SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-Q/A

                                 AMENDMENT NO. 1

            [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 38
<PAGE>

This Form 10-Q of Glenborough  Realty Trust Incorporated (the "Company") for the
quarter  ended March 31, 1998 is being  amended and restated in its entirety (i)
to add certain  information  to Note 2 and Note 4 of the Notes to the  Company's
Consolidated Financial Statements in Item 1 of Part I, (ii) as to Item 2 of Part
I,  Management's  Discussion and Analysis of Financial  Condition and Results of
Operations,   to  revise  "Funds  from   Operations"  and  "Cash  Available  for
Distribution"  and to revise  the first  paragraph  after the  caption  "Forward
Looking  Statements;  Factors That May Affect Operating  Results",  (iii) to add
certain  information in Item 1 of Part II, Legal Proceedings,  and (iv) to amend
and restate in its entirety Exhibit 12.1.

                                      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 38
<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 38
<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 38
<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 38
<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 38
<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 38
<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 38
<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 38
<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;  and (ii) is
computed using estimated sales price, as determined by prevailing  market values
for comparable  properties and/or the use of capitalization  rates multiplied by
annualized  rental  income  based  upon  the  age,  construction  and use of the
building.  The  fulfillment  of the  Company's  plans  related  to  each  of its
properties  is  dependent  upon,  among other  things,  the presence of economic
conditions  which will  enable the  Company to  continue to hold and operate the
properties  prior to their eventual sale. Due to  uncertainties  inherent in the
valuation process and in the economy,  it is reasonably possible that the actual
results  of  operating  and  disposing  of the  Company's  properties  could  be
materially different than current expectations.

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

                                 Page 10 of 38
<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 38
<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.

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

The Company  recognizes  contingent  rental  income after the related  target is
achieved,  consistent with EITF 98-9, "Accounting for Contingent Rent in Interim
Financial Periods."

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 38
<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 38
<PAGE>

Note 4.   INVESTMENTS IN ASSOCIATED COMPANIES

The Company accounts for its investments in the Associated Companies (as defined
in Note 1) using the equity  method as a  substantial  portion  of the  economic
benefits of the  Associated  Companies flow to the Company by virtue of its 100%
non-voting preferred stock interest in each of the Associated  Companies,  which
interests   constitute   substantially   all   of  the   Associated   Companies'
capitalization.  Two of the holders of the voting  common  stock of  Glenborough
Corporation  and one of the holders of the voting  common  stock of  Glenborough
Hotel Group are  officers  of the  Company;  however,  the Company has no direct
voting or management  control of either  Glenborough  Corporation or Glenborough
Hotel Group.  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 38
<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 38
<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 38
<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 38
<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 38
<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 38
<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 38
<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 38
<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 38
<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 38
<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 38
<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 38
<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 38
<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 38
<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 38
<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

Funds from  Operations,  as defined by NAREIT,  represents  income (loss) before
minority  interests and  extraordinary  items,  adjusted for real estate related
depreciation   and   amortization  and  gains  (losses)  from  the  disposal  of
properties.  The  Company  believes  that FFO is an  important  and widely  used
measure of the financial  performance  of equity REITs which provides a relevant
basis for comparison among other REITs. Together with net income and cash flows,
FFO provides  investors  with an  additional  basis to evaluate the ability of a
REIT to incur and service debt and to fund acquisitions,  developments and other
capital  expenditures.  FFO does not  represent  net  income or cash  flows from
operations as defined by GAAP, and should not be considered as an alternative to
net income (determined in accordance with GAAP) as an indicator of the Company's
operating  performance  or as an  alternative  to  cash  flows  from  operating,
investing and financing  activities  (determined  in accordance  with GAAP) as a
measure of liquidity.  FFO does not necessarily indicate that cash flows will be
sufficient  to  fund  all  of  the  Company's  cash  needs  including  principal
amortization,  capital improvements and distributions to stockholders.  Further,
FFO as  disclosed  by  other  REITs  may  not  be  comparable  to the  Company's
calculation  of FFO. The Company  calculates  FFO in  accordance  with the White
Paper on FFO approved by the Board of Governors of NAREIT in March 1995.

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

                                 Page 29 of 38
<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.  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 38
<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 38
<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 38
<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 38
<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  stayed the action pending  resolution of the Blumberg Action;  such
plaintiffs can revive their lawsuit.

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.  The Company believes that it is very
unlikely that this litigation  would result in a liability that would exceed the
accrued   liability  by  a  material   amount.   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.

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

Item 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 38
<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 38
<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: September 9, 1998                  /s/ Andrew Batinovich
                                         Andrew Batinovich
                                         Director, President
                                         and Chief Operating Officer
                                         (Principal Operating Officer)
 
 


 
Date: September 9, 1998                  /s/ Stephen Saul
                                         Stephen Saul
                                         Chief Financial Officer
                                         (Principal Financial Officer)
 




Date: September 9, 1998                  /s/ Terri Garnick
                                         Terri Garnick
                                         Senior Vice President,
                                         Chief Accounting Officer,
                                         Treasurer
                                         (Principal Accounting Officer)


                                 Page 36 of 38
<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.

**            Previously filed as part of the Company's Form 10-Q for the
              quarter ended March 31, 1998.

                                 Page 37 of 38
<PAGE>

<TABLE>
<CAPTION>

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

                                                   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 items                               (2,274)           --             --           186            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         2,782         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          0.71 (1)       3.21          2.41
                                                -----------   ------------  ------------  ------------   -----------   ------------

RATIO OF EARNINGS TO FIXED CHARGES AND 
   PREFERRED DIVIDENDS                              2.67          2.58           1.41          0.71 (1)       3.21          1.69
                                                -----------   ------------  ------------  ------------   -----------   ------------

(1) For the twelve months ended December 31, 1996, earnings were insufficient to cover fixed charges and fixed charges plus
    preferred dividends by $1,131.

</TABLE>


                                 Page 38 of 38
<PAGE>