##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

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

For the quarterly period ended June 30, 2003

OR

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

Commission File Number: 001-14162

GLENBOROUGH REALTY TRUST INCORPORATED




(Exact name of registrant as specified in its charter)


|                                        |  |                    
|--------------------------------------- |  | -------------------
|Maryland                                |  | 94-3211970         
|                                        |  |                    
|(State or other jurisdiction            |  | (I.R.S. Employer   
|of incorporation or organization)       |  | Identification No.)
|                                        |  |                    
|400 South El Camino Real,               |  |                    
|Suite 1100, San Mateo, California       |  |                    
|(650) 343-9300                          |  | 94402-1708         
|                                        |  |                    
|(Address of principal executive offices |  | (Zip Code)         
|and telephone number)                   |  |                    

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes
[X]   No  [   ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes
[X]   No  [   ]

As of August 13, 2003, 27,798,669 shares of Common Stock ($.001 par value) and
9,956,300 shares of 7.75% Series A Convertible Preferred Stock ($.001 par
value, $25.00 per share liquidation preference) were outstanding.





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TABLE OF CONTENTS



|                              |                                                                                               |                                                |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------- |  |  |  |  |  | 
|Part I. FINANCIAL INFORMATION
|                              | Item 1. Financial Statements                                                                 
|                              |                                                                                               | CONSOLIDATED BALANCE SHEETS                   
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF INCOME             
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF INCOME             
|                              |                                                                                               | CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS         
|                              |                                                                                               | Notes to Consolidated Financial Statements    
|                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                              | Item 3. Qualitative and Quantitative Information about Market Risk                           
|                              | Item 4. Controls and Procedures                                                              
|PART II. OTHER INFORMATION   
|                              | Item 1. Legal Proceedings                                                                    
|                              | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                              | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                   
|EXHIBIT INDEX                
|EXHIBIT 12.1                 
|EXHIBIT 31.1                 
|EXHIBIT 31.2                 
|EXHIBIT 31.3                 
|EXHIBIT 31.4                 



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##### Table of Contents



INDEX
GLENBOROUGH REALTY TRUST INCORPORATED

|              |  |  |    |  |                                                                                         |                                                                                       |       |         
|------------- |  |  | -- |  | --------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ----- | --------
|              |  |  |    |  |                                                                                         |                                                                                       |       | Page No.
|PART I        |  |  |    |  | FINANCIAL INFORMATION                                                                   |                                                                                       |      
|Item 1.       |  |  |    |  | Consolidated Financial Statements of Glenborough Realty Trust
Incorporated (Unaudited): |                                                                                       |      
|              |  |  |    |  |                                                                                         | Consolidated Balance Sheets at June 30, 2003 and December 31,
2002                    |       | 3       
|              |  |  |    |  |                                                                                         | Consolidated Statements of Income for the six months ended
June 30, 2003 and 2002     |       | 4       
|              |  |  |    |  |                                                                                         | Consolidated Statements of Income for the three months ended
June 30, 2003 and 2002   |       | 5       
|              |  |  |    |  |                                                                                         | Consolidated Statement of Stockholders Equity for the six
months ended June 30, 2003 |       | 6       
|              |  |  |    |  |                                                                                         | Consolidated Statements of Cash Flows for the six months ended
June 30, 2003 and 2002 |       | 7-8     
|              |  |  |    |  |                                                                                         | Notes to Consolidated Financial Statements                                            |       | 9-24    
|Item 2.       |  |  |    |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations   |                                                                                       | 25-33
|Item 3.       |  |  |    |  | Qualitative and Quantitative Information About Market Risk                              |                                                                                       | 34   
|Item 4.       |  |  |    |  | Controls and Procedures                                                                 |                                                                                       | 34   
|PART II       |  |  |    |  | OTHER INFORMATION                                                                       |                                                                                       |      
|Item 1.       |  |  |    |  | Legal Proceedings                                                                       |                                                                                       | 35   
|Item 4.       |  |  |    |  | Submission of Matters to a Vote of Security Holders                                     |                                                                                       | 35   
|Item 6.       |  |  |    |  | Exhibits and Reports on Form 8-K                                                        |                                                                                       | 35   
|SIGNATURES    |  |  | 36
|EXHIBIT INDEX |  |  | 37

2



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##### Table of Contents






Part I. FINANCIAL INFORMATION




Item 1. Financial Statements




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

|                                        |                                                                                                                                                                                |                            |              |                                            |         |           |           |              |         |           |           | 
|--------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------- | ------------ | ------------------------------------------ | ------- | --------- | --------- | ------------ | ------- | --------- | --------- | 
|                                        |                                                                                                                                                                                |                            |              |                                            |         | June 30,  |           | December 31,
|                                        |                                                                                                                                                                                |                            |              |                                            |         | 2003      |           | 2002        
|                                        |                                                                                                                                                                                |                            |              |                                            |         |           |           |             
|ASSETS                                  |                                                                                                                                                                                |                            |              |                                            |         |           |           |             
|                                        | Rental properties, gross                                                                                                                                                       |                            | $            | 1,312,305                                  |         |           | $         | 1,323,939    |        
|                                        | Accumulated depreciation                                                                                                                                                       |                            |              | (179,793                                   | )       |           |           | (171,701     | )      
|                                        |                                                                                                                                                                                |                            |              |                                            |         |           |           |             
|                                        | Rental properties, net                                                                                                                                                         |                            |              | 1,132,512                                  |         |           |           | 1,152,238    |        
|                                        | Properties held for sale (net of accumulated
depreciation of $8,336
and $12,291 at June 30, 2003 and December 31, 2002,
respectively)                                          |                            |              | 38,768                                     |         |           |           | 95,697       |        
|                                        | Investments in land and development                                                                                                                                            |                            |              | 64,691                                     |         |           |           | 78,529       |        
|                                        | Investments in unconsolidated operating joint ventures                                                                                                                         |                            |              | 7,842                                      |         |           |           | 7,822        |        
|                                        | Mortgage loans receivable                                                                                                                                                      |                            |              | 38,984                                     |         |           |           | 41,813       |        
|                                        | Cash and cash equivalents                                                                                                                                                      |                            |              | 24,890                                     |         |           |           | 5,029        |        
|                                        | Other assets                                                                                                                                                                   |                            |              | 62,088                                     |         |           |           | 52,735       |        
|                                        |                                                                                                                                                                                |                            |              |                                            |         |           |           |             
|                                        |                                                                                                                                                                                |                            | TOTAL ASSETS |                                            | $       | 1,369,775 |           |              | $       | 1,433,863 |          
|                                        |                                                                                                                                                                                |                            |              |                                            |         |           |           |             
|LIABILITIES AND STOCKHOLDERS EQUITY    |                                                                                                                                                                                |                            |              |                                            |         |           |           |             
|Liabilities:                            |                                                                                                                                                                                |                            |              |                                            |         |           |           |             
|                                        | Mortgage loans                                                                                                                                                                 |                            | $            | 611,102                                    |         |           | $         | 605,996      |        
|                                        | Unsecured bank line                                                                                                                                                            |                            |              | 56,836                                     |         |           |           | 76,204       |        
|                                        | Obligations associated with properties held for sale                                                                                                                           |                            |              | 19,596                                     |         |           |           | 56,705       |        
|                                        | Other liabilities                                                                                                                                                              |                            |              | 25,850                                     |         |           |           | 22,490       |        
|                                        |                                                                                                                                                                                |                            |              |                                            |         |           |           |             
|                                        |                                                                                                                                                                                | Total liabilities          |              |                                            | 713,384 |           |           |              | 761,395 |          
|                                        |                                                                                                                                                                                |                            |              |                                            |         |           |           |             
|Commitments and contingencies (Note 15) |                                                                                                                                                                                |                            |              |                                            |         |           |           |             
|Minority interest                       |                                                                                                                                                                                |                            | 39,529       |                                            |         |           | 40,910    |             
|Stockholders Equity:                   |                                                                                                                                                                                |                            |              |                                            |         |           |           |             
|                                        | Common stock, $0.001 par value, 27,798,664 and 27,927,698
shares issued and outstanding at June 30, 2003 and
December 31, 2002, respectively                                   |                            |              | 28                                         |         |           |           | 28           |        
|                                        | Preferred stock, $0.001 par value, $25.00 liquidation
preference, 10,092,800 and 10,097,800 shares issued and
outstanding at
June 30, 2003 and December 31, 2002, respectively |                            |              | 10                                         |         |           |           | 10           |        
|                                        | Additional paid-in capital                                                                                                                                                     |                            |              | 782,687                                    |         |           |           | 785,051      |        
|                                        | Deferred compensation                                                                                                                                                          |                            |              | (3,366                                     | )       |           |           | (3,897       | )      
|                                        | Distributions in excess of accumulated earnings                                                                                                                                |                            |              | (162,497                                   | )       |           |           | (149,634     | )      
|                                        |                                                                                                                                                                                |                            |              |                                            |         |           |           |             
|                                        |                                                                                                                                                                                | Total stockholders equity |              |                                            | 616,862 |           |           |              | 631,558 |          
|                                        |                                                                                                                                                                                |                            |              |                                            |         |           |           |             
|                                        |                                                                                                                                                                                |                            |              | TOTAL LIABILITIES AND STOCKHOLDERS
EQUITY |         | $         | 1,369,775 |              |         | $         | 1,433,863 | 
|                                        |                                                                                                                                                                                |                            |              |                                            |         |           |           |              |        

The accompanying notes are an integral part of these consolidated financial statements

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GLENBOROUGH REALTY TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
For the six months ended June 30, 2003 and 2002
(in thousands, except share and per share amounts)
(Unaudited)

|                                                                                                       |                                                               |                |               |        |        |        |            |        |        |        | 
|------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------- | -------------- | ------------- | ------ | ------ | ------ | ---------- | ------ | ------ | ------ | 
|                                                                                                       |                                                               |                |               |        | 2003   |        | 2002      
|                                                                                                       |                                                               |                |               |        |        |        |           
|REVENUE                                                                                                |                                                               |                |               |        |        |        |            |       
|                                                                                                       | Rental revenue                                                |                | $             | 90,502 |        |        | $          | 78,874 |       
|                                                                                                       | Fees and reimbursements from affiliates                       |                |               | 1,767  |        |        |            | 1,883  |       
|                                                                                                       | Interest and other income                                     |                |               | 1,923  |        |        |            | 3,589  |       
|                                                                                                       | Equity in earnings of unconsolidated operating
joint ventures |                |               | 304    |        |        |            | 123    |       
|                                                                                                       |                                                               |                |               |        |        |        |            |        |       
|                                                                                                       |                                                               |                | Total revenue |        |        | 94,496 |            |        |        | 84,469 | 
|                                                                                                       |                                                               |                |               |        |        |        |            |       
|EXPENSES                                                                                               |                                                               |                |               |        |        |        |            |       
|                                                                                                       | Property operating expenses                                   |                |               | 29,591 |        |        |            | 23,338 |       
|                                                                                                       | General and administrative                                    |                |               | 7,540  |        |        |            | 5,510  |       
|                                                                                                       | Depreciation and amortization                                 |                |               | 26,112 |        |        |            | 20,525 |       
|                                                                                                       | Interest expense                                              |                |               | 16,644 |        |        |            | 14,702 |       
|                                                                                                       | Provision for impairment of real estate assets                |                |               | 2,272  |        |        |            |       |       
|                                                                                                       | Provision for impairment of non-real estate assets            |                |               | 3,905  |        |        |            |       |       
|                                                                                                       |                                                               |                |               |        |        |        |            |       
|                                                                                                       |                                                               | Total expenses |               |        | 86,064 |        |            |        | 64,075 |       
|                                                                                                       |                                                               |                |               |        |        |        |            |       
|Income before minority interest and discontinued
operations                                            |                                                               |                | 8,432         |        |        |        | 20,394     |       
|Minority interest                                                                                      |                                                               |                | (1,201        | )      |        |        | (1,403     | )     
|                                                                                                       |                                                               |                |               |        |        |        |            |       
|Income before discontinued operations                                                                  |                                                               |                | 7,231         |        |        |        | 18,991     |       
|Discontinued operations (including gain on sales of
$15,604 and $1,423 in 2003 and 2002, respectively) |                                                               |                | 13,628        |        |        |        | 3,417      |       
|                                                                                                       |                                                               |                |               |        |        |        |            |        |       
|Net income                                                                                             |                                                               |                | 20,859        |        |        |        | 22,408     |       
|Preferred dividends                                                                                    |                                                               |                | (9,780        | )      |        |        | (9,782     | )     
|Discount on preferred stock repurchases                                                                |                                                               |                | 17            |        |        |        |           |       
|                                                                                                       |                                                               |                |               |        |        |        |            |       
|Net income available to Common Stockholders                                                            |                                                               | $              | 11,096        |        |        | $      | 12,626     |       
|                                                                                                       |                                                               |                |               |        |        |        |            |        |       
|Basic Per Share Data:                                                                                  |                                                               |                |               |        |        |        |            |       
|                                                                                                       | Continuing operations                                         |                | $             | (0.04  | )      |        | $          | 0.35   |       
|                                                                                                       | Discontinued operations                                       |                |               | 0.44   |        |        |            | 0.11   |       
|                                                                                                       |                                                               |                |               |        |        |        |            |       
|                                                                                                       | Net income available to Common Stockholders                   |                | $             | 0.40   |        |        | $          | 0.46   |       
|                                                                                                       |                                                               |                |               |        |        |        |            |       
|Basic weighted average shares outstanding                                                              |                                                               |                | 27,624,147    |        |        |        | 27,324,595 |       
|                                                                                                       |                                                               |                |               |        |        |        |            |       
|Diluted Per Share Data:                                                                                |                                                               |                |               |        |        |        |            |       
|                                                                                                       | Continuing operations                                         |                | $             | (0.04  | )      |        | $          | 0.34   |       
|                                                                                                       | Discontinued operations                                       |                |               | 0.44   |        |        |            | 0.11   |       
|                                                                                                       |                                                               |                |               |        |        |        |            |       
|                                                                                                       | Net income available to Common Stockholders                   |                | $             | 0.40   |        |        | $          | 0.45   |       
|                                                                                                       |                                                               |                |               |        |        |        |            |       
|Diluted weighted average shares outstanding                                                            |                                                               |                | 27,624,147    |        |        |        | 30,868,737 |       
|                                                                                                       |                                                               |                |               |        |        |        |            |       

The accompanying notes are an integral part of these consolidated financial statements

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GLENBOROUGH REALTY TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
For the three months ended June 30, 2003 and 2002
(in thousands, except share and per share amounts)
(Unaudited)

|                                                                                                           |                                                               |                |               |        |        |        |            |        |        |        | 
|---------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------- | -------------- | ------------- | ------ | ------ | ------ | ---------- | ------ | ------ | ------ | 
|                                                                                                           |                                                               |                |               |        | 2003   |        | 2002      
|                                                                                                           |                                                               |                |               |        |        |        |           
|REVENUE                                                                                                    |                                                               |                |               |        |        |        |            |       
|                                                                                                           | Rental revenue                                                |                | $             | 46,357 |        |        | $          | 41,271 |       
|                                                                                                           | Fees and reimbursements from affiliates                       |                |               | 961    |        |        |            | 842    |       
|                                                                                                           | Interest and other income                                     |                |               | 1,116  |        |        |            | 703    |       
|                                                                                                           | Equity in earnings of unconsolidated operating
joint ventures |                |               | 181    |        |        |            | 65     |       
|                                                                                                           |                                                               |                |               |        |        |        |            |        |       
|                                                                                                           |                                                               |                | Total revenue |        |        | 48,615 |            |        |        | 42,881 | 
|                                                                                                           |                                                               |                |               |        |        |        |            |       
|EXPENSES                                                                                                   |                                                               |                |               |        |        |        |            |       
|                                                                                                           | Property operating expenses                                   |                |               | 14,469 |        |        |            | 12,106 |       
|                                                                                                           | General and administrative                                    |                |               | 3,755  |        |        |            | 2,293  |       
|                                                                                                           | Depreciation and amortization                                 |                |               | 13,435 |        |        |            | 10,685 |       
|                                                                                                           | Interest expense                                              |                |               | 8,397  |        |        |            | 7,534  |       
|                                                                                                           | Provision for impairment of non-real estate assets            |                |               | 3,905  |        |        |            |       |       
|                                                                                                           |                                                               |                |               |        |        |        |            |       
|                                                                                                           |                                                               | Total expenses |               |        | 43,961 |        |            |        | 32,618 |       
|                                                                                                           |                                                               |                |               |        |        |        |            |       
|Income before minority interest and discontinued
operations                                                |                                                               |                | 4,654         |        |        |        | 10,263     |       
|Minority interest                                                                                          |                                                               |                | (588          | )      |        |        | (752       | )     
|                                                                                                           |                                                               |                |               |        |        |        |            |       
|Income before discontinued operations                                                                      |                                                               |                | 4,066         |        |        |        | 9,511      |       
|Discontinued operations (including net gain on sales of
$11,154 and $1,423 in 2003 and 2002, respectively) |                                                               |                | 6,139         |        |        |        | 2,206      |       
|                                                                                                           |                                                               |                |               |        |        |        |            |        |       
|Net income                                                                                                 |                                                               |                | 10,205        |        |        |        | 11,717     |       
|Preferred dividends                                                                                        |                                                               |                | (4,889        | )      |        |        | (4,891     | )     
|                                                                                                           |                                                               |                |               |        |        |        |            |        |       
|Net income available to Common Stockholders                                                                |                                                               | $              | 5,316         |        |        | $      | 6,826      |       
|                                                                                                           |                                                               |                |               |        |        |        |            |        |       
|Basic Per Share Data:                                                                                      |                                                               |                |               |        |        |        |            |       
|                                                                                                           | Continuing operations                                         |                | $             | (0.01  | )      |        | $          | 0.18   |       
|                                                                                                           | Discontinued operations                                       |                |               | 0.20   |        |        |            | 0.07   |       
|                                                                                                           |                                                               |                |               |        |        |        |            |       
|                                                                                                           | Net income available to Common Stockholders                   |                | $             | 0.19   |        |        | $          | 0.25   |       
|                                                                                                           |                                                               |                |               |        |        |        |            |       
|Basic weighted average shares outstanding                                                                  |                                                               |                | 27,600,788    |        |        |        | 27,639,344 |       
|                                                                                                           |                                                               |                |               |        |        |        |            |       
|Diluted Per Share Data:                                                                                    |                                                               |                |               |        |        |        |            |       
|                                                                                                           | Continuing operations                                         |                | $             | (0.01  | )      |        | $          | 0.17   |       
|                                                                                                           | Discontinued operations                                       |                |               | 0.20   |        |        |            | 0.07   |       
|                                                                                                           |                                                               |                |               |        |        |        |            |       
|                                                                                                           | Net income available to Common Stockholders                   |                | $             | 0.19   |        |        | $          | 0.24   |       
|                                                                                                           |                                                               |                |               |        |        |        |            |       
|Diluted weighted average shares outstanding                                                                |                                                               |                | 27,600,788    |        |        |        | 31,250,154 |       
|                                                                                                           |                                                               |                |               |        |        |        |            |       

The accompanying notes are an integral part of these consolidated financial statements

5



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GLENBOROUGH REALTY TRUST INCORPORATED
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
For the six months ended June 30, 2003
(in thousands)
(Unaudited)

|                                                                     |  |              |        |                 |  |        |    |           |  |         |        |        |  |               |    |       |  |            |         |          |  |              |        |   |  |   |          |   |  |   |         |  
|-------------------------------------------------------------------- |  | ------------ | ------ | --------------- |  | ------ | -- | --------- |  | ------- | ------ | ------ |  | ------------- | -- | ----- |  | ---------- | ------- | -------- |  | ------------ | ------ | - |  | - | -------- | - |  | - | ------- | -
|                                                                     |  | Common Stock |        | Preferred Stock |  |        |    |           |  |         |        |        |  |               |    |       |  |            |         |         
|                                                                     |  |              |        |                 |  |        |    |           |  |         |        |        |  | Distributions |    |       |  |           
|                                                                     |  |              |        |                 |  |        |    |           |  |         |        |        |  |               |    |       |  | Additional |         | Deferred |  | in excess of |        |   |  |  
|                                                                     |  |              |        |                 |  |        |    |           |  |         |        |        |  |               |    |       |  | Paid-in    |         | Compen-  |  | accumulated  |        |   |  |  
|                                                                     |  | Shares       |        | Par Value       |  | Shares |    | Par Value |  | Capital |        | sation |  | earnings      |    | Total
|                                                                     |  |              |        |                 |  |        |    |           |  |         |        |        |  |               |    |      
|Balance at December 31, 2002                                         |  |              | 27,928 |                 |  | $      | 28 |           |  |         | 10,098 |        |  | $             | 10 |       |  | $          | 785,051 |          |  | $            | (3,897 | ) |  | $ | (149,634 | ) |  | $ | 631,558 |  
|Exercise of stock options                                            |  |              | 10     |                 |  |        |   |           |  |         |       |        |  |               |   |       |  |            | 122     |          |  |              |       |   |  |   |         |   |  |   | 122     |  
|Common and preferred stock repurchases                               |  |              | (139   | )               |  |        |   |           |  |         | (5     | )      |  |               |   |       |  |            | (2,408  | )        |  |              |       |   |  |   |         |   |  |   | (2,408  | )
|Discount on preferred stock repurchases                              |  |              |       |                 |  |        |   |           |  |         |       |        |  |               |   |       |  |            | (17     | )        |  |              |       |   |  |   | 17       |   |  |   |        |  
|Amortization of deferred compensation                                |  |              |       |                 |  |        |   |           |  |         |       |        |  |               |   |       |  |            |        |          |  |              | 531    |   |  |   |         |   |  |   | 531     |  
|Accelerated vesting of stock options                                 |  |              |       |                 |  |        |   |           |  |         |       |        |  |               |   |       |  |            | 122     |          |  |              |       |   |  |   |         |   |  |   | 122     |  
|Reallocation of limited partners
interests in Operating Partnership |  |              |       |                 |  |        |   |           |  |         |       |        |  |               |   |       |  |            | (183    | )        |  |              |       |   |  |   |         |   |  |   | (183    | )
|Dividends paid to common and preferred
stockholders                  |  |              |       |                 |  |        |   |           |  |         |       |        |  |               |   |       |  |            |        |          |  |              |       |   |  |   | (33,739  | ) |  |   | (33,739 | )
|Net income                                                           |  |              |       |                 |  |        |   |           |  |         |       |        |  |               |   |       |  |            |        |          |  |              |       |   |  |   | 20,859   |   |  |   | 20,859  |  
|                                                                     |  |              |        |                 |  |        |    |           |  |         |        |        |  |               |    |       |  |            |         |          |  |              |        |   |  |   |          |   |  |   |         |  
|Balance at June 30, 2003                                             |  |              | 27,799 |                 |  | $      | 28 |           |  |         | 10,093 |        |  | $             | 10 |       |  | $          | 782,687 |          |  | $            | (3,366 | ) |  | $ | (162,497 | ) |  | $ | 616,862 |  
|                                                                     |  |              |        |                 |  |        |    |           |  |         |        |        |  |               |    |       |  |            |         |          |  |              |        |   |  |   |          |   |  |   |         |  

The accompanying notes are an integral part of these consolidated financial statements

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GLENBOROUGH REALTY TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 2003 and 2002
(in thousands)
(Unaudited)

|                                                                                                                     |                                                                                   |                                                                                             |                                                      |          |         |        |        |         |         |         |  
|-------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ---------------------------------------------------- | -------- | ------- | ------ | ------ | ------- | ------- | ------- | -
|                                                                                                                     |                                                                                   |                                                                                             |                                                      |          | 2003    |        | 2002  
|                                                                                                                     |                                                                                   |                                                                                             |                                                      |          |         |        |       
|Cash flows from operating activities:                                                                                |                                                                                   |                                                                                             |                                                      |          |         |        |        |        
|                                                                                                                     | Net income                                                                        |                                                                                             | $                                                    | 20,859   |         |        | $      | 22,408  |        
|                                                                                                                     | Adjustments to reconcile net income to net cash provided by
operating activities: |                                                                                             |                                                      |          |         |        |        |         |        
|                                                                                                                     |                                                                                   | Depreciation and amortization (including discontinued
operations)                           |                                                      |          | 28,379  |        |        |         | 25,449  |        
|                                                                                                                     |                                                                                   | Amortization of loan fees, included in
interest expense (including discontinued operations) |                                                      |          | 1,577   |        |        |         | 993     |        
|                                                                                                                     |                                                                                   | Accrued interest on mortgage loans receivable                                               |                                                      |          | (1,479  | )      |        |         | (1,543  | )      
|                                                                                                                     |                                                                                   | Minority interest in income from operations                                                 |                                                      |          | 1,201   |        |        |         | 1,403   |        
|                                                                                                                     |                                                                                   | Equity in earnings of unconsolidated operating joint
ventures                               |                                                      |          | (304    | )      |        |         | (123    | )      
|                                                                                                                     |                                                                                   | Net gain on sales of real estate assets                                                     |                                                      |          | (15,604 | )      |        |         | (1,423  | )      
|                                                                                                                     |                                                                                   | Net loss on early extinguishment of debt (included in
discontinued operations)              |                                                      |          | 5,411   |        |        |         | 892     |        
|                                                                                                                     |                                                                                   | Provision for impairment of real estate assets                                              |                                                      |          | 2,272   |        |        |         |        |        
|                                                                                                                     |                                                                                   | Provision for impairment of non-real estate assets                                          |                                                      |          | 3,905   |        |        |         |        |        
|                                                                                                                     |                                                                                   | Amortization of deferred compensation                                                       |                                                      |          | 531     |        |        |         | 92      |        
|                                                                                                                     |                                                                                   | Accelerated vesting of stock options                                                        |                                                      |          | 122     |        |        |         |        |        
|                                                                                                                     |                                                                                   | Changes in certain assets and liabilities, net                                              |                                                      |          | (10,643 | )      |        |         | (2,735  | )      
|                                                                                                                     |                                                                                   |                                                                                             |                                                      |          |         |        |        |         |        
|                                                                                                                     |                                                                                   |                                                                                             | Net cash provided by operating activities            |          |         | 36,227 |        |         |         | 45,413  |  
|                                                                                                                     |                                                                                   |                                                                                             |                                                      |          |         |        |        |         |        
|Cash flows from investing activities:                                                                                |                                                                                   |                                                                                             |                                                      |          |         |        |        |        
|                                                                                                                     | Net proceeds from sales of rental properties                                      |                                                                                             |                                                      | 149,632  |         |        |        | 50,698  |        
|                                                                                                                     | Acquisitions of rental properties                                                 |                                                                                             |                                                      | (69,508  | )       |        |        | (47,692 | )      
|                                                                                                                     | Payments for capital and tenant improvements                                      |                                                                                             |                                                      | (20,731  | )       |        |        | (19,463 | )      
|                                                                                                                     | Deposits on prospective acquisitions                                              |                                                                                             |                                                      | (2,635   | )       |        |        |        |        
|                                                                                                                     | Investments in land and development                                               |                                                                                             |                                                      | (6,608   | )       |        |        | (8,751  | )      
|                                                                                                                     | Investments in unconsolidated operating joint ventures                            |                                                                                             |                                                      | (75      | )       |        |        |        |        
|                                                                                                                     | Distributions from unconsolidated operating joint ventures                        |                                                                                             |                                                      | 449      |         |        |        |        |        
|                                                                                                                     | Buyout of minority interest in consolidated subsidiary                            |                                                                                             |                                                      | (175     | )       |        |        |        |        
|                                                                                                                     | Principal and interest payments from mortgage loans receivable                    |                                                                                             |                                                      | 4,308    |         |        |        |        |        
|                                                                                                                     |                                                                                   |                                                                                             |                                                      |          |         |        |        |         |        
|                                                                                                                     |                                                                                   |                                                                                             | Net cash provided by/(used for) investing activities |          |         | 54,657 |        |         |         | (25,208 | )
|                                                                                                                     |                                                                                   |                                                                                             |                                                      |          |         |        |        |         |        
|Cash flows from financing activities:                                                                                |                                                                                   |                                                                                             |                                                      |          |         |        |        |        
|                                                                                                                     | Proceeds from borrowings                                                          |                                                                                             |                                                      | 117,246  |         |        |        | 78,618  |        
|                                                                                                                     | Repayment of borrowings                                                           |                                                                                             |                                                      | (144,487 | )       |        |        | (74,246 | )      
|                                                                                                                     | Prepayment penalties on loan payoffs                                              |                                                                                             |                                                      | (5,411   | )       |        |        | (799    | )      
|                                                                                                                     | Distributions to minority interest holders                                        |                                                                                             |                                                      | (2,590   | )       |        |        | (2,665  | )      
|                                                                                                                     | Dividends paid to common and preferred stockholders                               |                                                                                             |                                                      | (33,739  | )       |        |        | (33,190 | )      
|                                                                                                                     | Exercise of stock options                                                         |                                                                                             |                                                      | 122      |         |        |        | 10,783  |        
|                                                                                                                     | Repurchases of common stock                                                       |                                                                                             |                                                      | (2,300   | )       |        |        | (734    | )      
|                                                                                                                     | Repurchases of preferred stock                                                    |                                                                                             |                                                      | (108     | )       |        |        |        |        
|                                                                                                                     |                                                                                   |                                                                                             |                                                      |          |         |        |        |         |        
|                                                                                                                     |                                                                                   | Net cash used for financing activities                                                      |                                                      |          | (71,267 | )      |        |         | (22,233 | )      
|                                                                                                                     |                                                                                   |                                                                                             |                                                      |          |         |        |        |         |        
|Net increase (decrease) in cash and cash equivalents                                                                 |                                                                                   |                                                                                             | 19,617                                               |          |         |        | (2,028 | )      
|Cash and cash equivalents at beginning of period, including $244 at
properties held for sale as of December 31, 2002 |                                                                                   |                                                                                             | 5,273                                                |          |         |        | 4,410  |        
|                                                                                                                     |                                                                                   |                                                                                             |                                                      |          |         |        |        |         |        
|Cash and cash equivalents at end of period                                                                           |                                                                                   | $                                                                                           | 24,890                                               |          |         | $      | 2,382  |        
|                                                                                                                     |                                                                                   |                                                                                             |                                                      |          |         |        |        |         |        

The accompanying notes are an integral part of these consolidated financial statements

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GLENBOROUGH REALTY TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS  continued
For the six months ended June 30, 2003 and 2002
(in thousands)
(Unaudited)

|                                                                        |                                                                                                          |  |      |        |      |  |   |        |  
|----------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|                                                                        |                                                                                                          |  | 2003 |        | 2002
|                                                                        |                                                                                                          |  |      |        |     
|Supplemental disclosure of cash flow information:                       |                                                                                                          |  |      |        |      |  |   |       
|                                                                        | Cash paid for interest (net of capitalized interest
of $2,057 and $1,904 in 2003 and 2002, respectively) |  | $    | 17,885 |      |  | $ | 17,991 |  
|                                                                        |                                                                                                          |  |      |        |      |  |   |        |  
|Supplemental disclosure of non-cash investing and financing
activities: |                                                                                                          |  |      |        |      |  |   |       
|                                                                        | Reclassification of real estate assets from
investments in land and development                          |  | $    | 18,084 |      |  | $ | 8,771  |  
|                                                                        |                                                                                                          |  |      |        |      |  |   |        |  
|                                                                        | Acquisition of joint venture from development alliance                                                   |  | $    |       |      |  | $ | 427    |  
|                                                                        |                                                                                                          |  |      |        |      |  |   |       
|                                                                        | Disposition of real estate involving buyers
assumption of mortgage loans                                |  | $    | 20,658 |      |  | $ | 4,850  |  
|                                                                        |                                                                                                          |  |      |        |      |  |   |        |  
|                                                                        | Note receivable from sale of investment in development                                                   |  | $    |       |      |  | $ | 3,775  |  
|                                                                        |                                                                                                          |  |      |        |      |  |   |       
|                                                                        | Reallocation of limited partners interests in
Operating Partnership                                     |  | $    | 183    |      |  | $ |       |  
|                                                                        |                                                                                                          |  |      |        |      |  |   |       
|                                                                        | Conversion of Operating Partnership units into common
stock, at market value on date of issuance         |  | $    |       |      |  | $ | 109    |  
|                                                                        |                                                                                                          |  |      |        |      |  |   |        |  
|                                                                        | Unrealized loss on marketable securities                                                                 |  | $    |       |      |  | $ | (80    | )
|                                                                        |                                                                                                          |  |      |        |      |  |   |       

The accompanying notes are an integral part of these consolidated financial statements

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GLENBOROUGH REALTY TRUST INCORPORATED

Notes to Consolidated Financial Statements
June 30, 2003

Note 1. ORGANIZATION

Glenborough Realty Trust Incorporated (the Company) was incorporated in the
State of Maryland on August 26, 1994. The Company commenced operations on
January 1, 1996. The Company has elected to qualify as a real estate investment
trust (REIT) under the Internal Revenue Code of 1986, as amended (the
Code). The common and preferred stock of the Company (the Common Stock and
the Preferred Stock, respectively) are listed on the New York Stock Exchange
(NYSE) under the trading symbols GLB and GLB Pr A, respectively.

As of June 30, 2003, 27,798,664 shares of Common Stock and 10,092,800 shares of
Preferred Stock were issued and outstanding. Common and preferred shares
authorized are 188,000,000 and 12,000,000, respectively. Assuming the issuance
of 3,012,024 shares of Common Stock issuable upon redemption of 3,012,024
partnership units in the Operating Partnership (as defined below), there would
be 30,810,688 shares of Common Stock outstanding as of June 30, 2003. In 1999
and 2000, the Companys Board of Directors authorized the repurchase of up to
8,210,700 shares of Common Stock and 3,450,000 shares of Preferred Stock. As of
June 30, 2003, 6,318,016 shares of Common Stock and 1,407,200 shares of
Preferred Stock have been repurchased at a total cost of approximately $126
million.

The Companys Preferred Stock has a $25.00 per share liquidation preference and
is convertible at any time at the option of the holder thereof into shares of
Common Stock at an initial conversion price of $32.83 per share of Common Stock
(equivalent to a conversion rate of 0.7615 shares of Common Stock for each
share of Series A Convertible Preferred Stock), subject to adjustment in
certain circumstances. As of January 16, 2003, the Series A Preferred Stock may
be redeemed at the option of the Company, in whole or in part, initially at
103.88% of the liquidation preference per share, and thereafter at prices
declining to 100% of the liquidation preference on and after January 16, 2008,
plus, in each case, accumulated, accrued and unpaid dividends, if any, to the
redemption date.

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

The Company, through its majority owned subsidiaries, is engaged primarily in
the ownership, operation, management, leasing, acquisition, expansion and
development of various income-producing properties. The Companys principal
consolidated subsidiary, in which it holds a 1% general partner interest and an
89.22% limited partner interest at June 30, 2003, is Glenborough Properties,
L.P. (the Operating Partnership). Each of the holders of the remaining
interests in the Operating Partnership (OP Units) has the option to redeem
its OP Units and to receive, at the option of the Company, in exchange for each
OP Unit, either (i) one share of common stock of the Company, or (ii) cash
equal to the fair market value of one share of common stock of the Company. As
of June 30, 2003, the Operating Partnership, directly and through the
subsidiaries in which it and the Company own 100% of the ownership interests,
controls a portfolio of 68 real estate projects.

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying financial statements present the consolidated financial
position of the Company and its subsidiaries as of June 30, 2003 and December
31, 2002, and the consolidated results of operations and cash flows of the
Company and its subsidiaries for the three and six months ended June 30, 2003
and 2002. All significant intercompany transactions, receivables and payables
have been eliminated in consolidation.

In the opinion of management, the accompanying unaudited financial statements
contain all adjustments (consisting of only normal accruals) necessary to
present fairly the financial position and results of operations of the Company
as of June 30, 2003, and for the period then ended.

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GLENBOROUGH REALTY TRUST INCORPORATED

Notes to Consolidated Financial Statements
June 30, 2003

Reclassifications

Certain prior year balances have been reclassified to conform to the current
year presentation, with no effect on consolidated results of operations.

Use of Estimates

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

New Accounting Pronouncements

In January 2003, the FASB approved for issuance FASB Interpretation No. 46 (FIN
46), Consolidation of Variable Interest Entities. FIN 46 clarifies the
application of Accounting Research Bulletin No. 51, Consolidated Financial
Statements to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 applies immediately
to variable interest entities (VIEs) created after January 31, 2003, and to
VIEs in which an enterprise obtains an interest after that date. It applies in
the first fiscal year or interim period beginning after June 15, 2003, to VIEs
in which an enterprise holds a variable interest that it acquired before
February 1, 2003. FIN 46 may be applied prospectively with a cumulative-effect
adjustment as of the date on which it is first applied or by restating
previously issued financial statements for one or more years with a
cumulative-effect adjustment as of the beginning of the first year restated.
The disclosure requirements of FIN 46 are effective for all financial
statements initially issued after January 31, 2003. Certain of the entities
through which and with which the Company conducts business, including those
described in Notes 5 and 7 have been deemed to be VIEs under the provisions of
FIN 46.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. This
statement establishes standards for the classification and measurement of
certain financial instruments with characteristics of both liabilities and
equity. SFAS No. 150 requires that an issuer classify a financial instrument
that is within its scope as a liability (or an asset in some circumstances).
Many of those instruments were previously classified as equity. This statement
is effective for financial instruments entered into or modified after May 31,
2003 and, otherwise, is effective at the beginning of the first interim period
beginning after June 15, 2003. Management does not expect this standard to have
a material impact on the Companys consolidated financial position or results
of operations.

Stock Based Compensation

The Company has an employee stock incentive plan and it accounts for stock
options and bonus grants in the plan under the recognition and measurement
principles of APB Opinion No. 25, Accounting for Stock Issued to Employees,
and related interpretations. For incentive stock options, no stock-based
employee compensation cost is reflected in net income as all options granted
under the plan have an exercise price equal to the market value of the
underlying Common Stock on the date of grant. The options vest over periods
between 1 and 6 years, and have a maximum term of 10 years. As of June 30, 2003
and 2002, 266,241 and 115,562 shares, respectively, of bonus grants were
outstanding under the Plan. The fair value of the shares granted has been
recorded as deferred compensation in the accompanying financial statements and
is being charged to earnings ratably over the respective vesting periods that
range from 5 to 10 years. As a result, additional compensation expense of
$653,299 and $91,648 was recognized during the six months ended June 30, 2003
and 2002, respectively, which is included in general and administrative expense
on the accompanying consolidated statements of income.

As permitted by Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (SFAS 123), the Company has not
changed its method of accounting for stock options but has provided the
additional required disclosures. Had compensation cost for the Companys
stock-based compensation plans been determined based on the fair value at the
grant dates for awards under those plans, consistent with the

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GLENBOROUGH REALTY TRUST INCORPORATED

Notes to Consolidated Financial Statements
June 30, 2003

method of SFAS No. 123, the Companys net income and earnings per share would
have been reduced to the pro forma amounts indicated below (in thousands except
for per share amounts):

|                                            |  |                         |  |   |       |                    |  |                  |       |          |  |          |        |   |  |   |        |   |  | 
|------------------------------------------- |  | ----------------------- |  | - | ----- | ------------------ |  | ---------------- | ----- | -------- |  | -------- | ------ | - |  | - | ------ | - |  | 
|                                            |  |                         |  |   |       | Three months ended |  | Six months ended
|                                            |  |                         |  |   |       | June 30,           |  | June 30,         |       | June 30, |  | June 30,
|                                            |  |                         |  |   |       | 2003               |  | 2002             |       | 2003     |  | 2002    
|                                            |  |                         |  |   |       |                    |  |                  |       |          |  |         
|Net income available to
Common Stockholders |  | As reported             |  | $ | 5,316 |                    |  | $                | 6,826 |          |  | $        | 11,096 |   |  | $ | 12,626 |  
|                                            |  | SFAS No. 123 Adjustment |  |   | (19   | )                  |  |                  | (256  | )        |  |          | (38    | ) |  |   | (518   | )
|                                            |  |                         |  |   |       |                    |  |                  |       |          |  |          |        |   |  |   |        |   |  | 
|                                            |  | Pro forma               |  | $ | 5,297 |                    |  | $                | 6,570 |          |  | $        | 11,058 |   |  | $ | 12,108 |  
|                                            |  |                         |  |   |       |                    |  |                  |       |          |  |          |        |   |  |   |        |   |  | 
|Basic earnings per share                    |  | As reported             |  | $ | 0.19  |                    |  | $                | 0.25  |          |  | $        | 0.40   |   |  | $ | 0.46   |  
|                                            |  | SFAS No. 123 Adjustment |  |   |      |                    |  |                  | (0.01 | )        |  |          |       |   |  |   | (0.02  | )
|                                            |  |                         |  |   |       |                    |  |                  |       |          |  |          |        |   |  |   |        |   |  | 
|                                            |  | Pro forma               |  | $ | 0.19  |                    |  | $                | 0.24  |          |  | $        | 0.40   |   |  | $ | 0.44   |  
|                                            |  |                         |  |   |       |                    |  |                  |       |          |  |          |        |   |  |   |        |   |  | 
|Diluted earnings per share                  |  | As reported             |  | $ | 0.19  |                    |  | $                | 0.24  |          |  | $        | 0.40   |   |  | $ | 0.45   |  
|                                            |  | SFAS No. 123 Adjustment |  |   |      |                    |  |                  | (0.01 | )        |  |          |       |   |  |   | (0.02  | )
|                                            |  |                         |  |   |       |                    |  |                  |       |          |  |          |        |   |  |   |        |   |  | 
|                                            |  | Pro forma               |  | $ | 0.19  |                    |  | $                | 0.23  |          |  | $        | 0.40   |   |  | $ | 0.43   |  
|                                            |  |                         |  |   |       |                    |  |                  |       |          |  |          |        |   |  |   |        |   |  | 

Rental Properties

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

Depreciation is provided using the straight line method over the useful lives
of the respective assets. The useful lives are as follows:

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

Expenditures for maintenance and repairs are charged to operations as incurred.
Maintenance expenditures include planned major maintenance activities such as
painting, paving, HVAC and roofing repair costs. The Company expenses costs as
incurred and does not accrue in advance of planned major maintenance
activities. Significant renovations or betterments that extend the economic
useful lives of assets are capitalized.

Investments in Land and 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 investments during the period in which the projects are
under development. See Note 5 for further discussion.

Investments in Unconsolidated Operating Joint Ventures

The Companys investments in operating joint ventures are accounted for using
the equity method. The Company does not hold a controlling interest in any
operating joint venture. See Note 6 for further discussion.

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GLENBOROUGH REALTY TRUST INCORPORATED

Notes to Consolidated Financial Statements
June 30, 2003

Mortgage Loans Receivable

The Company monitors the recoverability of its mortgage loans 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
receivable is recognized as revenue as it accrues during the period the loan is
outstanding. Mortgage loans receivable will be evaluated for impairment if it
becomes evident that the borrower is unable to meet its debt service
obligations in a timely manner and cannot satisfy its payments using sources
other than the operations of the property securing the loan. If it is concluded
that such circumstances exist, then such loan will be considered to be impaired
and its recorded amount will be reduced to the estimated 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 its mortgage loans receivable will be different than the recorded
amounts. See Note 7 for further discussion.

Cash and 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.

Derivative Financial Instruments

The Company may use derivative financial instruments in the event that it
believes such instruments will be an effective hedge against fluctuations in
interest rates on a specific borrowing. Derivative financial instruments such
as forward rate agreements or interest rate swaps may be used in this capacity.
To the extent such instruments do not qualify as hedges, they will be accounted
for on a mark-to-market basis and recorded in earnings each period as
appropriate.

At June 30, 2003 and December 31, 2002, the Company was not a party to any open
interest rate protection agreements other than the interest rate cap contract
entered into in December 2001 as discussed in Note 9.

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. Other assets also includes the cost allocated
to the at market component of leases, including origination of leases in place
at properties acquired by the Company, which are all amortized over the
expected average lease term.

Minority Interest

Minority interest represents the 9.78% and 9.74% limited partner interests in
the Operating Partnership not held by the Company at June 30, 2003 and December
31, 2002, respectively. The Company periodically adjusts the carrying value of
minority interest to reflect its share of the book value of the Operating
Partnership. Such adjustments are recorded to stockholders equity as a
reallocation of limited partnership interest in the Operating Partnership.

Revenues

The Company recognizes rental revenue on a straight-line basis at amounts that
it believes it will collect on a tenant by tenant basis. The estimation process
may result in higher or lower levels from period to period as the Companys
collection experience and the credit quality of the Companys tenants changes.
Actual amounts collected could be lower or higher than the amounts recognized
on a straight-line basis if specific tenants are unable to pay rent that the
Company has previously recognized as revenue, or if other tenants pay rent whom
the Company previously estimated would not. SFAS No. 141 requires the Company
to allocate a portion of the purchase price of a building to above market and
below market rate leases. An above market rate lease creates an asset which is
amortized over the remaining lease term of the leases in the acquired building
and results in a reduction to rental revenue. A below market rate lease creates
a liability which is amortized over the remaining lease term of the leases in
the acquired

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GLENBOROUGH REALTY TRUST INCORPORATED

Notes to Consolidated Financial Statements
June 30, 2003

building and results in an increase to rental revenue. The unamortized portions
of these obligations are included in other assets and other liabilities in the
accompanying consolidated balance sheets.

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

Reimbursements from tenants for real estate taxes and other recoverable
operating expenses are recognized as revenue in the period the applicable
expenses are incurred. Differences between estimated and actual amounts are
recognized in the subsequent year.

For the six months ended June 30, 2003 and 2002, no single tenant represented
10% or more of the rental revenue of the Company.

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

Sales of Real Estate

The Company recognizes sales of real estate when a contract has been executed,
a closing has occurred, the buyers initial and continuing investment is
adequate to demonstrate a commitment to pay for the property and the Company
does not have a substantial continuing involvement in the property. Each
property is considered a separately identifiable component of the Company and
is reported in discontinued operations when the operations and cash flows of
the property have been (or will be) eliminated from the ongoing operations of
the Company as a result of a disposal transaction.

Income Taxes

The Company has elected to be taxed as a real estate investment trust under
Sections 856 to 860 of the Internal Revenue Code of 1986, as amended (the
Code). A real estate investment trust is generally not subject to federal
income tax on that portion of its real estate investment trust taxable income
(Taxable Income) that is distributed to its stockholders, provided that at
least 90% of Taxable Income is distributed and other requirements are met.

Reference to 2002 Audited Financial Statements

These unaudited financial statements should be read in conjunction with the
Notes to Consolidated Financial Statements included in the 2002 audited
consolidated financial statements.

Note 3. ACQUISITION OF RENTAL PROPERTY

In the first quarter of 2003, the Company acquired 1525 Wilson Boulevard, a
305,000 square foot office building located in Arlington, Virginia. The total
acquisition cost of approximately $71 million was funded with a new $50 million
mortgage loan (as discussed in Note 9) and the proceeds from the disposition of
several industrial properties in the fourth quarter of 2002, as well as two
industrial property sales in the first quarter of 2003, as discussed below.
SFAS No. 141 requires that for business combinations initiated after June 30,
2001, the acquirer allocate a portion of the acquisition costs to intangible
assets and liabilities in applying the purchase method of accounting.
Intangible assets related to lease origination and at market rate and above
market rate leases recognized in the 1525 Wilson Boulevard transaction amounted
to approximately $4.4 million. Liabilities related to below market rate leases
amounted to approximately $695,000.

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GLENBOROUGH REALTY TRUST INCORPORATED

Notes to Consolidated Financial Statements
June 30, 2003

Note 4. DISPOSITIONS OF RENTAL PROPERTIES

In the first and second quarters of 2003, the Company sold ten properties,
including seven industrial, two office and one multifamily. These assets were
sold for an aggregate sales price of approximately $172 million and generated a
net gain of approximately $15,604,000.

The ten properties sold in 2003 were:

|                        |  |             |  |                     |  |              |  |                |    |               |  |             
|----------------------- |  | ----------- |  | ------------------- |  | ------------ |  | -------------- | -- | ------------- |  | ------------
|                        |  |             |  |                     |  |              |  |                |    |               |  | Total Square
|Property                |  | Type        |  | Location            |  | Date of Sale |  | Building Count |    | Footage/Units
|                        |  |             |  |                     |  |              |  |                |    |              
|Covance Business Center |  | Industrial  |  | Indianapolis, IN    |  | 1/8/03       |  |                | 1  |               |  | 333,600 sf  
|Bellanca Airport Park   |  | Industrial  |  | Los Angeles, CA     |  | 1/30/03      |  |                | 1  |               |  | 84,201  sf  
|Buschwood III           |  | Office      |  | Tampa, FL           |  | 3/25/03      |  |                | 1  |               |  | 77,095 sf   
|Clark Avenue            |  | Office      |  | King of Prussia, PA |  | 3/27/03      |  |                | 1  |               |  | 40,000 sf   
|Valley Forge VII        |  | Industrial  |  | Norristown, PA      |  | 3/27/03      |  |                | 1  |               |  | 25,700 sf   
|Canyons                 |  | Multifamily |  | Fort Worth, TX      |  | 3/28/03      |  |                | 1  |               |  | 349 units   
|Valley Forge IV         |  | Industrial  |  | Norristown, PA      |  | 3/31/03      |  |                | 1  |               |  | 51,600 sf   
|Valley Forge III        |  | Industrial  |  | Norristown, PA      |  | 4/29/03      |  |                | 1  |               |  | 27,750 sf   
|Palms Business Center   |  |             |  |                     |  |              |  |                |    |               |  |             
|III and South           |  | Industrial  |  | Las Vegas, NV       |  | 5/15/03      |  |                | 2  |               |  | 268,547 sf  
|Gateway Park Industrial |  | Industrial  |  | Aurora, CO          |  | 6/30/03      |  |                | 11 |               |  | 1,328,534 sf

In accordance with SFAS 144 Accounting for the Impairment or Disposal of Long
Lived Assets, the gain on sale and the related operating results from these
sold properties are classified as discontinued operations in the accompanying
consolidated statements of income for all periods presented. In addition, real
estate properties classified as held for sale are presented separately on the
consolidated balance sheet with the related results from operations classified
as discontinued operations in the accompanying consolidated statements of
income for all periods presented. There was one property classified as held
for sale at June 30, 2003 and four properties classified as held for sale at
December 31, 2002.

The major classes of assets and liabilities of properties classified as held
for sale at June 30, 2003 and December 31, 2002 are (dollars in thousands):

|            |                           |                                                      |   |        |        |      |   |         |        | 
|----------- | ------------------------- | ---------------------------------------------------- | - | ------ | ------ | ---- | - | ------- | ------ | 
|            |                           |                                                      |   | 2003   |        | 2002
|            |                           |                                                      |   |        |        |     
|ASSETS      |                           |                                                      |   |        |        |      |   |        
|            | Rental properties, gross  |                                                      | $ | 43,548 |        |      | $ | 104,154 |       
|            | Accumulated depreciation  |                                                      |   | (8,336 | )      |      |   | (12,291 | )     
|            |                           |                                                      |   |        |        |      |   |        
|            | Rental properties, net    |                                                      |   | 35,212 |        |      |   | 91,863  |       
|            | Cash and cash equivalents |                                                      |   |       |        |      |   | 244     |       
|            | Other assets              |                                                      |   | 3,556  |        |      |   | 3,590   |       
|            |                           |                                                      |   |        |        |      |   |        
|            |                           | Properties held for sale                             |   | $      | 38,768 |      |   | $       | 95,697 | 
|            |                           |                                                      |   |        |        |      |   |        
|LIABILITIES |                           |                                                      |   |        |        |      |   |        
|            | Mortgage loans            |                                                      | $ | 19,080 |        |      | $ | 52,717  |       
|            | Other liabilities         |                                                      |   | 516    |        |      |   | 3,988   |       
|            |                           |                                                      |   |        |        |      |   |        
|            |                           | Obligations associated with
properties held for sale |   | $      | 19,596 |      |   | $       | 56,705 | 
|            |                           |                                                      |   |        |        |      |   |         |       

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GLENBOROUGH REALTY TRUST INCORPORATED

Notes to Consolidated Financial Statements
June 30, 2003

Below is a summary of the results of operations of sold and held for sale
properties through their respective disposition dates, if applicable (dollars
in thousands):

|                                                      |  |                    |        |                  |  |      |       |      |  |   |        |   |  |   |        | 
|----------------------------------------------------- |  | ------------------ | ------ | ---------------- |  | ---- | ----- | ---- |  | - | ------ | - |  | - | ------ | 
|                                                      |  | Three months ended |        | Six months ended
|                                                      |  | June 30,           |        | June 30,        
|                                                      |  |                    |        |                 
|                                                      |  | 2003               |        | 2002             |  | 2003 |       | 2002
|                                                      |  |                    |        |                  |  |      |       |     
|Rental revenue                                        |  | $                  | 3,743  |                  |  | $    | 8,787 |      |  | $ | 12,255 |   |  | $ | 18,117 | 
|                                                      |  |                    |        |                  |  |      |       |      |  |   |        |   |  |   |        | 
|Property operating expenses                           |  |                    | 1,406  |                  |  |      | 2,726 |      |  |   | 3,727  |   |  |   | 5,991  | 
|Depreciation and amortization                         |  |                    | 651    |                  |  |      | 2,367 |      |  |   | 2,267  |   |  |   | 4,924  | 
|Interest expense                                      |  |                    | 1,290  |                  |  |      | 2,019 |      |  |   | 2,826  |   |  |   | 4,316  | 
|Loss on early extinguishment of debt                  |  |                    | 5,411  |                  |  |      | 892   |      |  |   | 5,411  |   |  |   | 892    | 
|                                                      |  |                    |        |                  |  |      |       |      |  |   |        |   |  |   |        | 
|Total expenses                                        |  |                    | 8,758  |                  |  |      | 8,004 |      |  |   | 14,231 |   |  |   | 16,123 | 
|                                                      |  |                    |        |                  |  |      |       |      |  |   |        |   |  |   |        | 
|Income (loss) before net gain on
sales of real estate |  |                    | (5,015 | )                |  |      | 783   |      |  |   | (1,976 | ) |  |   | 1,994  | 
|Net gain on sales of real estate                      |  |                    | 11,154 |                  |  |      | 1,423 |      |  |   | 15,604 |   |  |   | 1,423  | 
|                                                      |  |                    |        |                  |  |      |       |      |  |   |        |   |  |   |        | 
|Discontinued operations                               |  | $                  | 6,139  |                  |  | $    | 2,206 |      |  | $ | 13,628 |   |  | $ | 3,417  | 
|                                                      |  |                    |        |                  |  |      |       |      |  |   |        |   |  |   |        | 

Note 5. INVESTMENTS IN LAND AND DEVELOPMENT

The Company has developed a 96,000 square foot office building as the fourth
and final phase of Centerpointe at Bridgewater, located in New Jersey. This
property is complete and currently in the stabilization phase. The Companys
investment in this property of approximately $13.3 million was reclassified to
real estate assets at the beginning of the second quarter of 2003.

The Company has approximately 107 acres of land with a book value of
approximately $26.4 million as of June 30, 2003. This land has potential for
future development of approximately 1,295,000 square feet of office space. The
Company has no further contractual obligations for the future funding of these
developments; however, the Company will likely be funding a portion of their
working capital needs until such time as other financing is obtained. The loans
secured by certain of these development properties contain recourse provisions
to the Company in the aggregate amount of $14 million; however, some of the
loans were not fully drawn as of June 30, 2003.

Since 1998, the Company has been involved in a number of alliances organized in
limited liability companies and stock corporations which could ultimately
result in the development of approximately 938,000 square feet of commercial
and mixed-use properties in California and Colorado. These projects are
currently in three different phases of development: approximately 425,000
square feet is substantially completed and in the stabilization phase, 63,000
square feet is in the development phase and 450,000 square feet is in the
entitlement phase. The alliances grant the Company certain rights to purchase
the properties upon completion of development. As of June 30, 2003, the Company
had an investment basis of approximately $38.3 million in these alliances. In
addition, the Company has acquired properties from them aggregating
approximately $119.8 million since 1999. The Company has no further contractual
obligations for the future funding of these developments; however, the Company
will likely be funding a portion of their working capital needs until such time
as other financing is obtained. Under these alliances, the Company has provided
an aggregate of $48.7 million in debt guarantees; however, some of the loans
were not fully drawn as of June 30, 2003. These guarantees will remain in place
until such time as the related development financing has been replaced or
repaid, the terms of which vary from less than 1 year to up to 2 years. The
Company would be required to perform under these guarantees in the event that
the proceeds generated by the sale, refinance or additional capital
contribution by partners of the development project were insufficient to repay
the full amount of the related debt financing. There is currently no recorded
liability for any amounts that may become payable under these guarantees, nor
is there a liability for the Companys obligation to stand-ready to fund such
guarantees. In the event that the Company must make payments under one of these
guarantees, its only recourse is to the Limited

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GLENBOROUGH REALTY TRUST INCORPORATED

Notes to Consolidated Financial Statements
June 30, 2003

Liability Companies that own the properties. No estimate of the amount that
could be recovered by the Company in such an event can be made at this time.

In the first quarter of 2003, due to decreased leasing activity and lower than
anticipated market rents, the Company recorded a provision for impairment
totaling $2,272,000 to provide for a decrease in the carrying value of its 10%
owned development joint venture, which owns an 86,100 square foot office
property located in San Mateo, California, to its estimated fair value of zero.

Certain of the alliances with which the Company conducts business have been
deemed to be VIEs. The Company expects to consolidate the entity known as
Marina Shores, effective July 1, 2003, as the Company is the primary
beneficiary. The total assets and liabilities of Marina Shores were
approximately $78.0 million and $47.7 million, respectively, at June 30, 2003.
There are other alliances which are VIEs, but in which the Company is not the
primary beneficiary. The total assets and liabilities of such entities were
approximately $58.3 million and $38.7 million, respectively, at June 30, 2003.
The Companys maximum exposure to loss is equal to its investments in these
arrangements, plus the related debt guarantees, as described above.

Note 6. INVESTMENTS IN UNCONSOLIDATED OPERATING JOINT VENTURES

The Companys investments in unconsolidated operating joint ventures are
accounted for using the equity method. The Company records earnings on its
investments equal to its ownership interest in the ventures earnings (losses).
Distributions are recorded as a reduction of the Companys investment.

The Companys investments in unconsolidated operating joint ventures consist of
the following as of June 30, 2003 and December 31, 2002 (dollars in thousands):

|                     |  |                    |    |          |  |                           |  |               |         |      |  |           |  |   |       |  |  |   |       |  |  |   |       | 
|-------------------- |  | ------------------ | -- | -------- |  | ------------------------- |  | ------------- | ------- | ---- |  | --------- |  | - | ----- |  |  | - | ----- |  |  | - | ----- | 
|                     |  |                    |    |          |  | Property                  |  | Square        |         |      |  |           |  |   |       |  |  |   |       | 
|Joint Venture        |  | Ownership Interest |    | Location |  | Footage                   |  | Property Type |         | 2003 |  | 2002     
|                     |  |                    |    |          |  |                           |  |               |         |      |  |          
|Rincon Center I & II |  |                    | 10 | %        |  | San Francisco, California |  |               | 741,000 |      |  | Mixed-Use |  | $ | 4,564 |  |  | $ | 4,225 | 
|2000 Corporate Ridge |  |                    | 10 | %        |  | McLean, Virginia          |  |               | 256,000 |      |  | Office    |  |   | 2,858 |  |  |   | 3,171 | 
|Gateway Retail I     |  |                    | 50 | %        |  | Denver, Colorado          |  |               | 12,000  |      |  | Retail    |  |   | 420   |  |  |   | 426   | 
|                     |  |                    |    |          |  |                           |  |               |         |      |  |           |  |   |       |  |  |   |       |  |  |   |       | 
|                     |  |                    |    |          |  |                           |  |               |         |      |  |           |  |   |       |  |  | $ | 7,842 |  |  | $ | 7,822 | 
|                     |  |                    |    |          |  |                           |  |               |         |      |  |           |  |   |       |  |  |   |       |  |  |   |       | 

Note 7. MORTGAGE LOANS RECEIVABLE

The Company holds a first mortgage of approximately $39 million at June 30,
2003, secured by land at Gateway Park in Aurora, Colorado. The loan was
originally funded in June 1998. Through December 31, 2002, the loan accrued
interest at a fixed rate of 13% and matured in July 2005. Effective January 1,
2003, the loan was modified to reduce the interest rate to 6.5% and to extend
the maturity date to July 2007. Periodic payments of interest and principal are
received on the loan from proceeds of land parcel sales in the project. During
the second quarter of 2003, a payment of approximately $4.3 million was
received and applied to the balance of accrued interest of approximately $3.4
million and principal of approximately $900,000. Gateway Park is a development
project where the Company and the Pauls Corporation have an alliance and where
the Company has also acquired property. 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 5 million square feet of office
space over the next ten years. No loan loss reserves have been recorded related
to this loan.

The borrowing entities in this loan arrangement have been deemed to be VIEs,
but the Company is not the primary beneficiary. The total carrying value of
such entities assets and liabilities were approximately $70.8 million and
$70.9 million, respectively, at June 30, 2003. The Companys maximum exposure
to loss is equal to the recorded amount of its loan, including accrued
interest.

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GLENBOROUGH REALTY TRUST INCORPORATED

Notes to Consolidated Financial Statements
June 30, 2003

Note 8. OTHER ASSETS

As of June 30, 2003 and December 31, 2002, other assets on the consolidated
balance sheets consist of the following (in thousands):

|                                          |  |      |        |      |  |   |        | 
|----------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | 
|                                          |  | 2003 |        | 2002
|                                          |  |      |        |     
|Accounts receivable, net                  |  | $    | 343    |      |  | $ | 2,481  | 
|Straight-line rent receivable, net        |  |      | 8,780  |      |  |   | 6,570  | 
|Prepaid expenses                          |  |      | 3,875  |      |  |   | 4,312  | 
|Impound accounts                          |  |      | 1,844  |      |  |   | 2,352  | 
|Note receivable                           |  |      | 3,849  |      |  |   | 3,775  | 
|Deferred leasing and financing costs, net |  |      | 24,049 |      |  |   | 23,720 | 
|Investment in management contracts        |  |      | 2,052  |      |  |   | 2,356  | 
|Corporate office fixed assets, net        |  |      | 2,472  |      |  |   | 2,601  | 
|FASB 141 intangible assets, net           |  |      | 14,452 |      |  |   | 4,420  | 
|Other                                     |  |      | 372    |      |  |   | 148    | 
|                                          |  |      |        |      |  |   |        | 
|Total other assets                        |  | $    | 62,088 |      |  | $ | 52,735 | 
|                                          |  |      |        |      |  |   |        | 

Note 9. SECURED AND UNSECURED LIABILITIES

The Company had the following mortgage loans and bank lines outstanding as of
June 30, 2003 and December 31, 2002 (dollars in thousands):

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   |         |  |      |   |         |  | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ------- |  | ---- | - | ------- |  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   | 2003    |  | 2002
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   |         |  |     
|Secured loans with various lenders, bearing
interest at fixed rates between 4.83% and 8.13%
at June 30, 2003 and December 31, 2002, with
monthly principal and interest payments ranging
between $29 and $292 and maturing at various
dates through March 1, 2008. These loans are
secured by properties with an aggregate net
carrying value of $340,867 and $382,237 at June 30, 2003 and December 31, 2002, respectively                                                                                                                                                                                                                                                                           |  | $ | 243,416 |  |      | $ | 274,966 | 
|Secured loans with various lenders, bearing
interest at variable rates ranging between
3.32% and 3.88% at June 30, 2003, and 3.38% and
3.88% at December 31, 2002, and maturing at various dates through January 31, 2006. These
loans are secured by properties with an
aggregate net carrying value of $213,026 and
$198,371 at June 30, 2003 and December 31, 2002, respectively                                                                                                                                                                                                                                                                                                                   |  |   | 163,052 |  |      |   | 149,936 | 
|Secured loan with an insurance company, net of
unamortized discount of $1,647 and $1,801 at
June 30, 2003 and December 31, 2002,
respectively. The loan has two fixed rate
components. The fixed rate component of
$44,768 bears interest at 6.125%, matures on
November 10, 2008 and requires monthly principal and interest payments of $296. The
fixed rate component of $92,045 bears interest
at 5.91%, matures on November 10, 2008, and
requires monthly principal and interest
payments of $595. The two components are
cross-collateralized and are secured by
properties with an aggregate net carrying value
of $197,692 and $200,956 at June 30, 2003 and December 31, 2002, respectively |  |   | 136,813 |  |      |   | 137,684 | 

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GLENBOROUGH REALTY TRUST INCORPORATED

Notes to Consolidated Financial Statements
June 30, 2003

|                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |         |        |      |   |         |        | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------- | ------ | ---- | - | ------- | ------ | 
|                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | 2003    |        | 2002
|                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |         |        |     
|                                                                                                                                                                                                                                                                                                                                      | Secured loan with an insurance company, net
of unamortized discount of $749 and $819 at
June 30, 2003 and December 31, 2002,
respectively. The loan has both a fixed rate
and a variable rate component. The fixed rate
component of $51,800 bears interest at
6.125%, matures on November 10, 2008, and
requires monthly principal and interest
payments of $343. The variable rate component
of $35,101 bears interest at a floating rate
of 30-day LIBOR plus 3.25% with a floor of 5%
(5% at June 30, 2003 and December 31, 2002),
matures on December 11, 2004, and requires
monthly interest-only payments. The two
components are cross-collateralized and are
secured by properties with an aggregate net
carrying value of $139,972 and $157,248 at June 30, 2003 and December 31, 2002,
respectively |   | $       | 86,901 |      |   | $       | 96,127 | 
|                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |         |        |      |   |         |       
|Total mortgage loans                                                                                                                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | 630,182 |        |      |   | 658,713 |       
|                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |         |        |      |   |         |       
|Unsecured $180,000 line of credit with a
group of commercial banks (Credit Facility)
with a variable interest rate of 30-day LIBOR
plus 1.525% (2.65% and 2.91% at June 30, 2003
and December 31, 2002, respectively), monthly
interest only payments and a maturity date of
September 19, 2005, with one one-year
extension option |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | 56,836  |        |      |   | 76,204  |       
|                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |         |        |      |   |         |       
|Total secured and unsecured liabilities
before adjustment for properties held for
sale                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | $ | 687,018 |        |      | $ | 734,917 |       
|                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |         |        |      |   |         |       

Mortgage loans on the consolidated balance sheet as of June 30, 2003 and
December 31, 2002 are presented net of properties classified as held for sale.
The following table reconciles total secured and unsecured liabilities from the
table above to the amounts presented on the consolidated balance sheet:

|                                                           |  |      |         |      |  |   |         |  
|---------------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|                                                           |  | 2003 |         | 2002
|                                                           |  |      |         |     
|Total mortgage loans                                       |  | $    | 630,182 |      |  | $ | 658,713 |  
|Properties held for sale (Note 4)                          |  |      | (19,080 | )    |  |   | (52,717 | )
|                                                           |  |      |         |      |  |   |         |  
|Total mortgage loans adjusted for properties
held for sale |  |      | 611,102 |      |  |   | 605,996 |  
|Unsecured bank line                                        |  |      | 56,836  |      |  |   | 76,204  |  
|                                                           |  |      |         |      |  |   |         |  
|Total secured and unsecured liabilities                    |  | $    | 667,938 |      |  | $ | 682,200 |  
|                                                           |  |      |         |      |  |   |         |  

In the second quarter of 2003, in connection with the sale of three properties
(as discussed in Note 4), approximately $55.8 million of the Companys mortgage
loans were paid off or assumed by the buyer. In connection with these payoffs,
the Company recognized a loss on early extinguishment of debt of approximately
$5.4 million due to prepayment penalties and the writeoff of unamortized
original issuance costs as discussed in Note 10 below. As this loss is related
to property sales, it has been included in discontinued operations on the
accompanying consolidated statement of income for the three and six months
ended June 30, 2003.

In the first quarter of 2003, in order to finance the acquisition of 1525
Wilson Boulevard (as discussed in Note 3), the Company obtained a $50 million
loan. The loan has a maturity date of January 31, 2006 and bears interest at
the floating rate of 30-day LIBOR plus 2.25%. The interest rate on this loan
at June 30, 2003, was 3.63%.

In the first quarter of 2003, the Company closed a $17.5 million loan which is
secured by a 144,000 square foot office property located in Alexandria,
Virginia. The loan has a maturity date of March 1, 2008 and bears interest at a
fixed rate of 5%.

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GLENBOROUGH REALTY TRUST INCORPORATED

Notes to Consolidated Financial Statements
June 30, 2003

In the first quarter of 2003, approximately $33.3 million of the Companys
mortgage loans were paid off in connection with property sales. In addition, a
mortgage loan of approximately $3.9 million was paid off on its maturity date.

In 2001, the Company closed a $52.5 million secured loan with an insurance
company (Secured Financing). The Secured Financing bears interest at a
floating rate of 30-day LIBOR plus 3.25% with an absolute floor of 5% (5% at
June 30, 2003 and December 31, 2002) and has an initial maturity of December
11, 2004, with two one-year extension options. In connection with the Secured
Financing, the Company entered into an interest rate cap agreement (caplets) to
hedge increases in 30-day LIBOR rates above a specified level. The agreement
expires over a term concurrent with the Secured Financing, is indexed to a
30-day LIBOR rate, is for a notional amount equal to the maximum amount
available on the Secured Financing, and caps 30-day LIBOR at a maximum of 6%.
As of June 30, 2003 and December 31, 2002, the 30-day LIBOR rate was 1.12% and
1.38%, respectively. The Company paid a $594,000 fee at the inception of the
cap agreement. In connection with the sale of two properties in 2002 and one
property in 2003, approximately $17.4 million of this loan was paid off and
related portions of the caplets were cancelled. As a result of these
cancellations, as well as caplet expirations, approximately $237,000 of the
caplet fee has been charged to earnings. The remaining $357,000 fee is being
charged to earnings as the caplets expire.

Outstanding borrowings under the Credit Facility decreased from $76,204,000 at
December 31, 2002, to $56,836,000 at June 30, 2003. The decrease was due to pay
downs totaling $68,772,000 generated from the sales of properties, proceeds of
a new mortgage loan and cash flow from operations, offset by draws totaling
$49,404,000 for the acquisition of properties (as discussed in Note 3), stock
repurchases and development advances. The Credit Facility requires, among other
things, the Company to be in compliance with certain financial covenants and
ratios. The Company has been in compliance during the first six months of 2003
and remains in compliance at June 30, 2003.

Some of the Companys properties are held in limited partnerships and limited
liability companies in order to facilitate financing. All such entities are
owned 100% directly or indirectly by the Company.

The required principal payments on the Companys debt for the next five years
and thereafter, as of June 30, 2003, are as follows (in thousands). Included
in the year ending December 31, 2005, is the Credit Facility balance of $56,836
which has an initial maturity of September 19, 2005.

|             |  |   |         | 
|------------ |  | - | ------- | 
|Year Ending  |  |   |         | 
|December 31, |  |   |         | 
|             |  |   |         | 
|2003         |  | $ | 48,404  | 
|2004         |  |   | 43,145  | 
|2005         |  |   | 165,331 | 
|2006         |  |   | 153,319 | 
|2007         |  |   | 6,002   | 
|Thereafter   |  |   | 270,817 | 
|             |  |   |         | 
|Total        |  | $ | 687,018 | 
|             |  |   |         | 

Note 10. LOSSES ON EARLY EXTINGUISHMENT OF DEBT

In connection with various loan payoffs, the Company recorded losses on early
extinguishment of debt of $5,411,000 and $892,000 for the three and six months
ended June 30, 2003 and 2002, respectively, consisting of prepayment penalties
and the writeoff of unamortized original issuance costs. As these losses are
related to property sales, they have been included in discontinued operations
on the accompanying consolidated statements of income for the three and six
months ended June 30, 2003 and 2002.

Note 11. RELATED PARTY TRANSACTIONS

Fee and reimbursement income earned by the Company from related parties totaled
$1,767,000 and $1,883,000 for the six months ended June 30, 2003 and 2002,
respectively, and consisted of property management fees, asset management fees
and other fee income.

19



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GLENBOROUGH REALTY TRUST INCORPORATED

Notes to Consolidated Financial Statements
June 30, 2003

Note 12. EARNINGS PER SHARE

Earnings per share are as follows (in thousands, except for weighted average
shares and per share amounts):

|                                                      |                                         |   |                    |            |                  |   |       |            |      |   |        |            |  |   |        |            | 
|----------------------------------------------------- | --------------------------------------- | - | ------------------ | ---------- | ---------------- | - | ----- | ---------- | ---- | - | ------ | ---------- |  | - | ------ | ---------- | 
|                                                      |                                         |   | Three months ended |            | Six months ended
|                                                      |                                         |   | June 30,           |            | June 30,        
|                                                      |                                         |   |                    |            |                 
|                                                      |                                         |   | 2003               |            | 2002             |   | 2003  |            | 2002
|                                                      |                                         |   |                    |            |                  |   |       |            |     
|Net income available to common
Stockholders  Basic   |                                         | $ | 5,316              |            |                  | $ | 6,826 |            |      | $ | 11,096 |            |  | $ | 12,626 |           
|Minority interest                                     |                                         |   |                   |            |                  |   | 752   |            |      |   |       |            |  |   | 1,403  |           
|                                                      |                                         |   |                    |            |                  |   |       |            |      |   |        |            |  |   |        |           
|Net income available to common
Stockholders  Diluted |                                         | $ | 5,316              |            |                  | $ | 7,578 |            |      | $ | 11,096 |            |  | $ | 14,029 |           
|                                                      |                                         |   |                    |            |                  |   |       |            |      |   |        |            |  |   |        |           
|Weighted average shares:                              |                                         |   |                    |            |                  |   |       |            |      |   |        |            |  |   |        |           
|                                                      | Basic                                   |   |                    | 27,600,788 |                  |   |       | 27,639,344 |      |   |        | 27,624,147 |  |   |        | 27,324,595 | 
|                                                      | Stock options                           |   |                    |           |                  |   |       | 542,347    |      |   |        |           |  |   |        | 475,679    | 
|                                                      | Convertible Operating
Partnership Units |   |                    |           |                  |   |       | 3,068,463  |      |   |        |           |  |   |        | 3,068,463  | 
|                                                      |                                         |   |                    |            |                  |   |       |            |      |   |        |            |  |   |        |           
|                                                      | Diluted                                 |   |                    | 27,600,788 |                  |   |       | 31,250,154 |      |   |        | 27,624,147 |  |   |        | 30,868,737 | 
|                                                      |                                         |   |                    |            |                  |   |       |            |      |   |        |            |  |   |        |           
|Basic earnings per share                              |                                         | $ | 0.19               |            |                  | $ | 0.25  |            |      | $ | 0.40   |            |  | $ | 0.46   |           
|Diluted earnings per share                            |                                         | $ | 0.19               |            |                  | $ | 0.24  |            |      | $ | 0.40   |            |  | $ | 0.45   |           

Options to purchase 3,172,410 shares of the Companys common stock were not
included in the computation of diluted earnings per share for the three and six
months ended June 30, 2003 as they are anti-dilutive. Options to purchase
2,813,730 and 2,880,398 shares of the Companys common stock were not included
in the computation of diluted earnings per share for the three and six months
ended June 30, 2002 because their exercise prices were greater than the average
market price of the Companys common stock of $22.38 and $21.54 per share,
respectively. Convertible operating partnership units of 3,012,024 have been
excluded from the calculation of diluted earnings per share for the three and
six months ended June 30, 2003 as they are anti-dilutive. The preferred stock
has been excluded from the calculation of diluted earnings per share as it is
anti-dilutive in all periods presented.

Note 13. SEGMENT INFORMATION

The Company owns and operates office and industrial properties throughout the
United States and manages its business by geographic markets. After the sale of
the Gateway Park Industrial properties in the second quarter of 2003 (as
discussed in Note 4), office properties now represent approximately 94% of the
Companys portfolio by net operating income and consist primarily of
multi-tenant suburban office buildings. The remaining industrial properties are
designed for warehouse, distribution and light manufacturing for single-tenant
or multi-tenant use. The Companys geographic markets are managed separately as
each market requires different operating, pricing and leasing strategies. As of
June 30, 2003, the Companys largest markets are Washington, D.C., Southern
California, Northern New Jersey, Boston, San Francisco, Chicago, Tampa/Orlando,
St. Louis, Minneapolis, Denver, Philadelphia, Las Vegas and Atlanta. Each of
these markets represents a reportable segment that requires the Company to
employ different management strategies.

The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. The Company evaluates performance
based upon net operating income of the combined properties in each segment.
Significant information used by the Company for its reportable segments as of
and for the six months ended June 30, 2003 and 2002 is as follows (in
thousands):

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GLENBOROUGH REALTY TRUST INCORPORATED

Notes to Consolidated Financial Statements
June 30, 2003

|                    |                             |  |            |         |            |  |   |         | 
|------------------- | --------------------------- |  | ---------- | ------- | ---------- |  | - | ------- | 
|                    |                             |  | Six Months |         | Six Months
|                    |                             |  | Ended      |         | Ended     
|                    |                             |  | June 30,   |         | June 30,  
|                    |                             |  | 2003       |         | 2002      
|                    |                             |  |            |         |           
|Washington, D.C.    |                             |  |            |         |            |  |   |        
|                    | Rental revenue              |  | $          | 16,529  |            |  | $ | 13,277  | 
|                    | Property operating expenses |  |            | 4,421   |            |  |   | 3,203   | 
|                    |                             |  |            |         |            |  |   |        
|                    | Net operating income        |  | $          | 12,108  |            |  | $ | 10,074  | 
|                    |                             |  |            |         |            |  |   |        
|                    | Rental properties, net      |  | $          | 223,846 |            |  | $ | 153,815 | 
|                    |                             |  |            |         |            |  |   |        
|Southern California |                             |  |            |         |            |  |   |        
|                    | Rental revenue              |  | $          | 15,952  |            |  | $ | 9,359   | 
|                    | Property operating expenses |  |            | 4,902   |            |  |   | 2,316   | 
|                    |                             |  |            |         |            |  |   |        
|                    | Net operating income        |  | $          | 11,050  |            |  | $ | 7,043   | 
|                    |                             |  |            |         |            |  |   |        
|                    | Rental properties, net      |  | $          | 182,472 |            |  | $ | 137,525 | 
|                    |                             |  |            |         |            |  |   |        
|Northern New Jersey |                             |  |            |         |            |  |   |        
|                    | Rental revenue              |  | $          | 12,076  |            |  | $ | 11,952  | 
|                    | Property operating expenses |  |            | 3,757   |            |  |   | 2,988   | 
|                    |                             |  |            |         |            |  |   |        
|                    | Net operating income        |  | $          | 8,319   |            |  | $ | 8,964   | 
|                    |                             |  |            |         |            |  |   |        
|                    | Rental properties, net      |  | $          | 153,833 |            |  | $ | 150,641 | 
|                    |                             |  |            |         |            |  |   |        
|Boston              |                             |  |            |         |            |  |   |        
|                    | Rental revenue              |  | $          | 11,035  |            |  | $ | 11,174  | 
|                    | Property operating expenses |  |            | 3,758   |            |  |   | 3,380   | 
|                    |                             |  |            |         |            |  |   |        
|                    | Net operating income        |  | $          | 7,277   |            |  | $ | 7,794   | 
|                    |                             |  |            |         |            |  |   |        
|                    | Rental properties, net      |  | $          | 92,541  |            |  | $ | 96,865  | 
|                    |                             |  |            |         |            |  |   |        
|San Francisco       |                             |  |            |         |            |  |   |        
|                    | Rental revenue              |  | $          | 5,661   |            |  | $ | 5,028   | 
|                    | Property operating expenses |  |            | 1,379   |            |  |   | 1,308   | 
|                    |                             |  |            |         |            |  |   |        
|                    | Net operating income        |  | $          | 4,282   |            |  | $ | 3,720   | 
|                    |                             |  |            |         |            |  |   |        
|                    | Rental properties, net      |  | $          | 108,909 |            |  | $ | 87,689  | 
|                    |                             |  |            |         |            |  |   |        
|Chicago             |                             |  |            |         |            |  |   |        
|                    | Rental revenue              |  | $          | 5,826   |            |  | $ | 8,000   | 
|                    | Property operating expenses |  |            | 2,909   |            |  |   | 2,742   | 
|                    |                             |  |            |         |            |  |   |        
|                    | Net operating income        |  | $          | 2,917   |            |  | $ | 5,258   | 
|                    |                             |  |            |         |            |  |   |        
|                    | Rental properties, net      |  | $          | 83,084  |            |  | $ | 85,956  | 
|                    |                             |  |            |         |            |  |   |        
|Tampa/Orlando       |                             |  |            |         |            |  |   |        
|                    | Rental revenue              |  | $          | 4,235   |            |  | $ | 4,373   | 
|                    | Property operating expenses |  |            | 1,270   |            |  |   | 1,327   | 
|                    |                             |  |            |         |            |  |   |        
|                    | Net operating income        |  | $          | 2,965   |            |  | $ | 3,046   | 
|                    |                             |  |            |         |            |  |   |        
|                    | Rental properties, net      |  | $          | 40,521  |            |  | $ | 48,547  | 
|                    |                             |  |            |         |            |  |   |        

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GLENBOROUGH REALTY TRUST INCORPORATED

Notes to Consolidated Financial Statements
June 30, 2003

|             |                             |  |            |        |            |  |   |         | 
|------------ | --------------------------- |  | ---------- | ------ | ---------- |  | - | ------- | 
|             |                             |  | Six Months |        | Six Months
|             |                             |  | Ended      |        | Ended     
|             |                             |  | June 30,   |        | June 30,  
|             |                             |  | 2003       |        | 2002      
|             |                             |  |            |        |           
|St. Louis    |                             |  |            |        |            |  |   |        
|             | Rental revenue              |  | $          | 3,915  |            |  | $ | 3,910   | 
|             | Property operating expenses |  |            | 1,602  |            |  |   | 1,452   | 
|             |                             |  |            |        |            |  |   |        
|             | Net operating income        |  | $          | 2,313  |            |  | $ | 2,458   | 
|             |                             |  |            |        |            |  |   |        
|             | Rental properties, net      |  | $          | 29,161 |            |  | $ | 27,858  | 
|             |                             |  |            |        |            |  |   |        
|Minneapolis  |                             |  |            |        |            |  |   |        
|             | Rental revenue              |  | $          | 3,047  |            |  | $ | 3,201   | 
|             | Property operating expenses |  |            | 1,273  |            |  |   | 1,487   | 
|             |                             |  |            |        |            |  |   |        
|             | Net operating income        |  | $          | 1,774  |            |  | $ | 1,714   | 
|             |                             |  |            |        |            |  |   |        
|             | Rental properties, net      |  | $          | 29,702 |            |  | $ | 35,720  | 
|             |                             |  |            |        |            |  |   |        
|Denver       |                             |  |            |        |            |  |   |        
|             | Rental revenue              |  | $          | 6,325  |            |  | $ | 6,379   | 
|             | Property operating expenses |  |            | 2,207  |            |  |   | 1,924   | 
|             |                             |  |            |        |            |  |   |        
|             | Net operating income        |  | $          | 4,118  |            |  | $ | 4,455   | 
|             |                             |  |            |        |            |  |   |        
|             | Rental properties, net      |  | $          | 38,497 |            |  | $ | 84,873  | 
|             |                             |  |            |        |            |  |   |        
|Las Vegas    |                             |  |            |        |            |  |   |        
|             | Rental revenue              |  | $          | 3,083  |            |  | $ | 3,201   | 
|             | Property operating expenses |  |            | 790    |            |  |   | 749     | 
|             |                             |  |            |        |            |  |   |        
|             | Net operating income        |  | $          | 2,293  |            |  | $ | 2,452   | 
|             |                             |  |            |        |            |  |   |        
|             | Rental properties, net      |  | $          | 34,609 |            |  | $ | 60,445  | 
|             |                             |  |            |        |            |  |   |        
|Philadelphia |                             |  |            |        |            |  |   |        
|             | Rental revenue              |  | $          | 2,883  |            |  | $ | 3,184   | 
|             | Property operating expenses |  |            | 727    |            |  |   | 620     | 
|             |                             |  |            |        |            |  |   |        
|             | Net operating income        |  | $          | 2,156  |            |  | $ | 2,564   | 
|             |                             |  |            |        |            |  |   |        
|             | Rental properties, net      |  | $          | 33,649 |            |  | $ | 49,058  | 
|             |                             |  |            |        |            |  |   |        
|Atlanta      |                             |  |            |        |            |  |   |        
|             | Rental revenue              |  | $          | 3,013  |            |  | $ | 2,959   | 
|             | Property operating expenses |  |            | 1,054  |            |  |   | 1,036   | 
|             |                             |  |            |        |            |  |   |        
|             | Net operating income        |  | $          | 1,959  |            |  | $ | 1,923   | 
|             |                             |  |            |        |            |  |   |        
|             | Rental properties, net      |  | $          | 35,212 |            |  | $ | 40,344  | 
|             |                             |  |            |        |            |  |   |        
|All Others   |                             |  |            |        |            |  |   |        
|             | Rental revenue              |  | $          | 9,177  |            |  | $ | 10,994  | 
|             | Property operating expenses |  |            | 3,269  |            |  |   | 4,797   | 
|             |                             |  |            |        |            |  |   |        
|             | Net operating income        |  | $          | 5,908  |            |  | $ | 6,197   | 
|             |                             |  |            |        |            |  |   |        
|             | Rental properties, net      |  | $          | 81,688 |            |  | $ | 131,244 | 
|             |                             |  |            |        |            |  |   |        

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GLENBOROUGH REALTY TRUST INCORPORATED

Notes to Consolidated Financial Statements
June 30, 2003

|                        |                             |  |            |           |            |  |   |           |  
|----------------------- | --------------------------- |  | ---------- | --------- | ---------- |  | - | --------- | -
|                        |                             |  | Six Months |           | Six Months
|                        |                             |  | Ended      |           | Ended     
|                        |                             |  | June 30,   |           | June 30,  
|                        |                             |  | 2003       |           | 2002      
|                        |                             |  |            |           |           
|Discontinued Operations |                             |  |            |           |            |  |   |          
|                        | Rental revenue              |  | $          | (12,255   | )          |  | $ | (18,117   | )
|                        | Property operating expenses |  |            | (3,727    | )          |  |   | (5,991    | )
|                        |                             |  |            |           |            |  |   |          
|                        | Net operating income        |  | $          | (8,528    | )          |  | $ | (12,126   | )
|                        |                             |  |            |           |            |  |   |          
|                        | Rental properties, net      |  | $          | (35,212   | )          |  | $ | (40,344   | )
|                        |                             |  |            |           |            |  |   |          
|Total                   |                             |  |            |           |            |  |   |          
|                        | Rental revenue              |  | $          | 90,502    |            |  | $ | 78,874    |  
|                        | Property operating expenses |  |            | 29,591    |            |  |   | 23,338    |  
|                        |                             |  |            |           |            |  |   |          
|                        | Net operating income        |  | $          | 60,911    |            |  | $ | 55,536    |  
|                        |                             |  |            |           |            |  |   |          
|                        | Rental properties, net      |  | $          | 1,132,512 |            |  | $ | 1,150,236 |  
|                        |                             |  |            |           |            |  |   |          

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

|                                                            |                                                    |   |        |         |      |   |        |         |  
|----------------------------------------------------------- | -------------------------------------------------- | - | ------ | ------- | ---- | - | ------ | ------- | -
|                                                            |                                                    |   | 2003   |         | 2002
|                                                            |                                                    |   |        |         |     
|Revenues                                                    |                                                    |   |        |         |      |   |        |        
|Total revenue for reportable segments                       |                                                    | $ | 90,502 |         |      | $ | 78,874 |        
|Other revenue (1)                                           |                                                    |   | 3,994  |         |      |   | 5,595  |        
|                                                            |                                                    |   |        |         |      |   |        |        
|Total consolidated revenues                                 |                                                    | $ | 94,496 |         |      | $ | 84,469 |        
|                                                            |                                                    |   |        |         |      |   |        |        
|Net Income                                                  |                                                    |   |        |         |      |   |        |        
|NOI for reportable segments                                 |                                                    | $ | 60,911 |         |      | $ | 55,536 |        
|Unallocated amounts:                                        |                                                    |   |        |         |      |   |        |        
|                                                            | Other revenue (1)                                  |   |        | 3,994   |      |   |        | 5,595   |  
|                                                            | General and administrative expenses                |   |        | (7,540  | )    |   |        | (5,510  | )
|                                                            | Depreciation and amortization                      |   |        | (26,112 | )    |   |        | (20,525 | )
|                                                            | Interest expense                                   |   |        | (16,644 | )    |   |        | (14,702 | )
|                                                            | Provision for impairment of real estate assets     |   |        | (2,272  | )    |   |        |        |  
|                                                            | Provision for impairment of non-real estate assets |   |        | (3,905  | )    |   |        |        |  
|                                                            |                                                    |   |        |         |      |   |        |        
|Income before minority interest and discontinued
operations |                                                    | $ | 8,432  |         |      | $ | 20,394 |        
|                                                            |                                                    |   |        |         |      |   |        |        



|(1) |  | Other revenue includes fee income, interest and other income and equity
in earnings of unconsolidated operating joint ventures.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------

Note 14. PROVISIONS FOR IMPAIRMENT OF ASSETS

Provision for Impairment of Real
Estate Assets
In the first quarter of 2003, due to decreased leasing activity and lower than
anticipated market rents, the Company recorded a provision for impairment of
approximately $2.3 million to provide for a decrease in the carrying value of
its 10% owned development joint venture, which owns an 86,100 square foot
office property located in San Mateo, California, to its estimated fair value
of zero.

Provision for Impairment of
Non-Real Estate Assets
In the second quarter of 2003, the Company recorded an impairment charge of
approximately $3.9 million relating to the disposition of the Companys leased
aircraft.

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GLENBOROUGH REALTY TRUST INCORPORATED

Notes to Consolidated Financial Statements
June 30, 2003

Note 15. COMMITMENTS AND CONTINGENCIES

Environmental Matters

The Company follows a policy of monitoring its properties for the presence of
hazardous or toxic substances. The Company is not aware of any environmental
liability with respect to the properties that would have a material adverse
effect on the Companys business, assets or results of operations. However,
there can be no assurance that such a material environmental liability does not
exist. The existence of any such material environmental liability could have an
adverse effect on the Companys results of operations and cash flow.

General Uninsured Losses

The Company, or in certain instances, tenants of the properties, carries
comprehensive liability, fire and extended coverage with respect to the
properties. This coverage has policy specification and insured limits
customarily carried for similar properties. However, certain types of losses
(such as from earthquakes and floods) may be either uninsurable or not
economically insurable. Further, certain of the properties are located in areas
that are subject to earthquake activity and floods. Should a property sustain
damage as a result of an earthquake or flood, the Company may incur losses due
to insurance deductibles, co-payments on insured losses or uninsured losses. In
addition, although the Companys existing policies of insurance covering
property damage do not exclude coverage for acts of terrorism, it is possible
that such an exclusion could be imposed by an insurance carrier either during
the current policy term upon satisfaction of certain notice requirements, or
upon future policy renewal, in which case any losses from acts of terrorism
might be uninsured. Should an uninsured loss occur, the Company could lose some
or all of its capital investment, cash flow and anticipated profits related to
one or more properties.

Litigation

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

Note 16. SUBSEQUENT EVENTS

Acquisition

In July 2003, the Company acquired 99 Summer Street in Boston, Massachusetts,
for a purchase price of $68.3 million. This property is a 271,980 square foot,
20-story Class A multi-tenant office building located in the financial district
of downtown Boston. Constructed in 1987, the property is presently 97% leased
to 47 tenants. The purchase price was funded using 1031 tax-deferred exchange
proceeds from the Gateway Park Industrial sale (as discussed in Note 4), along
with a new $45 million 10-year fixed rate mortgage from a life insurance
company. The new loan bears a fixed interest rate of 4.83%.

Dispositions

Subsequent to June 30, 2003, the Company sold one office property and one
industrial property for an aggregate sales price of approximately $39.8 million
which generated an aggregate net loss of approximately $2 million.

Dividends

Subsequent to June 30, 2003, the
Board of Directors elected to reduce the dividend on the Company's
common stock from $0.43/share to $0.35/share commencing with the
dividend to be paid in October 2003.

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

Background

Glenborough Realty Trust Incorporated is a self-administered and self-managed
real estate investment trust, or REIT, with a portfolio of 68 primarily office
properties, including 3 operating joint ventures, as of June 30, 2003. Our
portfolio encompasses approximately 11.5 million square feet. We are focusing
on high-quality multi-tenant office properties in the following core markets:
Washington, D.C., Southern California, Northern New Jersey, Boston, Northern
California and Chicago. We also participate in several alliances to develop
property for both our portfolio and for sale to third parties.

We were incorporated in the State of Maryland on August 26, 1994 and commenced
operations on January 1, 1996. We elected to qualify as a REIT under the
Internal Revenue Code of 1986, as amended. Our Common Stock and Preferred Stock
are listed on the New York Stock Exchange, or NYSE, under the trading symbols
GLB and GLB Pr A, respectively.

Results of Operations

Comparison of the six months ended June 30, 2003 to the six months ended June
30, 2002.

Rental Revenue. Rental revenue increased $11,628,000, or 15%, to $90,502,000
for the six months ended June 30, 2003 from $78,874,000 for the six months
ended June 30, 2002. This change primarily resulted from property acquisitions,
lease termination fees, fixed rent increases on existing leases, higher
reimbursement of expenses and an increase in straight-line rents, partially
offset by lower average occupancies.

Fees and Reimbursements from Affiliates. Fees and reimbursements from
affiliates consist primarily of property management and asset management fees
paid to us under property and asset management agreements with the
unconsolidated operating and development joint ventures and the Rancon
Partnerships. This revenue decreased $116,000, or 6%, to $1,767,000 for the six
months ended June 30, 2003, from $1,883,000 for the six months ended June 30,
2002, primarily due to a disposition fee received upon the sale of a Rancon
property in 2002, partially offset by a refinance fee from a Rancon partnership
and a loan guarantee fee received in 2003.

Interest and Other Income. Interest and other income decreased $1,666,000, or
46%, to $1,923,000 for the six months ended June 30, 2003, from $3,589,000 for
the six months ended June 30, 2002. The decrease was primarily due to interest
income earned from the sale of a mezzanine loan related to a development
project in 2002, and a reduction in the interest rate on a mortgage loan
receivable. These decreases were slightly offset by losses on marketable
securities recognized in 2002.

Equity in Earnings of Unconsolidated Operating Joint Ventures.Equity in
earnings of unconsolidated operating joint ventures increased $181,000, or
147%, to $304,000 for the six months ended June 30, 2003, from $123,000 for the
six months ended June 30, 2002, primarily due to an increase in occupancy and a
decrease in interest expense at one joint venture.

Property Operating Expenses. Property operating expenses increased $6,253,000,
or 27%, to $29,591,000 for the six months ended June 30, 2003, from $23,338,000
for the six months ended June 30, 2002, primarily due to property acquisitions
and increases in property taxes and utility and snow removal costs.

General and Administrative Expenses. General and administrative expenses
increased $2,030,000, or 37%, to $7,540,000 for the six months ended June 30,
2003, from $5,510,000 for the six months ended June 30, 2002, primarily due to
severance paid in connection with staff reductions in the second quarter of
2003, as well as costs associated with the retirement of our chief executive
officer and an increase in professional services and travel costs.

Depreciation and Amortization. Depreciation and amortization increased
$5,587,000, or 27%, to $26,112,000 for the six months ended June 30, 2003, from
$20,525,000 for the six months ended June 30, 2002. This increase is due to
property acquisitions and depreciation of capital improvements.

Interest Expense. Interest expense increased $1,942,000, or 13%, to
$16,644,000 for the six months ended June 30, 2003, from $14,702,000 for the
six months ended June 30, 2002. This increase is primarily due to an increase
in secured debt as a result of property acquisitions, partially offset by
decreased borrowings on our unsecured credit facility and decreases in fixed
interest rates due to loan refinances, as well as decreases in variable
interest rates.

Provision for impairment of real estate assets.During the first quarter of
2003, due to decreased leasing activity and lower than anticipated market
rents, we recorded a provision for impairment totaling $2,272,000 to provide
for a decrease in the carrying

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value of our 10% owned development joint venture, which owns an 86,100 square
foot office property located in San Mateo, California, to its estimated fair
value of zero.

Provision for impairment of non-real estate assets.In the second quarter of
2003, we recorded an impairment charge of approximately $3.9 million relating
to the disposition of our leased aircraft.

Discontinued operations. The results of discontinued operations increased
$10,211,000 to $13,628,000 for the six months ended June 30, 2003, from
$3,417,000 for the six months ended June 30, 2002, primarily as a result of the
2003 gain on sale of $15,604,000, offset by a loss on early extinguishment of
debt of $5,411,000. In connection with various loan payoffs related to property
sales, the Company recorded a loss on early extinguishment of debt for the six
months ended June 30, 2003, which primarily consisted of a prepayment penalty,
as well as the writeoff of unamortized original issuance costs. During the six
months ended June 30, 2002, discontinued operations included a gain on sale of
$1,423,000, partially offset by a loss on early extinguishment of debt of
$892,000, which consisted of prepayment penalties and the writeoff of
unamortized original issuance costs related to loan payoffs in connection with
property sales.

Comparison of the three months ended June 30, 2003 to the three months ended
June 30, 2002.

Rental Revenue. Rental revenue increased $5,086,000, or 12%, to $46,357,000 for
the three months ended June 30, 2003 from $41,271,000 for the three months
ended June 30, 2002. This change primarily resulted from property acquisitions,
fixed rent increases on existing leases and higher reimbursement of expenses,
partially offset by lower average occupancies.

Fees and Reimbursements from Affiliates. Fees and reimbursements from
affiliates consist primarily of property management and asset management fees
paid to us under property and asset management agreements with the
unconsolidated operating and development joint ventures and the Rancon
Partnerships. This revenue increased $119,000, or 14%, to $961,000 for the
three months ended June 30, 2003, from $842,000 for the three months ended June
30, 2002, primarily due to a refinance fee from a Rancon partnership and a loan
guarantee fee received in the second quarter of 2003.

Interest and Other Income. Interest and other income increased $413,000, or
59%, to $1,116,000 for the three months ended June 30, 2003, from $703,000 for
the three months ended June 30, 2002. The increase was primarily due to losses
on marketable securities recognized in 2002.

Equity in Earnings of Unconsolidated Operating Joint Ventures.Equity in
earnings of unconsolidated operating joint ventures increased $116,000, or
178%, to $181,000 for the three months ended June 30, 2003, from $65,000 for
the three months ended June 30, 2002, primarily due to an increase in occupancy
and a decrease in interest expense at one joint venture.

Property Operating Expenses. Property operating expenses increased $2,363,000,
or 20%, to $14,469,000 for the three months ended June 30, 2003, from
$12,106,000 for the three months ended June 30, 2002, primarily due to property
acquisitions and increases in property taxes and utility costs.

General and Administrative Expenses. General and administrative expenses
increased $1,462,000, or 64%, to $3,755,000 for the three months ended June 30,
2003, from $2,293,000 for the three months ended June 30, 2002, primarily due
to severance paid in connection with staff reductions in the second quarter of
2003, as well as costs associated with the retirement of our chief executive
officer.

Depreciation and Amortization. Depreciation and amortization increased
$2,750,000, or 26%, to $13,435,000 for the three months ended June 30, 2003,
from $10,685,000 for the three months ended June 30, 2002. This increase is due
to property acquisitions and depreciation of capital improvements.

Interest Expense. Interest expense increased $863,000, or 11%, to $8,397,000
for the three months ended June 30, 2003, from $7,534,000 for the three months
ended June 30, 2002. This increase is primarily due to an increase in secured
debt as a result of property acquisitions, partially offset by decreased
borrowings on our unsecured credit facility and decreases in fixed interest
rates due to loan refinances, as well as decreases in variable interest rates.

Provision for impairment of non-real estate assets.In the second quarter of
2003, we recorded an impairment charge of approximately $3.9 million relating
to the disposition of our leased aircraft.

Discontinued operations. The results of discontinued operations increased
$3,933,000 to $6,139,000 for the three months ended June 30, 2003, from
$2,206,000 for the three months ended June 30, 2002, primarily as a result of
the 2003 gain on sale of $11,154,000, offset by a loss on early extinguishment
of debt of $5,411,000. In connection with various loan payoffs related

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to property sales, the Company recorded a loss on early extinguishment of debt
for the three months ended June 30, 2003, which primarily consisted of a
prepayment penalty, as well as the writeoff of unamortized original issuance
costs. During the three months ended June 30, 2002, discontinued operations
included a gain on sale of $1,423,000, partially offset by a loss on early
extinguishment of debt of $892,000, which consisted of prepayment penalties and
the writeoff of unamortized original issuance costs related to loan payoffs in
connection with property sales.

Liquidity and Capital Resources

Cash Flows

For the three months ended June 30, 2003, cash provided by operating activities
was $36,227,000 as compared to $45,413,000 for the same period in 2002. The
decrease is primarily due to a decrease in occupancy rates and an increase in
property taxes and utility and snow removal costs. Cash provided by investing
activities was $54,657,000 for the six months ended June 30, 2003, as compared
to $25,208,000 of cash used for investing activities for the same period in
2002. This change is primarily due to an increase in cash provided by real
estate sales and principal and interest payments from mortgage loans
receivable, partially offset by an increase in cash used for real estate
acquisitions. Cash used for financing activities was $71,267,000 for the six
months ended June 30, 2003, as compared to $22,233,000 for the same period in
2002. The change was primarily due to an increase in cash used for the
repayment of debt and common stock repurchases and decreased stock option
exercise proceeds, partially offset by an increase in proceeds from new debt.

We expect to meet our short-term liquidity requirements generally through our
working capital, our Credit Facility (as defined below) and cash generated by
operations. We believe that cash generated by our operations will be adequate
to meet our 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 our results of operations
will not fluctuate in the future and at times affect our ability to meet our
operating requirements and the amount of our distributions. If significant
decreases in occupancy or rental rates occurred at our properties, this could
have an adverse impact on our operating cash flows. Similarly, increases in
interest rates could have an adverse impact on our operating cash flows.

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

Investments in Land and Development

We have developed a 96,000 square foot office building as the fourth and final
phase of Centerpointe at Bridgewater, located in New Jersey. This property is
complete and currently in the stabilization phase. Our investment in this
property of approximately $13.3 million was reclassified to real estate assets
at the beginning of the second quarter of 2003.

We have approximately 107 acres of land with a book value of approximately
$26.4 million as of June 30, 2003. This land has potential for future
development of approximately 1,295,000 square feet of office space. We have no
further contractual obligations for the future funding of these developments;
however, we will likely be funding a portion of their working capital needs
until such time as other financing is obtained. The loans secured by certain of
these development properties contain recourse provisions to us in the aggregate
amount of $14 million; however, some of the loans were not fully drawn as of
June 30, 2003.

Since 1998, we have been involved in a number of alliances organized in limited
liability companies and stock corporations which could ultimately result in the
development of approximately 938,000 square feet of commercial and mixed-use
properties in California and Colorado. These projects are currently in three
different phases of development: approximately 425,000 square feet is
substantially completed and in the stabilization phase, 63,000 square feet is
in the development phase and 450,000 square feet is in the entitlement phase.
The alliances grant us certain rights to purchase the properties upon
completion of development. As of June 30, 2003, we had an investment basis of
approximately $38.3 million in these alliances. In addition, we have acquired
properties from them aggregating approximately $119.8 million since 1999. We
have no further contractual obligations for the future funding of these
developments; however, we will likely be funding a portion of their working
capital needs until such time as other financing is obtained. Under these
alliances, we have provided an aggregate of $48.7 million in debt guarantees;
however, some of the loans were not fully drawn as of June 30, 2003. These
guarantees will remain in place until such time as the related development
financing has been replaced or repaid, the terms of which vary from less than 1
year to up to 2 years. We would be required to perform under these guarantees
in the event that the proceeds generated by the sale, refinance or additional
capital contribution by partners of the development project were insufficient
to repay the full amount of

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the related debt financing. There is currently no recorded liability for any
amounts that may become payable under these guarantees, nor is there a
liability for our obligation to stand-ready to fund such guarantees. In the
event that we must make payments under one of these guarantees, our only
recourse is to the Limited Liability Companies that own the properties. No
estimate of the amount that could be recovered by us in such an event can be
made at this time.

In the first quarter of 2003, due to decreased leasing activity and lower than
anticipated market rents, we recorded a provision for impairment totaling
$2,272,000 to provide for a decrease in the carrying value of our 10% owned
development joint venture, which owns an 86,100 square foot office property
located in San Mateo, California, to its estimated fair value of zero.

Certain of the alliances with which we conduct business have been deemed to be
VIEs. We expect to consolidate the entity known as Marina Shores, effective
July 1, 2003, as we are the primary beneficiary. The total assets and
liabilities of Marina Shores were approximately $78.0 million and $47.7
million, respectively, at June 30, 2003. There are other alliances which are
VIEs, but in which we are not the primary beneficiary. The total assets and
liabilities of such entities were approximately $58.3 million and $38.7
million, respectively, at June 30, 2003. Our maximum exposure to loss is equal
to our investments in these arrangements, plus the related debt guarantees, as
described above.

Investments in Unconsolidated Operating Joint Ventures

Investments in unconsolidated operating joint ventures increased from
$7,822,000 at December 31, 2002, to $7,842,000 at June 30, 2003. This increase
was due to our equity interests in the joint ventures earnings during the
first six months of 2003, partially offset by distributions.

Mortgage Loans Receivable

Mortgage loans receivable decreased from $41,813,000 at December 31, 2002, to
$38,984,000 at June 30, 2003. This decrease was due to payments of principal
and interest received on a loan made by us under a development alliance,
partially offset by monthly interest accruals.

The borrowing entities in this loan arrangement have been deemed to be VIEs,
but we are not the primary beneficiary. The total carrying value of such
entities assets and liabilities were approximately $70.8 million and $70.9
million, respectively, at June 30, 2003. Our maximum exposure to loss is equal
to the recorded amount of our loan, including accrued interest.

Secured and Unsecured Financing

Mortgage loans payable decreased from $658,713,000 at December 31, 2002, to
$630,182,000 at June 30, 2003. This decrease resulted from loan payoffs of
$37,201,000 due to debt maturities, loan payoffs of $55,840,000 in connection
with property sales (discussed below), and $3,331,000 of scheduled principal
payments on other debt, partially offset by $67,500,000 in new mortgage loans
(discussed below) and $341,000 of draws on construction loans.

In the second quarter of 2003, in connection with the sale of three properties,
approximately $55.8 million of our mortgage loans were paid off or assumed by
the buyer. In connection with these payoffs, we recognized a loss on early
extinguishment of debt of approximately $5.4 million due to prepayment
penalties and the writeoff of umamortized original issuance costs. As this loss
is related to property sales, it has been included in discontinued operations
on our consolidated statement of income for the three and six months ended June
30, 2003.

In the first quarter of 2003, in order to finance the acquisition of 1525
Wilson Boulevard, we obtained a $50 million loan. The loan has a maturity date
of January 31, 2006 and bears interest at the floating rate of 30-day LIBOR
plus 2.25%. The interest rate on this loan at June 30, 2003, was 3.63%.

In the first quarter of 2003, we closed a $17.5 million loan which is secured
by a 144,000 square foot office property located in Alexandria, Virginia. The
loan has a maturity date of March 1, 2008 and bears interest at a fixed rate of
5%.

In the first quarter of 2003, approximately $33.3 million of our mortgage loans
were paid off in connection with property sales. In addition, a mortgage loan
of approximately $3.9 million was paid off on its maturity date.

In 2001, we closed a $52.5 million secured loan with an insurance company
(Secured Financing). The Secured Financing bears interest at a floating rate
of 30-day LIBOR plus 3.25% with an absolute floor of 5% (5% at June 30, 2003
and December 31, 2002) and has an initial maturity of December 11, 2004, with
two one-year extension options. In connection with the Secured Financing, we
entered into an interest rate cap agreement (caplets) to hedge increases in
30-day LIBOR rates above a specified level. The agreement expires over a term
concurrent with the Secured Financing, is indexed to a 30-day LIBOR rate,

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is for a notional amount equal to the maximum amount available on the Secured
Financing, and caps 30-day LIBOR at a maximum of 6%. As of June 30, 2003 and
December 31, 2002, the 30-day LIBOR rate was 1.12% and 1.38%, respectively. We
paid a $594,000 fee at the inception of the cap agreement. In connection with
the sale of two properties in 2002 and one property in 2003, approximately
$17.4 million of this loan was paid off and related portions of the caplets
were cancelled. As a result of these cancellations, as well as caplet
expirations, approximately $237,000 of the caplet fee has been charged to
earnings. The remaining $357,000 fee is being charged to earnings as the
caplets expire.

Outstanding borrowings under the Credit Facility decreased from $76,204,000 at
December 31, 2002, to $56,836,000 at June 30, 2003. The decrease was due to pay
downs totaling $68,772,000 generated from the sales of properties, proceeds of
a new mortgage loan and cash flow from operations, offset by draws totaling
$49,404,000 for the acquisition of properties, stock repurchases and
development advances. The Credit Facility requires us, among other things, to
be in compliance with certain financial covenants and ratios. We have been in
compliance during the first six months of 2003 and remain in compliance at June
30, 2003.

Some of our properties are held in limited partnerships and limited liability
companies in order to facilitate financing. All such entities are owned 100%
directly or indirectly by us.

At June 30, 2003, our total indebtedness included fixed-rate debt of
$432,029,000 and floating-rate debt of $254,989,000. Our ratio of total debt to
gross book assets was approximately 44% at June 30, 2003.

It is our policy to manage our exposure to fluctuations in market interest
rates through the use of fixed rate debt instruments to the extent possible. At
June 30, 2003, approximately 37% of our outstanding debt, including amounts
borrowed under the Credit Facility, was subject to variable rates. We may, from
time to time, enter into interest rate protection agreements intended to hedge
the cost of new borrowings. It is not our policy to engage in hedging
activities for speculative purposes. At June 30, 2003, we were not a party to
any open interest rate protection agreements other than the interest rate cap
contract entered into in December 2001 as discussed above.

Equity and Debt Offerings

In November 1997, we filed a shelf registration statement with the SEC (the
1997 Registration Statement) which registered the issuance of up to $1.0
billion of our equity securities. The 1997 Registration Statement was declared
effective on December 18, 1997. There is currently $801.2 million of capacity
in equity securities remaining on the 1997 Registration Statement. In January
1999, we filed a shelf registration statement with the SEC (the 1999
Registration Statement) which registered the issuance of up to $300 million of
debt securities of Glenborough Properties, L.P, which may be guaranteed by us.
The 1999 Registration Statement was declared effective by the SEC on January
25, 1999. There is currently $300 million of capacity of debt securities
remaining on the 1999 Registration Statement. We currently have no plans to
issue equity or debt securities in the near term under these registration
statements.

Stock Repurchases
In 1999, our Board of Directors authorized the repurchase of up to 6.2 million
shares of our outstanding Common Stock. This represented approximately 20% of
our total outstanding Common Stock. In December 2000, the repurchase
authorization was increased to approximately 8.2 million shares, representing
approximately 26% of Common Stock outstanding when the repurchase program
began. As of June 30, 2003, 6,318,016 common shares have been repurchased for a
total cost of approximately $104,831,000; this represents approximately 77% of
the expanded repurchase authorization and approximately 20% of Common Stock
outstanding when the repurchase program began. In addition, during 1999, we
announced that our Board of Directors had approved the repurchase of up to 15%
of our Preferred Stock, or 1,725,000 shares. In May 2000, the Preferred Stock
repurchase authorization was increased to 3,450,000 shares, representing
approximately 30% of Preferred Stock outstanding when the repurchase program
began. As of June 30, 2003, 1,407,200 preferred shares have been repurchased
for a total cost of approximately $21,076,000; this represents approximately
41% of the expanded repurchase authorization and approximately 12% of Preferred
Stock outstanding when the repurchase program began. Future stock repurchases
will be made from time to time in the open market or otherwise and the timing
will depend on market conditions and other factors.

Critical Accounting Policies

Revenue recognized on a straight-line basis

We recognize rental revenue on a straight-line basis at amounts that we believe
we will collect on a tenant by tenant basis. The estimation process may result
in higher or lower levels from period to period as our collection experience
and the credit quality of our tenants changes. Actual amounts collected could
be lower or higher than the amounts recognized on a straight-line basis

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if specific tenants are unable to pay rent that we have previously recognized
as revenue, or if other tenants remain whom we previously believed would not.

Carrying value of rental properties, investments in development and other
investment assets

Our rental properties, investments in development and other investment assets
such as operating joint ventures and mortgage loans receivable are generally
carried at the lower of cost or estimated fair value. Certain development and
operating joint ventures include our share of undistributed income or loss
arising from the investment, and the mortgage loans receivable include accrued
interest. In addition, some interest, payroll and general and administrative
costs incurred in connection with our development activities may be
capitalized. The actual value of our portfolio of properties, investments in
development and other investments could be significantly higher or lower than
their carrying amounts.

Our status as a real estate investment trust (REIT)

We have elected to be taxed as a real estate investment trust under Sections
856 to 860 of the Internal Revenue Code of 1986, as amended (the Code). A
real estate investment trust is generally not subject to federal income tax on
that portion of its real estate investment trust taxable income (Taxable
Income) that is distributed to its stockholders, provided that at least 90% of
Taxable Income is distributed and other requirements are met. We believe that
we have complied with all requirements to qualify as a REIT for the six months
ended June 30, 2003 and 2002. Accordingly, no provision for income taxes is
included in our consolidated financial statements.

New Accounting Pronouncements

In January 2003, the FASB approved for issuance FASB Interpretation No. 46 (FIN
46), Consolidation of Variable Interest Entities. FIN 46 clarifies the
application of Accounting Research Bulletin No. 51, Consolidated Financial
Statements to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 applies immediately
to variable interest entities (VIEs) created after January 31, 2003, and to
VIEs in which an enterprise obtains an interest after that date. It applies in
the first fiscal year or interim period beginning after June 15, 2003, to VIEs
in which an enterprise holds a variable interest that it acquired before
February 1, 2003. FIN 46 may be applied prospectively with a cumulative-effect
adjustment as of the date on which it is first applied or by restating
previously issued financial statements for one or more years with a
cumulative-effect adjustment as of the beginning of the first year restated.
The disclosure requirements of FIN 46 are effective for all financial
statements initially issued after January 31, 2003. Certain of the entities
through which and with which we conduct business, including those described in
Notes 5 and 7 in Item 1, have been deemed to be VIEs under the provisions of
FIN 46. As discussed above, we expect to consolidate the entity known as Marina
Shores, effective July 1, 2003, as we are the primary beneficiary. The total
assets and liabilities of Marina Shores were approximately $78.0 million and
$47.7 million, respectively, at June 30, 2003. There are other alliances which
are VIEs, but in which we are not the primary beneficiary.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. This
statement establishes standards for the classification and measurement of
certain financial instruments with characteristics of both liabilities and
equity. SFAS No. 150 requires that an issuer classify a financial instrument
that is within its scope as a liability (or an asset in some circumstances).
Many of those instruments were previously classified as equity. This statement
is effective for financial instruments entered into or modified after May 31,
2003 and, otherwise, is effective at the beginning of the first interim period
beginning after June 15, 2003. We do not expect this standard to have a
material impact on our consolidated financial position or results of
operations.

Inflation

Leases at the office properties typically provide for rent adjustment and
pass-through of certain operating expenses during the term of the lease.
Substantially all of the leases at the industrial properties provide for
pass-through to tenants of certain operating costs, including real estate
taxes, common area maintenance expenses, and insurance. All of these provisions
may permit us to increase rental rates or other charges to tenants in response
to rising prices and therefore, serve to reduce our exposure to the adverse
effects of inflation.

Funds from Operations

Funds from Operations, or FFO, as defined by NAREIT, represents net income
(loss) (including income and loss from discontinued operations) before minority
interest and extraordinary items, adjusted for real estate related depreciation
and amortization and gains (losses) from the disposal of properties. We believe
that FFO is a widely used measure of the operating

30



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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, to pay distributions, and to fund acquisitions, developments
and other capital expenditures. FFO does not represent net income or cash flows
from operations as defined by GAAP, and should not be considered as an
alternative to net income (determined in accordance with GAAP) as an indicator
of our 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 our cash needs including principal amortization,
capital improvements and distributions to stockholders. Further, FFO as
disclosed by other REITs may not be comparable to our calculation of FFO. We
calculate FFO in accordance with the White Paper on FFO approved by the Board
of Governors of NAREIT in October 1999, as amended.

Adjusted Funds from Operations, or AFFO, represents net income (loss)
(including income and loss from discontinued operations) 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, and less FASB 13 and FASB 141 rents. We believe that AFFO is a measure
of the operating performance of equity REITs which, together with FFO, net
income, and cash flows, provides investors with an additional basis to evaluate
the ability of a REIT to incur and service debt, to pay distributions, and to
fund acquisitions, developments and other capital expenditures. AFFO should not
be considered an alternative to net income (computed in accordance with GAAP)
as a measure of our operating performance or as an alternative to cash flow
from operating activities (computed in accordance with GAAP) as a measure of
our liquidity, nor is it necessarily indicative of sufficient cash flow to fund
all of our cash needs. Further, AFFO as disclosed by other REITs may not be
comparable to our calculation of AFFO.

The following table sets forth our calculation of FFO and AFFO for the three
and six months ended June 30, 2003 (in thousands, except weighted average
shares and per share amounts):

|                                                              |  |           |            |          |  |      |            |   |  |   |            |  
|------------------------------------------------------------- |  | --------- | ---------- | -------- |  | ---- | ---------- | - |  | - | ---------- | -
|                                                              |  | March 31, |            | June 30, |  | YTD 
|                                                              |  | 2003      |            | 2003     |  | 2003
|                                                              |  |           |            |          |  |     
|Income before minority interest and discontinued operations   |  | $         | 3,778      |          |  | $    | 4,654      |   |  | $ | 8,432      |  
|Preferred dividends                                           |  |           | (4,891     | )        |  |      | (4,889     | ) |  |   | (9,780     | )
|Depreciation and amortization (1)                             |  |           | 12,333     |          |  |      | 13,085     |   |  |   | 25,418     |  
|Provision for impairment of real estate assets                |  |           | 2,272      |          |  |      |           |   |  |   | 2,272      |  
|Income from discontinued operations                           |  |           | 7,489      |          |  |      | 6,139      |   |  |   | 13,628     |  
|Deduct gain on sale from discontinued operations              |  |           | (4,450     | )        |  |      | (11,154    | ) |  |   | (15,604    | )
|Depreciation and amortization from discontinued operations    |  |           | 1,616      |          |  |      | 651        |   |  |   | 2,267      |  
|Adjustment to reflect FFO of Unconsolidated Operating JVs(2) |  |           | 116        |          |  |      | 108        |   |  |   | 224        |  
|                                                              |  |           |            |          |  |      |            |   |  |   |            |  
|FFO                                                           |  | $         | 18,263     |          |  | $    | 8,594      |   |  | $ | 26,857     |  
|                                                              |  |           |            |          |  |      |            |   |  |   |            |  
|Amortization of deferred financing fees                       |  |           | 803        |          |  |      | 774        |   |  |   | 1,577      |  
|Non-real estate depreciation                                  |  |           | 344        |          |  |      | 350        |   |  |   | 694        |  
|Adjustment for FASB 13 rents(3)                               |  |           | (1,590     | )        |  |      | (1,440     | ) |  |   | (3,030     | )
|Adjustment for FASB 141(4)                                    |  |           | (329       | )        |  |      | (257       | ) |  |   | (586       | )
|Capital reserve                                               |  |           | (5,877     | )        |  |      | (4,789     | ) |  |   | (10,666    | )
|                                                              |  |           |            |          |  |      |            |   |  |   |            |  
|AFFO                                                          |  | $         | 11,614     |          |  | $    | 3,232      |   |  | $ | 14,846     |  
|                                                              |  |           |            |          |  |      |            |   |  |   |            |  
|Distributions per share(5)                                    |  | $         | 0.43       |          |  | $    | 0.43       |   |  | $ | 0.86       |  
|                                                              |  |           |            |          |  |      |            |   |  |   |            |  
|Diluted weighted average shares outstanding                   |  |           | 30,768,653 |          |  |      | 30,797,136 |   |  |   | 30,785,641 |  
|                                                              |  |           |            |          |  |      |            |   |  |   |            |  



|(1) |  | Excludes non-real estate depreciation and amortization.                                                                                                                                                                     
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Represents the adjustments to FFO required to reflect the FFO of the
unconsolidated operating joint ventures allocable to us. Our investments
in the joint ventures are accounted for using the equity method of
accounting.
|   
|(3) |  | Amortization of straight-line rent.                                                                                                                                                                                         
|   
|(4) |  | Amortization of above and below market rate leases.                                                                                                                                                                         
|   
|(5) |  | The distributions for the three months ended June 30, 2003, were paid on
July 15, 2003.                                                                                                                                     

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The following table sets forth our calculation of FFO and AFFO for the three
and six months ended June 30, 2002 (in thousands, except weighted average
shares and per share amounts):

|                                                              |  |           |            |          |  |      |            |   |  |   |            |  
|------------------------------------------------------------- |  | --------- | ---------- | -------- |  | ---- | ---------- | - |  | - | ---------- | -
|                                                              |  | March 31, |            | June 30, |  | YTD 
|                                                              |  | 2002      |            | 2002     |  | 2002
|                                                              |  |           |            |          |  |     
|Income before minority interest and discontinued operations   |  | $         | 10,131     |          |  | $    | 10,263     |   |  | $ | 20,394     |  
|Preferred dividends                                           |  |           | (4,891     | )        |  |      | (4,891     | ) |  |   | (9,782     | )
|Depreciation and amortization (1)                             |  |           | 9,520      |          |  |      | 10,361     |   |  |   | 19,881     |  
|Income from discontinued operations                           |  |           | 1,211      |          |  |      | 2,206      |   |  |   | 3,417      |  
|Deduct gain on sale from discontinued operations              |  |           |           |          |  |      | (1,423     | ) |  |   | (1,423     | )
|Depreciation and amortization from discontinued operations    |  |           | 2,557      |          |  |      | 2,367      |   |  |   | 4,924      |  
|Adjustment to reflect FFO of Unconsolidated Operating JVs(2) |  |           | 102        |          |  |      | 100        |   |  |   | 202        |  
|                                                              |  |           |            |          |  |      |            |   |  |   |            |  
|FFO                                                           |  | $         | 18,630     |          |  | $    | 18,983     |   |  | $ | 37,613     |  
|                                                              |  |           |            |          |  |      |            |   |  |   |            |  
|Amortization of deferred financing fees                       |  |           | 484        |          |  |      | 509        |   |  |   | 993        |  
|Non-real estate depreciation                                  |  |           | 320        |          |  |      | 324        |   |  |   | 644        |  
|Adjustment for FASB 13 rents(3)                               |  |           | (772       | )        |  |      | (1,532     | ) |  |   | (2,304     | )
|Capital reserve                                               |  |           | (4,392     | )        |  |      | (4,315     | ) |  |   | (8,707     | )
|                                                              |  |           |            |          |  |      |            |   |  |   |            |  
|AFFO                                                          |  | $         | 14,270     |          |  | $    | 13,969     |   |  | $ | 28,239     |  
|                                                              |  |           |            |          |  |      |            |   |  |   |            |  
|Distributions per share                                       |  | $         | 0.43       |          |  | $    | 0.43       |   |  | $ | 0.86       |  
|                                                              |  |           |            |          |  |      |            |   |  |   |            |  
|Diluted weighted average shares outstanding                   |  |           | 30,540,254 |          |  |      | 31,250,154 |   |  |   | 30,868,737 |  
|                                                              |  |           |            |          |  |      |            |   |  |   |            |  



| | (1) | Excludes non-real estate depreciation and amortization.                                                                                                                                                                     
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) | Represents the adjustments to FFO required to reflect the FFO of the
unconsolidated operating joint ventures allocable to us. Our investments
in the joint ventures are accounted for using the equity method of
accounting.
|
| | (3) | Amortization of straight-line rent.                                                                                                                                                                                         

Forward Looking Statements; Factors That May Affect Operating Results

This Quarterly 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 our
expectations, hopes, intentions, beliefs and strategies regarding the future.
These forward-looking statements include statements relating to:



| |  | Our belief that certain claims and lawsuits which have arisen against us in our normal course of business will not have a
material adverse effect on our financial position, cash flow or results of operations;                  
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Our intention to continue our policy of paying quarterly distributions;                                                                                                                                                           
| 
| |  | Our expectation to meet our short-term liquidity requirements generally through our working capital, our Credit Facility
and cash generated by operations;                                                                        
| 
| |  | Our belief that cash generated by our operations will be adequate to meet our operating requirements and to make
distributions in accordance with REIT requirements in both the short and the long-term;                          
| 
| |  | Our statements regarding potential future development;                                                                                                                                                                            
| 
| |  | Our statements regarding our current involvement in a number of alliances which could ultimately result in the development
of approximately 938,000 square feet of commercial and mixed-use properties in California and Colorado;
| 
| |  | Our expectation to continue our policy of managing our exposure to fluctuations in market interest rates through the use of
fixed rate debt instruments to the extent possible;                                                   
| 
| |  | Our current intent not to issue securities under our 1997 and 1999 Shelf Registration Statements in the near term;                                                                                                                
| 
| |  | Our expectation to make future stock repurchases from time to time in the open market or otherwise depending on market
conditions and other factors;                                                                              

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| |  | Our belief that certain provisions of the leases of our properties may permit us to increase rental rates or other charges
to tenants in response to rising prices and therefore, serve to reduce our exposure to the adverse effects of inflation;                    
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Our belief that the changes in market interest rates obtainable on our secured and unsecured borrowings will not have a
material impact on the performance or fair value of our mortgage loans receivable;                                                             
| 
| |  | Our statements regarding our entering into forward interest rate, or similar, agreements to hedge specific anticipated debt
issuances where we believe the risk of adverse changes in market rates is significant;                                                     
| 
| |  | Our belief that adoption of the standard set forth in SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity will not have a material impact on our consolidated financial position or
results of operations.

All forward-looking statements included in this document are based on
information available to us on the date hereof. It is important to note that
our actual results could differ materially from those stated or implied in such
forward-looking statements. The following factors, among others, could cause
actual results and future events to differ materially from those set forth or
contemplated in the forward-looking statements:



| |  | market fluctuations in rental rates and occupancy;                                                                                                                                                          
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | defaults or non-renewal of leases by customers;                                                                                                                                                             
| 
| |  | increased interest rates and operating costs;                                                                                                                                                               
| 
| |  | our failure to obtain necessary outside financing;                                                                                                                                                          
| 
| |  | difficulties in identifying properties to acquire and in effecting acquisitions;                                                                                                                            
| 
| |  | our failure to successfully integrate acquired properties and operations;                                                                                                                                   
| 
| |  | the unpredictability of litigation;                                                                                                                                                                         
| 
| |  | the unpredictability of changes in accounting rules;                                                                                                                                                        
| 
| |  | failure of market conditions to improve in certain geographic areas;                                                                                                                                        
| 
| |  | unanticipated difficulties with joint venture partners; and                                                                                                                                                 
| 
| |  | risks and uncertainties affecting property development and construction (including construction delays, cost overruns, our
inability to obtain necessary permits and public opposition to these activities);

The forward-looking statements in this Quarterly Report on Form 10-Q are
subject to additional risks and uncertainties further discussed under Item 7.
Managements Discussion and Analysis of Financial Condition and Results of
Operation - Risk Factors of our Annual Report on Form 10-K for the year ended
December 31, 2002. We assume no obligation to update any forward
looking-statement or statements.

Risk Factors

Stockholders or potential stockholders should read the Risk Factors section
of our 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 our results of operations and our
Common Stock share price. The fact that some of the risk factors may be the
same or similar to our past filings means only that the risks are present in
multiple periods. We believe that many of the risks detailed here and in our
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.

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Item 3. Qualitative and Quantitative Information about Market Risk

Interest Rates

We are exposed to changes in interest rates obtainable on our secured and
unsecured borrowings. We do not believe that changes in market interest rates
will have a material impact on the performance or fair value of our mortgage
loans receivable.

It is our policy to manage our exposure to fluctuations in market interest
rates for our borrowings through the use of fixed rate debt instruments to the
extent that reasonably favorable rates are obtainable with such arrangements.
In order to maximize financial flexibility when selling properties and minimize
potential prepayment penalties on fixed rate loans, we have also entered into
variable rate debt arrangements. Approximately 37% of our outstanding debt,
including amounts borrowed under the Credit Facility, was subject to variable
rates at June 30, 2003 and December 31, 2002. In addition, the average interest
rate on our debt decreased from 5.26% at December 31, 2002 to 5.05% at June 30,
2003. We review interest rate exposure in the portfolio continually in an
effort to minimize the risk of interest rate fluctuations. We do not have any
other material market-sensitive financial instruments. It is not our policy to
engage in hedging activities for speculative or trading purposes.

We may enter into forward interest rate, or similar, agreements to hedge
specific anticipated debt issuances where we believe the risk of adverse
changes in market rates is significant. Under a forward interest rate
agreement, if the referenced interest rate increases, we are entitled to a
receipt in settlement of the agreement that economically would offset the
higher financing cost of the debt issued. If the referenced interest rate
decreases, we make payment in settlement of the agreement, creating an expense
that economically would offset the reduced financing cost of the debt issued.
At June 30, 2003, we were not a party to any forward interest rate or similar
agreements other than the interest rate cap contract entered into in December
2001 as discussed above.

The table below provides information about our financial instruments that are
sensitive to changes in interest rates. For debt obligations, the table
presents principal cash flows and related weighted average interest rates by
expected maturity dates. Weighted average variable rates are based on rates in
effect at the reporting date.

|                      |  |                        |        |      |  |      |        |      |  |      |        |            |  |       |         |       |  |   |       |   |  |   |         |   |  |   |         |   |  |   |         | 
|--------------------- |  | ---------------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ | ---------- |  | ----- | ------- | ----- |  | - | ----- | - |  | - | ------- | - |  | - | ------- | - |  | - | ------- | 
|                      |  | Expected Maturity Date |        |      |  |      |        |      |  |     
|                      |  |                        |        |      |  |      |        | Fair
|                      |  | 2003                   |        | 2004 |  | 2005 |        | 2006 |  | 2007 |        | Thereafter |  | Total |         | Value
|                      |  |                        |        |      |  |      |        |      |  |      |        |            |  |       |         |      
|                      |  | (in thousands)         |        |      |  |      |        |      |  |     
|Secured Fixed         |  | $                      | 20,404 |      |  | $    | 8,044  |      |  | $    | 23,611 |            |  | $     | 103,151 |       |  | $ | 6,002 |   |  | $ | 270,817 |   |  | $ | 432,029 |   |  | $ | 432,029 | 
|Average interest rate |  |                        | 7.42   | %    |  |      | 6.63   | %    |  |      | 6.99   | %          |  |       | 6.77    | %     |  |   | 6.37  | % |  |   | 5.64    | % |  |   | 6.09    | % |  |   |         | 
|Secured Variable      |  | $                      | 28,000 |      |  | $    | 35,101 |      |  | $    | 84,884 |            |  | $     | 50,168  |       |  | $ |      |   |  | $ |        |   |  | $ | 198,153 |   |  | $ | 198,153 | 
|Average interest rate |  |                        | 3.88   | %    |  |      | 5.00   | %    |  |      | 3.37   | %          |  |       | 3.63    | %     |  |   |      |   |  |   |        |   |  |   | 3.79    | % |  |   |         | 
|Unsecured Variable    |  | $                      |       |      |  | $    |       |      |  | $    | 56,836 |            |  | $     |        |       |  | $ |      |   |  | $ |        |   |  | $ | 56,836  |   |  | $ | 56,836  | 
|Average interest rate |  |                        |       |      |  |      |       |      |  |      | 2.65   | %          |  |       |        |       |  |   |      |   |  |   |        |   |  |   | 2.65    | % |  |   |         | 

We believe that the interest rates given in the table for fixed rate borrowings
approximate the rates we could currently obtain for instruments of similar
terms and maturities and that the fair values of such instruments approximate
carrying value at June 30, 2003.

A change of 1/8% in the index rate to which our variable rate debt is tied
would change the annual interest we incurred by approximately $319,000, based
upon the balances outstanding on variable rate instruments at June 30, 2003.




Item 4. Controls and Procedures



| | (a) |  | Evaluation of disclosure controls and procedures. Our chief
executive officer and chief financial officer have reviewed our
disclosure controls and procedures (as defined in the Securities
Exchange Act of 1934 Rules 13a-14(c) and 15-d-14(c)) as of a date
within 90 days before the filing date of this quarterly report. We
refer to that date as the Evaluation Date. Our chief executive
officer and chief financial officer have concluded that, as of the
Evaluation Date, our disclosure controls and procedures were
effective and designed to ensure
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |     |  | that material information relating to us and our consolidated
subsidiaries would be made known to them by others within those
entities.                                                       
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Changes in internal controls. Subsequent to the Evaluation
Date there were no significant changes in our internal controls or in
other factors that could significantly affect those controls.







PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Certain claims and lawsuits have arisen against us in our normal course of
business. We believe that such claims and lawsuits will not have a material
adverse effect on our financial position, cash flow or results of operations.




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

At our annual meeting, held on May 7, 2003, in Redwood City, California, the
following persons were duly elected by the holders of our common stock to serve
as Class II directors:

|                  |  |           |            |                |  |  |           | 
|----------------- |  | --------- | ---------- | -------------- |  |  | --------- | 
|                  |  | Votes For |            | Votes Withheld
|                  |  |           |            |               
|Robert Batinovich |  |           | 24,534,615 |                |  |  | 362,729   | 
|Patrick Foley     |  |           | 22,353,281 |                |  |  | 2,544,063 | 




Item 6. Exhibits and Reports on Form 8-K



| | (a) |  | Exhibits:                                                                                                                                                
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The Exhibit Index attached hereto is hereby incorporated by
reference to this item.                                                                      
|
| | (b) |  | Reports on Form 8-K:                                                                                                                                     
|
| |     |  | On April 29, 2003, we filed a report on Form 8-K with respect to our
press release announcing results of operations for the quarter ended
March 31, 2003.

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SIGNATURES

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

GLENBOROUGH REALTY TRUST INCORPORATED

By: Glenborough Realty Trust Incorporated,

|                      |  |                               
|--------------------- |  | ------------------------------
|Date: August 14, 2003 |  | /s/ Andrew Batinovich         
|                      |  |                               
|                      |  | Andrew Batinovich             
|                      |  | Director, President and       
|                      |  | Chief Executive Officer       
|                      |  |                               
|Date: August 14, 2003 |  | /s/ Stephen Saul              
|                      |  |                               
|                      |  | Stephen Saul                  
|                      |  | Chief Financial Officer       
|                      |  | (Principal Financial Officer) 
|                      |  |                               
|Date: August 14, 2003 |  | /s/ Brian Peay                
|                      |  |                               
|                      |  | Brian Peay                    
|                      |  | Senior Vice President,        
|                      |  | Finance and Accounting        
|                      |  | (Principal Accounting Officer)

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EXHIBIT INDEX

|            |  |                                                                                                                                                                                                                                                                                                
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibit Title                                                                                                                                                                                                                                                                                  
|            |  |                                                                                                                                                                                                                                                                                                
|10.1        |  | Amended and Restated Employment Agreement dated May 7, 2003, between
Robert Batinovich and Glenborough Realty Trust Incorporated is
incorporated herein by reference to Exhibit 10.1 to the Companys
Quarterly Report on Form 10-Q for the quarter ended March 31, 2003.                      
|           
|10.2        |  | Amended and Restated Employment Agreement dated May 7, 2003, between
Andrew Batinovich and Glenborough Realty Trust Incorporated is
incorporated herein by reference to Exhibit 10.2 to the Companys
Quarterly Report on Form 10-Q for the quarter ended March 31, 2003.                      
|            |  |                                                                                                                                                                                                                                                                                                
|10.3        |  | Employment Agreement dated May 7, 2003, between Sandra L. Boyle and
Glenborough Realty Trust Incorporated is incorporated herein by reference
to Exhibit 10.3 to the Companys Quarterly Report on Form 10-Q for the
quarter ended March 31, 2003.                                             
|            |  |                                                                                                                                                                                                                                                                                                
|10.4        |  | Letter Agreement dated May 7, 2003, between Robert Batinovich and
Glenborough Realty Trust Incorporated, relating to supplemental retirement
benefits, is incorporated herein by reference to Exhibit 10.4 to the
Companys Quarterly Report on Form 10-Q for the quarter ended March 31,
2003.
|           
|10.5        |  | Letter Agreement dated May 7, 2003, between Andrew Batinovich and
Glenborough Realty Trust Incorporated, relating to supplemental retirement
benefits, is incorporated herein by reference to Exhibit 10.5 to the
Companys Quarterly Report on Form 10-Q for the quarter ended March 31,
2003.
|            |  |                                                                                                                                                                                                                                                                                                
|10.6        |  | Letter Agreement dated May 7, 2003, between Sandra L. Boyle and
Glenborough Realty Trust Incorporated, relating to supplemental retirement
benefits, is incorporated herein by reference to Exhibit 10.6 to the
Companys Quarterly Report on Form 10-Q for the quarter ended March 31,
2003.  
|            |  |                                                                                                                                                                                                                                                                                                
|11.1        |  | Statement re: Computation of Earnings Per Share is shown in Note 12 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.                                                                                                                                                                              
|            |  |                                                                                                                                                                                                                                                                                                
|           
|31.1        |  | Section 302 Certification of Andrew Batinovich, Chief Executive Officer.                                                                                                                                                                                                                       
|           
|31.2        |  | Section 302 Certification of Stephen R. Saul, Chief Financial Officer.                                                                                                                                                                                                                         
|           
|31.3        |  | Section 906 Certification of Andrew Batinovich, Chief Executive Officer.                                                                                                                                                                                                                       
|           
|31.4        |  | Section 906 Certification of Stephen R. Saul, Chief Financial Officer.                                                                                                                                                                                                                         

37