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 March 31, 1998

                                       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 3/4% 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___


As of May 15,  1998,  31,676,520  shares of Common  Stock  ($.001 par value) and
11,500,000  shares of 7 3/4% Series A  Convertible  Preferred  Stock  ($.001 par
value) were outstanding.


                                  Page 1 of 62
<PAGE>

                                      INDEX
                      GLENBOROUGH REALTY TRUST INCORPORATED

                                                                        Page No.
PART I    FINANCIAL INFORMATION

Item 1.   Consolidated  Financial Statements of Glenborough Realty Trust 
          Incorporated (Unaudited except for the Consolidated Balance Sheet
          at December 31, 1997):

               Consolidated Balance Sheets at March 31, 1998 and 
               December 31, 1997                                               4

               Consolidated Statements of Operations for the three months 
               ended March 31, 1998 and 1997                                   5

               Consolidated Statement of Stockholders' Equity for the
               three months ended March 31, 1998                               6

               Consolidated Statements of Cash Flows for the three
               months ended March 31, 1998 and 1997                          7-8

               Notes to Consolidated Financial Statements                   9-18

          Consolidated Financial Statements of Glenborough Hotel Group 
          (Unaudited except for the Consolidated Balance Sheet at 
          December 31, 1997):

               Consolidated Balance Sheets at March 31, 1998 and 
               December 31, 1997                                              19

               Consolidated Statements of Income for the three months ended
               March 31, 1998 and 1997                                        20

               Consolidated Statement of Stockholders' Equity for the 
               three months ended March 31, 1998                              21

               Consolidated Statements of Cash Flows for the three months 
               ended March 31, 1998 and 1997                                  22

               Notes to Consolidated Financial Statements                  23-25


                                  Page 2 of 62
<PAGE>

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

               Glenborough Realty Trust Incorporated                       26-31

               Glenborough Hotel Group                                        32

PART II   OTHER INFORMATION

Item 1.   Legal Proceedings                                                33-34

Item 2.   Changes in Securities                                               34

Item 6.   Exhibits and Reports on Form 8-K                                    35

SIGNATURES                                                                    36

EXHIBIT INDEX                                                                 37


                                  Page 3 of 62
<PAGE>

Part I.   FINANCIAL INFORMATION

Item 1.   Financial Statements
<TABLE>
<CAPTION>

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

                                                                               March 31,           December 31,
                                                                                 1998                  1997
                                                                             (Unaudited)            (Audited)
                                                                            --------------         -------------
<S>                                                                         <C>                    <C>
ASSETS
     Rental property, net of accumulated depreciation of
       $50,138 and $41,213 in 1998 and 1997, respectively                   $   1,306,931          $    825,218
     Investments in Associated Companies                                           10,752                10,948
     Mortgage loans receivable                                                      3,740                 3,692
     Cash and cash equivalents                                                      6,666                 5,070
     Other assets                                                                  34,056                20,846
                                                                            ---------------        -------------

         TOTAL ASSETS                                                       $   1,362,145          $    865,774
                                                                            ===============        =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
     Mortgage loans                                                         $     242,083          $    148,139
     Unsecured senior notes                                                       150,000                    --
     Unsecured bank line                                                           50,332                80,160
     Other liabilities                                                             18,881                11,091
                                                                            ---------------        -------------
       Total liabilities                                                          461,296               239,390
                                                                            ---------------        -------------

Commitments and contingencies                                                          --                     --

Minority interest                                                                  52,531                46,261

Stockholders' Equity:
     Common stock, 31,549,756 and 31,547,256 shares issued
       and outstanding at March 31, 1998 and
       December 31, 1997, respectively                                                 31                    31
     Preferred stock, 11,500,000 shares issued and outstanding
       at March 31, 1998                                                               11                    --
     Additional paid-in capital                                                   862,962               593,702
     Deferred compensation                                                           (249)                 (210)
     Retained earnings (deficit)                                                  (14,437)              (13,400)
                                                                            ---------------        -------------
       Total stockholders' equity                                                 848,318               580,123
                                                                            ---------------        -------------

           TOTAL LIABILITIES AND STOCKHOLDERS'
              EQUITY                                                        $   1,362,145          $    865,774
                                                                            ===============        =============


                                      See accompanying notes to consolidated financial statements

</TABLE>

                                  Page 4 of 62
<PAGE>

<TABLE>
<CAPTION>

                                       GLENBOROUGH REALTY TRUST INCORPORATED
                                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                 For the three months ended March 31, 1998 and 1997
                                      (in thousands, except per share amounts)
                                                    (Unaudited)

                                                                                1998                        1997
                                                                           --------------              -------------
<S>                                                                        <C>                         <C>
REVENUE
     Rental revenue                                                        $      45,963               $      7,907
     Fees and reimbursements from affiliate                                          473                        187
     Interest and other income                                                       357                        344
     Equity in earnings of Associated Companies                                      352                        145
     Net gain on sales of rental properties                                        1,446                         --
     Gain on collection of mortgage loan receivable                                   --                        154
                                                                           --------------              -------------
       Total revenue                                                              48,591                      8,737
                                                                           --------------              -------------

EXPENSES
     Property operating expenses                                                  14,324                      2,382
     General and administrative                                                    2,222                        651
     Depreciation and amortization                                                10,009                      1,537
     Interest expense                                                              9,145                      1,573
                                                                           --------------              -------------
       Total expenses                                                             35,700                      6,143
                                                                           --------------              -------------

Income from operations before minority interest                                   12,891                      2,594

   Minority interest                                                                (678)                      (231)
                                                                           ---------------             -------------

Net income                                                                 $      12,213               $      2,363
                                                                           --------------              -------------

Preferred dividend requirement                                                    (3,910)                        --
                                                                           --------------              -------------

Net income available to Common Stockholders                                $       8,303                $     2,363
                                                                           =============               =============

Basic Per Share Data:

Net income available to Common Stockholders                                $        0.26                $      0.23
                                                                           ==============              =============

Basic weighted average shares outstanding                                     31,548,706                 10,089,331
                                                                           ==============              =============

Diluted Per Share Data:

Net income available to Common Stockholders                                $        0.26                $      0.23
                                                                           ==============              =============

Diluted weighted average shares outstanding                                   34,372,364                 10,256,129
                                                                           ==============              =============


                             See accompanying notes to consolidated financial statements
</TABLE>

                                  Page 5 of 62
<PAGE>

<TABLE>
<CAPTION>
                                               GLENBOROUGH REALTY TRUST INCORPORATED
                                           CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                             For the three months ended March 31, 1998
                                                           (in thousands)
                                                            (Unaudited)

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

<S>                                    <C>        <C>           <C>    <C>     <C>            <C>          <C>          <C> 
Balance at December 31, 1997           31,547     $  31         --     $  --   $   593,702    $    (210)   $  (13,400)  $   580,123

Issuance of preferred stock, net of
    offering costs of $11,820              --        --     11,500        11       275,669           --            --       275,680

Exercise of stock options                   1        --         --        --            10           --            --            10

Amortization of deferred compensation      --        --         --        --            --           23            --            23

Issuance of common stock to director        2        --         --        --            62          (62)           --            --

Adjustment to fair value of minority                                     
    interest                               --        --         --        --        (6,481)          --            --        (6,481

Distributions                              --        --         --        --            --           --       (13,250)      (13,250)

Net income                                 --        --         --        --            --           --        12,213        12,213
                                   -------------------------------------------------------------------------------------------------

Balance at March 31, 1998              31,550     $  31     11,500     $  11   $   862,962    $    (249)   $  (14,437)  $   848,318
                                   =================================================================================================

                                     See accompanying notes to consolidated financial statements

</TABLE>

                                  Page 6 of 62
<PAGE>

<TABLE>
<CAPTION>
                                      GLENBOROUGH REALTY TRUST INCORPORATED
                                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                               For the three months ended March 31, 1998 and 1997
                                                 (in thousands)
                                                   (Unaudited)


                                                                             1998                        1997
                                                                       ---------------             ---------------
Cash flows from operating activities:
<S>                                                                    <C>                         <C>           
     Net income                                                        $       12,213              $        2,363
     Adjustments to reconcile net income
       to net cash provided by operating
       activities:
         Depreciation and amortization                                         10,009                       1,537
         Amortization of loan fees, included in
           interest expense                                                       418                          64
         Minority interest in income from operations                              678                         231
         Equity in earnings of Associated
           Companies                                                             (352)                       (145)
         Gain on collection of mortgage loan receivable                            --                        (154)
         Net gain on sales of rental properties                                (1,446)                         --
         Amortization of deferred compensation                                     23                          47
         Changes in certain assets and liabilities, net                        (6,216)                     (3,219)
                                                                       ---------------             ---------------

           Net cash provided by operating activities                           15,327                         724
                                                                       ---------------             ---------------

Cash flows from investing activities:
     Net proceeds from sales of rental properties                              28,559                          --
     Additions to rental property                                            (412,585)                     (8,226)
     Additions to mortgage loans receivable                                       (49)                      (250)
     Principal receipts on mortgage loans receivable                                1                       6,855
     Distributions from Associated Companies                                      548                         631
                                                                       ---------------             ---------------

           Net cash used for investing activities                            (383,526)                       (990)
                                                                       ---------------             ---------------


                                                     continued

                            See accompanying notes to consolidated financial statements

</TABLE>

                                  Page 7 of 62
<PAGE>

<TABLE>
<CAPTION>
                                     GLENBOROUGH REALTY TRUST INCORPORATED
                               CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
                              For the three months ended March 31, 1998 and 1997
                                                (in thousands)
                                                  (Unaudited)


                                                                             1998                       1997
                                                                       ---------------            --------------
Cash flows from financing activities:
<S>                                                                    <C>                        <C>          
     Proceeds from borrowings                                          $     309,365              $      10,700
     Repayment of borrowings                                                (201,005)                   (32,196)
     Distributions to minority interest holders                               (1,005)                      (206)
     Distributions                                                           (13,250)                    (3,092)
     Exercise of stock options                                                    10                         --
     Proceeds from issuance of preferred stock, net of
         offering costs                                                      275,680                     66,308
                                                                       ---------------            --------------

         Net cash provided by financing activities                           369,795                     41,514
                                                                       ---------------            --------------

Net increase in cash and cash equivalents                                      1,596                     41,248

Cash and cash equivalents at beginning of period                               5,070                      1,355
                                                                       ---------------            --------------

Cash and cash equivalents at end of period                             $       6,666              $      42,603
                                                                       ===============            ==============

Supplemental disclosure of cash flow information:

     Cash paid for interest                                            $       7,329              $       1,467
                                                                       ===============            ==============

Supplemental disclosure of Non-Cash Investing and Financing
     Activities:

     Acquisition of real estate through assumption of first
         trust deed notes payable                                      $     105,756              $       4,612
                                                                       ===============            ==============

     Acquisition of real estate through issuance of
         Operating Partnership units                                   $         116              $          --
                                                                       ===============            ==============

                            See accompanying notes to consolidated financial statements
</TABLE>

                                  Page 8 of 62
<PAGE>

                      GLENBOROUGH REALTY TRUST INCORPORATED

                   Notes to Consolidated Financial Statements
                                 March 31, 1998



Note 1.      ORGANIZATION

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

Subsequent  to the  Consolidation  on December 31, 1995,  and through  March 31,
1998, the following  Common Stock  transactions  occurred:  (i) 37,000 shares of
Common Stock were issued to officers and directors as stock  compensation;  (ii)
25,446,000  shares were issued in four separate public equity  offerings;  (iii)
312,606  shares were issued in connection  with various  acquisitions;  (iv) 500
shares were issued in connection  with the exercise of employee  stock  options;
and (v) 59 shares were retired, resulting in total shares of Common Stock issued
and  outstanding at March 31, 1998, of  31,549,756.  Fully  converted  shares of
common stock issued and outstanding  (including  2,369,283  partnership units in
the Operating Partnership) totaled 33,919,039 at March 31, 1998.

In January 1998, the Company completed a public offering of 11,500,000 shares of
7 3/4% Series A  Convertible  Preferred  Stock (the  "January  1998  Convertible
Preferred Stock Offering"). The shares are convertible at any time at the option
of the holder thereof into shares of Common Stock at an initial conversion price
of $32.83 per share of Common Stock  (equivalent to a conversion  rate of 0.7615
shares of Common Stock for each share of Series A Convertible  Preferred Stock),
subject to adjustment in certain circumstances. Shares of Preferred Stock issued
and outstanding at March 31, 1998 totaled 11,500,000.

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

The  Company,  through  several  subsidiaries,   is  engaged  primarily  in  the
ownership,   operation,   management,   leasing,   acquisition,   expansion  and
development  of  various  income-producing   properties.   The  Company's  major
consolidated  subsidiary,  in which it holds a 1% general partner interest and a
91.47% limited  partner  interest at March 31, 1998, is Glenborough  Properties,
L.P.  (the  "Operating  Partnership").  As of  March  31,  1998,  the  Operating
Partnership,  directly  and  through  various  subsidiaries  in which it and the
Company own 100% of the ownership interests, controls a total of 147 real estate
projects.

As of March 31, 1998,  the Company also holds 100% of the  non-voting  preferred
stock of the following two Associated Companies (the "Associated Companies"):

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

                                  Page 9 of 62
<PAGE>

     Glenborough  Hotel Group ("GHG")  leases the five Country Suites by Carlson
     hotels owned by the Company and operates them for its own account.  It also
     operates two Country  Suites By Carlson  hotels and two resort  condominium
     hotels under separate contracts.

Note 2.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
The  accompanying   financial  statements  present  the  consolidated  financial
position of the Company as of March 31, 1998,  and  December  31, 1997,  and the
consolidated  results of operations  and cash flows of the Company for the three
months ended March 31, 1998 and 1997. All intercompany transactions, receivables
and payables have been eliminated in consolidation.

In the opinion of management,  the accompanying  unaudited financial  statements
contain all  adjustments  (consisting  of only  normal  accruals)  necessary  to
present  fairly the financial  position and results of operations of the Company
as of March 31, 1998, and for the period then ended.

Reclassification
Certain  1997  balances  have been  reclassified  to conform to the current year
presentation.

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

New Accounting Pronouncements
In June 1997,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting  Standards No. 131 (SFAS 131),  "Disclosures about Segments
of an Enterprise and Related Information," which will be effective for financial
statements  issued for fiscal years  beginning after December 15, 1997. SFAS 131
will require the Company to report certain financial and descriptive information
about its reportable  operating segments,  segments for which separate financial
information is available  that is evaluated  regularly by management in deciding
how to allocate resources and in assessing performance. For these segments, SFAS
131 will require the Company to report profit and loss, certain specific revenue
and expense items and assets. It also requires  disclosures about each segment's
products and services,  geographic areas of operation and major  customers.  The
Company  will  adopt  the  disclosures  required  by SFAS  131 in the  financial
statements for the year ended December 31, 1998.

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

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

                                 Page 10 of 62
<PAGE>

The useful lives are as follows:

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

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

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

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

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

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

Minority Interest
Minority  interest  represents  the  7.53%  limited  partner  interests  in  the
Operating Partnership not held by the Company.

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

For the three months ended March 31, 1998, no tenants represented 10% or more of
rental revenue of the Company.

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

                                 Page 11 of 62
<PAGE>

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

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

Earnings Per Share
In 1997,  the  Company  adopted  the  disclosure  requirements  of SFAS No. 128,
"Earnings  per Share." SFAS 128 requires the  disclosure  of basic  earnings per
share and modified  existing  guidance for computing diluted earnings per share.
Earnings per share for all periods  presented  have been  restated to conform to
the new standard. For additional required disclosures, see Note 8.

Reference to 1997 Audited Financial Statements
These  unaudited  financial  statements  should be read in conjunction  with the
Notes  to  Consolidated  Financial  Statements  included  in  the  1997  audited
financial statements.

Note 3.   INVESTMENTS IN REAL ESTATE

In  January  1998,  the  Company  acquired a  portfolio  of 13  suburban  office
properties and one  office/flex  property (the "Windsor  Portfolio")  located in
eight states.  The Company  acquired the Windsor  Portfolio  from Windsor Realty
Fund II, L.P., of which Windsor  Advisor,  LLC is the general partner and DuPont
Pension Fund Investments and Gid/S&S Limited  Partnership are limited  partners,
and other  entities  affiliated  with  Windsor  Realty Fund II, L.P. The Windsor
Portfolio  properties  aggregate  3,383,240 net rentable square feet, located in
the eastern  and  mid-western  United  States and are  concentrated  in suburban
Washington,  D.C., Chicago,  Atlanta, Boston,  Philadelphia,  Tampa, Florida and
Cary, North Carolina.  The total acquisition cost, including  capitalized costs,
was approximately $423.2 million,  comprised of (i) approximately $167.2 million
in assumption of debt;  (ii) $150.0  million in borrowings  under a $150 million
loan  agreement with Wells Fargo Bank (the "Interim Loan" as defined in Note 6);
and  (iii)  the  balance  in cash,  including  cash  from  borrowings  under the
Acquisition   Credit  Facility  (as  defined  in  Note  6).  Subsequent  to  the
acquisition,  approximately  $68 million of the  assumed  debt was paid off with
proceeds from the January 1998 Convertible  Preferred Stock Offering (as defined
in Note 1).

In January 1998, the Company sold a  multi-family  property for a sales price of
$4.95 million. This sale generated a net gain of approximately  $948,000 and net
proceeds  of  approximately  $2.1  million.  The  proceeds  from the  sale  were
deposited into a deferred  exchange  account and were applied to the acquisition
of 400 El Camino Real (as defined  below) on a  tax-deferred  basis  pursuant to
Section 1031 of the Internal Revenue Code. The sale was an all-cash sale and the
Company  has no  continuing  obligations  or  involvement  with  this  property.
Accordingly,  the Company  recognized  the sale under the full accrual method of
accounting.

In 1997, the Company issued  approximately  $14.1 million in the form of 433,362
partnership units in the Operating Partnership and 72,564 shares of Common Stock
(based on an agreed per unit and per share value of $27.896, respectively, which
was equal to the average closing price of the Company's Common Stock for the ten
business days preceding the closing) and paid approximately  $200,000 in cash to
acquire all of the limited partnership  interests of GRC Airport  Associates,  a
California limited  partnership  ("GRCAA").  GRCAA's sole asset consisted of one
industrial  property  ("Skypark") that was subject to a binding sales agreement.
By virtue of interests held directly or indirectly in GRCAA,  Robert  Batinovich
received  consideration of approximately $2.2 million and GC

                                 Page 12 of 62
<PAGE>

(as defined in Note 1) received  consideration of approximately $1.7 million for
the GRCAA limited partnership  interests in the form of partnership units in the
Operating Partnership. Consistent with the Company's Board of Directors' policy,
neither  Robert  Batinovich  nor  Andrew  Batinovich  voted  when  the  Board of
Directors  considered and acted to approve this  transaction.  In February 1998,
the sale of the Skypark  property was completed to an  unaffiliated  third party
for a price of $22  million.  This sale  generated  a net gain of  approximately
$139,000 and net proceeds of approximately $14.1 million.  The proceeds from the
sale of the property were  deposited into a deferred  exchange  account and were
applied  to the  acquisition  of 400 El  Camino  Real  on a  tax-deferred  basis
pursuant  to Section  1031 of the  Internal  Revenue  Code.  The  Company has no
continuing  obligations or  involvement  with this  property.  Accordingly,  the
Company will recognize the sale under the full accrual method of accounting.

In February  1998,  the Company  acquired a 161,468  square foot office  complex
("Capitol  Center")  located in Des Moines,  Iowa. The total  acquisition  cost,
including  capitalized costs, was approximately $12.3 million,  comprising:  (i)
$116,000 in the form of 3,874  partnership  units in the  Operating  Partnership
(based on an agreed per unit value of $30.00) and (ii) the balance in cash.

In February  1998,  the Company sold an industrial  property to an  unaffiliated
third  party  for  $930,000.  The sale  generated  a net  gain of  approximately
$247,000 and net proceeds of approximately  $359,000. The proceeds from the sale
were  deposited  into a  deferred  exchange  account  and  were  applied  to the
acquisition  of 400 El Camino Real on a  tax-deferred  basis pursuant to Section
1031 of the Internal Revenue Code. The sale was an all-cash sale and the Company
has no continuing  obligations or involvement  with this property.  Accordingly,
the Company recognized the sale under the full accrual method of accounting.

In March 1998, the Company  acquired a 15-story office  property  located in San
Mateo, California ("400 El Camino Real"), which contains 139,109 square feet and
currently houses the Company's  corporate  headquarters in approximately  30,000
square feet, from Prudential Insurance Company of America. The total acquisition
cost, including  capitalized costs, was approximately $34.7 million and was paid
in cash, including cash from borrowings under the Acquisition Credit Facility.

In March 1998, the Company sold an office/flex property to an unaffiliated third
party for $1,368,000.  The sale generated a net gain of  approximately  $112,000
and net proceeds of  approximately  $696,000.  The  proceeds  from the sale were
deposited  into a  deferred  exchange  account  and will be  applied to a future
acquisition of property on a tax-deferred  basis pursuant to Section 1031 of the
Internal  Revenue  Code.  The sale was an  all-cash  sale and the Company has no
continuing  obligations or  involvement  with this  property.  Accordingly,  the
Company recognized the sale under the full accrual method of accounting.

In March 1998, the Company  acquired a portfolio of seven  properties  (the "BGK
Portfolio") from BGK Development. The BGK Portfolio properties aggregate 515,445
net rentable  square  feet,  located in Boston,  Massachusetts  and Kansas City,
Kansas, and consist of four office properties, two industrial properties and one
office/flex  property.  The total acquisition cost, including capitalized costs,
was approximately $50.2 million, comprised of (i) approximately $13.3 million in
assumption of debt; and (ii) the balance in cash, including cash from borrowings
under the Acquisition Credit Facility.

The Company has entered into a definitive agreement to sell the Shannon Crossing
retail  property for $9.3 million.  The property is currently  undergoing a $6.2
million renovation and expansion.  As of the date of this filing,  approximately
$1.4 million of the project  budget for the  renovation  and  expansion has been
funded.  The sale of  Shannon  Crossing  will not be  completed  until the first
quarter of 1999.

As of March 31, 1998,  approximately  $4.8 million of escrow deposits for future
acquisitions of properties are included in rental property.


                                 Page 13 of 62
<PAGE>

Note 4.   INVESTMENTS IN ASSOCIATED COMPANIES

The Company's investments in the Associated Companies (as defined in Note 1) are
accounted for using the equity method as the Company has  significant  ownership
interests through its 100% preferred stock ownership but does not own any voting
interests.  The Company  records  earnings on its  investments in the Associated
Companies equal to its cash flow preference, to the extent of earnings, plus its
pro rata share of remaining earnings, based on cash flow allocation percentages.
Distributions received from the Associated Companies are recorded as a reduction
of the Company's investments.

As of  March  31,  1998,  the  Company  had  the  following  investments  in the
Associated Companies (in thousands):

                                        GC             GHG            Total
                                   -----------    ------------    ------------
Investment at December 31, 1997     $   8,519      $   2,429       $  10,948

Distributions                            (510)           (38)           (548)

Equity in earnings                        110            242             352
                                   -----------    ------------    ------------
Investment at March 31, 1998        $   8,119      $   2,633       $  10,752
                                   ===========    ============    ============

Note 5.   MORTGAGE LOANS RECEIVABLE

The Company's mortgage loans receivable consist of the following as of March 31,
1998, and December 31, 1997 (dollars in thousands):
<TABLE>
<CAPTION>

                                                            1998                  1997
                                                      ---------------        --------------

<S>                                                      <C>                    <C>
Note  secured  by  an  industrial  property  in  Los
Angeles,  CA, with a fixed interest rate of 9% and a
maturity date of June 2001.                              $       506            $      507

Note secured by an office  property in Phoenix,  AZ,
with a fixed  interest  rate  of 11% and a  maturity
date of November 1999. The  Partnership is committed
to  additional  advances  totaling  $320 as of March
31, 1998, for tenant  improvements and other leasing
costs.                                                         3,234                 3,185
                                                      ---------------        --------------

Total                                                    $     3,740            $    3,692
                                                      ===============        ==============
</TABLE>


Note 6.   SECURED AND UNSECURED LIABILITIES

The Company had the following  mortgage loans,  bank lines,  unsecured notes and
notes payable  outstanding  as of March 31, 1998, and December 31, 1997 (dollars
in thousands):

                                                             1998         1997
                                                          ---------     --------
Unsecured  $250,000  line of credit with a bank
("Acquisition Credit Facility") with a variable
interest rate ranging  between LIBOR plus 1.10%
and LIBOR plus 1.30%  (6.79% and 7.07% at March
31, 1998 and December 31, 1997,  respectively),
monthly  interest  only payments and a maturity
date of December 22,  2000,  with one option to
extend for 10 years.                                      $ 50,332      $ 80,160


                                 Page 14 of 62
<PAGE>

                                                             1998         1997
                                                          ---------     --------

Secured loan with a bank with a fixed  interest
rate of 7.50%,  monthly  principal and interest
payments of $443 and a maturity date of October
1, 2022.  The loan is secured by ten properties
with  an  aggregate   net  carrying   value  of
$110,858  and  $111,372  at March 31,  1998 and
December  31,  1997,  respectively.                       $ 59,583      $ 59,724

Secured  loan  with an  investment  bank with a
fixed interest rate of 7.57%, monthly principal
(based   upon  a  25-year   amortization)   and
interest  payments of $149 and a maturity  date
of January 1, 2006. The loan is secured by nine
properties with an aggregate net carrying value
of $37,565  and  $37,711 at March 31,  1998 and
December 31, 1997, respectively.                            19,365        19,444

Secured  loans with  various  lenders,  bearing
interest  at  fixed  rates  between  7.25%  and
9.25%,  with  monthly  principal  and  interest
payments   ranging  between  $8  and  $165  and
maturing  at  various  dates  through  April 1,
2012.  These  loans are  secured by  properties
with  an  aggregate   net  carrying   value  of
$266,886  and  $66,353  at March  31,  1998 and
December 31, 1997, respectively.                           129,759        30,519

Secured   loans  with  various   banks  bearing
interest at  variable  rates  (ranging  between
7.49%  and 8.18% at March  31,  1998),  monthly
principal and interest payments ranging between
$4  and  $16  and  maturing  at  various  dates
through May 1, 2017. These loans are secured by
properties with an aggregate net carrying value
of $5,030  and  $17,246  at March 31,  1998 and
December 31, 1997, respectively.                             2,809         7,806

Secured  loans with  various  lenders,  bearing
interest  at  fixed  rates  between  7.25%  and
7.85%,  with  monthly  principal  and  interest
payments   ranging   between  $5  and  $55  and
maturing at various dates  through  December 1,
2030.  These  loans are  secured by Housing and
Urban Development  properties with an aggregate
net  carrying  value of $41,692  and $41,862 at
March  31,   1998  and   December   31,   1997,
respectively.                                               30,567        30,646

Unsecured  Senior  Notes with a fixed  interest
rate of 7.625%,  interest payable  semiannually
on  March  15  and  September  15,   commencing
September  15,  1998,  and a  maturity  date of
March  15,   2005.   See   below  for   further
discussion.                                                150,000            --
                                                        -----------    ---------
Total                                                   $  442,415     $ 228,299
                                                        ===========    =========

In January 1998,  the Company  closed a $150 million loan  agreement  with Wells
Fargo Bank (the  "Interim  Loan").  The Interim  Loan had a term of three months
with  interest at LIBOR plus 1.75%.  The purpose of the Interim Loan was to fund
the  acquisition  of the Windsor  Portfolio  as discussed in Note 3. The Interim
Loan was paid off in March 1998 with proceeds from the $150 million of unsecured
Senior Notes as discussed below.

In March 1998, the Operating Partnership issued $150 million of 7 5/8% unsecured
Senior Notes (the "Notes") in an unregistered 144A offering. The Notes mature on
March 15,  2005,  unless  previously  redeemed.  Interest  on the Notes  will be
payable  semiannually  on March 15 and  September 15,  commencing  September 15,
1998.  The  Notes

                                 Page 15 of 62
<PAGE>

may be redeemed at any time at the option of the Operating Partnership, in whole
or in part, at a redemption  price equal to the sum of (i) the principal  amount
of the Notes being  redeemed plus accrued  interest to the  redemption  date and
(ii) the  Make-Whole  Amount,  as  defined,  if any.  The Notes  will be general
unsecured and unsubordinated obligations of the Operating Partnership,  and will
rank pari passu with all other unsecured and unsubordinated  indebtedness of the
Operating  Partnership.  The Notes will be  subordinated  to  secured  borrowing
arrangements that the Operating  Partnership has and from time to time may enter
into  with  various  banks and other  lenders,  and to the prior  claims of each
secured  mortgage  lender to any specific  property  which  secures any lender's
mortgage.  As of  March  31,  1998,  such  secured  arrangements  and  mortgages
aggregated approximately $242.1 million.

The required  principal  payments on the Company's  debt for the next five years
and thereafter, as of March 31, 1998, are as follows (in thousands):

               Year Ending
               December 31,
                   1998                  $    5,747
                   1999                       5,670
                   2000                      56,989
                   2001                      10,765
                   2002                       9,120
                   Thereafter               354,124
                                         -----------
                   Total                 $  442,415
                                         ===========

Note 7.   RELATED PARTY TRANSACTIONS

Fee and  reimbursement  income earned by the Company from a related  partnership
totaled  $473,000  and  $187,000  for the three  months ended March 31, 1998 and
1997, respectively,  and consisted of property management fees, asset management
fees and other fee income.  In  addition,  for the three  months ended March 31,
1998, the Company paid GC property management fees and salary  reimbursements of
$295,000 for  management of a portfolio of residential  properties  owned by the
Company.

Note 8.   EARNINGS PER SHARE

In March 1997,  the Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards No. 128 (SFAS 128),  "Earnings Per Share." SFAS
No.  128  requires  the  disclosure  of basic  earnings  per share and  modifies
existing  guidance  for  computing  diluted  earnings  per share.  Under the new
standard,  basic earnings per share is computed as earnings  divided by weighted
average  shares,  excluding  the  dilutive  effects of stock  options  and other
potentially dilutive securities.  The effective date of SFAS No. 128 is December
15, 1997.  Earnings per share for all periods  presented  have been  restated to
conform  to the new  standard  as follows  (in  thousands,  except for  weighted
average shares and per share amounts):

                                            Three months ended March 31,
                                                1998          1997
                                             -----------  -----------
Net income available to common
     stockholders - Basic                         8,303        2,363
Minority interest                                   678          231 (1)
                                             -----------  -----------
Net income - Diluted                              8,981        2,594
                                             -----------  -----------

Weighted average shares:
Basic                                        31,548,706   10,089,331
Stock options                                   456,829      166,798
Convertible Operating Partnership Units       2,366,829           -- (1)
                                             -----------  -----------
Diluted                                      34,372,364   10,256,129
                                             -----------  -----------

                                 Page 16 of 62
<PAGE>

Basic earnings per share                           0.26         0.23
Diluted earnings per share                         0.26         0.23 (1)

(1) Diluted  earnings per share for the three months ended March 31, 1997,  does
not include the  conversion  of units of the Operating  Partnership  into common
stock  (644,120   weighted   average  units   outstanding)   as  the  effect  is
anti-dilutive.

Note 9.   STOCK COMPENSATION PLAN

In May 1996, the Company  adopted an employee stock  incentive plan (the "Plan")
to provide  incentives to attract and retain high quality executive officers and
key employees.  Certain amendments to the Plan were ratified and approved by the
stockholders   of  the  Company  at  the  Company's   1997  Annual   Meeting  of
Stockholders.  The Plan,  as amended,  provides for the grant of  (i) shares  of
Common Stock of the Company, (ii) options, stock appreciation rights ("SARs") or
similar  rights with an exercise or conversion  privilege at a fixed or variable
price related to the Common Stock and/or the passage of time,  the occurrence of
one or more  events,  or the  satisfaction  of  performance  criteria  or  other
conditions, or (iii) any other security with the value derived from the value of
the Common Stock of the Company or other securities  issued by a related entity.
Such awards include,  without  limitation,  options,  SARs,  sales or bonuses of
restricted  stock,  dividend  equivalent  rights ("DERs"),  Performance Units or
Preference  Shares.  The total number of shares of Common Stock  available under
the Plan is equal to the  greater  of  1,140,000  shares or 8% of the  number of
shares  outstanding  determined  as of the day  immediately  following  the most
recent issuance of shares of Common Stock or securities  convertible into shares
of Common Stock;  provided that the maximum aggregate number of shares of Common
Stock available for issuance under the Plan may not be reduced.  For purposes of
calculating  the number of shares of Common Stock  available under the Plan, all
classes  of  securities  of the  Company  and  its  related  entities  that  are
convertible  presently  or in the future by the  security  holder into shares of
Common Stock or which may  presently or in the future be exchanged for shares of
Common Stock pursuant to redemption  rights or otherwise,  shall be deemed to be
outstanding shares of Common Stock. Notwithstanding the foregoing, the aggregate
number of shares  as to which  incentive  stock  options,  one type of  security
available under the Plan, may be granted under the Plan may not exceed 1,140,000
shares.  The Company accounts for the fair value of the options and bonus grants
in accordance  with APB Opinion No. 25.  As of March 31, 1998,  37,000 shares of
bonus  grants  have been  issued  under the Plan.  The fair  value of the shares
granted  have  been  recorded  as  deferred  compensation  in  the  accompanying
financial statements and will be charged to earnings ratably over the respective
vesting  periods that range from 2 to 5 years.  As of March 31, 1998,  2,041,200
options to purchase shares of Common Stock have been granted. The exercise price
of each incentive stock option granted is greater than or equal to the per-share
fair  market  value of the Common  Stock on the date the option is  granted.  To
date, all incentive  stock options granted have been at exercise prices equal to
or higher  than the fair market  value of the shares on the grant  date,  and as
such,  no  compensation  expense has been  recognized as accounted for under APB
Opinion No. 25. The options vest over periods between 1 and 6 years,  and have a
maximum term of 10 years.

Note 10.  DECLARATION OF DIVIDENDS

On March 12, 1998, the Company's Board of Directors declared a dividend of $0.42
per share of common stock for the first quarter of 1998.  This dividend was paid
on April 10, 1998, to  stockholders  of record at the close of business on March
31, 1998.

Additionally,  the Company's Board of Directors declared a dividend of $0.34 per
share on the Company's 7 3/4% Series A Convertible  Preferred  Stock  (discussed
below).  This dividend was paid on April 15, 1998 to  stockholders  of record on
March 25,  1998.  The dividend was prorated for the number of days the stock was
outstanding during the first quarter of 1998.


                                 Page 17 of 62
<PAGE>

Note 11.  PUBLIC STOCK OFFERINGS

In January 1998, the Company completed a public offering of 11,500,000 shares of
7 3/4% Series A  Convertible  Preferred  Stock (the  "January  1998  Convertible
Preferred Stock Offering"). The 11,500,000 shares were sold at a per share price
of $25.00  for net  proceeds  of  approximately  $276  million.  The  shares are
convertible  at any time at the option of the  holders  thereof  into  shares of
Common Stock at an initial  conversion price of $32.83 per share of Common Stock
(equivalent to a conversion rate of 0.7615 shares of Common Stock for each share
of Series A  Convertible  Preferred  Stock),  subject to  adjustment  in certain
circumstances.  Except in certain instances  relating to the preservation of the
Company's  status as a REIT, the 7 3/4% Series A Convertible  Preferred Stock is
not  redeemable  prior to January 16, 2003. On and after  January 16, 2003,  the
Series A Preferred Stock may be redeemed at the option of the Company,  in whole
or in part,  initially at 103.88% of the liquidation  preference per share,  and
thereafter  at prices  declining to 100% of the  liquidation  preference  on and
after  January  16,  2008,  plus in each case  accumulated,  accrued  and unpaid
dividends,  if any, to the redemption date. A portion of this additional capital
was used to repay the outstanding balance under the Company's Acquisition Credit
Facility (as defined in Note 6). The  remaining  proceeds  were used to fund the
acquisitions   discussed  in  Note  3  and  for  general   corporate   purposes.
Approximately  $320,000 in other costs have been incurred in connection with the
January 1998 Convertible Preferred Stock Offering.

Note 12.  SUBSEQUENT EVENTS

In April 1998, the Company  acquired a portfolio of three office  properties and
four retail properties  aggregating  417,745 square feet and three  multi-family
properties containing 670 units (the "Eaton & Lauth Portfolio") from a number of
partnerships in which affiliates of Eaton & Lauth serve as general partners. The
total acquisition cost,  including  capitalized  costs, was approximately  $70.0
million,  comprising:  (i) approximately $32.0 million of net assumed debt; (ii)
approximately  $15.9 million of equity which consisted of (a) approximately $3.2
million in the form of 126,764  shares of Common Stock of the Company  (based on
an agreed per share value of $25.00); and (b) approximately $12.7 million in the
form of 506,788  partnership  units in the  Operating  Partnership  (based on an
agreed  per unit  value of  $25.00);  and (iii) the  balance  in cash.  The cash
portion was financed through advances under the Acquisition Credit Facility. The
Eaton & Lauth Portfolio properties are located in Indiana.

In April 1998, the Company sold an office/flex property to an unaffiliated third
party for $3.6 million. The sale generated a net gain of approximately  $466,000
and net proceeds of approximately $1.6 million.  The proceeds from the sale were
deposited  into a  deferred  exchange  account  and will be  applied to a future
acquisition of property on a tax-deferred  basis pursuant to Section 1031 of the
Internal  Revenue  Code.  The sale was an  all-cash  sale and the Company has no
continuing  obligations or  involvement  with this  property.  Accordingly,  the
Company recognized the sale under the full accrual method of accounting.

Note 13. PENDING ACQUISITION

The Company has entered into a  definitive  agreement to acquire all of the real
estate assets of Prudential-Bache/ Equitec Real Estate Partnership, a California
limited  partnership  (the "Pru-Bache  Portfolio") in which the managing general
partner  is  Prudential-Bache  Properties,  Inc.,  and in  which  GC and  Robert
Batinovich have served as co-general  partners since March 1994, but do not hold
a  material  equity or  economic  interest.  Because  of this  affiliation,  and
consistent  with  the  Company's  Board of  Directors'  policy,  neither  Robert
Batinovich nor Andrew  Batinovich  voted when the Board of Directors  considered
and acted to approve this acquisition.  The total  acquisition  cost,  including
capitalized costs, is expected to be approximately $47.9 million, which is to be
paid  entirely in cash.  The  Pru-Bache  Portfolio  is  comprised of four office
buildings   aggregating  405,825  square  feet  and  one  office/flex   property
containing  121,645  square  feet.  The  largest  of  these  properties  are  in
Rockville, Maryland (186,680 square feet) and Memphis, Tennessee (100,901 square
feet),  with the remaining  properties  located in  Sacramento,  California  and
Kirkland,  Washington.  This acquisition is subject to a number of contingencies
including approval of the acquisition by a majority vote of the limited partners
of Prudential-Bache/Equitec Real Estate Partnership,  satisfactory completion of
due diligence and customary  closing  conditions.  As a result,  there can be no
assurance that this acquisition will be completed.

                                 Page 18 of 62
<PAGE>

<TABLE>
<CAPTION>

                                                      GLENBOROUGH HOTEL GROUP
                                                    CONSOLIDATED BALANCE SHEETS
                                                (in thousands, except share amounts)
 
                                                                              March 31,             December 31,
                                                                                1998                    1997
                                                                             (Unaudited)              (Audited) 
ASSETS
<S>                                                                        <C>                     <C>       
Cash and cash equivalents                                                  $    3,510              $    2,632
Accounts receivable                                                               565                     472
Investments in management contracts, net                                          335                     354
Rental property and equipment, net of
   accumulated depreciation of $134 and $129
   in 1998 and 1997, respectively                                                 149                     154
Prepaid expenses                                                                  156                     119
Other assets                                                                       22                       4

     TOTAL ASSETS                                                          $    4,737              $    3,735

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
   Accrued lease expense                                                   $      842              $      557
   Mortgage loan                                                                   33                      37
   Other liabilities                                                              891                     405

     Total liabilities                                                          1,766                     999


Stockholders' Equity:
   Common stock (1,000 shares authorized,
     issued and outstanding)                                                       20                      20
   Non-voting preferred stock (50 shares
     authorized, issued and outstanding)                                           --                      --
   Additional paid-in capital                                                   1,542                   1,568
   Retained earnings                                                            1,409                   1,148

     Total stockholders' equity                                                 2,971                   2,736

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $    4,737              $    3,735





                                   See accompanying notes to consolidated financial statements

</TABLE>


                                 Page 19 of 62
<PAGE>

<TABLE>
<CAPTION>
                                                      GLENBOROUGH HOTEL GROUP
                                                 CONSOLIDATED STATEMENTS OF INCOME
                                         For the three months ended March 31, 1998 and 1997
                                                           (in thousands)
                                                             (Unaudited)

                                                                                 1998                   1997  
<S>                                                                         <C>                    <C>
REVENUE
     Hotel revenue                                                          $      3,804           $      2,918
     Fees and reimbursements                                                         390                   567
     Other revenue                                                                    36                    --
 
             Total revenue                                                         4,230                 3,485
 
EXPENSES
     Leased Hotel Properties:
        Room expenses                                                                748                   637
        Lease payments to affiliates                                               1,399                 1,048
        Sales and marketing                                                          356                   272
        Property general and administrative                                          231                   232
        Other operating expenses                                                     428                   286

     Managed Hotel Properties:
        Salaries and benefits                                                        242                   400

     Other Expenses:
        General and administrative                                                   274                   270
        Depreciation and amortization                                                 24                    24
        Interest expense                                                               1                     1
 
             Total expenses                                                        3,703                 3,170
 
Income from operations before provision
     for income taxes and minority interest                                          527                   315
 
Provision for income taxes                                                          (211)                 (136)
Minority interest                                                                      4                    --
 
Net income                                                                  $        320           $       179


                                   See accompanying notes to consolidated financial statements


</TABLE>


                                 Page 20 of 62
<PAGE>

<TABLE>
<CAPTION>

                                                           GLENBOROUGH HOTEL GROUP
                                               CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                                  For the three months ended March 31, 1998
                                                        (in thousands, except shares)
                                                                 (Unaudited)


                                                                                        Addi-
                                        Preferred Stock         Common Stock            tional      Retained
                                                    Par                     Par        Paid-in      Earnings
                                       Shares      Value      Shares       Value       Capital      (Deficit)      Total
<S>                                       <C>    <C>           <C>       <C>         <C>           <C>          <C>
BALANCE at
 December 31, 1997                        50     $    --       1,000     $    20     $   1,568     $   1,148    $   2,736

Redemption of minority interest in
consolidated subsidiary                   --          --          --          --           (26)           --          (26)

Dividends                                 --          --          --          --            --           (59)         (59)

Net income                                --          --          --          --            --           320          320
 
BALANCE at
 March 31, 1998                           50     $    --       1,000     $    20     $   1,542     $   1,409    $   2,971


                                   See accompanying notes to consolidated financial statements

</TABLE>


                                 Page 21 of 62
<PAGE>

<TABLE>
<CAPTION>
                                            GLENBOROUGH HOTEL GROUP
                                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                              For the three months ended March 31, 1998 and 1997
                                                (in thousands)
                                                  (Unaudited)

                                                                                  1998                1997   
Cash flows from operating activities:
<S>                                                                         <C>                  <C>         
   Net income                                                               $        320         $        179
   Adjustments to reconcile net income to net cash
      provided by operating activities:
         Depreciation and amortization                                                24                   24
         Changes in certain assets and liabilities                                   623                  521
 
         Net cash provided by operating activities                                   967                  724
 
Cash flows from investing activities:
   Additions to equipment                                                             --                  (36)

         Net cash used for investing activities                                       --                  (36)
 
 
Cash flows from financing activities:
   Dividends                                                                         (59)                 (20)
   Redemption of minority interest in consolidated
      subsidiary                                                                     (26)                  --
   Repayment of borrowings                                                            (4)                  (6)
 
         Net cash used for financing activities                                      (89)                 (26)
 
   Net increase in cash and cash equivalents                                         878                  662

   Cash and cash equivalents at beginning of period                                2,632                  461
 
   Cash and cash equivalents at end of period                               $      3,510         $      1,123
 
Supplemental disclosure of cash flow information:

         Cash paid for interest                                             $          1         $          1
 


                                   See accompanying notes to consolidated financial statements
</TABLE>


                                 Page 22 of 62
<PAGE>

                             GLENBOROUGH HOTEL GROUP

                   Notes to Consolidated Financial Statements
                                 March 31, 1998



Note 1.       ORGANIZATION
 
Glenborough  Hotel  Group  ("GHG")  was  organized  in the  State of  Nevada  on
September 23, 1991. As of March 31, 1998, GHG operates hotel properties owned by
Glenborough  Realty Trust  Incorporated  ("GLB") under five separate  percentage
leases and manages two hotel  properties  owned by affiliates.  GLB owns 100% of
the 50  shares  of  non-voting  preferred  stock of GHG and  three  individuals,
including  Terri Garnick,  an executive  officer of GLB, each own 33 1/3% of the
1,000 shares of voting common stock of GHG.

GHG also  owns  approximately  80% of the  common  stock of Resort  Group,  Inc.
("RGI").  GHG consolidates its financial  statements with RGI and recognizes its
joint venture partner's  interest as minority  interest.  RGI manages homeowners
associations  and  rental  pools for two  beachfront  resort  condominium  hotel
properties and owns six units at one of the properties.

In the opinion of management,  the accompanying  unaudited financial  statements
contain  all  adjustments  (consisting  only of normal  accruals)  necessary  to
present fairly, the consolidated  financial position and consolidated results of
operations of GHG as of March 31, 1998, 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,  1998,  and
December 31, 1997 and the  consolidated  results of operations and cash flows of
GHG and RGI for the three months ended March 31, 1998 and 1997. All intercompany
transactions,   receivables   and   payables   have  been   eliminated   in  the
consolidation.

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

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

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

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

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

Income  Taxes -  Provision  for income  taxes is based on  financial  accounting
income.  Certain  items are reported in different  periods for tax and financial
reporting  purposes.  Timing differences arising from such items are recorded as
deferred tax assets,  net of related  valuation  reserves,  or  liabilities,  as
appropriate.

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


                                 Page 23 of 62
<PAGE>

                             GLENBOROUGH HOTEL GROUP

                   Notes to Consolidated Financial Statements
                                 March 31, 1998


Note 4.       RENTAL PROPERTY

Rental property and equipment  represents the six condominium  hotel units owned
by RGI as well as furniture  and fixtures in GHG's  corporate  offices.  The six
units owned by RGI participate in a resort rental program on an "at will" basis,
whereby there is no fixed term of participation.  Such  participation  generated
approximately $3,000 of cash flow after deductions for capital reserves for each
of the three months ended March 31, 1998 and 1997.

Note 5.       MORTGAGE LOAN
 
The mortgage loan of $33,000 at March 31, 1998,  represents  the debt secured by
the six  condominium  hotel units owned by RGI. Such debt bears  interest at 7%,
payable in monthly  installments of principal and interest totaling $2,304,  and
matures June 30, 1999.

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

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

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

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

                                                     Hotel Lease Rent Provisions
 
                                            Percentage Rent
                                        incurred for the three
                           Annual            months ended                        Annual Percentage
Hotel                     Base Rent         March 31, 1998                         Rent Formulas                   
 
<S>                     <C>                 <C>                <C>
Ontario, CA             $   240,000         $    82,000        24% of the first  $1,711,000 of room revenue plus 40% of room revenue
                                                               above $1,711,000 and 5% of other revenue

Arlington, TX           $   360,000         $    38,000        27% of the first  $1,738,000 of room revenue plus 42% of room revenue
                                                               above $1,738,000 and 5% of other revenue


                                                              continued
</TABLE>

                                 Page 24 of 62
<PAGE>

                             GLENBOROUGH HOTEL GROUP

                   Notes to Consolidated Financial Statements
                                 March 31, 1998

<TABLE>
<CAPTION>


                                               Hotel Lease Rent Provisions - continued
 
                                            Percentage Rent
                                        incurred for the three
                           Annual            months ended                        Annual Percentage
Hotel                     Base Rent         March 31, 1998                         Rent Formulas                   

<S>                     <C>                 <C>                <C>
Tucson, AZ              $   600,000         $   315,000        40% of the first  $1,467,000 of room revenue plus 46% of room revenue
                                                               above $1,467,000 and 5% of other revenue

San Antonio, TX         $   312,000         $     1,000        33% of the first  $1,272,000 of room revenue plus 40% of room revenue
                                                               above $1,272,000 and 5% of other revenue

Scottsdale, AZ          $   720,000         $   406,000        45% of the first $3,200,000 of room revenue plus 60% of room revenue
                                                               above $3,200,000 and 5% of other revenue
</TABLE>

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

Note 7.       DECLARATION OF DIVIDENDS
 
The board of directors of GHG declared and paid the following  dividends for the
first quarter of 1998:
<TABLE>
<CAPTION>

                                             Preferred Stock       Common Stock           Total  

<S>                                         <C>                  <C>                 <C>         
Q1 1998                                     $       78,375       $     23,625        $    102,000

Total paid from 1998 earnings               $       78,375       $     23,625        $    102,000
</TABLE>


                                 Page 25 of 62
<PAGE>


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

GLENBOROUGH REALTY TRUST INCORPORATED

Background

Glenborough Realty Trust Incorporated (the "Company") is a self-administered and
self-managed  real estate  investment  trust ("REIT")  engaged  primarily in the
ownership,  operation,  management,  leasing and acquisition of various types of
income-producing  properties.  As of March  31,  1998,  the  Company  owned  and
operated  147   income-producing   properties  (the  "Properties,"  and  each  a
"Property") and held two mortgage loans receivable. The Properties are comprised
of 26 industrial Properties,  45 office/flex Properties, 48 office Properties, 9
retail Properties, 13 multi-family Properties and 6 hotel Properties, located in
24 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  ("GC"), a California  corporation,  and eight
public  limited  partnerships  (the  "Partnerships")  merged  with  and into the
Company. The Company (i) issued 5,753,709 shares (the "Shares") of the $.001 par
value  Common Stock of the Company to the  Partnerships  in exchange for the net
assets of the Partnerships;  (ii) merged with Glenborough Corporation,  with the
Company  being  the  surviving  entity;  (iii)  acquired  an  interest  in three
companies (the  "Associated  Companies"),  two of which merged on June 30, 1997,
that provide asset and property management services,  as well as other services;
and (iv) through a subsidiary  operating  partnership,  Glenborough  Properties,
L.P. (the  "Operating  Partnership"),  acquired  interests in certain  warehouse
distribution  facilities  from  GPA,  Ltd.,  a  California  limited  partnership
("GPA").  A portion  of the  Company's  operations  are  conducted  through  the
Operating Partnership,  of which the Company is the sole general partner, and in
which the Company holds a 91.47% limited partner interest.  The Company operates
the assets acquired in the  Consolidation  and in subsequent  acquisitions  (see
further  discussion below) 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
has elected to qualify as a REIT under the  Internal  Revenue  Code of 1986,  as
amended.  The common and preferred  stock of the Company (the "Common Stock" and
the "Preferred  Stock",  respectively) are listed on the New York Stock Exchange
("NYSE") under the trading symbols "GLB" and "GLB Pr A", respectively.

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

     Acquired  20  properties  in the  third and  fourth  quarters  of 1996,  90
     properties in 1997 and 33 properties in 1998. The total acquired Properties
     consist of an aggregate of approximately 13.8 million rentable square feet,
     2,817 multi-family units and 227 hotel suites and had aggregate acquisition
     costs,  including  capitalized  costs, of  approximately  $1.4 billion.  In
     addition, the Company has entered into a definitive agreement, subject to a
     number  of  contingencies,  to  acquire  five  properties  in four  states,
     aggregating  527,470  rentable  square  feet.  However,  there  can  be  no
     assurance that any or all of these properties will be acquired.
         
     From  January  1, 1996 to the date of this  filing,  sold  four  industrial
     properties,  16  retail  properties,  two  office/flex  properties  and one
     multi-family  property  to redeploy  capital  into  properties  the Company
     believes have  characteristics  more suited to its overall growth  strategy
     and operating goals.

     Entered  into a $250  million  unsecured  line of credit (the  "Acquisition
     Credit  Facility") with Wells Fargo Bank,  N.A.  ("Wells Fargo Bank") which
     replaced  its $50 million  secured line of credit and closed a $150 million
     unsecured loan agreement (the "Interim Loan") with Wells Fargo Bank.

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

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

     Issued $150 million of 7 5/8% unsecured Senior Notes which are due on March
     15, 2005. 

     Paid off the Interim Loan with  proceeds  from the issuance of $150 million
     of 7 5/8% unsecured Senior Notes.

                                 Page 26 of 62
<PAGE>

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.

Results of Operations

Comparison  of the three  months  ended March 31, 1998 to the three months ended
March 31, 1997.

Rental Revenues. Rental revenues increased $38,056,000,  or 481%, to $45,963,000
for the three months ended March 31, 1998,  from $7,907,000 for the three months
ended March 31, 1997. The increase  included growth in revenues from the office,
industrial,   office/flex,   retail,   multi-family   and  hotel  Properties  of
$23,716,000,   $2,243,000,   $8,192,000,   $921,000,  $2,632,000  and  $352,000,
respectively.  Of the rental  revenue for the three months ended March 31, 1998,
$4,379,000  represented  rental  revenues  generated from the  acquisition of 20
properties in the third and fourth  quarters of 1996 (the "1996  Acquisitions"),
$23,894,000  represented  rental  revenues  generated from the acquisition of 90
properties in 1997 (the "1997 Acquisitions") and $14,688,000  represented rental
revenues generated from the acquisition of 23 properties during the three months
ended March 31, 1998 (the "1998 Acquisitions").

Fees and Reimbursements.  Fees and reimbursements  revenue consists primarily of
property  management fees,  asset management fees and lease  commissions paid to
the  Company  under a property  and asset  management  agreement.  This  revenue
increased  $286,000,  or 153%,  to $473,000 for the three months ended March 31,
1998,  from  $187,000 for the three  months  ended March 31, 1997.  The increase
primarily  consisted of an increase in lease  commissions of $250,000 due to the
completion of an eight year lease renewal at one of the managed properties.

Equity in Earnings of Associated  Companies.  Equity in earnings from Associated
Companies  increased  $207,000,  or 143%, to $352,000 for the three months ended
March 31, 1998,  from  $145,000 for the three months ended March 31, 1997.  This
increase was primarily due to GC's 1997 write-off of the unamortized  balance of
its  investment in a management  contract and an increase in  Glenborough  Hotel
Group's  ("GHG")  net  income  due  to  the  February  1997  origination  of the
Scottsdale Hotel lease.

Net Gain on  Sales  of  Rental  Properties.  The net  gain on  sales  of  rental
properties of $1,446,000 during the three months ended March 31, 1998,  resulted
from the sales of one multi-family  property,  two industrial properties and one
office/flex property from the Company's portfolio.

Gain on  Collection  of Mortgage  Loan  Receivable.  The gain on  collection  of
mortgage  loan  receivable  of $154,000  during the three months ended March 31,
1997, resulted from the collection of a mortgage loan receivable which had a net
carrying value of $6,700,000.  The payoff amount totaled $6,863,000,  which, net
of legal costs, resulted in a gain of $154,000.

Property Operating Expenses.  Property operating expenses increased $11,942,000,
or 501%,  to  $14,324,000  for the  three  months  ended  March 31,  1998,  from
$2,382,000  for the  three  months  ended  March  31,  1997.  Of this  increase,
$11,807,000  represents  property  operating  expenses  attributable to the 1997
Acquisitions  and the 1998  Acquisitions.  This increase is partially  offset by
decreases  in  property  operating  expenses  due to the 1997 and 1998  sales of
properties.

General  and  Administrative  Expenses.   General  and  administrative  expenses
increased  $1,571,000,  or 241%, to $2,222,000  for the three months ended March
31, 1998,  from $651,000 for the three months ended March 31, 1997. The increase
is primarily due to increased  salary and overhead costs resulting from the 1997
Acquisitions and 1998 Acquisitions.

Depreciation  and   Amortization.   Depreciation   and  amortization   increased
$8,472,000,  or 551%, to $10,009,000  for the three months ended March 31, 1998,
from  $1,537,000  for the three  months  ended March 31,  1997.  The increase is
primarily  due  to  depreciation  and  amortization  associated  with  the  1997
Acquisitions and 1998 Acquisitions.

Interest Expense.  Interest expense increased $7,572,000, or 481%, to $9,145,000
for the three months ended March 31, 1998,  from $1,573,000 for the three months
ended March 31, 1997. Substantially all of the increase was the result of higher
average  borrowings during the three months ended March 31, 1998, as compared to
the three

                                 Page 27 of 62
<PAGE>

months ended March 31, 1997,  due to new debt and the assumption of debt related
to the 1997 Acquisitions and 1998 Acquisitions.

Liquidity and Capital Resources

For the three months ended March 31, 1998, cash provided by operating activities
increased by  $14,603,000  to  $15,327,000  as compared to $724,000 for the same
period in 1997.  The  increase  is  primarily  due to an  increase in net income
before depreciation and amortization, minority interest and net gain on sales of
rental  properties  of  $17,677,000  due  to  the  1997  Acquisitions  and  1998
Acquisitions.  Cash used for investing  activities  increased by $382,536,000 to
$383,526,000  for the three months ended March 31, 1998, as compared to $990,000
for the  same  period  in  1997.  The  increase  is  primarily  due to the  1998
Acquisitions. This increase was partially offset by the collection of a mortgage
loan receivable in 1997 and the proceeds from the 1998 sales of properties. Cash
provided by financing  activities  increased by $328,281,000 to $369,795,000 for
the three months ended March 31, 1998, as compared to  $41,514,000  for the same
period in 1997.  This  increase was  primarily  due to the net proceeds from the
January 1998  Convertible  Preferred  Stock  Offering (as defined below) and the
proceeds from new debt.

The Company  expects to meet its  short-term  liquidity  requirements  generally
through its working capital,  its Acquisition Credit Facility (as defined below)
and cash  generated  by  operations.  As of March 31,  1998,  the Company had no
material  commitments for capital  improvements.  Planned  capital  improvements
consist of tenant improvements, expenditures necessary to lease and maintain the
Properties and expenditures for furniture and fixtures and building improvements
at the hotel Properties.

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

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

Mortgage  loans payable  increased  from  $148,139,000  at December 31, 1997, to
$242,083,000  at March 31,  1998.  This  increase  primarily  resulted  from the
assumption of mortgage loans totaling  $105,789,000  in connection with the 1998
Acquisitions. These increases were partially offset by the payoff of $11,845,000
of mortgage  loans in  connection  with 1998 sales of  properties  and scheduled
principal payments on other mortgage debt.

The Company has a $250,000,000  unsecured line of credit provided by Wells Fargo
Bank (the  "Acquisition  Credit  Facility").  Outstanding  borrowings  under the
Acquisition  Credit Facility decreased from $80,160,000 at December 31, 1997, to
$50,332,000 at March 31, 1998. The $80,160,000  balance  outstanding at December
31,  1997,  was paid off in January  1998 with  proceeds  from the January  1998
Convertible  Preferred Stock Offering.  The $50,332,000  balance  outstanding at
March 31, 1998,  consists of draws for 1998  Acquisitions.  Borrowings under the
Acquisition  Credit Facility  currently bear interest at an annual rate of LIBOR
plus 1.1% or prime rate.

In January  1998,  the Company  closed a $150 million loan with Wells Fargo Bank
(the "Interim Loan").  The Interim Loan had a term of three months with interest
at LIBOR plus 1.75%.  The purpose of the Interim Loan was to fund  acquisitions.
The Interim Loan was paid off in March 1998 with  proceeds  from the issuance of
$150 million of unsecured Senior Notes (discussed below).

In March 1998,  the  Operating  Partnership,  as to which the Company is general
partner,  issued $150 million of 7 5/8% unsecured  Senior Notes (the "Notes") in
an  unregistered  144A  offering.  The Notes  mature on March 15,  2005,  unless
previously  redeemed.  Interest on the Notes is payable semiannually on March 15
and September 15, commencing September 15, 1998. The Operating  Partnership used
the net  proceeds of the  offering to repay the  outstanding  balance  under the
Interim Loan.

                                 Page 28 of 62
<PAGE>

At March 31, 1998, the Company's total indebtedness  included fixed-rate debt of
$389,274,000  (including  $85,437,000  subject to  cross-collateralization)  and
floating-rate  indebtedness of $53,141,000.  Approximately  34% of the Company's
total assets, comprising 51 properties, is encumbered by debt at March 31, 1998.

In January 1997 and May 1997,  the Company filed shelf  registration  statements
with the Securities and Exchange Commission (the "SEC") to register $250 million
and $350 million, respectively, of equity securities of the Company. In November
1997, the Company filed a shelf registration  statement with the SEC to register
an additional $1 billion of equity securities of the Company (the "November 1997
Shelf Registration  Statement").  The November 1997 Shelf Registration Statement
was declared  effective by the SEC on December 18, 1997. After the completion of
the March 1997, July 1997, October 1997 and January 1998 Offerings,  the Company
has the capacity pursuant to the November 1997 Shelf  Registration  Statement to
issue up to approximately $801.2 million in equity securities.

In January 1998, the Company completed a public offering of 11,500,000 shares of
7 3/4% Series A  Convertible  Preferred  Stock (the  "January  1998  Convertible
Preferred Stock Offering"). The 11,500,000 shares were sold at a per share price
of $25.00 for net proceeds of  approximately  $276  million,  which were used to
repay the outstanding  balance under the Company's  Acquisition Credit Facility,
to fund  certain  subsequent  property  acquisitions  and for general  corporate
purposes.  The  shares are  convertible  at any time at the option of the holder
thereof into shares of Common Stock at an initial conversion price of $32.83 per
share of Common  Stock  (equivalent  to a  conversion  rate of 0.7615  shares of
Common Stock for each share of Series A Convertible Preferred Stock), subject to
adjustment in certain circumstances.

Inflation

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

Funds from Operations and Cash Available for Distribution

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

FFO is not necessarily  indicative of cash flow available to fund cash needs and
is not the same as cash flow from  operations as defined by GAAP, and should not
be  considered  as an  alternative  to net income  (loss) as an indicator of the
Company's  operating  performance,  or as an  alternative  to  cash  flows  from
operating,  investing  and  financing  activities  as a measure of  liquidity or
ability to make distributions. Management generally considers FFO to be a useful
financial  performance  measure of the operating  performance  of an equity REIT
because, together with net income and cash flows, FFO provides investors with an
additional basis to evaluate the ability of a REIT to incur and service debt and
to fund acquisitions and other capital expenditures.  FFO does not represent net
income or cash flows from operations as defined by GAAP and does not necessarily
indicate that cash flows will be  sufficient  to fund all of the Company's  cash
needs including principal  amortization,  capital improvements and distributions
to  stockholders.  FFO  also  does  not  represent  cash  flows  generated  from
operating,  investing  or  financing  activities  as  defined  by  GAAP.  FFO as
disclosed by other REITs may not be comparable to the Company's  calculation  of
FFO.

Cash  Available for  Distribution  ("CAD")  represents  net income (loss) before
minority interests, loss provisions, extraordinary items and other non-recurring
items  plus  depreciation  and  amortization  except  amortization  of  deferred
financing costs, less lease commissions and recurring capital expenditures.  CAD
should  not be  considered  an  alternative  to net  income as a measure  of the
Company's  financial  performance  or to cash  flow  from  operating  activities
(computed in accordance with GAAP) as a measure of the Company's liquidity,  nor
is it  necessarily  indicative  of  sufficient  cash  flow  to  fund  all of the
Company's cash needs.

                                 Page 29 of 62
<PAGE>

The following table sets forth the Company's  calculation of FFO and CAD for the
three months ended March 31, 1998 (dollars in thousands):

                                                       March 31,
                                                          1998
                                                      -------------
Net income before minority interest                   $    12,891
Preferred dividend requirement                             (3,910)
Net gain on sales of rental properties                     (1,446)
Depreciation and amortization                              10,009
Adjustment to reflect FFO of Associated Companies (1)         210
                                                      -------------
FFO                                                   $    17,754
                                                      =============

Amortization of deferred financing fees                       418
Capital reserve                                              (983)
Capital expenditures                                       (1,227)
                                                      -------------
CAD                                                   $    15,962
                                                      =============

Distributions per share (2)                           $      0.42
                                                      =============

Diluted weighted average shares outstanding            34,372,364
                                                      =============

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

(2) The  distributions  for the three months ended March 31, 1998,  were paid on
April 10, 1998.

Forward Looking Statements; Factors That May Affect Operating Results

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

Factors which may cause the Company's results to differ include the inability to
complete  anticipated  future  acquisitions,  defaults or non-renewal of leases,
increased  interest rates and  operational  costs,  failure to obtain  necessary
outside  financing,  difficulties  in  identifying  properties to acquire and in
effecting  acquisitions,  failure to qualify as a real estate  investment  trust
under the Internal  Revenue  Code of 1986,  environmental  uncertainties,  risks
related to natural  disasters,  financial market  fluctuations,  changes in real
estate and zoning laws,  increases in real  property tax rates and other factors
discussed under the caption "Forward Looking Statements; Factors That May Affect
Operating  Results" in the  "Management's  Discussion  and Analysis of Financial
Condition and Results of Operations"  section of the Company's  Annual Report on
Form 10-K for the year ended December 31, 1997, and other risk factors set forth
in the Company's other Securities and Exchange  Commission filings. In addition,
past performance of the Company's Common Stock is not necessarily  indicative of
results that will be obtained in the future from an  investment in the Company's
Common Stock.  Furthermore,  the Company makes distributions to stockholders if,
as and when  declared by its Board of  Directors,  and  expects to continue  its
policy of paying  quarterly  distributions,  however,  there can be no assurance
that distributions will continue or be paid at any specific level.

                                 Page 30 of 62
<PAGE>

Year 2000 Compliance

The  Company  utilizes a number of  computer  software  programs  and  operating
systems across its entire organization, including applications used in financial
business systems and various  administrative  functions.  To the extent that the
Company's  software   applications   contain  source  code  that  is  unable  to
appropriately interpret the upcoming calendar year "2000" and beyond, some level
of  modification,  or replacement of such  applications  will be necessary.  The
Company has completed its  identification of applications that are not yet "Year
2000"   compliant  and  has  commenced   modification  or  replacement  of  such
applications,  as  necessary.  Given  information  known at this time  about the
Company's systems that are  non-compliant,  coupled with the Company's  ongoing,
normal  course-of-business  efforts to upgrade or replace critical  systems,  as
necessary,  management  does not expect Year 2000  compliance  costs to have any
material  adverse  impact on the  Company's  liquidity  or  ongoing  results  of
operations.  No  assurance  can be  given,  however,  that all of the  Company's
systems will be Year 2000  compliant or that  compliance  costs or the impact of
the Company's failure to achieve  substantial Year 2000 compliance will not have
a  material  adverse  effect on the  Company's  future  liquidity  or results of
operations.

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



                                 Page 31 of 62
<PAGE>

GLENBOROUGH HOTEL GROUP

Background

Glenborough  Hotel  Group  ("GHG")  was  organized  in the  state of  Nevada  on
September 23, 1991. As of March 31, 1998, GHG operates hotel properties owned by
the  Company  under  five  separate  percentage  leases  and  manages  two hotel
properties  owned by  affiliates.  The  Company  owns  100% of the 50  shares of
non-voting  preferred  stock  of GHG  and  three  individuals,  including  Terri
Garnick,  an  executive  officer of the  Company,  each own 33 1/3% of the 1,000
shares of voting common stock of GHG.

GHG also  owns  approximately  80% of the  common  stock of Resort  Group,  Inc.
("RGI").  GHG consolidates its financial  statements with RGI and recognizes its
joint venture partner's  interest as minority  interest.  RGI manages homeowners
associations  and  rental  pools for two  beachfront  resort  condominium  hotel
properties and owns six rental units at one of the properties.

Liquidity and Capital Resources

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

The  board  of  directors  of GHG  declared  and paid  the  following  quarterly
dividends for the three months ended March 31, 1998:

                                             1st Quarter
                                            -------------
Preferred dividends to the Company           $    7,500
Additional dividends to the Company              70,875
                                            -------------
Total dividends to the Company                   78,375
Dividends to others                              23,625
                                            -------------
Total dividends                              $  102,000
                                            =============

Results of Operations

Hotel  revenue,  which  represents  the revenue earned on the five hotels leased
from the Company, increased $886,000, or 30%, to $3,804,000 for the three months
ended March 31, 1998, from $2,918,000 for the three months ended March 31, 1997.
This increase is primarily due to the commencement of the Scottsdale Hotel lease
in February 1997.

Fee revenue and salary reimbursements of $390,000 represents the fees earned for
managing two hotels and two resort  condominium  hotels.  The decrease  from the
three months ended March 31, 1997,  to the three months ended March 31, 1998, is
primarily  due to a change in  ownership  of one of the  managed  hotels,  which
resulted in GHG no longer managing this hotel as of April 1997.

The primary expenses associated with the leased hotels are room expenses,  lease
payments, sales and marketing and other operating expenses, including utilities,
maintenance and insurance. All of these leased hotel expenses increased from the
three months ended March 31, 1997, to the three months ended March 31, 1998, due
to the commencement of the Scottsdale Hotel lease as discussed above.

The only direct  expenses  incurred in connection with the management of the two
hotels and two resort  condominium  hotel  properties  are salaries and benefits
which  decreased  $158,000  from the three months  ended March 31, 1997,  to the
three months ended March 31, 1998. This decrease is primarily due to a change in
ownership of one of the managed hotel properties which resulted in GHG no longer
managing this hotel as of April 1997.

General and  administrative  costs represent the overhead costs  associated with
administering   the   business  of  GHG.   Such  costs   primarily   consist  of
administrative  salaries and benefits,  rent,  legal fees and  accounting  fees.
These costs remained  relatively  stable with an increase of only $4,000, or 1%,
to $274,000 for the three months  ended March 31,  1998,  from  $270,000 for the
three months ended March 31, 1997.


                                 Page 32 of 62
<PAGE>

PART II.      OTHER INFORMATION

Item 1.       Legal Proceedings

Blumberg.  On February 17, 1998, the California  state court of appeals affirmed
the Company's  settlement of a class action complaint filed on February 21, 1995
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, one of the Partnerships included in the Consolidation, on
behalf of himself and all others (the "Blumberg Action") similarly situated. The
defendants  are  GC  (formerly   known  as  Glenborough   Realty   Corporation),
Glenborough Realty Corporation ("GRC"), Robert Batinovich,  the Partnerships and
the Company.

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

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

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

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

At a hearing on January 17, 1996, the court heard the arguments of the objectors
seeking to overturn the  settlement,  as well as the arguments of the plaintiffs
and the defendants in defense of the settlement. The court granted all parties a
period of time in which to file additional pleadings. On June 4, 1996, the court
granted approval of the settlement,  finding it fundamentally fair, adequate and
reasonable to the respective parties to the settlement.  However,  the objectors
gave  notice of their  intent to appeal the June 4 decision.  All parties  filed
their  briefs and a hearing was held on February 3, 1998.  On February 17, 1998,
the court of appeals rendered its decision rejecting the objectors'  contentions
and upholding the  settlement.  The objectors  have  petitioned  the  California
Supreme Court for review but no ruling 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 "BEJ  Action").  The  plaintiffs  are BEJ
Equity

                                 Page 33 of 62
<PAGE>

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

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

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

Item 2.       Changes in Securities

(c)  Sales of Unregistered Securities

In February  1998,  the Company  acquired  the  Capitol  Center  property in Des
Moines,  Iowa, for a total acquisition  cost,  including  capitalized  costs, of
approximately  $12.3 million.  In connection with this acquisition,  Glenborough
Properties, L.P., a California limited partnership (the "Operating Partnership,"
as  to  which  the  Company  is  general  partner),  issued  to  Hubbell  Realty
Corporation, the seller of the Capitol Center Property, 3,874 units ("Units") of
partnership  interest in Glenborough  Properties,  L.P. (with an agreed upon per
Unit value of $30.00,  or an aggregate value of $116,000) as partial payment for
the Capitol  Center  9roperty.  The Units are  redeemable  for cash,  or, at the
election  of the  Company,  for  shares  of  Common  Stock of the  Company  on a
one-for-one  basis.  The Units  were  issued  by the  Operating  Partnership  in
reliance on the  exemption  provided by Section  4(2) of the  Securities  Act of
1933, as amended.

In April 1998,  the Company  acquired the Eaton & Lauth  portfolio of properties
for a total acquisition cost, including  capitalized costs, of approximately $70
million.  In  connection  with this  acquisition,  the Company and the Operating
Partnership  issued   approximately   $15.9  million  in  the  form  of  506,788
partnership units in the Operating  Partnership and 126,764  unregistered shares
of Common Stock of the Company  (based on an agreed per unit and per share value
of $25.00) as partial  payment  for the Eaton & Lauth  portfolio.  The Units are
redeemable  for cash,  or, at the election of the Company,  for shares of Common
Stock of the Company on a one-for-one basis. The Units and shares were issued by
the Operating  Partnership and the Company in reliance on the exemption provided
by Section 4(2) of the Securities Act of 1933, as amended.


                                 Page 34 of 62
<PAGE>

Item 6.           Exhibits and Reports on Form 8-K

         (a)      Exhibits:

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

         (b)      Reports on Form 8-K:

                  On  January 6, 1998,  the  Company  filed a report on Form 8-K
                  with  respect  to the  Acquisition  Credit  Facility  and  the
                  acquisition of the Opus Portfolio.

                  On January 9, 1998,  the Company  filed a report on Form 8-K/A
                  with respect to the acquisition of the Copley Properties.

                  On January 12, 1998,  the Company filed a report on Form 8-K/A
                  with respect to the acquisition of the Thousand Oaks Property.

                  On January 12, 1998,  the Company filed a report on Form 8-K/A
                  with  respect  to the  Acquisition  Credit  Facility  and  the
                  acquisition of the Opus Portfolio.

                  On January 12,  1998,  the Company  filed a report on Form 8-K
                  with respect to the acquisitions of the Marion Bass Portfolio,
                  the Windsor Portfolio, Bryant Lake and the CRI Properties.

                  On January 12,  1998,  the Company  filed a report on Form 8-K
                  with respect to the January 1998 Offering.

                  On January 22,  1998,  the Company  filed a report on Form 8-K
                  with respect to the Press Release for the year ended  December
                  31, 1997 earnings.

                  On January 27,  1998,  the Company  filed a report on Form 8-K
                  with respect to the January 1998 Offering.

                  On February 20, 1998,  the Company  filed a report on Form 8-K
                  to  provide  certain  additional   ownership  and  operational
                  information concerning the Company and the properties owned or
                  managed by it as of December 31, 1997.

                  On March 3, 1998,  the Company filed a report on Form 8-K with
                  respect to the sale of GRC Airport Associates' sole property.

                  On March 12, 1998, the Company filed a report on Form 8-K with
                  respect to the acquisition of 400 El Camino Real.

                  On March 24,  1998,  the Company  filed a report on Form 8-K/A
                  with  respect  to the  sale of GRC  Airport  Associates'  sole
                  property.

                  On May 7, 1998,  the  Company  filed a report on Form 8-K with
                  respect to the  acquisition of the Eaton & Lauth Portfolio and
                  the BGK Portfolio.

                  On May 15, 1998, the Company filed a report on Form 8-K/A with
                  respect to the  acquisition of the Eaton & Lauth Portfolio and
                  the BGK Portfolio. 

                  On May 15,  1998,  the  Company  filed a report on Form 8-K/A,
                  Amendment No. 2, with respect to the  acquisition of the Eaton
                  & Lauth Portfolio and the BGK Portfolio.

                                 Page 35 of 62
<PAGE>

                                   SIGNATURES


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


                      GLENBOROUGH REALTY TRUST INCORPORATED




                   By: Glenborough Realty Trust Incorporated,



Date:  May 15, 1998                      /s/ Andrew Batinovich
                                         Andrew Batinovich
                                         Director, President
                                         and Chief Operating Officer
                                         (Principal Operating Officer)
 
 


 
Date: May 15, 1998                       /s/ Stephen Saul
                                         Stephen Saul
                                         Chief Financial Officer
                                         (Principal Financial Officer)
 




Date: May 15, 1998                       /s/ Terri Garnick
                                         Terri Garnick
                                         Senior Vice President,
                                         Chief Accounting Officer,
                                         Treasurer
                                         (Principal Accounting Officer)


                                 Page 36 of 62
<PAGE>

                                  EXHIBIT INDEX



Exhibit No.                                 Exhibit Title

3.1           Articles of Amendment of Articles of Incorporation of the Company.

10.1*         Employment Agreement between the Company and Robert Batinovich.

10.2*         Employment Agreement between the Company and Andrew Batinovich.

11.1          Statement re:  Computation of Per Share Earnings is shown in
              Note 8 of the Consolidated Financial Statements of the Company in
              Item 14.

12.1          Computation of Ratios.

27.1          Financial Data Schedule.



*             Indicates management contract or compensatory plan or arrangement.


                                 Page 37 of 62
<PAGE>

Exhibit 3.1

                            Articles of Amendment of
                            Articles of Incorporation
                                       of
                      Glenborough Realty Trust Incorporated


Glenborough  Realty  Trust  Incorporated  (the  "Corporation"),   a  corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Maryland, DOES HEREBY CERTIFY:

FIRST: The name of the Corporation is Glenborough Realty Trust Incorporated. The
Corporation's  original  Articles  of  Incorporation  were  filed with the State
Department  of  Assessments  and Taxation of the State of Maryland on August 26,
1994.

SECOND:  That the Board of  Directors  of the  Corporation  adopted a resolution
proposing  and declaring  advisable  the following  amendment to the Articles of
Amendment and Restatement of Articles of Incorporation:  By changing  subsection
(a) of Article SIXTH thereof so that, as amended, subsection (a) of said Article
shall read in its entirety as follows:

          "SIXTH:  (a) the  total  number  of  shares  of stock of all
          classes   ("Capital   Stock")  which  the   Corporation  has
          authority  to issue is  200,000,000  shares (par value $.001
          per  share),  188,000,000  shares  of  which  are  initially
          classified  as shares of common stock  ("Common  Stock") and
          12,000,000  shares  of which  are  initially  classified  as
          shares of 7-3/4% Series A Convertible  Preferred  Stock. The
          aggregate  par value of the shares of all classes  which the
          Corporation has authority to issue is $200,000.00. The Board
          of Directors may classify or reclassify any unissued  shares
          of stock by setting or changing in any one or more respects,
          the preferences,  conversion or other rights, voting powers,
          restrictions,   limitations   as  to   dividends   or  other
          distributions,  qualifications  or  terms or  conditions  of
          redemption of such shares of stock."

THIRD:  That  immediately  before said  amendment  the total number of shares of
stock of all classes which the Corporation had authority to issue was 50,000,000
shares,  having an aggregate par value of  $50,000.00,  divided into  38,000,000
shares of $.001 par value Common Stock, and 12,000,000 shares of $.001 par value
Preferred  Stock.  The  information  required by  2-607(b)(2)(i)  of the General
Corporation Law of the State of Maryland is not changed by said amendment.

FOURTH: That said amendment has been consented to and approved by the holders of
the  issued  and  outstanding  stock  entitled  to  vote  at a  meeting  of  the
stockholders, all in accordance with the provisions of Section 2-104 and Section
2-604 of the General Corporation Law of the State of Maryland.

FIFTH:  That the aforesaid  amendment  was duly adopted in  accordance  with the
applicable  provisions  of Section 2-604 of the General  Corporation  Law of the
State of Maryland.

IN WITNESS  WHEREOF,  Glenborough  Realty  Trust  Incorporated  has caused these
Articles of Amendment to be signed by its Chief Executive  Officer and witnessed
by its Secretary this ____ day of February, 1998.


                                 Page 38 of 62
<PAGE>

                                         GLENBOROUGH REALTY TRUST INCORPORATED

                                         By:  _____________________________
                                              Robert Batinovich
                                              Chief Executive Officer
Witness:

_____________________________
Frank E. Austin
Secretary

THE   UNDERSIGNED,   Chief  Executive   Officer  of  Glenborough   Realty  Trust
Incorporated,  who executed on behalf of the Corporation the foregoing  Articles
of Amendment of which this  certificate is made a part,  hereby  acknowledges in
the name and on behalf of said  Corporation the foregoing  Articles of Amendment
to be the  corporate  act of said  Corporation  and  hereby  certifies  that the
matters  and facts set forth  therein  with  respect  to the  authorization  and
approval  thereof  are true in all  material  respects  under the  penalties  of
perjury.

                                                  _____________________________
                                                  Robert Batinovich
                                                  Chief Executive Officer
Witness:

_____________________________
Frank E. Austin
Secretary


                                 Page 39 of 62
<PAGE>

Exhibit 10.1

                              EMPLOYMENT AGREEMENT



THIS  AGREEMENT  is  entered  into as of the 1st day of  January,  1998,  by and
between  ROBERT  BATINOVICH  (the  "Employee")  and  GLENBOROUGH   REALTY  TRUST
INCORPORATED, a Maryland corporation (the "Corporation").



For ease of reference, this Agreement is divided into the following parts, which
begin on the pages indicated:


FIRST PART:  TERM OF  EMPLOYMENT,  DUTIES AND SCOPE,  COMPENSATION  AND BENEFITS
DURING EMPLOYMENT
                           (Sections 1-5, beginning on page 2)

SECOND  PART:  COMPENSATION  AND  BENEFITS  IN CASE OF  ACTUAL  OR  CONSTRUCTIVE
TERMINATION NOT OCCURRING AFTER A CHANGE IN CONTROL
                           (Sections 6-8, beginning on page 5)

THIRD  PART:  COMPENSATION  AND  BENEFITS  IN CASE  OF  ACTUAL  OR  CONSTRUCTIVE
TERMINATION OCCURRING AFTER A CHANGE IN CONTROL
                           (Sections 9-12, beginning on page 8)

FOURTH PART: SECTION 280G PAYMENTS
                           (Sections 13-14, beginning on page 11)

FIFTH PART: TRADE SECRETS, SUCCESSORS, MISCELLANEOUS PROVISIONS, SIGNATURE PAGE
                           (Sections 15-17, beginning on page 13)

                                 Page 40 of 62
<PAGE>

FIRST PART:  TERM OF  EMPLOYMENT,  DUTIES AND SCOPE,  COMPENSATION  AND BENEFITS
DURING EMPLOYMENT

Section 1:   Term of Employment

     (a)  Basic  Rule.  The  Corporation   agrees  to  continue  the  Employee's
employment,   and  the  Employee   agrees  to  remain  in  employment  with  the
Corporation, from January 1, 1998, until the earliest of:

     (1) December 31, 2002; or

     (2) The date of the  Employee's  death or when  the  Employee's  employment
terminates pursuant to Subsection (b) or (c), below.

     The term and provisions of this Agreement  shall  automatically  extend for
additional  one-year  periods if Employee remains employed on and after December
31, 2002,  unless either party  notifies the other in writing to the contrary at
least 30 days prior to the applicable  December 31 that it, or he, does not want
the term to so extend.

     (b)  Termination  for Cause.  The  Corporation may terminate the Employee's
employment at any time for Cause shown.  For all purposes under this  Agreement,
"Cause"  shall  mean (1) a willful  failure  by the  Employee  to  substantially
perform  the  Employee's  duties  under  this  Agreement,  other  than a failure
resulting from the Employee's  complete or partial incapacity due to physical or
mental illness or impairment, (2) a willful act by the Employee that constitutes
gross  misconduct  and that is materially  injurious to the  Corporation,  (3) a
willful breach by the Employee of a material  provision of this Agreement or (4)
a  material  and  willful  violation  of a federal  or state  law or  regulation
applicable  to  the  business  of  the   Corporation   that  is  materially  and
demonstrably  injurious  to the  Corporation.  No act, or failure to act, by the
Employee shall be considered  "willful" unless committed  without good faith and
without a reasonable  belief that the act or omission  was in the  Corporation's
best interest.

     The Employee shall first be given  reasonable  advance  written notice that
the  Corporation  intends to terminate his  employment  for Cause.  Such written
notice shall specify the particular acts, or failures to act, the basis of which
the decision to so terminate  employment  has been made.  The Employee  shall be
given the opportunity within 20 days of receipt of notice to meet with the Board
of Directors,  accompanied by counsel,  to defend such acts, or failures to act,
and the  Employee  shall  also be given 14 working  days  after such  meeting to
correct  such acts or  failures  to act.  Upon  failure of  Employee,  within 14
working days, to correct such acts or failures to act, the Employee's employment
shall be automatically terminated for Cause.

     (c)  Termination   for  Disability.   The  Corporation  may  terminate  the
Employee's  employment for Disability by giving the Employee written notice. For
all purposes under this Agreement, "Disability" shall mean that the Employee, at
the time the notice is given,  has been unable to perform the Employee's  duties
under this Agreement for a period of not less than twelve  consecutive months as
a result of the Employee's  incapacity due to physical or mental illness. In the
event that the Employee  resumes the  performance  of  substantially  all of the
Employee's  duties under this Agreement before the termination of the Employee's
employment under this Section becomes effective, the notice of termination shall
automatically be deemed to have been revoked.

Section 2:  Duties and Scope of Employment

     (a) Position. The Corporation agrees to employ the Employee for the term of
employment  under this Agreement in the position of Chairman and Chief Executive
Officer.  Employee shall be given such duties,  responsibilities and authorities
as are appropriate to his position.

     (b) Obligations.  During the term of employment  under this Agreement,  the
Employee  shall  devote the  Employee's  full  business  efforts and time to the
business and affairs of the Corporation and  Glenborough  Realty  Corporation as
needed to carry out his duties  and  responsibilities  hereunder  subject to the
overall supervision of the Corporation's Board of Directors. The foregoing shall
not preclude the Employee  from  engaging in  appropriate  civic,  charitable or
religious  activities  or from  devoting a reasonable  amount of time to private
investments  or from serving on the boards of directors  of other  entities,  as
long as such  activities  and  service do not  interfere  or  conflict  with the
Employee's responsibilities to the Corporation.

                                 Page 41 of 62
<PAGE>

Section 3:  Base Compensation

During the term of employment  under this Agreement,  the Corporation  agrees to
pay the Employee as  compensation  for services a base salary at the annual rate
of $480,000,  or at such higher rate as the Compensation  Committee of the Board
of Directors  may determine  from time to time.  Such salary shall be payable in
accordance with the standard  payroll  procedures of the  Corporation.  Once the
Corporation's  Compensation  Committee of the Board of Directors  has  increased
such salary, it thereafter shall not be reduced;  provided,  however,  that if a
Change in Control has not occurred, such salary (including any increases) may be
reduced by the  Corporation if (1) the Employee  commits an act or omission that
meets the  definition of Cause,  as defined in Section 1(b), or (2) the Employee
and all other  executive  officers of the Corporation who are parties to written
employment  agreements  containing  substantially  the same  provisions  as this
Agreement  have their salaries  (including  any  increases)  reduced by the same
percentage amount for the same time period. The annual compensation specified in
this  Section 3,  together  with any  increases  in such  compensation  that the
Compensation  Committee of the Board of  Directors  may grant from time to time,
and together  with any  reductions  made in  accordance  with this Section 3, is
referred to in this Agreement as "Base Compensation."







Section 4:  Employee Benefits

In General.  During the term of employment  under this  Agreement,  the Employee
shall be eligible to  participate  in the employee  benefit  plans and executive
compensation  and  fringe  benefit  programs   maintained  by  the  Corporation,
including  (without  limitation)  savings,   pension  or  profit-sharing  plans,
deferred compensation plans, stock option, incentive or other bonus plans, life,
disability,  health,  accident and other  insurance  programs,  paid  vacations,
automobile and similar plans or programs,  subject in each case to the generally
applicable  terms and  conditions  of the plan or program in question and to the
discretion and determinations of any person,  committee or entity  administering
such plan or program.

During the term of employment under this Agreement,  Employee may be entitled to
an annual incentive bonus if consolidated  funds from operations per share ("FFO
Per Share") at the end of the Corporation's fiscal year exceed FFO Per Share for
the preceding  fiscal year by the percentages  shown below, as determined by the
Compensation Committee,  based on the annual audit prepared by the Corporation's
certified  public  accountants.  The amount of the bonus shall be  determined in
accordance  with a formula  as  adopted  by the  Compensation  Committee  at its
meeting on January 26, 1998.

The  Compensation  Committee  may alter the formula  during each year during the
term of this Agreement.

Section 5:  Business Expenses and Travel

During  the term of  employment  under this  Agreement,  the  Employee  shall be
authorized to incur  necessary and reasonable  travel,  entertainment  and other
business  expenses in  connection  with the  Employee's  duties  hereunder.  The
Corporation  shall reimburse the Employee for such expenses upon presentation of
an itemized account and appropriate supporting documentation,  all in accordance
with generally applicable policies.

                                 Page 42 of 62
<PAGE>

SECOND  PART:  COMPENSATION  AND  BENEFITS  IN CASE OF  ACTUAL  OR  CONSTRUCTIVE
TERMINATION NOT OCCURRING AFTER A CHANGE IN CONTROL

Section 6: Terminations Not Relating to a Change in Control

This Second Part of the Agreement, consisting of Sections 6 through 8, describes
the  benefits  and  compensation,  if any,  payable  in case of  termination  of
employment  that does not occur after a Change in Control (as defined in Section
12).  The Third Part of the  Agreement,  consisting  of  Sections 9 through  12,
describes  benefits and  compensation,  if any,  payable in case of  termination
occurring after a Change in Control.  If benefits and  compensation  are payable
under this Second Part, then no benefits and  compensation are payable under the
Third Part.

Section 7: Involuntary Termination Without Cause or Disability

In the event that, during the term of this Agreement, the Corporation terminates
the Employee's  employment  for any reason other than Cause or  Disability,  and
such termination does not occur after a Change in Control, then, after executing
the release of claims  described in Section 7(d), the Employee shall be entitled
to receive the following payments and benefits:

     (a)  Severance  (2x  payment).  The  Corporation  shall pay to the Employee
following  the date of the  employment  termination  and over the  succeeding 24
months, in accordance with standard payroll  procedures,  an amount equal to the
following:

          (1) Two times the Employee's  Base  Compensation in effect on the date
of the employment termination; plus

          (2)  200% of the  Employee's  annual  incentive  bonus  for  the  last
completed fiscal year of the Corporation.

     Any other  provision of this  Agreement or of the  Corporation's  incentive
bonus plan  notwithstanding,  after the amount  described in this Subsection (a)
has been paid to the Employee,  the Employee  shall have no further  interest in
such Plan.

     (b)  Twenty-four  Months of Life  Insurance and Health Plan  Coverage.  The
coverage  described in this Subsection (b) shall be provided for a "Continuation
Period"  beginning on the date when the employment  termination is effective and
ending  on the  earlier  of (1) the  24-month  anniversary  of the date when the
employment  termination  is effective or (2) the date of the  Employee's  death.
During the  Continuation  Period,  the  Employee  (and,  where  applicable,  the
Employee's  dependents) shall be entitled to continue participation in the group
term life insurance plan and in the health care plan for employees maintained by
the  Corporation  as if the Employee were still an employee of the  Corporation.
The coverage  provided under this Subsection (b) shall run concurrently with and
shall be offset against any continuation coverage under Part 6 of Title I of the
Employee  Retirement Income Security Act of 1974, as amended.  Where applicable,
the  Employee's  compensation  for  purposes of such plans shall be deemed to be
equal to the Employee's compensation (as defined in such plans) in effect on the
date of the employment termination.  To the extent that the Corporation finds it
undesirable  to cover the  Employee  under the group life  insurance  and health
plans of the Corporation, the Corporation shall provide the Employee (at its own
expense) with the same level of coverage under individual policies.

     (c) Incentive Programs. Upon termination of the Employee's employment under
this Section 7, all stock  options or equity awards  granted by the  Corporation
shall  vest  100%.  In  addition,   and  subject  to   subsection   (e)  hereof,
notwithstanding anything to the contrary in the Corporation's stock option plans
and the Employee's  stock option  agreements,  Employee shall have the full term
set forth in the stock option agreements to exercise such options  (irrespective
of termination of  employment),  subject only to the prior  satisfaction  of any
stock price  performance  conditions  set forth in the stock option  agreements.
Employee's  stock  option  grants  numbered  74 and 75 have no such stock  price
performance conditions.

     (d) Release of Claims.  As a condition  to the receipt of the  payments and
benefits  described in this Section 7, the Employee shall be required to execute
a  release  of  all  claims  arising  out of the  Employee's  employment  or the

                                 Page 43 of 62
<PAGE>

termination  thereof including,  but not limited to, any claim of discrimination
under state or federal law, but excluding  claims for  indemnification  from the
Corporation  under  any  indemnification  agreement  with the  Corporation,  its
certificate  of  incorporation  and  by-laws  or  applicable  law or claims  for
directors and officers' insurance coverage.

     (e)  Conditions to Receipt of Payments and Benefits.  In view of Employee's
position  and his access to  Confidential  Information,  as a  condition  to the
receipt of  payments  and  benefits  described  in this  Section  7,  during the
"Continuation  Period"  described in Subsection  7(b) above,  the Employee shall
not, without the Corporation's written consent, directly or indirectly, alone or
as  a  partner,  joint  venturer,  officer,  director,   employee,   independent
contractor,  agent or  stockholder  (other than a less than 5%  stockholder of a
publicly  traded  company)  (i) engage in any  activity  for any other  publicly
traded REIT  headquartered  in  California  with a market  capitalization  of $1
billion or more,  which is in competition  with the business of the Corporation,
(ii) solicit any of the  Corporation's  employees,  independent  contractors  or
customers,  (iii)  hire  any  of  the  Corporation's  employees  or  independent
contractors in an unlawful manner or actively encourage employees or independent
contractors to leave the Corporation,  or (iv) otherwise breach his Confidential
Information obligations.

     (f) No  Mitigation.  The  Employee  shall not be required  to mitigate  the
amount of any payment or benefit  contemplated  by this Section 7, nor shall any
such payment or benefit be reduced by any earnings or benefits that the Employee
may receive from any other source.

Section 8:        Other Terminations Under This Part

If termination of employment,  actual or constructive,  occurs at a time that is
not after a Change in Control,  and the  termination is not described in Section
7,  then  the  Employee  is  entitled  only to the  compensation,  benefits  and
reimbursements  payable under the terms of Sections 3, 4 and 5 of this Agreement
for the period  preceding the effective  date of the  termination  including any
disability or death benefits to which Employee (or his estate or beneficiary(s))
may be  entitled  as a result of  termination  of his  employment  on account of
Disability or death. The payments under this Agreement shall fully discharge all
responsibilities  of the  Corporation  to the Employee upon  termination  of the
Employee's  employment.  This  Section 8  applies,  without  limitation,  to any
termination of employment  initiated by the Employee,  termination of employment
caused by the Employee's  death or  Disability,  termination of the Employee for
Cause, and any constructive termination.

                                 Page 44 of 62
<PAGE>

THIRD  PART:  COMPENSATION  AND  BENEFITS  IN CASE  OF  ACTUAL  OR  CONSTRUCTIVE
TERMINATION OCCURRING AFTER A CHANGE IN CONTROL

Section 9: Terminations Relating to a Change in Control

This Third Part of the Agreement, consisting of Sections 9 through 12, describes
the  benefits  and  compensation,  if any,  payable  in case of  termination  of
employment that occurs after a Change in Control (as defined in Section 12). The
Second Part of the  Agreement,  consisting  of  Sections 6 through 8,  describes
benefits and compensation,  if any, payable in case of termination that does not
occur after a Change in Control.  If benefits and compensation are payable under
this Third Part, then no benefits and  compensation are payable under the Second
Part.

Section 10: Involuntary Actual or Constructive Termination Without Cause

In the  event  that,  during  the term of this  Agreement  and after a Change in
Control, the Employee's  employment terminates in a Qualifying  Termination,  as
defined in  Subsection  (a),  the  Employee  shall be  entitled  to receive  the
payments and benefits described in Subsections (b), (c) and (d).

(a) Qualifying Termination. A Qualifying Termination occurs if:

          (1) The  Corporation  terminates  the  Employee's  employment  for any
reason other than Cause or Disability; or

          (2) The Employee  separates from  employment  with the  Corporation in
response to a "Constructive  Termination,"  which means a material  reduction in
salary or benefits,  a material breach of this  Agreement,  a material change in
responsibilities,  or a requirement to relocate,  except for office  relocations
that would not increase the Employee's  one-way commute distance by more than 20
miles.

     (b) Severance (2.99x payment). The Corporation shall pay to the Employee in
a lump sum,  not less than 31 days nor more than 60 days  following  the date of
the employment termination, an amount equal to the following:

          (1) 299% of the Employee's Base  Compensation in effect on the date of
the employment termination; plus

          (2) 299% of his prior year's incentive bonus.

     Any other  provision of this  Agreement or of the  Corporation's  incentive
bonus plan  notwithstanding,  after the amount  described in this Subsection (b)
has been paid to the Employee,  the Employee  shall have no further  interest in
such Plan.

     (c) Three Years of Life  Insurance and Health Plan  Coverage.  The coverage
described in this Subsection (c) shall be provided for a  "Continuation  Period"
beginning on the date when the employment termination is effective and ending on
the  earlier  of (1) the  third  anniversary  of the date  when  the  employment
termination  is effective or (2) the date of the  Employee's  death.  During the
Continuation  Period,  the  Employee  (and,  where  applicable,  the  Employee's
dependents)  shall be entitled to continue  participation in the group term life
insurance  plan and in the  health  care plan for  employees  maintained  by the
Corporation  as if the Employee were still an employee of the  Corporation.  The
coverage  provided  under this  Subsection (c) shall run  concurrently  with and
shall be offset against any continuation coverage under Part 6 of Title I of the
Employee  Retirement Income Security Act of 1974, as amended.  Where applicable,
the  Employee's  compensation  for  purposes of such plans shall be deemed to be
equal to the Employee's compensation (as defined in such plans) in effect on the
date of the employment termination.  To the extent that the Corporation finds it
undesirable  to cover the  Employee  under the group life  insurance  and health
plans of the Corporation, the Corporation shall provide the Employee (at its own
expense) with the same level of coverage under individual policies.

     (d) Incentive  Programs.  All stock options or equity awards granted by the
Corporation shall vest 100% upon the effective date of the Change in Control. In
addition,  following a Qualifying Termination,  and notwithstanding  anything to
the contrary in the  Corporation's  stock option plans and the Employee's  stock
option  agreements,  Employee  shall  have the full  term set forth in the stock
option  agreements  to exercise such options  (irrespective  of

                                 Page 45 of 62
<PAGE>

termination of employment),  subject only to the prior satisfaction of any stock
price  performance   conditions  set  forth  in  the  stock  option  agreements.
Employee's  stock  option  grants  numbered  74 and 75 have no such stock  price
performance conditions.

     (e) No  Mitigation.  The  Employee  shall not be required  to mitigate  the
amount of any payment or benefit  contemplated by this Section 10, nor shall any
such payment or benefit be reduced by any earnings or benefits that the Employee
may receive from any other source.

Section 11: Other Terminations Under This Part

If termination of employment,  actual or constructive,  occurs at a time that is
after a Change in Control,  and the  termination is not described in Section 10,
then  the  Employee  is  entitled  only  to  the   compensation,   benefits  and
reimbursements  payable under the terms of Sections 3, 4 and 5 of this Agreement
for the period  preceding the effective  date of the  termination  including any
disability or death benefits to which Employee (or his estate or beneficiary(s))
may be  entitled  as a result of  termination  of his  employment  on account of
Disability or death. The payments under this Agreement shall fully discharge all
responsibilities  of the  Corporation  to the Employee upon  termination  of the
Employee's  employment.  This  Section 11 applies,  without  limitation,  to any
termination   of   employment    initiated   by   the   Employee    (except   an
Employee-initiated  termination  that is described  in Paragraph  (2) of Section
10(a))  or a  termination  of  employment  caused  by  Disability,  Cause or the
Employee's death.

Section 12: Definition of Change in Control

For all purposes under this Agreement,  "Change in Control" shall mean a "Change
in  Control"  or  "Corporate  Transaction,"  as those  terms are  defined in the
Glenborough  Realty Trust Incorporated 1996 Stock Incentive Plan as in effect on
the date this Agreement is executed.

                                 Page 46 of 62
<PAGE>

FOURTH PART: SECTION 280G PAYMENTS

Section 13: Gross-Up Payment.

In the event it is determined that any payment or distribution of any type to or
for the benefit of the Employee, pursuant to this Agreement or otherwise, by the
Corporation,  any Person who  acquires  ownership  or  effective  control of the
Corporation,  or  ownership  of a  substantial  portion  of  the  assets  of the
Corporation  (within the meaning of section 280G of the Code and the regulations
thereunder)  or any  affiliate  of such Person (the "Total  Payments")  would be
subject to the excise tax imposed by section 4999 of the Code or any interest or
penalties  with respect to such excise tax (such excise tax,  together  with any
such interest and penalties,  are collectively referred to as the "Excise Tax"),
then the  Employee  shall be  entitled  to  receive  an  additional  payment  (a
"Gross-Up Payment") in an amount such that, after payment by the Employee of all
taxes (including any interest or penalties  imposed with respect to such taxes),
including  any Excise Tax,  imposed  upon the  Gross-Up  Payment,  the  Employee
retains an amount of the Gross-Up  Payment  equal to the Excise Tax imposed upon
the Total Payments.

Section 14: Determination by Accountant

All  mathematical  determinations  and  determinations  as to whether any of the
Total Payments are "parachute  payments"  (within the meaning of section 280G of
the Code), in each case which  determinations are required to be made under this
Section 14, including whether a Gross-Up Payment is required, the amount of such
Gross-Up Payment,  and amounts relevant to the last sentence of this Section 14,
shall be made by an  independent  accounting  firm selected by the Employee from
among the largest four  accounting  firms in the United States (the  "Accounting
Firm"). The Accounting Firm shall provide to the Corporation and to the Employee
its  determination  (the  "Determination"),  together with  detailed  supporting
calculations regarding the amount of any Gross-Up Payment and any other relevant
matter,  within ten days after  termination  of the  Employee's  employment,  if
applicable,  or at such earlier time  following  termination of employment as is
requested by the Employee (if the Employee  reasonably  believes that any of the
Total  Payments  may be subject  to the  Excise  Tax).  If the  Accounting  Firm
determines  that no Excise Tax is payable by the Employee,  it shall furnish the
Employee with a written  statement that such  Accounting Firm has concluded that
no Excise Tax is payable  (including the reasons therefor) and that the Employee
has substantial authority not to report any Excise Tax on the Employee's federal
income tax return.  If a Gross-Up Payment is determined to be payable,  it shall
be paid to the Employee within ten days after the  Determination is delivered to
the Corporation or the Employee.  Any determination by the Accounting Firm shall
be binding upon the Corporation and the Employee, absent manifest error.

As a result of uncertainty in the application of section 4999 of the Code at the
time of the  initial  determination  by the  Accounting  Firm  hereunder,  it is
possible that Gross-Up  Payments not made by the  Corporation and members of the
Corporation  should have been made  ("Underpayment"),  or that Gross-Up Payments
will have been made by the  Corporation  and  members  of the  Corporation  that
should not have been made ("Overpayments"). In either such event, the Accounting
Firm shall  determine the amount of the  Underpayment  or  Overpayment  that has
occurred. In the case of an Underpayment, the Corporation promptly shall pay, or
cause to be paid, the amount of such  Underpayment  to or for the benefit of the
Employee.  In the case of an  Overpayment,  the Employee shall, at the direction
and  expense of the  Corporation,  take such steps as are  reasonably  necessary
(including  the filing of returns  and claims  for  refund),  follow  reasonable
instructions from, and procedures established by, the Corporation, and otherwise
reasonably cooperate with the Corporation to correct such Overpayment; provided,
however,  that (1) Employee shall not in any event be obligated to return to the
Corporation an amount greater than the net after-tax  portion of the Overpayment
that he has  retained  or  recovered  as a  refund  from the  applicable  taxing
authorities and (2) this provision  shall be interpreted in a manner  consistent
with the  intent of  Section  13,  which is to make the  Employee  whole,  on an
after-tax  basis,  from the  application of the Excise Tax, it being  understood
that the correction of an Overpayment may result in the Employee repaying to the
Corporation an amount that is less than the Overpayment.

                                 Page 47 of 62
<PAGE>

FIFTH PART: TRADE SECRETS, SUCCESSORS, MISCELLANEOUS PROVISIONS, SIGNATURE PAGE

Section 15: Confidential Information

     (a) Acknowledgement.  The Corporation and the Employee acknowledge that the
services to be  performed by the Employee  under this  Agreement  are unique and
extraordinary and that, as a result of the Employee's  employment,  the Employee
will be in a relationship  of confidence and trust with the Corporation and will
come into possession of  "Confidential  Information"  (1) owned or controlled by
the Corporation, (2) in the possession of the Corporation and belonging to third
parties or (3) conceived,  originated,  discovered or developed,  in whole or in
part, by the Employee.  As used herein "Confidential  Information includes trade
secrets and other confidential or proprietary business, technical,  personnel or
financial  information,  whether or not the Employee's work product, in written,
graphic,  oral or other tangible or intangible forms,  including but not limited
to  specifications,   samples,  records,  data,  computer  programs,   drawings,
diagrams,  models,  customer  names,  ID's  or  e-mail  addresses,  business  or
marketing plans, studies, analyses,  projections and reports,  communications by
or to attorneys (including attorney-client privileged communications), memos and
other  materials  prepared  by  attorneys  or under their  direction  (including
attorney work product), and software systems and processes. Any information that
is not readily  available to the public shall be considered to be a trade secret
and confidential and proprietary, even if it is not specifically marked as such,
unless the Corporation advises the Employee otherwise in writing.

     (b) Nondisclosure.  The Employee agrees that the Employee will not, without
the prior written  consent of the  Corporation,  directly or  indirectly  use or
disclose Confidential  Information to any person, during or after the Employee's
employment,  except as may be necessary in the ordinary course of performing the
Employee's duties under this Agreement.  The Employee will keep the Confidential
Information  in  strictest  confidence  and trust.  This  Section 15 shall apply
indefinitely, both during and after the term of this Agreement.

     (c) Surrender Upon  Termination.  The Employee  agrees that in the event of
the termination of the Employee's  employment for any reason,  the Employee will
immediately   deliver  to  the  Corporation   all  property   belonging  to  the
Corporation,  including all documents and materials of any nature  pertaining to
the Employee's  work with the  Corporation,  and will not take with the Employee
any documents or materials of any description,  or any  reproduction  thereof of
any description, containing or pertaining to any Confidential Information. It is
understood  that the Employee is free to use  information  that is in the public
domain (not as a result of a breach of this Agreement).

Section 16:       Successors

     (a) Corporation's  Successors.  The Corporation shall require any successor
(whether   direct  or  indirect   and  whether  by  purchase,   lease,   merger,
consolidation,  liquidation  or  otherwise) to all or  substantially  all of the
Corporation's  business  and/or  assets,  by an agreement in substance  and form
satisfactory to the Employee, to assume this Agreement and to agree expressly to
perform  this  Agreement  in the  same  manner  and to the  same  extent  as the
Corporation would be required to perform it in the absence of a succession.  The
Corporation's  failure to obtain such agreement prior to the  effectiveness of a
succession shall be a breach of this Agreement and shall entitle the Employee to
all of the  compensation  and  benefits  to which the  Employee  would have been
entitled   hereunder  if  the  Corporation  had  involuntarily   terminated  the
Employee's  employment  without  Cause  or  Disability,  on the date  when  such
succession  becomes effective.  For all purposes under this Agreement,  the term
"Corporation"  shall include any successor to the Corporation's  business and/or
assets that  executes and delivers the  assumption  agreement  described in this
Subsection (a) or that becomes bound by this Agreement by operation of law.

     (b)  Employee's  Successors.  This Agreement and all rights of the Employee
hereunder  shall inure to the benefit of, and be enforceable  by, the Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.

Section 17:  Miscellaneous Provisions

     (a) Waiver.  No provision of this  Agreement  shall be modified,  waived or
discharged unless the modification,  waiver or discharge is agreed to in writing
and signed by the  Employee  and by an  authorized  officer  of the  Corporation
(other  than the  Employee).  No waiver by either  party of any breach of, or of
compliance with, any

                                 Page 48 of 62
<PAGE>

condition or provision of this  Agreement by the other party shall be considered
a waiver  of any  other  condition  or  provision  or of the same  condition  or
provision at another time.
 
     (b) Whole  Agreement.  No  agreements,  representations  or  understandings
(whether  oral or written  and  whether  express or  implied),  other than stock
option agreements and indemnity agreements,  that are not expressly set forth in
this  Agreement  have been made or entered  into by either party with respect to
the subject matter hereof.  In addition,  the Employee hereby  acknowledges  and
agrees that this Agreement  supersedes in its entirety any employment  agreement
between the  Employee and the  Corporation  in effect  immediately  prior to the
effective date of this  Agreement.  As of the effective date of this  Agreement,
such  employment  agreement shall  terminate  without any further  obligation by
either party thereto,  and the Employee hereby  relinquishes  any further rights
that the Employee may have had under such prior employment agreement.

     (c)  Notice.  Notices  and all other  communications  contemplated  by this
Agreement  shall be in writing  and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt  requested  and postage  prepaid.  In the case of the  Employee,  mailed
notices shall be addressed to the Employee at the home address that the Employee
most recently  communicated  to the  Corporation in writing.  In the case of the
Corporation,  mailed  notices shall be addressed to its corporate  headquarters,
and all  notices  shall be  directed  to the  attention  of its Chief  Operating
Officer.

     (d) No  Setoff.  There  shall be no right of setoff or  counterclaim,  with
respect to any claim, debt or obligation, against payments to the Employee under
this Agreement.

     (e)  Choice  of  Law.  The  validity,   interpretation,   construction  and
performance  of this  Agreement  shall be  governed  by the laws of the State of
California, irrespective of California's choice-of-law principles.

     (f) Severability.  The invalidity or  unenforceability  of any provision or
provisions of this Agreement shall not affect the validity or  enforceability of
any other provision hereof, which shall remain in full force and effect.

     (g) Arbitration. Except as otherwise provided in Section 14, any dispute or
controversy arising out of the Employee's employment or the termination thereof,
including,  but not  limited  to,  any claim of  discrimination  under  state or
federal  law,  shall  be  settled  exclusively  by  arbitration  in  San  Mateo,
California, in accordance with the rules of the American Arbitration Association
then in effect;  provided,  however, that in the event of a claimed violation of
Section  15,  the  Corporation  may seek  injunctive  relief in order to prevent
irreparable  injury or preserve  the status quo.  Judgment may be entered on the
arbitrator's  award in any court having  jurisdiction  and attorney fees will be
awarded to the prevailing party.

     (h) No  Assignment  of  Benefits.  The rights of any person to  payments or
benefits under this Agreement shall not be made subject to option or assignment,
either by voluntary or involuntary  assignment or by operation of law, including
(without  limitation)  bankruptcy,  garnishment,  attachment or other creditor's
process, and any action in violation of this Subsection (i) shall be void.

     (i) Employment Taxes. All payments made pursuant to this Agreement shall be
subject to withholding of applicable taxes.

     (j)  Benefit  Coverage  Non-Additive.  In the event  that the  Employee  is
entitled  to life  insurance  and  health  plan  coverage  under  more  than one
provision hereunder,  only one provision shall apply, and neither the periods of
coverage nor the amounts of benefits shall be additive.


                                 Page 49 of 62
<PAGE>

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Corporation by its duly authorized  officer, as of the day and year first
above  written.  Employee has consulted (or has had the  opportunity to consult)
with his own counsel prior to execution of this Agreement.



                                           ______________________________
                                                      Employee


                                           GLENBOROUGH REALTY TRUST INCORPORATED



                                           By __________________________

                                           Its _________________________

                                 Page 50 of 62
<PAGE>

Exhibit 10.2

                              EMPLOYMENT AGREEMENT



THIS  AGREEMENT  is  entered  into as of the 1st day of  January,  1998,  by and
between  ANDREW  BATINOVICH  (the  "Employee")  and  GLENBOROUGH   REALTY  TRUST
INCORPORATED, a Maryland corporation (the "Corporation").



For ease of reference, this Agreement is divided into the following parts, which
begin on the pages indicated:


FIRST PART:  TERM OF  EMPLOYMENT,  DUTIES AND SCOPE,  COMPENSATION  AND BENEFITS
DURING EMPLOYMENT
                           (Sections 1-5, beginning on page 2)

SECOND  PART:  COMPENSATION  AND  BENEFITS  IN CASE OF  ACTUAL  OR  CONSTRUCTIVE
TERMINATION NOT OCCURRING AFTER A CHANGE IN CONTROL
                           (Sections 6-8, beginning on page 5)

THIRD  PART:  COMPENSATION  AND  BENEFITS  IN CASE  OF  ACTUAL  OR  CONSTRUCTIVE
TERMINATION OCCURRING AFTER A CHANGE IN CONTROL
                           (Sections 9-12, beginning on page 8)

FOURTH PART: SECTION 280G PAYMENTS
                           (Sections 13-14, beginning on page 11)

FIFTH PART: TRADE SECRETS, SUCCESSORS, MISCELLANEOUS PROVISIONS, SIGNATURE PAGE
                           (Sections 15-17, beginning on page 13)

                                 Page 51 of 62
<PAGE>

FIRST PART:  TERM OF  EMPLOYMENT,  DUTIES AND SCOPE,  COMPENSATION  AND BENEFITS
DURING EMPLOYMENT

Section 1: Term of Employment

     (a)  Basic  Rule.  The  Corporation   agrees  to  continue  the  Employee's
employment,   and  the  Employee   agrees  to  remain  in  employment  with  the
Corporation, from January 1, 1998, until the earliest of:

          (1) December 31, 2002; or

          (2) The date of the Employee's death or when the Employee's employment
terminates pursuant to Subsection (b) or (c), below.

     The term and provisions of this Agreement  shall  automatically  extend for
additional  one-year  periods if Employee remains employed on and after December
31, 2002,  unless either party  notifies the other in writing to the contrary at
least 30 days prior to the applicable  December 31 that it, or he, does not want
the term to so extend.

     (b)  Termination  for Cause.  The  Corporation may terminate the Employee's
employment at any time for Cause shown.  For all purposes under this  Agreement,
"Cause"  shall  mean (1) a willful  failure  by the  Employee  to  substantially
perform  the  Employee's  duties  under  this  Agreement,  other  than a failure
resulting from the Employee's  complete or partial incapacity due to physical or
mental illness or impairment, (2) a willful act by the Employee that constitutes
gross  misconduct  and that is materially  injurious to the  Corporation,  (3) a
willful breach by the Employee of a material  provision of this Agreement or (4)
a  material  and  willful  violation  of a federal  or state  law or  regulation
applicable  to  the  business  of  the   Corporation   that  is  materially  and
demonstrably  injurious  to the  Corporation.  No act, or failure to act, by the
Employee shall be considered  "willful" unless committed  without good faith and
without a reasonable  belief that the act or omission  was in the  Corporation's
best interest.

     The Employee shall first be given  reasonable  advance  written notice that
the  Corporation  intends to terminate his  employment  for Cause.  Such written
notice shall specify the particular acts, or failures to act, the basis of which
the decision to so terminate  employment  has been made.  The Employee  shall be
given the opportunity within 20 days of receipt of notice to meet with the Board
of Directors,  accompanied by counsel,  to defend such acts, or failures to act,
and the  Employee  shall  also be given 14 working  days  after such  meeting to
correct  such acts or  failures  to act.  Upon  failure of  Employee,  within 14
working days, to correct such acts or failures to act, the Employee's employment
shall be automatically terminated for Cause.

     (c)  Termination   for  Disability.   The  Corporation  may  terminate  the
Employee's  employment for Disability by giving the Employee written notice. For
all purposes under this Agreement, "Disability" shall mean that the Employee, at
the time the notice is given,  has been unable to perform the Employee's  duties
under this Agreement for a period of not less than twelve  consecutive months as
a result of the Employee's  incapacity due to physical or mental illness. In the
event that the Employee  resumes the  performance  of  substantially  all of the
Employee's  duties under this Agreement before the termination of the Employee's
employment under this Section becomes effective, the notice of termination shall
automatically be deemed to have been revoked.

Section 2:  Duties and Scope of Employment

     (a) Position. The Corporation agrees to employ the Employee for the term of
employment under this Agreement in the position of President and Chief Operating
Officer.  Employee shall be given such duties,  responsibilities and authorities
as are appropriate to his position.

     (b) Obligations.  During the term of employment  under this Agreement,  the
Employee  shall  devote the  Employee's  full  business  efforts and time to the
business and affairs of the  Corporation,  Glenborough  Realty  Corporation  and
Glenborough  Hotel Group as needed to carry out his duties and  responsibilities
hereunder  subject to the  overall  supervision  of the  Corporation's  Board of
Directors.  The  foregoing  shall

                                 Page 52 of 62
<PAGE>

not preclude the Employee  from  engaging in  appropriate  civic,  charitable or
religious  activities  or from  devoting a reasonable  amount of time to private
investments  or from serving on the boards of directors  of other  entities,  as
long as such  activities  and  service do not  interfere  or  conflict  with the
Employee's responsibilities to the Corporation.

Section 3:  Base Compensation

During the term of employment  under this Agreement,  the Corporation  agrees to
pay the Employee as  compensation  for services a base salary at the annual rate
of $300,000,  or at such higher rate as the Compensation  Committee of the Board
of Directors  may determine  from time to time.  Such salary shall be payable in
accordance with the standard  payroll  procedures of the  Corporation.  Once the
Corporation's  Compensation  Committee of the Board of Directors  has  increased
such salary, it thereafter shall not be reduced;  provided,  however,  that if a
Change in Control has not occurred, such salary (including any increases) may be
reduced by the  Corporation if (1) the Employee  commits an act or omission that
meets the  definition of Cause,  as defined in Section 1(b), or (2) the Employee
and all other  executive  officers of the Corporation who are parties to written
employment  agreements  containing  substantially  the same  provisions  as this
Agreement  have their salaries  (including  any  increases)  reduced by the same
percentage amount for the same time period. The annual compensation specified in
this  Section 3,  together  with any  increases  in such  compensation  that the
Compensation  Committee of the Board of  Directors  may grant from time to time,
and together  with any  reductions  made in  accordance  with this Section 3, is
referred to in this Agreement as "Base Compensation."

Section 4:  Employee Benefits

In General.  During the term of employment  under this  Agreement,  the Employee
shall be eligible to  participate  in the employee  benefit  plans and executive
compensation  and  fringe  benefit  programs   maintained  by  the  Corporation,
including  (without  limitation)  savings,   pension  or  profit-sharing  plans,
deferred compensation plans, stock option, incentive or other bonus plans, life,
disability,  health,  accident and other  insurance  programs,  paid  vacations,
automobile and similar plans or programs,  subject in each case to the generally
applicable  terms and  conditions  of the plan or program in question and to the
discretion and determinations of any person,  committee or entity  administering
such plan or program.

During the term of employment under this Agreement,  Employee may be entitled to
an annual incentive bonus if consolidated  funds from operations per share ("FFO
Per Share") at the end of the Corporation's fiscal year exceed FFO Per Share for
the preceding  fiscal year by the percentages  shown below, as determined by the
Compensation Committee,  based on the annual audit prepared by the Corporation's
certified  public  accountants.  The amount of the bonus shall be  determined in
accordance  with a formula  as  adopted  by the  Compensation  Committee  at its
meeting on January 26, 1998.

The  Compensation  Committee  may alter the formula  during each year during the
term of this Agreement.


Section 5:  Business Expenses and Travel

During  the term of  employment  under this  Agreement,  the  Employee  shall be
authorized to incur  necessary and reasonable  travel,  entertainment  and other
business  expenses in  connection  with the  Employee's  duties  hereunder.  The
Corporation  shall reimburse the Employee for such expenses upon presentation of
an itemized account and appropriate supporting documentation,  all in accordance
with generally applicable policies.

                                 Page 53 of 62
<PAGE>

SECOND  PART:  COMPENSATION  AND  BENEFITS  IN CASE OF  ACTUAL  OR  CONSTRUCTIVE
TERMINATION NOT OCCURRING AFTER A CHANGE IN CONTROL

Section 6:  Terminations Not Relating to a Change in Control

This Second Part of the Agreement, consisting of Sections 6 through 8, describes
the  benefits  and  compensation,  if any,  payable  in case of  termination  of
employment  that does not occur after a Change in Control (as defined in Section
12).  The Third Part of the  Agreement,  consisting  of  Sections 9 through  12,
describes  benefits and  compensation,  if any,  payable in case of  termination
occurring after a Change in Control.  If benefits and  compensation  are payable
under this Second Part, then no benefits and  compensation are payable under the
Third Part.

Section 7:  Involuntary Termination Without Cause or Disability

In the event that, during the term of this Agreement, the Corporation terminates
the Employee's  employment  for any reason other than Cause or  Disability,  and
such termination does not occur after a Change in Control, then, after executing
the release of claims  described in Section 7(d), the Employee shall be entitled
to receive the following payments and benefits:

     (a)  Severance  (2x  payment).  The  Corporation  shall pay to the Employee
following  the date of the  employment  termination  and over the  succeeding 24
months, in accordance with standard payroll  procedures,  an amount equal to the
following:

          (1) Two times the Employee's  Base  Compensation in effect on the date
of the employment termination; plus

          (2)  200% of the  Employee's  annual  incentive  bonus  for  the  last
completed fiscal year of the Corporation.

     Any other  provision of this  Agreement or of the  Corporation's  incentive
bonus plan  notwithstanding,  after the amount  described in this Subsection (a)
has been paid to the Employee,  the Employee  shall have no further  interest in
such Plan.

     (b)  Twenty-four  Months of Life  Insurance and Health Plan  Coverage.  The
coverage  described in this Subsection (b) shall be provided for a "Continuation
Period"  beginning on the date when the employment  termination is effective and
ending  on the  earlier  of (1) the  24-month  anniversary  of the date when the
employment  termination  is effective or (2) the date of the  Employee's  death.
During the  Continuation  Period,  the  Employee  (and,  where  applicable,  the
Employee's  dependents) shall be entitled to continue participation in the group
term life insurance plan and in the health care plan for employees maintained by
the  Corporation  as if the Employee were still an employee of the  Corporation.
The coverage  provided under this Subsection (b) shall run concurrently with and
shall be offset against any continuation coverage under Part 6 of Title I of the
Employee  Retirement Income Security Act of 1974, as amended.  Where applicable,
the  Employee's  compensation  for  purposes of such plans shall be deemed to be
equal to the Employee's compensation (as defined in such plans) in effect on the
date of the employment termination.  To the extent that the Corporation finds it
undesirable  to cover the  Employee  under the group life  insurance  and health
plans of the Corporation, the Corporation shall provide the Employee (at its own
expense) with the same level of coverage under individual policies.

     (c) Incentive Programs. Upon termination of the Employee's employment under
this Section 7, all stock  options or equity awards  granted by the  Corporation
shall  vest  100%.  In  addition,   and  subject  to   subsection   (e)  hereof,
notwithstanding anything to the contrary in the Corporation's stock option plans
and the Employee's  stock option  agreements,  Employee shall have the full term
set forth in the stock option agreements to exercise such options  (irrespective
of termination of  employment),  subject only to the prior  satisfaction  of any
stock price  performance  conditions  set forth in the stock option  agreements.
Employee's stock option grants numbered 4, 4a, 5 and 76 have no such stock price
performance conditions.

                                 Page 54 of 62
<PAGE>

     (d) Release of Claims.  As a condition  to the receipt of the  payments and
benefits  described in this Section 7, the Employee shall be required to execute
a  release  of  all  claims  arising  out of the  Employee's  employment  or the
termination  thereof including,  but not limited to, any claim of discrimination
under state or federal law, but excluding  claims for  indemnification  from the
Corporation  under  any  indemnification  agreement  with the  Corporation,  its
certificate  of  incorporation  and  by-laws  or  applicable  law or claims  for
directors and officers' insurance coverage.

     (e)  Conditions to Receipt of Payments and Benefits.  In view of Employee's
position  and his access to  Confidential  Information,  as a  condition  to the
receipt of  payments  and  benefits  described  in this  Section  7,  during the
"Continuation  Period"  described in Subsection  7(b) above,  the Employee shall
not, without the Corporation's written consent, directly or indirectly, alone or
as  a  partner,  joint  venturer,  officer,  director,   employee,   independent
contractor,  agent or  stockholder  (other than a less than 5%  stockholder of a
publicly  traded  company)  (i) engage in any  activity  for any other  publicly
traded REIT  headquartered  in  California  with a market  capitalization  of $1
billion or more,  which is in competition  with the business of the Corporation,
(ii) solicit any of the  Corporation's  employees,  independent  contractors  or
customers,  (iii)  hire  any  of  the  Corporation's  employees  or  independent
contractors in an unlawful manner or actively encourage employees or independent
contractors to leave the Corporation,  or (iv) otherwise breach his Confidential
Information obligations.

     (f) No  Mitigation.  The  Employee  shall not be required  to mitigate  the
amount of any payment or benefit  contemplated  by this Section 7, nor shall any
such payment or benefit be reduced by any earnings or benefits that the Employee
may receive from any other source.

Section 8:  Other Terminations Under This Part

If termination of employment,  actual or constructive,  occurs at a time that is
not after a Change in Control,  and the  termination is not described in Section
7,  then  the  Employee  is  entitled  only to the  compensation,  benefits  and
reimbursements  payable under the terms of Sections 3, 4 and 5 of this Agreement
for the period  preceding the effective  date of the  termination  including any
disability or death benefits to which Employee (or his estate or beneficiary(s))
may be  entitled  as a result of  termination  of his  employment  on account of
Disability or death. The payments under this Agreement shall fully discharge all
responsibilities  of the  Corporation  to the Employee upon  termination  of the
Employee's  employment.  This  Section 8  applies,  without  limitation,  to any
termination of employment  initiated by the Employee,  termination of employment
caused by the Employee's  death or  Disability,  termination of the Employee for
Cause, and any constructive termination.

                                 Page 55 of 62
<PAGE>

THIRD  PART:  COMPENSATION  AND  BENEFITS  IN CASE  OF  ACTUAL  OR  CONSTRUCTIVE
TERMINATION OCCURRING AFTER A CHANGE IN CONTROL

Section 9: Terminations Relating to a Change in Control

This Third Part of the Agreement, consisting of Sections 9 through 12, describes
the  benefits  and  compensation,  if any,  payable  in case of  termination  of
employment that occurs after a Change in Control (as defined in Section 12). The
Second Part of the  Agreement,  consisting  of  Sections 6 through 8,  describes
benefits and compensation,  if any, payable in case of termination that does not
occur after a Change in Control.  If benefits and compensation are payable under
this Third Part, then no benefits and  compensation are payable under the Second
Part.

Section 10: Involuntary Actual or Constructive Termination Without Cause

In the  event  that,  during  the term of this  Agreement  and after a Change in
Control, the Employee's  employment terminates in a Qualifying  Termination,  as
defined in  Subsection  (a),  the  Employee  shall be  entitled  to receive  the
payments and benefits described in Subsections (b), (c) and (d).

     (a) Qualifying Termination. A Qualifying Termination occurs if:

          (1) The  Corporation  terminates  the  Employee's  employment  for any
reason other than Cause or Disability; or

          (2) The Employee  separates from  employment  with the  Corporation in
response to a "Constructive  Termination,"  which means a material  reduction in
salary or benefits,  a material breach of this  Agreement,  a material change in
responsibilities,  or a requirement to relocate,  except for office  relocations
that would not increase the Employee's  one-way commute distance by more than 20
miles.

     (b) Severance (2.99x payment). The Corporation shall pay to the Employee in
a lump sum,  not less than 31 days nor more than 60 days  following  the date of
the employment termination, an amount equal to the following:

          (1) 299% of the Employee's Base  Compensation in effect on the date of
the employment termination; plus

          (2) 299% of his prior year's incentive bonus.

     Any other  provision of this  Agreement or of the  Corporation's  incentive
bonus plan  notwithstanding,  after the amount  described in this Subsection (b)
has been paid to the Employee,  the Employee  shall have no further  interest in
such Plan.

     (c) Three Years of Life  Insurance and Health Plan  Coverage.  The coverage
described in this Subsection (c) shall be provided for a  "Continuation  Period"
beginning on the date when the employment termination is effective and ending on
the  earlier  of (1) the  third  anniversary  of the date  when  the  employment
termination  is effective or (2) the date of the  Employee's  death.  During the
Continuation  Period,  the  Employee  (and,  where  applicable,  the  Employee's
dependents)  shall be entitled to continue  participation in the group term life
insurance  plan and in the  health  care plan for  employees  maintained  by the
Corporation  as if the Employee were still an employee of the  Corporation.  The
coverage  provided  under this  Subsection (c) shall run  concurrently  with and
shall be offset against any continuation coverage under Part 6 of Title I of the
Employee  Retirement Income Security Act of 1974, as amended.  Where applicable,
the  Employee's  compensation  for  purposes of such plans shall be deemed to be
equal to the Employee's compensation (as defined in such plans) in effect on the
date of the employment termination.  To the extent that the Corporation finds it
undesirable  to cover the  Employee  under the group life  insurance  and health
plans of the Corporation, the Corporation shall provide the Employee (at its own
expense) with the same level of coverage under individual policies.

                                 Page 56 of 62
<PAGE>

     (d) Incentive  Programs.  All stock options or equity awards granted by the
Corporation shall vest 100% upon the effective date of the Change in Control. In
addition,  following a Qualifying Termination,  and notwithstanding  anything to
the contrary in the  Corporation's  stock option plans and the Employee's  stock
option  agreements,  Employee  shall  have the full  term set forth in the stock
option  agreements  to exercise such options  (irrespective  of  termination  of
employment),  subject  only  to  the  prior  satisfaction  of  any  stock  price
performance  conditions  set forth in the stock  option  agreements.  Employee's
stock  option  grants  numbered  4,  4a,  5 and 76  have  no  such  stock  price
performance conditions.

     (e) No  Mitigation.  The  Employee  shall not be required  to mitigate  the
amount of any payment or benefit  contemplated by this Section 10, nor shall any
such payment or benefit be reduced by any earnings or benefits that the Employee
may receive from any other source.

Section 11:  Other Terminations Under This Part

If termination of employment,  actual or constructive,  occurs at a time that is
after a Change in Control,  and the  termination is not described in Section 10,
then  the  Employee  is  entitled  only  to  the   compensation,   benefits  and
reimbursements  payable under the terms of Sections 3, 4 and 5 of this Agreement
for the period  preceding the effective  date of the  termination  including any
disability or death benefits to which Employee (or his estate or beneficiary(s))
may be  entitled  as a result of  termination  of his  employment  on account of
Disability or death. The payments under this Agreement shall fully discharge all
responsibilities  of the  Corporation  to the Employee upon  termination  of the
Employee's  employment.  This  Section 11 applies,  without  limitation,  to any
termination   of   employment    initiated   by   the   Employee    (except   an
Employee-initiated  termination  that is described  in Paragraph  (2) of Section
10(a))  or a  termination  of  employment  caused  by  Disability,  Cause or the
Employee's death.

Section 12: Definition of Change in Control

For all purposes under this Agreement,  "Change in Control" shall mean a "Change
in  Control"  or  "Corporate  Transaction,"  as those  terms are  defined in the
Glenborough  Realty Trust Incorporated 1996 Stock Incentive Plan as in effect on
the date this Agreement is executed.

                                 Page 57 of 62
<PAGE>

FOURTH PART: SECTION 280G PAYMENTS

Section 13:  Gross-Up Payment.

In the event it is determined that any payment or distribution of any type to or
for the benefit of the Employee, pursuant to this Agreement or otherwise, by the
Corporation,  any Person who  acquires  ownership  or  effective  control of the
Corporation,  or  ownership  of a  substantial  portion  of  the  assets  of the
Corporation  (within the meaning of section 280G of the Code and the regulations
thereunder)  or any  affiliate  of such Person (the "Total  Payments")  would be
subject to the excise tax imposed by section 4999 of the Code or any interest or
penalties  with respect to such excise tax (such excise tax,  together  with any
such interest and penalties,  are collectively referred to as the "Excise Tax"),
then the  Employee  shall be  entitled  to  receive  an  additional  payment  (a
"Gross-Up Payment") in an amount such that, after payment by the Employee of all
taxes (including any interest or penalties  imposed with respect to such taxes),
including  any Excise Tax,  imposed  upon the  Gross-Up  Payment,  the  Employee
retains an amount of the Gross-Up  Payment  equal to the Excise Tax imposed upon
the Total Payments.

Section 14:  Determination by Accountant

All  mathematical  determinations  and  determinations  as to whether any of the
Total Payments are "parachute  payments"  (within the meaning of section 280G of
the Code), in each case which  determinations are required to be made under this
Section 14, including whether a Gross-Up Payment is required, the amount of such
Gross-Up Payment,  and amounts relevant to the last sentence of this Section 14,
shall be made by an  independent  accounting  firm selected by the Employee from
among the largest four  accounting  firms in the United States (the  "Accounting
Firm"). The Accounting Firm shall provide to the Corporation and to the Employee
its  determination  (the  "Determination"),  together with  detailed  supporting
calculations regarding the amount of any Gross-Up Payment and any other relevant
matter,  within ten days after  termination  of the  Employee's  employment,  if
applicable,  or at such earlier time  following  termination of employment as is
requested by the Employee (if the Employee  reasonably  believes that any of the
Total  Payments  may be subject  to the  Excise  Tax).  If the  Accounting  Firm
determines  that no Excise Tax is payable by the Employee,  it shall furnish the
Employee with a written  statement that such  Accounting Firm has concluded that
no Excise Tax is payable  (including the reasons therefor) and that the Employee
has substantial authority not to report any Excise Tax on the Employee's federal
income tax return.  If a Gross-Up Payment is determined to be payable,  it shall
be paid to the Employee within ten days after the  Determination is delivered to
the Corporation or the Employee.  Any determination by the Accounting Firm shall
be binding upon the Corporation and the Employee, absent manifest error.

As a result of uncertainty in the application of section 4999 of the Code at the
time of the  initial  determination  by the  Accounting  Firm  hereunder,  it is
possible that Gross-Up  Payments not made by the  Corporation and members of the
Corporation  should have been made  ("Underpayment"),  or that Gross-Up Payments
will have been made by the  Corporation  and  members  of the  Corporation  that
should not have been made ("Overpayments"). In either such event, the Accounting
Firm shall  determine the amount of the  Underpayment  or  Overpayment  that has
occurred. In the case of an Underpayment, the Corporation promptly shall pay, or
cause to be paid, the amount of such  Underpayment  to or for the benefit of the
Employee.  In the case of an  Overpayment,  the Employee shall, at the direction
and  expense of the  Corporation,  take such steps as are  reasonably  necessary
(including  the filing of returns  and claims  for  refund),  follow  reasonable
instructions from, and procedures established by, the Corporation, and otherwise
reasonably cooperate with the Corporation to correct such Overpayment; provided,
however,  that (1) Employee shall not in any event be obligated to return to the
Corporation an amount greater than the net after-tax  portion of the Overpayment
that he has  retained  or  recovered  as a  refund  from the  applicable  taxing
authorities and (2) this provision  shall be interpreted in a manner  consistent
with the  intent of  Section  13,  which is to make the  Employee  whole,  on an
after-tax  basis,  from the  application of the Excise Tax, it being  understood
that the correction of an Overpayment may result in the Employee repaying to the
Corporation an amount that is less than the Overpayment.

                                 Page 58 of 62
<PAGE>

FIFTH PART: TRADE SECRETS, SUCCESSORS, MISCELLANEOUS PROVISIONS, SIGNATURE PAGE

Section 15:  Confidential Information

     (a) Acknowledgement.  The Corporation and the Employee acknowledge that the
services to be  performed by the Employee  under this  Agreement  are unique and
extraordinary and that, as a result of the Employee's  employment,  the Employee
will be in a relationship  of confidence and trust with the Corporation and will
come into possession of  "Confidential  Information"  (1) owned or controlled by
the Corporation, (2) in the possession of the Corporation and belonging to third
parties or (3) conceived,  originated,  discovered or developed,  in whole or in
part, by the Employee.  As used herein "Confidential  Information includes trade
secrets and other confidential or proprietary business, technical,  personnel or
financial  information,  whether or not the Employee's work product, in written,
graphic,  oral or other tangible or intangible forms,  including but not limited
to  specifications,   samples,  records,  data,  computer  programs,   drawings,
diagrams,  models,  customer  names,  ID's  or  e-mail  addresses,  business  or
marketing plans, studies, analyses,  projections and reports,  communications by
or to attorneys (including attorney-client privileged communications), memos and
other  materials  prepared  by  attorneys  or under their  direction  (including
attorney work product), and software systems and processes. Any information that
is not readily  available to the public shall be considered to be a trade secret
and confidential and proprietary, even if it is not specifically marked as such,
unless the Corporation advises the Employee otherwise in writing.

     (b) Nondisclosure.  The Employee agrees that the Employee will not, without
the prior written  consent of the  Corporation,  directly or  indirectly  use or
disclose Confidential  Information to any person, during or after the Employee's
employment,  except as may be necessary in the ordinary course of performing the
Employee's duties under this Agreement.  The Employee will keep the Confidential
Information  in  strictest  confidence  and trust.  This  Section 15 shall apply
indefinitely, both during and after the term of this Agreement.

     (c) Surrender Upon  Termination.  The Employee  agrees that in the event of
the termination of the Employee's  employment for any reason,  the Employee will
immediately   deliver  to  the  Corporation   all  property   belonging  to  the
Corporation,  including all documents and materials of any nature  pertaining to
the Employee's  work with the  Corporation,  and will not take with the Employee
any documents or materials of any description,  or any  reproduction  thereof of
any description, containing or pertaining to any Confidential Information. It is
understood  that the Employee is free to use  information  that is in the public
domain (not as a result of a breach of this Agreement).

Section 16:  Successors

     (a) Corporation's  Successors.  The Corporation shall require any successor
(whether   direct  or  indirect   and  whether  by  purchase,   lease,   merger,
consolidation,  liquidation  or  otherwise) to all or  substantially  all of the
Corporation's  business  and/or  assets,  by an agreement in substance  and form
satisfactory to the Employee, to assume this Agreement and to agree expressly to
perform  this  Agreement  in the  same  manner  and to the  same  extent  as the
Corporation would be required to perform it in the absence of a succession.  The
Corporation's  failure to obtain such agreement prior to the  effectiveness of a
succession shall be a breach of this Agreement and shall entitle the Employee to
all of the  compensation  and  benefits  to which the  Employee  would have been
entitled   hereunder  if  the  Corporation  had  involuntarily   terminated  the
Employee's  employment  without  Cause  or  Disability,  on the date  when  such
succession  becomes effective.  For all purposes under this Agreement,  the term
"Corporation"  shall include any successor to the Corporation's  business and/or
assets that  executes and delivers the  assumption  agreement  described in this
Subsection (a) or that becomes bound by this Agreement by operation of law.

     (b)  Employee's  Successors.  This Agreement and all rights of the Employee
hereunder  shall inure to the benefit of, and be enforceable  by, the Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.

Section 17:  Miscellaneous Provisions

                                 Page 59 of 62
<PAGE>

     (a) Waiver.  No provision of this  Agreement  shall be modified,  waived or
discharged unless the modification,  waiver or discharge is agreed to in writing
and signed by the  Employee  and by an  authorized  officer  of the  Corporation
(other  than the  Employee).  No waiver by either  party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other  condition or provision or of the same
condition or provision at another time.
 
     (b) Whole  Agreement.  No  agreements,  representations  or  understandings
(whether  oral or written  and  whether  express or  implied),  other than stock
option agreements and indemnity agreements,  that are not expressly set forth in
this  Agreement  have been made or entered  into by either party with respect to
the subject matter hereof.  In addition,  the Employee hereby  acknowledges  and
agrees that this Agreement  supersedes in its entirety any employment  agreement
between the  Employee and the  Corporation  in effect  immediately  prior to the
effective date of this  Agreement.  As of the effective date of this  Agreement,
such  employment  agreement shall  terminate  without any further  obligation by
either party thereto,  and the Employee hereby  relinquishes  any further rights
that the Employee may have had under such prior employment agreement.

     (c)  Notice.  Notices  and all other  communications  contemplated  by this
Agreement  shall be in writing  and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt  requested  and postage  prepaid.  In the case of the  Employee,  mailed
notices shall be addressed to the Employee at the home address that the Employee
most recently  communicated  to the  Corporation in writing.  In the case of the
Corporation,  mailed  notices shall be addressed to its corporate  headquarters,
and all  notices  shall be  directed  to the  attention  of its Chief  Executive
Officer.

     (d) No  Setoff.  There  shall be no right of setoff or  counterclaim,  with
respect to any claim, debt or obligation, against payments to the Employee under
this Agreement.

     (e)  Choice  of  Law.  The  validity,   interpretation,   construction  and
performance  of this  Agreement  shall be  governed  by the laws of the State of
California, irrespective of California's choice-of-law principles.

     (f) Severability.  The invalidity or  unenforceability  of any provision or
provisions of this Agreement shall not affect the validity or  enforceability of
any other provision hereof, which shall remain in full force and effect.

     (g) Arbitration. Except as otherwise provided in Section 14, any dispute or
controversy arising out of the Employee's employment or the termination thereof,
including,  but not  limited  to,  any claim of  discrimination  under  state or
federal  law,  shall  be  settled  exclusively  by  arbitration  in  San  Mateo,
California, in accordance with the rules of the American Arbitration Association
then in effect;  provided,  however, that in the event of a claimed violation of
Section  15,  the  Corporation  may seek  injunctive  relief in order to prevent
irreparable  injury or preserve  the status quo.  Judgment may be entered on the
arbitrator's  award in any court having  jurisdiction  and attorney fees will be
awarded to the prevailing party.

     (h) No  Assignment  of  Benefits.  The rights of any person to  payments or
benefits under this Agreement shall not be made subject to option or assignment,
either by voluntary or involuntary  assignment or by operation of law, including
(without  limitation)  bankruptcy,  garnishment,  attachment or other creditor's
process, and any action in violation of this Subsection (i) shall be void.

     (i) Employment Taxes. All payments made pursuant to this Agreement shall be
subject to withholding of applicable taxes.

     (j)  Benefit  Coverage  Non-Additive.  In the event  that the  Employee  is
entitled  to life  insurance  and  health  plan  coverage  under  more  than one
provision hereunder,  only one provision shall apply, and neither the periods of
coverage nor the amounts of benefits shall be additive.


                                 Page 60 of 62
<PAGE>

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Corporation by its duly authorized  officer, as of the day and year first
above  written.  Employee has consulted (or has had the  opportunity to consult)
with his own counsel prior to execution of this Agreement.



                                         ______________________________
                                                    Employee


                                         GLENBOROUGH REALTY TRUST INCORPORATED



                                         By __________________________

                                         Its _________________________

                                 Page 61 of 62
<PAGE>

Exhibit 12.1

GLENBOROUGH REALTY TRUST INCORPORATED
Computation of Ratios
For the five years ended December 31, 1997
and the three months ended March 31, 1998
<TABLE>
<CAPTION>

                                                GRT Predecessor Entities, Combined                     The Company
                                              ----------------------------------------   -----------------------------------------
                                                                                                                         Three
                                                                                                                        Months
                                                                                                                         Ended
                                                                Twelve Months Ended December 31,                       March 31,
                                              ---------------------------------------------------------------------   ------------
                                                 1993           1994          1995          1996          1997           1998
                                              ------------   -----------   ------------  ------------  ------------   ------------
EARNINGS, AS DEFINED

<S>                                              <C>            <C>              <C>        <C>           <C>            <C>   
Net Income (Loss) before Preferred Dividends     4,418          1,580            524        (1,609)       19,368         12,213
Extraordinary and non-recurring items           (2,274)            --             --         7,423           843             --
Federal & State income taxes                        24            176            357            --            --             --
Minority Interest                                    5             43             --           292         1,119            678
Fixed Charges                                    1,301          1,140          2,129         3,913         9,668          9,145
                                              ------------   -----------   ------------  ------------  ------------   ------------

                                                 3,474          2,939          3,010        10,019        30,998         22,036
                                              ------------   -----------   ------------  ------------  ------------   ------------

FIXED CHARGES AND PREFERRED
  DIVIDENDS, AS DEFINED

Interest Expense                                 1,301          1,140          2,129         3,913         9,668          9,145
Preferred Dividends                                 --             --             --            --            --          3,910
                                              ------------   -----------   ------------  ------------  ------------   ------------
                                                 1,301          1,140          2,129         3,913         9,668         13,055

RATIO OF EARNINGS TO FIXED CHARGES                2.67           2.58           1.41          2.56          3.21           2.41
                                              ------------   -----------   ------------  ------------  ------------   ------------

RATIO OF EARNINGS TO FIXED CHARGES
  AND PREFERRED DIVIDENDS                         2.67           2.58           1.41          2.56          3.21           1.69
                                              ------------   -----------   ------------  ------------  ------------   ------------
</TABLE>

                                 Page 62 of 62
<PAGE>