,  the lessee was obligated to pay the
greater  of Base Rent or  Percentage  Rent.  Base Rent was  required  to be paid
monthly  in  advance.  Percentage  Rent  was  calculated  by  multiplying  fixed
percentages  by room  revenues  for  each of the  five  hotels;  the  applicable
percentage  changed  when  revenue  exceeded  a  specified  threshold,  and  the
threshold  was  to be  adjusted  annually  in  accordance  with  changes  in the
applicable Consumer Price Index. Percentage Rent was due quarterly.

The table below sets forth the annual Base Rent and the Percentage Rent formulas
for each of the six hotels.

<TABLE>
<CAPTION>
                                                    Hotel Lease Rent Provisions

                                            Percentage Rent
                                         incurred for the six
                           Annual            months ended                        Annual Percentage
Hotel                     Base Rent          June 30, 1998                         Rent Formulas
<S>                     <C>                 <C>                <C>
Ontario, CA             $   240,000         $   139,000        24% of the first  $1,711,000 of room revenue plus 
                                                               40% of room revenue above $1,711,000 and 5% of other revenue

Arlington, TX           $   360,000         $    85,000        27% of the first  $1,738,000 of room revenue plus
                                                               42% of room revenue above $1,738,000 and 5% of other revenue

                                                              continued
</TABLE>

                                       28
<PAGE>
                             GLENBOROUGH HOTEL GROUP

                   Notes to Consolidated Financial Statements
                                  June 30, 1998

<TABLE>
<CAPTION>

                                              Hotel Lease Rent Provisions - continued
 
                                            Percentage Rent
                                         incurred for the six
                           Annual            months ended                        Annual Percentage
Hotel                     Base Rent         June 30, 1998                          Rent Formulas
<S>                     <C>                 <C>                <C>
Tucson, AZ              $   600,000         $   464,000        40% of the first  $1,467,000 of room revenue plus
                                                               46% of room revenue above $1,467,000 and 5% of other revenue

San Antonio, TX (1)     $   312,000         $     1,000        33% of the first  $1,272,000 of room revenue plus
                                                               40% of room revenue above $1,272,000 and 5% of other revenue

Scottsdale, AZ          $   720,000         $   558,000        45% of the first $3,200,000 of room revenue plus
                                                               60% of room revenue above $3,200,000 and 5% of other revenue

Dallas, TX (1)          $   600,000         $     4,000        32% of the first $1,700,000 of room revenue plus
                                                               45% of room revenue above $1,700,000 and 5% of other revenue

(1) Hotel was sold in June 1998.
</TABLE>

Other than real estate and personal property taxes, casualty insurance,  a fixed
capital  improvement  allowance and  maintenance  of  underground  utilities and
structural elements, which were the responsibility of GLB, the Percentage Leases
required the lessees to pay rent, insurance,  salaries,  utilities and all other
operating costs incurred in the operation of the Hotels.

Note 7.       DECLARATION OF DIVIDENDS
 
The board of directors of GHG declared and paid the following  dividends for the
first and second quarters of 1998:

               Preferred Stock       Common Stock           Total  

Q1 1998        $       78,375       $     23,625        $    102,000

Q2 1998                78,375             23,625             102,000

Total          $      156,750       $     47,250        $    204,000


                                       29
<PAGE>

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

GLENBOROUGH REALTY TRUST INCORPORATED

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 and acquisition of various types of
income-producing properties. As of June 30, 1998, the Company owned and operated
179 income-producing  properties (the "Properties," and each a "Property").  The
Properties are comprised of 53 office Properties,  45 office/flex Properties, 27
industrial Properties,  13 retail Properties,  37 multi-family  Properties and 4
hotel Properties, located in 24 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  ("GC"), a California  corporation,  and eight
public  limited  partnerships  (the  "Partnerships")  merged  with  and into the
Company. The Company (i) issued 5,753,709 shares (the "Shares") of the $.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 84.76% limited partner interest.  The Company operates
the assets acquired in the  Consolidation  and in subsequent  acquisitions  (see
further  discussion below) and intends to invest in income 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 the  third and  fourth  quarters  of 1996,  90
     properties in 1997 and 69 properties in 1998. The total acquired Properties
     consist of an aggregate of approximately 15.7 million rentable square feet,
     9,353 multi-family 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  four  industrial
     properties,   16  retail  properties,   two  office/flex  properties,   one
     multi-family  property and two hotel  properties  to redeploy  capital into
     properties  the Company  believes have  characteristics  more suited to its
     overall growth strategy and operating goals.
          
     Entered  into a $250  million  unsecured  line of credit (the  "Acquisition
     Credit  Facility")  with a commercial  bank which  replaced its $50 million
     secured line of credit and closed a $150 million  unsecured  loan agreement
     (the "Interim Loan") with a commercial bank.

     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 7.75% Series A  Convertible  Preferred  Stock (the
     "January  1998  Convertible  Preferred  Stock  Offering")  for total  gross
     proceeds of approximately $287.5 million.

     Issued $150 million of 7 5/8% unsecured Senior Notes which are due on March
     15, 2005.

     Paid off the Interim Loan with  proceeds  from the issuance of $150 million
     of 7 5/8% unsecured Senior Notes.

     Closed a $150 million  unsecured  loan agreement (the "Bridge Loan") with a
     commercial bank.

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  stockholder  value
over time.

                                       30
<PAGE>

Results of Operations

Comparison  of the six months  ended June 30, 1998 to the six months  ended June
30, 1997.

Rental Revenues. Rental revenues increased $77,891,000,  or 366%, to $97,582,000
for the six months  ended June 30,  1998,  from  $19,691,000  for the six months
ended June 30, 1997. The increase  included  growth in revenues from the office,
industrial,  office/flex,  retail and  multi-family  Properties of  $49,728,000,
$4,331,000, $15,778,000, $2,385,000 and $5,896,000,  respectively. Of the rental
revenue for the six months ended June 30, 1998,  $8,768,000  represented  rental
revenues generated from the acquisition of 20 properties in the third and fourth
quarters  of 1996 (the  "1996  Acquisitions"),  $48,715,000  represented  rental
revenues  generated  from the  acquisition  of 90  properties in 1997 (the "1997
Acquisitions")  and $34,596,000  represented  rental revenues generated from the
acquisition  of 58  properties  during the six months  ended June 30,  1998 (the
"1998 Acquisitions").

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
increased  $865,000,  or 236%, to  $1,232,000  for the six months ended June 30,
1998,  from  $367,000  for the six months  ended  June 30,  1997.  The  increase
primarily  consisted  of  increased  lease  commissions  and sales fees from the
managed portfolio.

Equity in Earnings of Associated  Companies.  Equity in earnings from Associated
Companies  increased  $458,000,  or 76%, to $1,061,000  for the six months ended
June 30,  1998,  from  $603,000  for the six  months  ended June 30,  1997.  The
increase  is  primarily  due to  transaction  fees  earned by GC  related to the
disposition of several of the managed properties.

Net Gain on  Sales  of  Rental  Properties.  The net  gain on  sales  of  rental
properties  of  $2,139,000  during the six months ended June 30, 1998,  resulted
from the sales of one  multi-family  property,  two industrial  properties,  two
office/flex  properties and two hotel  properties from the Company's  portfolio.
The net gain on sales of rental  properties  of  $570,000  during the six months
ended June 30, 1997,  resulted from the sales of 15 retail  properties  from the
Company's portfolio.

Gain on  Collection  of Mortgage  Loan  Receivable.  The gain on  collection  of
mortgage loan  receivable of $652,000  during the six months ended June 30, 1997
resulted  from the  collection  of a mortgage  loan  receivable  which had a net
carrying  value of  $6,700,000.  The payoff amount  totaled  $6,863,000,  plus a
$500,000  note  receivable,  which,  net of legal  costs,  resulted in a gain of
$652,000.

Property Operating Expenses.  Property operating expenses increased $24,544,000,
or 406%, to $30,589,000  for the six months ended June 30, 1998, from $6,045,000
for the six months ended June 30, 1997. Of this increase, $24,380,000 represents
increases in property operating  expenses  attributable to the 1997 Acquisitions
and the 1998 Acquisitions.

General  and  Administrative  Expenses.   General  and  administrative  expenses
increased  $3,451,000,  or 251%, to $4,825,000 for the six months ended June 30,
1998,  from  $1,374,000  for the six months ended June 30, 1997. The increase is
primarily due to increased  salary and overhead  costs  resulting  from the 1997
Acquisitions and 1998 Acquisitions.

Depreciation  and   Amortization.   Depreciation   and  amortization   increased
$16,899,000,  or 418%,  to  $20,943,000  for the six months ended June 30, 1998,
from  $4,044,000  for the six  months  ended  June 30,  1997.  The  increase  is
primarily  due  to  depreciation  and  amortization  associated  with  the  1997
Acquisitions and 1998 Acquisitions.

Interest  Expense.   Interest  expense  increased   $15,052,000,   or  396%,  to
$18,852,000  for the six months ended June 30, 1998, from $3,800,000 for the six
months ended June 30, 1997.  Substantially all of the increase was the result of
higher average borrowings during the six months ended June 30, 1998, as compared
to the six months ended June 30,  1997,  due to new debt and the  assumption  of
debt related to the 1997 Acquisitions and 1998 Acquisitions.

Net Income and Earnings Per Share (EPS).  Net income increased  $19,530,000,  or
296%, to $26,134,000 for the six months ended June 30, 1998, from $6,604,000 for
the six months  ended June 30,  1997.  However,  both Basic EPS

                                       31
<PAGE>

and  Diluted EPS  decreased  $0.04 per share,  respectively,  for the six months
ended June 30, 1998,  from the six months ended June 30, 1997.  The decreases in
Basic and Diluted EPS are due to a decrease  in Net Income  Available  to Common
Stockholders  resulting  from the dividends  paid to preferred  stockholders  in
1998.  There  were no  preferred  stock  dividends  paid in 1997 as there was no
preferred stock outstanding until January 1998.

Comparison  of the three  months  ended June 30, 1998 to the three  months ended
June 30, 1997.

Rental Revenues. Rental revenues increased $39,835,000,  or 338%, to $51,619,000
for the three months ended June 30, 1998, from  $11,784,000 for the three months
ended June 30, 1997. The increase  included  growth in revenues from the office,
industrial,  office/flex,  retail and  multi-family  Properties of  $26,015,000,
$2,088,000,  $7,585,000, $1,463,000 and $3,264,000,  respectively. Of the rental
revenue for the three months ended June 30, 1998, $4,389,000  represented rental
revenues generated from the acquisition of 20 properties in the third and fourth
quarters  of 1996 (the  "1996  Acquisitions"),  $24,821,000  represented  rental
revenues  generated  from the  acquisition  of 90  properties in 1997 (the "1997
Acquisitions")  and $19,908,000  represented  rental revenues generated from the
acquisition  of 58  properties  during the six months  ended June 30,  1998 (the
"1998 Acquisitions").

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
increased  $579,000,  or 322%,  to $759,000  for the three months ended June 30,
1998,  from $180,000 for the three months ended June 30, 1997.  The increase was
primarily  due to a disposition  fee from GC of $581,000  related to the sale of
one of the managed properties.

Equity in Earnings of Associated  Companies.  Equity in earnings from Associated
Companies  increased  $251,000,  or 55%, to $709,000  for the three months ended
June 30, 1998,  from  $458,000  for the three  months  ended June 30, 1997.  The
increase  is  primarily  due to  transaction  fees  earned by GC  related to the
disposition of several of the managed properties.

Net Gain on  Sales  of  Rental  Properties.  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.  The net gain on sales of rental  properties  of  $570,000
during the three  months  ended  June 30,  1997,  resulted  from the sales of 15
retail properties from the Company's portfolio.

Gain on  Collection  of Mortgage  Loan  Receivable.  The gain on  collection  of
mortgage  loan  receivable  of $498,000  during the three  months ended June 30,
1997,  resulted from the  collection of a mortgage loan  receivable.  The payoff
amount  included a $500,000  note  receivable,  which was  recorded  as deferred
income to be  recognized as cash was  received.  Payments  received in the three
months ended March 31, 1997,  totaled $2,000.  The remaining balance of the note
receivable  was assigned to a third party in June 1997 which  resulted in a gain
of $498,000 during the three months ended June 30, 1997.
 
Property Operating Expenses.  Property operating expenses increased $12,602,000,
or  344%,  to  $16,265,000  for the  three  months  ended  June 30,  1998,  from
$3,663,000  for the  three  months  ended  June  30,  1997.  Of  this  increase,
$12,685,000  represents increases in property operating expenses attributable to
the 1997  Acquisitions  and the 1998  Acquisitions.  This  increase is partially
offset by  decreases  in property  operating  expenses  due to the 1997 and 1998
sales of properties.

General  and  Administrative  Expenses.   General  and  administrative  expenses
increased $1,880,000, or 260%, to $2,603,000 for the three months ended June 30,
1998,  from  $723,000 for the three months ended June 30, 1997.  The increase is
primarily due to increased  salary and overhead  costs  resulting  from the 1997
Acquisitions and 1998 Acquisitions.

Depreciation  and   Amortization.   Depreciation   and  amortization   increased
$8,427,000,  or 336%, to  $10,934,000  for the three months ended June 30, 1998,
from  $2,507,000  for the three  months  ended June 30,  1997.  The  increase is
primarily  due  to  depreciation  and  amortization  associated  with  the  1997
Acquisitions and 1998 Acquisitions.

Interest Expense.  Interest expense increased $7,480,000, or 336%, to $9,707,000
for the three months ended June 30, 1998,  from  $2,227,000 for the three months
ended June 30, 1997.  Substantially all of the increase was the result of higher

                                       32
<PAGE>

average  borrowings  during the three months ended June 30, 1998, as compared to
the three months ended June 30, 1997, due to new debt and the assumption of debt
related to the 1997 Acquisitions and 1998 Acquisitions.

Net Income and Earnings Per Share (EPS).  Net income  increased  $9,680,000,  or
228%, to $13,921,000  for the three months ended June 30, 1998,  from $4,241,000
for the three months ended June 30,  1997.  However,  both Basic EPS and Diluted
EPS decreased $0.06 per share, respectively, for the three months ended June 30,
1998,  from the three  months ended June 30,  1997.  The  decreases in Basic and
Diluted EPS are due to a decrease in Net Income Available to Common Stockholders
resulting from the dividends paid to preferred  stockholders in 1998. There were
no  preferred  stock  dividends  paid in 1997 as there  was no  preferred  stock
outstanding until January 1998.

Liquidity and Capital Resources

For the six months ended June 30, 1998,  cash  provided by operating  activities
increased by  $24,030,000  to $32,603,000 as compared to $8,573,000 for the same
period in 1997.  The increase is  primarily  due to an increase in net income of
$35,969,000  (before  depreciation and  amortization,  minority interest and net
gain on sales  of  rental  properties)  due to the  1997  Acquisitions  and 1998
Acquisitions.  The increase is partially offset by an increase in investments in
development   alliances.   Cash  used  for  investing  activities  increased  by
$471,360,000 to $595,440,000 for the six months ended June 30, 1998, as compared
to  $124,080,000  for the same period in 1997.  The increase is primarily due to
the  1998  Acquisitions,  additions  to  mortgage  loans  receivable  and  other
investments.  This increase was partially offset by the collection of a mortgage
loan receivable in 1997 and the proceeds from the 1998 sales of properties. Cash
provided by financing  activities  increased by $447,291,000 to $564,795,000 for
the six months ended June 30,  1998,  as compared to  $117,504,000  for the same
period in 1997.  This  increase was  primarily  due to the net proceeds from the
January 1998  Convertible  Preferred Stock Offering (as defined below),  the net
proceeds from an issuance of Notes (as defined  below) and the proceeds from new
debt.  This  increase  was  partially  offset  by  increased   distributions  to
stockholders  resulting from an increase in the number of shares of common stock
outstanding and the issuance of preferred stock in January 1998.

The Company  expects to meet its  short-term  liquidity  requirements  generally
through its working capital,  its Acquisition Credit Facility (as defined below)
and cash generated by operations. Planned capital improvements consist of tenant
improvements and expenditures necessary to lease and maintain the Properties.

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  Acquisition  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 an unsecured  Acquisition 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 and cash flow provided by operations.

Mortgage  loans payable  increased  from  $148,139,000  at December 31, 1997, to
$451,084,000  at June  30,  1998.  This  increase  primarily  resulted  from the
assumption of mortgage loans totaling  $317,527,000  in connection with the 1998
Acquisitions. These increases were partially offset by the payoff of $13,581,000
of mortgage  loans in  connection  with 1998 sales of  properties  and scheduled
principal payments on other mortgage debt.

The Company has a $250,000,000 unsecured line of credit provided by a commercial
bank (the  "Acquisition  Credit  Facility").  Outstanding  borrowings  under the
Acquisition  Credit Facility increased from $80,160,000 at December 31, 1997, to
$125,152,000 at June 30, 1998. The $80,160,000  balance  outstanding at December
31,  1997,  was paid off in January  1998 with  proceeds  from the January  1998
Convertible  Preferred Stock Offering.  The $125,152,000  balance outstanding at
June 30, 1998  consists  of draws for 1998  Acquisitions.  Borrowings  under the
Acquisition  Credit Facility  currently bear interest at an annual rate of LIBOR
plus 1.2%.

In January 1998, the Company  closed a $150 million loan with a commercial  bank
(the "Interim Loan").  The Interim Loan had a term of three months with interest
at LIBOR plus 1.75%.  The purpose of the Interim Loan was to fund  acquisitions.

                                       33
<PAGE>

The Interim Loan was paid off in March 1998 with  proceeds  from the issuance of
$150 million of unsecured Senior Notes (discussed below).

In March 1998,  the  Operating  Partnership,  as to which the Company is general
partner,  issued $150 million of 7 5/8% unsecured  Senior Notes (the "Notes") in
an  unregistered  144A  offering.  The Notes  mature on March 15,  2005,  unless
previously  redeemed.  Interest on the Notes is payable semiannually on March 15
and September 15, commencing September 15, 1998. The Operating  Partnership used
the net  proceeds of the  offering to repay the  outstanding  balance  under the
Interim Loan.

In June  1998,  the  Company  obtained  a $150  million  unsecured  loan  from a
commercial  bank (the "Bridge  Loan") which bears interest at a variable rate of
LIBOR plus 1.3%, and has a maturity date of December 31, 1998. As of the date of
this filing,  approximately  $147.7 million has been drawn under the Bridge Loan
to fund acquisitions and development activities.

At June 30, 1998, the Company's total indebtedness  included  fixed-rate debt of
$482,696,000  (including  $139,008,000 subject to  cross-collateralization)  and
floating-rate  indebtedness of $385,710,000  (including  $115,589,000 subject to
cross-collateralization).  Approximately  41.4% of the  Company's  total assets,
comprising 74 properties, is encumbered by debt at June 30, 1998.

In January 1997 and May 1997,  the Company filed shelf  registration  statements
with the Securities and Exchange Commission (the "SEC") to register $250 million
and $350 million, respectively, of equity securities of the Company. In November
1997, the Company filed a shelf registration  statement with the SEC to register
an additional $1 billion of equity securities of the Company (the "November 1997
Shelf Registration  Statement").  The November 1997 Shelf Registration Statement
was declared  effective by the SEC on December 18, 1997. After the completion of
the March 1997, July 1997, October 1997 and January 1998 Offerings,  the Company
has the capacity pursuant to the November 1997 Shelf  Registration  Statement to
issue up to approximately $801.2 million in equity securities.

In January 1998, the Company completed a public offering of 11,500,000 shares of
7.75%  Series A  Convertible  Preferred  Stock (the  "January  1998  Convertible
Preferred Stock Offering" or the "January 1998 Offering"). The 11,500,000 shares
were sold at a per share price of $25.00 for net proceeds of approximately  $276
million,  which were used to repay the  outstanding  balance under the Company's
Acquisition Credit Facility,  to fund certain subsequent  property  acquisitions
and for general  corporate  purposes.  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.

Inflation

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

Funds from Operations and Cash Available for Distribution

Funds from Operations  ("FFO"),  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

                                       34
<PAGE>

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

The following table sets forth the Company's  calculation of FFO and CAD for the
three months  ended March 31 and June 30, 1998 (in  thousands,  except  weighted
average shares and per share amounts):

<TABLE>
<CAPTION>
                                                         March 31,         June 30,            YTD
                                                           1998             1998              1998
                                                      -------------    -------------     -------------
<S>                                                   <C>              <C>               <C>        
Net income before minority interest                   $    12,891      $    14,517       $    27,408
Preferred dividend requirement                             (3,910)          (5,570)           (9,480)
Net gain on sales of rental properties                     (1,446)            (693)           (2,139)
Depreciation and amortization                              10,009           10,934            20,943
Adjustment to reflect FFO of Associated Companies(1)          210              173               383
                                                      -------------    -------------     -------------
FFO                                                   $    17,754      $    19,361       $    37,115
                                                      =============    =============     =============

Amortization of deferred financing fees                       418              174               592
Capital reserve                                              (983)              --              (983)
Capital expenditures                                       (1,227)          (3,200)           (4,427)
                                                      -------------    -------------     -------------

CAD                                                   $    15,962      $    16,335       $    32,297
                                                      =============    =============     =============

Distributions per share (2)                           $      0.42      $      0.42       $      0.84
                                                      =============    =============     =============

Diluted weighted average shares outstanding            34,372,364       34,868,905        34,612,985
                                                      =============    =============     =============
</TABLE>

(1)  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.

(2) The  distributions  for the three months  ended June 30, 1998,  were paid on
July 10, 1998.

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.
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.

                                       35
<PAGE>

Factors which may cause the Company's results to differ include the inability to
complete  anticipated  future  acquisitions,  defaults or non-renewal of leases,
increased  interest rates and  operational  costs,  failure to obtain  necessary
outside  financing,  difficulties  in  identifying  properties to acquire and in
effecting  acquisitions,  failure to qualify as a real estate  investment  trust
under the Internal  Revenue  Code of 1986,  environmental  uncertainties,  risks
related to natural  disasters,  financial market  fluctuations,  changes in real
estate and zoning laws,  increases in real  property tax rates and other factors
discussed under the caption "Forward Looking Statements; Factors That May Affect
Operating  Results" in the  "Management's  Discussion  and Analysis of Financial
Condition and Results of Operations"  section of the Company's  Annual Report on
Form 10-K for the year ended December 31, 1997, 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.

Year 2000 Compliance

The  Company  utilizes a number of  computer  software  programs  and  operating
systems across its entire organization, including applications used in financial
business systems and various  administrative  functions.  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 such  applications  will be necessary.  The
Company has completed its  identification of applications that are not yet "Year
2000"   compliant  and  has  commenced   modification  or  replacement  of  such
applications,  as  necessary.  Given  information  known at this time  about the
Company's systems that are  non-compliant,  coupled with the Company's  ongoing,
normal  course-of-business  efforts to upgrade or replace critical  systems,  as
necessary,  management  does not expect Year 2000  compliance  costs to have any
material  adverse  impact on the  Company's  liquidity  or  ongoing  results  of
operations.  No  assurance  can be  given,  however,  that all of the  Company's
systems will be Year 2000  compliant or that  compliance  costs or the impact of
the Company's failure to achieve  substantial Year 2000 compliance will not have
a  material  adverse  effect on the  Company's  future  liquidity  or results of
operations.

Stockholders or potential stockholders should read the "Risk Factors" section of
the Company's  latest annual report on Form 10-K/A 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.



                                       36
<PAGE>

GLENBOROUGH HOTEL GROUP

Background

Glenborough  Hotel  Group  ("GHG")  was  organized  in the  state of  Nevada  on
September 23, 1991.  Through June 1998, GHG operated hotel  properties  owned by
Glenborough  Realty  Trust  Incorporated  (the  "Company")  under  six  separate
percentage  leases  and  managed  one hotel  property  owned by an  unaffiliated
company.  In June 1998,  two of the hotel  properties  owned by the Company were
sold. In addition, the four remaining hotel properties owned by the Company were
leased to unaffiliated  entities.  These unaffiliated entities will manage three
of the  hotel  properties  through  the end of 1998,  at which  time  they  will
purchase the properties from the Company.

The Company owns 100% of the 50 shares of non-voting  preferred stock of GHG and
three individuals, including Terri Garnick, an executive officer of the Company,
each own 33 1/3% of the 1,000 shares of voting common stock of GHG.

Through April 30, 1998, GHG also owned  approximately 80% of the common stock of
Resort Group, Inc. ("RGI").  GHG consolidated its financial  statements with RGI
and recognized its joint venture partner's  interest as minority  interest.  RGI
manages  homeowners  associations  and rental  pools for two  beachfront  resort
condominium hotel properties and owns six units at one of the properties.  As of
May 1, 1998, GHG sold its interest in RGI to a partnership  affiliated  with the
Company.

Liquidity and Capital Resources

Through June 30, 1998, GHG's primary source of funding was the cash generated by
the  operations  of the six hotels leased from the Company and fees received for
(i) managing  hotels and (ii) managing the  homeowners  associations  and rental
pools for the resort condominium hotel properties as discussed above.

The  board  of  directors  of GHG  declared  and paid  the  following  quarterly
dividends for the three months ended March 31 and June 30, 1998:
<TABLE>
<CAPTION>

                                              1st Quarter     2nd Quarter      Year to Date
                                             --------------  --------------   --------------
<S>                                          <C>             <C>                <C>      
Preferred dividends to the Company            $    7,500      $    7,500         $  15,000
Additional dividends to the Company               70,875          70,875           141,750
                                             --------------  --------------   --------------
Total dividends to the Company                    78,375          78,375           156,750
Dividends to others                               23,625          23,625            47,250
                                             --------------  --------------   --------------
Total dividends                               $  102,000      $  102,000         $ 204,000
                                             ==============  ==============   ==============
</TABLE>

Results of Operations

Hotel revenue, which represents the revenue earned on the six hotels leased from
the Company,  increased $767,000, or 12%, to $6,904,000 for the six months ended
June 30, 1998,  from  $6,137,000  for the six months  ended June 30, 1997.  This
increase is primarily due to the  commencement of the Scottsdale  Hotel lease in
February 1997 and the commencement of the Irving Hotel lease in April 1998.

Fee revenue and salary reimbursements of $645,000 represents the fees earned for
managing hotels and resort condominium  hotels. The decrease from the six months
ended June 30, 1997,  to the six months ended June 30, 1998, is primarily due to
a change in ownership  of one of the managed  hotels,  which  resulted in GHG no
longer managing this hotel as of April 1997.

The primary expenses associated with the leased hotels are room expenses,  lease
payments, sales and marketing and other operating expenses, including utilities,
maintenance and insurance. All of these leased hotel expenses increased from the
six months  ended June 30, 1997,  to the six months ended June 30, 1998,  due to
the  commencement  of the Scottsdale  Hotel and Irving Hotel leases as discussed
above.

The only direct  expenses  incurred in connection with the management of the two
hotels and two resort  condominium  hotel  properties  are salaries and benefits
which  decreased  $298,000  from the six months ended June 30, 1997,  to the six
months  ended June 30,  1998.  This  decrease  is  primarily  due to a change in
ownership of one of the managed hotel properties which resulted in GHG no longer
managing this hotel as of April 1997.

                                       37
<PAGE>

General and  administrative  costs represent the overhead costs  associated with
administering   the   business  of  GHG.   Such  costs   primarily   consist  of
administrative  salaries and benefits,  rent,  legal fees and  accounting  fees.
These costs  remained  relatively  stable  with a decrease of $5,000,  or 1%, to
$520,000  for the six months  ended June 30,  1998,  from  $525,000  for the six
months ended June 30, 1997.

Depreciation and amortization  decreased $15,000, or 31%, to $34,000 for the six
months ended June 30, 1998, from $49,000 for the six months ended June 30, 1997.
Depreciation  expense relates to the  depreciation of building  improvements and
furniture,  fixtures and equipment at the leased  hotels.  Amortization  expense
primarily  relates  to  the  amortization  of  RGI's  investment  in  management
contracts. The decrease is primarily due to the sale of GHG's interest in RGI to
an affiliate of the Company, effective May 1, 1998.

On May 1, 1998,  GHG sold its 80% interest in RGI to an affiliate of the Company
for  $340,000  and  recognized  a  $261,000  loss  which  is  included  in GHG's
consolidated statements of income for the six months ended June 30, 1998.

                                       38
<PAGE>

PART II.      OTHER INFORMATION

Item 1.       Legal Proceedings

Blumberg.  On February 17, 1998, the California  state court of appeals affirmed
the Company's  settlement of a class action complaint filed on February 21, 1995
in the Superior  Court of the State of California in and for San Mateo County in
connection  with the  Consolidation.  The plaintiff is Anthony E.  Blumberg,  an
investor in Equitec B, one of the Partnerships included in the Consolidation, on
behalf of himself and all others (the "Blumberg Action") similarly situated. The
defendants  are  GC  (formerly   known  as  Glenborough   Realty   Corporation),
Glenborough Realty Corporation ("GRC"), Robert Batinovich,  the Partnerships and
the Company.

The complaint  alleged  breaches by the  defendants of their  fiduciary duty and
duty of good  faith and fair  dealing  to  investors  in the  Partnerships.  The
complaint  sought  injunctive  relief and  compensatory  damages.  The complaint
alleged that the valuation of GC was excessive and was done without appraisal of
GC's business or assets.  The complaint  further  alleged that the interest rate
for the Notes to be issued to  investors in lieu of shares of Common  Stock,  if
they so  elected  was too low for the risk  involved  and that the  Notes  would
likely sell,  if at all, at a  substantial  discount from their face value (as a
matter  entirely  distinct from the litigation and  subsequent  settlement,  the
Company,  as it had the option to, paid in full the amounts due plus interest in
lieu of issuing Notes).

On October 9, 1995 the parties  entered  into an agreement to settle the action.
The defendants,  in entering into the settlement agreement,  did not acknowledge
any fault, liability or wrongdoing of any kind and continue to deny all material
allegations  asserted in the litigation.  Pursuant to the settlement  agreement,
the  defendants  will be released from all claims,  known or unknown,  that have
been,  could have been,  or in the future might be asserted,  relating to, among
other  things,  the  Consolidation,  the  acquisition  of the  Company's  shares
pursuant  to  the  Consolidation,  any  misrepresentation  or  omission  in  the
Registration  Statement on Form S-4,  filed by the Company on September 1, 1994,
as  amended,   or  the   prospectus   contained   therein   ("Prospectus/Consent
Solicitation  Statement"),  or the subject matter of the lawsuit. In return, the
defendants agreed to the following:  (a) the inclusion of additional or expanded
disclosure  in the  Prospectus  Consent  Solicitation  Statement,  and  (b)  the
placement of certain  restrictions on the sale of the stock by certain  insiders
and the granting of stock options to certain insiders following  consummation of
the Consolidation.  Plaintiff's counsel indicated that it would request that the
court award it $850,000 in attorneys'  fees,  costs and  expenses.  In addition,
plaintiffs'  counsel indicated it would request the court for an award of $5,000
payable to Anthony  E.  Blumberg  as the class  representative.  The  defendants
agreed not to oppose such requests.

On October 11, 1995,  the court  certified the class for purposes of settlement,
and scheduled a hearing to determine  whether it should  approve the  settlement
and class counsel's  application  for fees. A notice of the proposed  settlement
was  distributed  to the members of the class on November 15,  1995.  The notice
specified that, in order to be heard at the hearing,  any class member objecting
to the proposed  settlement  must, by December 15, 1995, file a notice of intent
to appear, and a detailed statement of the grounds for their objection.

Objections  were received from a small number of class  members.  The objections
reiterated the claims in the original Blumberg complaint,  and asserted that the
settlement agreement did not adequately compensate the class for releasing those
claims.  One of the  objections  was filed by the same law firm that brought the
BEJ Action described below.

At a hearing on January 17, 1996, the court heard the arguments of the objectors
seeking to overturn the  settlement,  as well as the arguments of the plaintiffs
and the defendants in defense of the settlement. The court granted all parties a
period of time in which to file additional pleadings. On June 4, 1996, the court
granted approval of the settlement,  finding it fundamentally fair, adequate and
reasonable to the respective parties to the settlement.  However,  the objectors
gave  notice of their  intent to appeal the June 4 decision.  All parties  filed
their  briefs and a hearing was held on February 3, 1998.  On February 17, 1998,
the  Court of  Appeals  rejected  the  objectors'  contentions  and  upheld  the
settlement. The objectors filed with the California Supreme Court a petition for
review, which was denied on May 21, 1998.

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  are BEJ

                                       39
<PAGE>

Equity Partners,  J/B Investment  Partners,  Jesse B. Small and Sean O'Reilly as
custodian  f/b/o  Jordan  K.  O'Reilly,  who as a  group  held  limited  partner
interests in certain of the Partnerships  included in the Consolidation known as
Outlook  Properties Fund IV,  Glenborough All Suites Hotels,  L.P.,  Glenborough
Pension Investors,  Equitec Income Real Estate  Investors-Equity Fund 4, Equitec
Income Real Estate Investors C and Equitec Mortgage Investors Fund IV, on behalf
of themselves and all others similarly situated. The defendants are GRC, GC, the
Company,  GPA, Ltd., Robert Batinovich and Andrew  Batinovich.  The Partnerships
are named as nominal defendants.

This action  alleges the same  disclosure  violations  and 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,  and the  objections  to the
settlement of the Blumberg Action,  are without merit, and management intends to
pursue  a  vigorous  defense  in both  matters.  In view  of the  denial  of the
objector's  petition for review in the Blumberg Action,  among other things, the
Company believes that it is very unlikely that this litigation would result in a
liability that would exceed the accrued liability by a material amount. However,
given the inherent  uncertainties of litigation,  there can be no assurance that
the ultimate  outcome in these two legal  proceedings  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 2.       Changes in Securities

(a)   Rights of Holders of Registered Securities

On July 7, 1998, the Company's Board of Directors  adopted a Stockholder  Rights
Plan and pursuant  thereto  declared a dividend of one preferred  share purchase
right for each  outstanding  share of the  Company's  Common  Stock.  A Form 8-A
relating to such plan was filed with the Securities  and Exchange  Commission on
July 16, 1998. Said Form 8-A is incorporated herein by reference.

(c)   Sales of Unregistered Securities

In February  1998,  the Company  acquired  the  Capitol  Center  property in Des
Moines,  Iowa, for a total acquisition  cost,  including  capitalized  costs, of
approximately  $12.3 million.  In connection with this acquisition,  Glenborough
Properties, L.P., a California limited partnership (the "Operating Partnership,"
as  to  which  the  Company  is  general  partner),  issued  to  Hubbell  Realty
Corporation, the seller of the Capitol Center Property, 3,874 units ("Units") of
partnership  interest in Glenborough  Properties,  L.P. (with an agreed upon per
Unit value of $30.00,  or an aggregate value of $116,000) as partial payment for
the Capitol  Center  Property.  The Units are  redeemable  for cash,  or, at the
election  of the  Company,  for  shares  of  Common  Stock of the  Company  on a
one-for-one  basis.  The Units  were  issued  by the  Operating  Partnership  in
reliance on the  exemption  provided by Section  4(2) of the  Securities  Act of
1933, as amended.

In April 1998,  the Company  acquired the Eaton & Lauth  portfolio of properties
for a total acquisition cost, including  capitalized costs, of approximately $70
million.  In  connection  with this  acquisition,  the Company and the Operating
Partnership  issued   approximately   $15.9  million  in  the  form  of  506,788
partnership units in the Operating  Partnership and 126,764  unregistered shares
of Common Stock of the Company  (based on an agreed per unit and per share value
of $25.00) as partial  payment  for the Eaton & Lauth  portfolio.  The Units are
redeemable  for cash,  or, at the election of the Company,  for shares of Common
Stock of the Company on a one-for-one basis. The Units and shares were issued by
the Operating  Partnership and the Company in reliance on the exemption provided
by Section 4(2) of the Securities Act of 1933, as amended.

                                       40
<PAGE>

In June 1998, the Company acquired the Covance Property for a total  acquisition
cost, including capitalized costs, of approximately $16.5 million. In connection
with  this  acquisition,  the  Company  and  the  Operating  Partnership  issued
approximately  $4.3  million  in the form of  161,492  partnership  units in the
Operating  Partnership  and 8,802  unregistered  shares  of Common  Stock of the
Company  (based on an agreed per unit and per share  value of $25.00) as partial
payment for the Covance Property.  The Units are redeemable for cash, or, at the
election  of the  Company,  for  shares  of  Common  Stock of the  Company  on a
one-for-one basis. The Units and shares were issued by the Operating Partnership
and the  Company in reliance on the  exemption  provided by Section  4(2) of the
Securities Act of 1933, as amended.

In June 1998, the Company acquired the Galesi Portfolio for a total  acquisition
cost,   including   capitalized  costs,  of  approximately  $275.8  million.  In
connection with this acquisition, the Operating Partnership issued approximately
$21.2  million  in the  form  of  806,393  partnership  units  in the  Operating
Partnership  (based on an agreed per unit value of $26.2315) as partial  payment
for the Galesi Portfolio. The Units are redeemable for cash, or, at the election
of the  Company,  for shares of Common  Stock of the  Company  on a  one-for-one
basis.  The Units were issued by the  Operating  Partnership  in reliance on the
exemption provided by Section 4(2) of the Securities Act of 1933, as amended.

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

At the  Company's  annual  meeting,  held  on May  14,  1998  in  Redwood  City,
California, the following votes of security holders occurred:

(a)  The  following  persons were duly  elected by the holders of the  Company's
     Common Stock to serve as directors,  each for the term of their  respective
     Class as  indicated  below and  until  their  successors  are  elected  and
     qualified:

     (1)  As a Class I director  (for a one year term;  until 1999),  Richard C.
          Blum, 24,566,510 votes for and 123,123 votes withheld;

     (2)  As a Class I director  (for a one year term;  until 1999),  Richard A.
          Magnuson, 24,568,385 votes for and 121,248 votes withheld;

     (3)  As a Class II  director  (for a two year  term;  until  2000),  Robert
          Batinovich, 24,566,995 votes for and 122,638 votes withheld;

     (4)  As a Class II  director  (for a two year term;  until  2000),  Patrick
          Foley, 24,566,978 votes for and 122,655 votes withheld;

     (5)  As a Class III director  (for a three year term;  until 2001),  Andrew
          Batinovich, 24,567,892 votes for and 121,741 votes withheld;

     (6)  As a Class III director  (for a three year term;  until  2001),  Laura
          Wallace, 24,566,551 votes for and 123,082 votes withheld.

(b)  The holders of Common Stock ratified the appointment of Arthur Andersen LLP
     as the Company's  independent  auditors for the fiscal year ending December
     31, 1998,  by a vote of  24,643,409  votes for and 10,078 votes against and
     36,146 votes abstaining.

Item 5:  Other Information

Any  stockholder  proposal  submitted  with respect to the Company's 1999 Annual
Meeting of Stockholders, which proposal is submitted outside the requirements of
Rule  14a-8  under  the  Securities  Exchange  Act of 1934,  will be  considered
untimely for  purposes of Rule 14a-4 and 14a-5 if notice  thereof is received by
the Company after March 1, 1999.


                                       41
<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 29,  1998,  the  Company  filed a report on Form 8-K with
              respect to Supplemental Information as of March 31, 1998.

              On May 7,  1998,  the  Company  filed a  report  on Form  8-K with
              respect to the  acquisition of the Eaton & Lauth Portfolio and the
              BGK Portfolio.

              On May 15,  1998,  the  Company  filed a report on Form 8-K/A with
              respect to the  acquisition of the Eaton & Lauth Portfolio and the
              BGK Portfolio.

              On May 15,  1998,  the  Company  filed  a  report  on Form  8-K/A,
              Amendment  No. 2, with respect to the  acquisition  of the Eaton &
              Lauth Portfolio and the BGK Portfolio.

              On July 10,  1998,  the  Company  filed a report  on Form 8-K with
              respect to its adoption of a stockholder rights plan.

              On July 15,  1998,  the  Company  filed a report  on Form 8-K with
              respect  to  the   acquisition  of  the  Galesi   Portfolio,   the
              Donau/Gruppe  Portfolio,  the  Pauls  Portfolio  and One and Three
              Pacific and the Bridge Loan.

              On July 22,  1998,  the  Company  filed a report  on Form 8-K with
              respect to Supplemental Information as of June 30, 1998.

              On August 13, 1998,  the Company filed a report on Form 8-K/A with
              respect  to  the   acquisition  of  the  Galesi   Portfolio,   the
              Donau/Gruppe  Portfolio,  the  Pauls  Portfolio  and One and Three
              Pacific and the Bridge Loan.


                                       42
<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 14, 1998                /s/ Andrew Batinovich
                                      Andrew Batinovich
                                      Director, President
                                      and Chief Operating Officer
                                      (Principal Operating Officer)





Date:  August 14, 1998                /s/ Stephen Saul
                                      Stephen Saul
                                      Executive Vice President
                                      and Chief Financial Officer
                                      (Principal Financial Officer)




Date:  August 14, 1998                /s/ Terri Garnick
                                      Terri Garnick
                                      Senior Vice President,
                                      Chief Accounting Officer,
                                      Treasurer
                                      (Principal Accounting Officer)


                                       43
<PAGE>

                                  EXHIBIT INDEX



Exhibit No.                          Exhibit Title

3.1       Amended Bylaws of the Company.

3.2       Articles  Supplementary  of the Series B Preferred  Stock (relating to
          the Rights Plan).

10.1      Rights Agreement,  dated as of July 20, 1998,  between the Company and
          the  Registrar and Transfer  Company,  together with Exhibit A Form of
          Rights Certificate;  Exhibit B Summary of Rights to Purchase Preferred
          Stock;  and Exhibit C Form of Articles  Supplementary  of the Series B
          Preferred Stock (incorporated  herein by reference to Exhibit 1 to the
          Company's Form 8-A, filed July 16, 1998).

10.2      Term Credit Agreement,  dated as of June 29, 1998, between the Company
          and a commercial  bank with  respect to the $150  Million  Bridge Loan
          (incorporated  by  reference  to Exhibit  10.1 to the  Company's  Form
          8-K/A, filed August 13, 1998).

11.1      Statement re:  Computation of Per Share Earnings is shown in Note 8 of
          the Consolidated Financial Statements of the Company in Item 1.

12.1      Computation of Ratios.

27.1      Financial Data Schedule.


                                       44
<PAGE>

Exhibit 3.1

                      GLENBOROUGH REALTY TRUST INCORPORATED

                                     BYLAWS

                 as amended by actions of the Board of Directors
            at Meetings held on October 28, 1996 and January 26, 1998

                                    ARTICLE I

                                  STOCKHOLDERS

     1.1 Annual  Meetings.  The Corporation  shall hold an annual meeting of its
stockholders to elect directors and transact any other business within its power
either at 10:00  a.m.  on the last  Thursday  of May in each year if not a legal
holiday,  or at such other time on such other day  falling on or before the 30th
day  thereafter as shall be set by the Board of  Directors.  Except as otherwise
permitted by applicable law, any business may be considered at an annual meeting
without the purpose of the meeting having been specified in the notice.  Failure
to hold an annual  meeting does not invalidate  the  Corporation's  existence or
affect any otherwise valid corporate acts.

     1.2  Special  Meetings.  The  Chairman  of the Board,  the  President  or a
majority  of  the  Board  of  Directors   may  call  special   meetings  of  the
stockholders.  Special  meetings  of  stockholders  shall  also be called by the
Secretary of the  Corporation  upon the written request of the holders of shares
entitled to cast not less than 10% of all the votes  entitled to be cast at such
meeting.  Such  request  shall state the purpose of such meeting and the matters
proposed  to be  acted on at such  meeting.  The  Secretary  shall  inform  such
requesting  stockholders  of the  reasonably  estimated  cost of  preparing  and
mailing  notice of the meeting  and,  upon  payment to the  Corporation  of such
costs, the Secretary shall give notice to each stockholder entitled to notice of
the meeting. Unless requested by stockholders entitled to cast a majority of all
the votes  entitled to be cast at such  meeting,  a special  meeting need not be
called to consider any matter which is substantially  the same as a matter voted
on at any special meeting of the  stockholders  held during the preceding twelve
months.

     1.3 Place of Meetings. Meetings of stockholders shall be held at such place
in the United States as is set from time to time by the Board of Directors.

     1.4 Notice of Meetings: Waiver of Notice. Not less than 10 nor more than 90
days before each stockholders'  meeting, the Secretary shall give written notice
of the  meeting to each  stockholder  entitled  to vote at the  meeting and each
other stockholder  entitled to notice of the meeting. The notice shall state the
time and place of the meeting and, if the meeting is a special meeting or notice
of the purpose is required by  statute,  the purpose of the  meeting.  Notice is
given to a  stockholder  when it is  personally  delivered  to him,  left at his
residence  or usual  place of  business,  or mailed to him at his  address as it
appears  on  the  records  of the  Corporation.  Notwithstanding  the  foregoing
provisions,  each person who is entitled to notice waives notice if he before or
after the meeting  signs a waiver of the notice  which is filed with the records
of stockholders' meetings, or is present at the meeting in person or by proxy.

     1.5 Quorum:  Voting.  Unless statute or the charter of the Corporation (the
"Charter")  provides  otherwise,  at a meeting of  stockholders  the presence in
person or by proxy of stockholders  entitled to cast a majority of all the votes
entitled to be cast at the meeting  constitutes a quorum,  and a majority of all
the  votes  cast at a meeting  at which a quorum is  present  is  sufficient  to
approve  any matter  which  properly  comes  before the  meeting,  except that a
plurality  of all the votes  cast at a meeting  at which a quorum is  present is
sufficient to elect a director.

     1.6  Adjournments.  Whether  or not a  quorum  is  present,  a  meeting  of
stockholders  convened on the date for which it was called may be adjourned from
time to time without  further  notice to a date not more than 120 days after the
original  record date.  Any  business  which might have been  transacted  at the
meeting as  originally  notified  may be  deferred  and  transacted  at any such
adjourned meeting at which a quorum shall be present.

     1.7  General  Right to Vote:  Proxies.  Unless the Charter  provides  for a
greater or lesser number of votes per share or limits or denies  voting  rights,
each outstanding share of stock, regardless of class, is entitled to one vote on
each matter submitted to a vote at a meeting of stockholders.  A stockholder may
vote the stock he owns of record

                                       45
<PAGE>

either in person or by written  proxy signed by the  stockholder  or by his duly
authorized attorney in fact. Unless a proxy provides otherwise,  it is not valid
more than 11  months  after its  date.  Shares  of Common  Stock  shall not have
cumulative voting rights.

     1.8 List of  Stockholders.  At each  meeting  of  stockholders,  a true and
complete list of all stockholders entitled to vote at such meeting,  showing the
number and class of shares held by each and certified by the transfer  agent for
such class or by the Secretary, shall be furnished by the Secretary.

     1.9 Conduct of Business and Voting. At all meetings of stockholders, unless
the  voting is  conducted  by  inspectors,  the  proxies  and  ballots  shall be
received, and all questions touching the qualification of votes and the validity
of proxies,  the acceptance or rejection of votes and procedures for the conduct
of business not otherwise  specified by these Bylaws,  the Charter or law, shall
be  decided or  determined  by the  chairman  of the  meeting.  If  demanded  by
stockholders,  present in person or by proxy,  entitled  to cast at least 10% of
all the votes entitled to be cast at the meeting, or if ordered by the chairman,
the vote upon any election or question  shall be taken by ballot and,  upon like
demand or order, the voting shall be conducted by two inspectors, in which event
the  proxies and ballots  shall be  received,  and all  questions  touching  the
qualification of voters and the validity of proxies, the acceptance or rejection
of votes and procedures  for the conduct of business not otherwise  specified by
these Bylaws, the Charter or law shall be decided, by such inspectors. Unless so
demanded or ordered,  no vote need be by ballot and voting need not be conducted
by  inspectors.  The  stockholders  at any  meeting may choose an  inspector  or
inspectors to act at such meeting,  and in default of such election the chairman
of the meeting may appoint an inspector or inspectors. No candidate for election
as a director at a meeting shall serve as an inspector thereat.

     1.10 Informal Action by  Stockholders.  Any action required or permitted to
be taken at a meeting of stockholders may be taken without a meeting if there is
filed with the records of  stockholders'  meetings a unanimous  written  consent
which sets forth the action and is signed by each  stockholder  entitled to vote
on the  matter  and a  written  waiver of any  right to  dissent  signed by each
stockholder entitled to notice of the meeting but not entitled to vote at it.

     1.11 Annual Meetings and Stockholder Proposals.  Nominations of individuals
for  election  to the Board of  Directors  and the  proposal  of  business to be
considered by the  stockholders may be made at an annual meeting of stockholders
(i) pursuant to the Corporation's notice of meeting, (ii) by or at the direction
of the Board of Directors or (iii) by any stockholder of the Corporation who was
a  stockholder  of record at the time of giving of notice  provided  for this in
this Section 1.11,  who is entitled to vote at the meeting and who complied with
the notice procedures set forth in this Section 1.11.

     For  nominations or other business to be properly  brought before an annual
meeting by a stockholder  pursuant to clause (iii) of the preceding paragraph of
this Section 1.11,  the  stockholder  must have given timely  notice  thereof in
writing to the  Secretary  of the  Corporation.  To be timely,  a  stockholder's
notice shall be delivered to the secretary at the principal executive offices of
the  Corporation  not less than 60 days nor more than 90 days prior to the first
anniversary  of the preceding  year's annual  meeting.  For purposes of applying
this minimum to the 1995 annual  meeting,  the previous  year's  annual  meeting
shall be deemed to have taken place on May 20, 1994; provided that this sentence
shall  cease to be a part of the Bylaws  after the  holding  of the 1995  annual
meeting and any  adjournment  thereof.  In the event that the date of the annual
meeting  is  advanced  by more than 30 days or delayed by more than 60 days from
such  anniversary  date,  notice  by the  stockholder  to be  timely  must be so
delivered  not earlier  than the 90th day prior to such  annual  meeting and not
later  than the  close of  business  on the  later of the 60th day prior to such
annual  meeting or the tenth day following the day on which public  announcement
of the date of such meeting is first made. Such  stockholder's  notice shall set
forth (i) as to each  person  whom the  stockholder  proposes  to  nominate  for
election or  reelection  as a director all  information  relating to such person
that is required to be  disclosed  in  solicitations  of proxies for election of
directors,  or is otherwise  required,  in each case pursuant to Regulation  14A
under the  Securities  Exchange  Act of 1934,  as amended (the  "Exchange  Act")
(including  such person's  written consent to being named in the proxy statement
as a nominee  and to  serving as a director  if  elected);  (ii) as to any other
business  that the  stockholder  proposes to bring before the  meeting,  a brief
description  of the  business  desired to be brought  before  the  meeting,  the
reasons for conducting such business at the meting and any material  interest in
such business of such stockholder and of the beneficial  owner, if any, on whose
behalf the proposal is made; and (iii) as to the  stockholder  giving the notice
and the beneficial  owner, if any, on whose behalf the nomination or proposal is
made,  (x) the name and  address  of such  stockholder,  as they  appear  on the
Corporation's books and of such beneficial owner and (y) the number of shares of
each  class of stock of the  Corporation  which  are owned  beneficially  and of
record by such stockholder and such beneficial owner.

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<PAGE>

     Notwithstanding  anything in the second sentence of the preceding paragraph
of this Section 1.11 to the contrary,  in the event that the number of directors
to be  elected to the Board of  Directors  is  increased  and there is no public
announcement  naming all of the nominees for director or specifying  the size of
the increased  Board of Directors made by the Corporation at least 70 days prior
to the first anniversary of the preceding year's annual meeting, a stockholder's
notice  required by this Section 1.1 shall also be considered  timely,  but only
with respect to nominees for any new positions  created by such increase,  if it
shall be delivered to the  secretary at the principal  executive  offices of the
Corporation  not later than the close of business on the tenth day  following on
which such public announcement is first made by the Corporation.

     Notwithstanding the foregoing,  to the extent any of the provisions of this
Section 1.11 are inconsistent  with the provisions of Rule 14a-8 of the Exchange
Act, the provisions of Rule 14a-8 shall govern.

     1.12 Business at Special Meetings of Stockholders. Only such business shall
be conducted  at a special  meeting of  stockholders  as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting.  Nominations
of  persons  for  election  to the Board of  Directors  may be made at a special
meeting of stockholders at which directors are to be elected (i) pursuant to the
Corporation's  notice of meeting,  (ii) by or at the  direction  of the Board of
Directors or (iii)  provided  that the Board of Directors  had  determined  that
directors  shall be elected at such special  meeting,  by any stockholder of the
Corporation  who is a  stockholder  of  record  at the time of  giving of notice
provided  for in this Section  1.12,  who is entitled to vote at the meeting and
who has complied with the notice  procedures  set forth in this Section 1.12. In
the event  the  Corporation  calls a special  meeting  of  stockholders  for the
purpose of electing one or more  directors to the Board of  Directors,  any such
stockholder  may  nominate a person or persons (as the case may be) for election
to such  position as specified in the  Corporation's  notice of meeting,  if the
stockholder's  notice required by the second  paragraph of Section 1.11 shall be
delivered to the Secretary at the principal executive offices of the Corporation
not earlier than the 90th day prior to such  special  meeting and not later than
the close of business on the later of the 60th day prior to such special meeting
or the tenth day following the day on which public announcement is first made of
the date of the special meeting and of the nominees proposed by the directors to
be elected at such meeting.

                                   ARTICLE II

                               BOARD OF DIRECTORS

     2.1 Function of  Directors.  The  business  and affairs of the  Corporation
shall be managed under the  direction of its Board of  Directors.  All powers of
the  Corporation  may  be  exercised  by or  under  authority  of the  Board  of
Directors,  except as conferred on or reserved to the stockholders by statute or
by the Charter or Bylaws.

     2.2  Number  of  Directors.  The  Corporation  shall  have at  least  three
directors;  provided  that,  if there is no stock  outstanding,  the  number  of
directors  may be less than three but not less than one,  and, if there is stock
outstanding and so long as there are less than three stockholders, the number of
directors  may be less than three but not less than the number of  stockholders,
provided  that the number  thereof  shall never be less than the minimum  number
required by statute. The Corporation shall have the number of directors provided
in the Charter until changed as herein provided.  A majority of the entire Board
of  Directors  may alter the  number of  directors  set by the  Charter or these
Bylaws to not more than seven nor less than the minimum  number  then  permitted
herein, but the action may not affect the tenure of office of any director.

     2.3 Election and Tenure of Directors. Effective January 26, 1998, Directors
are divided into three  classes,  as nearly  equal in number as  possible,  with
respect to the times for which they shall  severally  hold office.  Directors of
the First Class first  chosen shall hold office for one year or until the annual
election occurring in the year 1999;  Directors of the Second Class first chosen
shall hold office for two years or until the annual  election  occurring  in the
year 2000; Directors of the Third Class first chosen shall hold office for three
years or until the annual  election  occurring  in the year 2001;  and,  in each
case, until their  successors  shall be duly elected and shall qualify.  At each
future  annual  meeting  of the  stockholders,  the  successors  to the Class of
Directors  whose terms shall expire at that time shall be elected to hold office
for a term of three years,  so that the term of office of one Class of Directors
shall expire in each year.

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<PAGE>

     2.4 Removal of Director.  Any director may be removed with or without cause
and only by the  affirmative  vote of  stockholders  holding  66 2/3% of all the
votes entitled to be cast for the election of directors.

     2.5  Vacancy  on Board.  Except  in the case of a  vacancy  on the Board of
Directors  among the  directors  elected by a class or series of  capital  stock
other than Common Stock, newly created directorships resulting from any increase
in the  authorized  number of  directors  shall be filled by a  majority  of the
entire Board of  Directors;  any  vacancies on the Board of Directors  resulting
from death,  resignation,  retirement,  disqualification or other causes, except
removal  from  office,  shall be filled by a majority of the  directors  then in
office,  whether or not sufficient to constitute a quorum;  and any vacancies on
the Board of Directors  resulting  from removal from office shall be filled by a
vote of the  stockholders.  A director so elected by the  stockholders or by the
remaining  directors  shall  hold  office  until  the  next  annual  meeting  of
stockholders and until his successor is elected and qualified.

     2.6 Regular Meetings. After each meeting of stockholders at which directors
shall  have  been  elected,  the  Board  of  Directors  shall  meet  as  soon as
practicable  for the  purpose  of  organization  and the  transaction  of  other
business.  In the event that no other time and place are specified by resolution
of the Board or by the President or the Chairman, with notice in accordance with
Section 2.8, the Board of Directors shall meet  immediately  following the close
of, and at the place of, such stockholders'  meeting.  Any other regular meeting
of the Board or Directors  shall be held on such date and at any place as may be
designated from time to time by the Board of Directors.

     2.7 Special  Meetings.  Special  meetings of the Board of Directors  may be
called  at any  time by the  Chairman  of the  Board  or the  President  or by a
majority of the Board of Directors  by vote at a meeting,  or in writing with or
without a meeting.  A special meeting of the Board of Directors shall be held at
such  time and  place as may be  designated  from  time to time by the  Board of
Directors. In the absence of designation such meeting shall be held at such time
and place as may be designated in the call.

     2.8 Notice of Meeting.  Except as provided in Section  2.6,  the  Secretary
shall give written notice to each director of each regular and special meting of
the  Board of  Directors.  The  notice  shall  state  the time and  place of the
meeting.  Notice is given to a director when it is delivered  personally to him,
left at his  residence  or  usual  place  of  business,  or  sent by  telegraph,
facsimile  transmission  or telephone,  at least 24 hours before the time of the
meeting or, in the alternative, by mail to his address as it shall appear on the
records of the  Corporation,  at least 72 hours  before the time of the meeting.
Unless the Bylaws or a resolution of the Board of Directors provides  otherwise,
the notice need not state the  business to be  transacted  at or the purposes of
any  regular or  special  meeting  of the Board of  Directors.  No notice of any
meeting of the Board of  Directors  need be given to any director who is present
at the meeting except where a director attends a meeting for the express purpose
of  objecting  to the  transaction  of any  business  because the meeting is not
lawfully  called or convened,  or to any director  who, in writing  executed and
filed  with the  records  of the  meeting  either  before or after  the  holding
thereof,  waives such notice. Any meeting of the Board of Directors,  regular or
special,  may adjourn  from time to time to  reconvene at the same or some other
place,  and no notice need be given of any such adjourned  meeting other than by
announcement.

     2.9 Action by Directors. Unless statute or the Charter or By laws require a
greater  proportion,  the action of a  majority  of the  directors  present at a
meeting at which a quorum is present is the action of the Board of Directors.  A
majority of the entire  Board of  Directors  shall  constitute  a quorum for the
transaction of business.  In the absence of a quorum,  the directors  present by
majority  vote and without  notice  other than by  announcement  may adjourn the
meeting from time to time until a quorum  shall  attend.  At any such  adjourned
meeting at which a quorum shall be present, any business may be transacted which
might have been  transacted  at the meeting as originally  notified.  Any action
required or permitted to be taken at a meeting of the Board of Directors  may be
taken  without a meeting,  if a unanimous  written  consent which sets forth the
action is signed by each  member  of the  Board and filed  with the  minutes  of
proceedings of the Board.

     2.10 Meeting by Conference Telephone. Members of the Board of Directors may
participate  in  a  meeting  by  means  of a  conference  telephone  or  similar
communications  equipment if all persons  participating  in the meeting can hear
each  other  at the  same  time.  Participation  in a  meeting  by  these  means
constitutes presence in person at a meeting.

     2.11 Compensation.  By resolution of the Board of Directors a fixed sum and
expenses, if any, for attendance at each regular or special meeting of the Board
of Directors or of committees thereof, and other compensation for their services
as such or on  committees  of the Board of  Directors,  may be paid to directors

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<PAGE>

other than directors who are full-time employees of the Corporation.  A director
who serves the  Corporation in any other capacity also may receive  compensation
for such other services pursuant to a resolution of the Board of Directors.

     2.12  Restrictions  on  Investments.  For so long a  period  of time as the
Corporation  shall be  qualified  as real  estate  investment  trust  under  the
Internal   Revenue  Code,  the  Board  of  Directors  shall  not  authorize  the
Corporation  to  engage  in  any  of  the  following   investment  practices  or
activities:  (a) invest in commodities or commodity future contracts; (b) invest
more than 10% of its total assets in unimproved  real  property or  indebtedness
secured by a deed of trust or mortgage loans on unimproved  real  property;  (c)
invest in  indebtedness  (herein  called "junior debt") secured by a mortgage on
real property which is subordinate to the lean of the other indebtedness (herein
called  "senior  debt"),  except where the amount of such junior debt,  plus the
outstanding  amount of the senior  debt,  does not  exceed 90% of the  appraised
value of such property,  if after giving effect  thereto,  the value of all such
investments  by the  Corporation  (as shown on the books of the  Corporation  in
accordance with generally  accepted  accounting  principals after all reasonable
reserves but before provision for depreciation) would not then exceed 25% of the
tangible assets of the Corporation;  provided, however, the restrictions in this
subparagraph  (c) shall not apply to  investments in junior debt which do not in
the aggregate  exceed 10% of the  Corporation's  tangible  assets  provided such
excluded  investments  are  included  within the 25%  limitation;  (d) invest in
contracts  for the sale of real  estate but  nothing  herein  shall  prevent the
Corporation  from entering  into  contracts for the sale of real estate which it
may own; (e) engage in trading,  as compared  with  investment  activities;  (f)
acquire securities in any company holding  investments or engaging in activities
prohibited  by  this  section;  or (g)  engage  in  underwriting  or the  agency
distribution of securities issued by others.  The foregoing  restrictions  shall
not  apply  to any  assets  that are  acquired  by the  Corporation  prior to or
concurrently with its qualification as a real estate investment trust.

     2.13  Transactions with Interested  Directors and Officers.  No contract or
transaction  between  the  Corporation  and  one or  more  of its  directors  or
officers,  or between the  Corporation and any other  corporation,  partnership,
association  or other  entity in which one or more of its  directors or officers
are  directors  or officers of this  Corporation  or in which one or more of the
directors or officers of this Corporation are financially  interested,  shall be
either void or voidable for this reason alone,  or solely because the interested
director or directors of this  Corporation is present at or  participates in the
meeting of the Board of Directors or of the committee  thereof which  authorizes
the contract or  transaction,  or solely  because his or their votes are counted
for such purpose,  if the material facts as to the  relationship  or interest of
such  interested  director or officer and as to the contract or transaction  are
disclosed or are known to the Board of Directors or committee,  and the Board of
Directors  or  committee  in good faith  authorizes,  approves or  ratifies  the
contract  or  transaction  by  the  affirmative   vote  of  a  majority  of  the
disinterested directors,  even though the disinterested directors be less than a
quorum,  and such majority of disinterested  directors  determines in good faith
that (a) the contract or transaction  is fair and reasonable to the  Corporation
and its shareholders;  (b) the terms of the contract or transaction are at least
as favorable as the terms of any comparable  contract or transaction  made on an
arms  length  basis and  known to such  disinterested  directors;  (c) the total
consideration,  if  applicable,  is not in excess of the appraised  value of any
property being  acquired;  (d) and, if the contract or transaction  involves the
rendering  of services to the  Corporation  or any of its  affiliates,  that the
compensation  is not in  excess  of the  compensation  then  being  paid  by the
Corporation for any comparable services and the compensation is not greater than
the charges for comparable  services then known to such disinterested  directors
for  comparable  services  available  from  others  who  are  competent  and not
affiliated with any of the parties.

                                   ARTICLE III

                                   COMMITTEES

     3.1  Committees.  The Board of Directors may appoint from among its members
an Executive  Committee and other  committees  composed of one or more directors
and delegate to these  committees  any of the powers of the Board of  Directors,
except as prohibited  by law. If the Board of Directors has given  authorization
for the  issuance  of stock,  a committee  of the Board,  in  accordance  with a
general formula or method specified by the Board by resolution or by adoption of
a  stock  option  or  other  plan,  may  fix  the  terms  of  stock  subject  to
classification  and  reclassification  and the  terms on which  any stock may be
issued,  including  all  terms  and  conditions  required  or  permitted  to  be
established  or authorized by the Board of Directors  under  Sections  2-203 and
2-208 of the  Corporations  and  Associations  Article of the Annotated  Code of
Maryland.

     3.2 Committee  Procedure  Each committee may fix rules of procedure for its
business. A majority of the members of a committee shall constitute a quorum for
the transaction of business,  and the action of a majority of those present at a

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<PAGE>

meeting at which a quorum is present shall be the action of the  committee.  The
members of a committee present at any meeting,  whether or not they constitute a
quorum,  may  appoint a director  to act in the place of an absent  member.  Any
action  required or  permitted  to be taken at a meeting of a  committee  may be
taken  without a meeting,  if a unanimous  written  consent which sets forth the
action is signed by each member of the  committee  and filed with the minutes of
proceedings of the committee. The members of a committee may conduct any meeting
thereof by  conference  telephone in accordance  with the  provisions of Section
2.10.

     3.3 Emergency.  In the event of a state of disaster of sufficient  severity
to prevent  the  conduct  and  management  of the  affairs  and  business of the
Corporation by its directors and officers as contemplated by the Charter and the
By-Laws,  any two or more  available  members  of the then  incumbent  Executive
Committee  shall  constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Corporation in accordance with the
provisions of Section 3.1. In the event of the unavailability,  at such time, of
a  minimum  of two  members  of the  then  incumbent  Executive  Committee,  the
available  directors  shall elect an Executive  Committee  consisting of any two
members  of the  Board of  Directors,  whether  or not they be  officers  of the
Corporation,  which two members shall constitute the Executive Committee for the
full conduct and management of the affairs of the Corporation in accordance with
the  foregoing  provisions  of this  Section.  This Section  shall be subject to
implementation  by resolution of the Board of Directors passed from time to time
for that purpose,  and any  provisions of the By-Laws  (other than this Section)
and any  resolutions  which are contrary to the provisions of this Section or to
the provisions of any such implementing  resolutions shall be suspended until it
shall be determined by any interim Executive Committee acting under this Section
that it shall be to the advantage of the  Corporation  to resume the conduct and
management  of its affairs and business  under all the other  provisions  of the
By-Laws.

                                   ARTICLE IV

                                    OFFICERS

     4.1 Executive and Other Officers. The Corporation shall have a President, a
Secretary,  and a  Treasurer.  It may also have a  Chairman  of the  Board.  The
Corporation may also have one or more Vice-Presidents,  including Executive Vice
Presidents,  as well as one or more assistant officers, and subordinate officers
as may be established by the Board of Directors. A person may hold more than one
office in the Corporation  except that no person may serve  concurrently as both
President and Vice-President of the Corporation. The Chairman of the Board shall
be a director; the other officers may be directors. The Board of Directors shall
designate who shall serve as chief executive  officer and who shall have general
supervision of the business and affairs of the Corporation,  and may designate a
chief  operating  officer,  who shall have  supervision of the operations of the
Corporation,  and a chief financial officer,  who, among other functions,  shall
have  supervision  of the  finance,  treasury  and  accounting  functions of the
Corporation.  In the absence of any  designation,  the Chairman of the Board, if
there be one, shall serve as chief executive  officer and the President,  if not
the same person,  shall serve as chief operating officer. If the Chairman of the
Board and the President are the same person,  any  Executive  Vice  President or
Vice  President  may serve as chief  operating  officer.  In the  absence of the
Chairman of the Board,  or if there be none,  the  President  shall be the chief
executive  officer and any Executive  Vice President or Vice President may serve
as chief operating officer.

     4.2 Chairman of the Board.  The  Chairman of the Board,  if one be elected,
shall preside at all meetings of the Board of Directors and of the  stockholders
at which he shall be present.  Unless  otherwise  provided by  resolution of the
Board of Directors,  he shall be the chief executive  officer of the Corporation
and shall perform the duties customarily  performed by chief executive officers,
and may perform any duties of the  President.  In general,  he shall perform all
such duties as are from time to time assigned to him by the Board of Directors.

     4.3  President.  Unless  otherwise  provided by  resolution of the Board of
Directors,  the  President,  in the absence of the Chairman of the Board,  shall
preside at all meetings of the Board of  Directors  and of the  stockholders  at
which he shall be present.  Unless otherwise provided by resolution of the Board
of  Directors,  the  President  shall  be the  chief  operating  officer  of the
Corporation  and  shall  perform  the  duties  customarily  performed  by  chief
operating officers. He may sign and execute, in the name of the Corporation, all
authorized deeds,  mortgages,  bonds, contracts or other instruments,  except in
cases in which the  signing  and  execution  thereof  shall have been  expressly
delegated  to some other  officer or agent of the  Corporation.  In general,  he
shall  perform  such  other  duties  usually  performed  by  a  president  of  a
corporation  and such other  duties as are from time to time  assigned to him by
the Board of Directors or the chief executive officer of the Corporation.

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<PAGE>

     4.4  Vice-Presidents.  The Vice-President or Vice-Presidents  designated by
the Board of Directors of the Corporation as Executive  Vice-Presidents,  at the
request of the chief executive  officer or the President,  or in the President's
absence or during his  inability to act,  shall  perform the duties and exercise
the functions of the President,  and when so acting shall have the powers of the
President.  If there be more  than one  Executive  Vice-President,  the Board of
Directors may determine which one or more of the Executive Vice-Presidents shall
perform  any of  such  duties  or  exercise  any of such  functions,  of if such
determination is not made by the Board of Directors, the chief executive officer
or the  President  may make such  determination;  otherwise any of the Executive
Vice-Presidents  may  perform  any of  such  duties  or  exercise  any  of  such
functions.  If there  be no  Vice-President  or  Vice-Presidents  designated  as
Executive Vice-President, the Vice-President or Vice-Presidents,  at the request
of the chief executive officer or the President,  or in the President's  absence
or during his  inability  to act,  shall  perform  the duties and  exercise  the
functions  of the  President,  and when so acting  shall  have the powers of the
President. If there be more than one Vice-President,  the Board of Directors may
determine  which one or more of the  Vice-Presidents  shall  perform any of such
duties or exercise any of such functions,  or if such  determination is not made
by the Board of Directors, the chief executive officer or the President may make
such  determination;  otherwise,  any of the  Vice-Presidents may perform any of
such  duties  or  exercise  any  of  such  functions.   The   Vice-President  or
Vice-Presidents,  including the Executive Vice-Presidents, shall have such other
powers and  perform  such other  duties,  and have such  additional  descriptive
designations in their titles (if any), as are from time to time assigned to them
by the Board of Directors, the chief executive officer, or the President.

     4.5 Secretary.  The Secretary shall keep the minutes of the meetings of the
stockholders, of the Board of Directors and of any committees; he shall see that
all notices are duly given in accordance with the provisions of the Bylaws or as
required by law; he shall be custodian of the records of the Corporation; he may
witness any  document on behalf of the  Corporation,  the  execution of which is
duly  authorized,  see that the corporate seal is affixed where such document is
required or desired to be under the  Corporation's  seal,  and, when so affixed,
may attest the same;  and, in general,  he shall perform all duties  incident to
the office of a secretary  of a  corporation,  and such other duties as are from
time to time  assigned  to him by the Board of  Directors,  the chief  executive
officer, or the President.

     4.6 Treasurer.  The Treasurer  shall have charge of and be responsible  for
all funds, securities,  receipts and disbursements of the Corporation, and shall
deposit, or cause to be deposited, in the name of the Corporation, all moneys or
other valuable effects in such banks,  trust companies or depositories as shall,
from time to time, be selected by the Board of Directors; he shall render to the
President and to the Board of Directors,  whenever requested,  an account of the
financial  condition of the Corporation;  and, in general,  he shall perform all
duties  incident to the office of a treasurer of a  corporation,  and such other
duties as are from time to time assigned to him by the Board of  Directors,  the
chief executive officer, or the President.

     4.7  Assistant and  Subordinate  Officers.  The  assistant and  subordinate
officers of the Corporation are all officers below the office of Vice-President,
Secretary,  or Treasurer.  The assistant or subordinate officers shall have such
duties as are from time to time assigned to them by the Board of Directors,  the
chief  executive  officer,  the  President  or any  person  designated  as their
superior officer by the committee or person electing them.

     4.8 Election,  Tenure and Removal of Officers. The Board of Directors shall
elect the officers.  The Board of Directors may from time to time  authorize any
committee  or officer to appoint  assistant  and  subordinate  officers.  Unless
otherwise  provided  herein,  an  officer  serves  for one  year and  until  his
successor is elected and  qualified.  Notwithstanding  the  foregoing,  officers
shall serve at the will of the Board of Directors. Election or appointment of an
officer,  employee  or agent shall not of itself  create  contract  rights.  All
officers shall be elected or appointed to hold their offices,  respectively,  at
the pleasure of the Board.  The Board of Directors  (or, as to any  assistant or
subordinate  officer,  any  committee  or officer  authorized  by the Board) may
remove an  officer  at any  time,  if the Board  (or any  committee  or  officer
authorized by the Board, as the case may be) in its judgment finds that the best
interests of the Corporation  will be served thereby.  The removal of an officer
does not prejudice any of his contract rights. The Board of Directors (or, as to
any assistant or subordinate officer, any committee or officer authorized by the
Board) may fill a vacancy which occurs in any office for the  unexpired  portion
of the term.

     4.9  Compensation.  The  Board of  Directors  shall  have  power to fix the
salaries and other  compensation  and  remuneration,  of whatever  kind,  of all
officers of the  Corporation.  No officer shall be prevented from receiving such
salary by reason of the fact that he is also a director of the Corporation.  The
Board of Directors may  authorize any committee or officer,  upon whom the power
of appointing assistant and subordinate officers may have been conferred, to fix
the salaries,  compensation  and  remuneration of such assistant and subordinate
officers.

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                                    ARTICLE V

                                DIVISIONAL TITLES

     5.1 Conferring  Divisional  Titles. The Board of Directors may from time to
time confer upon any  employee  of a division  of the  Corporation  the title of
President, Vice-President, Treasurer or Controller of such division or any other
title or titles deemed appropriate or may authorize the Chairman of the Board or
the  President to do so. Any such titles so conferred  may be  discontinued  and
withdrawn at any time by the Board of Directors, or by the Chairman of the Board
or the President if so  authorized by the Board of Directors.  Any employee of a
division  designated by such a divisional title shall have the powers and duties
with respect to such  division as shall be prescribed by the Board of Directors,
the Chairman of the Board or the President.

     5.2 Effect of Divisional  Titles. The conferring of divisional titles shall
not create an office of the  Corporation  under  Article IV unless  specifically
designated as such by the Board of  Directors;  but any person who is an officer
of the Corporation may also have a divisional title.

                                   ARTICLE VI

                                      STOCK

     6.1  Certificates for Stock.  Except as otherwise  proved by statute,  each
stockholder is entitled to  certificates  which represent and certify the shares
of stock he holds in the Corporation.  Each stock  certificate  shall include on
its face  the name of the  Corporation,  the  name of the  stockholder  or other
person to whom it is  issued,  and the  class of stock  and  number of shares it
represents. Each stock certificate shall be signed by the Chairman of the Board,
the President,  or a  Vice-President,  and  countersigned  by the Secretary,  an
Assistant Secretary, the Treasurer, or an Assistant Treasurer.  Each certificate
may be sealed  with the actual  corporate  seal or a  facsimile  of it or in any
other form, and the signatures may be either manual or facsimile  signatures.  A
certificate  is valid and may be issued  whether or not an officer who signed it
is still an officer when it is issued.

     6.2  Transfers.  The Board of Directors  shall have power and  authority to
make such rules and  regulations as it may deem expedient  concerning the issue,
transfer and  registration of certificates  of stock;  and may appoint  transfer
agents and registrars thereof. The duties of transfer agent and registrar may be
combined.

     6.3  Record  Dates and  Closing  of  Transfer  Books.  Except as  otherwise
provided in Section 1.6, the Board of Directors  may set a record date or direct
that the stock  transfer  books be closed for a stated period for the purpose of
making any proper  determination  with respect to stockholders,  including which
stockholders are entitled to notice of a meeting,  vote at a meeting,  receive a
dividend or other distribution,  or be allowed other rights. Except as otherwise
provided  in  Section  1.6,  the  record  date may not be prior to the  close of
business  on the day the record  date is fixed;  the record date may not be more
than 90 days  before the date on which the action  requiring  the  determination
will be taken;  the transfer books may not be closed for a period longer than 20
days;  and,  in the case of a meeting of  stockholders,  the record  date or the
closing of the transfer  books shall be at least ten days before the date of the
meeting.
 
     6.4 Stock  Ledger.  The  Corporation  shall  maintain a stock  ledger which
contains  the name and address of each  stockholder  and the number of shares of
stock of each class  which the  stockholder  holds.  The stock  ledger may be in
written  form or in any other form which can be  converted  within a  reasonable
time into written form for visual inspection. The original or a duplicate of the
stock ledger shall be kept at the offices of a transfer agent for the particular
class of stock, or, if none, at the principal office in the State of Maryland or
the principal executive offices of the Corporation.

     6.5 Certification of Beneficial Owners. The Board of Directors may adopt by
resolution a procedure by which a stockholder of the  Corporation may certify in
writing to the  Corporation  that any shares of stock  registered in the name of
the  stockholder  are held for the account of a specified  person other than the
stockholder.  The resolution  shall set forth the class of stockholders  who may
certify;  the  purpose  for which  the  certification  may be made;  the form of
certification and the information to be contained in it; if the certification is
with respect to a record date or closing of the stock transfer  books,  the time
after the record date or closing of the stock  transfer  books  within which the
certification must be received by the Corporation; and any other provisions with
respect to the procedure  which the Board considers  necessary or desirable.  On

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<PAGE>

receipt of a  certification  which  complies with the  procedure  adopted by the
Board in accordance with this Section, the person specified in the certification
is, for the purpose set forth in the certification,  the holder of record of the
specified stock in place of the stockholder who makes the certification.

     6.6  Replacement  Stock  Certificates.   The  Board  of  Directors  of  the
Corporation may determine the conditions for issuing a new stock  certificate in
place of one which is alleged to have been lost,  stolen,  or destroyed,  or the
Board of  Directors  may  delegate  such power to any officer or officers of the
Corporation.  In their  discretion,  the Board of  Directors  or such officer or
officers may refuse to issue a new certificate (a) unless the owner of the lost,
stolen  or  destroyed  certificate  gives a bond,  with  sufficient  surety,  to
indemnify the Corporation against any loss or claim arising as the result of the
issuance of the new certificate or (b) unless a court having jurisdiction in the
premises orders the Corporation to issue a new certificate.

                                   ARTICLE VII

                                     FINANCE

     7.1 Checks,  Drafts, Etc. All checks,  drafts and orders for the payment of
money,  notes and other  evidences  of  indebtedness,  issued in the name of the
Corporation,  shall,  unless  otherwise  provided by  resolution of the Board of
Directors,  be  signed  by  the  President,  a  Vice-President  or an  Assistant
Vice-President and countersigned by the Treasurer,  and Assistant Treasurer, the
Secretary or an Assistant Secretary.

     7.2 Annual Statement of Affairs.  The President or chief accounting officer
shall  prepare  annually  a full and  correct  statement  of the  affairs of the
Corporation,  to include a balance sheet and a financial statement of operations
for the  preceding  fiscal year.  The statement of affairs shall be submitted at
the annual meeting of the  stockholders  and,  within 20 days after the meeting,
placed on file at the Corporation's principal office.

     7.3 Fiscal  Year.  The fiscal year of the  Corporation  shall be the twelve
calendar  months  period  ending  December  31 in each  year,  unless  otherwise
provided by the Board of Directors.

     7.4 Dividends and Other  Distributions.  If authorized  and declared by the
Board of Directors at any meeting thereof, the Corporation may pay dividends and
other distributions on its shares in cash,  property,  or in shares of the stock
of the  Corporation,  unless such dividend or other  distribution is contrary to
law or to a restriction contained in the Charter.

     7.5  Contracts.  To the extent  permitted by applicable  law, and except as
otherwise prescribed by the Charter or these Bylaws with respect to certificates
for shares, the Board of Directors may authorize any officer, employee, or agent
of the  Corporation  to enter into any  contract  or  execute  and  deliver  any
instrument in the name of and on behalf of the  Corporation.  Such authority may
be general or confined to specific instances.

                                  ARTICLE VIII

                                SUNDRY PROVISIONS

     8.1 Books and  Records.  The  Corporation  shall keep  correct and complete
books  and  records  of  its  accounts  and  transactions  and  minutes  of  the
proceedings of its  stockholders  and Board of Directors and of any executive or
other committee when exercising any of the powers of the Board of Directors. The
books and records of the Corporation may be in written form or in any other form
which can be  converted  within a  reasonable  time into written form for visual
inspection.  Minutes  shall be recorded in written form but may be maintained in
the form of a  reproduction.  The  original or a  certified  copy of the Bylaws,
including any amendments to them,  shall be kept at the principal  office of the
Corporation.

     8.2 Corporate  Seal. The Board of Directors  shall provide a suitable seal,
bearing  the  name of the  Corporation,  which  shall  be in the  charge  of the
Secretary.  The Board of Directors may authorize one or more duplicate seals and
provide for the custody  thereof.  If the  Corporation  is required to place its
corporate  seal to a document,  it is sufficient to meet the  requirement of any
law, rule or regulation  relating to a corporate seal to place the word "(Seal)"
adjacent  to the  signature  of the person  authorized  to sign the  document on
behalf of the Corporation.

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<PAGE>

     8.3  Bonds.  The Board of  Directors  may  require  any  officer,  agent or
employee of the Corporation to give a bond to the Corporation,  conditioned upon
the  faithful  discharge  of his duties,  with one or more  sureties and in such
amount as may be satisfactory to the Board of Directors.

     8.4 Voting upon Shares in Other  Corporations.  Stock of other corporations
or associations,  registered in the name of the Corporation, may be voted by the
President,  a Vice-President,  or a proxy appointed by either of them. The Board
of Directors,  however, may by resolution appoint some other person to vote such
shares, in which case such person shall be entitled to vote such shares upon the
production of a certified copy of such resolution.

     8.5 Execution of Documents.  A person who holds more than one office in the
Corporation  may not act in more than one capacity to execute,  acknowledge,  or
verify an instrument required by law to be executed,  acknowledged,  or verified
by more than one officer.

     8.6  Amendments.  Subject to the special  provisions of Section 2.2,  these
By-Laws may be altered,  amended,  repealed or added to by a majority  vote of a
quorum present at any regular or special  meeting of the  stockholders or of the
Board of Directors.

     8.7 Designated Attendees.  The Board of Directors may by resolution appoint
individuals  as  designated  advisors  ("Designated  Advisors")  to the Board of
Directors,  who shall  have the  right to  notice of and  attend as set forth in
Article  II all  meetings  of the  Board of  Directors  and shall  receive  such
compensation  and  reimbursement  as  the  Board  of  Directors  shall  provide.
Designated Advisors shall not have any right to vote as directors.

                                   ARTICLE IX

                               INDEMNIFICATION AND
                              ADVANCE FOR EXPENSES

     9.1 To the maximum extent  permitted by Maryland law in effect from time to
time, the Corporation  shall  indemnify,  and shall pay or reimburse  reasonable
expenses in advance of final  disposition of a proceeding to, (1) any individual
who is a present,  former or proposed director or officer of the Corporation and
who is made a party to the  proceeding by reason of his service in that capacity
or (2) any  individual  who,  while a  director  of the  Corporation  and at the
request  of  the  Corporation,   serves  or  has  served  another   corporation,
partnership, joint venture, trust, employee benefit plan or any other enterprise
as a director,  officer,  partner or trustee of such  corporation,  partnership,
joint venture,  trust, employee benefit plan or other enterprise and who is made
a party to the  proceeding  by reasons  of his  service  in that  capacity.  The
Corporation  may,  with the  approval of its Board of  Directors,  provide  such
indemnification  and  advancement  of  expenses  to a  person  who  served  as a
predecessor of the Corporation in any of the capacities  described in (1) or (2)
above and to any employee or agent of the  Corporation  or a predecessor  of the
Corporation. This Article shall not apply to any proceeding brought by a present
or former director or officer.

     Neither  the  amendment  nor repeal of this  Article,  nor the  adoption or
amendment of any other  provision of these Bylaws or Charter of the  Corporation
inconsistent  with this  Article,  shall  apply to or affect in any  respect the
applicability  of the preceding  paragraph with respect to any act or failure to
act which occurred prior to such amendment, repeal or adoption.

     I, Frank E. Austin, do hereby certify that I am the duly elected and acting
Secretary of  Glenborough  Realty  Trust  Incorporated,  and that the  foregoing
By-Laws were originally  adopted by the Board of Directors of the corporation at
a meeting  held on August 31,  1994 and the  foregoing  provisions  reflect  all
amendments through May 18, 1998.

                                           ____________________________
                                            Frank E. Austin, Secretary
 
Attest:

___________________________
Robert Batinovich, Chairman


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<PAGE>

Exhibit 3.2

                      GLENBOROUGH REALTY TRUST INCORPORATED

                             ARTICLES SUPPLEMENTARY

                            SERIES B PREFERRED STOCK


          Glenborough Realty Trust Incorporated, a Maryland corporation,  having
its  principal  office in the City of Baltimore,  Maryland (the  "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:

          FIRST:  Under a power  contained  in Article  SIXTH of the Articles of
Incorporation,  as  amended  (the  "Charter"),  the  Board of  Directors  of the
Corporation  (the "Board of Directors"),  has duly  reclassified  and designated
shares (the "Shares") of the Common Stock, par value $.001 per share (as defined
in the  Charter),  as shares of Series B  Preferred  Stock,  par value $.001 per
share, of the Corporation (the "Series B Preferred Stock")

          SECOND: Subject in all cases to the provisions of Article NINTH of the
Charter of the Corporation  with respect to  Share-in-Trust,  the following is a
description  of the  preferences,  conversion  and other rights,  voting powers,
restrictions,   limitations  as  to  dividends   qualifications  and  terms  and
conditions of redemption of Series B Preferred Stock of the Corporation:

     1.  Designation  and Amount.  The  designation of Series B Preferred  Stock
described in Article FIRST hereof shall be "Series B Preferred  Stock (par value
$.001 per  share)."  The  number of  shares  of Series B  Preferred  Stock to be
authorized shall be Five Hundred Thousand  (500,000).  Such number of shares may
be increased or decreased by resolution of the Board of Directors; provided that
no decrease  shall reduce the number of shares of Series B Preferred  Stock to a
number less than the number of shares then outstanding plus the number of shares
reserved  for  issuance  upon the  exercise of  outstanding  options,  rights or
warrants or upon the  conversion  of any  outstanding  securities  issued by the
Corporation convertible into Series B Preferred Stock.

     2.  Dividends  and  Distributions.  (A)  Subject to the prior and  superior
rights of the holders of any shares of any other  series of  Preferred  Stock or
any other shares of stock of the  Corporation  ranking prior and superior to the
shares of Series B Preferred Stock with respect to dividends, including, without
limitation,  the Corporation's 7-3/4% Series A Convertible  Preferred Stock (the
"Series A  Preferred  Shares"),  each holder of one  one-hundredth  (1/100) of a
share (a "Unit") of Series B Preferred Stock shall be entitled to receive, when,
as and if declared by the Board of Directors out of funds legally  available for
that purpose,  (i) quarterly dividends payable in cash on the last day of March,
June,  September,  and  December in each year (each such date being a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of such Unit of Series B Preferred  Stock, in an amount
per Unit  (rounded to the nearest  cent) equal to the greater of (a) $.01 or (b)
subject to the provision for adjustment hereinafter set forth, the aggregate per
share amount of all cash dividends  declared on shares of the Common Stock since
the immediately  preceding  Quarterly Dividend Payment Date, or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of a Unit of
Series B Preferred  Stock,  and (ii)  subject to the  provision  for  adjustment
hereinafter  set  forth,  quarterly  distributions  (payable  in  kind)  on each
Quarterly Dividend Payment Date in an amount per Unit equal to the aggregate per
share amount of all  non-cash  dividends  or other  distributions  (other than a
dividend  payable in shares of Common Stock or a subdivision of the  outstanding
shares of Common Stock, by  reclassification or otherwise) declared on shares of
Common Stock since the immediately preceding Quarterly Dividend Payment Date, or
with  respect to the first  Quarterly  Dividend  Payment  Date,  since the first
issuance  of a Unit  of  Series  B  Preferred  Stock.  In  the  event  that  the
Corporation  shall at any time  after  July 20,  1998 (the  "Rights  Declaration
Date") (i) declare any dividend on outstanding shares of Common Stock payable in
shares of Common Stock,  (ii)  subdivide  outstanding  shares of Common Stock or
(iii)  combine  outstanding  shares of  Common  Stock  into a smaller  number of
shares,  then in each  such case the  amount  to which  the  holder of a Unit of
Series B  Preferred  Stock was  entitled  immediately  prior to such event under
clause (b) of the  preceding  sentence  shall be  adjusted by  multiplying  such
amount by a fraction  the  numerator  of which  shall be the number of shares of

                                       55
<PAGE>

Common  Stock  that  are  outstanding  immediately  after  such  event  and  the
denominator  of which  shall be the  number of shares of Common  Stock that were
outstanding immediately prior to such event.

     (B) The  Corporation  shall declare a dividend or  distribution on Units of
Series B Preferred Stock as provided in paragraph (A) above immediately after it
declares a dividend or  distribution on the shares of Common Stock (other than a
dividend  payable in shares of Common Stock);  provided,  however,  that, in the
event no dividend or  distribution  shall have been declared on the Common Stock
during the period  between  any  Quarterly  Dividend  Payment  Date and the next
subsequent  Quarterly  Dividend Payment Date, a dividend of $.01 per Unit on the
Series B  Preferred  Stock  shall  nevertheless  be payable  on such  subsequent
Quarterly Dividend Payment Date.

     (C)  Dividends  shall  begin to  accrue  and  shall be  cumulative  on each
outstanding Unit of Series B Preferred Stock from the Quarterly Dividend Payment
Date next  preceding  the date of  issuance  of such Unit of Series B  Preferred
Stock,  unless the date of issuance of such Unit is prior to the record date for
the first Quarterly Dividend Payment Date, in which case, dividends on such Unit
shall begin to accrue from the date of issuance of such Unit, or unless the date
of issuance is a Quarterly  Dividend  Payment Date or is a date after the record
date for the  determination  of  holders  of Units of Series B  Preferred  Stock
entitled to receive a quarterly  dividend  and before  such  Quarterly  Dividend
Payment Date, in either of which events such dividends shall begin to accrue and
be cumulative  from such  Quarterly  Dividend  Payment Date.  Accrued but unpaid
dividends shall not bear interest. Dividends paid on Units of Series B Preferred
Stock in an amount less than the aggregate  amount of all such  dividends at the
time  accrued  and  payable  on such  Units  shall  be  allocated  pro rata on a
unit-by-unit  basis  among  all Units of  Series B  Preferred  Stock at the time
outstanding.  The Board of Directors may fix a record date for the determination
of holders of Units of Series B Preferred Stock entitled to receive payment of a
dividend or distribution  declared  thereon,  which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.

     3. Voting  Rights.  The holders of Units of Series B Preferred  Stock shall
have the following voting rights:

     (A) Subject to the provision for  adjustment  hereinafter  set forth,  each
Unit of Series B Preferred Stock shall entitle the holder thereof to one vote on
all matters  submitted to a vote of the stockholders of the Corporation.  In the
event the Corporation  shall at any time after the Rights  Declaration  Date (i)
declare any dividend on outstanding  shares of Common Stock payable in shares of
Common Stock, (ii) subdivide outstanding shares of Common Stock or (iii) combine
the outstanding shares of Common Stock into a smaller number of shares,  then in
each such case the number of votes per Unit to which  holders of Units of Series
B  Preferred  Stock  were  entitled  immediately  prior to such  event  shall be
adjusted by  multiplying  such number by a fraction the numerator of which shall
be the number of shares of Common Stock outstanding immediately after such event
and the  denominator of which shall be the number of shares of Common Stock that
were outstanding immediately prior to such event; and

     (B) Except as otherwise  provided  herein,  in the Charter or the Bylaws of
the  Corporation  or as  required  by law,  the  holders  of Units  of  Series B
Preferred Stock and the holders of shares of Common Stock shall vote together as
one class on all matters submitted to a vote of stockholders of the Corporation,
and such holders shall have no special  voting rights and their  consents  shall
not be required for taking any corporate action.

     4.  Certain  Restrictions.   (A)  Whenever  quarterly  dividends  or  other
dividends  or  distributions  payable  on Units of Series B  Preferred  Stock as
provided  herein are in  arrears,  thereafter  and until all  accrued and unpaid
dividends and  distributions,  whether or not declared,  on outstanding Units of
Series B Preferred Stock shall have been paid in full, the Corporation shall not
(i) declare or pay dividends on, make any other  distributions  on, or redeem or
purchase or otherwise acquire for consideration any shares of junior stock; (ii)
declare or pay  dividends  on or make any other  distributions  on any shares of
parity stock, except dividends paid ratably on Units of Series B Preferred Stock
and shares of all such parity stock on which dividends are payable or in arrears
in  proportion  to the total  amounts to which the holders of such Units and all
such shares are then entitled; (iii) redeem or purchase or otherwise acquire for
consideration  shares  of  any  parity  stock,   provided,   however,  that  the
Corporation may at any time redeem,  purchase or otherwise acquire shares of any
such parity stock in exchange for shares of any junior  stock;  (iv) purchase or
otherwise  acquire  for  consideration  any Units of Series B  Preferred  Stock,

                                       56
<PAGE>

except in accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such Units.

     (B) The  Corporation  shall not permit any subsidiary of the Corporation to
purchase  or  otherwise  acquire  for  consideration  any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 3,
purchase or otherwise acquire such shares at such time and in such manner.

     5.  Reacquired  Shares.  Any Units of Series B Preferred Stock purchased or
otherwise  acquired by the Corporation in any manner whatsoever shall be retired
and cancelled promptly after the acquisition thereof. All such Units shall, upon
their  cancellation,  become  authorized  but unissued  shares (or  fractions of
shares)  of  Preferred  Stock  and may be  reissued  as part of a new  series of
Preferred  Stock to be  created by  resolution  or  resolutions  of the Board of
Directors,  subject to the  conditions  and  restrictions  on issuance set forth
herein, in the Charter, or in any other articles supplementary creating a series
of Preferred Stock or any other similar stock or as otherwise required by law.

     6.  Liquidation,  Dissolution  or  Winding  Up. (A) Upon any  voluntary  or
involuntary  liquidation,  dissolution  or  winding  up of the  Corporation,  no
distribution  shall be made (i) to the holders of shares of junior  stock unless
the holders of Units of Series B Preferred Stock shall have received, subject to
adjustment as  hereinafter  provided in paragraph (B), the greater of either (a)
$.01 per  Unit  plus an  amount  equal  to  accrued  and  unpaid  dividends  and
distributions  thereon,  whether or not earned or declared,  to the date of such
payment,  or (b) the  amount  equal to the  aggregate  per  share  amount  to be
distributed  to holders  of shares of Common  Stock,  or (ii) to the  holders of
shares of parity stock, unless simultaneously  therewith  distributions are made
ratably on Units of Series B Preferred Stock and all other shares of such parity
stock in proportion to the total amounts to which the holders of Units of Series
B Preferred Stock are entitled under clause (i)(a) of this sentence and to which
the holders of shares of such parity stock are entitled,  in each case upon such
liquidation, dissolution or winding up.

     (B) In the  event  the  Corporation  shall at any  time  after  the  Rights
Declaration Date (i) declare any dividend on outstanding  shares of Common Stock
payable in shares of Common Stock, (ii) subdivide  outstanding  shares of Common
Stock, or (iii) combine outstanding shares of Common Stock into a smaller number
of shares, then in each such case the aggregate amount to which holders of Units
of Series B  Preferred  Stock  were  entitled  immediately  prior to such  event
pursuant to clause  (i)(b) of paragraph  (A) of this Section 5 shall be adjusted
by  multiplying  such amount by a fraction  the  numerator of which shall be the
number of shares of Common  Stock that are  outstanding  immediately  after such
event and the denominator of which shall be the number of shares of Common Stock
that were outstanding immediately prior to such event.

     7. Consolidation, Merger, etc. In case the Corporation shall enter into any
consolidation,  merger,  combination or other transaction in which the shares of
Common Stock are exchanged for or converted into other stock or securities, cash
and/or any other  property,  then in any such case  Units of Series B  Preferred
Stock shall at the same time be similarly  exchanged  for or  converted  into an
amount per Unit (subject to the provision for adjustment  hereinafter set forth)
equal to the  aggregate  amount  of stock,  securities,  cash  and/or  any other
property  (payable  in kind),  as the case may be,  into which or for which each
share of Common Stock is converted or  exchanged.  In the event the  Corporation
shall at any time after the Rights  Declaration Date (i) declare any dividend on
outstanding  shares of Common  Stock  payable  in shares of Common  Stock,  (ii)
subdivide  outstanding  shares of Common  Stock,  or (iii)  combine  outstanding
Common Stock into a smaller number of shares,  then in each such case the amount
set forth in the immediately  preceding sentence with respect to the exchange or
conversion of Units of Series B Preferred Stock shall be adjusted by multiplying
such amount by a fraction  the  numerator of which shall be the number of shares
of Common  Stock  that are  outstanding  immediately  after  such  event and the
denominator  of which  shall be the  number of shares of Common  Stock that were
outstanding immediately prior to such event.

     8. Redemption. The Units of Series B Preferred Stock and shares of Series B
Preferred Stock shall not be redeemable.

                                       57
<PAGE>

     9.  Ranking.  The Units of Series B Preferred  Stock and shares of Series B
Preferred  Stock shall rank,  with respect to the payment of  dividends  and the
distribution of assets, junior to the Series A Preferred Shares and to all other
series of the  Preferred  Stock and to any other class of  Preferred  Stock that
hereafter  may be issued by the  Corporation  as to the payment of dividends and
the  distribution of assets,  unless the terms of any such series or class shall
provide otherwise.

     10. Fractional  Shares. The Series B Preferred Stock may be issued in Units
or other  fractions  of a share,  which  Units or  fractions  shall  entitle the
holder,  in proportion to such holder's units or fractional  shares, to exercise
voting rights,  receive dividends,  participate in distributions and to have the
benefit of all other rights of holders of Series B Preferred Stock.

     11. Certain  Definitions.  As used in this  resolution  with respect to the
Series B Preferred Stock, the following terms shall have the following meanings:

     (A) The term "Common Stock" shall mean the class of stock designated as the
common stock,  par value $.001 per share,  of the Corporation at the date hereof
or  any  other   class  of  stock   resulting   from   successive   changes   or
reclassification of the common stock. 

     (B) The term "junior  stock" (i) as used in Section 3 shall mean the Common
Stock  and any  other  class or  series  of  capital  stock  of the  Corporation
hereafter  authorized  or issued  over  which the Series B  Preferred  Stock has
preference  or  priority  as to the  payment  of  dividends  and (ii) as used in
Section 5, shall mean the Common  Stock and any other class or series of capital
stock of the Corporation  over which the Series B Preferred Stock has preference
or priority in the  distribution  of assets on any  liquidation,  dissolution or
winding up of the Corporation.

     (C) The term  "parity  stock" (i) as used in Section 3 shall mean any class
or series of stock of the  Corporation  hereafter  authorized or issued  ranking
pari passu with the Series B Preferred Stock as to dividends and (ii) as used in
Section 5, shall mean any class or series of capital  stock  ranking  pari passu
with  the  Series  B  Preferred  Stock  in the  distribution  of  assets  on any
liquidation, dissolution or winding up.


                                       58
<PAGE>

<TABLE>
<CAPTION>
Exhibit 12.1

GLENBOROUGH REALTY TRUST INCORPORATED
Computation of Ratios
For the five years ended December 31, 1997
and the three months ended March 31 and June 30, 1998

                                        GRT Predecessor Entities, Combined                          The Company
                                        ------------------------------------   -----------------------------------------------------
                                                                                                             Three         Three
                                                                                                             Months        Months
                                                                                                          Ended March    Ended June
                                                            Year Ended December 31,                           31,            30,
                                        ----------------------------------------------------------------  -------------  -----------
                                           1993         1994         1995          1996          1997          1998          1998
                                        ----------   ----------   ----------   -----------   -----------  -------------  -----------
EARNINGS, AS DEFINED

<S>                                     <C>          <C>          <C>          <C>           <C>          <C>            <C>
Net Income (Loss) before Preferred
   Dividends                               4,418        1,580           524       (1,609)       19,368        12,213         13,921
Extraordinary and non-recurring items     (2,274)          --            --          186           843            --             --
Federal & State income taxes                  24          176           357           --            --            --             --
Minority Interest                              5           43            --          292         1,119           678            596
Fixed Charges                              1,301        1,140         2,129        3,913         9,668         9,145          9,707
                                        ----------   ----------   ----------   -----------   -----------  -------------  -----------
                                           3,474        2,939         3,010        2,782        30,998        22,036         24,224
                                        ----------   ----------   ----------   -----------   -----------  -------------  -----------

FIXED CHARGES AND PREFERRED DIVIDENDS, AS
   DEFINED

Interest Expense                           1,301        1,140         2,129        3,913         9,668         9,145          9,707
Capitalized Interest                          --           --            --           --            --            --            131
Preferred Dividends                           --           --            --           --            --         3,910          5,570
                                        ----------   ----------   ----------   -----------   -----------  -------------  -----------
                                           1,301        1,140         2,129        3,913         9,668        13,055         15,408

RATIO OF EARNINGS TO FIXED CHARGES          2.67         2.58          1.41         0.71 (1)      3.21          2.41           2.46
                                        ----------   ----------   ----------   -----------   -----------  -------------  -----------

RATIO OF EARNINGS TO FIXED CHARGES AND
   PREFERRED DIVIDENDS                      2.67         2.58          1.41         0.71 (1)      3.21          1.69           1.57
                                        ----------   ----------   ----------   -----------   -----------  -------------  -----------
<FN>

(1) For the twelve months ended December 31, 1996, earnings were insufficient to cover fixed charges and fixed charges plus
preferred dividends by $1,131.
</FN>
</TABLE>


                                       59
<PAGE>