SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20543


                                    FORM 10-Q


                QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


                      FOR QUARTER ENDED September 30, 1996


                           COMMISSION FILE NO. 1-11706


                         CARRAMERICA REALTY CORPORATION
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


               Maryland                                    52-1796339
-----------------------------------------      ---------------------------------
   (State or other jurisdiction of               (I.R.S. Employer Identification
    incorporation or organization)                           Number)


             1700 Pennsylvania Avenue, N.W., Washington, D.C. 20006
--------------------------------------------------------------------------------
               (Address or principal executive office) (Zip code)


        Registrant's telephone number, including area code (202) 624-7500


                                       N/A
--------------------------------------------------------------------------------
         (Former name, former address and former fiscal year, if changed
                               since last report)


            Number of shares outstanding of each of the registrant's
                classes of common stock, as of November 5, 1996:

               Common Stock, par value $.01 per share: 35,536,189
--------------------------------------------------------------------------------


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 twelve (12) months (or such shorter period that the Registrant was
required  to file  such  report)  and  (2)  has  been  subject  to  such  filing
requirements for the past ninety (90) days.

                     YES        X                      NO
                               ---                     --


<PAGE>

                                      Index

                                                                     
                                                             Page
                                                             ----
Part I: Financial Information

Item 1.  Financial Statements

         Condensed consolidated balance sheets of
         CarrAmerica Realty Corporation and subsidiaries as
         of September 30, 1996 (unaudited) and December 31,
         1995.................................................4

         Condensed consolidated statements of operations of
         CarrAmerica Realty Corporation and subsidiaries for
         the three months ended September 30, 1996 and 1995
         (unaudited)
         .....................................................5

         Condensed consolidated statements of operations of
         CarrAmerica Realty Corporation and subsidiaries for
         the nine months ended September 30, 1996 and 1995
         (unaudited)
         .....................................................6

         Condensed consolidated statements of cash flows of
         CarrAmerica Realty Corporation and subsidiaries for
         the three months ended September 30, 1996 and 1995
         (unaudited)
         .....................................................7

         Condensed consolidated statements of cash flows of
         CarrAmerica Realty Corporation and subsidiaries for
         the nine months ended September 30, 1996 and 1995
         (unaudited)..........................................8

         Notes to condensed consolidated financial
         statements.....................................9 to 16

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations...........17 to 25


Part II: Other Information

Item 1.  Legal Proceedings.................................. 26

Item 2.  Changes in Securities...............................26

Item 3.  Defaults Upon Senior Securities.....................26

Item 4.  Submission of Matters to a Vote of Security Holders.26

Item 5.  Other Information.................................. 26

Item 6.  Exhibits and Reports on Form 8-K....................27

                             2

<PAGE>


                           Part I


Item 1.  Financial Information

         The information  furnished in the accompanying  condensed  consolidated
balance sheets,  condensed  consolidated  statements of operations and condensed
consolidated  statements of cash flows of  CarrAmerica  Realty  Corporation  and
subsidiaries  (the Company) reflect all adjustments which are, in the opinion of
management,  necessary for a fair presentation of the  aforementioned  financial
statements for the interim periods.

         The aforementioned  financial  statements should be read in conjunction
with the notes to such  financial  statements  and  Management's  Discussion and
Analysis of Financial Condition and Results of Operations.












   



                             3
<PAGE>


                 CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
                      Condensed Consolidated Balance Sheets
                 As of September 30, 1996 and December 31, 1995

--------------------------------------------------------------------------------

(Unaudited and in thousands, except  common share amounts)

<TABLE>
<CAPTION>


                                                                September 30,        December 31,
                                                                    1996                 1995
                                                                    ----                 ----
                                                                 (Unaudited)            


<S>                                                               <C>                  <C>    
Assets 
------ 
Rental property: 
   Land                                                           $  226,572           115,565
   Buildings                                                         700,133           301,537
   Tenant improvements                                                92,664            60,060
   Furniture, fixtures and equipment                                   2,682             3,427
                                                                --------------       -----------
                                                                   1,022,051           480,589
   Less - accumulated depreciation                                  (115,709)          (98,873)
                                                                --------------       -----------
          Total rental property                                      906,342           381,716
                                                                --------------       -----------

Cash and cash equivalents                                             14,238             9,217
Restricted cash and cash equivalents (note 2)                          8,644             2,249
Accounts receivable and notes receivable                              10,002             8,728
Accrued straight-line rents                                           22,915            22,437
Investments                                                           12,155            10,745
Land held for development                                             28,409              --
Construction in process                                               12,040              --
Tenant leasing costs, net                                             10,520            10,746
Deferred financing costs, net                                          3,117             2,267
Prepaid expenses and other assets, net                                15,526            10,755
                                                                --------------       -----------
                                                                  $1,043,908           458,860
                                                                ==============       ===========

Liabilities, Minority Interest, and Stockholders' Equity
--------------------------------------------------------
Liabilities:
   Mortgages and notes payable (note 2)                              426,069           317,374
   Accounts payable and accrued expenses                              14,676             9,357
   Rent received in advance and security deposits                      5,804             1,736
                                                                --------------       -----------
         Total liabilities                                           446,549           328,467
                                                                --------------       -----------

Minority interest (note 3)                                            51,611            34,850

Stockholders' equity:
   Common  stock,  $.01 par  value,  authorized  90,000,000 
     shares,  issued and outstanding 35,473,493 at September
     30, 1996 and 13,409,177 at December 31, 1995                        355               134
   Additional paid in capital                                        588,684           126,835
   Cumulative dividends paid in excess of net income                 (43,291)          (31,426)
                                                                --------------       -----------
         Total stockholders' equity                                  545,748            95,543
                                                                --------------       -----------

   Commitments (note 4)
                                                                  $1,043,908           458,860
                                                                ==============       ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.

                                        4

<PAGE>


                 CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
                 Condensed Consolidated Statements of Operations
             For the Three Months Ended September 30, 1996 and 1995

--------------------------------------------------------------------------------
 (Unaudited and in thousands, except per common share amounts)


<TABLE>
<CAPTION>
                                                                             1996                 1995
                                                                       ------------------    ---------------

<S>                                                                         <C>                  <C>   
Real estate operating revenue: 
   Rental revenue (note 4):
      Minimum base rent                                                     $  37,011            20,211
      Recoveries from tenants                                                   4,310             1,428
      Parking and other tenant charges                                          1,185             1,103
                                                                         --------------       -----------
         Total rental revenue                                                  42,506            22,742
      
   Real estate service income                                                   3,634             2,640
                                                                         --------------       -----------
         Total revenue                                                         46,140            25,382
                                                                         --------------       -----------

   Real estate operating expenses:
   Property operating expenses:
      Operating expenses                                                        9,898             5,746
      Real estate taxes                                                         4,014             2,307
   Interest expense                                                             7,911             5,575
   General and administrative                                                   4,002             2,556
   Depreciation and amortization                                               11,645             4,579
                                                                         --------------       -----------
         Total operating expenses                                              37,470            20,763
                                                                         --------------       -----------

         Real estate operating income                                           8,670             4,619
                                                                         --------------       -----------

Other operating income (expense):
   Interest income                                                                434               292
   Equity in earnings (losses) of unconsolidated partnerships                      99               (32)
                                                                         --------------       -----------

         Total other operating income                                             533               260
                                                                         --------------       -----------
         Net operating income before minority interest                          9,203             4,879

 Minority interest (note 3)                                                    (1,293)           (1,444)
                                                                         --------------       -----------

         Net income                                                         $   7,910             3,435
                                                                         ==============       ===========

         Net income per common share                                        $    0.24              0.26
                                                                         ==============       ===========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                              5

<PAGE>

                  CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
                 Condensed Consolidated Statements of Operations
              For the Nine Months Ended September 30, 1996 and 1995
--------------------------------------------------------------------------------

(Unaudited and in thousands, except per common share amounts)

<TABLE>
<CAPTION>
                                                                             1996                 1995
                                                                       ------------------    ---------------

<S>                                                                         <C>                  <C>   
Real estate operating revenue:
  Rental revenue (note 4):
      Minimum base rent                                                     $  88,088            59,540
      Recoveries from tenants                                                   8,820             3,843
      Parking and other tenant charges                                          3,731             3,296
                                                                         --------------       -----------
         Total rental revenue                                                 100,639            66,679
 
  Real estate service income                                                    9,265             7,748
                                                                         --------------       -----------
         Total revenue                                                        109,904            74,427
                                                                         --------------       -----------

Real estate operating expenses:
   Property operating expenses:
      Operating expenses                                                       23,545            15,731
      Real estate taxes                                                         9,826             7,126
   Interest expense                                                            21,857            16,260
   General and administrative                                                  10,661             7,850
   Depreciation and amortization                                               25,744            13,306
                                                                         --------------       -----------
         Total operating expenses                                              91,633            60,273
                                                                         --------------       -----------

         Real estate operating income                                          18,271            14,154
                                                                         --------------       -----------

Other operating income (expense):
   Interest income                                                              1,253               839
   Equity in earnings (losses) of unconsolidated partnerships                     357              (108)
                                                                         --------------       -----------

         Total other operating income                                           1,610               731
                                                                         --------------       -----------
         Net operating income before minority interest and
            extraordinary item                                                 19,881            14,885

   Minority interest (note 3)                                                  (3,895)           (4,509)
                                                                         --------------       -----------

         Income before extraordinary item                                      15,986            10,376
Extraordinary item-loss on early extinguishment of debt                          (484)               --
                                                                         --------------       -----------

         Net income                                                         $  15,502            10,376
                                                                         ==============       ===========

         Net income per common share:
             Income before extraordinary item                               $  0.70               0.78
             Extraordinary item-loss on early extinguishment
                of debt                                                       (0.02)                --
                                                                         --------------       -----------

         Net income per common share                                        $  0.68               0.78
                                                                         ==============       ===========
</TABLE>

See accompanying notes to condensed consolidated financial statements.


                              6

<PAGE>

                CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
                 Condensed Consolidated Statements of Cash Flows
             For the Three Months Ended September 30, 1996 and 1995
--------------------------------------------------------------------------------

(Unaudited and in thousands)

<TABLE>
<CAPTION>

                                                                               1996             1995
                                                                               ----             ----
<S>                                                                       <C>                    <C>  
  Cash flows from operating activities:
     Net income                                                           $     7,910            3,435
                                                                            ------------     ------------
     Adjustments  to  reconcile  net income to net cash
       provided  by  operating activities:
        Depreciation and amortization                                          11,645            4,579
        Minority interest in income                                             1,293            1,444
        Equity in (earnings) losses of unconsolidated partnerships                (93)              40
        Increase in accounts receivable                                        (1,081)            (299)
        Decrease (increase) in accrued straight-line rents                       (333)             229
        Additions to tenant leasing costs                                        (768)            (295)
        Decrease (increase) in prepaid expenses and other assets                2,501           (1,024)
        Increase (decrease) in accounts payable and accrued expenses            3,331           (1,509)
        Increase (decrease) in rent received in advance and
          security deposits                                                     2,627             (170)
                                                                            ------------     ------------
           Total adjustments                                                   19,122            2,995
                                                                            ------------     ------------
           Net cash provided by operating activities                           27,032            6,430
                                                                            ------------     ------------

  Cash flows from investing activities:
     Acquisitions of property                                                (135,767)         (18,408)
     Additions to rental property                                              (3,946)          (2,721)
     Additions to land held for development                                    (9,548)              --
     Additions to construction in process                                     (12,040)              --
     Investments in unconsolidated partnerships                                (1,214)            (153)
     Distributions from unconsolidated partnerships                               197            3,054
     Increase in restricted cash and cash equivalents                             (10)             (31)
                                                                            ------------     ------------
           Net cash used by investing activities                             (162,328)         (18,259)
                                                                            ------------     ------------

  Cash flows from financing activities:
     Net proceeds from sale of common stock                                   216,656              --
     Net proceeds from exercise of options                                         18              --
     Net borrowings (repayments) on line of credit                            (62,000)           8,000
     Borrowings on mortgages payable                                               --            6,280
     Dividends paid                                                           (15,515)          (5,846)
     Repayment of mortgages payable                                              (606)            (670)
     Additions to deferred financing costs                                       (272)            (292)
     Distributions to minority interest                                        (1,769)          (1,881)
                                                                            ------------     ------------
           Net cash provided by financing activities                          136,512            5,591
                                                                            ------------     ------------
           Increase (decrease) in unrestricted cash and cash equivalents        1,216           (6,238)
  Unrestricted cash and cash equivalents, beginning of the period              13,022           14,162
                                                                            ------------     ------------
  Unrestricted cash and cash equivalents, end of the period               $    14,238            7,924
                                                                            ============     ============

  Supplemental disclosure of cash flow information:

     Cash paid for interest, net of capitalized interest
        of $969 and $0 for the three months ended
        September 30, 1996 and 1995, respectively.                        $     7,315            5,623
                                                                            ============     ============

     During the three month period ended  September 30, 1996,
        the Company assumed $35.7 million of mortgages  payable
        and issued $17.6 million of Units in connection  with
        acquisitions  of office  properties  and land held for
        development.
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       7
<PAGE>


                 CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
                 Condensed Consolidated Statements of Cash Flows
              For the Nine Months Ended September 30, 1996 and 1995
--------------------------------------------------------------------------------

(Unaudited and in thousands)

<TABLE>
<CAPTION>
                                                                               1996              1995
                                                                               ----              ----
<S>                                                                       <C>                   <C>   
  Cash flows from operating activities:
     Net income                                                           $    15,502           10,376
                                                                            ------------     -----------
     Adjustments  to  reconcile  net income to net cash
       provided  by  operating activities:
        Depreciation and amortization                                          25,744           13,306
        Minority interest in income                                             3,895            4,509
        Equity in (earnings) losses of unconsolidated partnerships               (337)             131
        Extraordinary item - loss on early extinguishment of debt                 484               --
        Increase in accounts receivable                                        (1,274)          (1,007)
        (Increase) decrease in accrued straight-line rents                       (478)           1,113
        Additions to tenant leasing costs                                      (1,793)            (683)
        Increase in prepaid expenses and other assets                          (4,776)          (1,704)
        Increase (decrease) in accounts payable and accrued expenses            6,317           (1,280)
        Increase (decrease) in rent received in advance and
          security deposits                                                     4,068             (405)
                                                                            ------------     -----------
           Total adjustments                                                   31,850           13,980
                                                                            ------------     -----------
           Net cash provided by operating activities                           47,352           24,356
                                                                            ------------     -----------

  Cash flows from investing activities:
     Acquisition of real estate service contracts                              (1,750)          (7,419)
     Acquisitions of property                                                (438,427)         (18,408)
     Additions to rental property                                              (5,782)          (7,681)
     Additions to land held for development                                   (19,153)              --
     Additions to construction in process                                     (12,040)              --
     Investments in unconsolidated partnerships                                (2,678)          (2,930)
     Acquisition of minority interest                                              (3)              --
     Distributions from unconsolidated partnerships                             1,605            4,395
     Increase in restricted cash and cash equivalents                          (6,395)            (251)
     Notes receivable issued                                                      --            (1,500)
                                                                            ------------     -----------
           Net cash used by investing activities                             (484,623)         (33,794)
                                                                            ------------     -----------

  Cash flows from financing activities:
     Net proceeds from sale of common stock                                   461,348               --
     Net proceeds from exercise of options                                         35               --
     Net borrowings on line of credit                                          72,000           12,000
     Borrowings on mortgages payable                                               --           12,000
     Contributions from minority interests                                         --               17
     Dividends paid                                                           (27,367)         (17,479)
     Repayment of mortgages payable                                           (56,419)          (1,574)
     Additions to deferred financing costs                                     (1,966)            (308)
     Distributions to minority interests                                       (5,339)          (5,756)
                                                                            ------------     -----------
           Net cash provided (used) by financing activities                   442,292           (1,100)
                                                                            ------------     -----------
           Increase (decrease) in unrestricted cash and cash equivalents        5,021          (10,538)
  Unrestricted cash and cash equivalents, beginning of the period               9,217           18,462
                                                                            ------------     -----------
  Unrestricted cash and cash equivalents, end of the period               $    14,238            7,924
                                                                            ============     ===========

  Supplemental disclosure of cash flow information:

  Cash paid for interest, net of capitalized interest of $1,410 and $0
     for the nine months ended September 30, 1996 and 1995 respectively   $    21,130           16,222
                                                                            ============     ===========
  During the nine month period ended  September  30, 1996,  the Company 
    assumed $93.0  million of  mortgages  payable and issued
    $17.9  million of Units in connection  with  acquisitions 
    of office  properties  and as a payment of a liability.
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       8
<PAGE>


                 CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)
--------------------------------------------------------------------------------

(1)      Organization, Business and Summary of Significant Accounting Policies

         (a)      Organization and Business

                  CarrAmerica   Realty   Corporation   (formerly   Carr   Realty
                  Corporation)   (the  Company)  is  a   self-administered   and
                  self-managed  equity  real  estate  investment  trust  (REIT),
                  organized  under the laws of Maryland,  which owns,  develops,
                  acquires and operates office buildings.

         (b)      Principles of Consolidation

                  The   accounts   of  the   Company   and  its   majority-owned
                  subsidiaries are  consolidated in the  accompanying  financial
                  statements.   All   significant   intercompany   balances  and
                  transactions  have been eliminated in  consolidation.  As used
                  hereafter,   the   Company   refers  to   CarrAmerica   Realty
                  Corporation and its consolidated subsidiaries.

         (c)      Interim Financial Statements

                  The information  furnished reflects all adjustments which are,
                  in the  opinion  of  management,  necessary  to reflect a fair
                  presentation  of the results for the interim  periods, and all
                  such adjustments are of a normal, recurring nature.

         (d)      Rental Property

                  Rental   property  is   recorded  at  cost  less   accumulated
                  depreciation  (which is less than the net realizable  value of
                  the property).  Depreciation is computed on the  straight-line
                  basis  over  the  estimated  useful  lives of the  assets,  as
                  follows:

                      Base building...............  20 to 50 years
                      Building components.........  7 to 20 years
                      Tenant improvements.........  Terms of the leases or
                                                      useful lives, whichever 
                                                      is shorter
                      Furniture, fixtures and
                         equipment................  5 to 15 years

                  Expenditures  for  maintenance  and  repairs  are  charged  to
                  operations   as   incurred.    Significant   renovations   are
                  capitalized.

         (e)      Tenant Leasing Costs

                  Fees and  costs  incurred  in the  successful  negotiation  of
                  leases  have  been  deferred  and are being  amortized  on the
                  straight-line basis over the terms of the respective leases.

                                       9
<PAGE>


                 CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)
--------------------------------------------------------------------------------

         (f)      Deferred Financing Costs

                  Deferred  financing  costs include fees and costs  incurred to
                  obtain  long-term  financing and are being  amortized over the
                  terms of the  respective  loans on a basis which  approximates
                  the interest method.

         (g)      Fair Value of Financial Instruments

                  The carrying  amount of the  following  financial  instruments
                  approximates fair value because of their short-term  maturity:
                  cash and cash  equivalents;  accounts  and  notes  receivable;
                  accounts payable and accrued expenses.

         (h)      Real Estate Service Contracts and Other Intangible Assets

                  Real estate  service  contracts and other  intangible  assets,
                  including goodwill, represent the purchase price of net assets
                  of real estate service  operations  acquired and are amortized
                  on the  straight-line  basis  over the  expected  lives of the
                  respective  real estate  service  contracts.  Goodwill,  which
                  represents the excess of purchase price over the fair value of
                  net assets acquired,  is amortized on the straight-line  basis
                  over the expected periods to be benefited, generally 15 years.
                  The Company  assesses the  recoverability  of these intangible
                  assets by determining  whether the amortization of the balance
                  over its remaining life can be recovered through  undiscounted
                  future  operating  cash flows of the acquired  operation.  The
                  amount of  impairment  loss, if any, is measured as the amount
                  by which the  carrying  amount of the assets  exceeds the fair
                  value of the assets.  The assessment of the  recoverability of
                  these  intangible  assets will be impacted if estimated future
                  operating cash flows are not achieved.

         (i)      Revenue Recognition

                  The  Company   reports  base  rental   revenue  for  financial
                  statement  purposes   straight-line  over  the  terms  of  the
                  respective leases.  Accrued  straight-line rents represent the
                  amount  that   straight-line   rental  revenue  exceeds  rents
                  collected in accordance with the lease agreements. Management,
                  considering  current  information  and  events  regarding  the
                  tenants' ability to fulfill their lease obligations, considers
                  accrued  straight-line  rents to be impaired if it is probable
                  that the  Company  will be  unable  to  collect  all rents due
                  according  to  the   contractual   lease  terms.   If  accrued
                  straight-line rents associated with a tenant are considered to
                  be impaired, the amount of the impairment is measured based on
                  the present  value of expected  future cash flows.  Impairment
                  losses,  if any, are recorded  through a loss on the write-off
                  of assets.  Cash  receipts on impaired  accrued  straight-line
                  rents are applied to reduce the remaining  outstanding balance
                  and as rental revenue, thereafter.

                  The Company receives  monthly  management fees generally equal
                  to 2% to 3% of the gross  monthly  revenue of each property it
                  manages. Management fees are recognized as revenue as they are
                  earned.

                                       10
<PAGE>

                 CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)
--------------------------------------------------------------------------------

                  The Company  receives  monthly leasing fees generally equal to
                  1.5%  to  2.0%  of  the  gross  monthly   revenue  of  certain
                  properties it manages.  These  leasing fees are  recognized as
                  revenue  as  they  are  earned.   For  certain  other  managed
                  properties,  leasing  commissions  are  received at the time a
                  lease is executed or at lease commencement.  Such leasing fees
                  are  recognized  as  revenue  upon  lease  execution  or lease
                  commencement, when earned.

         (j)      Income and Other Taxes

                  The Company qualifies as a REIT under Sections 856 through 860
                  of the Internal Revenue Code of 1986, as amended.  A REIT will
                  generally  not be subject to federal  income  taxation on that
                  portion of its income that qualifies as REIT taxable income to
                  the  extent  that it  distributes  at least 95  percent of its
                  taxable income to its  shareholders  and complies with certain
                  other  requirements.  Accordingly,  no provision has been made
                  for  federal  income  taxes for the Company and certain of its
                  subsidiaries  in  the  accompanying   condensed   consolidated
                  financial statements.

                  Certain  consolidated  subsidiaries of the Company are subject
                  to District  of Columbia  franchise  tax.  These  consolidated
                  subsidiaries  file  separate  tax  returns  and are subject to
                  federal and state income taxes. Income taxes are accounted for
                  using the  asset and  liability  method of  accounting.  These
                  taxes are recorded as general and  administrative  expenses in
                  the accompanying condensed consolidated financial statements.

         (k)      Investments in Unconsolidated Partnerships

                  The  Company  uses the  equity  method of  accounting  for its
                  investments  in  and  earnings   (losses)  of   unconsolidated
                  partnerships.

         (l)      Per Share Data

                  The  computation  of earnings  per share in each year is based
                  upon the weighted average number of common shares outstanding.
                  When dilutive, stock options are included as share equivalents
                  using the treasury stock method.  The weighted  average number
                  of shares used in computing earnings per share was 38,765,122,
                  including  5,200,940  Units which are considered  common stock
                  equivalents, and  13,361,992 for the three month periods ended
                  September 30, 1996 and 1995, respectively, and 27,723,006, in-
                  cluding  4,832,212  Units which are  considered  common  stock
                  equivalents,  and  13,324,269 for the nine month periods ended
                  September 30, 1996 and 1995, respectively.

         (m)      Cash Equivalents

                  For  the  purposes  of  reporting  cash  flows,   the  Company
                  considers  all highly  liquid  investments  with a maturity of
                  three  months  or less  at the  time  of  purchase  to be cash
                  equivalents.

         (n)      Use of Estimates

                  Management  of the Company has made a number of estimates  and
                  assumptions   relating   to  the   reporting   of  assets  and
                  liabilities  and  the  disclosure  of  contingent  assets  and
                  liabilities   to  prepare   these   financial   statements  in
                  conformity  with  generally  accepted  accounting  principles.
                  Actual results could differ from those estimates.


                             11
<PAGE>


                 CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)
--------------------------------------------------------------------------------

 (2)     Mortgages and Notes Payable

         Mortgages and notes payable  generally require monthly principal and/or
         interest  payments.  Following is a summary of the Company's  mortgages
         and notes  payable as of  September  30, 1996  (in thousands):

<TABLE>
<CAPTION>
                                                                      September 30,     
                                                                           1996         
                                                                    ------------------- 
<S>                                                                   <C>               
          Mortgages  payable to  The Northwestern Mutual Life
             Insurance  Company  (NML);  bearing  interest at
             rates ranging from 7.55 percent to 8.80 percent;
             interest   only  is  payable   monthly   through
             February  1,  1998;   thereafter  principal  and
             interest  payments  are due  monthly  based on a
             25-year amortization schedule through maturity
             in February, 2003.                                        $ 183,500         

          Mortgage payable to  NML;  bearing interest at 8.90
             percent monthly; principal and interest payments
             of $346 thousand  through maturity in June 2002;
             additional annual principal curtailments of $500
             thousand  are  due  through  2000, $2 million in
             2001 and $1 million in 2002.                                 38,471         

          Mortgages  payable  to  the  Aid  Association   for
             Lutherans  (AAL) under two notes;  $16.5 million
             note bearing  interest at 9.50 percent  requires
             monthly  principal and interest payments of $144
             thousand  through  maturity  on  July  1,  2017;
             callable  after  June  30,  2002 by  AAL;  $21.6
             million  note  bearing  interest at 8.25 percent
             requires monthly principal and interest payments
             of  $138  thousand  through maturity on July 15,
             2019; callable by AAL after July 1, 2004.                    32,694         

</TABLE>

                             12
<PAGE>


                 CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                      September 30,      
                                                                           1996          
                                                                    -------------------  

<S>                                                                    <C>               
          Note  payable  to  Morgan Guaranty Trust Company of
             New York, as agent for a group of banks;  $325.0
             million   unsecured   credit  facility   bearing
             interest,  as selected by the Company, at either
             (i) the higher of the prime interest rate or the
             sum of .5 percent  plus the  Federal  Funds Rate
             for such day or (ii) an  interest  rate equal to
             1.75 percent above LIBOR.                                   72,000          

          Mortgage  payable to Salomon Brothers Realty Corp.;
             bearing interest at 8.375 percent; principal and
             interest  payments  of  $221  thousand  are  due
             monthly through maturity in January 2006. *                 28,110          

          Mortgage  payable  to  CBA  Conduit, Inc.;  bearing
             interest at 7.96 percent; interest only payments
             of  $194  thousand  are  due   monthly   through
             maturity in December 2003.                                  29,250          

          Mortgage payable  to CIGNA; bearing interest at 7.4
             percent; interest only payments of $160 thousand
             are due monthly  through  maturity  in  December
             2000.                                                       26,000          

          Mortgage  payable  to  Metropolitan  Life Insurance
             Company;  bearing  interest  at  7.375  percent;
             principal  and interest payments of $72 thousand
             are due monthly through maturity in March 1999.              9,669          

          Mortgage  payable  to  The  Riggs  National Bank of
             Washington,   D.C.;  bearing  interest  at  7.50
             percent;  principal and interest payments of $49
             thousand are  due  monthly  through  maturity in
             February 1999.                                               6,375          
                                                                      ----------         
                                                                      $ 426,069          
                                                                      ==========         
</TABLE>

                             13
<PAGE>

                 CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)
--------------------------------------------------------------------------------

         As of September 30, 1996, the scheduled maturities of mortgages payable
         for years ended  December 31 are as follows (in thousands):

                               1996               $       547
                               1997                     2,413
                               1998                    76,348
                               1999                    20,408
                               2000                    31,450
                               Thereafter             294,903
                                                    -----------
                                                  $   426,069
                                                    ===========

         Restricted  cash and  cash  equivalents  primarily  consist  of  escrow
         deposits   required   by  lenders  to  be  used  for  future   building
         renovations,  tenant  improvements,  or as additional  collateral for a
         loan or for letters of credit.

         * This  mortgage  payable  is  held  by  Carr  Redmond  Corporation,  a
         wholly-owned  subsidiary  of the Company  which owns the  Redmond  East
         office   campus.   The  accounts  of  Carr  Redmond   Corporation   are
         consolidated in the Company's financial statements.




















                             14

<PAGE>
 

                 CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)
--------------------------------------------------------------------------------


(3)      Minority Interest

         In conjunction with the formation of the Company and its majority-owned
         subsidiary,  Carr  Realty,  L.P.,  persons  contributing  interests  in
         properties  to Carr  Realty,  L.P.  had the  right to elect to  receive
         either  common  stock of the Company or Units in Carr  Realty,  L.P. In
         addition,  the Company has acquired  certain assets since its formation
         by issuing dividend paying Units and non-dividend  paying Units of Carr
         Realty, L.P. and CarrAmerica Realty, L.P. The non-dividend paying Units
         are not entitled to any distributions until they automatically  convert
         into  dividend  paying  Units  at  various  dates in the  future.  Each
         dividend paying Unit, subject to certain restrictions,  may be redeemed
         for either one share of common  stock or, at the option of the Company,
         cash equal to the fair market  value of a share of common  stock at the
         time of the  redemption.  When a Unitholder  redeems a dividend  paying
         Unit for a share of common stock or cash,  minority interest is reduced
         and the  Company's  investment  in Carr  Realty,  L.P.  or  CarrAmerica
         Realty,  L.P., as the case may be, is  increased.  During the three and
         nine month  periods  ended  September  30,  1996,  11,310  and  173,695
         dividend  paying Units,  of Carr Realty,  L.P. or  CarrAmerica  Realty,
         L.P., respectively, were redeemed for common stock of the Company.

         The  following  table  sets  forth  the  operating   partnership  Units
         outstanding at September 30, 1996 and December 31, 1995:

                                                September 30,     December 31,
                                                     1996             1995
                                                ---------------   --------------
          Operating partnership Units
               owned by the Company               18,597,845        13,409,177

          Operating partnership Units
               owned by minority interest:
                   Dividend paying Units           4,304,725         4,079,615
                   Non-dividend paying Units       1,207,338           667,745
                                                --------------    -------------
          Total operating partnership
               Units outstanding                  24,109,908        18,156,537
                                                ==============    =============


         Minority interest in the accompanying  condensed consolidated financial
         statements   relates  primarily  to  holders  of  dividend  paying  and
         non-dividend paying Units.


(4)      Lease Agreements

         The Company receives minimum rentals under noncancelable tenant leases.
         Certain leases provide for additional rentals based on increases in the
         Consumer  Price Index (CPI) and  increases in operating  expenses.  The
         increased  rentals from  operating  expenses are  generally  payable in
         equal installments  throughout the year, based on estimated  increases,
         with any differences being adjusted in the succeeding year.

                             15

<PAGE>

                 CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)
--------------------------------------------------------------------------------

(5)      Transactions With Affiliates

         In May 1996,  the Company  purchased  the  development  business of The
         Oliver Carr Company for $1.75 million. The principal shareholder of The
         Oliver Carr Company is also a director,  officer and shareholder of the
         Company.


 (6)     Subsequent Events

         From  October 1, 1996 to November 1, 1996,  the Company has acquired 12
         operating  office  properties,  consisting  of  39  buildings  totaling
         approximately  1.4 million  square feet, one property  currently  under
         construction  totaling  128,000 square feet and land which will support
         the development of up to 95,000 square feet of additional office space.
         The total purchase price for the properties and land was  approximately
         $130  million.  The  purchase  of the  properties  was  financed by the
         assumption  of $22 million in debt,  the  issuance  of $1.5  million in
         shares of common stock of the Company and payment of $106.5  million in
         cash.

         On October 18,  1996,  the Company  signed an  agreement  to extend its
         borrowing capacity under its unsecured line of credit from $215 million
         to $325 million.

         On October 25,  1996,  the Company  sold  1,740,000  shares of Series A
         Cumulative  Convertible Redeemable Preferred Stock at $25.00 per share.
         The proceeds derived from the sale of preferred stock were used to fund
         a portion of  the  acquisition of a portfolio of properties  located in
         suburban Atlanta, Georgia.

 







                                       16





<PAGE>


           Management's Discussion and Analysis of Financial Condition
                    and Results of Operations of the Company
--------------------------------------------------------------------------------

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

         The  following   discussion   is  based   primarily  on  the  Condensed
Consolidated   Financial   Statements  of  CarrAmerica  Realty  Corporation  and
subsidiaries  (the Company) as of September 30, 1996 and December 31, 1995,  and
for the  three  and  nine  months  ended  September  30,  1996  and  1995.  This
information  should  be read in  conjunction  with  the  accompanying  condensed
consolidated  financial statements and notes thereto. These financial statements
include all  adjustments  which are, in the opinion of management,  necessary to
reflect a fair presentation of the results for the interim periods, and all such
adjustments are of a normal, recurring nature.

Results of Operations - Three Months Ended September 30, 1996 and 1995

Real Estate Operating Revenue

         Total real estate operating revenue increased $20.8 million,  or 81.8%,
to $46.1  million for the three months ended  September  30, 1996 as compared to
$25.4  million for the three months ended  September  30, 1995.  The increase in
revenue  was  primarily  attributable  to a  $19.8  million  and a $1.0  million
increase in rental revenue and real estate service  revenue,  respectively.  The
Company  experienced  net  growth  in its  rental  revenue  as a  result  of its
acquisitions  since the third  quarter of 1995 which  contributed  approximately
$21.6  million of  additional  rental  revenue in the three month  period  ended
September 30, 1996.  Rental revenue from  properties  that were fully  operating
throughout both periods  decreased by approximately  $1.8 million as a result of
increased vacancies experienced in these properties. Real estate service revenue
increased by $1.0 million,  or 37.7%,  for the three months ended  September 30,
1996 to $3.6  million as compared to $2.6  million  for the three  months  ended
September  30, 1995,  primarily as a result of  development  fees earned by Carr
Development & Construction, Inc., which was acquired by the Company in May 1996.

Real Estate Operating Expenses

         Total real estate  operating  expenses  increased $16.7 million for the
three months ended September 30, 1996, or 80.5%, to $37.5 million as compared to
$20.8 million for the three months ended September 30, 1995. The net increase in
operating  expenses  was  attributable  to a $5.9  million  increase in property
operating expenses,  a $2.3 million increase in interest expense, a $1.4 million
increase in general and administrative  expenses, and a $7.1 million increase in
depreciation and amortization.  The increase in property  operating expenses was
primarily attributable to property acquisitions since the third quarter of 1995.
The  increase  in  the  Company's  interest  expense  is  primarily  related  to
borrowings for acquisitions. The increase in general and administrative expenses
is  predominately  a  result  of the  addition  of new  staff to  implement  the
Company's new business  strategy,  the addition of approximately  $.6 million of
expenses  associated with Carr Development & Construction,  Inc., and inflation.
The increase in  depreciation  and  amortization  is  predominately  a result of
additional   depreciation   and   amortization  on  the  Company's  real  estate
acquisitions.

Other Operating Income (Expense)

         Other operating income increased $.3 million for the three months ended
September  30,  1996,  to $.5  million as  compared to $.2 million for the three
months ended September 30, 1995, primarily due to an increase in interest income
and the addition of equity in earnings of CC-JM II Associates.  The Company is a
50%  venturer  in this  entity,  which  constructed  the  Booz-Allen  & Hamilton
Building that was placed in service in January 1996.
  
                                       17

<PAGE>

           Management's Discussion and Analysis of Financial Condition
                    and Results of Operations of the Company
--------------------------------------------------------------------------------

 Net Income

         Net  income of $7.9  million  was  earned  for the three  months  ended
September  30, 1996 as compared to $3.4  million  during the three month  period
ended  September  30,  1995.  The  comparability  of net income  between the two
periods is impacted by the  acquisitions  the Company made and the other changes
described above.


Cash Flows

         Net cash provided by operating  activities  increased $20.6 million, or
320.4%,  to $27.0  million  for the three  months  ended  September  30, 1996 as
compared  to $6.4  million  for the  three  months  ended  September  30,  1995,
primarily as a result of the acquisitions made by the Company.  Net cash used by
investing  activities  increased $144.0 million, to $162.3 million for the three
months  ended  September  30, 1996 as  compared  to $18.3  million for the three
months ended  September 30, 1995,  primarily as a result of capital  deployed by
the  Company  for  acquisitions  of  office  properties,  land  held for  future
development  and  construction  in  process.  Net  cash  provided  by  financing
activities increased $130.9 million to $136.5 million for the three months ended
September  30, 1996 as compared to $5.6  million  provided  for the three months
ended  September  30, 1995,  primarily as a result of proceeds  from the sale of
common  stock,  partially  offset by net  repayments  on the  Company's  line of
credit.


Results of Operations - Nine Months Ended September 30, 1996 and 1995

Real Estate Operating Revenue

         Total real estate operating revenue increased $35.5 million,  or 47.7%,
to $109.9  million for the nine months ended  September  30, 1996 as compared to
$74.4  million for the nine months ended  September  30,  1995.  The increase in
revenue  was  primarily  attributable  to a  $34.0  million  and a $1.5  million
increase in rental revenue and real estate service  revenue,  respectively.  The
Company  experienced  net  growth  in its  rental  revenue  as a  result  of its
acquisitions  since the third  quarter of 1995 which  contributed  approximately
$36.8  million of  additional  rental  revenue in the nine  month  period  ended
September 30, 1996.  Rental revenue from  properties  that were fully  operating
throughout both periods decreased by approximately $2.8 million due to increased
vacancies experienced in those properties. Real estate service revenue increased
by $1.5 million,  or 19.6%, for the nine months ended September 30, 1996 to $9.3
million as compared to $7.7  million for the nine  months  ended  September  30,
1995.  The  increase  was  primarily  as a  result  of an  increase  in  leasing
commissions  earned in the first quarter of 1996 and development  fees earned by
Carr Development & Construction,  Inc., which was acquired by the Company in May
1996.

Real Estate Operating Expenses

         Total real estate  operating  expenses  increased $31.3 million for the
nine months ended  September 30, 1996, or 52.0%, to $91.6 million as compared to
$60.3 million for the nine months ended  September 30, 1995. The net increase in
operating  expenses was  attributable  to a $10.5  million  increase in property
operating expenses,  a $5.6 million increase in interest expense, a $2.8 million
increase in general and administrative expenses, and a $12.4 million increase in
depreciation and amortization.  The increase in property  operating expenses was
primarily  attributable  to $9.7 million in operating  expenses  associated with
property  acquisitions since September 30, 1995. Exclusive of operating expenses
attributable to new property acquisitions, property operating expenses increased
by $.8 million for the nine months ended September 30, 1996  predominately  as a
result of higher real estate tax assessments and repairs and maintenance  costs.
The  increase  in  the  Company's  interest  expense  is  primarily  related  to
borrowings for acquisitions. The increase in general and administrative expenses
is  predominately  a  result  of the  addition  of new  staff to  implement  the
Company's new business  strategy,  the addition of approximately $1.1 million of
expenses  associated with Carr Development & Construction,  Inc., and inflation.
The increase in  depreciation  and  amortization 

                                       18
<PAGE>

           Management's Discussion and Analysis of Financial Condition
                    and Results of Operations of the Company
--------------------------------------------------------------------------------

is  predominately a result of additional  depreciation  and  amortization on the
Company's real estate acquisitions.

Other Operating Income (Expense)

         Other operating  income increased $.9 million for the nine months ended
September  30,  1996,  to $1.6  million as  compared to $.7 million for the nine
months ended September 30, 1995; primarily due to an increase in interest income
and the addition of equity in earnings of CC-JM II Associates.  The Company is a
50%  venturer  in this  entity,  which  constructed  the  Booz-Allen  & Hamilton
Building that was placed in service in January 1996.

Net Income

         Net  income of $15.5  million  was  earned  for the nine  months  ended
September  30, 1996 as compared to $10.4  million  during the nine month  period
ended  September  30,  1995.  The  comparability  of net income  between the two
periods is impacted by the  acquisitions  the Company made and the other changes
described above.

Cash Flows

         Net cash provided by operating  activities  increased $23.0 million, or
94.4%, to $47.4 million for the nine months ended September 30, 1996 as compared
to $24.4 million for the nine months ended  September  30, 1995,  primarily as a
result of the  acquisitions  made by the  Company.  Net cash  used by  investing
activities increased $450.8 million, to $484.6 million for the nine months ended
September  30,  1996 as compared  to $33.8  million  for the nine  months  ended
September 30, 1995, primarily as a result of capital deployed by the Company for
acquisitions  of  office  properties,  land  held  for  future  development  and
construction  in process.  Net cash provided by financing  activities  increased
$443.4 million to $442.3 million for the nine months ended September 30, 1996 as
compared to $1.1  million  used for the nine months  ended  September  30, 1995,
primarily  as a result of  proceeds  from the sale of  common  stock and the net
borrowings necessary for the Company's acquisitions.


                                       19

<PAGE>


           Management's Discussion and Analysis of Financial Condition
                    and Results of Operations of the Company
-------------------------------------------------------------------------------

Liquidity and Capital Resources

         The  Company's  total  indebtedness  at  September  30, 1996 was $426.1
million, of which $72.0 million,  or 16.9%, had a LIBOR-based  floating interest
rate. The Company's fixed rate indebtedness had a weighted average interest rate
of 8.3% and had a weighted average term to maturity of 6.2 years. In addition to
the indebtedness outstanding,  the Company can borrow up to an additional $143.0
million under its unsecured  revolving  line of credit which bears a LIBOR-based
floating  interest  rate (see  below).   Based upon the  Company's  total market
capitalization  at September  30, 1996 of $1,450.7  million (the stock price was
$25.00 per share and the total  shares/Units  outstanding were  40,985,556,  the
Company's debt represented 29.4% of its total market capitalization. 

         On October 18, 1996, the Company expanded its unsecured credit facility
from $215 million to $325 million. The Company intends to use the line of credit
to finance acquisitions and development activities, for capital expenditures and
for  working  capital  purposes.  The Company  has drawn  $145.0  million on its
unsecured  line  of  credit  in  conjunction  with  various  acquisitions  since
September 30, 1996.

         The Company's  operating  properties  require  periodic  investments of
capital  for  tenant-related   capital  expenditures  and  for  general  capital
improvement projects. The Company has recently completed large-scale renovations
of  certain of the  Company's  Washington,  D.C.  properties  to  improve  these
properties'  market  position and to bring the properties  into  compliance with
certain new local and  federal  laws.  As a result,  the  Company  expects  that
general capital  expenditures for its Washington,  D.C. properties will be lower
than the  general  capital  expenditures  the  Company  has  incurred  for these
properties over the last three years.  The Company has recently begun renovating
several garages at its Washington, D.C. properties at an estimated total cost of
approximately  $3.5  million,   or  $1.45  per  square  foot  of  the  Company's
Washington,  D.C. properties,  to be spent over the next two years. Exclusive of
the  garage  renovations,   general  capital   expenditures  for  the  Company's
Washington,  D.C.  properties are expected to be  approximately  $1.0 million or
less  annually, or $.40 or less per  square  foot annually.  With respect to the
Company's  recent  acquisitions in select  suburban growth markets,  the Company
expects  that the  annual  capital  expenditures  for these  properties  will be
substantially  less than the  Company  has  incurred  for its  Washington,  D.C.
properties.  Based on  current  market  conditions  in its target  markets,  the
Company  expects  that  tenant-related   capital  expenditures  for  its  recent
acquisitions  will be  approximately  $7.75 to $8.25 per square  foot leased for
leases entered into in the next 12 months.  The Company expects that this amount
should decline if market  conditions in its target markets  continue to improve.
The  Company   believes   that  general   capital   expenditures   will  average
approximately  $.30 per  square  foot  owned on an annual  basis for its  recent
acquisitions.  The Company anticipates  funding the capital  requirements of its
Washington,  D.C.  properties  and of its new  acquisitions  with cash flow from
operations and, if necessary, with proceeds from its line of credit.

         The Company's estimates regarding capital  expenditures set forth above
are forward-looking  information representing the Company's best estimates based
on currently available information.  As with any estimates,  they are based on a
number of assumptions,  any of which, if unrealized,  could adversely affect the
accuracy  of the  estimates.  These  assumptions  include  that (i) the  Company
experiences  tenant retention rates consistent with its  expectations,  (ii) the
supply/demand  characteristics  for office space in the Company's target markets
do  not  vary  materially  from  the  Company's   expectations,   (iii)  leasing
commissions  associated with obtaining new tenants or retaining existing tenants
are consistent  with the Company's past experience and future  expectation,  and
(iv) the Company does not acquire operating office properties in the future that
require substantial renovations.

                                       20
<PAGE>

           Management's Discussion and Analysis of Financial Condition
                    and Results of Operations of the Company
-------------------------------------------------------------------------------

         Net cash  provided by operating  activities  was $27.0  million for the
three months ended  September  30, 1996,  compared to $6.4 million for the three
months ended  September 30, 1995. The increase in net cash provided by operating
activities  was  primarily  as a result  of  acquisitions  made by the  Company,
partially offset by decreased net income at certain of its operating properties.
The Company's investing  activities used approximately  $162.3 million and $18.3
million for the three months ended  September  30, 1996 and 1995,  respectively.
The  Company's  investment   activities  included  the  acquisitions  of  office
buildings, land held for development,  and additions to construction in process,
for approximately  $157.4 million for the three months ended September 30, 1996,
as compared  to $18.4  million in  acquisitions  during the same period in 1995.
Additionally,  the Company invested  approximately $3.9 million and $2.7 million
in the existing real estate assets for the three months ended September 30, 1996
and 1995, respectively. Exclusive of distributions to the Company's shareholders
and minority interests,  the Company's financing activities provided net cash of
$153.8  million and $13.3 million for the three months ended  September 30, 1996
and 1995  respectively.  For the three months  ended  September  30,  1996,  the
Company raised $216.7 million through the sale of common stock which was used to
repay  $62.0  million  of its line of credit and to fund  acquisitions.  For the
three months ended September 30, 1995, the Company borrowed  approximately $14.3
million to provide adequate capital for the Company's investing activities.

         Net cash  provided by operating  activities  was $47.4  million for the
nine months ended  September  30, 1996,  compared to $24.4  million for the nine
months ended  September 30, 1995. The increase in net cash provided by operating
activities  was  primarily  as a result  of  acquisitions  made by the  Company,
partially offset by decreased net income at certain of its operating properties.
The Company's investing  activities used approximately  $484.6 million and $33.8
million for the nine months ended September 30, 1996 and 1995, respectively. The
Company's  investment  activities included the acquisitions of office buildings,
land held for future  development  and additions to  construction in process for
approximately  $469.6  million  and  the  acquisition  of  real  estate  service
contracts for approximately $1.8 million for the nine months ended September 30,
1996, as compared to acquisition  activity of $18.4 million of office  buildings
and $7.4  million of real  estate  service  contracts  during the same period in
1995.  Additionally,  the Company invested  approximately  $5.8 million and $7.7
million in the existing real estate  assets for the nine months ended  September
30, 1996 and 1995,  respectively.  Exclusive of  distributions  to the Company's
shareholders and minority interests, the Company's financing activities provided
net cash of $475.0 million and $22.1 million for the nine months ended September
30, 1996 and 1995  respectively.  For the nine months ended  September 30, 1996,
the Company  raised $461.3  million  through the sale of common stock,  borrowed
$72.0  million  on the  Company's  line of credit and  repaid  $56.4  million of
indebtedness to provide adequate capital for the Company's investing activities,
as compared to  approximately  borrowing $24.0 million for the nine months ended
September 30, 1995.

         Rental revenue and real estate service  revenue have been the principal
sources of capital to fund the Company's  operating  expenses,  debt service and
capital expenditures,  excluding nonrecurring capital expenditures.  The Company
believes that rental  revenue and real estate  service  revenue will continue to
provide the  necessary  funds for its operating  expenses and debt service.  The
Company  expects  to fund  capital  expenditures,  including  tenant  concession
packages and building  renovations from (a) available cash flow from operations;
(b)  existing  capital  reserves;  and  (c)  if  necessary,   credit  facilities
established   with  third  party   lenders.   If  these  sources  of  funds  are
insufficient,  the Company's ability to make expected dividends may be adversely
impacted. At September 30, 1996, the Company had cash of $22.9 million, of which
$8.6 million was restricted.

         The Company's  dividends are paid  quarterly.  Amounts  accumulated for
distribution  will  predominately  be  invested  by the  Company  in  short-term
investments  that  are   collateralized  by  securities  of  the  United  States
Government or any of its agencies.

                                       21
<PAGE>


           Management's Discussion and Analysis of Financial Condition
                    and Results of Operations of the Company
-------------------------------------------------------------------------------

         Management  believes  that the Company  will have access to the capital
resources necessary to expand and develop its business. Accordingly, the Company
may seek to obtain funds through  additional equity  offerings,  joint ventures,
asset sales,  or debt  financing in a manner  consistent  with its  intention to
operate with a  conservative  borrowing  policy.  The Company  anticipates  that
adequate  cash  will be  available  to fund  its  operating  and  administrative
expenses,  to continue debt service obligations,  to pay dividends in accordance
with REIT requirements, and to acquire additional rental properties.

         The  Company  believes  that funds from  operations  is an  appropriate
measure of the  performance  of an equity REIT because  industry  analysts  have
accepted it as a  performance  measure of equity REITs.  In accordance  with the
final  NAREIT White Paper on Funds From  Operations  as approved by the Board of
Governors  of NAREIT on March 3, 1995,  funds  from  operations  represents  net
income  (loss)  (computed  in  accordance  with  generally  accepted  accounting
principles),  excluding  gains  (losses)  from  debt  restructuring  or sales of
property,  plus depreciation and amortization of assets uniquely  significant to
the real estate industry and after adjustments for  unconsolidated  partnerships
and  joint  ventures.  Adjustments  for  unconsolidated  partnerships  and joint
ventures will be calculated to reflect funds from  operations on the same basis.
The Company's  funds from  operations for the three and nine month periods ended
September 30, 1995 have been restated to conform to the new NAREIT definition of
funds from  operations.  Funds from  operations does not represent net income or
cash flows  generated  from  operating  activities in accordance  with generally
accepted  accounting  principles  and should not be considered an alternative to
net income as an indication of the Company's  performance  or to cash flows as a
measure of liquidity or the Company's ability to make distributions.

         The following  table provides the  calculation  of the Company's  funds
from  operations  for the three and nine month periods ended  September 30, 1996
and 1995 (in thousands):

<TABLE>
<CAPTION>
                                                       Three Months Ended         Nine Months Ended
                                                          September 30,             September 30,
                                                     ------------------------    ---------------------

                                                         1996        1995          1996        1995
                                                         ----        ----          ----        ----
<S>                                                   <C>             <C>        <C>         <C>   

      Net income before minority interest and
          extraordinary item                          $ 9,203         4,879      $ 19,881    14,885


      Adjustments to derive funds from operations:
          Add:
             Depreciation and amortization             10,974         4,327        24,171    12,650
          Deduct:
             Minority interests' (non Unitholders)
             share of depreciation, amortization and 
             net income                                  (146)         (408)         (763)   (1,327) 
                                                      -------         ------         -----   ------  
      Funds from operations before allocation to     
          the minority Unitholders                     20,031         8,798        43,289    26,208
      Less:  Funds from operations allocable to the
          minority Unitholders                         (2,390)       (2,076)       (6,761)   (6,240)
                                                     ---------       -------       -------   -------
      Funds from operations allocable
          to CarrAmerica Realty Corporation          $ 17,641         6,722      $ 36,528    19,968
                                                     ========         =====      ========    ======
</TABLE>

         Changes in funds from operations are largely attributable to changes in
net income between the periods as previously discussed.

                                       22
<PAGE>


           Management's Discussion and Analysis of Financial Condition
                    and Results of Operations of the Company
-------------------------------------------------------------------------------

Building and Lease Information

         The following table sets forth certain lease related  information about
each operating property as of September 30, 1996:
<TABLE>
<CAPTION>

                                          Company's                                    
                                          Effective           Net                      
                                           Property      Rentable Area      Percent    
Property                                  Ownership    (Square Feet) (1)   Leased (2)  
--------                                  ---------    -----------------   ----------  

<S>                                           <C>          <C>                 <C>     
Consolidated Properties
-----------------------
Washington, D.C.:
International Square (3 Properties)           100.0 %      1,017,899           90.7 %  
1730 Pennsylvania Avenue                      100.0          229,500           96.2    
2550 M Street                                 100.0          187,931          100.0    
1775 Pennsylvania Avenue                      100.0          143,981           99.1    
900 19th Street                               100.0          101,186           89.3    
1747 Pennsylvania Avenue                       89.7          152,314           74.9    
1255 23rd Street                               75.0          303,831           70.3    
2445 M Street                                  74.0          266,902           89.4    

Suburban Maryland:
One Rock Spring Plaza                         100.0          205,298           98.3    

Northern Virginia:
Tycon Courthouse                              100.0          414,595           96.5    
Three Ballston Plaza                          100.0          302,797           99.1    
Reston Quadrangle (3 Properties)              100.0          261,175           99.8    
Parkway One                                   100.0           87,842          100.0    

Southern California:
Scenic Business Park (4 Properties)           100.0          137,436           89.7    
Harbor Corporate Park(4 Properties)           100.0          149,938           54.1    
Plaza PacifiCare                              100.0          104,377          100.0    
Katella Corporate Center                      100.0           80,204           92.7    
Warner Center (12 Properties)                 100.0          342,959           94.5    

Northern, California:
AT&T Center (6 Properties)                    100.0        1,082,032          100.0    
Sunnyvale Research Plaza (3 Properties)       100.0          126,000          100.0    

Denver :
Harlequin Plaza (2 Properties)                100.0          327,623           94.4    
Quebec Court I & II (2 Properties)            100.0          285,829          100.0    
The Quorum (2 Properties)                     100.0          123,900           80.8    
Greenwood Center                              100.0           74,853           94.1    
Quebec Center (3 Properties)                  100.0          106,786           97.7    

Seattle:
Redmond East (10 Properties)                  100.0          400,297           98.1    

Suburban Chicago:
Parkway North (2 Properties)                  100.0          514,029           96.4    

Austin, Texas:
Norwood Tower                                 100.0          111,444           86.5    
Littlefield Complex (2 Properties)            100.0          128,625           46.9    
First State Bank Tower                        100.0          268,244           68.0    
Great Hills Plaza                             100.0          135,335           87.3    
Balcones Center                               100.0           75,761           83.5    
Park North (2 Properties)                     100.0          132,935           98.3    
The Settings (3 Properties)                   100.0          136,183           95.3    


Total Consolidated Properties:                             8,520,041
                                                           =========
Weighted Average                                                                92.0   
</TABLE>
                                       23
<PAGE>



           Management's Discussion and Analysis of Financial Condition
                    and Results of Operations of the Company
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                          Company's                                     
                                          Effective           Net                       
                                           Property      Rentable Area      Percent     
Property                                  Ownership    (Square Feet) (1)   Leased (2)   
--------                                  ---------    -----------------   ----------   

<S>                                           <C>           <C>                <C>      
Unconsolidated Properties:
--------------------------
Washington, DC:
AARP Headquarters                             24.0          477,187            98.9     
Bond Building                                 15.0          162,097           100.0     
1776 Eye Street                                5.0          212,774            92.8     
Willard Office/Hotel                           5.0          242,787            93.0     
1575  Eye Street                               2.0          205,441            52.5     

Virginia:
Booz-Allen & Hamilton Building                50.0          222,989           100.0     
                                                         ----------           -----     

Total Unconsolidated Properties:                          1,523,275
                                                          ---------
Weighted Average                                                               91.1     
                                                                             ======     

All Operating Properties
Total:                                                   10,043,316
                                                         ----------
Weighted Average                                                               91.9     
                                                                             ======     
</TABLE>

------------
(1) Excludes storage space.

(2) Includes space for leases that have been  executed and have  commenced as of
    September 30, 1996.

         The  following  table sets forth a schedule  of lease  expirations  for
executed  leases as of September  30, 1996,  for each of the 10 years  beginning
with 1996, for the 81 operating properties  consolidated for financial statement
purposes, assuming that no tenants exercise renewal options:

                                                               Percent of Total
                                      Net Rentable              Leased Square
           Year of                   Area Subject to               Footage
            Lease                    Expiring Leases           Represented by
         Expiration                   (Square Feet)           Expiring Leases*
       ----------------             ------------------        ------------------

           1996                           235,632                   3.0 %
           1997                           673,759                   8.6
           1998                         1,608,517                  20.5
           1999                           846,018                  10.8
           2000                           764,188                   9.7
           2001                           913,225                  11.6
           2002                           791,723                  10.1
           2003                           484,965                   6.2
           2004                           227,022                   2.9
           2005                           342,593                   4.4
           and thereafter                 958,345                  12.2
                                      =============              =========
------------
*  Excludes  674,064 square feet of space vacant and uncommitted as of September
   30, 1996.

                                       24
<PAGE>


           Management's Discussion and Analysis of Financial Condition
                    and Results of Operations of the Company
-------------------------------------------------------------------------------

         The following  table sets forth certain  lease-related  information for
the  consolidated  operating  properties  presented  in order  to show  downtown
Washington,  D.C. operating properties separate from other operating properties.
The table  presents  leases that  commenced  during the twelve month period from
October 1, 1995 to  September  30,  1996,  excluding  the  leases for  operating
properties that were executed prior to the date of acquisition:
<TABLE>
<CAPTION>
    
                                                        Calculated on a Weighted Average Basis
                                          --------------------------------------------------------------------

Downtown                                     Tenant         
Washington, D.C.                          Improvements      Base      
Properties                    Total          & Cash         Rent                                    Leasing
                             Square        Allowances        per        Lease       Abatements     Commission
                              Feet            per          Square      Life in          in         Per Square
Type of Lease               Leased        Square Foot       Foot        Years         Months          Foot   
--------------              ------        -----------      ------     ---------    -----------   ------------        


<S>                         <C>        <C>                <C>            <C>           <C>          <C>    
Office                      103,094    $     29.09        $   31.38      8.6           3.1          $  7.36
Retail                       10,765           4.16            26.25      3.8           1.6             2.88
                           ------------
Total                       113,859          26.73            30.90      8.2           3.0             6.94
                           ============  ===============    ========   =======    =============   =============

New leases or
  expansion space            55,996          27.34            30.46      6.6           2.3             5.33
Renewals of existing
  tenants' space             57,863          26.14            31.33      9.7           3.6             8.49
                           ------------
Total                       113,859          26.73            30.90      8.2           3.0             6.94
                           ============  ===============    ========   =======    =============   =============


                                                          Calculated on a Weighted Average Basis
                                          --------------------------------------------------------------------
                                         
                                             Tenant         
All Other Operating                       Improvements      Base      
Properties                    Total          & Cash         Rent                                    Leasing
                             Square        Allowances        per        Lease       Abatements     Commission
                              Feet            per          Square      Life in          in         Per Square
Type of Lease               Leased        Square Foot       Foot        Years         Months           Foot     
--------------              ------        -----------     -------      -------     -----------     ----------        


Office                      161,446    $      3.61        $   17.42      4.1           0.7          $  0.28
Retail                            0           0.00             0.00      0.0           0.0             0.00
                           ------------
Total                       161,446           3.61            17.42      4.1           0.7             0.28
                           ============  ===============    ========   =======    =============   =============

New leases or
  expansion space            96,425           6.03            16.93      5.1           1.2             0.48
Renewals of existing
  tenants' space             65,021           0.03            18.15      2.5           0.0             0.00
                           ------------
Total                       161,446           3.61            17.42      4.1           0.7             0.28
                           ============  ===============    ========   =======    =============================

</TABLE>

                                       25



<PAGE>
                                     Part II

OTHER INFORMATION

Item 1.    Legal Proceedings.

                  None

Item 2.    Changes in Securities.

                  None

Item 3.    Defaults Upon Senior Securities.

                  None

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

                  None

Item 5.    Other Information.

           On October 25, 1996, the Board of Directors of the Company  adopted a
Second  Amendment and Restatement of By-Laws which  incorporated  all previously
approved  amendments  to the By-Laws and two new  amendments:  an  amendment  of
Section 3.01 of the By-Laws to provide that the annual  Meeting of  Stockholders
of the  Corporation  shall be held each year  between  May 1 and May 31; and the
amendment of Section 3.02 of the By-Laws to provide  that,  in  accordance  with
recent  legislation  from the State of Maryland (H.B. 636), a special meeting of
stockholders  called at the request of stockholders must be requested by holders
of 35% or more of the issued  and  outstanding  shares of  capital  stock of the
Corporation  entitled to vote at the meeting. A copy of the Second Amendment and
Restatement of By-Laws is attached as Exhibit 3.1 to this Form 10-Q.

           On October  24,  1996,  the  Company  filed with the  Maryland  State
Department  of  Assessments  and  Taxation  Articles Supplementary  of  Series A
Cumulative  Convertible  Redeemable  Preferred  Stock (the  "Series A  Preferred
Stock") in connection with the sale, on October 25, 1996, of 1,740,000 shares of
the Series A Preferred  Stock. A copy of the Articles  Supplementary is attached
as Exhibit 4.1 to this Form 10-Q.

           On  November  1, 1996,  the  Company  acquired  38  operating  office
buildings  and one office  building  currently  under  construction  in Atlanta,
Georgia  and one  operating  property  located  in Boca  Raton,  Florida  for an
aggregate  purchase price of approximately  $128 million.  The consideration for
these  acquisitions  was paid through a combination of cash,  issuance of common
stock of the Company and the  assumption  of  approximately  $22 million in debt
that  bears  interest  at an annual  rate of 7.2% and  matures  in 2006.  The 39
operating office  properties (the "Peterson  Portfolio")  contain  approximately
1,437,000  square feet of space.  The building under  construction  will contain
approximately 128,000 square feet when completed.

           The  historical   financial   statements  relating  to  the  Peterson
Portfolio required by Item 7 (a) of Form 8-K were filed with the Commission on a
Current Report on Form 8-K on October 24, 1996. It is impracticable at this time
to file the pro forma financial  information  relating to the Peterson Portfolio
required  by Item 7 (b) of Form 8-K.   The  Company  will  file  such pro  forma
financial statements  with the Commission as soon as they are  available but not
later than January 14, 1997.

                                       26
<PAGE>

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

    (a)    Exhibits
           --------

           3.1    Second  Amendment  and  Restatement  of By-Laws of CarrAmerica
                  Realty Corporation dated as of October 25, 1996.

           4.1    Articles Supplementary of  Series A Cumulative Convertible Re-
                  deemeable Preferred Stock

           27     Financial Data Schedule

    (b)    Reports on Form 8-K
           -------------------

           a.     Current Report on Form 8-K dated October 16, 1996 and filed on
                  October  16, 1996  relating to the closing of the  purchase of
                  the Littlefield  Portfolio  located  in  Austin, Texas and pro
                  forma financial statements.

           b.     Current Report on Form 8-K dated October 24, 1996 and filed on
                  October 24, 1996 relating to certain historical  summaries and
                  pro forma financial information.

           c.     Current Report as Form 8-K dated October 24, 1996 and filed on
                  October 24, 1996  relating  to  the  sale  by  the  Company of
                  1,740,000  shares of Series A Cumulative Convertible Preferred
                  Stock.

                                       27



<PAGE>



                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


CARRAMERICA REALTY CORPORATION




/s/ Thomas A. Carr
-------------------------------
Thomas A. Carr, President and
Chief Operating Officer




/s/ Brian K. Fields
----------------------------------------
Brian K. Fields, Chief Financial Officer




Date:    November 5, 1996


                                       28

<PAGE>


                                  Exhibit Index


Exhibit         Description     
-------         -----------                                               
   
3.1               Second  Amendment and  Restatement  of  By-Laws of CarrAmerica
                  Realty Corporation dated as of October 25, 1996.

4.1               Articles  Supplementary  of   Series  A Cumulative Convertible
                  Redeemeable Preferred Stock

27                Financial Data Schedule
















                                       29