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, 1999

                                       OR

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

                        Commission File Number: 001-14162


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

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

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

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

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

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

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

                                   Yes X No___


As of November 5, 1999,  31,055,079 shares of Common Stock ($.001 par value) and
11,500,000  shares of 7.75%  Series A  Convertible  Preferred  Stock  ($.001 par
value) were outstanding.

                                       1
<PAGE>





                                      INDEX
                      GLENBOROUGH REALTY TRUST INCORPORATED

                                                                 Page No.
PART I         FINANCIAL INFORMATION

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

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

                    Consolidated   Statements   of
                    Operations for the nine months
                    ended  September  30, 1999 and
                    1998                                            4

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

                    Consolidated    Statement   of
                    Stockholders'  Equity  for the
                    nine  months  ended  September
                    30, 1999                                        6

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

                    Notes     to      Consolidated
                    Financial Statements                           9-21

Item 2.        Management's     Discussion     and
               Analysis of Financial Condition and
               Results of Operations                              22-30

PART II        OTHER INFORMATION

Item 1.        Legal Proceedings                                   31

Item 4.        Submission  of Matters to a Vote of
               Security Holders                                    31

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

SIGNATURES                                                         32

EXHIBIT INDEX                                                      33




                                       2
<PAGE>


Part I.           FINANCIAL INFORMATION

Item 1.           Financial Statements

<TABLE>
<CAPTION>

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

                                                                                September 30,             December 31,
                                                                                     1999                     1998
                                                                                 (Unaudited)               (Audited)
                                                                               -----------------        -----------------
ASSETS
<S>                                                                            <C>                      <C>
     Rental property, net of accumulated depreciation of
       $100,700 and $72,951 in 1999 and 1998, respectively                     $    1,637,991           $     1,720,579
     Real estate held for sale                                                         18,507                    21,860
     Investments in Development                                                        42,263                    35,131
     Investments in Associated Companies                                                9,586                     8,807
     Mortgage loans receivable                                                         43,003                    42,420
     Cash and cash equivalents                                                          3,315                     4,357
     Other assets                                                                      63,367                    45,862
                                                                               -----------------        -----------------

         TOTAL ASSETS                                                          $    1,818,032           $     1,879,016
                                                                               =================        =================

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
     Mortgage loans                                                            $      694,288           $       708,578
     Unsecured Series A Senior Notes                                                  124,140                   150,000
     Unsecured bank line                                                               83,207                    63,519
     Other liabilities                                                                 28,650                    28,921
                                                                               -----------------        -----------------
       Total liabilities                                                              930,285                   951,018
                                                                               -----------------        -----------------

Commitments and contingencies                                                              --                        --

Minority interest                                                                      97,245                    99,465

Stockholders' Equity:
     Common stock, 30,630,058 and 31,758,915 shares issued
       and outstanding at September 30, 1999 and
       December 31, 1998, respectively                                                     31                        32
     Preferred stock, 11,500,000 shares issued and outstanding
       at September 30, 1999 and December 31, 1998                                         11                        11
     Additional paid-in capital                                                       844,942                   865,692
     Deferred compensation                                                               (649)                     (181)
     Retained earnings (deficit)                                                      (53,833)                  (37,021)
                                                                               -----------------        -----------------
       Total stockholders' equity                                                     790,502                   828,533
                                                                               -----------------        -----------------

           TOTAL LIABILITIES AND STOCKHOLDERS'
              EQUITY                                                           $    1,818,032           $     1,879,016
                                                                               =================        =================

                              See accompanying notes to consolidated financial statements

</TABLE>



                                       3
<PAGE>

<TABLE>
<CAPTION>


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

                                                                                1999                        1998
                                                                           ---------------             ---------------
REVENUE
<S>                                                                        <C>                        <C>
     Rental revenue                                                        $     192,127               $     162,903
     Fees and reimbursements from affiliates                                       2,492                       2,452
     Interest and other income                                                     5,216                       2,019
     Equity in earnings of Associated Companies                                    1,212                       1,690
     Net gain on sales of real estate assets                                       6,722                       1,889
                                                                           ---------------             ---------------
       Total revenue                                                             207,769                     170,953
                                                                           ---------------             ---------------

EXPENSES
     Property operating expenses                                                  66,006                      53,035
     General and administrative                                                    7,054                       8,197
     Depreciation and amortization                                                43,578                      35,252
     Interest expense                                                             48,678                      35,916
                                                                           ---------------             ---------------
       Total expenses                                                            165,316                     132,400
                                                                           ---------------             ---------------

Income from operations before minority interest and
     extraordinary item                                                           42,453                      38,553
   Minority interest                                                              (3,084)                     (1,909)
                                                                           ---------------             ---------------
   Net income before extraordinary item                                           39,369                      36,644
Extraordinary item:
Net gain on early extinguishment of debt                                             437                          --
                                                                           ---------------             ---------------
Net income                                                                        39,806                      36,644
Preferred dividends                                                              (16,710)                    (15,050)
                                                                           ---------------             ---------------
Net income available to Common Stockholders                                $      23,096               $      21,594
                                                                           ===============             ===============


Basic Per Share Data:
Net income available to Common Stockholders before
     extraordinary item                                                    $        0.72               $        0.68
Extraordinary item                                                                  0.01                          --
                                                                           ===============             ===============
Net income available to Common Stockholders                                $        0.73               $        0.68
                                                                           ===============             ===============
Basic weighted average shares outstanding                                     31,480,583                  31,634,138
                                                                           ===============             ===============

Diluted Per Share Data:
Net income available to Common Stockholders before
     extraordinary item                                                    $        0.72               $        0.67
Extraordinary item                                                                  0.01                          --
                                                                           ===============             ===============
Net income available to Common Stockholders                                $        0.73               $        0.67
                                                                           ===============             ===============
Diluted weighted average shares outstanding                                   35,782,784                  35,114,838
                                                                           ===============             ===============

                              See accompanying notes to consolidated financial statements

</TABLE>


                                       4
<PAGE>


<TABLE>
<CAPTION>



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

                                                                                1999                        1998
                                                                           ---------------             ---------------
REVENUE
<S>                                                                       <C>                         <C>

     Rental revenue                                                        $      62,934               $      65,321
     Fees and reimbursements from affiliates                                         618                       1,220
     Interest and other income                                                     1,779                       1,416
     Equity in earnings of Associated Companies                                    1,777                         629
     Net loss on sales of real estate assets                                        (371)                       (250)
                                                                           ---------------             ---------------
       Total revenue                                                              66,737                      68,336
                                                                           ---------------             ---------------

EXPENSES
     Property operating expenses                                                  22,145                      22,446
     General and administrative                                                    2,281                       3,372
     Depreciation and amortization                                                14,266                      14,309
     Interest expense                                                             15,720                      17,064
                                                                           ---------------             ---------------
       Total expenses                                                             54,412                      57,191
                                                                           ---------------             ---------------

Income from operations before minority interest and
     extraordinary item                                                           12,325                      11,145
   Minority interest                                                                (888)                       (635)
                                                                           ---------------             ---------------
   Net income before extraordinary item                                           11,437                      10,510
Extraordinary item:
Net gain on early extinguishment of debt                                             740                          --
                                                                           ---------------             ---------------
Net income                                                                        12,177                      10,510
Preferred dividends                                                               (5,570)                     (5,570)
                                                                           ---------------             ---------------
Net income available to Common Stockholders                                $       6,607               $       4,940
                                                                           ===============             ===============


Basic Per Share Data:
Net income available to Common Stockholders before
     extraordinary item                                                    $        0.19               $        0.16
Extraordinary item                                                                  0.02                          --
                                                                           ===============             ===============
Net income available to Common Stockholders                                $        0.21               $        0.16
                                                                           ===============             ===============
Basic weighted average shares outstanding                                     31,020,822                  31,703,963
                                                                           ===============             ===============

Diluted Per Share Data:
Net income available to Common Stockholders before
     extraordinary item                                                    $        0.19               $        0.15
Extraordinary item                                                                  0.02                          --
                                                                           ===============             ===============
Net income available to Common Stockholders                                $        0.21               $        0.15
                                                                           ===============             ===============
Diluted weighted average shares outstanding                                   35,274,940                  36,261,228
                                                                           ===============             ===============

                               See accompanying notes to consolidated financial statements
</TABLE>


                                       5
<PAGE>

<TABLE>
<CAPTION>


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

                                           Common Stock        Preferred Stock
                                       --------------------- ---------------------
                                                                                   Additional     Deferred      Retained
                                                     Par                    Par      Paid-in       Compen-      Earnings
                                         Shares     Value      Shares      Value     Capital       sation       (Deficit)      Total
                                       ---------- ---------- ----------- --------- ------------ ------------- ------------- --------
<S>                                    <C>        <C>         <C>        <C>     <C>            <C>         <C>          <C>

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

Exercise of stock options                     85        --          --        --         1,275           --           --       1,275

Conversion of Operating Partnership
    units into common stock                   60        --          --        --            --           --           --          --

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

Common stock repurchases                  (1,304)       (1)         --        --       (22,575)          --           --    (22,576)

Amortization of deferred compensation         --        --          --        --            --           82           --          82

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

Distributions                                 --        --          --        --            --           --      (56,652)   (56,652)

Net income                                    --        --          --        --            --           --       39,806      39,806
                                       ---------- ---------- ------------ -------- ------------- ------------ ------------- --------

Balance at September 30, 1999             30,630     $  31      11,500     $  11   $   844,942    $    (649)   $ (53,833)  $ 790,502
                                       ========== ========== =========== ========= ============= ============= ========== ==========

                              See accompanying notes to consolidated financial statements

</TABLE>




                                       6
<PAGE>

<TABLE>
<CAPTION>


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


                                                                            1999                        1998
                                                                       ---------------             ---------------
<S>                                                                  <C>                         <C>
Cash flows from operating activities:
     Net income                                                        $       39,806              $       36,644
     Adjustments to reconcile net income
       to net cash provided by operating
       activities:
         Depreciation and amortization                                         43,578                      35,252
         Amortization of loan fees, included in
           interest expense                                                     1,470                         998
         Minority interest in income from operations                            3,084                       1,909
         Equity in earnings of Associated Companies                            (1,212)                     (1,690)
         Net gain on sales of real estate assets                               (6,722)                     (1,889)
         Net gain on early extinguishment of debt                                (437)                         --
         Amortization of deferred compensation                                     82                          68
         Changes in certain assets and liabilities, net                        (8,820)                      5,386
                                                                       ---------------             ---------------

           Net cash provided by operating activities                           70,829                      76,678
                                                                       ---------------             ---------------

Cash flows from investing activities:
     Net proceeds from sales of real estate assets                            111,490                      39,247
     Additions to rental properties                                           (39,857)                   (589,480)
     Investments in Development                                                (7,132)                    (23,856)
     Investment in Joint Ventures                                              (3,301)                         --
     Additions to mortgage loans receivable                                      (583)                    (37,397)
     Investments in marketable securities                                          --                     (24,087)
     Principal receipts on mortgage loans receivable                               --                         507
     Payments from affiliates                                                     400                          --
     Distributions from Associated Companies                                      433                       1,200
                                                                       ---------------             ---------------

           Net cash provided by (used for) investing
                activities                                                     61,450                    (633,866)
                                                                       ---------------             ---------------
                               See accompanying notes to consolidated financial statements

</TABLE>






                                                             continued




                                       7
<PAGE>



<TABLE>
<CAPTION>


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

                                                                            1999                      1998
                                                                       ---------------            --------------
<S>                                                                  <C>                        <C>
Cash flows from financing activities:
     Proceeds from borrowings                                          $     256,240              $     425,350
     Repayment of borrowings                                                (280,116)                  (227,281)
     Proceeds from issuance of Series A Senior Notes                              --                    150,000
     Retirement of Series A Senior Notes (less gain on
         retirement of $2,568 in 1999)                                       (23,292)                        --
     Draws from (payments into) lender impound accounts, net                    (870)                   (10,001)
       Prepayment penalties on loan payoffs                                   (2,026)                        --
     Distributions to minority interest holders                               (5,304)                    (3,280)
     Distributions to stockholders                                           (56,652)                   (49,288)
     Exercise of stock options                                                 1,275                        138
     Repurchases of common stock                                             (22,576)                        --
     Proceeds from issuance of preferred stock, net of
         offering costs                                                            --                    273,861
                                                                       ---------------            --------------

         Net cash (used for) provided by financing
             activities                                                     (133,321)                   559,499
                                                                       ---------------            --------------

Net (decrease) increase in cash and cash equivalents                          (1,042)                     2,311

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

Cash and cash equivalents at end of period                             $       3,315              $       7,381
                                                                       ===============            ==============

Supplemental disclosure of cash flow information:

     Cash paid for interest (net of capitalized interest of
         $2,077 and $724 in 1999 and 1998, respectively)               $      48,560              $      30,691
                                                                       ===============            ==============

Supplemental disclosure of Non-Cash Investing and Financing
     Activities:
     Acquisition of real estate through assumption of first
         trust deed notes payable                                      $      29,275              $     358,876
                                                                       ===============            ==============

     Acquisition of real estate through issuance of shares
         of common stock and Operating Partnership units               $          --              $      52,621
                                                                       ===============            ==============

                              See accompanying notes to consolidated financial statements

</TABLE>



                                       8
<PAGE>


                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1999




Note 1.      ORGANIZATION

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

Subsequent to the  Consolidation on December 31, 1995, and through September 30,
1999, the following  Common Stock  transactions  occurred:  (i) 67,250 shares of
Common Stock were issued to officers and directors as stock  compensation;  (ii)
25,446,000  shares were issued in four separate public equity  offerings;  (iii)
448,172 shares were issued in connection with various acquisitions; (iv) 107,414
shares were issued in connection  with the exercise of employee  stock  options;
(v) 111,188  shares were issued in  connection  with the  exchange of  Operating
Partnership  units;  (vi) 1,303,616  shares were repurchased by the Company (see
discussion below) and (vii) 59 shares were retired, resulting in total shares of
Common  Stock issued and  outstanding  at September  30,  1999,  of  30,630,058.
Assuming  the  issuance  of  4,159,314  shares of  Common  Stock  issuable  upon
redemption of 4,159,314  partnership units in the Operating  Partnership,  there
would be 34,789,372 shares of Common Stock outstanding as of September 30, 1999.

In January 1998, the Company completed a public offering of 11,500,000 shares of
7 3/4% Series A  Convertible  Preferred  Stock (the  "January  1998  Convertible
Preferred Stock Offering"). The shares are convertible at any time at the option
of the holder thereof into shares of Common Stock at an initial conversion price
of $32.83 per share of Common Stock  (equivalent to a conversion  rate of 0.7615
shares of Common Stock for each share of Series A Convertible  Preferred Stock),
subject to adjustment in certain circumstances. Shares of Preferred Stock issued
and outstanding at September 30, 1999, totaled 11,500,000.

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

In February  1999,  the Company's  Board of Directors  authorized the Company to
repurchase  up to 3.1  million  shares of its  outstanding  Common  Stock.  This
represents  approximately 10% of the Company's total  outstanding  Common Stock.
Such  purchases  will be made from time to time in the open market or  otherwise
and the  timing  will  depend on market  conditions  and  other  factors.  As of
September 30, 1999, 1,303,616 shares have been repurchased.  In addition, during
the  third  quarter,  the  Company  announced  that its Board of  Directors  had
approved an expansion of the stock repurchase program to include preferred stock
as well as common  stock.  The Company is  authorized to repurchase up to 15% of
its preferred stock, or 1,725,000 shares.

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

The Company,  through its majority owned  subsidiaries,  is engaged primarily in
the  ownership,  operation,  management,  leasing,  acquisition,  expansion  and
development  of  various  income-producing   properties.   The  Company's  major
consolidated  subsidiary,  in which it holds a 1% general partner interest and a

                                       9
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1999


87.04%  limited   partner   interest  at  September  30,  1999,  is  Glenborough
Properties,  L.P. (the "Operating  Partnership").  As of September 30, 1999, the
Operating Partnership, directly and through the subsidiaries in which it and the
Company own 100% of the  ownership  interests,  controls a portfolio of 167 real
estate projects, including office, office/flex,  industrial, multifamily, retail
and hotel properties.  The portfolio encompasses approximately 23 million square
feet in 22 states.

Prior to September  30, 1999,  the Operating  Partnership  also held 100% of the
non-voting   preferred  stock  of  the  following   associated   companies  (the
"Associated Companies"):

      Glenborough  Corporation  ("GC") is the  general  partner of several  real
     estate limited  partnerships and provides asset and property management and
     development  services for these partnerships (the "Managed  Partnerships").
     It also provides  partnership  administration,  asset management,  property
     management and development services to a group of unaffiliated partnerships
     which  include  three public  partnerships  sponsored  by Rancon  Financial
     Corporation,  an unaffiliated corporation which has significant real estate
     assets in the Inland  Empire  region of Southern  California  (the  "Rancon
     Partnerships").

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

Effective  September 30, 1999, GHG merged with GC. In the merger,  the Operating
Partnership  received  preferred stock of GC in exchange for its preferred stock
of GHG.

Following the merger,  the Operating  Partnership owns 100% of the 47,500 shares
(representing 95% of total outstanding shares) of non-voting  preferred stock of
GC. Six  individuals,  including  Sandra Boyle,  Frank Austin and Terri Garnick,
executive  officers of the  Company,  own the 2,500 shares  (representing  5% of
total  outstanding   shares)  of  voting  common  stock  of  GC.  The  Operating
Partnership  and GC  intend  that the  Operating  Partnership's  interest  in GC
complies with REIT qualification standards.

The Operating  Partnership,  through its ownership of preferred  stock of GC, is
entitled to receive cumulative,  preferred annual dividends of $1.896 per share,
which GC must pay before it pays any dividends  with respect to the common stock
of GC. Once GC pays the required cumulative preferred dividend,  it will pay any
additional  dividends in equal amounts per share on both the preferred stock and
the common stock at 95% and 5%,  respectively.  Through the preferred stock, the
Operating  Partnership is also entitled to receive a preferred liquidation value
of $169.49 per share plus all  cumulative  and unpaid  dividends.  The preferred
stock is subject to redemption at the option of GC after  December 31, 2005, for
a redemption price of $169.49 per share. As the holder of preferred stock of GC,
the  Operating  Partnership  has no voting power with respect to the election of
the directors of GC; all power to elect directors of GC is held by the owners of
the common stock of GC.

This  structure  is  intended  to  provide  the  Operating  Partnership  with  a
significant  portion  of the  economic  benefits  of the  operations  of GC. The
Operating  Partnership  will account for the  financial  results of GC using the
equity method.

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, 1999, and December 31, 1998, and the
consolidated  results of  operations  and cash flows of the Company for the nine
months  ended  September  30,  1999 and  1998.  All  intercompany  transactions,
receivables and payables have been eliminated in consolidation.

In the opinion of management,  the accompanying  unaudited financial  statements
contain all  adjustments  (consisting  of only  normal  accruals)  necessary  to
present  fairly the financial  position and results of operations of the Company
as of September 30, 1999, and for the period then ended.

                                       10
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1999


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

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

New Accounting Pronouncements
Statement of Financial  Accounting  Standards  (SFAS) No. 133,  "Accounting  for
Derivative Instruments and Hedging Activities" was issued in June 1998. SFAS No.
133 was  originally  effective for fiscal years  beginning  after June 15, 1999,
with early  adoption  permitted.  In June 1999,  SFAS No. 137,  "Accounting  for
Derivative  Instruments and Hedging  Activities - Deferral of the Effective Date
of FASB  Statement No. 133 - an amendment of FASB  Statement No. 133" was issued
which,  among other things,  deferred the final  implementation  to fiscal years
beginning  after June 15, 2000. SFAS No. 133 provides  comprehensive  guidelines
for the recognition  and  measurement of derivatives and hedging  activities and
specifically  requires all  derivatives  to be recorded on the balance  sheet at
fair  value.   Management  is  evaluating   the  effects,   if  any,  that  this
pronouncement  will  have  on the  Company's  consolidated  financial  position,
results of operations and financial statement position.

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

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

The useful lives are as follows:

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

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

Investments in Development
The  Company,  through  mezzanine  loans and  equity  contributions,  invests in
various  development  alliances with projects currently under  development.  The
interest on advances and other direct  project costs incurred by the Company are
capitalized to the investment  during the period in which the projects are under
development. See Note 6 for further discussion.

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

                                       11
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1999


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

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

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

Fair Value of Financial Instruments
Statement of Financial  Accounting  Standards No. 107 requires  disclosure about
fair value for all financial instruments. Based on the borrowing rates currently
available to the Company,  the carrying amount of debt  approximates fair value.
Certain assumed debt  instruments have been recorded at a premium based upon the
stated rate on the  instrument and the then  available  borrowing  rates for the
Company.  Cash and cash equivalents  consist of demand deposits and certificates
of deposit with  financial  institutions.  The carrying  amount of cash and cash
equivalents  as  well  as  the  mortgage  loans   receivable   described  above,
approximates fair value.

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

At September  30, 1999,  the Company was not a party to any open  interest  rate
protection  agreements other than the interest rate cap contract entered into in
August 1999 and discussed in Note 7 below.

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

Minority Interest
Minority  interest  represents  the  11.96%  limited  partner  interests  in the
Operating Partnership not held by the Company.

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

                                       12
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1999


For the nine months ended  September 30, 1999 and 1998,  no tenants  represented
10% or more of rental revenue of the Company.

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

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

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

Income Taxes
The  Company  has made an  election  to be taxed as a REIT  under  Sections  856
through 860 of the Code. As a REIT, the Company generally will not be subject to
Federal  income tax to the extent that it  distributes  at least 95% of its REIT
taxable  income  to  its  stockholders.   REITs  are  subject  to  a  number  of
organizational and operational requirements.  If the Company fails to qualify as
a REIT in any taxable  year,  the Company will be subject to Federal  income tax
(including  any  applicable  alternative  minimum tax) on its taxable  income at
regular  corporate  tax rates.  Even if the Company  qualifies for taxation as a
REIT,  the Company may be subject to certain state and local taxes on its income
and property and to Federal income and excise taxes on its undistributed income.

Reference to 1998 Audited Financial Statements
These  unaudited  financial  statements  should be read in conjunction  with the
Notes  to  Consolidated  Financial  Statements  included  in  the  1998  audited
financial statements.

Note 3.   RENTAL PROPERTY

Acquisitions
In the third quarter of 1999, the Company acquired all of the real estate assets
of  Prudential-Bache/Equitec  Real  Estate  Partnership,  a  California  limited
partnership (the "Pru Bache Portfolio") in which the managing general partner is
Prudential-Bache  Properties, Inc., and in which GC and Robert Batinovich, Chief
Executive Officer of the Company, have served as co-general partners since March
1994.  Neither  GC nor Robert  Batinovich  held a  material  equity or  economic
interest in the Pru-Bache Portfolio. The acquisition was unanimously approved by
the  Company's  independent   directors,   with  Robert  Batinovich  and  Andrew
Batinovich  abstaining.  The  total  acquisition  cost,  including  third  party
expenditures  incurred  for the purpose of the  transaction,  was  approximately
$49.1 million,  which  consisted of (i)  approximately  $15.2 million of assumed
debt and (ii) the  balance in cash,  including  approximately  $21.4  million of
proceeds from the sales of real estate assets and an $11.2 million advance under
the Credit Facility.  The Pru-Bache  Portfolio consists of four office buildings
and one office/flex property,  aggregating 550,592 total square feet and located
in Rockville, Maryland, Memphis, Tennessee, Sacramento,  California and Seattle,
Washington.

In the second quarter of 1999, the Company  expanded its existing  holdings near
Los Angeles  International Airport by purchasing a 41,709 square foot industrial
building which is the second phase of the project purchased in the first quarter
(see  below).  This second phase has been leased on a long term triple net basis
to  the  tenant  currently  occupying  phase  one  of  the  project.  The  total
acquisition cost, including third party expenditures incurred for the purpose of
the transaction, was approximately $5.6 million.

In the first  quarter  of 1999,  the  Company  acquired  a 285 unit  multifamily
property  ("Springs of Indian Creek") located in Carrolton,  Texas. The property
is the first phase of a two-phase  project  comprising a total of 519 units. The
234 unit second phase of the project is currently under construction through one
of the  Company's  development  alliances and is expected to be completed in the
first quarter of the year 2000.  The total  acquisition  cost,  including  third

                                       13
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1999

party   expenditures   incurred  for  the  purpose  of  the   transaction,   was
approximately  $20.8  million  comprising:  (i)  approximately  $14.1 million in
assumption  of debt and (ii) the  balance  in cash.  In  addition,  the  Company
acquired  a  1.45-acre  parcel  containing  34,500  square  feet  of  industrial
buildings  in Los  Angeles,  California,  near  the  Los  Angeles  International
Airport.  This  property is the first phase of a  two-phase  project.  The total
acquisition cost, including third party expenditures incurred for the purpose of
the  transaction,  was  approximately  $3.1 million,  which was paid entirely in
cash. The property has been leased to a single tenant under a 15-year triple-net
lease.

Dispositions
In the third quarter of 1999,  the Company sold five  properties,  including two
office,  two  office/flex  and one hotel.  The assets were sold for an aggregate
sales price of approximately  $19,865,000 and generated an aggregate net gain of
approximately $1,229,000.  This gain was offset by a $1,600,000 reduction in the
sale  price of a hotel  sold in June 1998 (see Note 5 for  further  discussion),
resulting in an aggregate net loss for the quarter of $371,000.

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

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

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

Prospective Dispositions
The  Company  has  entered  into  separate  definitive  agreements  to sell  six
properties,  including two office properties, two office/flex properties and two
industrial properties.  The sales are expected to close in the fourth quarter of
1999 and the first quarter of 2000 for an aggregate sales price of approximately
$22.7 million,  however,  they are subject to certain  contingencies,  including
satisfactory completion of due diligence and customary closing conditions.  As a
result,  there can be no  assurance  that these sales will be  completed.  These
properties  are  reflected  as Real  Estate  Held For  Sale on the  accompanying
consolidated  balance sheet as of September 30, 1999. See Note 13 for discussion
of sales subsequent to September 30, 1999.

Note 4.   INVESTMENTS IN ASSOCIATED COMPANIES

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

                                       14
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1999


As of September 30, 1999 and 1998, the Company had the following  investments in
the Associated Companies (in thousands):

                                          GC (1)
Investment at December 31, 1998         $   8,807
Distributions                                (433)
Equity in earnings                          1,212
                                        ---------
Investment at September 30, 1999        $   9,586
                                        =========

                                            GC             GHG           Total
Investment at December 31, 1997         $   8,519      $   2,429      $  10,948
Distributions                              (1,005)          (195)        (1,200)
Equity in earnings (loss)                   1,889           (199)         1,690
                                        ---------      ----------     ---------
Investment at September 30, 1998        $   9,403      $   2,035      $  11,438
                                        =========      =========      =========

(1) All amounts  presented for GC represent  combined amounts for GC and GHG due
to the September 30, 1999 merger, as previously discussed in Note 1.

Note 5.   MORTGAGE LOANS RECEIVABLE

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

                                                        1999              1998
                                                      ---------        ---------

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

Note  secured by a hotel  property in Dallas,  TX,
with  a  fixed   interest  rate  of  9%,   monthly
interest-only  payments  and a  maturity  date  of
March 2000. The principal  amount of this loan was
reduced in September  1999.  See below for further
discussion.                                             2,000             3,600

Note  secured  by  Gateway  Park land  located  in
Aurora,  CO, with a stated fixed  interest rate of
13%,  quarterly   interest-only   payments  and  a
maturity  date of July 2005 (see below for further
discussion)                                            37,275            35,336

                                                     ----------        ---------
Total                                                $ 43,003          $ 42,420
                                                     ==========        =========

In 1998,  the  Company  entered  into a  development  alliance  with  The  Pauls
Corporation (see Note 6). In addition to this development alliance,  the Company
loaned approximately $34 million ($37.3 million,  including accrued interest, at
September 30, 1999),  secured by a First Mortgage,  to continue the build-out of
Gateway  Park.  In this  arrangement,  the  Company  has  rights  under  certain
conditions and subject to certain  contingencies to purchase the properties upon
completion of development and, thus, through this arrangement, the Company could
acquire up to 2.2 million  square  feet of office,  office/flex  and  industrial
space and 1,600 multifamily units over the next ten years.

In June 1998,  the Company sold a hotel  property in Dallas,  Texas,  to a third
party for a sale price of $4.2 million, of which $3.6 million was represented by
a note  receivable  secured by the hotel  property.  In September 1999, the loan
agreement  was  modified  to reduce the sale price of the hotel by $1.6  million
and, thus, the principal  amount of the note receivable was also reduced by $1.6
million. In addition,  the maturity date of the note was extended to March 2000.
This  reduction in the sale price of the hotel was recorded as a loss on sale of
the  property  and is included in the  $371,000 net loss on sales of real estate
assets on the  accompanying  consolidated  statement of operations for the three
months ended September 30, 1999.

                                       15
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1999


Note 6.   INVESTMENTS IN DEVELOPMENT AND OTHER ASSETS

The  Company  has  formed  4  development   alliances  for  the  development  of
approximately  713,000  square  feet of  office,  office/flex  and  distribution
properties and 1,710 multifamily units in North Carolina,  Colorado,  Texas, New
Jersey,  Kansas and Michigan. As of September 30, 1999, the Company has advanced
approximately $42 million.  Under these development  alliances,  the Company has
certain rights to purchase the properties  upon  completion of development  over
the next five years.

In June 1999,  the Company  entered into a joint  venture in which it sold a 90%
interest in Rockwall I & II, a 340,252  square  foot office  complex  located in
Rockville,  Maryland.  The Company  maintains a 10%  interest in the asset along
with a contract for property  management  and asset  management  services  under
which the Company is entitled to receive property  management fees of 3% of cash
receipts and an annual asset  management fee of $350,000.  The proceeds from the
sale were used to paydown the Credit  Facility  (discussed  below) and to reduce
other secured debt. The value of this 10% interest is approximately $1.3 million
and is included in Other Assets on the accompanying  consolidated  balance sheet
as of September  30, 1999.  This  investment  is accounted  for using the equity
method.

In April 1999,  the Company  also  purchased a 10%  interest in a joint  venture
holding  the fee  simple  title to the land  under  Rincon  Center I & II in San
Francisco, California. The land was purchased from the United States Post Office
for a purchase  price of $80.5  million.  The land has a triple net ground lease
with a remaining  term of 51 years with minimum 30% rental  increases  every six
years.  Occupying  a full  city  block  near  the  waterfront  in the  Financial
District, Rincon Center I & II contains 476,709 square feet of commercial office
and retail space, 320 multifamily units and 381 subterranean parking spaces. The
value of this 10% interest is  approximately $2 million and is included in Other
Assets on the accompanying  consolidated balance sheet as of September 30, 1999.
This  investment is accounted for using the equity method.  In October 1999, the
joint venture acquired Rincon Center I & II. See Note 13 for further discussion.

Note 7.   SECURED AND UNSECURED LIABILITIES

The Company had the following  mortgage loans,  bank lines,  unsecured notes and
notes  payable  outstanding  as of  September  30,  1999,  and December 31, 1998
(dollars in thousands):
                                                             1999          1998
                                                            ------        ------

Secured  loans  with  various   lenders,   net  of
unamortized  discount  of  $5,671  and  $6,140  at
September   30,  1999  and   December   31,  1998,
respectively. All loans have a fixed interest rate
of 6.125% and a November 10, 2008  maturity  date.
Monthly  principal  and  interest  payments  range
between $296 and $458.  These loans are secured by
35 properties with an aggregate net carrying value
of $402,418 and $408,439 at September 30, 1999 and
December  31,  1998,  respectively.                       $ 233,322    $ 234,871

Secured loan with an investment  bank with a fixed
interest  rate of  7.57%  and a  maturity  date of
January 1,  2006.  This loan was paid off in March
1999 with the  proceeds  from a $26  million  loan
discussed below.                                                --        13,220


                                       16
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1999



                                                             1999          1998
                                                            ------        ------

Secured  loans  with  various   lenders,   bearing
interest  at fixed rates  between  6.95% and 9.25%
(approximately  $52,824 of these loans  include an
unamortized  premium of  approximately  $366 which
reduces  the  effective  interest  rate  on  those
instruments to 6.75%),  with monthly principal and
interest payments ranging between $11 and $443 and
maturing  at various  dates  through  December  1,
2030.  These loans are secured by properties  with
an aggregate  net  carrying  value of $549,627 and
$576,633 at  September  30, 1999 and  December 31,
1998, respectively.                                       $ 324,841    $ 335,257

Secured loans with various banks bearing  interest
at variable rates ranging  between 6.20% and 8.25%
at  September  30,  1999,  monthly  principal  and
interest payments ranging between $16 and $500 and
maturing at various dates through August 30, 2004.
These  loans are  secured  by  properties  with an
aggregate  net  carrying  value  of  $210,007  and
$179,438 at  September  30, 1999 and  December 31,
1998, respectively.                                         136,125      125,230

Unsecured  $142,500  line  of  credit  with a bank
("Credit  Facility") with a variable interest rate
of  LIBOR  plus  1.625%   (6.960%  and  7.401%  at
September   30,  1999  and   December   31,  1998,
respectively),  monthly interest only payments and
a maturity  date of December  22,  2000,  with one
option to extend for 10 years.                               83,207       63,519

Unsecured  Series  A  Senior  Notes  with a  fixed
interest   rate  of   7.625%,   interest   payable
semiannually  on March 15 and  September 15, and a
maturity  date of March  15,  2005.  Approximately
$25.9 million of the notes were retired in 1999 as
discussed below.                                            124,140      150,000

Total                                                     $ 901,635    $ 922,097
                                                          =========    =========

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

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

In August 1999,  the Company closed a $97.6 million  secured  financing with Key
Bank/FNMA.  The proceeds from this financing,  combined with proceeds from a new
$7.2 million mortgage and a draw on the Credit  Facility,  were used to retire a
$113.2  million  mortgage  which would have matured in December of 1999. The new
financing is a revolving line of credit  maturing in five years with a five-year
extension option, and bears interest at a floating rate equal to 75 basis points
over the rate for 90-day mortgage backed securities credit-enhanced by FNMA. The
current interest rate on this loan is 6.2%.

In connection with the Key Bank/FNMA secured financing, the Company entered into
an interest  rate cap  agreement to hedge  increases  in interest  rates above a
specified  level of 11.21%.  The agreement is for a term concurrent with the Key

                                       17
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1999

Bank/FNMA  instrument,  is indexed to a 90-day LIBOR rate, and is for a notional
amount equal to the maximum  amount  available on the Key Bank/FNMA  loan. As of
September 30, 1999, the 90-day LIBOR rate was 6.084%. The Company paid a premium
of approximately $434,000 at the inception of the cap agreement,  which is being
amortized as additional interest expense over the life of the agreement.

In the second and third  quarters  of 1999,  the Company  retired  approximately
$25.9 million of unsecured  Series A Senior Notes at a discount.  As a result of
these transactions, a gain on early extinguishment of debt of approximately $2.6
million was recorded  which is included in the net gain on early  extinguishment
of debt on the  accompanying  consolidated  statement of operations for the nine
months ended September 30, 1999, as discussed in Note 8 below.

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

The required  principal  payments on the Company's  debt for the next five years
and thereafter, as of September 30, 1999, are as follows (in thousands):
                   Year Ending
                   December 31,
                      1999                  $    2,377
                      2000                     176,050
                      2001                      22,532
                      2002                      14,301
                      2003                      37,891
                      Thereafter               648,484
                                              ---------
                      Total                 $  901,635
                                              =========

Note 8.   NET GAIN ON EARLY EXTINGUISHMENT OF DEBT

In  connection  with the loan  payoffs  discussed  above and the payoff of other
mortgage debt, the Company recorded a net gain on early  extinguishment  of debt
of $437,000 for the nine months ended  September 30, 1999. This gain consists of
$2,568,000 of gains on retirement of Series A Senior Notes (as discussed  above)
offset by  $2,026,000  of losses due to  prepayment  penalties  and  $105,000 of
losses due to the  writeoff of  unamortized  loan fees upon the early  payoff of
four  loans.  These loans were  paid-off  early when more  favorable  terms were
obtained  through  new  financing  (discussed  above)  and  upon the sale of the
properties securing the loans.

Note 9.   RELATED PARTY TRANSACTIONS

Fee and reimbursement  income earned by the Company from related parties totaled
$2,492,000 and $2,452,000 for the nine months ended September 30, 1999 and 1998,
respectively,  and consisted of property  management fees, asset management fees
and other fee income. In addition,  the Company paid GC property management fees
and salary  reimbursements  totaling $1,180,000 and $940,000 for the nine months
ended September 30, 1999 and 1998,  respectively,  for management of a portfolio
of residential  properties  owned by the Company,  which is included in property
operating expenses and general and  administrative  expenses on the accompanying
consolidated statements of operations.

In 1998, the Company  acquired from a Managed  Partnership an option to purchase
all of its rights under a Lease with Option to Purchase  Agreement,  for certain
undeveloped  land located in  Burlingame,  California.  Upon  expiration  of the
option  period,  the  independent  members of the  Company's  Board of Directors
concluded  that  proceeding  with the  development  of the  property  would have
required that the Company incur  substantial debt.  Accordingly,  on February 1,
1999,  the  Company  elected  not to  proceed  with the  development  and not to
exercise  the  option in  return  for the  Managed  Partnership's  agreement  to
reimburse the Company for  $2,309,000 of  predevelopment  costs,  $462,000 to be
paid in cash with the balance in a promissory  note bearing  interest at 10% and
due on the earlier of sale,  refinance or March 31, 2002. The note also contains
a  participation  in  profits  realized  by the  Managed  Partnership  from  the
development  and sale of the  property.  The  principal  balance  of the note is
included in Other Assets on the  accompanying  consolidated  balance sheet as of
September 30, 1999.

                                       18
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1999


Note 10.  EARNINGS PER SHARE

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

                                                            Three months ended                   Nine months ended
                                                              September 30,                        September 30,
                                                      -------------------------------      -------------------------------
                                                          1999              1998               1999              1998
                                                      -------------     -------------      -------------     -------------
<S>                                                  <C>               <C>               <C>               <C>
Net income available to common
     Stockholders - Basic                             $      6,607      $      4,940       $     23,096      $     21,594
Minority interest                                              888               635              3,084             1,909

                                                      -------------     -------------      -------------     -------------
Net income available to common
     Stockholders - Diluted                           $      7,495      $      5,575       $     26,180      $     23,503
                                                      -------------     -------------      -------------     -------------

Weighted average shares:
Basic                                                   31,020,822        31,703,963         31,480,583       31,634,138
Stock options                                               86,380           325,661            103,430          346,666
Convertible Operating Partnership Units                  4,167,738         4,231,604          4,198,771        3,134,034
                                                      -------------     -------------      -------------    --------------
Diluted                                                 35,274,940        36,261,228         35,782,784       35,114,838
                                                      -------------     -------------      -------------    --------------

Basic earnings per share                              $       0.21      $       0.16       $       0.73     $       0.68
Diluted earnings per share                            $       0.21      $       0.15       $       0.73     $       0.67
</TABLE>

Note 11.  STOCK COMPENSATION PLAN

In May 1996, the Company  adopted an employee stock  incentive plan (the "Plan")
to provide  incentives to attract and retain high quality executive officers and
key employees.  Certain amendments to the Plan were ratified and approved by the
stockholders   of  the  Company  at  the  Company's   1997  Annual   Meeting  of
Stockholders.  The Plan,  as  amended,  provides  for the grant of (i) shares of
Common Stock of the Company, (ii) options, stock appreciation rights ("SARs") or
similar  rights with an exercise or conversion  privilege at a fixed or variable
price related to the Common Stock and/or the passage of time,  the occurrence of
one or more  events,  or the  satisfaction  of  performance  criteria  or  other
conditions, or (iii) any other security with the value derived from the value of
the Common Stock of the Company or other securities  issued by a related entity.
Such awards include,  without  limitation,  options,  SARs,  sales or bonuses of
restricted  stock,  dividend  equivalent  rights ("DERs"),  Performance Units or
Preference  Shares.  The total number of shares of Common Stock  available under
the Plan is equal to the  greater  of  1,140,000  shares or 8% of the  number of
shares  outstanding  determined  as of the day  immediately  following  the most
recent issuance of shares of Common Stock or securities  convertible into shares
of Common Stock;  provided that the maximum aggregate number of shares of Common
Stock available for issuance under the Plan may not be reduced.  For purposes of
calculating  the number of shares of Common Stock  available under the Plan, all
classes  of  securities  of the  Company  and  its  related  entities  that  are
convertible  presently  or in the future by the  security  holder into shares of
Common Stock or which may  presently or in the future be exchanged for shares of
Common Stock pursuant to redemption  rights or otherwise,  shall be deemed to be
outstanding shares of Common Stock. Notwithstanding the foregoing, the aggregate
number of shares  as to which  incentive  stock  options,  one type of  security
available under the Plan, may be granted under the Plan may not exceed 1,140,000

                                       19
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1999

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, 1999,  67,250 shares
of bonus  grants have been issued  under the Plan.  The fair value of the shares
granted  have  been  recorded  as  deferred  compensation  in  the  accompanying
financial statements and will be charged to earnings ratably over the respective
vesting  periods  that  range  from 2 to 5  years.  As of  September  30,  1999,
3,831,493  options to  purchase  shares of Common  Stock were  outstanding.  The
exercise price of each  incentive  stock option granted is greater than or equal
to the per-share fair market value of the Common Stock on the date the option is
granted and, as such, no compensation  expense has been recognized.  The options
vest over periods between 1 and 6 years, and have a maximum term of 10 years.

Note 12.  SEGMENT INFORMATION

The Company owns a diverse portfolio of properties comprising six product types:
office, office/flex,  industrial,  retail, multifamily and hotels. Each of these
product  types  represents a reportable  segment with  distinct  uses and tenant
types which require the Company to employ different management strategies.  Each
segment  contains  properties  located in various regions and markets within the
United  States.  The office  portfolio  consists  primarily  of suburban  office
buildings.  The  office/flex  portfolio  consists of  properties  designed for a
combination of office and warehouse uses. The industrial  portfolio  consists of
properties  designed for warehouse,  distribution  and light  manufacturing  for
single-tenant or multi-tenant  use. The retail portfolio  consists  primarily of
community  shopping centers  anchored with national or regional  supermarkets or
drug stores. The properties in the multifamily portfolio are apartment buildings
with units rented to residential tenants on either a month-by-month basis or for
terms of one year or less. The Company's hotel operations are from three limited
service  "all-suite"  properties leased to and operated by third parties.  As of
September 30, 1999, two of these hotel  properties  have been sold with only one
remaining in the Company's portfolio.

The accounting  policies of the segments are the same as those  described in the
summary of significant accounting policies. The Company evaluates performance of
its property types based on net operating  income derived by subtracting  rental
expenses  and real estate  taxes  (operating  expenses)  from  rental  revenues.
Significant  information  used by the Company for its reportable  segments as of
and for the nine  months  ended  September  30,  1999 and 1998 is as follows (in
thousands):
<TABLE>
<CAPTION>


1999                             Office     Office/Flex    Industrial     Retail     Multi-family     Hotel      Total
----
                               -----------  -------------  -----------  -----------  ------------ ------------  -------------
<S>                           <C>           <C>            <C>         <C>           <C>           <C>          <C>

Rental revenue                 $   89,946    $   27,289     $  14,229    $   8,561    $  50,891     $   1,211    $   192,127
Property operating expenses        35,310         7,875         3,328        2,853       22,353           377         72,096
                               ===========  =============  ===========  ===========  ============ ============  =============
Net operating income (NOI)     $   54,636    $   19,414     $  10,901    $   5,708    $  28,538     $     834    $   120,031
                               ===========  =============  ===========  ===========  ============ ============  =============

1998
Rental revenue                 $   87,647    $   27,063     $  11,432    $   8,638    $  24,695     $   3,428    $   162,903
Property operating expenses        33,429         8,165         2,761        2,876       10,306           838         58,375
                               ===========  =============  ===========  ===========  ============ ============  =============
Net operating income (NOI)     $   54,218    $   18,898     $   8,671    $   5,762    $  14,389     $   2,590    $   104,528
                               ===========  =============  ===========  ===========  ============ ============  =============
</TABLE>

                                       20
<PAGE>
                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                               September 30, 1999


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

                                                           1999                 1998
                                                      ----------------     ----------------
<S>                                                   <C>                  <C>
Revenues
Total revenue for reportable segments                   $    192,127         $    162,903
Other revenue (1)                                             15,642                8,050
                                                      ================     ================
Total consolidated revenues                             $    207,769         $    170,953
                                                      ================     ================
</TABLE>


<TABLE>
<CAPTION>
                                                           1999                 1998
                                                      ----------------     ----------------
<S>                                                   <C>                  <C>

Net Income
NOI for reportable segments                             $    120,031         $    104,528
Elimination of internal property management fees               6,090                5,340
Unallocated amounts:
   Other revenue (1)                                          15,642                8,050
   General and administrative expenses                        (7,054)              (8,197)
   Depreciation and amortization                             (43,578)             (35,252)
   Interest expense                                          (48,678)             (35,916)
                                                      ================     ================
Income from operations  before minority interest and
   extraordinary items                                  $     42,453         $     38,553
                                                      ================     ================
</TABLE>

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

Note 13.  SUBSEQUENT EVENTS

Acquisitions
In October 1999, through one of its development alliances,  the Company acquired
the recently  completed  Phase II (96 units) of the Chase Monroe  Apartments  in
Monroe,  North Carolina.  Phase I (120 units) was acquired as part of the Marion
Bass Portfolio acquisition in December 1997.

In October  1999,  a joint  venture in which the  Company  holds a 10%  interest
purchased  the  leasehold  improvements  comprising  Rincon Center I & II in San
Francisco,  California, after having previously acquired the fee simple title to
the  land.  In  connection  with  this  acquisition,  the  Company  invested  an
additional $6,425,000 in the joint venture. The Company took over management and
leasing  of the  project  on  November  1, 1999 and is now  entitled  to receive
property  management  fees of 1.75%  of cash  receipts.  See Note 6 for  further
discussion of this joint venture.

Dispositions
Subsequent  to  September  30, 1999,  and through the date of this  filing,  the
Company sold two office/flex properties and a 22,314 square foot building from a
300,894 square foot  office/flex  property.  These  properties  were sold for an
aggregate  sales price of $7.4 million and  generated  an aggregate  net gain of
approximately $1.1 million.

Common Stock Repurchase Plan
In November 1999, the Company  announced that its Board of Directors has doubled
the size of the  repurchase  authorization  under  the  Company's  common  stock
repurchase  plan.  The repurchase  plan,  under which the Board of Directors had
originally approved the repurchase of up to 3.1 million shares, was increased to
6.2 million  shares.  To date,  the Company has  repurchased  approximately  1.4
million  shares,  representing  approximately  22%  of the  expanded  repurchase
authorization.

                                       21
<PAGE>


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

Background

Glenborough Realty Trust Incorporated (the "Company") is a self-administered and
self-managed  real estate  investment  trust ("REIT")  engaged  primarily in the
ownership,   operation,   management,   leasing,   acquisition,   expansion  and
development of various types of income-producing properties. As of September 30,
1999,  the Company  owned and  operated  167  income-producing  properties  (the
"Properties," and each a "Property").  The Properties are comprised of 51 office
Properties,  39  office/flex  Properties,  29 industrial  Properties,  10 retail
Properties,  37  multifamily  Properties  and 1 hotel  Property,  located  in 22
states.

The Company was  incorporated  in the State of Maryland on August 26,  1994.  On
December 31, 1995, the Company completed a consolidation  (the  "Consolidation")
in which Glenborough  Corporation,  a California  corporation,  and eight public
limited  partnerships (the  "Partnerships")  collectively,  the "GRT Predecessor
Entities",  merged with and into the Company.  The Company (i) issued  5,753,709
shares  (the  "Shares")  of $.001 par value  Common  Stock of the Company to the
Partnerships  in exchange  for the net assets of the  Partnerships;  (ii) merged
with Glenborough Corporation, with the Company being the surviving entity; (iii)
acquired an interest in three  companies (the  "Associated  Companies"),  two of
which  merged on June 30,  1997,  that  provide  asset and  property  management
services,  as well as other  services;  and (iv) through a subsidiary  operating
partnership,   Glenborough  Properties,   L.P.  (the  "Operating  Partnership"),
acquired interests in certain warehouse distribution  facilities from GPA, Ltd.,
a California limited partnership  ("GPA"). A portion of the Company's operations
are  conducted  through the Operating  Partnership,  of which the Company is the
sole general  partner,  and in which the Company holds a 87.04% limited  partner
interest at September 30, 1999. The Company  operates the assets acquired in the
Consolidation and in subsequent  acquisitions (see further discussion below) and
intends to continue to invest in income-producing  property directly and through
joint  ventures.  In addition,  the  Associated  Companies  may acquire  general
partner  interests in other real estate  limited  partnerships.  The Company has
elected  to  qualify  as a REIT  under the  Internal  Revenue  Code of 1986,  as
amended.  The common and preferred  stock of the Company (the "Common Stock" and
the "Preferred  Stock",  respectively) are listed on the New York Stock Exchange
("NYSE") under the trading symbols "GLB" and "GLB Pr A", respectively.

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

     Acquired 20  properties  in 1996,  90  properties in 1997, 69 properties in
     1998 and 8 properties in 1999. The total acquired  Properties consist of an
     aggregate of  approximately  16.4 million  rentable  square feet of office,
     office/flex,  industrial and retail space,  9,734 multifamily units and 227
     hotel suites and had aggregate  acquisition  costs,  including  third party
     expenditures   incurred   for  the  purpose  of  these   transactions,   of
     approximately $1.84 billion.

     From January 1, 1996 to the date of this filing,  sold 57 properties  which
     were comprised of eight office properties, 15 office/flex properties, eight
     industrial properties, 19 retail properties, two multifamily properties and
     five hotel  properties,  to redeploy  capital into  properties  the Company
     believes have  characteristics  more suited to its overall growth  strategy
     and operating goals.

     Completed four offerings of Common Stock in October 1996,  March 1997, July
     1997 and October 1997  (respectively,  the  "October  1996  Offering,"  the
     "March 1997  Offering,"  the "July 1997  Offering,"  and the "October  1997
     Offering"),  resulting in aggregate  gross proceeds of  approximately  $562
     million.

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

     Issued $150 million of unsecured  7.625% Series A Senior Notes which mature
     on March 15, 2005. In the second and third quarters of 1999,  $25.9 million
     of the Senior Notes were retired at a discount  which resulted in a gain on
     early extinguishment of debt of approximately $2.6 million.

                                       22
<PAGE>

     Entered into 4 development alliances to which the Company has made
     advances  of  approximately  $42  million  and a  loan  (including  accrued
     interest) of $37.3 million as of September 30, 1999.

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

Results of Operations

Comparison of the nine months ended  September 30, 1999 to the nine months ended
September 30, 1998.

Rental Revenue.  Rental revenue increased  $29,224,000,  or 18%, to $192,127,000
for the nine months ended  September 30, 1999,  from  $162,903,000  for the nine
months ended  September 30, 1998. The increase  included  growth in revenue from
the office,  office/flex,  industrial and multifamily  Properties of $2,299,000,
$226,000,  $2,797,000 and $26,196,000,  respectively,  due primarily to 1998 and
1999 acquisitions. These increases were partially offset by decreases in revenue
from the retail and hotel  Properties of $77,000 and  $2,217,000,  respectively,
due to the 1998  and  1999  sales of  three  retail  properties  and five  hotel
properties.  Excluding  properties  that have been sold,  rental revenue for the
nine months ended September 30, 1999,  included  $13,329,000  generated from the
1996 Acquisitions, $67,313,000 generated from the 1997 Acquisitions, $98,740,000
generated  from the 1998  Acquisitions  and  $3,615,000  generated from the 1999
Acquisitions.  In addition,  $9,130,000 of rental  revenue was generated from 26
properties that were sold during the nine months ended September 30, 1999.

Fees and Reimbursements from Affiliates. Fees and reimbursements from affiliates
consist  primarily of property  management fees, asset management fees and lease
commissions paid to the Company under property and asset  management  agreements
with the Managed Partnerships.  This revenue did not change significantly,  with
an increase of $40,000, or 2%, to $2,492,000 for the nine months ended September
30, 1999, from $2,452,000 for the nine months ended September 30, 1998.

Interest and Other Income.  Interest and other income increased  $3,197,000,  or
158%,  to  $5,216,000  for the  nine  months  ended  September  30,  1999,  from
$2,019,000 for the nine months ended September 30, 1998. The increase  primarily
consisted  of  interest  income on a mortgage  loan  receivable  secured by land
located in Aurora,  Colorado  which  originated  on June 30, 1998,  and interest
earned on lender impound  accounts,  invested cash balances and notes receivable
for tenant improvements.

Equity in Earnings of  Associated  Companies.  Equity in earnings of  Associated
Companies  decreased  $478,000 or 28%, to  $1,212,000  for the nine months ended
September  30, 1999,  from  $1,690,000  for the nine months ended  September 30,
1998.  The decrease is primarily due to a decrease in earnings from GC resulting
from a provision  to reduce the  carrying  value of  management  contracts  with
certain of the Managed Partnerships.  This decrease is also due to a decrease in
earnings from GHG resulting from the cancellation of GHG's hotel leases with the
Company.

Net Gain on  Sales of Real  Estate  Assets.  A net gain on sales of real  estate
assets of $6,722,000  during the nine months ended September 30, 1999,  resulted
from the sale of seven office  properties,  eleven office/flex  properties,  two
industrial  properties,  three retail properties,  one multifamily property, two
hotel  properties  and a small  interest  in real  estate  securities  from  the
Company's  portfolio.  The net gain on sales of real estate assets of $1,889,000
during the nine months ended  September 30, 1998,  resulted from the sale of one
multifamily property, two industrial properties,  two office/flex properties and
two hotel properties from the Company's portfolio.

Property Operating Expenses.  Property operating expenses increased $12,971,000,
or 24%, to  $66,006,000  for the nine months  ended  September  30,  1999,  from
$53,035,000  for the  nine  months  ended  September  30,  1998.  This  increase
represents  increases in property  operating  expenses  attributable to the 1998
Acquisitions and the 1999 Acquisitions offset by decreases in property operating
expenses due to the 1998 and 1999 sales of properties.

                                       23
<PAGE>

General  and  Administrative  Expenses.   General  and  administrative  expenses
decreased $1,143,000,  or 14%, to $7,054,000 for the nine months ended September
30, 1999,  from  $8,197,000 for the nine months ended  September 30, 1998.  This
decrease is  primarily  due to a  reduction  in staff and  overhead  expenses in
response to a decrease in acquisition  and marketing  activities  since mid-1998
and a reduction in the number of  properties  owned.  As a percentage  of rental
revenue,  general and  administrative  expenses decreased from 5.0% for the nine
months ended September 30, 1998, to 3.7% for the nine months ended September 30,
1999.

Depreciation  and   Amortization.   Depreciation   and  amortization   increased
$8,326,000, or 24%, to $43,578,000 for the nine months ended September 30, 1999,
from  $35,252,000  for the nine months ended September 30, 1998. The increase is
primarily  due  to  depreciation  and  amortization  associated  with  the  1998
Acquisitions and 1999 Acquisitions.

Interest Expense.  Interest expense increased $12,762,000 or 36%, to $48,678,000
for the nine months ended  September  30, 1999,  from  $35,916,000  for the nine
months  ended  September  30,  1998.  Substantially  all of the increase was the
result of higher average  borrowings  during the nine months ended September 30,
1999, as compared to the nine months ended  September 30, 1998,  due to new debt
and  the  assumption  of  debt  related  to  the  1998   Acquisitions  and  1999
Acquisitions.

Net Gain on Early  Extinguishment  of Debt. Net gain on early  extinguishment of
debt of $437,000 during the nine months ended September 30, 1999,  consists of a
$2,568,000  gain on the  retirement  of Senior  Notes at a  discount,  offset by
$2,026,000 of prepayment penalties and $105,000 for the write-off of unamortized
loan fees upon the early payoff of four loans.  These loans were paid-off  early
when more favorable terms were obtained through new financing  (discussed below)
and upon the sale of the properties securing the loans.

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

Rental Revenues. Rental revenues decreased $2,387,000, or 4%, to $62,934,000 for
the three months ended September 30, 1999, from $65,321,000 for the three months
ended September 30, 1998. The decrease  included  decreases in revenues from the
office,  office/flex,  retail  and hotel  Properties  of  $1,319,000,  $896,000,
$690,000 and $211,000,  respectively.  These  decreases are primarily due to the
sale of eight office  properties,  eleven office/flex  properties,  three retail
properties  and three  hotels since  September  30, 1998.  These  decreases  are
partially  offset by increases in revenue from the  industrial  and  multifamily
Properties of $64,000 and $665,000,  respectively.  The increase in  multifamily
revenue is primarily due to the acquisition of a 285-unit  property in the first
quarter of 1999.

Fees and Reimbursements.  Fees and reimbursements  revenue consists primarily of
property  management fees,  asset management fees and lease  commissions paid to
the  Company  under  property  and asset  management  agreements.  This  revenue
decreased $602,000, or 49%, to $618,000 for the three months ended September 30,
1999, from  $1,220,000 for the three months ended September 30, 1998,  primarily
due to transaction fees received from GC in 1998.

Interest  and Other  Income.  Interest and other  income  increased  $363,000 to
$1,779,000 for the three months ended  September 30, 1999,  from  $1,416,000 for
the three months ended September 30, 1998. The increase  primarily  consisted of
an increase in interest income from a mortgage loan  receivable  secured by land
located in Aurora, Colorado, which originated on June 30, 1998. Interest on this
loan is  compounded  annually  on June  30  which  resulted  in an  increase  of
approximately  $100,000  during the three  months  ended  September  30, 1999 as
compared to the three months ended  September  30, 1998.  In addition,  interest
from other notes receivable which originated in 1999 in connection with property
sales was  approximately  $133,000  during the three months ended  September 30,
1999. These other notes receivable have a book value of approximately $6,400,000
at  September  30,  1999,  and are  included  in other  assets on the  Company's
consolidated balance sheet as of September 30, 1999.

Equity in Earnings of  Associated  Companies.  Equity in earnings of  Associated
Companies  increased  $1,148,000,  or 183%, to  $1,777,000  for the three months
ended September 30, 1999, from $629,000 for the three months ended September 30,
1998.  The increase is primarily  due to an increase in earnings from GC arising
from a benefit for income taxes  generated by the write-off of certain tax basis
assets which had no book basis for financial reporting purposes.

                                       24
<PAGE>

Net Loss on Sales of Real  Estate  Assets.  The net loss on sales of real estate
assets of $371,000  during the three months ended  September 30, 1999,  resulted
from the  $1,229,000  gain on sales of two office  properties,  two  office/flex
properties  and one hotel  property  from the Company's  portfolio,  offset by a
$1,600,000 loss on the 1998 sale of a hotel property.  In June 1998, the Company
sold a hotel  property  in Dallas,  Texas,  to a third party for a sale price of
$4.2 million, of which $3.6 million was represented by a note receivable secured
by the hotel  property.  In September  1999,  the loan agreement was modified to
reduce the sale price of the hotel by $1.6  million  and,  thus,  the  principal
amount of the note  receivable was also reduced by $1.6 million.  This reduction
in the sale price of the hotel was  recorded as a loss on sale of the  property.
The net loss on sales of real estate assets of $250,000  during the three months
ended September 30, 1998, resulted from additional costs to sell one office/flex
property,  one  industrial  property,  one  multifamily  property  and two hotel
properties  from the  Company's  portfolio  in the first and second  quarters of
1998.

Property  Operating  Expenses.   Property  operating  expenses  did  not  change
significantly  with a decrease of $301,000,  or 1%, to $22,145,000 for the three
months ended  September 30, 1999,  from  $22,446,000  for the three months ended
September 30, 1998.

General  and  Administrative  Expenses.   General  and  administrative  expenses
decreased $1,091,000, or 32%, to $2,281,000 for the three months ended September
30, 1999,  from  $3,372,000 for the three months ended  September 30, 1998. This
decrease is  primarily  due to a  reduction  in staff and  overhead  expenses in
response to a decrease in acquisition  and marketing  activities  since mid-1998
and a reduction in the number of  properties  owned.  As a percentage  of rental
revenue,  general and administrative  expenses decreased from 5.2% for the three
months ended  September 30, 1998,  to 3.6% for the three months ended  September
30, 1999.

Depreciation  and  Amortization.  Depreciation  and  amortization did not change
significantly with a decrease of $43,000, or 0.30%, to $14,266,000 for the three
months ended  September 30, 1999,  from  $14,309,000  for the three months ended
September 30, 1998.

Interest Expense.  Interest expense decreased $1,344,000,  or 8%, to $15,720,000
for the three months ended  September 30, 1999,  from  $17,064,000 for the three
months  ended  September  30,  1998.  Substantially  all of the decrease was the
result of higher average  borrowings during the three months ended September 30,
1998, as compared to the three months ended September 30, 1999, due to pay downs
of debt in connection with sales of properties in 1999.

Net Gain on Early  Extinguishment  of Debt. Net gain on early  extinguishment of
debt of $740,000 during the three months ended September 30, 1999,  represents a
gain on the retirement of $8,750,000 of Senior Notes at a discount.

Liquidity and Capital Resources

Cash Flows
For the nine months  ended  September  30,  1999,  cash  provided  by  operating
activities decreased by $5,849,000 to $70,829,000 as compared to $76,678,000 for
the same period in 1998.  The decrease is  primarily  due to an increase in cash
used for other  assets  and  liabilities  offset by an  increase  in net  income
(before depreciation and amortization,  minority interest,  net gain on sales of
real estate assets and net gain on early  extinguishment  of debt) of $7,865,000
due  to the  1998  Acquisitions  and  1999  Acquisitions.  Cash  from  investing
activities  increased  by  $695,316,000  to  $61,450,000  of  cash  provided  by
investing  activities for the nine months ended  September 30, 1999, as compared
to  $633,866,000  of cash used for investing  activities  for the same period in
1998.  The increase is primarily due to a decrease in property  acquisitions  in
1999 as  compared  to the same  period in 1998.  During  the nine  months  ended
September  30, 1998,  the Company  acquired 69  properties  as compared to seven
properties  during the nine months ended  September 30, 1999. In addition,  cash
used for  investments in development,  marketable  securities and mortgage loans
receivable  decreased  significantly  during the nine months ended September 30,
1999 as compared  to the same  period in 1998.  These  decreases  are  partially
offset by an increase in proceeds  from sales of  properties  during 1999.  Cash
from financing activities decreased by $692,820,000 to $133,321,000 of cash used
for  financing  activities  for the nine months ended  September  30,  1999,  as
compared to $559,499,000  of cash provided by financing  activities for the same
period in 1998. This change was primarily due to a decrease in net proceeds from
the issuance of stock and proceeds from new debt. In 1998, the Company completed
an  offering  of  Preferred  Stock;  there have been no  offerings  in 1999.  In
addition,  in 1998, the Company issued $150,000,000 of unsecured Series A Senior
Notes.

                                       25
<PAGE>

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

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

Mortgage Loans Receivable
Mortgage loans  receivable  increased from  $42,420,000 at December 31, 1998, to
$43,003,000  at September  30, 1999.  This increase was primarily due to accrued
interest on a loan made by the Company under a development alliance, offset by a
$1.6 million decrease in a loan secured by a hotel property as discussed above.

Secured and Unsecured Financing
Mortgage  loans payable  decreased  from  $708,578,000  at December 31, 1998, to
$694,288,000  at September 30, 1999.  This decrease  resulted from the payoff of
approximately  $167,438,000  of mortgage loans in connection  with 1999 sales of
properties  and  refinancing  of  debt,  and  scheduled  principal  payments  of
approximately  $6,927,000.  This decrease is partially  offset by $29,275,000 of
new mortgage  loans in connection  with 1999  Acquisitions  and new financing of
$130,800,000 (as discussed below).

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

In August 1999,  the Company closed a $97.6 million  secured  financing with Key
Bank/FNMA.  The proceeds from this financing,  combined with proceeds from a new
$7.2 million mortgage and a draw on the Credit Facility (as defined below), were
used to retire a $113.2 million mortgage which would have matured in December of
1999.  The new  financing is a revolving  line of credit  maturing in five years
with a five-year  extension option,  and bears interest at a floating rate equal
to 75  basis  points  over  the  rate  for  90-day  mortgage  backed  securities
credit-enhanced by FNMA. The current interest rate on this loan is 6.2%.

In connection with the Key Bank/FNMA secured financing, the Company entered into
an interest  rate cap  agreement to hedge  increases  in interest  rates above a
specified  level of 11.21%.  The agreement is for a term concurrent with the Key
Bank/FNMA  instrument,  is indexed to a 90-day LIBOR rate, and is for a notional
amount equal to the maximum  amount  available on the Key Bank/FNMA  loan. As of
September 30, 1999, the 90-day LIBOR rate was 6.084%. The Company paid a premium
of approximately $434,000 at the inception of the cap agreement,  which is being
amortized as additional interest expense over the life of the agreement.

In the second and third  quarters  of 1999,  the Company  retired  approximately
$25.9 million of unsecured  Series A Senior Notes at a discount.  As a result of
these transactions, a gain on early extinguishment of debt of approximately $2.6
million was recorded  which is included in the net gain on early  extinguishment
of debt on the  Company's  consolidated  statement  of  operations  for the nine
months ended September 30, 1999, as discussed below.

In  connection  with the loan  payoffs  discussed  above and the payoff of other
mortgage debt, the Company recorded a net gain on early  extinguishment  of debt
of $437,000 for the nine months ended  September 30, 1999. This gain consists of
$2,568,000 of gains on retirement of Series A Senior Notes (as discussed  above)
offset by  $2,026,000  of losses due to  prepayment  penalties  and  $105,000 of
losses due to the  writeoff of  unamortized  loan fees upon the early  payoff of
four  loans.  These loans were  paid-off  early when more  favorable  terms were
obtained  through  new  financing  (discussed  above)  and  upon the sale of the
properties securing the loans.

                                       26
<PAGE>

The Company has an unsecured  line of credit  provided by a group of  commercial
banks (the "Credit Facility").  Outstanding borrowings under the Credit Facility
increased from $63,519,000 at December 31, 1998, to $83,207,000 at September 30,
1999,  due to  draws  for  acquisitions,  stock  repurchases,  purchases  of the
Company's Series A Senior Notes, and debt refinancing,  offset by pay downs from
proceeds from the sales of properties and cash from operations. In June 1999, in
order to increase the Company's financial  flexibility,  the Credit Facility was
modified to increase the  commitment  from $100 million to $142.5  million.  The
interest rate, monthly payments and maturity date remain unchanged.

At September 30, 1999, the Company's total indebtedness included fixed-rate debt
of $682,303,000 and  floating-rate  indebtedness of $219,332,000.  Approximately
64% of the Company's total assets,  comprising 101 properties,  is encumbered by
debt at September 30, 1999.

It is the  Company's  policy to manage its  exposure to  fluctuations  in market
interest  rates  through  the use of fixed rate debt  instruments  to the extent
possible. At September 30, 1999,  approximately 24% of the Company's outstanding
debt,  including  amounts  borrowed under the Credit  Facility,  were subject to
variable  rates.  The Company may,  from time to time,  enter into interest rate
protection  agreements  intended  to hedge the cost of new  borrowings  that are
reasonably  assured of completion.  It is not the Company's  policy to engage in
hedging   activities  for  previously   outstanding   debt  instruments  or  for
speculative  purposes. At September 30, 1999, the Company was not a party to any
open  interest  rate  protection  agreements  other than the  interest  rate cap
contract associated with the Key Bank/FNMA loan discussed above.

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

Development Alliances
The  Company  has  formed  4  development   alliances  for  the  development  of
approximately  713,000  square  feet of  office,  office/flex  and  distribution
properties and 1,710 multifamily units in North Carolina,  Colorado,  Texas, New
Jersey,  Kansas and Michigan. As of September 30, 1999, the Company has advanced
approximately $42 million.  Under these development  alliances,  the Company has
certain rights to purchase the properties  upon  completion of development  over
the next five years.  In addition,  the Company has loaned  approximately  $37.3
million  (including  accrued  interest)  under another  development  alliance to
continue the  build-out of a 1,200 acre  master-planned  development  in Denver,
Colorado.

Inflation

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

Funds from Operations and Cash Available for Distribution

Funds from  Operations,  as defined by NAREIT,  represents  income (loss) before
minority  interests and  extraordinary  items,  adjusted for real estate related
depreciation   and   amortization  and  gains  (losses)  from  the  disposal  of
properties.  The  Company  believes  that FFO is a widely  used  measure  of the
financial  performance  of equity  REITs  which  provides a  relevant  basis for
comparison  among other  REITs.  Together  with net income and cash  flows,  FFO
provides investors with an additional basis to evaluate the ability of a REIT to
incur and service debt and to fund acquisitions,  developments and other capital
expenditures. FFO does not represent net income or cash flows from operations as

                                       27
<PAGE>

defined by GAAP,  and should not be considered as an  alternative  to net income
(determined in accordance with GAAP) as an indicator of the Company's  operating
performance  or as an alternative  to cash flows from  operating,  investing and
financing  activities  (determined  in  accordance  with  GAAP) as a measure  of
liquidity.  FFO does not necessarily indicate that cash flows will be sufficient
to fund  all of the  Company's  cash  needs  including  principal  amortization,
capital  improvements  and  distributions  to  stockholders.   Further,  FFO  as
disclosed by other REITs may not be comparable to the Company's  calculation  of
FFO.  The  Company  calculates  FFO in  accordance  with the White  Paper on FFO
approved by the Board of Governors of NAREIT in March 1995.

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

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, 1999 (in  thousands,
except weighted average shares and per share amounts):
<TABLE>
<CAPTION>

                                                       March 31,         June 30,         September 30,            YTD
                                                          1999             1999               1999                1999
                                                      -------------    -------------     ----------------    ----------------
<S>                                                  <C>              <C>              <C>                 <C>
Net income before minority interest                   $    13,236      $    16,892       $      12,325       $      42,453
Preferred dividends                                        (5,570)          (5,570)             (5,570)            (16,710)
Net (gain) loss on sales of real estate assets             (1,351)          (5,742)                371              (6,722)
Depreciation and amortization (1)                          14,947           14,075              14,096              43,118
Adjustment to reflect FFO of Associated
    Companies(2)                                              253            2,170                 135               2,558
                                                      -------------    -------------     ----------------    ----------------

FFO                                                   $    21,515      $    21,825       $      21,357       $      64,697
                                                      =============    =============     ================    ================

Amortization of deferred financing fees                       485              508                 477               1,470
Capital reserve                                            (1,465)             994                 550                  79
Capital expenditures                                       (2,573)          (5,392)             (5,592)            (13,557)
                                                      -------------    -------------     ----------------    ----------------

CAD                                                   $    17,962      $    17,935       $      16,792       $      52,689
                                                      =============    =============     ================    ================

Distributions per share (3)                           $      0.42      $      0.42       $        0.42       $        1.26
                                                      =============    =============     ================    ================

Diluted weighted average shares outstanding            36,098,374       35,984,107          35,274,940          35,782,784
                                                      =============    =============     ================    ================
</TABLE>

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

Forward Looking Statements; Factors That May Affect Operating Results

This Report on Form 10-Q contains forward looking  statements within the meaning
of Section 27A of the  Securities  Act of 1933 and Section 21E of the Securities
and  Exchange  Act  of  1934,   including  statements  regarding  the  Company's

                                       28
<PAGE>

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

Factors which may cause the Company's results to differ include the inability to
complete  anticipated  future  acquisitions,  defaults or non-renewal of leases,
increased  interest rates and  operational  costs,  failure to obtain  necessary
outside  financing,  difficulties  in  identifying  properties to acquire and in
effecting  acquisitions,  failure to qualify as a real estate  investment  trust
under the Internal  Revenue  Code of 1986,  environmental  uncertainties,  risks
related to natural  disasters,  financial market  fluctuations,  changes in real
estate and zoning laws,  increases in real  property tax rates and other factors
discussed under the caption "Forward Looking Statements; Factors That May Affect
Operating  Results" in the  "Management's  Discussion  and Analysis of Financial
Condition and Results of Operations"  section of the Company's  Annual Report on
Form 10-K for the year ended December 31, 1998, and other risk factors set forth
in the Company's other Securities and Exchange  Commission filings. In addition,
past performance of the Company's Common Stock is not necessarily  indicative of
results that will be obtained in the future from an  investment in the Company's
Common Stock.  Furthermore,  the Company makes distributions to stockholders if,
as and when  declared by its Board of  Directors,  and  expects to continue  its
policy of paying  quarterly  distributions,  however,  there can be no assurance
that distributions will continue or be paid at any specific level.

Impact of Year 2000 Compliance Costs on Operations

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

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

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

                                       29
<PAGE>

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

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

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

Risk Factors

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




                                       30
<PAGE>

PART II. OTHER INFORMATION

Item 1.       Legal Proceedings

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

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

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

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

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

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

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

There were no matters submitted to a vote of security holders during the quarter
ended September 30, 1999.

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

                    On October 26, 1999,  the Company filed a report on Form 8-K
                    with  respect to  Supplemental  Information  for the quarter
                    ended September 30, 1999.


                                       31
<PAGE>



                                   SIGNATURES


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


                      GLENBOROUGH REALTY TRUST INCORPORATED




                   By: Glenborough Realty Trust Incorporated,



      Date: November 15, 1999                  /s/ Andrew Batinovich
                                               ---------------------
                                               Andrew Batinovich
                                               Director, President
                                               and Chief Operating Officer
                                               (Principal Operating Officer)





      Date: November 15, 1999                  /s/ Stephen Saul
                                               ----------------
                                               Stephen Saul
                                               Executive Vice President
                                               and Chief Financial Officer
                                               (Principal Financial Officer)





      Date: November 15, 1999                   /s/ Terri Garnick
                                                -----------------
                                               Terri Garnick
                                               Senior Vice President,
                                               Chief Accounting Officer,
                                               Treasurer
                                               (Principal Accounting Officer)






                                       32
<PAGE>



                                  EXHIBIT INDEX



Exhibit No.    Exhibit Title

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

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

27.1           Financial Data Schedule.





                                       33
<PAGE>



<TABLE>
<CAPTION>

Exhibit 12.1

GLENBOROUGH REALTY TRUST INCORPORATED  Computation of Ratio of Earnings to Fixed
Charges and Ratio of Earnings to Fixed Charges and  Preferred  Dividends For the
five years ended December 31, 1998
and the three months ended March 31, June 30, and September 30, 1999
(in thousands)
                                 GRT Predecessor
                                    Entities,
                                     Combined                                                         The Company
                              -----------------------   ----------------------------------------------------------------------------
                                                                                 Three       Three     Three
                                                                                 Months     Months    Months
                                                                                 Ended       Ended     Ended          Year To
                                                 Year Ended December 31,        March 31,   June 30,  Sept. 30,         Date
                              ------------------------------------------------  ---------- ---------  ----------   -------------
                                1994       1995     1996      1997     1998       1999        1999       1999           1999
                              ---------- -------  --------  ------- ----------  ---------- ---------  ----------   ------------
EARNINGS, AS DEFINED
<S>                          <C>         <C>     <C>       <C>      <C>        <C>        <C>      <C>             <C>

Net Income (Loss) before
  Preferred Dividends (2)     $  1,580   $  524  $ (1,609)  $19,368  $ 44,602   $10,578    $17,051   $ 12,177       $  39,806
Extraordinary items                 --       --       186       843     1,400     1,991     (1,688)      (740)           (437)
Federal & State income taxes       176      357        --        --        --        --         --         --              --
Minority Interest                   43       --       292     1,119     2,550       667      1,529        888           3,084
Fixed Charges                    1,140    2,129     3,913     9,668    53,289    16,540     16,418     15,720          48,678
                              ---------- ------- ---------- -------- ---------- --------- ---------  ----------    ------------

                              $  2,939   $3,010  $  2,782   $30,998  $101,841   $29,776    $33,310   $ 28,045       $  91,131
                              ---------- ------- ---------- -------- ---------- --------- ---------  ----------    ------------

FIXED CHARGES AND PREFERRED
   DIVIDENDS, AS DEFINED

Interest Expense              $  1,140   $2,129  $  3,913   $ 9,668   $53,289   $16,540    $16,418   $ 15,720       $  48,678
Capitalized Interest                --       --        --        --     1,108       643        687        747           2,077
Preferred Dividends                 --       --        --        --    20,620     5,570      5,570      5,570          16,710
                              ---------- ------- ---------- -------- ---------- --------- ---------  ----------    -----------
                              $  1,140   $2,129  $  3,913   $ 9,668   $75,017   $22,753    $22,675   $ 22,037       $  67,465

RATIO OF EARNINGS TO FIXED
   CHARGES (3)                    2.58     1.41      0.71(1)   3.21      1.87      1.73       1.95       1.70            1.80
                              ---------- ------- ---------- --------- --------- --------- ---------  ----------    -----------

RATIO OF EARNINGS TO FIXED
   CHARGES AND PREFERRED
   DIVIDENDS (3)                  2.58     1.41      0.71(1)   3.21      1.36      1.31       1.47       1.27            1.35
                              ---------- ------- ---------- --------- --------- --------- ---------  ----------    -----------
</TABLE>

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

                                       34