SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q


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

                For the quarterly period ended September 30, 1997

                                       OR

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

                        Commission File Number: 001-14162


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

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

                            400 South El Camino Real,
                        Suite 1100 San Mateo, California
                            (415) 343-9300 94402-1708
               (Address of principal executive offices (Zip Code)
                              and telephone number)

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

                                                     Name of Exchange
    Title of each class:                           on which registered:
Common Stock, $.001 par value                    New York Stock Exchange

        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  10,  1997,  31,474,692  shares of Common Stock ($.001 par value)
were outstanding.


                                  Page 1 of 44
<PAGE>

                                      INDEX
                      GLENBOROUGH REALTY TRUST INCORPORATED

                                                                        Page No.
PART I               FINANCIAL INFORMATION

Item 1.  Consolidated  Financial Statements of Glenborough Realty Trust
         Incorporated (Unaudited except for the Consolidated Balance
         Sheet at December 31, 1996):

            Consolidated Balance Sheets at September 30, 1997 and
            December 31, 1996                                                  4

            Consolidated Statements of Operations for the nine months
            ended September 30, 1997 and 1996                                  5

            Consolidated Statements of Operations for the three months
            ended September 30, 1997 and 1996                                  6

            Consolidated Statements of Stockholders' Equity for the
            nine months ended September 30, 1997 and 1996                      7

            Consolidated Statements of Cash Flows for the nine months
            ended September 30, 1997 and 1996                                8-9

            Notes to Consolidated Financial Statements                     10-21

         Consolidated Financial Statements of Glenborough Hotel Group
         (Unaudited except for the Consolidated Balance Sheet at
         December 31, 1996):

            Consolidated Balance Sheets at September 30, 1997 and
            December 31, 1996                                                 22

            Consolidated Statements of Income for the nine months ended
            September 30, 1997 and 1996                                       23

            Consolidated Statements of Income for the three months ended
            September 30, 1997 and 1996                                       24

            Consolidated Statements of Stockholders' Equity for the
            nine months ended September 30, 1997 and 1996                     25

            Consolidated Statements of Cash Flows for the nine months ended
            September 30, 1997 and 1996                                       26

            Notes to Consolidated Financial Statements                     27-29


                                  Page 2 of 44
<PAGE>

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

            Glenborough Realty Trust Incorporated                          30-37

            Glenborough Hotel Group                                        38-39

PART II  OTHER INFORMATION

Item 1.  Legal Proceedings                                                 40-41

Item 2.  Changes in Securities                                                41

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

SIGNATURES                                                                    43

EXHIBIT INDEX                                                                 44


                                  Page 3 of 44
<PAGE>

Part I.           FINANCIAL INFORMATION

Item 1.           Financial Statements
<TABLE>
<CAPTION>

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

                                                                             September 30,          December 31,
                                                                                 1997                   1996
                                                                             (Unaudited)             (Audited)
                                                                            --------------         -------------
<S>                                                                         <C>                    <C>
ASSETS
     Rental property, net of accumulated depreciation of
       $35,185 and $28,784 in 1997 and 1996, respectively                   $    588,644           $    161,945
     Investments in Associated Companies and Glenborough
       Partners                                                                    7,567                  7,350
     Mortgage loans receivable, net of provision for loss of
       $863 in 1996                                                                3,622                  9,905
     Cash and cash equivalents                                                     2,770                  1,355
     Other assets                                                                 13,373                  4,965
                                                                            -------------          -------------

         TOTAL ASSETS                                                       $    615,976           $    185,520
                                                                            =============          =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
     Mortgage loans                                                         $    228,580           $     54,584
     Secured bank line                                                            28,865                 21,307
     Other liabilities                                                            11,216                  3,198
                                                                            -------------          -------------
       Total liabilities                                                         268,661                 79,089
                                                                            -------------          -------------

Minority interest                                                                 36,012                  8,831

Stockholders' Equity:
     Common stock, 20,174,692 and 9,661,553 shares issued
       and outstanding at September 30, 1997, and
       December 31, 1996, respectively                                                20                     10
     Additional paid-in capital                                                  321,771                105,952
     Deferred compensation                                                          (257)                  (399)
     Retained earnings (deficit)                                                 (10,231)                (7,963)
                                                                            -------------          -------------
       Total stockholders' equity                                                311,303                 97,600
                                                                            -------------          -------------

           TOTAL LIABILITIES AND STOCKHOLDERS'
              EQUITY                                                        $    615,976           $    185,520
                                                                            =============          =============


                           See accompanying notes to consolidated financial statements
</TABLE>

                                  Page 4 of 44
<PAGE>

<TABLE>
<CAPTION>

                                      GLENBOROUGH REALTY TRUST INCORPORATED
                                      CONSOLIDATED STATEMENTS OF OPERATIONS
                              For the nine months ended September 30, 1997 and 1996
                                     (in thousands, except per share amounts)
                                                   (Unaudited)

                                                                               1997                        1996
                                                                           --------------              -------------
<S>                                                                        <C>                         <C>
REVENUE
     Rental revenue                                                        $      35,899               $     11,281
     Fees and reimbursements from affiliate                                          572                        199
     Interest and other income                                                     1,167                        623
     Equity in earnings of Associated Companies                                    1,942                      1,363
     Gain on collection of mortgage loan receivable                                  652                        ---
     Net gain on sales of rental properties                                          555                        321
                                                                           --------------              -------------
       Total revenue                                                              40,787                     13,787
                                                                           --------------              -------------

EXPENSES
     Property operating expenses                                                  11,282                      3,244
     General and administrative                                                    2,031                        977
     Depreciation and amortization                                                 8,867                      2,694
     Interest expense                                                              6,416                      2,546
     Consolidation costs                                                             ---                      6,082
     Litigation costs                                                                ---                      1,155
                                                                           ---------------             -------------
       Total expenses                                                             28,596                     16,698
                                                                           --------------              -------------

Income (loss) from operations before minority interest and
     extraordinary item                                                           12,191                     (2,911)

Minority interest                                                                   (689)                      (312)
                                                                           ---------------             -------------

Net income (loss) before extraordinary item                                       11,502                     (3,223)

Loss on debt refinancing                                                             ---                       (186)
                                                                           --------------              -------------

Net income (loss)                                                          $      11,502               $     (3,409)
                                                                           ==============              =============

Primary earnings (loss) per share                                          $       0.79                $      (0.60)
                                                                           ==============              =============

Primary weighted average shares outstanding                                   14,512,987                  5,763,742
                                                                           ==============              =============


                           See accompanying notes to consolidated financial statements
</TABLE>

                                  Page 5 of 44
<PAGE>

<TABLE>
<CAPTION>

                                      GLENBOROUGH REALTY TRUST INCORPORATED
                                      CONSOLIDATED STATEMENTS OF OPERATIONS
                              For the three months ended September 30, 1997 and 1996
                                     (in thousands, except per share amounts)
                                                   (Unaudited)

                                                                               1997                        1996
                                                                           --------------              -------------
<S>                                                                        <C>                         <C>
REVENUE
     Rental revenue                                                        $      16,208               $      4,242
     Fees and reimbursements from affiliate                                          205                         66
     Interest and other income                                                       554                        253
     Equity in earnings of Associated Companies                                    1,339                        394
     Reduction in gain on prior quarter sales of rental
        properties                                                                   (15)                       ---
                                                                           --------------              -------------
       Total revenue                                                              18,291                      4,955
                                                                           --------------              -------------

EXPENSES
     Property operating expenses                                                   5,237                      1,335
     General and administrative                                                      657                        302
     Depreciation and amortization                                                 4,823                        935
     Interest expense                                                              2,616                      1,125
                                                                           --------------              -------------
       Total expenses                                                             13,333                      3,697
                                                                           --------------              -------------

Income from operations before minority interest and                                                     
     extraordinary item                                                            4,958                      1,258
    
Minority interest                                                                    (60)                       (69)
                                                                           ---------------             -------------

Net income before extraordinary item                                               4,898                      1,189

Loss on debt refinancing                                                             ---                       (186)
                                                                           --------------              -------------

Net income                                                                 $       4,898               $      1,003
                                                                           ==============              =============

Primary earnings per share                                                 $        0.25               $       0.17
                                                                           ==============              =============

Primary weighted average shares outstanding                                   19,737,153                  5,778,545
                                                                           ==============              =============
                           See accompanying notes to consolidated financial statements
</TABLE>


                                  Page 6 of 44
<PAGE>

<TABLE>
<CAPTION>
                                               GLENBOROUGH REALTY TRUST INCORPORATED
                                          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                       For the nine months ended September 30, 1997 and 1996
                                                           (in thousands)
                                                            (Unaudited)




                                                    Common Stock          Additional       Deferred      Retained
                                                               Par         Paid-in          Compen-      Earnings
                                                 Shares        Value       Capital          sation       (Deficit)       Total
                                              ------------- ------------- -------------- -------------- ------------- ------------

<S>                                               <C>      <C>          <C>              <C>           <C>          <C>        
Balance at December 31, 1996                       9,662   $       10   $    105,952     $     (399)   $   (7,963)  $    97,600

Issuance of common stock, net of offering
    costs of $13,601                              10,480           10        215,186            ---           ---       215,196

Issuance of common stock related to
    acquisition of E&L Properties                     33          ---            633            ---           ---           633

Amortization of deferred compensation                ---          ---            ---            142           ---           142

Distributions                                        ---          ---            ---            ---       (13,770)      (13,770)

Net income                                           ---          ---            ---            ---        11,502        11,502
                                              -----------------------------------------------------------------------------------

Balance at September 30, 1997                     20,175   $       20   $    321,771     $     (257)   $  (10,231)  $   311,303
                                              ===================================================================================

</TABLE>
<TABLE>
<CAPTION>


                                                     Common Stock        Additional      Deferred       Retained
                                                               Par        Paid-in         Compen-       Earnings
                                                 Shares       Value       Capital         sation        (Deficit)       Total
                                              -----------------------------------------------------------------------------------

<S>                                                <C>       <C>        <C>            <C>            <C>          <C>       
Balance at December 31, 1995                       5,754     $     6    $   55,622     $      ---     $      ---   $   55,628

Issuance of stock to officers and directors           35         ---           525           (446)           ---           79

Distributions                                        ---         ---           ---            ---         (3,463)      (3,463)

Net loss                                             ---         ---           ---            ---         (3,409)      (3,409)
                                              -----------------------------------------------------------------------------------

Balance at September 30, 1996                      5,789     $     6    $   56,147     $     (446)   $    (6,872)  $   48,835
                                              ===================================================================================

                           See accompanying notes to consolidated financial statements
</TABLE>

                                  Page 7 of 44
<PAGE>

<TABLE>
<CAPTION>

                                       GLENBOROUGH REALTY TRUST INCORPORATED
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                               For the nine months ended September 30, 1997 and 1996
                                                   (in thousands)
                                                    (Unaudited)


                                                                            1997                        1996
                                                                       ---------------             ---------------
<S>                                                                    <C>                         <C>
Cash flows from operating activities:
     Net income (loss)                                                 $       11,502              $       (3,409)
     Adjustments to reconcile net income (loss)
       to net cash provided by operating
       activities:
         Depreciation and amortization                                          8,867                       2,694
         Amortization of loan fees, included in
           interest expense                                                       174                         141
         Minority interest in income from operations                              689                         312
         Equity in earnings of Associated
           Companies                                                           (1,942)                     (1,363)
         Gain on collection of mortgage loan receivable                          (652)                        ---
         Net gain on sales of rental properties                                  (555)                       (321)
         Loss on debt refinancing                                                 ---                         186
         Amortization of deferred compensation                                    142                         ---
         Consolidation costs                                                      ---                       6,082
         Litigation costs                                                         ---                       1,155
         Changes in certain assets and liabilities, net                          (913)                     (5,475)
                                                                       ---------------             ---------------

           Net cash provided by operating activities                           17,312                           2
                                                                       ---------------             ---------------

Cash flows from investing activities:
     Net proceeds from sales of rental properties                              11,873                       2,882
     Additions to rental property                                            (393,534)                    (26,631)
     Proceeds from collection of mortgage loan receivable                         652                         ---
     Additions to mortgage loans receivable                                    (2,420)                        ---
     Principal receipts on mortgage loans receivable                            8,703                         252
     Investments in Associated Companies                                          ---                        (389)
     Distributions from Associated Companies and
         Glenborough Partners                                                   1,725                       1,326
                                                                       ---------------             ---------------

           Net cash used for investing activities                            (373,001)                    (22,560)
                                                                       ---------------             ---------------


                                                             continued

                           See accompanying notes to consolidated financial statements
</TABLE>

                                  Page 8 of 44
<PAGE>

<TABLE>
<CAPTION>

                                       GLENBOROUGH REALTY TRUST INCORPORATED
                                  CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
                               For the nine months ended September 30, 1997 and 1996
                                                   (in thousands)
                                                    (Unaudited)


                                                                             1997                       1996
                                                                       ---------------            --------------
<S>                                                                    <C>                        <C>
Cash flows from financing activities:
     Proceeds from borrowings                                          $     369,540              $      35,122
     Repayment of borrowings                                                (212,910)                   (10,263)
     Payment of investor notes                                                   ---                     (2,483)
     Distributions to minority interest holders                                 (952)                      (332)
     Distributions                                                           (13,770)                    (3,463)
     Proceeds from issuance of stock, net of offering costs                  215,196                        ---
                                                                       ---------------            --------------

         Net cash provided by financing activities                           357,104                     18,581
                                                                       ---------------            --------------

Net increase (decrease) in cash and cash equivalents                           1,415                     (3,977)

Cash and cash equivalents at beginning of period                               1,355                      4,587
                                                                       ---------------            --------------

Cash and cash equivalents at end of period                             $       2,770              $         610
                                                                       ===============            ==============

Supplemental disclosure of cash flow information:

     Cash paid for interest                                            $       5,695              $       2,070
                                                                       ===============            ==============

Supplemental disclosure of Non-Cash Investing and Financing
     Activities:

     Acquisition of real estate through assumption of first
         trust deed notes payable                                      $      24,924              $         ---
                                                                       ===============            ==============

     Acquisition of real estate through issuance of shares
         of common stock and Operating Partnership units
                                                                       $      28,078              $         ---
                                                                       ===============            ==============


                           See accompanying notes to consolidated financial statements
</TABLE>


                                  Page 9 of 44
<PAGE>

                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1997


Note 1.      ORGANIZATION

Glenborough Realty Trust Incorporated (the "Company") was organized in the State
of  Maryland  on August 26,  1994.  The Company has elected to qualify as a real
estate  investment  trust ("REIT")  under the Internal  Revenue Code of 1986, as
amended (the "Code").  The Company completed a consolidation with certain public
California limited partnerships and other entities (the "Consolidation") engaged
in real estate activities (the "GRT Predecessor  Entities")  through an exchange
of assets of the GRT Predecessor  Entities for 5,753,709  shares of Common Stock
of the Company. The Consolidation occurred on December 31, 1995, and the Company
commenced operations on January 1, 1996.

Subsequent to the  Consolidation on December 31, 1995, and through September 30,
1997, the following  Common Stock  transactions  occurred:  (i) 35,000 shares of
Common Stock were issued to officers and directors as stock  compensation;  (ii)
14,146,000 shares were issued in three separate public equity  offerings;  (iii)
240,042 shares were issued in connection with various acquisitions;  and (iv) 59
shares  were  retired,  resulting  in total  shares of Common  Stock  issued and
outstanding at September 30, 1997, of 20,174,692.  In addition,  fully converted
shares issued and  outstanding  (including  1,932,047  partnership  units in the
Operating Partnership) totaled 22,106,739 at September 30, 1997.

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

The  Company,  through  several  subsidiaries,   is  engaged  primarily  in  the
ownership,   operation,   management,   leasing,   acquisition,   expansion  and
development  of  various  income-producing   properties.   The  Company's  major
consolidated  subsidiary,  in which it holds a 1% general partner interest and a
90.17%  limited   partner   interest  at  September  30,  1997,  is  Glenborough
Properties,  L.P. (the "Operating  Partnership").  As of September 30, 1997, the
Operating Partnership, directly and through various subsidiaries in which it and
the Company own 100% of the  ownership  interests,  controls a total of 103 real
estate projects and 2 mortgage loans receivable.

As of  September  30,  1997,  the  Company  also  holds  100% of the  non-voting
preferred  stock of the  following two  Associated  Companies  (the  "Associated
Companies"):

     Glenborough  Corporation (formerly known as Glenborough Realty Corporation)
     ("GC") is the general partner of eight  partnerships and provides asset and
     property  management services for these eight partnerships (the "Controlled
     Partnerships").   It  also  provides  partnership   administration,   asset
     management,  property management and development services under a long term
     contract to a group of unaffiliated  partnerships  which include six public
     partnerships  sponsored by Rancon  Financial  Corporation,  an unaffiliated
     corporation  which has significant  real estate assets in the Inland Empire
     region of Southern California (the "Rancon Partnerships").  The services to
     the Rancon  Partnerships  were  previously  provided by Glenborough  Inland
     Realty Corporation ("GIRC"), a California corporation, which merged with GC
     effective June 30, 1997. GC also provides property  management services for
     a limited portfolio of property owned by other  unaffiliated third parties.
     In the merger between GC and GIRC, the Company received  preferred stock of
     GC in exchange for its preferred  stock of GIRC,  on a  one-for-one  basis.
     Following the merger,  the Company holds the same  preferences with respect
     to dividends and liquidation distributions paid by GC as it previously held
     with respect to GC and GIRC combined.

     Glenborough  Hotel Group ("GHG")  leases the five Country Suites by Carlson
     hotels owned by the Company and operates them for its own account.  It also
     operates  two  Country  Suites By Carlson  hotels  owned by the  Controlled
     Partnerships,  and two resort condominium  hotels. On October 14, 1997, one
     of the hotels owned by a Controlled  Partnership was sold, however, GHG has
     retained management of the hotel.

                                 Page 10 of 44
<PAGE>
                     GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1997

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, 1997, and December 31, 1996, and the
consolidated  results of  operations  and cash flows of the Company for the nine
and  three  months  ended   September  30,  1997  and  1996.  All   intercompany
transactions, receivables and payables have been eliminated in consolidation.

In the opinion of management,  the accompanying  unaudited financial  statements
contain all  adjustments  (consisting  of only  normal  accruals)  necessary  to
present  fairly the financial  position and results of operations of the Company
as of September 30, 1997, and for the period then ended.

Reclassification
Certain 1996  balances have been  reclassified  to conform with 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.

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

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

The useful lives are as follows:

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

Investments in Associated Companies and Glenborough Partners
The Company's  investments in the  Associated  Companies are accounted for using
the equity method and its  investment in  Glenborough  Partners is accounted for
using the cost method, as discussed further in Note 4.

Investment in Management Contract
Investment  in  management  contract  is  recorded  at cost and  amortized  on a
straight-line  basis over the term of the  contract,  and is  included  in other
assets.

                                 Page 11 of 44
<PAGE>
                     GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1997

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

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

Fair Value of Financial Instruments
Statement of Financial  Accounting  Standards No. 107 requires  disclosure about
fair value for all financial instruments. Based on the borrowing rates currently
available to the Company,  the carrying amount of debt  approximates fair value.
Cash and cash equivalents  consist of demand  deposits,  certificates of deposit
and short-term investments with financial  institutions.  The carrying amount of
cash and cash  equivalents  as well as the mortgage notes  receivable  described
above, approximates fair value.

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

Minority Interest
Minority  interest  represents  the  8.83%  limited  partner  interests  in  the
Operating Partnership not held by the Company.

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

For the nine months ended September 30, 1997, 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 leasing and  construction
supervision of real estate owned by an affiliated partnership.

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

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.

                                 Page 12 of 44
<PAGE>
                     GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1997

Earnings Per Share
In March 1997,  the Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  No. 128 (SFAS No. 128),  "Earnings Per Share."
SFAS No. 128 requires the  disclosure  of basic  earnings per share and modifies
existing guidance for computing fully diluted earnings per share.  Under the new
standard,  basic earnings per share is computed as earnings  divided by weighted
average  shares,  excluding  the  dilutive  effects of stock  options  and other
potentially dilutive securities.  The effective date of SFAS No. 128 is December
15, 1997, and early adoption is not permitted. The Company intends to adopt SFAS
No. 128 during the quarter and year ended  December 31, 1997. Had the provisions
of SFAS No. 128 been  applied to the  Company's  results of  operations  for the
three and nine months ended  September 30, 1997 and 1996,  the  Company's  basic
earnings per share would not have been materially different than amounts already
reported.

Reference to 1996 Audited Financial Statements
These  unaudited  financial  statements  should be read in conjunction  with the
Notes  to  Consolidated  Financial  Statements  included  in  the  1996  audited
financial statements.

Note 3.      RENTAL PROPERTY

On February 28,  1997,  the Company  acquired a 163-suite  hotel  Property  (the
"Scottsdale  Hotel"),  which began  operations in January 1996 and is located in
Scottsdale,  Arizona. The total acquisition cost,  including  capitalized costs,
was approximately  $12.1 million,  which consisted of approximately $4.6 million
of mortgage debt assumed, and the balance in cash. The cash portion was financed
through  advances  under the Company's  Line of Credit (as defined  below).  The
Scottsdale Hotel is marketed as a Country Inns and Suites by Carlson.

On April 8, 1997,  the Company  acquired from two limited  partnerships  and one
limited liability company managed by affiliates of Lennar Partners,  a portfolio
of three properties,  aggregating approximately 282,000 square feet (the "Lennar
Properties").  The total  acquisition  cost,  including  capitalized  costs, was
approximately  $23.2  million,  which was paid in cash from the  proceeds of the
March 1997 Offering (see Note 10). The Lennar  Properties  consist of one office
property  located in Virginia and one  office/flex  property and one  industrial
property, each located in Massachusetts.

On April 14, 1997,  the Company  acquired from a private seller a 227,129 square
foot, 15-story office building located in Bloomington, Minnesota (the "Riverview
Property").  The  total  acquisition  cost,  including  capitalized  costs,  was
approximately  $20.5 million,  of which  approximately $16.3 million was paid in
cash from the proceeds of the March 1997  Offering,  and the balance was paid in
cash from borrowings  under the Company's  existing line of credit (the "Line of
Credit").

On April 18,  1997,  the  Company  acquired  from seven  partnerships  and their
general  partner,  a  Southern  California  syndicator,  a  portfolio  of eleven
properties,   aggregating  approximately  523,000  square  feet,  together  with
associated management interests (the "E & L Properties").  The total acquisition
cost,  including  capitalized  costs,  was  approximately  $22.2 million,  which
consisted of (i)  approximately  $12.8 million of mortgage  debt  assumed,  (ii)
approximately  $6.7  million  in the form of  352,197  partnership  units in the
Operating  Partnership  (based on an agreed  per unit value of  $19.075),  (iii)
approximately  $633,000  in the form of 33,198  shares  of  Common  Stock of the
Company (based on an agreed per share value of $19.075), and (iv) the balance in
cash. The cash portion was paid from borrowings under the Line of Credit. Of the
$12.8 million of mortgage debt assumed in the  acquisition,  approximately  $8.9
million was paid off on May 1, 1997, through a draw on the Line of Credit. The E
& L Properties consist of one office property,  nine office/flex  properties and
one industrial property, all located in Southern California.

On April 29, 1997, the Company acquired from two partnerships formed and managed
by affiliates of CIGNA, a portfolio of six properties, aggregating approximately
616,000 square feet and 224  multi-family  units (the "CIGNA  Properties").  The
total acquisition cost,  including  capitalized  costs, was approximately  $45.4
million, which was

                                 Page 13 of 44
<PAGE>
                     GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1997

paid entirely in cash from the proceeds of the $40 million  unsecured  loan from
Wells  Fargo Bank (see Note 6) and a draw  under the Line of  Credit.  The CIGNA
Properties are located in four states and consist of two office properties,  two
office/flex properties, a shopping center and a multi-family property.

On June 18, 1997, the Company acquired from Carlsberg  Realty,  Inc. a portfolio
of three  properties,  aggregating  approximately  245,600 square feet (the "CRI
Properties").  The total  acquisition  cost,  including  capitalized  costs, was
approximately  $14.8  million,  which was paid entirely in cash from  borrowings
under the Line of Credit.  The CRI  Properties  consist  of one office  property
located in California and one office/flex  property and one industrial property,
each  located  in  Arizona.  The CRI  Properties  have been  managed by GC since
December 1996.

In June 1997,  the Company sold from its retail  portfolio six Atlanta Auto Care
Center properties and nine of the ten QuikTrip properties for an aggregate sales
price of  approximately  $12.1  million.  These  sales  generated  a net gain of
$555,000.  The proceeds  from the sale of the QuikTrip  properties  were used to
fund the acquisition of the Centerstone  Property and the proceeds from the sale
of the Auto Care Center  properties  were used to paydown the Line of Credit and
to payoff a mortgage loan. The remaining  QuikTrip  property was sold on October
1,  1997,  for a sales  price of  approximately  $1.1  million.  See Note 11 for
further discussion.

On July 1, 1997,  the Company  acquired an office  property  containing  157,579
square feet (the  "Centerstone  Property")  located in Irvine,  California.  The
total acquisition cost,  including  capitalized  costs, was approximately  $30.4
million,  which  consisted  of (i)  approximately  $5.5  million  in the form of
275,000  partnership units in the Operating  Partnership (based on an agreed per
unit  value of  $20.00),  and (ii) the  balance  in cash from a  combination  of
borrowings  under the Line of  Credit  and the net  proceeds  of the sale of the
QuikTrip retail properties.

On  September  12,  1997,  the Company  acquired a portfolio  of 27  properties,
aggregating approximately 2,888,000 square feet (the "T. Rowe Price Properties")
from five limited  partnerships,  two general partnerships and one private REIT,
each  organized  by  affiliates  of T. Rowe  Price  Associates,  Inc.  The total
acquisition cost, including capitalized costs, was approximately $146.8 million,
which  was paid  entirely  in cash  from  the  proceeds  of a new  $114  million
unsecured loan from Wells Fargo Bank (see Note 6),  approximately $23 million of
the proceeds from a new $60 million secured loan from Wells Fargo Bank (see Note
6), a $6.5 million  draw on the  existing  $50 million  Wells Fargo Bank Line of
Credit and the balance from the proceeds  from the July 1997  Offering (see Note
10).  The T. Rowe Price  Properties  consist of three  office  properties,  nine
office/flex properties, twelve industrial properties and three retail properties
located in 12 states.

On September  12,  1997,  the Company  acquired a portfolio  of ten  properties,
aggregating  approximately 755,006 square feet (the "Advance Properties") from a
group of  partnerships  affiliated  with The Advance  Group of  Bedminster,  New
Jersey.   The  total  acquisition  cost,   including   capitalized   costs,  was
approximately $103.0 million,  which consisted of (i) approximately $7.4 million
of  mortgage  debt  assumed,  (ii)  approximately  $13.6  million in the form of
599,508 partnership units in the Operating  Partnership (based on an assumed per
unit value of $22.625),  (iii)  approximately $37 million of the proceeds from a
new $60  million  secured  loan from Wells  Fargo Bank (see Note 6) and (iv) the
balance in cash. The cash portion of the acquisition was paid with proceeds from
the July 1997  Offering  (see Note 10). The Advance  Properties  consist of five
office properties,  three office/flex  properties and two industrial properties.
Nine of the properties are located in New Jersey and one is located in Maryland.
Concurrent with this  acquisition,  the Company  invested  $2,985,000 in a joint
venture with The Advance  Group for the  development  of new projects in the New
Jersey market.  This joint venture owns 57 acres of land suitable for office and
office/flex development of up to 560,000 square feet. At September 30, 1997, the
Company's investment in this joint venture is included in other assets.

On  September  30,  1997,  the Company  acquired an office  property  containing
147,978 square feet ("Citibank  Park") located in Las Vegas,  Nevada.  The total
acquisition cost, including  capitalized costs, was approximately $23.3 million,
which  consisted  of (i)  approximately  $1.66  million  in the  form of  61,222
partnership  units in the  Operating  Partnership  (based on an agreed  per unit
value of $27.156),  (ii) a $19.4  million draw on the Line of Credit,  and (iii)
the balance in cash.

                                 Page 14 of 44
<PAGE>
                     GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1997

The Company has entered into a definitive agreement to sell the Shannon Crossing
retail property for $3.1 million in December 1997. In connection with this sale,
the  Company has agreed to lend $6.2  million to the buyer under a  construction
loan with a fixed  interest  rate of 8%, to be funded  as  needed.  The  initial
funding under the loan occurred in November 1997 for approximately $2 million.

As of September  30,  1997,  approximately  $1.3 million of escrow  deposits for
future acquisitions of properties are included in rental property.

Note 4.      INVESTMENTS IN ASSOCIATED COMPANIES AND GLENBOROUGH PARTNERS

The Company's  investments in the  Associated  Companies are accounted for using
the equity method as the Company has significant ownership interests through its
100%  preferred  stock  ownership  but does not own any  voting  interests.  The
Company records earnings on its investments in the Associated Companies equal to
its cash flow preference,  to the extent of earnings, plus its pro rata share of
remaining  earnings,  based on cash flow allocation  percentages.  Distributions
received  from the  Associated  Companies  are  recorded as a  reduction  of the
Company's investments.

The Company's  investment in Glenborough  Partners ("GP") is accounted for using
the cost method as the Company holds only a 3.98% limited partner interest.

As of  September  30, 1997,  the Company had the  following  investments  in the
Associated Companies and GP (in thousands):
<TABLE>
<CAPTION>

                                       GC(1)           GHG             GP             Total
                                   ----------     -----------     -----------     ------------
<S>                                <C>            <C>             <C>             <C>
Investment at December 31, 1996    $   5,261      $   1,504       $     585       $   7,350

Distributions                         (1,620)           (93)            (12)         (1,725)

Equity in earnings                       816          1,126             ---           1,942
                                   ----------     -----------     -----------     ------------
Investment at September 30, 1997   $   4,457      $   2,537       $     573       $   7,567
                                   ==========     ===========     ===========     ============
</TABLE>

(1) All amounts presented for GC represent  combined amounts for GC and GIRC due
    to the June 30, 1997 merger, as previously discussed in Note 1.

Note 5.      MORTGAGE LOANS RECEIVABLE

The Company held a first  mortgage  loan with a principal  balance of $7,563,000
and a carrying  value of $6,700,000  at December 31, 1996,  secured by an office
and research complex in Eatontown, New Jersey. The loan had an original maturity
date of November 1, 1996 with interest only payable monthly at the fixed rate of
eight percent (8%) per annum.  In 1995, due to the  uncertainty  surrounding the
borrower's  ability  to  payoff  the  note  receivable  upon its  November  1996
maturity,  the Company  recorded a $863,000 loss provision on this mortgage loan
receivable  to reduce  its  carrying  value to the  estimated  fair value of the
underlying  property.  The terms of the note were  renegotiated in December 1996
with the maturity date extended to February 1, 1997. The interest rate continued
at 8% per  annum.  The  borrower  had the right to payoff the loan at a discount
between January 10 and January 31, 1997. The discounted payoff was i) $6,863,000
in cash and ii) a note for  $500,000  payable over a term of twelve years at six
percent (6%) interest amortized over twenty-five years. On January 28, 1997, the
borrower paid off the note at the above discounted terms, resulting in a gain to
the Company of $152,000 ($163,000 net of $11,000 in legal costs) and recognition
of $2,000 of the related  $500,000  deferred  gain.  In June 1997, in connection
with the acquisition of the CRI Properties,  the note receivable was assigned to
a third party. Therefore, the remaining balance of the deferred gain of $498,000
has been  recognized in the Company's  Consolidated  Statement of Operations for
the nine months ended September 30, 1997.

                                 Page 15 of 44
<PAGE>
                     GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1997

At September 30, 1997,  the Company held a first  mortgage loan in the amount of
$508,000 secured by an industrial property in Los Angeles, California. The terms
of the note include  interest  accruing at eight  percent (8%) per annum for the
first  twenty-four  months  (ended June 1996) and at nine percent (9%) per annum
for the next sixty months until the note matures in June 2001.  Monthly payments
of  principal  and  interest,  computed  based  on a  thirty  year  amortization
schedule, commenced January 1995 and continue until maturity.

In 1996,  the  Operating  Partnership  entered into a Loan  Agreement and Option
Agreement  (the  "Option  Agreement")  with  Carlsberg  Properties,  LTD.  ("the
Borrower").  The loan amount was $3,600,000,  of which  $2,694,000 was initially
disbursed to the Borrower and $906,000 was held by the Operating  Partnership as
leasing and interest reserves.  On June 18, 1997, the Loan Agreement was amended
to include an additional  advance to the borrower of $250,000  which was applied
in its entirety to the interest reserve,  resulting in an amended loan amount of
$3,850,000 and an increase in the interest reserve of $250,000.  During the nine
months ended  September  30, 1997,  $420,000 of reserves  were  disbursed to the
borrower  which  resulted in an  outstanding  balance at September  30, 1997, of
$3,114,000.  The loan is secured by a 48,000  square  foot  medical  building in
Phoenix, Arizona (the "Grunow Building"), and matures on November 19, 1999, with
interest  only  payable  monthly at the fixed rate of eleven  percent  (11%) per
annum calculated on the full amount of the loan. The Option  Agreement  provides
the Operating  Partnership  the option to purchase the Grunow Building on either
the second or third  anniversary  of the closing date of November 19, 1996,  for
the greater of i) the then  outstanding  loan  balance  plus  $50,000 or ii) the
value of the Secured Property as defined in the Option Agreement.

Note 6.      SECURED AND UNSECURED LIABILITIES

The Company had the  following  mortgage  loans,  bank lines,  and notes payable
outstanding as of September 30, 1997, and December 31, 1996 (in thousands):

                                                             1997         1996
                                                          --------      --------
Secured  $50,000  line of credit with a bank
with variable  interest  rates of LIBOR plus
1.75%  and  prime  rate  (7.44%  and  8.50%,
respectively at September 30, 1997), monthly
interest  only  payments and a maturity date
of July 14,  1998,  with an option to extend
for  10  years.   The  line  is  secured  by
nineteen  properties  with an aggregate  net
carrying  value of  $60,557  and  $67,118 at
September  30, 1997,  and December 31, 1996,
respectively.                                             $ 28,865      $ 21,307

Secured  loan  with  a  bank  with  a  fixed
interest  rate of 7.50%,  monthly  principal
and interest  payments (based upon a 25 year
amortization) of $443 and a maturity date of
September  11, 2007.  The loan is secured by
ten   properties   with  an  aggregate   net
carrying  value of $111,667 at September 30,
1997.  See  below  for  further  discussion.
                                                            60,000           ---

Secured  loan  with  a  bank  with  variable
interest  rates of  LIBOR  plus  2.375%  and
prime rate plus 0.50%, monthly interest only
payments  and a  maturity  date of July  14,
1998.  The loan was  paid-off  in June  1997
upon the sale of the properties securing the
loan.                                                          ---         6,120

Secured loan with an investment  bank with a
fixed   interest  rate  of  7.57%,   monthly
principal and interest  payments (based upon
a  25  year  amortization)  of  $149  and  a
maturity  date of January 1, 2006.  The loan
is  secured  by  nine   properties  with  an
aggregate net carrying  value of $37,720 and
$39,298 at  September  30, 1997 and December
31, 1996, respectively.                                     19,521        19,744


                                 Page 16 of 44
<PAGE>
                     GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1997

                                                             1997         1996
                                                          ---------     --------
Secured loans with various lenders,  bearing
interest  at fixed rates  between  7.75% and
9.25%,  with monthly  principal and interest
payments  ranging  between  $9 and  $62  and
maturing at various  dates  through April 1,
2012.  These loans are secured by properties
with an  aggregate  net  carrying  value  of
$38,707 and $30,441 at  September  30, 1997,
and  December  31,  1996,  respectively.                   $19,944      $ 17,581

Secured  loans with various  banks,  bearing
interest at variable rates (ranging  between
7.39%  and  8.18% at  September  30,  1997),
monthly   principal  and  interest  payments
ranging  between $4 and $46 and  maturing at
various  dates  through  May 1, 2017.  These
loans  are  secured  by  properties  with an
aggregate net carrying  value of $17,447 and
$6,975 at September  30, 1997,  and December
31, 1996, respectively.                                      7,866         3,807

Secured loan with an investment company with
a  fixed  interest  rate of  7.50%,  monthly
principal and interest payments of $55 and a
maturity date of March 1, 2021.  The loan is
secured by a multifamily property with a net
carrying  value  of  $9,361  and  $9,491  at
September  30, 1997,  and December 31, 1996,
respectively.                                                7,249         7,332

Unsecured  loan  with  a bank  with a  fixed
interest  rate of  7.50%,  monthly  interest
only   payments  and  a  maturity   date  of
December 11, 1997,  with two 90-day  options
to extend. See below for further discussion.               114,000           ---
                                                        ----------     ---------
Total                                                   $  257,445     $  75,891
                                                        ==========     =========

In April 1997, the Operating  Partnership  entered into a $40 million  unsecured
loan with Wells Fargo Bank to fund the acquisition of the CIGNA  Properties (the
"CIGNA Acquisition  Financing").  The CIGNA Acquisition  Financing had a term of
three months (extendible to six months at the Company's  option),  interest at a
variable annual rate equal to 175 basis points above 30-day LIBOR, was unsecured
and was guaranteed by the Company. Required payments under the CIGNA Acquisition
Financing were monthly, interest only.

As of June 30, 1997, Wells Fargo had  substantially  completed  underwriting and
due diligence  for a $60 million  mortgage loan to the Company (the "$60 Million
Mortgage") to be secured by the Lennar Properties,  the Riverview Property,  the
Centerstone  Property and five of the CIGNA  Properties.  In the interim,  Wells
Fargo funded on June 19, 1997, a $60 million  unsecured  "bridge" loan (the "$60
Million  Unsecured Bridge Loan"),  which was used to (i) repay all principal and
accrued  interest under the $40 million CIGNA  Acquisition  Financing,  and (ii)
reduce the  outstanding  balance under the Line of Credit by  approximately  $20
million.

The $60 Million  Unsecured  Bridge  Loan was  paid-off on July 18, 1997 from the
proceeds of the July 1997  Offering  (see Note 10) and was replaced with the $60
Million  Mortgage on September  12, 1997.  This loan has a 10-year  term,  bears
interest at a fixed annual rate of 7.5%, and requires  monthly payments based on
a 25-year  amortization  schedule.  Proceeds from the $60 Million  Mortgage were
used to fund the  acquisitions  of the T. Rowe Price  Properties and the Advance
Properties.

In September  1997, the Company closed a $114 million  unsecured loan (the "$114
Million Interim  Unsecured  Loan") with Wells Fargo Bank. This loan has a 90-day
term with two 90-day extension options, bears interest at a fixed annual rate of
7.5% and requires  monthly  payments of interest only. The proceeds of this loan
were  used to

                                 Page 17 of 44
<PAGE>
                     GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1997

fund a  portion  of the  purchase  price for the T. Rowe  Price  Properties.  In
October 1997,  the Company repaid the $114 Million  Interim  Unsecured Loan with
net proceeds from the October 1997 Offering (see Note 11).

The required  principal  payments on the Company's  debt for the next five years
and thereafter, as of September 30, 1997, are as follows (in thousands):

                   Year Ending
                   December 31,
                        1997                  $  114,490
                        1998                      30,942
                        1999                       3,578
                        2000                       4,401
                        2001                       2,546
                        Thereafter               101,488
                                              -----------
                        Total                 $  257,445
                                              ===========

Note 7.      RELATED PARTY TRANSACTIONS

Fee and  reimbursement  income earned by the Company from a related  partnership
totaled  $572,000 and $199,000 for the nine months ended September 30, 1997, and
1996, respectively, and consisted of property management fees, lease commissions
and asset  management  fees for the nine months ended  September  30, 1997,  and
asset management fees for the nine months ended September 30, 1996.

Note 8.      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  for
grant  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 outstanding  shares of Common Stock,  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 may be granted under the
Plan may not exceed 1,140,000 shares. The Company accounts for the fair value of
the options  and bonus  grants in  accordance  with APB  Opinion  No. 25.  As of
September 30,  1997,  35,000  shares of bonus  grants have been issued under the
Plan.  The fair value of the  shares  granted  have been  recorded  as  deferred
compensation  in the  accompanying  financial  statements and will be charged to
earnings  ratably  over the  respective  vesting  periods  that  range from 2 to
5 years.  As of  September 30,  1997,  1,078,000  options to purchase  shares of
Common Stock have been  granted.  The exercise  price of each option  granted is
greater than or equal to the per-share  fair market value of the Common Stock on
the date the option is granted. To date, all options granted have been at higher
than the fair  market  value of the shares on the grant  date,  and as such,  no
compensation  expense has been  recognized  as

                                 Page 18 of 44
<PAGE>
                     GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1997

accounted for under APB Opinion No. 25. The options vest over periods  between 1
and 6 years, and have a maximum term of 10 years.

Note 9.      DECLARATION OF DIVIDENDS

On April 22, 1997, the Company's Board of Directors  declared a dividend for the
first  quarter  of $0.32 per share or  $4,222,301  payable on May 13,  1997,  to
stockholders  of record at the close of business on May 2, 1997.  Such  dividend
was made from the Company's  cash reserves at March 31, 1997,  combined with the
dividends received from the Associated Companies.

On July 22, 1997, the Company's  Board of Directors  declared a dividend for the
second  quarter of $0.32 per share or $6,455,901  payable on August 12, 1997, to
stockholders of record at the close of business on August 1, 1997. Such dividend
was made from the Company's  cash  reserves at June 30, 1997,  combined with the
dividends received from the Associated Companies.

On October 21, 1997,  the Company's  Board of Directors  declared a dividend for
the third  quarter of $0.32 per share or  $10,071,901  payable on  November  11,
1997,  to  stockholders  of record at the close of business on October 31, 1997.
Such dividend will be made from the Company's available cash.

Note 10.     PUBLIC STOCK OFFERINGS

In March 1997,  the Company  completed  the "March 1997  Offering"  of 3,500,000
shares of Common Stock.  The 3,500,000  shares were sold at a per share price of
$20.25  for  total  proceeds  of  $66,955,000  (net  of 6%  underwriting  fee of
$3,920,000).  This additional  capital was used to acquire the Scottsdale  Hotel
and the Lennar,  Riverview and Ellis & Lane Properties (see Note 3) and to repay
the outstanding  balance under the Company's Line of Credit with Wells Fargo. In
addition, approximately $916,000 in other costs were incurred in connection with
the March 1997 Offering.

In July 1997,  the Company  completed a public  offering of 6,980,000  shares of
Common Stock (the "July 1997 Offering"). The 6,980,000 shares were sold at a per
share price of $22.625 for total proceeds of  $149,965,300  (net of underwriting
fees of $7,957,200).  This additional  capital was used to repay the $60 Million
Unsecured  Bridge Loan and the  outstanding  balance under the Company's Line of
Credit with Wells Fargo. In addition,  the remaining  proceeds were used to fund
the acquisitions of the T. Rowe Price  Properties and the Advance  Properties as
discussed in Note 3. As of September 30, 1997,  approximately  $806,000 in other
costs had been incurred in connection with the July 1997 Offering.

Note 11.     SUBSEQUENT EVENTS

On October 1, 1997,  the Company sold from its retail  portfolio  the  remaining
QuikTrip  property for a sales price of  approximately  $1.1 million.  This sale
generated a net gain of $297,000 and cash proceeds of $1.1 million. The proceeds
from the sale of the QuikTrip property will be used to fund future  acquisitions
of properties.  This sale was an all-cash sale and the Company has no continuing
obligations or involvement  with this  property.  Accordingly,  the Company will
recognize the sale under the full accrual method of accounting.

On October 24, 1997,  the Company  acquired eight  properties  from six separate
limited  partnerships  in  which  affiliates  of AEW  Capital  Management,  L.P.
(successors in interest to one or more affiliates of Copley Advisors Inc.) serve
as general  partners  (the "Copley  Properties").  The total  acquisition  cost,
including  capitalized  costs, was approximately  $63.7 million,  which was paid
entirely in cash from the  proceeds of the October 1997  Offering (as  discussed
below). The Copley Properties  comprise 766,269 square feet of industrial space,
with one property located in Tempe, Arizona, one in Anaheim,  California, one in
Columbia, Maryland and five in Las Vegas, Nevada.

On November 4, 1997, the Company acquired a 171,789  square-foot office property
located in Eden Prairie,  Minnesota ("Bryant Lake"), from Outlook Income Fund 9,
a  limited  partnership  in  which  GC  is  managing  general

                                 Page 19 of 44
<PAGE>
                     GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1997

partner. Robert Batinovich,  the Company's Chairman and Chief Executive Officer,
is co-general  partner of Outlook  Income Fund 9 and holds an indirect  economic
interest  therein equal to an approximate  0.83% limited  partnership  interest.
Because  of this  affiliation,  and  consistent  with  the  Company's  Board  of
Directors'  policy,  neither  Robert  Batinovich  nor  Andrew  Batinovich,   the
Company's  President  and  Chief  Operating  Officer,  voted  when the  Board of
Directors   considered  and  acted  to  approve  this  acquisition.   The  total
acquisition cost,  including  capitalized costs, was approximately $9.4 million,
comprising approximately $4.8 million in the form of cash and the balance in the
form of assumption of debt.

In October 1997, the Company completed a public offering of 11,300,000 shares of
Common Stock (the "October 1997 Offering"). The 11,300,000 shares were sold at a
per  share  price  of  $25.00  for  total  proceeds  of  $268,092,500   (net  of
underwriting fees of $14,407,500). This additional capital was used to repay the
$114 Million Unsecured Loan and the outstanding balance under the Company's Line
of Credit with Wells Fargo.  In addition,  the  remaining  proceeds were used to
fund the  acquisitions of the Copley  Properties and the Bryant Lake property as
discussed above.

In November 1997, the Company  received a firm  commitment from Wells Fargo Bank
to establish a $250 million  unsecured  line of credit (the "Credit  Facility"),
which will replace the  Company's  existing $50 million  secured Line of Credit.
The Credit  Facility  will bear  interest on a sliding  scale ranging from LIBOR
plus 0.8% to LIBOR plus 1.3%,  which represents a rate that is lower by at least
0.45% than the rate under the current $50 million Line of Credit.

Note 12.     PENDING ACQUISITIONS

The Company has entered into a  definitive  agreement to acquire all of the real
estate assets of Rancon Realty Fund IV, a California  limited  partnership which
has been managed by GC since January 1995 (the "Rancon IV Portfolio"). The total
acquisition cost,  including  capitalized costs, is expected to be approximately
$49.0 million,  comprising  approximately  $32.0 million in the form of cash and
the  balance  in the form of  assumption  of debt.  The Rancon IV  Portfolio  is
comprised of three  office  properties  aggregating  223,938  square  feet;  one
office/flex  property  containing  62,605  square feet;  four retail  properties
aggregating  135,554 square feet; one 240-unit  multi-family  property  totaling
214,400 square feet; and  approximately 74 acres of undeveloped land. All of the
office and retail  properties,  and  approximately  26 acres of the  undeveloped
land,  are located  within the  Tri-City  mixed use  complex in San  Bernardino,
California.  The  multi-family  complex is located in Vista (San Diego  County),
California,  and the remaining  approximately  48 acres of undeveloped  land are
located  in three  separate  sites  in the  Inland  Empire  region  of  Southern
California. Robert Batinovich holds an indirect economic interest in Rancon Fund
IV equal to an approximate 0.54% limited partnership  interest.  Because of this
interest,  and consistent with the Company's Board of Directors' policy, neither
Robert  Batinovich  nor  Andrew  Batinovich  voted  when the Board of  Directors
considered and acted to approve this acquisition. This acquisition is subject to
approval by a majority  vote of the limited  partners of Rancon  Realty Fund IV,
which has filed with the Securities and Exchange  Commission a preliminary proxy
statement to solicit such approval.  As a result, there can be no assurance that
this transaction will be completed.

The Company has entered into a  definitive  agreement to acquire all of the real
estate assets of Rancon Realty Fund V, a California  limited  partnership  which
has been managed by GC since January 1995 (the "Rancon V Portfolio").  The total
acquisition cost, including  capitalized costs, is expected to be $45.5 million,
comprising  approximately  $31.8  million in the form of cash and the balance in
the form of  assumption  of debt.  The Rancon V Portfolio  is  comprised of five
office  properties  aggregating  390,785 square feet; one  office/flex  property
containing 50,804 square feet; one 245,000 square foot industrial property;  two
retail properties aggregating 31,500 square feet; and approximately 139 acres of
undeveloped land. All of the office and retail properties,  and approximately 14
acres of the undeveloped land, are located within the Tri-City mixed use complex
in San Bernardino,  California.  The industrial  property is located in Ontario,
California,  and the remaining  approximately  125 acres of undeveloped land are
located  in three  separate  sites  in the  Inland  Empire  region  of  Southern
California. Robert Batinovich holds an indirect economic interest in Rancon Fund
V equal to an approximate  0.7% limited  partnership  interest.  Because of this
interest,  and consistent with the Company's Board of Directors' policy, neither
Robert  Batinovich  nor  Andrew

                                 Page 20 of 44
<PAGE>
                     GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1997

Batinovich  voted when the Board of  Directors  considered  and acted to approve
this acquisition.  This acquisition is subject to approval by a majority vote of
the  limited  partners  of  Rancon  Realty  Fund V,  which  has  filed  with the
Securities and Exchange Commission a preliminary proxy statement to solicit such
approval.  As a result,  there can be no assurance that this transaction will be
completed.

The Company has entered into a  definitive  agreement to acquire all of the real
estate  assets  of  Prudential-Bache  /  Equitec  Real  Estate  Partnership,   a
California  limited  partnership  in  which  the  managing  general  partner  is
Prudential-Bache  Securities,  Inc., and in which GC and Robert  Batinovich have
served as  co-general  partners  since  March  1994,  but do not hold a material
equity  interest  (the  "Prudential-Bache  /  Equitec  Portfolio").   The  total
acquisition cost,  including  capitalized costs, is expected to be approximately
$43.5  million,  which is to be paid entirely in cash.  The  Prudential-Bache  /
Equitec  Portfolio  is comprised of four office  buildings  aggregating  405,825
square feet and one  office/flex  property  containing  121,645 square feet. The
largest of these properties are in Rockville, Maryland (186,680 square feet) and
Memphis,  Tennessee (100,901 square feet), with the remaining properties located
in Sacramento,  California and Kirkland, Washington. This acquisition is subject
to approval by a majority  vote of the limited  partners of  Prudential-Bache  /
Equitec Real Estate Limited  Partnership,  thus,  there can be no assurance that
this transaction will be completed.

                                 Page 21 of 44
<PAGE>

<TABLE>
<CAPTION>

                                             GLENBOROUGH HOTEL GROUP
                                           CONSOLIDATED BALANCE SHEETS
                                       (in thousands, except share amounts)
 
                                                                            September 30,           December 31,
                                                                                1997                    1996
                                                                             (Unaudited)              (Audited)
                                                                           --------------          --------------
ASSETS
<S>                                                                        <C>                     <C>       
Cash                                                                       $    2,818              $      461
Accounts receivable                                                               251                     247
Investments in management contracts, net                                          373                     430
Rental property and equipment, net of
   accumulated depreciation of $125 and $111
   in 1997 and 1996, respectively                                                 159                     170
Investment in Atlantic Pacific Assurance Company, Limited                         ---                     755
Prepaid expenses                                                                  150                     156
Other assets                                                                        5                      36
                                                                           --------------          --------------
     TOTAL ASSETS                                                          $    3,756              $    2,255
                                                                           ==============          ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
   Accrued lease expense                                                   $      406              $      285
   Mortgage loan                                                                   45                      61
   Other liabilities                                                              427                     407
                                                                           --------------          --------------
     Total liabilities                                                            878                     753
                                                                           --------------          --------------

Stockholders' Equity:
   Common stock (1,000 shares authorized,
     issued and outstanding)                                                       20                      20
   Non-voting preferred stock (50 shares
     authorized, issued and outstanding)                                          ---                     ---
   Additional paid-in capital                                                   1,568                   1,568
   Retained earnings                                                            1,290                     (86)
                                                                           --------------          --------------
     Total stockholders' equity                                                 2,878                   1,502
                                                                           --------------          --------------
     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $    3,756              $    2,255
                                                                           ==============          ==============



                           See accompanying notes to consolidated financial statements

</TABLE>


                                 Page 22 of 44
<PAGE>

<TABLE>
<CAPTION>
                                             GLENBOROUGH HOTEL GROUP
                                        CONSOLIDATED STATEMENTS OF INCOME
                              For the nine months ended September 30, 1997 and 1996
                                                  (in thousands)
                                                   (Unaudited)

                                                                                 1997                   1996  
                                                                            ------------           ------------
REVENUE
<S>                                                                         <C>                    <C>        
     Hotel revenue                                                          $      8,549           $     5,532
     Fees and reimbursements                                                       1,674                 1,836
     Net gain on liquidation of APAC                                               1,381                   ---
     Other revenue                                                                    18                    72
                                                                            ------------           ------------
             Total revenue                                                        11,622                 7,440
                                                                            ------------           ------------
EXPENSES
     Leased Hotel Properties:
        Room expenses                                                              2,260                 1,468
        Lease payments to affiliates                                               2,990                 1,843
        Sales and marketing                                                          883                   571
        Property general and administrative                                          884                   597
        Other operating expenses                                                   1,082                   751

     Managed Hotel Properties:
        Salaries and benefits                                                      1,044                 1,222

     Other Expenses:
        General and administrative                                                   812                   706
        Depreciation and amortization                                                 73                    74
        Interest expense                                                               3                     4
                                                                            ------------           ------------
             Total expenses                                                       10,031                 7,236
                                                                            ------------           ------------
Income from operations before provision
     for income taxes                                                              1,591                   204
 
Provision for income taxes                                                           (98)                  (76)
                                                                            ------------           ------------
Net income                                                                  $      1,493           $       128
                                                                            ============           ============






                           See accompanying notes to consolidated financial statements

</TABLE>

                                 Page 23 of 44
<PAGE>


<TABLE>
<CAPTION>

                                             GLENBOROUGH HOTEL GROUP
                                        CONSOLIDATED STATEMENTS OF INCOME
                              For the three months ended September 30, 1997 and 1996
                                                  (in thousands)
                                                   (Unaudited)

                                                                                 1997                   1996  
                                                                            ------------           ------------
REVENUE
<S>                                                                         <C>                    <C>        
     Hotel revenue                                                          $      2,412           $     1,948
     Fees and reimbursements                                                         561                   280
     Net gain on liquidation of APAC                                               1,381                   ---
     Other revenue                                                                    18                   206
                                                                            ------------           ------------
             Total revenue                                                         4,372                 2,434
                                                                            ------------           ------------
EXPENSES
     Leased Hotel Properties:
        Room expenses                                                                787                   476
        Lease payments to affiliates                                                 783                   575
        Sales and marketing                                                          264                   190
        Property general and administrative                                          306                   228
        Other operating expenses                                                     407                   303

     Managed Hotel Properties:
        Salaries and benefits                                                        301                   385

     Other Expenses:
        General and administrative                                                   287                   240
        Depreciation and amortization                                                 24                    25
        Interest expense                                                               1                     1
                                                                            ------------           ------------
             Total expenses                                                        3,160                 2,423
                                                                            ------------           ------------
Income from operations before provision
     for income taxes                                                              1,212                    11
 
Income tax benefit                                                                    64                   ---
                                                                            ------------           ------------
Net income                                                                  $      1,276           $        11
                                                                            ============           ============


                           See accompanying notes to consolidated financial statements
</TABLE>

                                 Page 24 of 44
<PAGE>

<TABLE>
<CAPTION>
                                             GLENBOROUGH HOTEL GROUP
                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                              For the nine months ended September 30, 1997 and 1996
                                          (in thousands, except shares)
                                                   (Unaudited)


                                                                                           Addi-
                                        Preferred Stock            Common Stock           tional      Retained
                                                   Par                         Par       Paid-in      Earnings
                                      Shares       Value         Shares       Value      Capital     (Deficit)        Total
                                      ------     ---------       ------    ---------   ----------    ----------   -----------
<S>                                   <C>        <C>             <C>       <C>         <C>           <C>          <C>
BALANCE at
 December 31, 1996                        50     $     ---       1,000     $    20     $   1,568     $     (86)   $   1,502

Dividends                                ---           ---         ---         ---           ---          (117)        (117)

Net income                               ---           ---         ---         ---           ---         1,493        1,493
                                      ------     ---------       ------    ---------   ----------    ----------   -----------
BALANCE at
 September 30, 1997                       50     $     ---       1,000     $    20     $   1,568     $   1,290    $   2,878
                                      ======     =========       ======    =========   ==========    ==========   ===========

</TABLE>
<TABLE>
<CAPTION>


                                                                                        Addi-
                                        Preferred Stock         Common Stock            tional      Retained
                                                   Par                     Par         Paid-in      Earnings
                                      Shares       Value      Shares       Value       Capital      (Deficit)        Total
                                     --------    ----------     ------     --------    ----------    ----------   -----------
<S>                                  <C>         <C>             <C>       <C>         <C>           <C>          <C>
BALANCE at
 December 31, 1995                        50     $     ---       1,000     $    20     $   1,368     $     ---    $   1,388

Additional paid-in capital               ---           ---         ---         ---           200           ---          200

Dividends                                ---           ---         ---         ---           ---           (83)         (83)

Net income                               ---           ---         ---         ---           ---           128          128
                                     --------    ----------     -------    --------    ----------    ----------   -----------
BALANCE at
September 30, 1996                        50     $     ---       1,000     $    20     $   1,568     $      45    $   1,633
                                     ========    ==========     =======    ========    ==========    ==========   ===========

                           See accompanying notes to consolidated financial statements
</TABLE>

                                 Page 25 of 44
<PAGE>

<TABLE>
<CAPTION>

                                             GLENBOROUGH HOTEL GROUP
                                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                              For the nine months ended September 30, 1997 and 1996
                                                 (in thousands)
                                                   (Unaudited)

                                                                                  1997                 1996   
                                                                            -------------          ------------
Cash flows from operating activities:
<S>                                                                         <C>                    <C>       
   Net income                                                               $      1,493           $      128
   Adjustments to reconcile net income to net cash
      provided by operating activities:
         Depreciation and amortization                                                73                   74
         Net gain on liquidation of APAC                                          (1,381)                 ---
         Changes in certain assets and liabilities                                   171                  123
                                                                            -------------          ------------
         Net cash provided by operating activities                                   356                  325
                                                                            -------------          ------------
Cash flows from investing activities:
   Additions to equipment                                                             (2)                  (7)
   Liquidation of investment in APAC                                               2,136                  ---
                                                                            -------------          ------------
         Net cash provided by (used for) investing activities                      2,134                   (7)
                                                                            -------------          ------------
 
Cash flows from financing activities:
   Dividends                                                                        (117)                 (83)
   Capital contributions                                                             ---                  200
   Repayment of borrowings                                                           (16)                 (19)
                                                                            -------------          ------------
         Net cash provided by (used for) financing activities                       (133)                  98
                                                                            -------------          ------------
   Net increase in cash                                                            2,357                  416

   Cash at beginning of period                                                       461                   33
                                                                            -------------          ------------
   Cash at end of period                                                    $      2,818           $      449
                                                                            =============          ============
Supplemental disclosure of cash flow information:

         Cash paid for interest                                             $          3           $        4
                                                                            =============          ============






                           See accompanying notes to consolidated financial statements

</TABLE>


                                 Page 26 of 44
<PAGE>

                             GLENBOROUGH HOTEL GROUP

                   Notes to Consolidated Financial Statements
                               September 30, 1997


Note 1.      ORGANIZATION
 
Glenborough  Hotel  Group  ("GHG")  was  organized  in the  State of  Nevada  on
September  23, 1991.  As of September 30, 1997,  GHG operates  hotel  properties
owned by  Glenborough  Realty Trust  Incorporated  ("GLB")  under five  separate
percentage  leases and manages two hotel  properties  owned by two  partnerships
whose managing general partner is Glenborough Corporation.  GLB owns 100% of the
50 shares of non-voting preferred stock of GHG and three individuals,  including
Terri Garnick, an executive officer of GLB, each own 33 1/3% of the 1,000 shares
of voting common stock of GHG.

GHG also  owns  approximately  80% of the  common  stock of Resort  Group,  Inc.
("RGI"). RGI manages homeowners associations and rental pools for two beachfront
resort condominium hotel properties and owns six units at one of the properties.
GHG receives 100% of the earnings of RGI and consolidates  RGI's operations with
its own.

In 1997, GHG also owned 94% of the outstanding  common stock of Atlantic Pacific
Holdings,  Ltd., the sole owner of 100% of the common stock of Atlantic  Pacific
Assurance Company,  Limited ("APAC"), a Bermuda corporation formed to underwrite
certain insurable risks of certain of GLB's predecessor partnerships and related
entities.  As anticipated,  in July 1997, APAC was liquidated and GHG received a
liquidating distribution of approximately $2,136,000.  GHG has recognized a gain
of  $1,381,000  over its  investment  basis  and costs of  liquidation.  GHG had
accounted  for  its  investment  in  APAC  using  the  cost  method  due  to its
anticipated liquidation.

In the opinion of management,  the accompanying  unaudited financial  statements
contain  all  adjustments  (consisting  only of normal  accruals)  necessary  to
present  fairly,  the financial  position and results of operations of GHG as of
September 30, 1997, and for the period then ended.

Note 2.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Basis of  Presentation  - The  accompanying  financial  statements  present  the
consolidated  financial  position of GHG and RGI as of September  30, 1997,  and
December 31, 1996 and the  consolidated  results of operations and cash flows of
GHG and RGI for the nine and three months ended September 30, 1997 and 1996. All
intercompany transactions,  receivables and payables have been eliminated in the
consolidation.

Reclassification  - Certain 1996 balances have been reclassified to conform with
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.

Rental  Property - Rental  properties  are stated at cost  unless  circumstances
indicate that cost cannot be recovered, in which case, the carrying value of the
property is reduced to estimated fair value.

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

Investments in Management  Contracts - Investments  in management  contracts are
recorded at cost and are amortized on a straight-line basis over the term of the
contracts.

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

Income  Taxes -  Provision  for income  taxes is based on  financial  accounting
income.


                                 Page 27 of 44
<PAGE>

                             GLENBOROUGH HOTEL GROUP

                   Notes to Consolidated Financial Statements
                               September 30, 1997

Note 3.      INVESTMENTS IN MANAGEMENT CONTRACTS, NET
 
Investments  in management  contracts  reflects the  unamortized  portion of the
management  contracts RGI holds with the two beachfront resort condominium hotel
properties  for both  management of the homeowners  associations  and the rental
pool programs.

Note 4.      RENTAL PROPERTY

Rental property and equipment  represents the six condominium  hotel units owned
by RGI as well as furniture  and fixtures in GHG's  corporate  offices.  The six
units owned by RGI participate in a resort rental program on an "at will" basis,
whereby there is no fixed term of participation.  Such  participation  generated
approximately  $21,000  and  $17,000 of cash flow after  deductions  for capital
reserves for the nine months ended September 30, 1997 and 1996, respectively.

Note 5.      MORTGAGE LOAN
 
Mortgage loan of $45,000 at September 30, 1997,  represents  the debt secured by
the six  condominium  hotel units owned by RGI. Such debt bears  interest at 7%,
payable in monthly  installments of principal and interest totaling $2,304,  and
matures June 30, 1999.

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

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

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

The table below sets forth the annual Base Rent and the Percentage Rent formulas
for each of the five hotels.
<TABLE>
<CAPTION>

                                               Hotel Lease Rent Provisions

                                            Percentage Rent
                                         incurred for the nine
                       Initial Annual        months ended                        Annual Percentage
Hotel                     Base Rent       September 30, 1997                       Rent Formulas
 
<S>                     <C>                 <C>                <C>
Ontario, CA             $   240,000         $   254,000        24% of the first  $1,575,000 of room revenue plus 40%
                                                               of room revenue above $1,575,000 and 5% of other revenue


                                                        continued
</TABLE>

                                 Page 28 of 44
<PAGE>

                             GLENBOROUGH HOTEL GROUP

                   Notes to Consolidated Financial Statements
                               September 30, 1997
<TABLE>
<CAPTION>


                                         Hotel Lease Rent Provisions - continued
 
                                            Percentage Rent
                                         incurred for the nine
                           Annual            months ended                        Annual Percentage
Hotel                     Base Rent       September 30, 1997                       Rent Formulas

<S>                     <C>                 <C>                <C>
Arlington, TX           $   360,000         $   298,000        27% of the first  $1,600,000 of room revenue plus 42%
                                                               of room revenue above $1,600,000 and 5% of other revenue

Tucson, AZ              $   600,000         $   537,000        40% of the first  $1,350,000 of room revenue plus 46%
                                                               of room revenue above $1,350,000 and 5% of other revenue

San Antonio, TX         $   312,000         $     2,000        33% of the first  $1,200,000 of room revenue plus 40%
                                                               of room revenue above $1,200,000 and 5% of other revenue

Scottsdale, AZ          $   720,000         $   345,000        41% of the first $2,600,000 of room revenue plus 60%
                                                               of room revenue above $2,600,000 and 5% of other revenue
</TABLE>

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

Note 7.      DECLARATION OF DIVIDENDS
 
The board of directors of GHG declared and paid the following  dividends for the
first, second and third quarters of 1997:
<TABLE>
<CAPTION>

                                             Preferred Stock       Common Stock           Total  
                                            ----------------     --------------      -------------
<S>                                         <C>                  <C>                 <C>         
April, 1997                                 $       38,438       $     10,312        $     48,750

July, 1997                                          38,438             10,312              48,750

October, 1997                                       38,438             10,312              48,750
                                            ---------------      --------------      -------------
Total paid from 1997 earnings               $      115,314       $     30,936        $    146,250
                                            ===============      ==============      =============
</TABLE>


                                 Page 29 of 44
<PAGE>

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

GLENBOROUGH REALTY TRUST INCORPORATED

Background

Glenborough Realty Trust Incorporated (the "Company") is a self-administered and
self-managed  real estate  investment  trust ("REIT")  engaged  primarily in the
ownership,  operation,  management,  leasing and acquisition of various types of
income-producing  properties.  As of September  30, 1997,  the Company owned and
operated  103   income-producing   properties  (the  "Properties,"  and  each  a
"Property") and held two mortgage loans receivable. The Properties are comprised
of 23 industrial Properties, 32 office/flex Properties, 28 office Properties, 10
retail Properties,  4 multifamily Properties and 6 hotel Properties,  located in
22 states. The 103 income-producing Properties include three Properties in which
the Company holds a participating first mortgage interest,  not fee title. These
three Properties consist of one retail Property, one industrial Property and one
hotel  Property which are each owned by AFP Partners.  In accordance  with GAAP,
the  Company  accounts  for  these  properties  as  though it holds fee title as
substantially  all risks and rewards of ownership  have been  transferred to the
Company as a result of the terms of the mortgages.

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  ("GC"), and eight
public limited partnerships (the "Partnerships,"  collectively with GC, the "GRT
Predecessor Entities"), merged with and into the Company. The Company (i) issued
5,753,709  shares  (the  "Shares")  of the $.001 par value  Common  Stock of the
Company to the Partnerships in exchange for the net assets of the  Partnerships;
(ii) merged with Glenborough  Corporation,  with the Company being the surviving
entity;  (iii)  acquired an interest in the  Associated  Companies  that provide
asset and property  management  services,  as well as other  services;  and (iv)
through a subsidiary operating partnership,  Glenborough  Properties,  L.P. (the
"Operating  Partnership"),  acquired interests in certain warehouse distribution
facilities from GPA, Ltd., a California limited  partnership  ("GPA"). A portion
of the Company's operations are conducted through the Operating Partnership,  of
which the Company is the sole general partner,  and in which the Company holds a
90.17% limited partner  interest as of September 30, 1997. The Company  operates
the assets  acquired in the  Consolidation  and in subsequent  acquisitions  and
intends  to invest in  income-producing  property  directly  and  through  joint
ventures.  In addition,  two associated companies,  Glenborough  Corporation and
Glenborough Hotel Group (the "Associated Companies") may acquire general partner
interests  in other real estate  limited  partnerships.  The Company  elected to
qualify as a REIT under the Internal Revenue Code of 1986, as amended.

The  Company  seeks to  achieve  sustainable  long-term  growth  in  Funds  from
Operations primarily through the following strategies:  (i) acquiring portfolios
or  individual  properties  on  attractive  terms  often from public and private
partnerships;   (ii)  acquiring  properties  from  entities  controlled  by  the
Associated  Companies;  (iii)  improving  the  performance  of Properties in the
Company's  portfolio;  and  (iv)  constantly  reviewing  the  Company's  current
portfolio for opportunities to redeploy capital from certain existing Properties
into other  properties  which the Company  believes  have  characteristics  more
suited to its overall growth strategy and operating goals.

Consistent  with the  Company's  strategy  for growth,  the Company  acquired 20
properties  in the third and fourth  quarters of 1996 and, as of  September  30,
1997,  had  acquired 64  properties  during 1997.  In addition,  the Company has
acquired 9 properties  subsequent  to September  30,  1997.  The total  acquired
Properties  consist of an aggregate of approximately 8.2 million rentable square
feet, 762 multi-family units and 227 hotel suites and had aggregate  acquisition
costs,  including capitalized costs, of approximately $606 million. In addition,
the Company has entered into two separate  definitive  agreements,  subject to a
number  of  contingencies,  and  has  negotiated  the  definitive  terms  of  an
additional  agreement to acquire 23 properties and 213 acres of undeveloped land
in 4  states,  aggregating  approximately  1.9  million  rentable  square  feet.
However,  there can be no assurance  that any or all of these 23 properties  and
213 acres of undeveloped land will be acquired.

                                 Page 30 of 44
<PAGE>

Results of Operations

Comparison of the nine months ended  September 30, 1997 to the nine months ended
September 30, 1996.

Rental Revenues. Rental revenues increased $24,618,000,  or 218%, to $35,899,000
for the nine months ended  September  30, 1997,  from  $11,281,000  for the nine
months ended  September 30, 1996. The increase  included growth in revenues from
the office, industrial,  office/flex,  retail, multi-family and hotel Properties
of $12,293,000,  $1,779,000,  $3,800,000, $2,166,000, $3,436,000 and $1,144,000,
respectively.  Of the rental  revenue for the nine months  ended  September  30,
1997, $11,255,000  represented rental revenues generated from the acquisition of
20  properties  (the "1996  Acquisitions")  in the third and fourth  quarters of
1996, and $13,167,000 represented rental revenues generated from the acquisition
of 64  properties  during the nine months  ended  September  30, 1997 (the "1997
Acquisitions").  The  increase  in  rental  revenue  for the nine  months  ended
September 30, 1997,  was  partially  offset by a decrease in revenues due to the
June 1996 sale of the All American Self Storage  industrial  properties  and the
June 1997 sales of the QuikTrip and Atlanta Auto Care Center retail properties.

Fees and Reimbursements.  Fees and reimbursements  revenue consists primarily of
property  management fees,  asset management fees and lease  commissions paid to
the  Company  under  property  and asset  management  agreements.  This  revenue
increased $373,000, or 187%, to $572,000 for the nine months ended September 30,
1997,  from $199,000 for the nine months ended  September 30, 1996. The increase
primarily  consisted of an increase in asset  management  fees of  $133,000,  an
increase  in  property  management  fees of $220,000  and lease  commissions  of
$20,000;  in 1996,  such fees were paid to GC, and during the nine months  ended
September 30, 1997, they were paid to the Company.

Interest and Other Income.  Interest and other income,  which consists primarily
of  interest  on cash  investments  and  mortgage  loans  receivable,  increased
$544,000,  or 87%, to $1,167,000  for the nine months ended  September 30, 1997,
from  $623,000 for the nine months ended  September  30, 1996.  The increase was
primarily  due to a $583,000  increase in interest  income as a result of higher
invested  cash  balances  following  the March 1997  Offering  and the July 1997
Offering,  a $50,000 loan fee received for the extension of the Hovpark mortgage
loan  receivable  and $305,000 of interest  income on the Carlsberg  Properties,
Ltd.  mortgage loan receivable.  This increase is partially offset by a $397,000
reduction in income caused by the payoff of the Hovpark mortgage loan receivable
in January 1997.

Equity in Earnings of Associated  Companies.  Equity in earnings from Associated
Companies  increased  $579,000,  or 42%, to $1,942,000 for the nine months ended
September  30, 1997,  from  $1,363,000  for the nine months ended  September 30,
1996. This increase was primarily due to an increase in the net operating income
of Glenborough  Hotel Group ("GHG") due to the  acquisition of the management of
the Scottsdale  Hotel and from a $1,381,000  gain on the liquidation of Atlantic
Pacific Assurance  Company,  Limited ("APAC",  a Bermuda  corporation  formed to
underwrite  certain insurable risks of certain GLB predecessor  partnerships and
related entities). This increase is offset by reduced management fees in 1997 as
a result of sales of  several  properties  under  management  and a  partnership
liquidation  as  well  as the  write-off  of  GC's  unamortized  balance  of its
investment in a management contract, offset by lower income tax expense.

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

Net Gain on  Sales  of  Rental  Properties.  The net  gain on  sales  of  rental
properties of $555,000 during the nine months ended September 30, 1997, resulted
from the sale of nine of the ten  QuikTrips  and six Atlanta  Auto Care  Centers
from the Company's retail portfolio.  The net gain on sales of rental properties
of $321,000 during the nine months ended  September 30, 1996,  resulted from the
sale of the two self-storage facilities from the Company's industrial portfolio.

Property Operating Expenses.  Property operating expenses increased  $8,038,000,
or 248%,  to  $11,282,000  for the nine months ended  September  30, 1997,  from
$3,244,000  for the nine months  ended  September  30, 1996.  Of this  increase,
$8,077,000  represents  property  operating  expenses  attributable  to the 1996
Acquisitions  and the  1997  Acquisitions,  which  was  slightly  offset  by the
reduction in expenses resulting from the June 1996 sale of the All

                                 Page 31 of 44
<PAGE>

American  Self  Storage  industrial  properties  and the June 1997  sales of the
QuikTrip and Atlanta Auto Care Center retail properties.

General  and  Administrative  Expenses.   General  and  administrative  expenses
increased $1,054,000, or 108%, to $2,031,000 for the nine months ended September
30,  1997,  from  $977,000  for the nine months ended  September  30, 1996.  The
increase  is  primarily  due  to  increased   costs   resulting  from  the  1996
Acquisitions and the 1997 Acquisitions.

Depreciation  and   Amortization.   Depreciation   and  amortization   increased
$6,173,000, or 229%, to $8,867,000 for the nine months ended September 30, 1997,
from  $2,694,000  for the nine months ended  September 30, 1996. The increase is
primarily  due  to  depreciation  and  amortization  associated  with  the  1996
Acquisitions and the 1997 Acquisitions.

Interest Expense.  Interest expense increased $3,870,000, or 152%, to $6,416,000
for the nine months ended  September  30,  1997,  from  $2,546,000  for the nine
months  ended  September  30,  1996.  Substantially  all of the increase was the
result of higher average  borrowings  during the nine months ended September 30,
1997, as compared to the nine months ended  September 30, 1996,  due to new debt
and the  assumption  of debt  related  to the  1996  Acquisitions  and the  1997
Acquisitions.

Consolidation Costs.  Consolidation costs during the nine months ended September
30, 1996, consisted of the costs associated with preparing, printing and mailing
the Prospectus/Consent Solicitation Statement and other documents related to the
Consolidation,   and  all  other  costs   incurred  in  the  forwarding  of  the
Prospectus/Solicitation Statement to investors.

Litigation  Costs.  Litigation  costs during the nine months ended September 30,
1996,  consisted of the legal fees  incurred in  connection  with  defending two
class  action  complaints  filed  by  investors  in  certain  of  the  Company's
predecessor  entities,  as well as an accrual for the proposed settlement in one
case.

Loss on debt  refinancing.  Loss on debt refinancing of $186,000 during the nine
months ended September 30, 1996 resulted from the write-off of unamortized  loan
fees when a  $10,000,000  line of credit  from  Imperial  Bank was paid off with
proceeds from a line of credit with Wells Fargo Bank.

Comparison  of the three  months  ended  September  30, 1997 to the three months
ended September 30, 1996.

Rental Revenues. Rental revenues increased $11,966,000,  or 282%, to $16,208,000
for the three months ended  September 30, 1997,  from  $4,242,000  for the three
months ended  September 30, 1996. The increase  included growth in revenues from
the office, office/flex,  industrial,  retail, multi-family and hotel Properties
of  $6,401,000,   $2,355,000,   $945,000,  $784,000,  $1,273,000  and  $208,000,
respectively.  Of the rental  revenues for the three months ended  September 30,
1997, $12,295,000  represented rental revenues generated from the acquisition of
20 properties (the "1996 Acquisitions") in the third and fourth quarters of 1996
and the acquisition of 64 properties  during the nine months ended September 30,
1997 (the "1997  Acquisitions").  The increase in rental  revenues for the three
months ended September 30, 1997, was partially  offset by a decrease in revenues
due to the June 1996 sale of the All American Self Storage industrial properties
and the June 1997 sales of the  QuikTrip  and Atlanta  Auto Care  Center  retail
properties.

Fees and Reimbursements.  Fees and reimbursements  revenue consists primarily of
property  management fees,  asset management fees and lease  commissions paid to
the  Company  under  property  and asset  management  agreements.  This  revenue
increased  $139,000,  or 211%, to $205,000 for the three months ended  September
30,  1997,  from  $66,000 for the three months  ended  September  30, 1996.  The
increase  consisted  of an increase  in asset  management  fees of  $44,000,  an
increase  in  property  management  fees of  $75,000  and lease  commissions  of
$20,000.  In 1996,  such fees were paid to GC, and during the three months ended
September 30, 1997, they were paid to the Company.

Interest and Other Income.  Interest and other income,  which consists primarily
of  interest  on cash  investments  and  mortgage  loans  receivable,  increased
$301,000,  or 119%,  to $554,000 for the three months ended  September 30, 1997,
from $253,000 for the three months ended  September  30, 1996.  The increase was
primarily  due to a $423,000  increase in interest  income as a result of higher
invested  cash  balances  following  the July 1997  Offering,

                                 Page 32 of 44
<PAGE>

and $107,000 of interest income on the Carlsberg Properties,  Ltd. mortgage loan
receivable. This increase was partially offset by a $151,000 reduction in income
caused by the payoff of the Hovpark mortgage loan receivable in January 1997 and
$78,000 of other income  received  during the three months ended  September  30,
1996 from a workers'  compensation refund and franchise fee refunds on the hotel
properties.

Equity in Earnings of Associated  Companies.  Equity in earnings from Associated
Companies increased $945,000,  or 240%, to $1,339,000 for the three months ended
September 30, 1997, from $394,000 for the three months ended September 30, 1996.
This increase was  primarily  due to an increase in the net operating  income of
GHG due to the acquisition of the management of the Scottsdale  Hotel and from a
$1,381,000 gain on the  liquidation of APAC. This increase was partially  offset
by reduced  management  fees in 1997 as a result of sales of several  properties
under management and a partnership  liquidation as well as the write-off of GC's
unamortized balance of its investment in a management contract.

Property Operating Expenses.  Property operating expenses increased  $3,902,000,
or 292%,  to  $5,237,000  for the three months ended  September  30, 1997,  from
$1,335,000  for the three months ended  September  30, 1996.  Of this  increase,
$3,857,000  represented  property  operating  expenses  attributable to the 1996
Acquisitions and the 1997 Acquisitions.

General  and  Administrative  Expenses.   General  and  administrative  expenses
increased  $355,000,  or 118%, to $657,000 for the three months ended  September
30, 1997,  from  $302,000 for the three months  ended  September  30, 1996.  The
increase  is  primarily  due  to  increased   costs   resulting  from  the  1996
Acquisitions and the 1997 Acquisitions.

Depreciation  and   Amortization.   Depreciation   and  amortization   increased
$3,888,000,  or 416%,  to  $4,823,000  for the three months ended  September 30,
1997,  from $935,000 for the three months ended September 30, 1996. The increase
is primarily  due to  depreciation  and  amortization  associated  with the 1996
Acquisitions and the 1997 Acquisitions.

Interest Expense.  Interest expense increased $1,491,000, or 133%, to $2,616,000
for the three months ended  September 30, 1997,  from  $1,125,000  for the three
months  ended  September  30,  1996.  Substantially  all of the increase was the
result of higher average  borrowings during the three months ended September 30,
1997, as compared to the three months ended  September 30, 1996, due to new debt
and the  assumption  of debt  related  to the  1996  Acquisitions  and the  1997
Acquisitions.

Loss on debt refinancing.  Loss on debt refinancing of $186,000 during the three
months ended September 30, 1996 resulted from the write-off of unamortized  loan
fees when a  $10,000,000  line of credit  from  Imperial  Bank was paid off with
proceeds from the Wells Fargo Line of Credit.

Liquidity and Capital Resources

For the nine months  ended  September  30,  1997,  cash  provided  by  operating
activities increased by $17,310,000 to $17,312,000 as compared to $2,000 for the
same period in 1996.  The increase is primarily due to an increase in net income
of $21,117,000 before depreciation and amortization due to the 1996 Acquisitions
and 1997  Acquisitions and the one-time  payment in 1996 of consolidation  costs
and  litigation  costs in the  aggregate  amount  of  $7,237,000.  Cash used for
investing  activities  increased by $350,441,000  to  $373,001,000  for the nine
months ended  September 30, 1997, as compared to $22,560,000 for the same period
in 1996. The increase is primarily due to the 1997  Acquisitions.  This increase
was partially  offset by the collection of the Hovpark  mortgage loan receivable
and the proceeds  from the June 1997 sales of the QuikTrip and Atlanta Auto Care
Center retail  properties.  Cash provided by financing  activities  increased by
$338,523,000  to  $357,104,000  for the nine months ended September 30, 1997, as
compared to $18,581,000 for the same period in 1996. This increase was primarily
due to the net proceeds  from the March 1997 Offering and the July 1997 Offering
(as defined below) and the proceeds from new debt.

The Company  expects to meet its  short-term  liquidity  requirements  generally
through its  working  capital,  its Line of Credit (as  defined  below) and cash
generated by  operations.  As of September 30, 1997, the Company had no material
commitments  for  capital  improvements  other than  certain  expansion  related
improvements  estimated at  approximately  $1,620,000  at its existing  shopping
center in Tampa,  Florida.  Other planned capital improvements

                                 Page 33 of 44
<PAGE>

consist of tenant improvements, expenditures necessary to lease and maintain the
Properties and expenditures for furniture and fixtures and building improvements
at the hotel Properties.

The  Company's  principal  sources of  funding  for  acquisitions,  development,
expansion and  renovation of properties are a secured Line of Credit (as defined
below),  permanent  secured debt financing,  public equity and privately  placed
financing,  the issuance of partnership  units in the Operating  Partnership and
cash flow provided by operations.

Mortgage loans  receivable  decreased  from  $9,905,000 at December 31, 1996, to
$3,622,000 at September 30, 1997.  This decrease was primarily due to the payoff
of the  Hovpark  mortgage  loan  receivable  which had a net  carrying  value of
$6,700,000.  This decrease was partially offset by $420,000 of draws made by the
borrower on the leasing and  interest  reserves  related to the Grunow  mortgage
loan receivable.

Mortgage  loans  payable  increased  from  $54,584,000  at December 31, 1996, to
$228,580,000  at September 30, 1997. This increase  primarily  resulted from the
assumption of mortgage  loans totaling  $15,986,000 in connection  with the 1997
Acquisitions  and the funding of a $60 million  secured  loan and a $114 million
unsecured  loan.  These  increases  were  partially  offset  by the  payoff of a
$6,120,000  term loan which was secured by the QuikTrip retail  properties,  the
payoff of $9,172,000 of mortgage loans and scheduled principal payments on other
mortgage debt.

The Company has a  $50,000,000  secured  line of credit  provided by Wells Fargo
Bank (the "Line of  Credit").  Outstanding  borrowings  under the Line of Credit
increased from $21,307,000 at December 31, 1996, to $28,865,000 at September 30,
1997, due to draws for 1997  Acquisitions.  Borrowings  under the Line of Credit
currently  bear  interest  at an annual  rate of LIBOR plus  1.75%.  The Company
repaid the  outstanding  balance  under the Line of Credit in October  1997 with
proceeds from the October 1997 Offering as discussed below.

The Company has a $60,000,000  secured loan  provided by Wells Fargo Bank.  This
loan has a 10-year  term,  bears  interest  at a fixed  annual  rate of 7.5% and
requires monthly principal and interest payments based on a 25-year amortization
schedule.  The proceeds from this loan were used to fund the acquisitions of the
T. Rowe Price Properties and the Advance Properties.

The Company had a $114,000,000 unsecured loan provided by Wells Fargo Bank. This
loan had a 90-day term with two 90-day  extension  options,  interest at a fixed
annual rate of 7.5% and required monthly  interest-only  payments.  The proceeds
from this loan were used to fund in part the  acquisition  of the T. Rowe  Price
Properties.  The Company repaid this loan in October 1997 with proceeds from the
October 1997 Offering as discussed below.
 
In November 1997, the Company  received a firm  commitment from Wells Fargo Bank
to establish a $250 million  unsecured  line of credit (the "Credit  Facility"),
which will replace the  Company's  existing $50 million  secured Line of Credit.
The Credit  Facility  will bear  interest on a sliding  scale ranging from LIBOR
plus 0.8% to LIBOR plus 1.3%,  which represents a rate that is lower by at least
0.45% than the rate under the current $50 million Line of Credit.

In March 1997,  the  Company  completed a public  equity  offering of  3,500,000
shares of Common Stock at an offering price of $20.25 per share (the "March 1997
Offering").  The net proceeds from the offering of  approximately  $66.3 million
were  used  to  fund  certain  1997   Acquisitions  and  to  repay   outstanding
indebtedness.

In July 1997, the Company completed a public equity offering of 6,980,000 shares
of Common  Stock at an  offering  price of  $22.625  per share  (the  "July 1997
Offering").  The net proceeds from the offering of approximately  $149.3 million
were used to fund certain 1997 Acquisitions and for general corporate purposes.

In October 1997,  the Company  completed a public equity  offering of 11,300,000
shares of Common  Stock at an offering  price of $25.00 per share (the  "October
1997  Offering").  The net  proceeds  from the  offering of  approximately  $268
million were used to repay the $114 million unsecured loan (discussed above) and
the  outstanding  balance  under the  Company's  Line of Credit with Wells Fargo
Bank. In addition,  the remaining  proceeds were used to fund the acquisition of
the Copley Properties.

                                 Page 34 of 44
<PAGE>

In January 1997, the Company filed a shelf registration  statement (the "January
1997 Shelf Registration  Statement") with the Securities and Exchange Commission
to  register  $250  million  of  equity  securities.   The  January  1997  Shelf
Registration  Statement was declared  effective by the  Securities  and Exchange
Commission  on  February  25,  1997.  In May  1997,  the  Company  filed a shelf
registration  statement  to  register  an  additional  $350  million  of  equity
securities of the Company (the "May 1997 Shelf Registration Statement).  The May
1997 Shelf  Registration  Statement was declared effective by the Securities and
Exchange  Commission  on May 21, 1997.  After the  completion of the March 1997,
July 1997 and October 1997 Offerings,  the Company has the capacity  pursuant to
the May 1997 Shelf  Registration  Statement to issue up to  approximately  $88.7
million in equity securities.

At September 30, 1997, the Company's total indebtedness included fixed-rate debt
of  $220,714,000,   or  86%  of  the  Company's  aggregate   indebtedness,   and
floating-rate  indebtedness  of $36,731,000,  or 14% of the Company's  aggregate
indebtedness.

Inflation

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

Funds from Operations and Cash Available for Distribution

The Company  believes  that funds from  operations  ("FFO") is a measure of cash
flow which,  when  considered in  conjunction  with other  measures of operating
performance,  affects the value of equity REITs such as the  Company.  FFO means
income (loss) from operations before minority interests and extraordinary  items
plus depreciation and amortization,  except  amortization of deferred  financing
costs and loss provisions.

FFO is not necessarily  indicative of cash flow available to fund cash needs and
is not the same as cash flow from  operations as defined by GAAP, and should not
be  considered  as an  alternative  to net income  (loss) as an indicator of the
Company's  operating  performance,  or as an  alternative  to  cash  flows  from
operating,  investing  and  financing  activities  as a measure of  liquidity or
ability to make distributions. Management generally considers FFO to be a useful
financial  performance  measure of the operating  performance  of an equity REIT
because, 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 and other capital expenditures.  FFO does not represent net
income or cash flows from operations as defined by GAAP and 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.  FFO  also  does  not  represent  cash  flows  generated  from
operating,  investing  or  financing  activities  as  defined  by  GAAP.  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) (computed
in  accordance  with  GAAP),  excluding  extraordinary  gains or  losses or loss
provisions,   plus  depreciation  and  amortization  including  amortization  of
deferred   financing  costs,   less  lease  commissions  and  recurring  capital
expenditures.  CAD should not be  considered an  alternative  to net income as a
measure of the Company's  financial  performance  or 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.

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,  1997  (dollars  in
thousands):

                                 Page 35 of 44
<PAGE>

<TABLE>
<CAPTION>

                                                       March 31,         June 30,          Sept 30,         Year to Date
                                                          1997             1997              1997               Total
                                                      -------------    -------------     -------------     ---------------
<S>                                                   <C>              <C>               <C>               <C>          
Net income before minority interest                   $     2,594      $     4,639       $     4,958       $      12,191
Gain on collection of mortgage loan receivable               (154)            (498)              ---                (652)
Net gain on sales of rental properties                        ---             (570)               15                (555)
Prepayment penalty on payoff of mortgage loan                 ---              ---                75                  75
Depreciation and amortization                               1,537            2,507             4,823               8,867
Adjustment to reflect FFO of Associated Companies(1)          623              248              (776)                 95
                                                      -------------    -------------     -------------     ---------------

FFO                                                   $     4,600      $     6,326       $     9,095       $      20,021
                                                      =============    =============     =============     ===============

Amortization of deferred financing fees                        64               64                46                 174
Capital reserve                                              (110)            (220)             (204)               (534)
Capital expenditures                                         (421)            (541)             (853)             (1,815)
                                                      -------------    -------------     -------------     ---------------

CAD                                                   $     4,133      $     5,629       $     8,084       $      17,846
                                                      =============    =============     =============     ===============

Distributions per share (2)                           $      0.32      $      0.32       $      0.32       $        0.96
                                                      =============    =============     =============     ===============

Fully diluted weighted average shares outstanding      10,935,951       14,466,852        21,194,507          15,654,461
                                                      =============    =============     =============     ===============
</TABLE>

(1)  Reflects  the  adjustments  to  FFO  required  to  reflect  the  FFO of the
Associated Companies allocable to the Company. The Company's  investments in the
Associated Companies are accounted for using the equity method of accounting.

(2) The  distributions  for the three months ended  September 30, 1997,  will be
paid on November 11, 1997.

Forward Looking Statements; Factors That May Affect Operating Results

This Report on Form 10-Q contains forward looking  statements within the meaning
of Section 27A of the  Securities  Act of 1933 and Section 21E of the Securities
and  Exchange  Act  of  1934,   including  statements  regarding  the  Company's
expectations,  hopes,  intentions,  beliefs and strategies regarding the future.
Forward looking statements include statements regarding potential  acquisitions,
the  anticipated   performance  of  future   acquisitions,   recently  completed
acquisitions  and existing  properties,  and statements  regarding the Company's
financing  activities.  All forward looking statements included in this document
are based on  information  available to the Company on the date hereof,  and the
Company assumes no obligation to update any such forward looking statements.  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, 1996, 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.

                                 Page 36 of 44
<PAGE>

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.

                                 Page 37 of 44
<PAGE>

GLENBOROUGH HOTEL GROUP

Background

Glenborough  Hotel  Group  ("GHG")  was  organized  in the  state of  Nevada  on
September  23, 1991.  As of September 30, 1997,  GHG operates  hotel  properties
owned by the Company under five separate percentage leases and manages two hotel
properties  owned  by  two  partnerships   whose  managing  general  partner  is
Glenborough  Corporation.  The Company owns 100% of the 50 shares of  non-voting
preferred  stock of GHG and  three  individuals,  including  Terri  Garnick,  an
executive officer of the Company, each own 33 1/3% of the 1,000 shares of voting
common stock of GHG.

In April 1997,  the management  contract of one of the managed hotel  properties
was terminated due to the sale of the property.
 
GHG also  owns  approximately  80% of the  common  stock of Resort  Group,  Inc.
("RGI"). RGI manages homeowners associations and rental pools for two beachfront
resort  condominium  hotel  properties  and owns six rental  units at one of the
properties.  GHG  receives  100% of the earnings of RGI and  consolidates  their
operations with its own.

As of June 30,  1997,  GHG also  owned 94% of the  outstanding  common  stock of
Atlantic Pacific  Holdings,  Ltd., the sole owner of 100% of the common stock of
Atlantic Pacific  Assurance  Company,  Limited ("APAC"),  a Bermuda  corporation
formed to underwrite  certain  insurable  risks of certain of GLB's  predecessor
partnerships  and  related  entities.  As  anticipated,  in July 1997,  APAC was
liquidated  and  GHG  received  a  liquidating   distribution  of  approximately
$2,136,000.  GHG has  recognized  a gain of  approximately  $1,381,000  over its
investment basis and costs of liquidation.  GHG had accounted for its investment
in APAC using the cost method due to its anticipated liquidation.

Liquidity and Capital Resources

GHG's primary  source of funding is the cash  generated by the operations of the
five  hotels  leased from the Company and fees  received  for (i)  managing  two
hotels owned by two partnerships  and (ii) managing the homeowners  associations
and rental pools for the resort condominium hotel properties as discussed above.

The  board  of  directors  of GHG  declared  and paid  the  following  quarterly
dividends for the three months ended March 31, June 30 and September 30, 1997:

<TABLE>
<CAPTION>

                                             1st Quarter       2nd Quarter      3rd Quarter        Year to Date
                                             -------------     -------------    -------------     --------------
<S>                                            <C>               <C>              <C>               <C>      
Preferred dividends to the Company             $  7,500          $  7,500         $  7,500          $  22,500
Additional dividends to the Company              30,938            30,938           30,938             92,814
                                             -------------     -------------    -------------     --------------
Total dividends to the Company                   38,438            38,438           38,438            115,314
Dividends to others                              10,312            10,312           10,312             30,936
                                             -------------     -------------    -------------     --------------
Total dividends                                $ 48,750          $ 48,750         $ 48,750          $ 146,250
                                             =============     =============    =============     ==============
</TABLE>


Results of Operations

Hotel  revenue,  which  represents  the revenue earned on the five hotels leased
from the  Company,  increased  $3,017,000,  or 55%, to  $8,549,000  for the nine
months ended  September  30,  1997,  from  $5,532,000  for the nine months ended
September 30, 1996. This increase is primarily due to the acquisition of the San
Antonio  Hotel  management  contract in August 1996 and the  acquisition  of the
Scottsdale Hotel management contract in February 1997.

Fee revenue and salary  reimbursements of $1,674,000  represents the fees earned
for managing two hotels and two resort condominium hotels. The decrease from the
nine months ended  September  30, 1996,  to the nine months ended  September 30,
1997,  is primarily  due to the change in ownership of one of the managed  hotel
properties (see discussion  above) which resulted in GHG no longer managing this
hotel as of April 1997.

                                 Page 38 of 44
<PAGE>

The net gain on the liquidation of APAC resulted from the July 1997  liquidation
of APAC from which GHG  received a  liquidating  distribution  of  approximately
$2,136,000  which resulted in a gain of $1,381,000 over its investment  basis of
$755,000 and costs of liquidation.  GHG had accounted for its investment in APAC
using the cost method due to its anticipated liquidation.

The primary expenses associated with the leased hotels are room expenses,  lease
payments, sales and marketing and other operating expenses, including utilities,
maintenance  and insurance.  All leased hotel  expenses  increased from the nine
months ended  September 30, 1996,  to the nine months ended  September 30, 1997,
due to the acquisition of two hotels as discussed above.

The only direct  expenses  incurred in connection with the management of the two
hotels and two resort  condominium  hotel  properties  are salaries and benefits
which  decreased  $178,000 from the nine months ended September 30, 1996, to the
nine months ended September 30, 1997. This decrease is primarily due to the sale
of one of the managed hotel  properties which resulted in GHG no longer managing
this hotel as of April 1997.

General and  administrative  costs represent the overhead costs  associated with
administering   the   business  of  GHG.   Such  costs   primarily   consist  of
administrative  salaries and benefits,  rent,  legal fees and  accounting  fees.
These costs  increased  $106,000,  or 15%, to $812,000 for the nine months ended
September 30, 1997,  from $706,000 for the nine months ended September 30, 1996.
The increase is  primarily  due to higher  salaries and benefits  related to the
growth of GHG.


                                 Page 39 of 44
<PAGE>

PART II.     OTHER INFORMATION

Item 1.      Legal Proceedings

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

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

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

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

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

At a hearing on January 17, 1996, the court heard the arguments of the objectors
seeking to overturn the  settlement,  as well as the arguments of the plaintiffs
and the defendants in defense of the settlement. The court granted all parties a
period of time in which to file additional pleadings. On June 4, 1996, the court
granted approval of the settlement,  finding it fundamentally fair, adequate and
reasonable to the respective parties to the settlement.  However,  the objectors
gave  notice of their  intent to appeal  the June 4  decision,  and filed  their
opening  brief with the court of appeals on November 15,  1996.  The Company and
the other  defendants  filed  their  answering  brief on January 17,  1997.  The
objectors filed a reply brief and have requested a hearing.

BEJ Equity  Partners.  On  December 1, 1995,  a second  class  action  complaint
relating  to the  Consolidation  was  filed in  Federal  District  Court for the
Northern  District of California  (the "BEJ  Action").  The  plaintiffs  are BEJ
Equity Partners,  J/B Investment  Partners,  Jesse B. Small and Sean O'Reilly as
custodian  f/b/o  Jordan  K.  O'Reilly,  who as a  group  held  limited  partner
interests in the California  limited  partnerships  known as Outlook  Properties
Fund IV,

                                 Page 40 of 44
<PAGE>

Glenborough All Suites Hotels,  L.P.,  Glenborough  Pension  Investors,  Equitec
Income Real Estate Investors-Equity Fund 4, Equitec Income Real Estate Investors
C and Equitec Mortgage Investors Fund IV, on behalf of themselves and all others
similarly situated.  The defendants are GRC, GC, the Company,  GPA, Ltd., Robert
Batinovich  and  Andrew  Batinovich.  The  Partnerships  are  named  as  nominal
defendants.

This action  alleges the same  disclosure  violations  and breaches of fiduciary
duty as were alleged in the Blumberg  Action.  The complaint  sought  injunctive
relief, which was denied at a hearing on December 22, 1995. At that hearing, the
court  also  deferred  all  further  proceedings  in this case  until  after the
scheduled  January 17, 1996 hearing in the Blumberg  Action.  Following  several
stipulated  extensions of time for the Company to respond to the complaint,  the
Company  filed a motion to dismiss the case.  The court  subsequently  entered a
stipulated  order  staying the case  pending  final  resolution  of the Blumberg
action.

It is  management's  position  that the BEJ Action,  and the  objections  to the
settlement of the Blumberg Action,  are without merit, and management intends to
pursue  a  vigorous  defense  in  both  matters.  However,  given  the  inherent
uncertainties of litigation, there can be no assurance that the ultimate outcome
in these two legal proceedings will be in the Company's favor.

Item 2.      Changes in Securities

(c)  Sales of Unregistered Securities

In  September  1997,  the Company  acquired  the  Citibank  Property for a total
acquisition cost, including  capitalized costs, of approximately $23 million. In
connection with this  acquisition,  Glenborough  Properties,  L.P., a California
limited  partnership (the "Operating  Partnership"),  issued to Schulman\Nielsen
Partnership,  the seller of the Citibank  Property,  61,222  units  ("Units") of
partnership  interest in Glenborough  Properties,  L.P. (with an agreed upon per
Unit value of $27.156, or an aggregate value of $1.7 million) as partial payment
for the  Citibank  Property.  The Units  are  redeemable  for  cash,  or, at the
election  of the  Company,  for  shares  of  Common  Stock of the  Company  on a
one-for-one  basis.  The Units  were  issued  by the  Operating  Partnership  in
reliance on the  exemption  provided by Section  4(2) of the  Securities  Act of
1933, as amended.

In  September  1997,  the Company  acquired the Advance  Properties  for a total
acquisition cost, including capitalized costs, of approximately $103 million. In
connection with this  acquisition,  Glenborough  Properties,  L.P., a California
limited partnership (the "Operating  Partnership"),  issued to affiliates of The
Advance Group, the seller of the Advance Properties,  599,508 units ("Units") of
partnership  interest in Glenborough  Properties,  L.P. (with an agreed upon per
Unit  value of  $22.625,  or an  aggregate  value of $13.6  million)  as partial
payment for the Advance  Properties.  The Units are  redeemable for cash, or, at
the  election  of the  Company,  for shares of Common  Stock of the Company on a
one-for-one  basis.  The Units  were  issued  by the  Operating  Partnership  in
reliance on the  exemption  provided by Section  4(2) of the  Securities  Act of
1933, as amended.

In  July  1997,  the  Company  acquired  the  Centerstone  Property  for a total
acquisition cost,  including  capitalized costs, of approximately $30.4 million.
In connection with this acquisition,  Glenborough Properties, L.P., a California
limited partnership (the "Operating Partnership"), issued to CT Realty Corp. and
RESCO,  the sellers of the  Centerstone  Property,  275,000  units  ("Units") of
partnership  interest in Glenborough  Properties,  L.P. (with an agreed per Unit
value of $20.00,  or an aggregate  value of $5.5 million) as partial payment for
the Centerstone Property.  The balance of the acquisition cost was paid in cash.
The Units are  redeemable  for cash,  or, at the  election of the  Company,  for
shares of Common  Stock of the Company on a  one-for-one  basis.  The Units were
issued by the Operating  Partnership  in reliance on the  exemption  provided by
Section 4(2) of the Securities Act of 1933, as amended.


                                 Page 41 of 44
<PAGE>

Item 6.      Exhibits and Reports on Form 8-K

             (a)      Exhibits:

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

             (b)      Reports on Form 8-K:

                      On July 15, 1997,  the Company  filed a report on Form 8-K
                      with  respect  to  the   acquisition  of  the  Centerstone
                      Property.

                      On July 15, 1997,  the Company  filed a report on Form 8-K
                      with respect to the July 1997 Offering.

                      On July 28, 1997,  the Company  filed a report on Form 8-K
                      to provide  certain  additional  ownership and operational
                      information  concerning  the  Company  and the  properties
                      owned or managed by it as of June 30, 1997.

                      On  August 8,  1997,  the  Company  filed a report on Form
                      8-K/A with respect to the  acquisition of the  Centerstone
                      Property.

                      On September 29, 1997,  the Company filed a report on Form
                      8-K with respect to the  acquisition  of the T. Rowe Price
                      Properties and the Advance Properties.

                      On October 17,  1997,  the Company  filed a report on Form
                      8-K/A with respect to the acquisition of the T. Rowe Price
                      Properties and the Advance Properties.

                      On October 17,  1997,  the Company  filed a report on Form
                      8-K/A with respect to the acquisition of the Citibank Park
                      Property.

                      On October 17,  1997,  the Company  filed a report on Form
                      8-K to  announce  funds  from  operations  for  the  third
                      quarter  of  1997  and  to  provide   certain   additional
                      operational information concerning the Company.

                      On October 23,  1997,  the Company  filed a report on Form
                      8-K with respect to the October 1997 Offering.

                      On  November 7, 1997,  the Company  filed a report on Form
                      8-K  to   provide   certain   additional   ownership   and
                      operational  information  concerning  the  Company and the
                      properties  owned or  managed  by it as of  September  30,
                      1997.

                      On November 10, 1997,  the Company  filed a report on Form
                      8-K  with  respect  to  the   acquisition  of  the  Copley
                      Properties.

                                 Page 42 of 44
<PAGE>

                                   SIGNATURES


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


                      GLENBOROUGH REALTY TRUST INCORPORATED




                   By: Glenborough Realty Trust Incorporated,



      Date:  November 10, 1997                 /s/ Andrew Batinovich
                                               Andrew Batinovich
                                               Director, President
                                               and Chief Operating Officer
                                               (Principal Operating Officer)





      Date:  November 10, 1997                 /s/ Terri Garnick
                                               Terri Garnick
                                               Senior Vice President,
                                               Chief Accounting Officer,
                                               Treasurer
                                               (Principal Accounting Officer)

                                 Page 43 of 44
<PAGE>

                                  EXHIBIT INDEX



Exhibit No.          Exhibit Title

27.1                 Financial Data Schedule



                                 Page 44 of 44
<PAGE>