|SECURITIES
AND EXCHANGE COMMISSIONWashington,
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 September 30, 2000
| | -------------------------------------------------

|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(State or other jurisdictionof incorporation or organization) | 94-3211970(I.R.S. EmployerIdentification No.)
|--------------------------------------------------------------------- | ---------------------------------------------

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

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

|Title of each class:Common Stock, $.001 par value7.75% Series A Convertible Preferred Stock, $.001 par value | Name of Exchangeon which registered:New York Stock ExchangeNew 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 November 9, 2000,
28,984,677 shares of Common Stock ($.001 par value) and 10,097,800 shares of
7.75% Series A Convertible Preferred Stock ($.001 par value) were outstanding.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|INDEX



GLENBOROUGH
REALTY TRUST INCORPORATED
|----------------------------------------------

|       |  |                      
|------ |  | ---------------------
|PART I |  | FINANCIAL INFORMATION

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

| |  | Consolidated Balance Sheets at September 30, 2000 and December 31, 1999 |  | 3 | 
| |  | ----------------------------------------------------------------------- |  | - | 

| |  | Consolidated
Statements of Income for the nine months ended September 30, 2000 and 1999 |  | 4 | 
| |  | --------------------------------------------------------------------------------------- |  | - | 

| |  | Consolidated
Statements of Income for the three months ended September 30, 2000 and 1999 |  | 5 | 
| |  | ---------------------------------------------------------------------------------------- |  | - | 

| |  | Consolidated
Statement of Stockholders' Equity for the nine months ended September 30, 2000 |  | 6 | 
| |  | ------------------------------------------------------------------------------------------- |  | - | 

| |  | Consolidated
Statements of Cash Flows for the nine months ended September 30, 2000 and 1999 |  | 7-8 | 
| |  | ------------------------------------------------------------------------------------------- |  | --- | 

| |  | Notes
to Consolidated Financial Statements |  | 9-21 | 
| |  | ------------------------------------------ |  | ---- | 

|Item 2. |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 22-29 | 
|------- |  | ------------------------------------------------------------------------------------- |  | ----- | 

|PART II |  | OTHER INFORMATION |  |  | 
|------- |  | ----------------- |  |  | 

|Item 1. |  | Legal Proceedings |  | 30 | 
|------- |  | ----------------- |  | -- | 

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

|Item 6. |  | Exhibits and Reports on Form 8-K |  | 30 | 
|------- |  | -------------------------------- |  | -- | 

|SIGNATURES |  |  |  | 31 | 
|---------- |  |  |  | -- | 

|EXHIBIT INDEX |  |  |  | 32 | 
|------------- |  |  |  | -- | 

|Part I.
FINANCIAL INFORMATION



Item 1.
Financial Statements


GLENBOROUGH REALTY
TRUST INCORPORATEDCONSOLIDATED BALANCE SHEETS(in thousands, except share amounts) (Unaudited)
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                  | September 30,2000 | December 31,1999
|------------------------------------------------- | ----------------- | ----------------
|ASSETS                                            |                   |                 
|Rental properties, gross                          |                   | $ 1,603,498     
|Accumulated depreciation                          |                   | (141,262        
|                                                 
|Rental properties, net                            |                   | 1,462,236       
|Investments in Development                        |                   | 42,873          
|Investments in Joint Ventures                     |                   | 9,018           
|Mortgage loans receivable                         |                   | 36,902          
|Investment in Associated Company                  |                   | 9,198           
|Cash and cash equivalents                         |                   | 21,864          
|Other assets                                      |                   | 51,714          
|                                                 
|TOTAL ASSETS                                      |                   | $ 1,633,805     
|                                                 
|LIABILITIES AND STOCKHOLDERS' EQUITY              |                  
|Liabilities:                                      |                  
|Mortgage loans                                    |                   | $    679,106    
|Unsecured term debt                               |                   | 125,000         
|Unsecured bank line                               |                   | 17,481          
|Other liabilities                                 |                   | 24,115          
|                                                 
|Total liabilities                                 |                   | 845,702         
|                                                 
|Commitments and contingencies                     |                  
|Minority interest                                 |                   | 78,767          
|Stockholders' Equity:                             |                  
|Common stock, 28,583,783 and 30,820,646 shares    |                  
|issued and outstanding at September 30, 2000 and  |                  
|December 31, 1999, respectively                   |                   | 29              
|Preferred stock, 10,097,800 and 11,330,000 shares |                  
|issued and outstanding at September 30, 2000 and  |                  
|December 31, 1999, respectively                   |                   | 10              
|Additional paid-in capital                        |                   | 794,003         
|Deferred compensation                             |                   | (526            
|Retained earnings (deficit)                       |                   | (84,180         
|                                                 
|Total stockholders' equity                        |                   | 709,336         
|                                                 
|TOTAL LIABILITIES AND STOCKHOLDERS'               |                  
|EQUITY                                            |                   | $ 1,633,805     
|                                                 

|See accompanying notes
to consolidated financial statements
|-----------------------------------------------------------

|GLENBOROUGH REALTY TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
For the nine months ended September
30, 2000 and 1999(in thousands, except per share amounts) (Unaudited)
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                           | 2000 | 1999             
|-------------------------------------------------------------------------- | ---- | -----------------
|REVENUE                                                                    |      |                  
|Rental revenue                                                             |      | $      182,869   
|Fees and reimbursements from affiliates                                    |      | 2,841            
|Interest and other income                                                  |      | 6,867            
|Equity in earnings of Associated Company                                   |      | 1,027            
|Equity in (loss) earnings of unconsolidated joint           ventures       |      | (263             
|Net gain on sales of real estate assets                                    |      | 1,652            
|                                                                          
|Total revenue                                                              |      | 194,993          
|                                                                          
|EXPENSES                                                                   |     
|Property operating expenses                                                |      | 62,361           
|General and administrative                                                 |      | 7,326            
|Depreciation and amortization                                              |      | 44,595           
|Interest expense                                                           |      | 47,349           
|                                                                          
|Total expenses                                                             |      | 161,631          
|                                                                          
|Income from operations before minority interest and     extraordinary item |      | 33,362           
|Minority interest                                                          |      | (1,833           
|                                                                          
|Net income before extraordinary item                                       |      | 31,529           
|Extraordinary item:                                                        |     
|Net (loss) gain on early extinguishment of debt                            |      | (550             
|                                                                          
|Net income                                                                 |      | 30,979           
|Preferred dividends                                                        |      | (15,822          
|                                                                          
|Net income available to Common Stockholders                                |      | $        15,157  
|                                                                          
|Basic Per Share Data:                                                      |     
|Net income before extraordinary item                                       |      | $            0.53
|Extraordinary item                                                         |      | (0.02            
|                                                                          
|Net income available to Common Stockholders                                |      | $            0.51
|                                                                          
|Basic weighted average shares outstanding                                  |      | 29,451,451       
|                                                                          
|Diluted Per Share Data:                                                    |     
|Net income before extraordinary item                                       |      | $            0.53
|Extraordinary item                                                         |      | (0.02            
|                                                                          
|Net income available to Common Stockholders                                |      | $            0.51
|                                                                          
|Diluted weighted average shares outstanding                                |      | 33,279,375       
|                                                                          

|See accompanying notes
to consolidated financial statements
|-----------------------------------------------------------

|GLENBOROUGH REALTY
TRUST INCORPORATEDCONSOLIDATED STATEMENTS OF INCOME
For the three months ended September 30, 2000 and 1999 
(in thousands, except per share amounts) (Unaudited)
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                            | 2000 | 1999             
|--------------------------------------------------------------------------- | ---- | -----------------
|REVENUE                                                                     |      |                  
|Rental revenue                                                              |      | $        58,891  
|Fees and reimbursements from affiliates                                     |      | 479              
|Interest and other income                                                   |      | 2,224            
|Equity in earnings of Associated Company                                    |      | 405              
|Equity in (loss) earnings of unconsolidated           joint ventures        |      | (92              
|Net gain (loss) on sales of real estate assets                              |      | 4,694            
|                                                                           
|Total revenue                                                               |      | 66,601           
|                                                                           
|EXPENSES                                                                    |     
|Property operating expenses                                                 |      | 20,514           
|General and administrative                                                  |      | 953              
|Depreciation and amortization                                               |      | 14,382           
|Interest expense                                                            |      | 14,979           
|                                                                           
|Total expenses                                                              |      | 50,828           
|                                                                           
|                                                                            |     
|Income from operations before minority interest and      extraordinary item |      | 15,773           
|Minority interest                                                           |      | (1,177           
|                                                                           
|Net income before extraordinary item                                        |      | 14,596           
|Extraordinary item:                                                         |     
|Net gain on early extinguishment of debt                                    |      |                 
|                                                                           
|Net income                                                                  |      | 14,596           
|Preferred dividends                                                         |      | (4,891           
|                                                                           
|Net income available to Common Stockholders                                 |      | $          9,705 
|                                                                           
|Basic Per Share Data:                                                       |     
|Net income before extraordinary item                                        |      | $            0.34
|Extraordinary item                                                          |      |                 
|                                                                           
|Net income available to Common Stockholders                                 |      | $            0.34
|                                                                           
|Basic weighted average shares outstanding                                   |      | 28,677,017       
|                                                                           
|Diluted Per Share Data:                                                     |     
|Net income before extraordinary item                                        |      | $            0.33
|Extraordinary item                                                          |      |                 
|                                                                           
|Net income available to Common Stockholders                                 |      | $            0.33
|                                                                           
|Diluted weighted average shares outstanding                                 |      | 32,636,164       
|                                                                           

|See accompanying notes
to consolidated financial statements
|-----------------------------------------------------------

|GLENBOROUGH REALTY TRUST INCORPORATED 
CONSOLIDATED STATEMENT OF STOCKHOLDERSEQUITY 
For the nine months
ended September 30, 2000 (in thousands)(Unaudited)
|------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                           | Common Stock | Preferred Stock
|------------------------------------------ | ------------ | ---------------
|
|Balance at     December 31, 1999           |              | 30,821         
|Exercise of stock options                  |              | 36             
|Conversion of Operating                    |             
|Partnership units into     common stock    |              | 13             
|Common and preferred stock     repurchases |              | (2,286         
|Amortization of deferred     compensation  |              |               
|Distributions                              |              |               
|Net income                                 |              |               
|                                          
|Balance at     September 30, 2000          |              | 28,584         
|                                          

|See accompanying notes
to consolidated financial statements
|-----------------------------------------------------------

|GLENBOROUGH REALTY TRUST INCORPORATED 
CONSOLIDATED STATEMENTS OF CASH FLOWS For the nine months ended
September 30, 2000 and 1999 (in thousands) (Unaudited)
|-------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                  | 2000    | 1999      
|------------------------------------------------- | ------- | ----------
|Cash flows from operating activities:             |         |           
|Net income                                        |         | $   30,979
|Adjustments to reconcile net income to net cash   |        
|provided by operating activities:                 |        
|Depreciation and amortization                     |         | 44,595    
|Amortization of loan fees, included in            |        
|interest expense                                  |         | 1,846     
|Minority interest in income from operations       |  
; | 1,833     
|Equity in earnings of Associated Company          |         | (1,027    
|Equity in loss of unconsolidated joint ventures   |         | 263       
|Net gain on sales of real estate assets           |         | (1,652    
|Net loss (gain) on early extinguishment of debt   |         | 550       
|Amortization of deferred compensation             |         | 87        
|Changes in certain assets and liabilities, net    |         | (13,382   
|                                                 
|Net cash provided by operating activities         |         | 64,092    
|                                                 
|Cash flows from investing activities:             |        
|Net proceeds from sales of real estate assets     |         | 159,250   
|Additions to rental properties                    |         | (42,404   
|Deposits on prospective acquisitions              |         | (2,696    
|Investments in Development                        |         | 1,256     
|Investments in Joint Ventures                     |         | (3,710    
|Distributions from Joint Ventures                 |         | 486       
|Additions to mortgage loans receivable            |         | (2,914    
|Principal receipts on mortgage loans receivable   |         | 3,594     
|Repayments of notes receivable                    |         | 3,040     
|Payments from affiliates                          |         | 200       
|Contribution to Associated Company                |         | (25       
|Distributions from Associated Company             |         | 1,258     
|                                                 
|Net cash provided by investing activities         |         | 117,335   
|                                                 
|Cash flows from financing activities:             |        
|Proceeds from borrowings                          |         | 244,801   
|Repayment of borrowings                           |         | (208,375  
|Retirement of Series A Senior Notes (plus loss on |        
|retirement of $512 in 2000)                       |         | (91,662   
|Prepayment penalties on loan payoffs              |         | (38       
|Distributions to minority interest holders        |         | (4,511    
|Distributions to stockholders                     |         | (53,371   
|Exercise of stock options                         |         | 536       
|Repurchases of common stock                       |         | (34,906   
|Repurchases of preferred stock                    |         | (18,519   
|                                                 
|Net cash used for financing activities            |         | (166,045  
|                                                 

|continued




See accompanying notes
to consolidated financial statements
|-------------------------------------------------------------------------

|GLENBOROUGH REALTY TRUST INCORPORATED 
CONSOLIDATED STATEMENTS OF CASH FLOWS - continued For the nine months
ended September 30, 2000 and 1999 (in thousands) (Unaudited)
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                             | 2000 | 1999     
|------------------------------------------------------------------------------------------------------------ | ---- | ---------
|Net increase (decrease) in cash and cash equivalents                                                         |      | $15,382  
|Cash and cash equivalents at beginning of period                                                             |      | 6,482    
|                                                                                                            
|Cash and cash equivalents at end of period                                                                   |      | $21,864  
|                                                                                                            
|Supplemental disclosure of                                                                                   |     
|cash flow information:                                                                                       |     
|Cash paid for interest (net of capitalized interest of                                                       |     
|$2,629 and $2,077 in 2000 and 1999, respectively)                                                            |      | $47,339  
|                                                                                                            
|Supplemental disclosure of Non-Cash Investing and Financing                                                  |     
|Activities:                                                                                                  |     
|Assumption of first trust deed notes payable in                                                              |     
|acquisition of real estate                                                                                   |      | $  4,300 
|                                                                                                            
|Buyer's assumption of first trust deed notes payable                                                         |     
|in disposition of real estate                                                                                |      | $25,347  
|                                                                                                            
|Conversion of Operating Partnership units into common         stock, at current market value of common
stock |      | $     196
|                                                                                                            
|Redemption of Operating Partnership units                                                                    |      | $     504
|                                                                                                            

|See accompanying notes
to consolidated financial statements
|-----------------------------------------------------------

|GLENBOROUGH
REALTY TRUST INCORPORATED



Notes to Consolidated
Financial Statements September 30, 2000





Note 1.
ORGANIZATION


Glenborough Realty Trust
Incorporated (the Company) was incorporated in the State of Maryland
on August 26, 1994. On December 31, 1995, the Company completed a consolidation
(the Consolidation) in which Glenborough Corporation, a California
corporation, and eight public limited partnerships (the
Partnerships), collectively, the GRT Predecessor
Entities, merged with and into the Company. The Company has elected to
qualify as a real estate investment trust (REIT) under the Internal
Revenue Code of 1986, as amended (the Code). The common and
preferred stock of the Company (the Common Stock and the
Preferred Stock, respectively) are listed on the New York Stock
Exchange (NYSE) under the trading symbols GLB and
GLB Pr A, respectively.


As of September 30, 2000,
28,583,783 shares of Common Stock and 10,097,800 shares of Preferred Stock were
issued and outstanding. Under the Companys Common and Preferred Stock
repurchase authorizations which were approved by the Companys Board of
Directors in 1999, 3,946,116 shares of Common Stock and 1,402,200 shares of
Preferred Stock have been repurchased as of September 30, 2000.


The Companys
Preferred Stock is convertible at any time at the option of the holder thereof
into shares of Common Stock at an initial conversion price of $32.83 per share
of Common Stock (equivalent to a conversion rate of 0.7615 shares of Common
Stock for each share of Series A Convertible Preferred Stock), subject to
adjustment in certain circumstances. Except in certain instances relating to the
preservation of the Companys status as a REIT, the 73⁄4% Series A
Convertible Preferred Stock is not redeemable prior to January 16, 2003. On and
after January 16, 2003, the Series A Preferred Stock may be redeemed at the
option of the Company, in whole or in part, initially at 103.88% of the
liquidation preference per share, and thereafter at prices declining to 100% of
the liquidation preference on and after January 16, 2008, plus in each case
accumulated, accrued and unpaid dividends, if any, to the redemption date.


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


The Company, through its
majority owned subsidiaries, is engaged primarily in the ownership, operation,
management, leasing, acquisition, expansion and development of various
income-producing properties. The Companys major consolidated subsidiary,
in which it holds a 1% general partner interest and a 88.06% limited partner
interest at September 30, 2000, is Glenborough Properties, L.P. (the
Operating Partnership). Each of the holders of the remaining
interests in the Operating Partnership (OP Units) has the option to
redeem its OP Units and to receive, at the option of the Company, in exchange
for each OP Unit, either (i) one share of common stock of the Company, or (ii)
cash equal to the fair market value of one share of common stock of the Company.
As of September 30, 2000, the Operating Partnership, directly and through the
subsidiaries in which it and the Company own 100% of the ownership interests,
controls a portfolio of 126 real estate projects.


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



Note 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Basis of
Presentation


The accompanying financial
statements present the consolidated financial position of the Company as of
September 30, 2000, and December 31, 1999, and the consolidated results of
operations and cash flows of the Company for the nine months ended September 30,
2000 and 1999. All intercompany transactions, receivables and payables have been
eliminated in consolidation.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|GLENBOROUGH
REALTY TRUST INCORPORATED


Notes to Consolidated
Financial Statements September 30, 2000




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 September 30,
2000, and for the period then ended.



Reclassification


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



Use of
Estimates


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



New Accounting
Pronouncements


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



Rental
Properties


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


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


The useful lives are as
follows:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |                           
| |  | --------------------------
| |  | Buildings and Improvements
| |  | Tenant Improvements       
| |  | Furniture and Equipment   

|Investments in
Development


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



Investments in
Joint Ventures


The Companys
investments in joint ventures are accounted for using the equity method. See
Note 5 for further discussion.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|GLENBOROUGH
REALTY TRUST INCORPORATED


Notes to Consolidated
Financial Statements September 30, 2000




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 such 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.



Investment in
Associated Company


The Companys
Investment in Associated Company is accounted for using the equity method, as
discussed further in Note 7.



Cash
Equivalents


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



Fair Value of
Financial Instruments


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



Derivative
Financial Instruments


The Company may use
derivative financial instruments in the event that it believes such instruments
will be an effective hedge against fluctuations in interest rates on a specific
borrowing. Derivative financial instruments such as forward rate agreements or
interest rate swaps may be used in this capacity. To the extent such instruments
do not qualify as hedges, they will be accounted for on a mark-to-market basis
and recorded in earnings each period as appropriate. The cost of terminated
instruments not qualifying as hedges will be recorded in earnings in the period
they are terminated. Instruments which qualify as hedges upon obtaining the
related debt will be recorded as a premium or discount on the related debt
principal and amortized into earnings over the life of the debt instrument. If
the hedged instrument is retired early, the unamortized discount or premium will
be included as a component of the calculation of gain or loss on retirement.


At September 30, 2000 and
December 31, 1999, the Company was not a party to any open interest rate
protection agreements other than the interest rate cap contracts discussed in
Note 9 below.



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 10.94% limited partner interests in the Operating Partnership not
held by the Company at September 30, 2000.



Revenues


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


For the nine months ended
September 30, 2000 and 1999, no tenants represented 10% or more of rental
revenue of the Company.


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


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


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

|GLENBOROUGH
REALTY TRUST INCORPORATED


Notes to Consolidated
Financial Statements September 30, 2000



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



Income Taxes


The Company has made an
election to be taxed as a REIT under Sections 856 through 860 of the Code. As a
REIT, the Company generally will not be subject to Federal income tax to the
extent that it distributes at least 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.



Reference to
1999 Audited Financial Statements


These unaudited financial
statements should be read in conjunction with the Notes to Consolidated
Financial Statements included in the 1999 audited financial statements.



Note 3. RENTAL
PROPERTY

Acquisitions


In the third quarter of
2000, through one of its development alliances, the Company acquired the second
phase of Springs of Indian Creek, a multifamily property located in Carrollton,
Texas. The second phase consists of 233 units which, combined with the 285 units
of the first phase, brings this property to a total of 518 multifamily units.
The total acquisition cost was approximately $16.3 million.


In the first quarter of
2000, through one of its development alliances, the Company acquired Gateway 14,
a 113,538 square foot industrial property located in Denver, Colorado. The total
acquisition cost of $6.2 million consisted of approximately $1.9 million in
cash, which was funded with the proceeds from a tax-deferred exchange, and the
assumption of $4.3 million in debt.


Dispositions


In the third quarter of
2000, the Company sold eleven properties, including three office, seven
industrial and one retail. These assets were sold for an aggregate sales price
of approximately $49.1 million and generated an aggregate net gain of
approximately $4.7 million.


In the second quarter of
2000, the Company sold eleven properties, including five office, three
industrial and three retail. These assets were sold for an aggregate sales price
of approximately $105.6 million and generated an aggregate net loss of
approximately $2.3 million.


In the first quarter of
2000, the Company formed a limited liability company with an independent third
party and contributed its interest in the office property known as 2000
Corporate Ridge, located in McLean, Virginia. This transaction resulted in a
loss on sale of approximately $211,000. See Note 5 for further discussion. In
addition, the Company sold an industrial property known as Columbia Warehouse,
located in Columbia, Maryland, to an independent third party for all cash
consideration of $1.6 million. This resulted in a loss on sale of approximately
$420,000. Further, additional costs of approximately $63,000 were incurred
related to 1999 sales.


These transactions are
reflected in the net gain on sales of real estate assets in the accompanying
consolidated statements of income for the nine and three months ended September
30, 2000.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|GLENBOROUGH
REALTY TRUST INCORPORATED


Notes to Consolidated
Financial Statements September 30, 2000




Note 4.
INVESTMENTS IN DEVELOPMENT


The Company is currently
involved in a number of development alliances for the development of
approximately 1,068,000 square feet of commercial properties and 1,146
multifamily units in California, Colorado, Texas, Indiana, New Jersey and
Massachusetts. As of September 30, 2000, the Company has advanced approximately
$43 million to these alliances. Under these development alliances, the Company
has certain rights to purchase the properties upon completion of development
over the next five years.



Note 5.
INVESTMENTS IN JOINT VENTURES


In the first quarter of
2000, the Company formed a limited liability company (the LLC) with
an independent third party and contributed its interest in the office property
known as 2000 Corporate Ridge, located in McLean, Virginia. This transaction
resulted in a loss on sale of approximately $211,000 and is included in net gain
on sales of real estate assets in the Companys consolidated statement of
income for the nine months ended September 30, 2000. Consideration received for
this contribution included $14.7 million in cash and the assumption of a $20.6
million mortgage by the LLC. The Company now has a 10% interest in the LLC and
the LLC agreement provides for, among other things, a 3% annual management fee
to the Company for property management services, certain asset management fees
and certain additional distributions in excess of its 10% interest, if
available, upon the ultimate sale of the property by the LLC. The value of this
10% interest is approximately $3.8 million and is included in Investments in
Joint Ventures on the accompanying consolidated balance sheet as of September
30, 2000. The Company accounts for its interest in the LLC using the equity
method.


In June 1999, the Company
entered into a joint venture in which it sold a 90% interest in Rockwall I &
II, a 340,252 square foot office complex located in Rockville, Maryland. The
Company maintains a 10% interest in the asset along with a contract for property
management and asset management services under which the Company is entitled to
receive property management fees of 3% of cash receipts and an annual asset
management fee of $350,000. The proceeds from the sale were used to paydown the
Credit Facility (discussed below), to reduce other secured debt and to
repurchase stock. The value of this 10% interest is approximately $1.4 million
and is included in Investments in Joint Ventures on the accompanying
consolidated balance sheet as of September 30, 2000. This investment is
accounted for using the equity method.


In April 1999, the Company
also purchased a 10% interest in a joint venture holding the fee simple title to
the land under Rincon Center I & II in San Francisco, California. The land
was purchased from the United States Post Office for a purchase price of $80.5
million. The land had a triple net ground lease with a remaining term of 51
years with minimum 30% rental increases every six years. In October 1999, the
joint venture purchased the leasehold improvements comprising Rincon Center I
& II. Occupying a full city block near the waterfront in the Financial
District, Rincon Center I & II contains approximately 700,000 square feet
which includes commercial office and retail space, 320 multifamily units and 381
subterranean parking spaces. The Company took over management and leasing of the
project on November 1, 1999 and is now entitled to receive property management
fees of 1.75% of cash receipts. The book value of this 10% interest is
approximately $3.8 million and is included in Investments in Joint Ventures on
the accompanying consolidated balance sheet as of September 30, 2000. This
investment is accounted for using the equity method.



Note 6.
MORTGAGE LOANS RECEIVABLE


The Companys mortgage
loans receivable consist of the following as of September 30, 2000, and December
31, 1999 (dollars in thousands):
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|GLENBOROUGH
REALTY TRUST INCORPORATED


Notes to Consolidated
Financial Statements September 30, 2000
|-----------------------------------------------------------------------------------------------------

|                                                                                                                                                                                                        | 2000 | 1999      
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | ----------
|Note secured by a hotel  property in Arlington,  TX, with a fixed  interest rate of 9%, monthly  interest-only  payments and a maturity date of March 2000.  This note
was paid off in January 2000     |      | $       --
|                                                                                                                                                                                                        |     
|Note secured by Gateway Park land located in Aurora, CO, with a stated fixed interest rate of 13%, quarterly interest-only payments and a maturity date of July 2005 (see below for
further discussion) |      | 36,902    
|                                                                                                                                                                                                       
|                                                                                                                                                                                                        |     
|Total                                                                                                                                                                                                   |      | $36,902   
|                                                                                                                                                                                                       

|In 1998, the Company
entered into a development alliance with The Pauls Corporation. In addition to
this development alliance, the Company loaned approximately $34 million ($36.9
million, including accrued interest, at September 30, 2000), secured by a first
mortgage, to facilitate the build-out of Gateway Park. In this arrangement, the
Company has rights under certain conditions and subject to certain contingencies
to purchase the properties upon completion of development and, thus, through
this arrangement, the Company could acquire up to 2.2 million square feet of
office and industrial space and 1,600 multifamily units over the next ten years.



Note 7.
INVESTMENT IN ASSOCIATED COMPANY


The Company accounts for
its investment in GC (as defined in Note 1) using the equity method as a
substantial portion of its economic benefits flow to the Company by virtue of
its 100% non-voting preferred stock interest in GC, which interest constitutes
substantially all of GCs capitalization. Two of the holders of the voting
common stock of GC are officers of the Company; however, the Company has no
direct voting or management control of GC. The Company records earnings on its
investment in GC 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 GC are recorded as a reduction of the
Companys investment.


As of December 31, 1999 and
September 30, 2000, the Company had the following investment in the Associated
Company (in thousands):
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | GC                              
| |  | --------------------------------
| |  | Investment at December 31, 1998 
| |  | Distributions                   
| |  | Equity in earnings              
| |  |                                 
| |  | Investment at December 31, 1999 
| |  | Contribution                    
| |  | Distributions                   
| |  | Equity in earnings              
| |  |                                 
| |  | Investment at September 30, 2000
|

|Note 8. OTHER
ASSETS


As of September 30, 2000
and December 31, 1999, other assets on the consolidated balance sheets consist
of the following (in thousands):
|---------------------------------------------------------------------------------------------------------------------------------------------------------------

|GLENBOROUGH
REALTY TRUST INCORPORATED


Notes to Consolidated
Financial Statements September 30, 2000
|-----------------------------------------------------------------------------------------------------

| |  | 2000                                     | 1999
| |  | ---------------------------------------- | ----
| |  | Accounts receivable, net                 |     
| |  | Prepaid expenses                         |     
| |  | Impound accounts                         |     
| |  | Lease commissions and deferred financing |     
| |  | fees, net                                |     
| |  | Corporate office fixed assets, net       |     
| |  | Related party receivable (Note 11)       |     
| |  | Other                                    |     
| |  |                                          |     
| |  | Total other assets                       |     
|

|Note 9.
SECURED AND UNSECURED LIABILITIES


The Company had the
following mortgage loans, bank lines, unsecured notes and notes payable
outstanding as of September 30, 2000, and December 31, 1999 (dollars in
thousands):
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |          |  |          | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- |  | -------- | 
|
|Secured loans with various lenders, net of unamortized discount of $5,047 and
$5,515 at September 30, 2000 and December 31, 1999, respectively. All loans have
a fixed interest rate of 6.125% and a November 10, 2008 maturity date. Monthly
principal and interest payments range between $296 and $458. These loans are
secured by 31 properties with an aggregate net carrying value of $406,356 and
$409,130 at September 30, 2000 and December 31, 1999, respectively. |  | $230,986 |  | $232,735 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Secured loans with various lenders, bearing interest at fixed rates between
6.95% and 9.25%, with monthly principal and interest payments ranging between $5
and $443 and maturing at various dates through December 1, 2030. These loans are
secured by properties with an aggregate net carrying value of $373,589 and
$547,264 at September 30, 2000 and December 31, 1999, respectively.                                                                                 |  | 219,403  |  | 322,878  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Secured loans with various banks bearing interest at variable rates ranging
between 8.17% and 9.50% at September 30, 2000 and 6.53% and 8.52% at December
31, 1999, and maturing at various dates through August 30, 2004. These loans are
secured by properties with an aggregate net carrying value of $326,242 and
$224,526 at September 30, 2000 and December 31, 1999, respectively.                                                                                    |  | 228,717  |  | 146,102  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Unsecured $142,500 line of credit with a group of commercial banks ("Credit
Facility") with a variable interest rate of LIBOR plus 1.625% at September 30,
2000 and December 31, 1999 (8.245% and 7.753%, respectively), monthly interest
only payments and a maturity date of June 10, 2002, with one option to extend
for 10 years.                                                                                                                                        |  | 17,481   |  | 70,628   | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Unsecured $125,000 term loan with a group of commercial banks with a variable
interest rate of LIBOR plus 1.75% (8.37% and 8.25% at September 30, 2000 and
December 31, 1999, respectively), monthly interest only payments and a maturity
date of June 10, 2002.                                                                                                                                                                                                            |  | 125,000  |  | 33,865   | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Unsecured Series A Senior Notes with a fixed interest rate of 7.625%, interest
payable semiannually on March 15 and September 15, and a maturity date of March
15, 2005. All of the notes were retired in the first six months of 2000, as
discussed below.                                                                                                                                                                                                                  |  |         |  | 91,150   | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Total                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | $821,587 |  | $897,358 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|GLENBOROUGH
REALTY TRUST INCORPORATED


Notes to Consolidated
Financial Statements September 30, 2000






In the third quarter of
2000, related to the acquisition of the second phase of Springs of Indian Creek
(as discussed in Note 3), the Company refinanced the loan on the first phase of
this property to include both phases which increased the loan balance from $14.1
million to $26.6 million. The new loan has a maturity date of September 30, 2001
and bears interest at the floating rate of LIBOR plus 2.25%. The interest rate
on this loan at September 30, 2000 was 8.87%. In addition, during the third
quarter, the Company paid off a $2 million loan which was secured by an office
property located in Phoenix, Arizona.


In the second quarter of
2000, the Company obtained an $18 million construction loan to refinance a
264,000 square foot industrial property located in Indianapolis, Indiana, and to
provide funds to build an approximate 83,000 square foot expansion to this
prop


erty. Approximately $11.6 million was outstanding at September 30, 2000. The
loan has a maturity date of June 15, 2002 and bears interest at the floating
rate of LIBOR plus 2.50%. The interest rate on this loan at September 30, 2000
was 9.12%.


In the first quarter of
2000, the Company obtained a $10.5 million construction loan to build an 80,000
square foot office property in Bedminster, New Jersey. Approximately $6.1
million was outstanding at September 30, 2000. The loan has a maturity date of
November 12, 2001 and bears interest at the floating rate of LIBOR plus 2.25%.
The interest rate on this loan at September 30, 2000 was 8.87%.


In the first quarter of
2000, the Company contributed its interest in the office property known as 2000
Corporate Ridge to a limited liability company (the LLC). The LLC
assumed the $20.6 million mortgage loan on this property. See Note 5 for further
discussion.


In the first quarter of
2000, related to the acquisition of an industrial property from one of the
Companys development alliances (as discussed in Note 3 above), the Company
assumed a $4.3 million secured loan. This loan has a maturity date of April 1,
2000 (with one 6-month extension option) and bears interest at the floating rate
of LIBOR plus 1.55%. The interest rate on this loan at September 30, 2000 was
8.17%.


During the first two
quarters of 2000, the Company retired the remaining $91.2 million of unsecured
Series A Senior Notes at a discount. As a result of these transactions and the
related write-off of capitalized original issuance costs, a net loss on early
extinguishment of debt of $550,000 was recorded in the accompanying consolidated
statement of income for the nine months ended September 30, 2000, as discussed
in Note 10 below.


In August 1999, the Company
closed a $97.6 million secured financing with a commercial bank (Secured
Financing). In connection with the Secured Financing, the Company entered
into an interest rate cap agreement to hedge increases in interest rates above a
specified level of 11.21%. The agreement is for a term concurrent with the
Secured Financing instrument, is indexed to the 90-day LIBOR rate, and is for a
notional amount equal to the maximum amount available on the Secured Financing
loan. As of September 30, 2000, the 90-day LIBOR rate was 6.81%. The Company
paid a premium of approximately $434,000 at the inception of the cap agreement,
which is being amortized as additional interest expense over the life of the
agreement.


In August 2000, the Company
expanded the Secured Financing by $50.2 million and used the proceeds to payoff
a $52 million note which matured on September 1, 2000. This note was secured by
three multifamily properties which are now security for the expanded Secured
Financing. In connection with this expansion, the Company entered into a second
interest rate cap agreement to hedge increases in interest rates above a
specified level of 10.33%. The agreement is for a term concurrent with the
Secured Financing instrument, is indexed to the 90-day LIBOR rate, and is for a
notional amount equal to the maximum incremental additional amount available on
the Secured Financing loan. As of September 30, 2000, the 90-day LIBOR rate was
6.81%. The Company paid a premium of approximately $83,000 at the inception of
this cap agreement, which is being amortized as additional interest expense over
the life of the agreement.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|GLENBOROUGH
REALTY TRUST INCORPORATED


Notes to Consolidated
Financial Statements September 30, 2000



Outstanding borrowings
under the Credit Facility (as discussed above) decreased from $70,628,000 at
December 31, 1999, to $17,481,000 at September 30, 2000. The decrease was due to
draws of $123,522,000 for acquisitions, stock repurchases, and retirement of the
Companys Series A Senior Notes, offset by pay downs of $176,669,000
generated from proceeds from the sales of Properties and cash from operations.
In February 2000, the maturity date on the Credit Facility was extended from
December 2000 to June 2002.


Some of the Companys
properties are held in limited partnerships and limited liability companies in
order to facilitate financing. Such limited partnerships and limited liability
companies are included in the consolidated financial statements of the Company
in accordance with Generally Accepted Accounting Principles (GAAP).


The required principal
payments on the Companys debt for the next five years and thereafter, as
of September 30, 2000, are as follows (in thousands):
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Year EndingDecember 31, | 
|----------------------- | 
|                        | 
|                        | 
|                        | 
|                        | 
|                        | 
|                        | 
|                        | 
|                        | 
|                        | 

|Note 10. NET LOSS ON
EARLY EXTINGUISHMENT OF DEBT


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



Note 11.
RELATED PARTY TRANSACTIONS


Fee and reimbursement
income earned by the Company from related parties totaled $2,841,000 and
$2,492,000 for the nine months ended September 30, 2000 and 1999, respectively,
and consisted of property management fees, asset management fees and other fee
income. In addition, the Company paid GC property management fees and salary
reimbursements totaling $505,000 and $1,180,000 for the nine months ended
September 30, 2000 and 1999, respectively, for management of a portfolio of
residential properties owned by the Company, which is included in property
operating expenses and general and administrative expenses on the accompanying
consolidated statements of income.


Prior to 2000, the Company
owned 116,945 units of limited partnership interest in a Managed Partnership.
This Managed Partnership owned 666,883 units of limited partnership interest in
the Operating Partnership. In 2000, the Company and this Managed Partnership
agreed to a redemption transaction in which the Company surrendered 102,945 of
its units in the Managed Partnership. As consideration for this redemption, the
Managed Partnership transferred 80,817 units in the Operating Partnership to the
Company. This transaction is reflected on the Companys Consolidated
Balance Sheet as of September 30, 2000, as a reduction in other assets and
minority interest of $504,000, the book value of the units in the Managed
Partnership that were surrendered. The remaining value of the Companys
interest in the Managed Partnership in included in other assets on the
Companys Consolidated Balance Sheet as of September 30, 2000.


In 1998, the Company
acquired from a Managed Partnership an option to purchase all of its rights
under a Lease with Option to Purchase Agreement, for certain undeveloped and
unentitled land located in Burlingame, California. Upon expiration of the option
period, the independent members of the Companys Board of Directors
concluded that proceeding with the development of the property would have
required that the Company incur substantial debt and entitlement risk.
Accordingly, on February 1, 1999, the Company elected not to proceed with the
development and not to exercise the option in return for the Managed
Partnerships agreement to reimburse the Company for $2,309,000 of
predevelopment costs, $462,000 to be paid in cash with the balance in a
promissory note bearing interest at 10% and due on the earlier of sale,
refinance or March 31, 2002. The note also contained a participation in profits
realized by the Managed Partnership from the sale of the property if such sale
occurred within 3 years. During the third quarter of 2000, this note receivable
was paid in full.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|GLENBOROUGH
REALTY TRUST INCORPORATED


Notes to Consolidated
Financial Statements September 30, 2000







Note 12.
EARNINGS PER SHARE


Basic earnings per share is
computed as earnings divided by weighted average shares, excluding the dilutive
effects of stock options and other potentially dilutive securities. Earnings per
share are as follows (in thousands, except for weighted average shares and per
share amounts):
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                        | Three months endedSeptember 30, | Nine months endedSeptember 30,
|--------------------------------------- | ------------------------------- | ------------------------------
|
|Net income available to Common          |                                 |                               
|Stockholders - Basic                    |                                 | $         9,705               
|Minority interest                       |                                 | 1,177                         
|                                       
|Net income available to Common          |                                
|Stockholders - Diluted                  |                                 | $       10,882                
|                                       
|Weighted average shares:                |                                
|Basic                                   |                                 | 28,677,017                    
|Stock options                           |                                 | 438,168                       
|Convertible Operating Partnership Units |                                 | 3,520,979                     
|                                       
|Diluted                                 |                                 | 32,636,164                    
|                                       
|Basic earnings per share                |                                 | $           0.34              
|Diluted earnings per share              |                                 | $           0.33              

|Note 13. STOCK
COMPENSATION PLAN


In May 1996, the Company
adopted an employee stock incentive plan (the Plan) to provide
incentives to attract and retain high quality executive officers and key
employees. Certain amendments to the Plan were ratified and approved by the
stockholders of the Company at the Companys 1997 Annual Meeting of
Stockholders. The Plan, as amended, provides for the grant of (i) shares of
Common Stock of the Company, (ii) options, stock appreciation rights
(SARs) or similar rights with an exercise or conversion privilege at
a fixed or variable price related to the Common Stock and/or the passage of
time, the occurrence of one or more events, or the satisfaction of performance
criteria or other conditions, or (iii) any other security with the value
derived from the value of the Common Stock of the Company or other securities
issued by a related entity. Such awards include, without limitation, options,
SARs, sales or bonuses of restricted stock, dividend equivalent rights
(DERs), Performance Units or Preference Shares. The total number of
shares of Common Stock available under the Plan is equal to the greater of
1,140,000 shares or 8% of the number of shares outstanding determined as of the
day immediately following the most recent issuance of shares of Common Stock or
securities convertible into shares of Common Stock; provided that the maximum
aggregate number of shares of Common Stock available for issuance under the Plan
may not be reduced. For purposes of calculating the number of shares of Common
Stock available under the Plan, all classes of securities of the Company and its
related entities that are convertible presently or in the future by the security
holder into shares of Common Stock or which may presently or in the future be
exchanged for shares of Common Stock pursuant to redemption rights or otherwise,
shall be deemed to be outstanding shares of Common Stock. Notwithstanding the
foregoing, the aggregate number of shares as to which incentive stock options,
one type of security available under the Plan, may be granted under the Plan may
not exceed 1,140,000 shares. In May 1999, the Companys stockholders
approved the grant of 700,000 non-qualified stock options to Robert Batinovich
and 300,000 non-qualified stock options to Andrew Batinovich, outside the Plan.
The Company accounts for the fair value of the options and bonus grants in
accordance with APB Opinion No. 25. As of September 30, 2000, 70,250 shares
of bonus grants have been issued under the Plan. The fair value of the shares
granted has 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 September 30, 2000, 2,648,379
options to purchase shares of Common Stock were outstanding under the Plan,
excluding the 1,000,000 stock options granted to Robert Batinovich and Andrew
Batinovich as described above. The exercise price of each incentive stock option
granted is greater than or equal to the per-share fair market value of the
Common Stock on the date the option is granted and, as such, no compensation
expense has been recognized. The options vest over periods between 1 and
6 years, and have a maximum term of 10 years.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|GLENBOROUGH
REALTY TRUST INCORPORATED


Notes to Consolidated
Financial Statements September 30, 2000







Note 14.
SEGMENT INFORMATION


The Company owns a diverse
portfolio of properties comprising five product types: office, industrial,
retail, multifamily and hotels. Effective January 1, 2000, in order to simplify
reporting, the Company eliminated the office/flex property type and reallocated
the properties to either the office or industrial category. Each of these
product types represents a reportable segment with distinct uses and tenant
types which require the Company to employ different management strategies. Each
segment contains properties located in various regions and markets within the
United States. The office portfolio consists primarily of suburban office
buildings. The industrial portfolio consists of properties designed for
warehouse, distribution and light manufacturing for single-tenant or
multi-tenant use. The retail portfolio consists primarily of community shopping
centers anchored with national or regional supermarkets or drug stores. The
properties in the multifamily portfolio are apartment buildings with units
rented to residential tenants on either a month-by-month basis or for terms of
one year or less. The Companys hotel operations are from one 227-room
property leased to and operated by a third party.


The accounting policies of
the segments are the same as those described in the summary of significant
accounting policies. The Company evaluates performance of its property types
based on net operating income derived by subtracting rental expenses and real
estate taxes (operating expenses) from rental revenues. Significant information
used by the Company for its reportable segments as of and for the nine months
ended September 30, 2000 and 1999 is as follows (in thousands):
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Office                      | Industrial | Retail  | Multi-family | Hotel   | Total
|--------------------------- | ---------- | ------- | ------------ | ------- | -----
|Rental revenue              |            | $94,831 |              | $28,910 |      
|Property operating expenses |            | 35,161  |              | 7,100   |      
|                           
|Net operating income (NOI)  |            | $59,670 |              | $21,810 |      
|                           
|1999                        |            |         |             
|                           
|Rental revenue              |            | $98,209 |              | $33,255 |      
|Property operating expenses |            | 37,534  |              | 8,979   |      
|                           
|Net operating income (NOI)  |            | $60,675 |              | $24,276 |      
|                           

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

|                                      | 2000 | 1999    
|------------------------------------- | ---- | --------
|Revenues                              |      |         
|Total revenue for reportable segments |      | $182,869
|Other revenue (1)                     |      | 12,124  
|                                     
|Total consolidated revenues           |      | $194,993
|                                     

|                                                                                                     
|-----------------------------------------------------------------------------------------------------
|GLENBOROUGH
REALTY TRUST INCORPORATED


Notes to Consolidated
Financial Statements September 30, 2000

|                                                      | 2000 | 1999      
|----------------------------------------------------- | ---- | ----------
|Net Income                                            |      |           
|NOI for reportable segments                           |      | $ 114,870 
|Elimination of internal property management fees      |      | 5,638     
|Unallocated amounts:                                  |     
|Other revenue (1)                                     |      | 12,124    
|General and administrative expenses                   |      | (7,326    
|Depreciation and amortization                         |      | (44,595   
|Interest expense                                      |      | (47,349   
|                                                     
|Income from operations  before minority  interest and |     
|extraordinary items                                   |      | $   33,362
|                                                     

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

|Note 15.
SUBSEQUENT EVENTS





Acquisitions


Subsequent to September 30,
2000, through one of its development alliances, the Company acquired Two Gateway
Center, a 80,049 square foot office property located in Aurora, Colorado. The
total acquisition cost of $9.5 million was funded with the proceeds from two
tax-deferred exchanges.


In addition, the Company
formed a new joint venture with the Pauls Corporation (Pauls),
Glenborough Pauls Development LLC (the Development LLC). The Company
and Pauls each own an equal 50% interest in the Development LLC. The Company and
Pauls are required to make equal capital contributions to the Development LLC.
The Company will account for its investment in the Development LLC using the
equity method. In October 2000, the Development LLC acquired a 33 acre
development parcel located in Redwood City, California, with a development
potential of 400,000 square feet of office space and approximately 500
residential units, surrounding an existing marina, on which the Development LLC
plans to pursue a significant mixed-use waterfront development. The total
acquisition cost of $56.8 million consisted of approximately $45 million of new
debt, $8.8 million in a loan from the Company and a $3 million equity
contribution from the Development LLC. The Company has provided guarantees for
$18 million of the new debt.





Dispositions


Subsequent to September 30,
2000, the Company sold one industrial property and one retail property. These
properties were sold for an aggregate sales price of approximately $5.1 million
and generated an aggregate net loss of approximately $1.8 million.



Note 16.
PROSPECTIVE ACQUISITIONS AND DISPOSITIONS



Acquisitions


The Company is under
contract or letter of intent for the following acquisitions in the San Francisco
Bay Area, all of which are subject to a number of contingencies including
satisfactory completion of due diligence and customary closing conditions and
thus cannot be assured:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | An
existing 300,000 square-foot fully leased office campus built in 1999, on 19 acres in San
Jose, California. This property is being acquired at a price representing an unleveraged
yield of 10% based on existing below-market rents. When the existing leases begin to
expire in 2005, the Company anticipates releasing the space at significantly higher
rates. This acquisition would be funded by using a portion of the trade proceeds from the
sale of the multifamily portfolio discussed below.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | An
existing 255,000 square-foot fully leased industrial building on 13.6 acres in
Burlingame, California. When the existing leases expire in 2002 the Company anticipates
major redevelopment in which some or all of the existing industrial space will be
converted to office space. The acquisition cost for this property will be funded from the
proceeds of prior and other pending dispositions.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|GLENBOROUGH
REALTY TRUST INCORPORATED


Notes to Consolidated Financial Statements September 30, 2000
|-----------------------------------------------------------------------------------------------------

| |  | A
97-acre unimproved parcel in Hayward, California, with a development potential of
approximately 1.5 million square feet of office and R&D,which the Company expects to
complete over a period of time as market conditions warrant. The acquisition cost for
this property also will be funded from the proceeds of prior and other pending
dispositions.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A
2.3-acre mixed-use development site in Millbrae, California, at the new hub of the BART
and CalTrain regional transportation systems near the San Francisco International
Airport. This site has potential for a 300,000 square-foot mixed-use development. This
site also would be developed in a joint venture with the Pauls Corporation through the
Company's newly-created Taxable REIT Subsidiary.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Dispositions


In September 2000, the
Company and Bush Gardens, LLC, an affiliate of Westdale Properties America I,
Ltd. (which owns and operates 25,000 apartment units around the country),
announced that they have signed a definitive agreement under which Bush Gardens,
LLC will acquire the Companys multifamily portfolio for a price of $404
million. The $404 million sale price will comprise three components: (i) $259
million of existing mortgage debt either assumed or retired, (ii) approximately
$102 million in cash, and (iii) approximately $43 million in the form of
2,335,907 shares and units, respectively, of the Companys stock and units
in the Operating Partnership currently held by Westdale Properties America I,
Ltd. and affiliates.


The transaction, which is
anticipated to close in December 2000, is expected to produce a gain on sale for
the Company of approximately $34 million, however, the Company will take a
charge against income of approximately $0.31 per share in the fourth quarter for
restructuring and other charges, if the sale is completed. In addition, the
Company will recognize extraordinary expenses relating to the write off of
deferred loan fees on the prepayment of debt. Of the net cash proceeds received
by the Company from the transaction, $22 million will be set aside in tax
deferred exchange accounts to fund the acquisition of the San Jose property
discussed above, and approximately $68 million will be applied to reduce
unsecured debt.


The multifamily portfolio
comprises 9,253 units, with the bulk of the portfolio concentrated in Texas and
other southern states. The Texas component comprises 17 properties (5,422
units), with 13 properties (2,399 units) located in North Carolina, Georgia and
Tennessee. The balance of the portfolio comprises 6 properties (1,432 units) in
Indiana, Arizona and Nevada. This disposition is subject to a number of
contingencies, including satisfactory completion of due diligence and customary
closing conditions. As a result, there can be no assurance that this disposition
will be completed.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



Background


Glenborough Realty Trust
Incorporated (the Company) is a self-administered and self-managed
real estate investment trust (REIT) engaged primarily in the
ownership, operation, management, leasing, acquisition, expansion and
development of various types of income-producing properties. As of September 30,
2000, the Company owned and operated 126 income-producing properties (the
Properties, and each a Property). The Properties are
comprised of 52 office Properties, 27 industrial Properties, 6 retail
Properties, 37 multifamily Properties, 1 hotel Property and 3 joint ventures,
located in 26 metropolitan markets.


The Company was
incorporated in the State of Maryland on August 26, 1994. On December 31, 1995,
the Company completed a consolidation (the Consolidation) in which
Glenborough Corporation, a California corporation, and eight public limited
partnerships (the Partnerships) collectively, the GRT
Predecessor Entities, merged with and into the Company. The Company has
elected to qualify as a REIT under the Internal Revenue Code of 1986, as
amended. The common and preferred stock of the Company (the Common
Stock and the Preferred Stock, respectively) are listed on the
New York Stock Exchange (NYSE) under the trading symbols
GLB and GLB Pr A, respectively.


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



Results of
Operations


Comparison of the nine
months ended September 30, 2000 to the nine months ended September 30, 1999.


Rental Revenue.
Rental revenue decreased $9,258,000, or 5%, to $182,869,000 for the nine months
ended September 30, 2000 from $192,127,000 for the nine months ended September
30, 1999, due to decreases in revenues from the office, industrial, retail and
hotel Properties of $3,378,000, $4,345,000, $1,841,000 and $572,000,
respectively. These decreases are primarily due to the sales of 10 office
Properties, 18 industrial Properties and four retail Properties since September
30, 1999. These decreases are offset by an increase in revenue from the
multifamily Properties of $878,000 which is primarily due to the acquisition of
two multifamily properties since September 30, 1999.


Fees and Reimbursements
from Affiliates. Fees and reimbursements from affiliates consist primarily
of property and asset management fees paid to the Company under agreements with
the Managed Partnerships. This revenue increased $349,000, or 14%, to $2,841,000
for the nine months ended September 30, 2000, from $2,492,000 for the nine
months ended September 30, 1999, primarily due to transaction fees received from
an affiliate in the second quarter of 2000. This increase is partially offset by
decreases due to the sale of properties by the Managed Partnerships which
resulted in lower property and asset management fees.


Interest and Other
Income. Interest and other income increased $1,810,000, or 36%, to
$6,867,000 for the nine months ended September 30, 2000, from $5,057,000 for the
nine months ended September 30, 1999. The increase is primarily due to interest
income earned upon the payoff of loans made to three development projects sold
by a development alliance in the second and third quarters of 2000, offset by
decreases in interest earned on notes receivable as a result of payoffs
received.


Equity in Earnings of
Associated Company. Equity in earnings of Associated Company decreased
$185,000, or 15%, to $1,027,000 for the nine months ended September 30, 2000,
from $1,212,000 for the nine months ended September 30, 1999. The decrease is
primarily due to higher transaction fees received from affiliates in 1999 versus
2000 offset by a decrease in GCs 1999 earnings resulting from a provision
to reduce the carrying value of management contracts with certain of the Managed
Partnerships.


Equity in Earnings
(Loss) of Unconsolidated Joint Ventures. Equity in earnings (loss) of
unconsolidated joint ventures decreased $422,000 to an equity in loss of
$263,000 for the nine months ended September 30, 2000, from an equity in
earnings of $159,000 during the nine months ended September 30, 1999. This
decrease is due to a decrease in the capitalization of interest expense and
property taxes, recognition of depreciation expense, and payment of operating
expenses by the joint ventures upon the completion of development of several
projects in 2000.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|GLENBOROUGH
REALTY TRUST INCORPORATED


Notes to Consolidated
Financial Statements September 30, 2000





Net Gain on Sales of
Real Estate Assets. The net gain on sales of real estate assets of
$1,652,000 during the nine months ended September 30, 2000, resulted from the
sales of nine office Properties, eleven industrial Properties and four retail
Properties. The net gain on sales of real estate assets of $6,722,000 during the
nine months ended September 30, 1999, resulted from the sale of nine office
Properties, eleven industrial Properties, three retail Properties, one
multifamily Property, two hotel Properties and a small interest in a REIT.


Property Operating
Expenses. Property operating expenses decreased $3,645,000, or 6%, to
$62,361,000 for the nine months ended September 30, 2000, from $66,006,000 for
the nine months ended September 30, 1999. This decrease corresponds to the 5%
decrease in rental revenues resulting from the sale of Properties.


General and
Administrative Expenses. General and administrative expenses increased
$272,000, or 4%, to $7,326,000 for the nine months ended September 30, 2000,
from $7,054,000 for the nine months ended September 30, 1999. As a percentage of
rental revenue, general and administrative expenses remained stable at 4% for
the nine months ended September 30, 2000 and 1999.


Depreciation and
Amortization. Depreciation and amortization did not change significantly
with an increase of $1,017,000, or 2%, to $44,595,000 for the nine months ended
September 30, 2000, from $43,578,000 for the nine months ended September 30,
1999.


Interest Expense.
Interest expense decreased $1,329,000, or 3%, to $47,349,000 for the nine months
ended September 30, 2000, from $48,678,000 for the nine months ended September
30, 1999. This decrease is primarily due to retirement of the Senior Notes and
paydowns on the Credit Facility as discussed below.


Net Gain (Loss) on Early
Extinguishment of Debt. Net loss on early extinguishment of debt of $550,000
during the nine months ended September 30, 2000, consists of $931,000 of gains
on retirement of Series A Senior Notes at a discount, offset by the related
write-off of unamortized loan fees in the amount of $1,481,000. The net gain on
early extinguishment of debt of $437,000 during the nine months ended September
30, 1999, consists of gains on the retirement of Series A Senior Notes offset by
prepayment penalties and the write-off of unamortized loan fees upon early
payoff of debt.


Comparison of the
three months ended September 30, 2000 to the three months ended September 30,
1999.


Rental Revenue.
Rental revenue decreased $4,043,000, or 6%, to $58,891,000 for the three months
ended September 30, 2000 from $62,934,000 for the three months ended September
30, 1999, due to decreases in revenues from the office, industrial, retail and
hotel Properties of $2,050,000, $1,570,000, $1,001,000 and $134,000,
respectively. These decreases are primarily due to the sales of 10 office
Properties, 18 industrial Properties and four retail Properties since September
30, 1999. These decreases are offset by an increase in revenue from the
multifamily Properties of $712,000 which is primarily due to the acquisition of
two multifamily properties since September 30, 1999.


Fees and Reimbursements
from Affiliates. Fees and reimbursements from affiliates consist primarily
of property and asset management fees paid to the Company under agreements with
the Managed Partnerships. This revenue decreased $139,000, or 22%, to $479,000
for the three months ended September 30, 2000, from $618,000 for the three
months ended September 30, 1999, primarily due to the sale of properties by the
Managed Partnerships which resulted in lower property and asset management fees.


Interest and Other
Income. Interest and other income increased $547,000, or 33%, to $2,224,000
for the three months ended September 30, 2000, from $1,677,000 for the three
months ended September 30, 1999. The increase is primarily due to interest
income earned upon the payoff of a loan made to a development project sold by a
development alliance in the third quarter of 2000, offset by decreases in
interest earned on notes receivable as a result of payoffs received.


Equity in Earnings of
Associated Company. Equity in earnings of Associated Company decreased
$1,372,000, or 77%, to $405,000 for the three months ended September 30, 2000,
from $1,777,000 for the three months ended September 30, 1999. The decrease is
primarily due to an increase in earnings from GC in the third quarter of 1999
arising from a benefit for income taxes generated by the write-off of certain
tax basis assets which had no book basis for financial reporting purposes.


Equity in Earnings
(Loss) of Unconsolidated Joint Ventures. Equity in earnings (loss) of
unconsolidated joint ventures decreased $194,000 to an equity in loss of $92,000
for the three months ended September 30, 2000, from an equity in earnings of
$102,000 during the three months ended September 30, 1999. This decrease is due
to a decrease in the capitalization of interest expense and property taxes,
recognition of depreciation expense, and payment of operating expenses by the
joint ventures upon the completion of development of several projects in 2000.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Net Gain (Loss) on Sales
of Real Estate Assets. The net gain on sales of real estate assets of
$4,694,000 during the three months ended September 30, 2000, resulted from the
sales of three office Properties and eight industrial Properties. The net loss
on sales of real estate assets of $371,000 during the three months ended
September 30, 1999, resulted from the sale of three office Properties, one
industrial Property and one hotel Property.


Property Operating
Expenses. Property operating expenses decreased $1,631,000, or 7%, to
$20,514,000 for the three months ended September 30, 2000, from $22,145,000 for
the three months ended September 30, 1999. This decrease corresponds to the 6%
decrease in rental revenues resulting from the sale of Properties.


General and
Administrative Expenses. General and administrative expenses decreased
$1,328,000, or 58%, to $953,000 for the three months ended September 30, 2000,
from $2,281,000 for the three months ended September 30, 1999. This decrease is
primarily due to incentive compensation costs which were recognized in the third
quarter of 1999, but not in the third quarter of 2000 due to differences in
relevant operating results between the quarters.


Depreciation and
Amortization. Depreciation and amortization did not change significantly
with an increase of $116,000, or 1%, to $14,382,000 for the three months ended
September 30, 2000, from $14,266,000 for the three months ended September 30,
1999.


Interest Expense.
Interest expense decreased $741,000, or 5%, to $14,979,000 for the three months
ended September 30, 2000, from $15,720,000 for the three months ended September
30, 1999. This decrease is primarily due to retirement of the Senior Notes and
paydowns on the Credit Facility as discussed below.


Net Gain on Early
Extinguishment of Debt. The net gain on early extinguishment of debt of
$740,000 during the three months ended September 30, 1999, represents a gain on
the retirement of Series A Senior Notes at a discount.



Liquidity and
Capital Resources


Cash Flows


For the nine months ended
September 30, 2000, cash provided by operating activities decreased by
$6,026,000 to $64,092,000 as compared to $70,118,000 for the same period in
1999. The decrease is primarily due to a decrease in net income resulting from
the 1999 and 2000 sales of Properties. Cash provided by investing activities
increased by $56,044,000 to $117,335,000 for the nine months ended September 30,
2000, as compared to $61,291,000 for the same period in 1999. The increase is
primarily due to an increase in net proceeds from sales of real estate assets, a
decrease in net cash used for investments in development due to the payoff of
loans made to three development projects sold by a development alliance in the
second and third quarters of 2000 and an increase in principal receipts on
mortgage loans and notes receivable due to payoffs received in 2000. Cash used
for financing activities increased by $33,594,000 to $166,045,000 for the nine
months ended September 30, 2000, as compared to $132,451,000 for the same period
in 1999. This change was primarily due to an increase in common and preferred
stock repurchases during the nine months ended September 30, 2000 versus the
same period in 1999.


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


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


Investments in
Development


The Company is currently
involved in a number of development alliances for the development of
approximately 1,068,000 square feet of commercial properties and 1,146
multifamily units in California, Colorado, Texas, Indiana, New Jersey and
Massachusetts. As of September 30, 2000, the Company has advanced approximately
$43 million to these alliances. Under these development alliances, the Company
has certain rights to purchase the properties upon completion of development
over the next five years. In addition, the Company has loaned approximately
$36.9 million (including accrued interest) under another development alliance to
continue the build-out of a 1,200 acre master-planned development in Denver,
Colorado.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Investments in
Joint Ventures


In the first quarter of
2000, the Company formed a limited liability company (the LLC) with
an independent third party and contributed its interest in the office property
known as 2000 Corporate Ridge, located in McLean, Virginia. This transaction
resulted in a loss on sale of approximately $211,000 and is included in net gain
on sales of real estate assets in the Companys consolidated statement of
income for the nine months ended September 30, 2000. Consideration received for
this contribution included $14.7 million in cash and the assumption of a $20.6
million mortgage by the LLC. The Company now has a 10% interest in the LLC and
the LLC agreement provides for, among other things, a 3% annual management fee
to the Company for property management services, certain asset management fees
and certain additional distributions in excess of its 10% interest, if
available, upon the ultimate sale of the property by the LLC. The value of this
10% interest is approximately $3.8 million and is included in Investments in
Joint Ventures on the Companys consolidated balance sheet as of September
30, 2000. The Company accounts for its interest in the LLC using the equity
method.


In June 1999, the Company
entered into a joint venture in which it sold a 90% interest in Rockwall I &
II, a 340,252 square foot office complex located in Rockville, Maryland. The
Company maintains a 10% interest in the asset along with a contract for property
management and asset management services under which the Company is entitled to
receive property management fees of 3% of cash receipts and an annual asset
management fee of $350,000. The proceeds from the sale were used to paydown the
Credit Facility (discussed below), to reduce other secured debt and to
repurchase stock. The value of this 10% interest is approximately $1.4 million
and is included in Investments in Joint Ventures on the Companys
consolidated balance sheet as of September 30, 2000. This investment is
accounted for using the equity method.


In April 1999, the Company
also purchased a 10% interest in a joint venture holding the fee simple title to
the land under Rincon Center I & II in San Francisco, California. The land
was purchased from the United States Post Office for a purchase price of $80.5
million. The land had a triple net ground lease with a remaining term of 51
years with minimum 30% rental increases every six years. In October 1999, the
joint venture purchased the leasehold improvements comprising Rincon Center I
& II. Occupying a full city block near the waterfront in the Financial
District, Rincon Center I & II contains approximately 700,000 square feet
which includes commercial office and retail space, 320 multifamily units and 381
subterranean parking spaces. The Company took over management and leasing of the
project on November 1, 1999 and is now entitled to receive property management
fees of 1.75% of cash receipts. The book value of this 10% interest is
approximately $3.8 million and is included in Investments in Joint Ventures on
the Companys consolidated balance sheet as of September 30, 2000. This
investment is accounted for using the equity method.



Mortgage Loans
Receivable


Mortgage loans receivable
decreased from $37,582,000 at December 31, 1999, to $36,902,000 at September 30,
2000. This decrease was due to the payoff of a $1,141,000 loan made by the
Company to the buyer of one of the hotel Properties offset by accrued interest
on a loan made by the Company under a development alliance.





Secured and
Unsecured Financing


Mortgage loans payable
decreased from $701,715,000 at December 31, 1999, to $679,106,000 at September
30, 2000. This decrease resulted from the assumption by the buyers of two of the
Companys Properties of mortgage loans in the amount of $25,346,000, the
payoff of approximately $75,257,000 of mortgage loans in connection with 2000
sales of Properties and a refinance, and scheduled principal payments of
approximately $6,684,000. This decrease is partially offset by $84,678,000 of
new mortgage loans in connection with acquisitions, a refinance, the
construction of a property in Bedminster, New Jersey and the expansion of a
property in Indianapolis, Indiana (see below for further discussion).


In the third quarter of
2000, related to the acquisition of the second phase of a multifamily property
located in Carrollton, Texas, the Company refinanced the loan on the first phase
of this property to include both phases which increased the loan balance from
$14.1 million to $26.6 million. The new loan has a maturity date of September
30, 2001 and bears interest at the floating rate of LIBOR plus 2.25%. The
interest rate on this loan at September 30, 2000 was 8.87%. In addition, during
the third quarter, the Company paid off a $2 million loan which was secured by
an office property located in Phoenix, Arizona.


In the second quarter of
2000, the Company obtained an $18 million construction loan to refinance a
264,000 square foot industrial property located in Indianapolis, Indiana, and to
provide funds to build an approximate 83,000 square foot expansion to this
property. Approximately $11.6 million was outstanding at September 30, 2000. The
loan has a maturity date of June 15, 2002 and bears interest at the floating
rate of LIBOR plus 2.50%. The interest rate on this loan at September 30, 2000
was 9.12%.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|In the first quarter of
2000, the Company obtained a $10.5 million construction loan to build an 80,000
square foot office property in Bedminster, New Jersey. Approximately $6.1
million was outstanding at September 30, 2000. The loan has a maturity date of
November 12, 2001 and bears interest at the floating rate of LIBOR plus 2.25%.
The interest rate on this loan at September 30, 2000 was 8.87%.


In the first quarter of
2000, the Company formed a limited liability company (the LLC) with
an independent third party and contributed its interest in the office property
known as 2000 Corporate Ridge, located in McLean, Virginia. Consideration
received for this contribution included $14.7 million in cash and the assumption
of a $20.6 million mortgage by the LLC.


In the first quarter of
2000, related to the acquisition of an industrial property from one of the
Companys development alliances, the Company assumed a $4.3 million secured
loan. This loan has a maturity date of April 1, 2000 (with one 6-month extension
option) and bears interest at the floating rate of LIBOR plus 1.55%. The
interest rate on this loan at September 30, 2000 was 8.17%.


During the first two
quarters of 2000, the Company retired the remaining $91.2 million of unsecured
Series A Senior Notes at a discount. As a result of these transactions and the
related write-off of capitalized original issuance costs, a net loss on early
extinguishment of debt of $550,000 was recognized by the Company in the
consolidated statement of income for the nine months ended September 30, 2000.


In August 1999, the Company
closed a $97.6 million secured financing with a commercial bank (Secured
Financing). In connection with the Secured Financing, the Company entered
into an interest rate cap agreement to hedge increases in interest rates above a
specified level of 11.21%. The agreement is for a term concurrent with the
Secured Financing instrument, is indexed to the 90-day LIBOR rate, and is for a
notional amount equal to the maximum amount available on the Secured Financing
loan. As of September 30, 2000, the 90-day LIBOR rate was 6.81%. The Company
paid a premium of approximately $434,000 at the inception of the cap agreement,
which is being amortized as additional interest expense over the life of the
agreement.


In August 2000, the Company
expanded the Secured Financing by $50.2 million and used the proceeds to payoff
a $52 million note which matured on September 1, 2000. This note was secured by
three multifamily properties which are now security for the expanded Secured
Financing. In connection with this expansion, the Company entered into a second
interest rate cap agreement to hedge increases in interest rates above a
specified level of 10.33%. The agreement is for a term concurrent with the
Secured Financing instrument, is indexed to the 90-day LIBOR rate, and is for a
notional amount equal to the maximum incremental additional amount available on
the Secured Financing loan. As of September 30, 2000, the 90-day LIBOR rate was
6.81%. The Company paid a premium of approximately $83,000 at the inception of
this cap agreement, which is being amortized as additional interest expense over
the life of the agreement.


The Company has an
unsecured line of credit provided by a group of commercial banks (the
Credit Facility). Outstanding borrowings under the Credit Facility
decreased from $70,628,000 at December 31, 1999, to $17,481,000 at September 30,
2000. The decrease was due to draws of $123,522,000 for acquisitions, stock
repurchases, and retirement of the Companys Series A Senior Notes, offset
by pay downs of $176,669,000 generated from proceeds from the sales of
Properties and cash from operations. In February 2000, the maturity date on the
Credit Facility was extended from December 2000 to June 2002.


At September 30, 2000, the
Companys total indebtedness included fixed-rate debt of $450,389,000 and
floating-rate indebtedness of $371,198,000. Approximately 68% of the
Companys total assets, comprising 96 properties, is encumbered by debt at
September 30, 2000.


It is the Companys
policy to manage its exposure to fluctuations in market interest rates through
the use of fixed rate debt instruments to the extent possible. At September 30,
2000, approximately 45% of the Companys outstanding debt, including
amounts borrowed under the Credit Facility, was subject to variable rates. The
Company may, from time to time, enter into interest rate protection agreements
intended to hedge the cost of new borrowings that are reasonably assured of
completion. It is not the Companys policy to engage in hedging activities
for previously outstanding debt instruments or for speculative purposes. At
September 30, 2000, the Company was not a party to any open interest rate
protection agreements other than the interest rate cap contracts associated with
the Secured Financing discussed above.






Equity and Debt
Offerings


In January 1999, the
Operating Partnership and the Company filed a shelf registration statement with
the SEC (the January 1999 Shelf Registration Statement) to register
$300 million of debt securities of the Operating Partnership and to carry
forward the remaining $801.2 million in equity securities of the Company from a
November 1997 shelf registration statement (declared effective by the SEC on
December 18, 1997). The January 1999 Shelf Registration Statement was declared
effective by the SEC on January 25, 1999. Therefore, the Operating Partnership
and the Company have the capacity pursuant to the January 1999 Shelf
Registration Statement to issue up to $300 million in debt securities and $801.2
million in equity securities, respectively. The Company currently has no plans
to issue equity or debt under these shelf registrations.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Inflation


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



Funds from
Operations and Cash Available for Distribution


In October 1999, the Board
of Governors of NAREIT issued White Paper on FFO-October 1999 to
clarify its definition of Funds from Operations (FFO). The
clarification is effective January 1, 2000 and requires restatement for all
periods presented in financial statements or tables. FFO, as clarified by
NAREIT, represents net income excluding gains (or losses) from sales of
property, plus depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. Adjustments for unconsolidated
partnerships and joint ventures will be calculated to reflect FFO on the same
basis. The Company is reporting using the clarified definition for all
periods presented. The Company believes that FFO is a widely used measure of the
financial performance of equity REITs which provides a relevant basis for
comparison among other REITs. Together with net income and cash flows, FFO
provides investors with an additional basis to evaluate the ability of a REIT to
incur and service debt and to fund acquisitions, developments and other capital
expenditures. FFO does not represent net income or cash flows from operations as
defined by GAAP, and should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indicator of the Companys
operating performance or as an alternative to cash flows from operating,
investing and financing activities (determined in accordance with GAAP) as a
measure of liquidity. FFO does not necessarily indicate that cash flows will be
sufficient to fund all of the Companys cash needs including principal
amortization, capital improvements and distributions to stockholders. Further,
FFO as disclosed by other REITs may not be comparable to the Companys
calculation of FFO.


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


The following table sets
forth the Companys calculation of FFO and CAD for the three months ended
March 31, June 30 and September 30, 2000, and the nine months ended September
30, 2000 (in thousands, except weighted average shares and per share amounts):
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|
|

|                                                      | March 31,2000 | June 30,2000      | September 30,2000 | YTD2000          
|----------------------------------------------------- | ------------- | ----------------- | ----------------- | -----------------
|Income  from  operations  before  minority  interest, |               |                   |                   |                  
|extraordinary items and preferred dividends           |               | $          8,823  |                   | $          8,766 
|Preferred dividends                                   |               | (5,488            | )                 | (5,443           
|Net (gain) loss on sales of real estate assets        |               | 695               |                   | 2,347            
|Depreciation and amortization (1)                     |               | 14,915            |                   | 14,871           
|Adjustment to reflect FFO of Unconsolidated           |              
|Joint Ventures (2)                                    |               | 190               |                   | 264              
|Adjustment to reflect FFO of Associated Company(3)    |               | 164               |                   | 22               
|                                                     
|FFO(4)                                                |               | $        19,299   |                   | $        20,827  
|                                                     
|Amortization of deferred financing fees               |               | 639               |                   | 610              
|Capital reserve                                       |               |                  |                   |                 
|Capital expenditures                                  |               | (4,989            | )                 | (6,319           
|                                                     
|CAD                                                   |               | $        14,949   |                   | $        15,118  
|                                                     
|Distributions per share (5)                           |               | $            0.42 |                   | $            0.42
|                                                     
|Diluted weighted average shares outstanding           |               | 34,096,464        |                   | 33,111,493       
|                                                     

|(1) |  | Excludes
depreciation of corporate office fixed assets.
|--- |  | -------------------------------------------------------

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

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

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

|(5) |  | The
distributions for the three months ended September 30, 2000, were paid on October 16,
2000.
|--- |  | -----------------------------------------------------------------------------------------------

|Forward
Looking Statements; Factors That May Affect Operating Results


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


Factors which may cause the
Companys results to differ include the inability to complete anticipated
future acquisitions, defaults or non-renewal of leases, increased interest rates
and operational costs, failure to obtain necessary outside financing,
difficulties in identifying properties to acquire and in effecting acquisitions,
failure to qualify as a real estate investment trust under the Internal Revenue
Code of 1986, environmental uncertainties, risks related to natural disasters,
financial market fluctuations, changes in real estate and zoning laws, increases
in real property tax rates and other factors discussed under the caption
Forward Looking Statements; Factors That May Affect Operating
Results in the Managements Discussion and Analysis of
Financial Condition and Results of Operations section of the
Companys Annual Report on Form 10-K for the year ended December 31, 1999,
and other risk factors set forth in the Companys other Securities and
Exchange Commission filings. In addition, past performance of the Companys
Common Stock is not necessarily indicative of results that will be obtained in
the future from an investment in the Companys Common Stock. Furthermore,
the Company makes distributions to stockholders if, as and when declared by its
Board of Directors, and expects to continue its policy of paying quarterly
distributions, however, there can be no assurance that distributions will
continue or be paid at any specific level.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Risk Factors


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

|PART II. OTHER
INFORMATION



Item 1. Legal
Proceedings


For information regarding
litigation fully resolved during the reporting period ended March 31, 2000,
please refer to the Companys quarterly report on Form 10-Q for such
period.


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



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


There were no matters
submitted to a vote of security holders during the quarter ended September 30,
2000.



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  July
25, 2000, the Company filed a report on Form 8-K with respect to Supplemental Information
for the quarter ended June 30, 2000.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------

| |  |  | On  October
25, 2000, the Company filed a report on Form 8-K with respect to Supplemental Information
for the quarter ended September 30, 2000.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------

|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: November 14, 2000 |  | /s/ Andrew Batinovich 
Andrew Batinovich
Director, President  
and Chief Operating Officer
(Principal Operating Officer)
|----------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------

|Date: November 14, 2000 |  | /s/ Stephen Saul
  Stephen Saul                 
  Executive Vice President     
  and Chief Financial Officer  
  (Principal Financial Officer)
|----------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|Date: November 14, 2000 |  | /s/ Brian Peay 
Brian Peay                          
Vice President,                     
Finance and Accounting              
(Principal Accounting Officer)
|----------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|EXHIBIT INDEX
|-------------

|Exhibit No. | Exhibit Title
|----------- | -------------
|11.01       |              
|            |              
|12.01       |              
|            |              
|27.01       |              

---