<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-Q/A
                                   (Mark One)
            [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 1996

                                       OR

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

                         COMMISSION FILE NUMBER 1-14162


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

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

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

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

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

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

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

As of May 10, 1996, 5,753,709 shares of Common Stock ($.001 par value) were
outstanding.


                                  Page 1 of 32
<PAGE>   2
                                Explanatory Note

        All items of the Registrant's Quarterly Report on Form 10-Q for the
period ended March 31, 1996 are included herein; however, only the items set
forth below are hereby amended to the extent set forth herein, by this Form
10-Q/A:

        Part I
        ------

        Item 1
        Item 2


                                      INDEX
                      GLENBOROUGH REALTY TRUST INCORPORATED

                                                               PAGE NO.
PART I            FINANCIAL INFORMATION

Item 1.      Consolidated Financial Statements of
             Glenborough Realty Trust Incorporated
             and Combined Financial Statements of
             the GRT Predecessor Entities
             (Unaudited except for the
             Consolidated Balance Sheet at
             December 31, 1995):

             Consolidated Balance Sheets at March
             31, 1996 and December 31, 1995                      4

             Consolidated and Combined Statements
             of Income for the three months ended
             March 31, 1996 and 1995                             5

             Consolidated and Combined Statements
             of Equity for the three months ended
             March 31, 1996 and 1995                             6

             Consolidated and Combined Statements
             of Cash Flows for the three months
             ended March 31, 1996 and 1995                       7-8

             Notes to Consolidated Financial
             Statements                                          9-14

             Consolidated Financial Statements of
             Glenborough Hotel Group (Unaudited):

             Consolidated Balance Sheet at March
             31, 1996                                            15

             Consolidated Statement of Income for
             the three months ended March 31, 1996               16

             Consolidated Statement of Equity for
             the three months ended March 31, 1996               17

             Consolidated Statement of Cash Flows
             for the three months ended March 31,
             1996                                                18

             Notes to Consolidated Financial
             Statements                                          19-22


                                                            
                                  Page 2 of 32
<PAGE>   3
                                      INDEX
                      GLENBOROUGH REALTY TRUST INCORPORATED


                                                                 PAGE NO.

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

                 Glenborough Realty Trust Incorporated             23-27

                 Glenborough Hotel Group                           28


PART II      OTHER INFORMATION

ITEM 1.      Legal Proceeding                                      29-30

ITEM 5.      Other Information                                     31

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


SIGNATURES                                                         32



                                  Page 3 of 32
<PAGE>   4
PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

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

<TABLE>
<CAPTION>
                                                    March 31,             December 31,
                                                      1996                   1995
                                                      ----                   ----
<S>                                                 <C>                   <C>
ASSETS
   Rental property, net of accumulated
     depreciation of $25,312 and $24,877
     in 1996 and 1995, respectively                  $74,300               $ 77,574
   Property held for sale, net of
    accumulated depreciation of $378 in
    1996                                               2,570                    ---
   Investments in Associated Companies
     and Glenborough Partners                          6,577                  5,763
   Investments in management contracts
     and other, net                                      433                    484
   Mortgage loans receivable, net of
     provision for loss of $863 in 1996
     and 1995                                          7,451                  7,465
   Cash and cash equivalents                           1,326                  4,587
   Prepaid consolidation costs                           ---                  6,082
   Prepaid litigation costs                              ---                  1,155
   Other assets                                        2,605                  2,630
                                                     -------               --------
        TOTAL ASSETS                                 $95,262               $105,740
                                                     =======               ========
LIABILITIES
   Mortgage loans                                    $23,616               $ 23,685
   Secured bank line                                  10,000                 10,000
   Investor notes payable                                ---                  2,483
   Other liabilities                                   3,939                  5,982
                                                     -------               --------
     Total liabilities                                37,555                 42,150
                                                     -------               --------
MINORITY INTEREST                                      8,063                  7,962

STOCKHOLDERS' EQUITY
   Common stock (5,753,709 shares
    issued and outstanding)                                6                      6
   Additional paid-in capital                         55,622                 55,622
   Retained earnings (deficit)                        (5,984)                   ---
                                                     -------               --------
     Total stockholders' equity                       49,644                 55,628
                                                     -------               --------
        TOTAL LIABILITIES AND
         STOCKHOLDERS' EQUITY                        $95,262               $105,740
                                                     =======               ========
</TABLE>

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


                                  Page 4 of 32
<PAGE>   5
                      GLENBOROUGH REALTY TRUST INCORPORATED
                          AND GRT PREDECESSOR ENTITIES
                 CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
               For the three months ended March 31, 1996 and 1995
                    (in thousands, except per share amounts)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                             Glenborough          GRT
                                             Realty Trust     Predecessor
                                             Incorporated      Entities
                                             Consolidated       Combined
                                            March 31, 1996    March 31, 1995
                                            --------------    --------------
<S>                                         <C>               <C>
REVENUES
    Rental revenue                           $    3,589           $3,928
    Fees and reimbursements
        (including $66 and
        $1,264 to affiliates
        in 1996 and 1995)                            66            3,707
    Interest and other income                       191              918
    Equity in earnings of
        Associated Companies                        425               --
                                             ----------           ------
           Total revenue                          4,271            8,553
                                             ----------           ------
OPERATING EXPENSES
    Operating expenses                            1,017            1,457
    General and administrative                      281            3,678
    Depreciation and amortization                   897            1,061
    Interest expense                                722              503
    Consolidation  costs                           6,082               --

    Litigation costs                              1,155               --
                                             ----------           ------
               Total operating expense           10,154            6,699


Income (loss) from operations before
 provision for income taxes
 and minority interest                           (5,883)           1,854

Provision for income taxes                           --             (160)
Minority interest                                  (101)              --

Net income (loss)                            $   (5,984)          $1,694
                                             ==========           ======
Net loss per share                           $    (1.04)
                                             ==========
Weighted average shares
 outstanding                                  5,753,709
                                             ==========
</TABLE>


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


                                  Page 5 of 32
<PAGE>   6
                      GLENBOROUGH REALTY TRUST INCORPORATED
                          AND GRT PREDECESSOR ENTITIES
                 CONSOLIDATED AND COMBINED STATEMENTS OF EQUITY
               For the three months ended March 31, 1996 and 1995
                                 (in thousands)
                                   (Unaudited)




<TABLE>
<CAPTION>
                                                           GRT Predecessor Entities Combined
                                       ------------------------------------------------------------------------
                                                                  Add-      Receivable
                                                               itional       from         Retained
                           General      Limited      Common    Paid-in      Stock-        Earnings
                           Partner     Partners       Stock    Capital      holder        (Deficit)       Total
                           -------     --------       -----    -------      ------        ---------       -----
<S>                        <C>         <C>           <C>      <C>          <C>            <C>            <C>
BALANCE at
  December 31, 1994        $(1,730)      $85,337       $  5     $ 6,613    $(8,763)        $ (904)       $80,558
Distributions                   (8)         (956)       ---         ---        ---            ---           (964)

Redemption of shares           ---           ---         (2)     (6,613)       ---         (4,002)       (10,617)

Repayment of
  Stockholder
  advances, net                ---           ---        ---         ---      8,763            ---          8,763
Net income                      11         1,001        ---         ---        ---            682          1,694
                           -------       -------       ----     -------    -------         ------        -------
BALANCE at
  March 31, 1995           $(1,727)      $85,382       $  3     $   ---    $   ---        $(4,224)       $79,434
                           =======       =======       ====     =======    =======         ======        =======
</TABLE>


                      Glenborough Realty Trust Incorporated
                   ------------------------------------------------
<TABLE>
<CAPTION>
                                Common Stock            Add -
                             ------------------       itional        Retained
                                           Par        Paid-in        Earnings
                             Shares       Value       Capital       (Deficit)          Total
                             ------       -----       -------        -------           -----
<S>                          <C>         <C>          <C>            <C>              <C>
BALANCE at
  December 31, 1995          5,754       $    6       $55,622         $   ---         $55,628

Net income                     ---          ---           ---          (5,984)         (5,984)
                             -----       ------       -------         -------         -------
Balance at
  March 31, 1996             5,754       $    6       $55,622         $(5,984)        $49,644
                             =====       ======       =======         =======         =======
</TABLE>



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




                                  Page 6 of 32
<PAGE>   7

                      GLENBOROUGH REALTY TRUST INCORPORATED
                          AND GRT PREDECESSOR ENTITIES
                CONSOLIDATED AND COMBINED STATEMENT OF CASH FLOWS
               For the three months ended March 31, 1996 and 1995
                                 (in thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                         Glenborough            GRT
                                                         Realty Trust       Predecessor
                                                         Incorporated         Entities
                                                         Consolidated         Combined
                                                        March 31, 1996      March 31, 1995
                                                           -------             --------
<S>                                                    <C>                  <C>
Cash flows from operating activities:
             Net income (loss)                             $(5,984)            $  1,694
             Adjustments to reconcile net
               income (loss) to net cash
               used for operating
               activities:
                Depreciation and amortization                  897                1,061
                Amortization of loan fees                       36                   23
                Minority interest in income
                  from operations                              101                   --
                Equity in earnings of
                    Associated Companies                      (425)                  --
                Consolidation costs                          6,082                   --
                Litigation costs                             1,155                   --
                Changes in certain assets and
                    liabilities, net                        (2,169)             (15,589)
                                                           -------             --------
                Net cash used for operating
                  activities                                  (307)             (12,811)
                                                           -------             --------
Cash flows from investing activities:
             Additions to rental property                      (27)              (2,459)
             Principal receipts on mortgage
                loans receivable                                14                  415
             Investment in Associated Companies               (389)                  --
                                                           -------             --------
                Net cash used for investing
                  activities                                  (402)              (2,044)
                                                           -------             --------
</TABLE>


                                  - continued -


                                  Page 7 of 32
<PAGE>   8
                      GLENBOROUGH REALTY TRUST INCORPORATED
                          AND GRT PREDECESSOR ENTITIES
          CONSOLIDATED AND COMBINED STATEMENT OF CASH FLOWS - continued
               For the three months ended March 31, 1996 and 1995
                                 (in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                               Glenborough              GRT
                                                              Realty Trust          Predecessor
                                                              Incorporated           Entities
                                                              Consolidated           Combined
                                                             March 31, 1996       March 31, 1995
                                                              ------------         ------------
<S>                                                          <C>                  <C>
Cash flows from financing activities:
             Repayment of borrowings                                (69)                 (1,043)
             Payment of investor notes                           (2,483)                    ---
             Payments from Stockholder, net                         ---                   8,763
             Distributions                                          ---                    (964)
             Redemption of shares                                   ---                 (10,617)
                                                                -------                --------
                    Net cash used for
                       financing activities                      (2,552)                 (3,861)
                                                                -------                --------
Net decrease in cash and cash
             equivalents                                         (3,261)                (18,716)

Cash and cash equivalents, at
             beginning of period                                  4,587                  23,929
                                                                -------                --------
Cash and cash equivalents, at
             end of period                                      $ 1,326                $  5,213
                                                                =======                ========
Supplemental disclosure of cash flow information:

             Cash paid for interest                             $   509                $    480
                                                                =======                ========
</TABLE>


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



                                  Page 8 of 32
<PAGE>   9
                      GLENBOROUGH REALTY TRUST INCORPORATED
                          AND GRT PREDECESSOR ENTITIES

                          Notes to Financial Statements

                                 March 31, 1996
                                   (Unaudited)



Note 1.    ORGANIZATION

Glenborough Realty Trust Incorporated (the "Company") was organized in the State
of Maryland on August 26, 1994. It is the intent of the Company to qualify as a
real estate investment trust ("REIT") under the Internal Revenue Code of 1986,
as amended (the "Code"). The Company completed a Consolidation with certain
associated public California limited partnerships and other entities engaged in
real estate activities (the "GRT Predecessor Entities") through an exchange of
assets of the GRT Predecessor Entities for 5,753,709 shares of Common Stock of
the Company. Proxy materials were mailed to the limited partners of the GRT
Predecessor Entities on October 29, 1995. The Solicitation period expired on
December 28, 1995, and the Consolidation occurred on December 31, 1995. The
Company commenced operations on January 1, 1996.

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

The Company, through several subsidiaries, is engaged primarily in the
ownership, operation, management, leasing, acquisition, expansion and
development of various income-producing properties. The Company's major
consolidated subsidiary, in which it holds a 1% general partner and an 85.37%
limited partner interest in Glenborough Properties, L.P. (the "Operating
Partnership"). The Operating Partnership, directly and through various
subsidiaries in which it and the Company own 100% of the ownership interests,
controls a total of 36 real estate projects and 2 notes receivable. The
remaining 13.63% limited partnership interest in the Operating Partnership is
owned by GPA, Ltd., an affiliated partnership which exchanged certain of its
assets for an interest in the Operating Partnership.

The Company also holds 100% of the non-voting preferred stock of three
Associated Companies:

- Glenborough Corporation (formerly known as Glenborough Realty Corporation)
("GC") is the general partner of nine partnerships and provides asset and
property management services for these nine partnerships and two partnerships
for which an affiliate serves as general partner (the "Controlled
Partnerships"). It also provides property management services for a limited
portfolio of property owned by unaffiliated third parties.

- Glenborough Inland Realty Corporation ("GIRC") provides partnership
administration, asset management, property management and development services
under a long term contract to an additional group of partnerships which include
six public and one private partnerships.

- Glenborough Hotel Group ("GHG") leases the three Country Suites By Carlson
hotels owned by the Company and operates them for its own account. It also
operates three Country Suites By Carlson hotels owned by the Controlled
Partnerships, and operates two resort condominium hotels.



                                  Page 9 of 32
<PAGE>   10
                      GLENBOROUGH REALTY TRUST INCORPORATED
                          AND GRT PREDECESSOR ENTITIES

                          Notes to Financial Statements

                                 March 31, 1996
                                   (Unaudited)


The Associated Companies are accounted for using the equity method.

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 March 31, 1996 and for the period then ended.

Reclassification - Certain 1995 balances have been reclassified to conform with
the current year presentation.

Note 2. REFERENCE TO 1995 AUDITED FINANCIAL STATEMENTS

These unaudited financial statements should be read in conjunction with the
Notes to Financial Statements included in the 1995 audited financial statements.

Note 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying financial statements present the consolidated financial
position of the Company as of March 31, 1996 and December 31, 1995, the
consolidated statements of income and cash flows of the Company for the three
months ended March 31, 1996 and the combined statements of income and cash flows
of the GRT Predecessor Entities for the three months ended March 31, 1995, as
the Consolidation transaction discussed in Note 1 above was not effective until
December 31, 1995. All intercompany transactions, receivables and payables have
been eliminated in consolidation and combination.


                                 Page 10 of 32
<PAGE>   11
                      GLENBOROUGH REALTY TRUST INCORPORATED
                          AND GRT PREDECESSOR ENTITIES

                          Notes to Financial Statements

                                 March 31, 1996
                                   (Unaudited)


PERVASIVENESS OF ESTIMATES

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

INCOME TAXES

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

Certain of the Company's predecessors were subject to income taxes, provisions
for such taxes have been included in the accompanying combined results of
operations of the GRT Predecessor Entities.

Note 4. INVESTMENTS IN ASSOCIATED COMPANIES AND GLENBOROUGH PARTNERS

The Company's investments in the Associated Companies are accounted for on the
equity method as the Company has significant ownership interests but does not
own any voting interests. The Company records earnings on its investments in the
Associated Companies equal to its cash flow preference, to the extent of
earnings, plus its pro rata share of remaining earnings, based upon cash flow
allocation percentages. Dividends received from the Associated Companies are
recorded as a reduction of the Company's investments. The Company's investment
in Glenborough Partners ("GP") is accounted for on the cost method as the
Company has minimal ownership interest in the partnership.



                                 Page 11 of 32
<PAGE>   12
                      GLENBOROUGH REALTY TRUST INCORPORATED
                          AND GRT PREDECESSOR ENTITIES

                          Notes to Financial Statements

                                 March 31, 1996
                                   (Unaudited)


As of March 31, 1996 and December 31, 1995 the Company had the following
investments in Associated Companies and GP (in thousands):

<TABLE>
<CAPTION>
                         GC             GIRC             GHG              GP           Total
                       -----           ------           ------           ----          ------
<S>                   <C>              <C>              <C>            <C>            <C>
Investment at
 December 31,
 1995                  $(109)          $3,919           $1,368           $585          $5,763

Cash contribution         94               95              200            ---             389

Equity in
 earnings                 61              320               44            ---             425
                       -----           ------           ------           ----          ------
Investment at
 March 31,
 1996                  $  46           $4,334           $1,612           $585          $6,577
                       =====           ======           ======           ====          ======

                                                                          3.9%
                      100%             100%             100%             Limited
Nature of             Preferred        Preferred        Preferred        partner
 investment           stock            stock            stock            interest
</TABLE>

On April 23, 1996, the boards of directors of the Associated Companies declared
the following respective dividends to be made in April 1996 (in thousands):

<TABLE>
<CAPTION>
                                GC             GIRC           GHG           Total
                               ----            ----           ----          -----
<S>                            <C>             <C>            <C>           <C>
Preferred dividends
 to the Company                $  4            $  4            $ 7          $ 15

Additional dividends
 to the Company                 127             481             32           640
                               ----            ----            ---           ---
Total dividends
 to the Company                 131             485             39           655

Dividends to others               7              25             11            43
                               ----            ----           ----          ----
Total dividends                $138            $510           $ 50          $698
                               ====            ====           ====          ====
</TABLE>

Financial statements and notes thereto of Glenborough Hotel Group follow Note 11
of the Company's Notes to Financial Statements.



                                 Page 12 of 32
<PAGE>   13
                      GLENBOROUGH REALTY TRUST INCORPORATED
                          AND GRT PREDECESSOR ENTITIES

                          Notes to Financial Statements

                                 March 31, 1996
                                   (Unaudited)



Note 5.  PREPAID CONSOLIDATION AND LITIGATION COSTS

Prepaid consolidation costs at December 31, 1995 included the costs of mailing
and printing the Prospectus/Consent Solicitation Statement, any supplements
thereto or other documents related to the Consolidation, the costs of the
Information Agent, Investor brochure, telephone calls, printing, postage,
travel, meetings, legal and other professional fees related to the solicitation
of consents, as well as reimbursement of costs incurred by brokers and banks in
forwarding the Prospectus/Consent Solicitation Statement to Investors. The
entire balance of prepaid consolidation costs was expensed as of January 1,
1996.

Prepaid litigation costs at December 31, 1995 included the legal fees incurred
in connection with defending two class action complaints filed by investors in
certain of the GRT Predecessor Entities as well as an accrual for the amount of
the settlement that the plaintiff's counsel in one case was requesting be
awarded by the court. The entire balance in prepaid litigation costs was
expensed as of January 1, 1996.

It is management's position that the cases are without merit and management
intends to pursue a vigorous defense in both cases. Although, given the inherent
uncertainties of litigation, no assurance can be made as to the outcome of these
complaints.

Note 6.  INVESTOR NOTES PAYABLE

Included in the proxy to approve or disapprove the Consolidation, was the option
on the part of the investors to choose notes (the "Notes") in lieu of shares of
Common Stock. However, the Company reserved the option to pay cash in lieu of
issuing Notes. In the vote approving the consolidation, investors elected to
receive Notes in the aggregate amount of $2,483,000, which represented an
unsecured obligation of the Company at December 31, 1995. The Company exercised
its option to pay cash in lieu of issuing Notes, and on January 29, 1996, the
Company paid the notes in full, along with accrued interest thereon.

Note 7.  RELATED PARTY TRANSACTIONS

Fee and reimbursement income earned by the Company and the GRT Predecessor
Entities from related partnerships totaled $66,000 and $1,264,000 for the three
months ended March 31, 1996 and 1995, respectively.

Note 8.  STOCK COMPENSATION PLAN

Subject to stockholder approval, the Board of Directors of the Company has
adopted an incentive stock compensation plan (the "Incentive Plan") to enable
certain executive officers and key employees of the Company and others to
participate in the ownership of the Company. No option awards under the
Incentive Plan were made during the quarter.



                                 Page 13 of 32
<PAGE>   14
                      GLENBOROUGH REALTY TRUST INCORPORATED
                          AND GRT PREDECESSOR ENTITIES

                          Notes to Financial Statements

                                 March 31, 1996
                                   (Unaudited)


Shares of Common Stock will be reserved for issuance under the Incentive Plan
which will equal the greater of 680,000 shares of Common Stock, or ten percent
(10%) of the total number of shares of Common Stock outstanding, as of each
December 31 of the preceding twelve-month period, which includes 60,000 shares
which may be granted directly. The Incentive Plan is subject to approval by the
Stockholders and is scheduled to remain in effect for 10 years unless terminated
prior to such time by the Board of Directors.

In addition to the Incentive Plan, the Company intends to adopt other types of
compensation plans for its directors, executive officers and employees.

Note 9.  COMMITMENTS AND CONTINGENCIES

Litigation. The Company and the Associated Companies are defendants in certain
legal proceedings stemming from the Consolidation and prior restructuring
transactions. The complaints allege, among other things, that the valuation of
the Associated Companies was excessive and that the interest rate assigned to
the Investor Notes was too low for the risk involved. These proceedings are in
various stages of completion. It is management's position that all claims
associated with these matters are without merit. The Company intends to pursue a
vigorous defense of all these matters. However, given the inherent uncertainties
of litigation, there can be no assurance that the ultimate outcome of these
proceedings will be in the Company's favor.

Note 10. PROPERTY SALES AND ACQUISITIONS

The Company has entered into an agreement to sell the two self-storage
facilities included in its industrial portfolio, for a sales price of
$2,900,000. Such properties currently have a net book value of  $2,750,000. The
sale, which is expected to close in June or July, is anticipated to be an
all-cash sale and the Company will have no continuing obligations or involvement
with these properties. Accordingly, the Company will recognize the sale of the
two self-storage facilities under the full accrual method of accounting.

Subsequent to March 31, 1996, the Company purchased property adjacent to one of
its retail facilities for $106,000. This property will be used to expand the
parking at the facility. Simultaneous to the acquisition, the Company and the
existing tenant modified the term of the lease to extend it for an additional
five years and increase the annual return.

Note 11. DECLARATION OF DIVIDENDS

On April 24, 1996, the Company's board of directors declared a dividend for the
first quarter of $0.30 per share or $1,726,000 payable on May 13, 1996 to
stockholders of record at the close of business on May 6, 1996. Such dividend
will be made from the Company's cash reserves at March 31, 1996 combined with
the dividends received from the Associated Companies, as was discussed in Note
4.


                                 Page 14 of 32
<PAGE>   15
                             GLENBOROUGH HOTEL GROUP
                           CONSOLIDATED BALANCE SHEET
                      (in thousands, except share amounts)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                 March 31,
                                                   1996
                                                   ----
<S>                                              <C>
ASSETS
   Rental property and equipment, net of
     accumulated depreciation of $96              $  189
   Investments in management contracts, net          487
   Cash and cash equivalents                         594
   Investment in Atlantic Pacific Assurance
     Company, Limited                                755
   Other assets                                      446
                                                  ------
        TOTAL ASSETS                              $2,471
                                                  ======
LIABILITIES
   Mortgage loan                                  $   80
   Accrued lease expense                             383
   Other liabilities                                 371
                                                  ------
     Total liabilities                               834
                                                  ------

STOCKHOLDERS' EQUITY
   Common stock (1,000 shares)                        20
   Non-Voting preferred stock (50 shares)             --
   Additional paid-in capital                      1,568
   Retained earnings                                  49
                                                  ------
     Total stockholders' equity                    1,637
                                                  ------
        TOTAL LIABILITIES AND
         STOCKHOLDERS' EQUITY                     $2,471
                                                  ======
</TABLE>


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


                                 Page 15 of 32
<PAGE>   16
                             GLENBOROUGH HOTEL GROUP
                        CONSOLIDATED STATEMENT OF INCOME
                                 (in thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                               Three Months
                                                  Ended
                                                March 31,
                                                  1996
                                                --------
<S>                                             <C>
REVENUES
    Room revenue                                  $1,915
    Fees and reimbursements                          550
    Other revenue                                     79
                                                  ------
           Total revenue                           2,544
                                                  ------
EXPENSES
    Hotel Leased Properties
        Room expenses                                576
        Lease payments                               683
        Sales and marketing                          185
        Property general and administrative          163
        Other operating expenses                     190
    Hotel Managed Properties
        Salaries and benefits                        401
    Other Expenses
        General and administrative                   231
        Depreciation and amortization                 25
        Interest expense                               1
                                                  ------
               Total expense                       2,455
                                                  ------
Income from operations before provision
    for income taxes                                  89

Provision for income taxes                           (40)
                                                  ------
Net income                                        $   49
                                                  ======
</TABLE>


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


                                 Page 16 of 32
<PAGE>   17
                             GLENBOROUGH HOTEL GROUP
                        CONSOLIDATED STATEMENT OF EQUITY
                    For the three months ended March 31, 1996
                          (in thousands, except shares)
                                   (Unaudited)




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

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

Net income                   --        --           --        --           --            49           49
                             --       ---        -----       ---       ------           ---       ------
Balance At
 March 31, 1996              50       $--        1,000       $20       $1,568           $49       $1,637
                             ==       ===        =====       ===       ======           ===       ======
</TABLE>


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



                                 Page 17 of 32
<PAGE>   18
                             GLENBOROUGH HOTEL GROUP
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (in thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                     Three Months
                                                        Ended
                                                      March 31,
                                                        1996
                                                        ----
<S>                                                  <C>
Cash flows from operating activities:
   Net income                                           $ 49
   Adjustments to reconcile net
      income to net cash provided by
      operating activities:
         Depreciation and amortization                    25
         Changes in certain assets and
            liabilities                                  292
                                                        ----
         Net cash provided by operating
            activities                                   366
                                                        ----
Cash flows from financing activities:
   Capital contributions                                 200
   Repayment of borrowings                                (5)
                                                        ----
   Net cash provided by
      financing activities                               195
                                                        ----
   Net increase in cash                                  561

   Cash and cash equivalents at
      beginning of period                                 33
                                                        ----
   Cash and cash equivalents at
      at end of period                                  $594
                                                        ====
Supplemental disclosure of
  cash flow information:

         Cash paid for interest                         $  1
                                                        ====
</TABLE>

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


                                 Page 18 of 32
<PAGE>   19
                             GLENBOROUGH HOTEL GROUP
                   Notes to Consolidated Financial Statements
                                 March 31, 1996
                                   (Unaudited)


Note 1.   ORGANIZATION

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

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

GHG also owns 94% of the outstanding common stock of Atlantic Pacific Holdings,
Ltd., the sole owner of 100% of the common stock of Atlantic Pacific Assurance
Company, Limited ("APAC"), a Bermuda corporation formed to underwrite certain
insurable risks of certain of GRT's predecessor partnerships and related
entities. APAC no longer underwrites any business and is expected to be
liquidated in 1997. GHG accounts for its investment in APAC using the cost
method due to its anticipated liquidation.

In the opinion of management, the accompanying unaudited financial statements
contain all adjustments (consisting only of normal accruals) necessary to
present fairly, the financial position and results of operations of GHG as of
March 31, 1996 and for the period then ended.

Note 2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation - The accompanying financial statements present the
consolidated financial position of GHG and RGI as of March 31, 1996 and the
consolidated results of operations and cash flows of GHG and RGI for the three
months ended March 31, 1996. All intercompany transactions, receivables and
payables have been eliminated in the consolidation.

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

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

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

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



                                 Page 19 of 32
<PAGE>   20
                             GLENBOROUGH HOTEL GROUP
                   Notes to Consolidated Financial Statements
                                 March 31, 1996
                                   (Unaudited)


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.

Note 3.   RENTAL PROPERTY, NET

Rental property and equipment of $285,000, net of accumulated depreciation of
$96,000 at March 31, 1996 represents the six condominium hotel units owned by
RGI as well as furniture and fixtures in GHG's corporate offices. The six units
owned by RGI participate in a resort rental program on an "at will" basis,
whereby there is no fixed term of participation. Such participation generated
approximately $3,000 of net rental pool profit and approximate cash flow of
$1,000 after deductions for capital reserves for the three months ended March
31, 1996.

Note 4.   INVESTMENTS IN MANAGEMENT CONTRACTS, NET

Investments in management contracts reflects the unamortized portion of the
management contracts RGI holds with the two beachfront resort condominium hotel
properties for both management of the homeowners associations and the rental
pool programs.

Note 5.   INVESTMENT IN APAC

GHG owns 94% of the outstanding common stock of Atlantic Pacific Holdings, Ltd.,
the sole owner of 100% of the common stock of APAC. APAC no longer underwrites
any business and is expected to be liquidated in 1997. GHG accounts for its
investment in APAC using the cost method due to its anticipated liquidation.

Note 6.   MORTGAGE LOAN

Mortgage loan of $80,000 represents the debt secured by the six condominium
hotel units owned by RGI. Such debt bears interest at 7% payable in monthly
installments of principal and interest totaling $2,304 and matures June 30,
1999.


Note 7.   THE PERCENTAGE LEASES

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

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

During the term of each Percentage Lease, the lessee is obligated to pay the
greater of Base Rent or Percentage Rent. Base Rent accrues and is required to be
paid monthly in advance. Percentage


                                 Page 20 of 32
<PAGE>   21
                             GLENBOROUGH HOTEL GROUP
                   Notes to Consolidated Financial Statements
                                 March 31, 1996
                                   (Unaudited)

Rent is calculated by multiplying fixed percentages by room revenues for each of
the three hotels; the applicable percentage changes when revenue exceeds a
specified threshold, and the threshold may be adjusted annually in accordance
with changes in the applicable CPI. Percentage Rent is due quarterly.


                                 Page 21 of 32
<PAGE>   22

                             GLENBOROUGH HOTEL GROUP
                   Notes to Consolidated Financial Statements
                                 March 31, 1996
                                   (Unaudited)


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

                           HOTEL LEASE RENT PROVISIONS

<TABLE>
<CAPTION>
                       Initial
                       Annual
  Hotel               Base Rent       Annual Percentage Rent Formulas
  -----               ---------       -------------------------------
<S>                   <C>             <C>
Ontario, CA           $240,000        24% of the first $1,575,000 of room
                                      revenue plus 40% of room revenue above
                                      $1,575,000 and 5% of other revenue

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

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

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

Note 8.   DECLARATION OF DIVIDENDS

On April 23, 1996, the board of directors of GHG declared dividends for the
first quarter of $50,000 of which $39,400 will be made to GRT as the preferred
stockholder and the balance to the holders of GHG's common stock.




                                 Page 22 of 32
<PAGE>   23
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

GLENBOROUGH REALTY TRUST INCORPORATED AND GRT PREDECESSOR ENTITIES

Background

Glenborough Realty Trust Incorporated (the "Company") is a self-administered and
self-managed equity real estate investment trust ("REIT") engaged primarily in
the ownership, operation, management, leasing and acquisition of various types
of income-producing properties. As of March 31, 1996 and December 31, 1995 the
Company owned and operated 36 income-producing properties (the "Properties,"
and each a "Property") and held two mortgage receivables. The Properties are
comprised of 10 industrial Properties, 19 retail Properties, one residential
Property, four hotel Properties and two office Properties, located in 17 states.

The Company was incorporated in the state of Maryland on August 26, 1994. On
December 31, 1995, the Company completed a consolidation (the "Consolidation")
in which Glenborough Corporation, a California corporation ("GC") and eight
public limited partnerships (the "Partnerships") collectively, the "GRT
Predecessor Entities", merged with and into the Company. The Company (i) issued
shares (the "Shares") of the $.001 par value Common Stock of the Company to the
Partnerships in exchange for the net assets of the Partnerships; (ii) merged
with GC, with the Company being the surviving entity; (iii) acquired an interest
in three companies (the "Associated Companies") that provide asset and property
management services, as well as other services; and (iv) through a subsidiary
operating partnership, Glenborough Properties, L.P. (the "Operating
Partnership"), acquired interests in certain warehouse distribution facilities
from GPA, Ltd., a California limited partnership ("GPA"). A portion of the
Company's operations are conducted through the Operating Partnership, of which
the Company is the sole general partner and in which the limited partner
interest not held by the Company are held by GPA. The Company operates the
assets acquired in the Consolidation and intends to invest in income property
directly and through joint ventures. In addition, the Associated Companies may
acquire general partner interests in other real estate limited partnerships. The
Company intends to qualify as a REIT under the Internal Revenue Code of 1986, as
amended. The common stock of the Company (the "Common Stock") is listed on the
New York Stock Exchange ("NYSE") under the trading symbol "GLB".

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




                                 Page 23 of 32
<PAGE>   24
LIQUIDITY AND CAPITAL RESOURCES

General

Historically for the Partnerships, the principal sources of funding for the
acquisition of Properties was the sale of limited partnership interests in the
Partnerships and permanent financing. The Company intends to rely upon cash
generated by operations, permanent debt financing, public debt and equity as its
funding sources for acquisition, expansion and renovation of properties.

The Company expects to meet its short-term liquidity requirements generally
through its initial working capital and cash generated by operations. As of
March 31, 1996, the Company had no material commitments for capital
improvements. Planned capital improvements consist only of tenant improvements
and other expenditures necessary to lease and maintain the Properties and
furniture fixtures and building improvements at the Hotel Properties. The
Company believes that its cash generated by operations has been and will
continue to be adequate to meet both operating requirements and dividends in
accordance with REIT requirements in both the short and the long-term. However,
there can be no assurance that the Company's results of operations will not
fluctuate in the future and at times negatively affect its ability to meet its
operating requirements and to declare dividends on a regular basis.

The Company expects to meet certain of its long-term liquidity requirements,
such as scheduled debt maturities and possible acquisitions, through a
combination of cash generated by operations, long-term secured and unsecured
borrowings and the issuance of debt and equity securities of the Company.

The Company adopted Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to Be
Disposed Of" in the fourth quarter of 1995. The adoption of SFAS No. 121 did not
have a material effect on the recorded amounts of the Company's long-lived
assets.

On April 23, 1996, the boards of directors of the Associated Companies declared
dividends to be made in April 1996 of $138,000, $510,000 and $50,000 by GC, GIRC
and GHG, respectively. Of such dividends, the amounts to be received by the
Company are $131,300, $484,700 and $39,400 from GC, GIRC and GHG, respectively.

On April 24, 1996, the Company's board of directors declared a dividend for the
first quarter of $0.30 per share or $1,726,000 payable on May 13, 1996 to
stockholders of record at the close of business on May 6, 1996. Such dividend
will be made from the Company's cash reserves at March 31, 1996 combined with
the dividends received from the Associated Companies, as discussed above.

RESULTS OF OPERATIONS

Certain components of the Company's results of operations are not comparable to
those of the GRT Predecessor Entities. The primary reason for the difference is
due to the segregation in 1996 of the operations (management fees and
reimbursements, as well as related expenses) of GHG, GIRC and GC (the Associated
Companies), all of which were consolidated in the GRT Predecessor Entities 1995
financial statements. Effective January 1, 1996, the Company owns 100% of the
preferred stock in each of these Associated Companies and accounts for its
interests under the equity method. Also contributing to the comparability
difference is the change in the operations structure of the three hotel
properties ("the Hotels"). The Hotels were wholly owned by the GRT Predecessor
Entities and thereby, the operations of the Hotels were included in the
financial statements of the GRT Predecessor Entities. Under the current
structure, the Company owns the Hotels but leases them to GHG for operation. The
Company includes only the related



                                 Page 24 of 32
<PAGE>   25
lease payments received from GHG in its statement of operations. The decrease in
fees and reimbursements by $3,641,000 or 98% from $3,707,000 in 1995 to $66,000
in 1996 and the decrease of $3,397,000, or 92% in general and administrative
expenses, including salaries, from $3,678,000 in 1995 to $281,000 in 1996 are
the primary components affected by these changes in structure.

Average occupancy at the Company's properties, summarized by property type, at
March 31 was:

<TABLE>
<CAPTION>
                             1996         1995
                             ----         ----
<S>                         <C>          <C>
Retail                       92.1%        94.5%
Industrial                   99.5%        99.2%
Office                       98.0%        92.3%
Residential                  89.4%        96.0%
Hotel                        77.9%        76.4%
</TABLE>

Interest and other income decreased $727,000, or 79%, to $191,000 in the three
months ended March 31, 1996 from $918,000 in 1995. This decrease resulted
primarily from the 1995 short-term investment of funds generated from the early
repayment of the Finley Square note receivable in April of 1995 and the early
repayment in January and June of 1995 of three of the four notes from the sale
of the Laurel Cranford buildings. In 1996, cash balances have been used to
prepay the investor notes payable and consolidation costs.

Operating expenses decreased by $440,000 or 30% to $1,017,000 in the three
months ended March 31, 1996 from $1,457,000 in the same period in 1995. The
decrease is primarily due to the change in operational structure of the leased
hotels as previously discussed.

Depreciation and amortization expense decreased $164,000, or 15%, to date in
1996 to $897,000 from $1,061,000 in the same period in 1995. The decrease was
primarily due to certain of the Company's fixed assets and deferred leasing
commissions becoming fully depreciated and amortized in 1995.

Interest expense increased $219,000 or 44% in the three months ended March 31,
1996 to $722,000 from $503,000 during the three months ended March 31, 1995. The
increase is primarily the result of an increase in average borrowings during
1996 compared to 1995.

FUNDS FROM OPERATIONS

The Company believes that Funds From Operations ("FFO") is a measure of cash
flow which, when considered in conjunction with other measures of operating
performance, affects the value of equity REITs such as the Company. FFO, as
defined by the National Association of Real Estate Investment Trusts ("NAREIT"),
means net income (computed in accordance with GAAP) excluding gains (losses)
from debt restructuring and sales of property, plus depreciation and
amortization, and after adjustments for unconsolidated partnerships and joint
ventures. In the first quarter of 1996, consolidaton and litigation costs that
were charged to net income have also been added back to determine FFO.

FFO is not necessarily indicative of cash flow available to fund cash needs and
is not the same as cash flow from operations as defined by GAAP, and should not
be considered as an alternative to net income (loss) as an indicator of the
Company's operating performance, or as an alternative to cash flows from
operating, investing and financing activities as a measure of liquidity or
ability to make distributions. Management generally considers FFO to be a useful
financial performance measurement because it provides investors



                                 Page 25 of 32
<PAGE>   26
with an additional basis to evaluate the performance of a REIT. FFO as disclosed
by other REITs may not be comparable to the Company's calculation of FFO.

In February 1995, NAREIT established new guidelines for calculating FFO that
clarify previous guidelines. The primary change from the old definition to the
new definition is the treatment of amortization of deferred financing fees.
Under the new definition, the amortization of deferred financing fees is no
longer added back to net income in calculating FFO. The new guidelines are
effective beginning in 1996.

Beginning with the first quarter of 1996, the Company calculates its FFO based
upon the new NAREIT definition and, accordingly, does not add back amortization
of deferred financing fees and costs. The change does not affect the Company's
Funds Available for Distribution ("FAD"). FAD represents FFO plus recurring
principal receipts from mortgage loans less reserves for lease commissions,
capital expenditures (excluding property acquisitions) and debt principal
amortization. FAD should not be considered an alternative to net income as a
measure of the Company's financial performance or to cash flow from operating
activities (computed in accordance with GAAP) as a measure of the Company's
liquidity, nor is it necessarily indicative of sufficient cash flow to fund all
of the Company's needs.


                                 Page 26 of 32
<PAGE>   27
The following table sets forth the Company's calculation of FFO, based upon the
new NAREIT definitions, and FAD for the three months ended March 31, 1996
(dollars in thousands).

<TABLE>
<CAPTION>
                                     March 31,
                                       1996
                                     ---------
<S>                                  <C>
Net LOSS before PROVISION
   FOR INCOME TAXES AND
   minority interest                 $   (5,883)

Consolidation costs                       6,082

Litigation costs                          1,155

Depreciation and amortization               897
Loss provisions                              --
Adjustment to reflect FFO of
   Associated Companies (1)                 284
                                     ----------
FFO                                       2,535
                                     ----------
Amortization of deferred
 financing fees                              36
Principal receipts on mortgage
 loans                                       14
Capital reserve                            (185)
Capital expenditures                        (54)
Principal amortization reserve              (86)
                                     ----------
FAD                                  $    2,260
                                     ==========
Distributions per share              $     0.30

Fully converted weighted
 average shares outstanding           6,296,042
</TABLE>

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


                                 Page 27 of 32
<PAGE>   28
GLENBOROUGH HOTEL GROUP

BACKGROUND

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

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

GHG also owns 94% of the outstanding common stock of Atlantic Pacific Holdings,
Ltd., the sole owner of 100% of the common stock of APAC. APAC no longer
underwrites any business and is expected to be liquidated in 1997. GHG accounts
for its investment in APAC using the cost method due to its anticipated
liquidation.

LIQUIDITY AND CAPITAL RESOURCES

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

As of March 31, 1996, GHG has no plans for major capital improvements. Any
capital expenditures associated with the six condominium units owned by RGI
would be performed by the rental pool and be deducted from the rental checks
received monthly.

On April 23, 1996, the board of directors of GHG declared dividends for the
first quarter of $50,000 of which $39,400 will be made to GRI as the preferred
stockholder and the balance to the holders of GHG's common stock.

RESULTS OF OPERATIONS

Room revenue of $1,915,000 represents the revenue earned on the three hotels
leased from GRT.

Fee revenue of $550,000 represents the fees earned for managing three hotels and
two resort condominium hotels.

The primary expenses associated with the leased hotels are room expense of
$576,000, lease payments of $683,000, sales and marketing of $185,000 and other
operating expenses of $190,000.

The only direct expenses incurred in connection with the management of the three
hotels and two resort condominium hotel properties are salaries and benefits of
$401,000.

General and administrative costs of $231,000 represent the overhead costs
associated with administering the business of GHG.



                                 Page 28 of 32
<PAGE>   29
PART 2.  OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

                  BLUMBERG. On February 21, 1995, a class action complaint was
                  filed in the Superior Court of the State of California in and
                  for San Mateo County in connection with the Consolidation. The
                  plaintiff is Anthony E. Blumberg, an Investor in Equitec B, on
                  behalf of himself and all others similarly situated. The
                  defendants are GRC, GC and Robert Batinovich. The Partnerships
                  and the Company are nominal defendants.

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

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



                                 Page 29 of 32
<PAGE>   30
                  On October 11, 1995, the court certified the class for
                  purposes of settlement, and set a hearing on December 21,
                  1995, to determine whether it should approve the settlement
                  and class counsel's application for fees. A notice of the
                  proposed settlement was distributed to the members of the
                  class on November 15, 1995. The notice specified that, in
                  order to be heard at the hearing, any class member objecting
                  to the proposed settlement must, by December 15, 1995, file a
                  notice of intent to appear, and a detailed statement of the
                  grounds for their objection.

                  A number of objections were received from class members. The
                  objections reiterated the claims in the original Blumberg
                  complaint, and asserted that the settlement agreement did not
                  adequately compensate the class for releasing those claims.
                  One of the objections was filed by the same law firm that had
                  brought a class action against the former general partners of
                  one of the merging partnerships (described as the "GPI
                  Litigation" in the issuer's Registration Statement on Form
                  S-4). The other was filed by the same law firm that brought
                  the "BEJ" action described below.

                  The hearing originally scheduled for December 21, 1995 was
                  continued to January 17, 1996. At the hearing on January 17,
                  the court heard the arguments of the objectors seeking to
                  overturn the settlement, as well as the arguments of the
                  plaintiffs and the defendants in defense of the settlement.
                  The court granted all parties a period of time in which to
                  file additional pleadings, and announced that it would render
                  a final decision after receiving those additional pleadings.
                  As of May 10, 1996, no decision has been issued.

                  BEJ EQUITY PARTNERS. On December 1, 1995, a second class
                  action complaint relating to the Consolidation was filed in
                  Federal District Court for the Northern District of
                  California. The plaintiffs are BEJ Equity Partners, J/B
                  Investment Partners, Jesse B. Small and Sean O'Reilly as
                  custodian f/b/o Jordan K. O'Reilly, who as a group held
                  limited partner interests in the Partnerships known as Outlook
                  IV, All Suites, GPI, Equitec 4, Equitec C and Equitec Mortgage
                  IV, on behalf of themselves and all others similarly situated.
                  The defendants are GRC, GC, the Company, GPA, Ltd., Robert
                  Batinovich and Andrew Batinovich. The Partnerships are named
                  as nominal defendants.

                  This action alleges the same disclosure violations and
                  breaches of fiduciary duty as were alleged in the Blumberg
                  action. The complaint sought injunctive relief, which was
                  denied at a hearing on December 22, 1995. At that hearing, the
                  court also deferred all further proceedings in this case until
                  after the scheduled January 17 hearing in the Blumberg case.
                  Given the delays in the resolution of the Blumberg case, the
                  court and the parties in BEJ have postponed all proceedings in
                  BEJ, and the defendants' responsive pleading in BEJ is now due
                  on June 1, 1996.

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



                                 Page 30 of 32
<PAGE>   31
ITEM 5.  OTHER INFORMATION

                  The Company's annual stockholders meeting has been scheduled
                  for May 30, 1996, and a Proxy Statement was distributed on
                  April 15, 1996. Stockholders of record as of April 5, 1996
                  will be entitled to vote on the matters submitted to a vote of
                  the stockholders.

                  Subject to approval of the Company's 1996 Stock Incentive Plan
                  at the annual meeting, the Company has awarded to each of the
                  independent directors (i) 5,000 shares of the Company's Common
                  Stock, and (ii) options to acquire 2,000 shares of the
                  Company's Common Stock.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits:

                  None

         (b)      Reports on Form 8-K:

                  On January 12, 1996, the Company filed a report on Form 8-K to
                  make available Unaudited Consolidated Pro Forma Financial
                  Statements of the Company as of December 31, 1995.

                  On January 12, 1996, the Company filed a report on Form 8-K to
                  make available additional ownership and operation information
                  concerning the Company and the properties owned or managed by
                  it as of December 31, 1995, in the form of a Supplemental
                  Information package.



                                 Page 31 of 32
<PAGE>   32
                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                        GLENBOROUGH REALTY TRUST INCORPORATED


Date: February 21, 1997                 By:  /s/ Terri Garnick
                                           -----------------------------------
                                             Terri Garnick
                                             Senior Vice President,
                                             Chief Accounting Officer,
                                             Treasure
                                             (Principal Accounting Officer)


                                Page 32 of 32