<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549


                                   FORM 10-Q


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


                        FOR QUARTER ENDED June 30, 2001
                                          -------------

                          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
    incorporation or organization)                Identification Number)



                  1850 K Street, N.W., Washington, D.C.  20006
     ----------------------------------------------------------------------
               (Address or principal executive office) (Zip code)


      Registrant's telephone number, including area code    (202) 729-1000
                                                            --------------


                                      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  August 3, 2001:

           Common Stock, par value $.01 per share: 62,563,351 shares
     ----------------------------------------------------------------------

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
                                     -----



Part I: Financial Information                                          Page
-----------------------------                                          ----

Item 1. Financial Statements

        Consolidated balance sheets of CarrAmerica Realty
        Corporation and subsidiaries as of June 30, 2001
        (unaudited) and December 31, 2000.......................         4

        Consolidated statements of operations of CarrAmerica
        Realty Corporation and subsidiaries for the three
        months and six months ended June 30, 2001 and 2000
        (unaudited).............................................    5 to 6

        Consolidated statements of cash flows of CarrAmerica
        Realty Corporation and subsidiaries for the six months
        ended June 30, 2001 and 2000 (unaudited)................         7

        Notes to consolidated financial statements (unaudited)..   8 to 13

        Independent Accountants' Review Report..................        14

Item 2. Management's Discussion and Analysis of Financial
        Condition and Results of Operations.....................  15 to 20

Item 3. Quantitative and Qualitative Disclosures About
        Market Risk.............................................        21


Part II: Other Information
--------------------------

Item 4. Submission of Matters to a Vote of Security Holders.....        22

Item 6. Exhibits and Reports on Form 8-K........................        22

                                       2
<PAGE>

                                     Part I
                                     ------


Item 1.  Financial Information
         ---------------------

The information furnished in our accompanying consolidated balance sheets,
consolidated statements of operations and consolidated statements of cash flows
reflect all adjustments which are, in our opinion, necessary for a fair
presentation of the aforementioned financial statements for the interim periods.

The financial statements should be read in conjunction with the notes to the
financial statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations in our December 31, 2000 Annual Report on
Form 10-K. The results of operations for the six months ended June 30, 2001 are
not necessarily indicative of the operating results to be expected for the full
year.

                                       3
<PAGE>

               CARRAMERICA REALTY CORPORTATION AND SUBSIDIARIES
     Consolidated Balance Sheets As Of June 30, 2001 and December 31, 2000
--------------------------------------------------------------------------------

(in thousands, except share amounts)

<TABLE>
<CAPTION>
                                                                                 June 30,          December 31,
                                                                                   2001                2000
                                                                             -----------------   -----------------
                                                                                (unaudited)
<S>                                                                        <C>                 <C>
Assets
------
Rental property:
      Land                                                                  $         644,799   $         644,326
      Buildings                                                                     1,825,629           1,836,214
      Tenant improvements                                                             338,606             325,936
      Furniture, fixtures and equipment                                                 3,521               6,844
                                                                             -----------------   -----------------
                                                                                    2,812,555           2,813,320
      Less: Accumulated depreciation                                                 (422,617)           (381,260)
                                                                             -----------------   -----------------
           Total rental property                                                    2,389,938           2,432,060

Land held for development or sale                                                      44,599              47,984
Construction in progress                                                               32,549              48,300
Cash and cash equivalents                                                              14,482              24,704
Restricted deposits                                                                     7,288              39,482
Accounts and notes receivable                                                          32,374              70,693
Investments in unconsolidated entities                                                153,468             269,193
Accrued straight-line rents                                                            59,189              54,960
Tenant leasing costs, net                                                              52,030              54,522
Deferred financing costs, net                                                           9,760              11,311
Prepaid expenses and other assets, net                                                 25,495              19,632
                                                                             -----------------   -----------------
                                                                            $       2,821,172   $       3,072,841
                                                                             =================   =================

Liabilities, Minority Interest, and Stockholders' Equity
--------------------------------------------------------
Liabilities:
      Mortgages and notes payable                                           $       1,109,778   $       1,211,158
      Accounts payable and accrued expenses                                            64,778              96,147
      Rents received in advance and security deposits                                  29,892              29,143
                                                                             -----------------   -----------------
           Total liabilities                                                        1,204,448           1,336,448

Minority interest                                                                      85,993              89,687

Stockholders' equity:
      Preferred stock, $.01 par value, authorized 35,000,000 shares:
           Series A Cumulative Convertible Redeemable Preferred Stock,
                80,000 and 480,000 shares issued and outstanding at June 30,
                2001 and December 31, 2000, respectively, with an aggregate
                liquidation preference of $2,000 and $12,000 respectively.                  1                   5
           Series B, C, and D Cumulative Redeemable Preferred Stock,
                8,800,000 shares issued and outstanding with an aggregate
                liquidation preference of $400,000.                                        88                  88
      Common Stock, $.01 par value, authorized 180,000,000 shares
           issued and outstanding 62,082,448 shares at June 30,
           2001 and 65,017,623 shares at December 31, 2000.                               621                 650
      Additional paid-in capital                                                    1,653,396           1,755,985
      Cumulative dividends in excess of net income                                   (123,375)           (110,022)
                                                                             -----------------   -----------------
           Total stockholders' equity                                               1,530,731           1,646,706
                                                                             -----------------   -----------------

Commitments and contingencies

                                                                            $       2,821,172   $       3,072,841
                                                                             =================   =================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       4
<PAGE>

                CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
                     Consolidated Statements of Operations
               For the Three Months Ended June 30, 2001 and 2000
--------------------------------------------------------------------------------

(Unaudited and in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                 2001              2000
                                                                            --------------    --------------
<S>                                                                         <C>               <C>
Operating revenues:
     Rental revenue:
        Minimum base rent                                                    $    105,802      $    115,303
        Recoveries from tenants                                                    14,683            17,505
        Parking and other tenant charges                                            3,338             6,319
                                                                            --------------    --------------
            Total rental revenue                                                  123,823           139,127
     Real estate service revenue                                                    9,703             5,312
                                                                            --------------    --------------
            Total operating revenues                                              133,526           144,439
                                                                            --------------    --------------

Operating expenses:
     Property expenses:
        Operating expenses                                                         28,433            31,930
        Real estate taxes                                                          10,050            12,572
     Interest expense                                                              21,136            25,115
     General and administrative                                                    11,939            12,001
     Depreciation and amortization                                                 30,820            35,170
                                                                            --------------    --------------
            Total operating expenses                                              102,378           116,788
                                                                            --------------    --------------
            Real estate operating income                                           31,148            27,651
                                                                            --------------    --------------

Other income:
     Interest income                                                                1,023               873
     Equity in earnings of unconsolidated entities                                  3,674             1,267
                                                                            --------------    --------------
            Total other income                                                      4,697             2,140
                                                                            --------------    --------------

            Income from continuing operations before income taxes, minority
            interest, and (loss) gain on sale of assets and other
            provisions, net                                                        35,845            29,791

Income taxes                                                                         (187)                -
Minority interest                                                                  (3,076)           (2,353)
(Loss) gain on sale of assets and other provisions, net                               (22)            2,387
                                                                            --------------    --------------
            Income from continuing operations                                      32,560            29,825

Discontinued operations - Income from executive suites operations
     (net of applicable income tax expense of $1,083 )                                  -             1,836
Discontinued operations - Gain on sale of discontinued operations
     (net of applicable income tax expense of $21,131)                                  -            31,852
                                                                            --------------    --------------

            Net income                                                       $     32,560      $     63,513
                                                                            ==============    ==============

     Basic net income per common share:
        Income from continuing operations                                    $       0.39      $       0.31
        Discontinued operations                                                         -              0.03
        Gain on sale of discontinued operations                                         -              0.48
                                                                            --------------    --------------
            Net income                                                       $       0.39      $       0.82
                                                                            ==============    ==============

     Diluted net income per common share:
        Income from continuing operations                                    $       0.38      $       0.31
        Discontinued operations                                                         -              0.03
        Gain on sale of discontinued operations                                         -              0.43
                                                                            --------------    --------------
            Net income                                                       $       0.38      $       0.77
                                                                            ==============    ==============
</TABLE>


See accompanying notes to consolidated financial statements.

                                       5
<PAGE>

                CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
                     Consolidated Statements of Operations
                For the Six Months Ended June 30, 2001 and 2000
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                 2001              2000
                                                                            --------------    --------------
<S>                                                                         <C>               <C>
Operating revenues:
     Rental revenue:
        Minimum base rent                                                    $    212,012      $    229,183
        Recoveries from tenants                                                    28,724            34,339
        Parking and other tenant charges                                            6,876            12,230
                                                                            --------------    --------------
            Total rental revenue                                                  247,612           275,752
     Real estate service revenue                                                   19,840            10,253
                                                                            --------------    --------------
            Total operating revenues                                              267,452           286,005
                                                                            --------------    --------------

Operating expenses:
     Property expenses:
        Operating expenses                                                         60,474            64,212
        Real estate taxes                                                          19,617            24,518
     Interest expense                                                              41,996            52,005
     General and administrative                                                    26,340            21,773
     Depreciation and amortization                                                 61,645            67,319
                                                                            --------------    --------------
            Total operating expenses                                              210,072           229,827
                                                                            --------------    --------------
            Real estate operating income                                           57,380            56,178
                                                                            --------------    --------------

Other income:
     Interest income                                                                2,127             1,750
     Equity in earnings of unconsolidated entities                                  7,028             2,716
                                                                            --------------    --------------
            Total other income                                                      9,155             4,466
                                                                            --------------    --------------

            Income from continuing operations before income taxes, minority
            interest, and gain on sale of assets and other
            provisions, net                                                        66,535            60,644

Income taxes                                                                         (234)                -
Minority interest                                                                  (4,529)           (5,408)
Gain on sale of assets and other provisions, net                                    1,054             7,741
                                                                            --------------    --------------

            Income from continuing operations                                      62,826            62,977

Discontinued operations - Income from executive suites operations
     (net of applicable income tax expense of $1,300 )                                  -               456
Discontinued operations - Gain on sale of discontinued operations
     (net of applicable income tax expense of $21,131)                                  -            31,852
                                                                            --------------    --------------

            Net income                                                       $     62,826      $     95,285
                                                                            ==============    ==============

     Basic net income per common share:
        Income from continuing operations                                    $       0.73      $       0.68
        Discontinued operations                                                         -                 -
        Gain on sale of discontinued operations                                         -              0.48
                                                                            --------------    --------------
            Net income                                                       $       0.73      $       1.16
                                                                            ==============    ==============

     Diluted net income per common share:
        Income from continuing operations                                    $       0.71      $       0.68
        Discontinued operations                                                         -                 -
        Gain on sale of discontinued operations                                         -              0.44
                                                                            --------------    --------------
            Net income                                                       $       0.71      $       1.12
                                                                            ==============    ==============
</TABLE>


See accompanying notes to consolidated financial statements.

                                       6
<PAGE>

                CARRAMERICA REALTY CORPORATION AND SUBSIDIARIES
                     Consolidated Statements of Cash Flows
                For the Six Months Ended June 30, 2001 and 2000
--------------------------------------------------------------------------------

(Unaudited and in thousands)

<TABLE>
<CAPTION>
                                                                                            2001              2000
                                                                                       ----------------  ----------------
<S>                                                                                    <C>               <C>
Cash flows from operating activities:
     Net income                                                                          $      62,826     $      95,285
     Adjustments to reconcile net income to net cash provided by operating activities:
        Depreciation and amortization                                                           61,645            67,370
        Minority interest                                                                        4,529             5,408
        Equity in earnings of unconsolidated entities                                           (7,028)           (2,716)
        Gain on sale of assets and other provisions, net                                        (1,054)           (7,741)
        Income and gain on sale of discontinued operations                                           -           (32,308)
        Provision for uncollectible accounts                                                     4,703             1,549
        Stock based compensation                                                                 1,469             1,553
        Other                                                                                      264            (1,140)
     Changes in assets and liabilities:
        Decrease (increase) in accounts receivable                                              16,140            (5,689)
        Increase in accrued straight-line rents                                                 (5,417)           (6,466)
        Additions to tenant leasing costs                                                       (5,519)           (9,059)
        Increase in prepaid expenses and other assets                                           (7,866)           (9,876)
        Decrease in accounts payable and accrued expenses                                      (32,221)           (5,080)
        Increase in rent received in advance and security deposits                               1,279             3,095
                                                                                       ----------------  ----------------
            Total adjustments                                                                   30,924            (1,100)
                                                                                       ----------------  ----------------
            Net cash provided by operating activities                                           93,750            94,185
                                                                                       ----------------  ----------------
Cash flows from investing activities:
     Acquisition and development of rental property                                            (16,207)          (46,825)
     Additions to land held for development or sale                                            (34,840)          (11,071)
     Additions to construction in progress                                                     (19,215)          (33,493)
     Acquisition and development of executive suites assets                                          -            (6,678)
     Payments on notes receivable                                                               16,539               139
     Distributions from unconsolidated entities                                                 89,616             3,568
     Investments in unconsolidated entities                                                    (10,440)           (9,875)
     Acquisition of minority interest                                                           (3,289)           (1,478)
     Decrease (increase) in restricted deposits                                                 32,194              (322)
     Proceeds from the sale of discontinued operations                                               -           377,310
     Proceeds from sales of  properties                                                        100,474            62,883
                                                                                       ----------------  ----------------
            Net cash provided by investing activities                                          154,832           334,158
                                                                                       ----------------  ----------------
Cash flows from financing activities:
     Repurchase of common stock                                                               (119,210)          (28,450)
     Exercises of stock options                                                                 16,082             9,945
     Net repayments on unsecured credit facility (including $140,500 related to
        discontinued operations in 2000)                                                       (86,000)         (317,500)
     Net repayments of mortgages payable                                                       (15,502)           (7,849)
     Proceeds from mortgages                                                                    26,628                 -
     Dividends and distributions to minority interests                                         (80,802)          (85,524)
     Contributions from minority interests                                                           -             1,948
                                                                                       ----------------  ----------------
            Net cash used by financing activities                                             (258,804)         (427,430)
                                                                                       ----------------  ----------------


           (Decrease) increase in unrestricted cash and cash equivalents                       (10,222)              913
Unrestricted cash and cash equivalents, beginning of the period                                 24,704            51,886
                                                                                       ----------------  ----------------
Unrestricted cash and cash equivalents, end of the period                                $      14,482     $      52,799
                                                                                       ================  ================

Supplemental disclosure of cash flow information:
     Cash paid for interest (net of capitalized interest of $3,837 and $7,229
        for the six months ended June 30, 2001 and 2000, respectively)                   $      49,207     $      60,106
                                                                                       ================  ================
</TABLE>


See accompanying notes to consolidated financial statements.

                                       7
<PAGE>

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

(1)  Description of Business and Summary of Significant Accounting Policies

     (a)  Business

          We are a fully integrated, self-administered and self-managed publicly
          traded real estate investment trust ("REIT"), organized under the laws
          of Maryland. We focus on the acquisition, development, ownership and
          operation of office properties, located primarily in selected suburban
          markets across the United States.

     (b)  Basis of Presentation

          Our accounts and those of our majority-owned/controlled subsidiaries
          and affiliates are consolidated in the financial statements.  We use
          the equity or cost methods, as appropriate in the circumstances, to
          account for our investments in and our share of the earnings or losses
          of unconsolidated entities.  These entities are not majority owned or
          controlled by us.

          Management has made estimates and assumptions that affect the reported
          amounts of assets, liabilities, revenues and expenses in the financial
          statements, and the disclosure of contingent assets and liabilities.
          Estimates are required in order for us to prepare our financial
          statements in conformity with accounting principles generally accepted
          in the United States of America.  Significant estimates are required
          in a number of areas, including the evaluation of impairment of long-
          lived assets, determination of useful lives of assets subject to
          depreciation or amortization and evaluation of the collectibility of
          accounts and notes receivable.  Actual results could differ from these
          estimates.

     (c)  Interim Financial Statements

          The financial statements reflect all adjustments, which are, in our
          opinion, necessary to reflect a fair presentation of the results for
          the interim periods, and all adjustments are of a normal, recurring
          nature.

     (d)  New Accounting Pronouncements

          In June 1998, the Financial Accounting Standards Board issued SFAS No.
          133 "Accounting for Derivative Instruments and Hedging Activities".
          SFAS No. 133 requires that an entity recognize all derivatives as
          either assets or liabilities in the statement of financial position
          and measure those instruments at fair value.  We adopted this
          statement as of January 1, 2001 and the adoption had no effect on the
          financial statements.  We had no derivative instruments as of June 30,
          2001.

     (e)  Earnings Per Share

          The following table sets forth information relating to the
          computations of our basic and diluted earnings per share for income
          from continuing operations:

                                       8
<PAGE>

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

<TABLE>
<CAPTION>
                                                Three Months Ended                               Three Months Ended
                                                   June 30, 2001                                   June 30, 2000
                                   ----------------------------------------------  -----------------------------------------------
(In thousands,                         Income           Shares        Per Share        Income            Shares        Per Share
  except per share amounts)         (Numerator)     (Denominator)       Amount      (Numerator)      (Denominator)       Amount
                                   ---------------  ---------------   -----------  ---------------   ---------------  ------------
<S>                                <C>              <C>               <C>          <C>               <C>              <C>
Basic EPS                             $ 23,815           61,840         $   0.39      $  21,080           66,856        $   0.31
                                                                      ===========                                     ============
Effect of Dilutive Securities
  Stock options                              -            1,200                               -              878
                                   ---------------  ---------------   -----------  ---------------   ---------------  ------------
Diluted EPS                           $ 23,815           63,040          $  0.38      $  21,080           67,734        $   0.31
                                   ===============  ===============   ===========  ===============   ===============  ============
</TABLE>

          Income from continuing operations has been reduced by preferred stock
          dividends of approximately $8,745,000 and approximately $8,745,000 for
          the three months ended June 30, 2001 and 2000, respectively.

<TABLE>
<CAPTION>
                                                 Six Months Ended                                Six Months Ended
                                                   June 30, 2001                                   June 30, 2000
                                   ----------------------------------------------  -----------------------------------------------
(In thousands,                          Income           Shares        Per Share        Income           Shares        Per Share
  except per share amounts)          (Numerator)     (Denominator)       Amount      (Numerator)      (Denominator)      Amount
                                   ---------------  ---------------   -----------  ---------------   ---------------  ------------
<S>                                <C>              <C>               <C>          <C>               <C>              <C>
Basic EPS                            $    45,432           62,509      $   0.73      $    45,455            66,912      $    0.68
                                                                      ===========                                     ============
Effect of Dilutive Securities
  Stock options                                -            1,340                              -               395
  Convertible partnership units            4,304            6,068                              -                 -
                                   ---------------  ---------------   -----------  ---------------   ---------------  ------------
Diluted EPS                          $    49,736           69,917      $   0.71      $    45,455            67,307      $    0.68
                                   ===============  ===============   ===========  ===============   ===============  ============
</TABLE>

          Income from continuing operations has been reduced by preferred stock
          dividends of approximately $17,394,000 and approximately $17,522,000
          for the six months ended June 30, 2001 and 2000, respectively.

          The effects of convertible units in CarrAmerica Realty, L.P. and Carr
          Realty, L.P. and Series A Convertible Preferred Stock are not included
          in the computation of diluted earnings per share for the periods in
          which their effect is antidilutive.

     (f)  Reclassifications

          Certain reclassifications of prior period amounts have been made to
          conform to the current period's presentation.

(3)  Discontinued Operations

     On January 20, 2000, we, along with HQ Global Workplaces, Inc. (HQ Global),
     VANTAS Incorporated (VANTAS) and FrontLine Capital Group, entered into
     several agreements that contemplated several transactions including (i) the
     merger of VANTAS with and into HQ Global, (ii) the acquisition by FrontLine
     Capital Group of shares of HQ Global common stock from us and other
     stockholders of HQ Global, and (iii) the acquisition by VANTAS of our debt
     and equity interest in OmniOffices (UK) Limited and OmniOffices LUX 1929
     Holding Company S.A.  On June 1, 2000, we consummated the transactions.

     As part of the HQ Global/VANTAS transactions, we received put rights with
     respect to our continuing interest in HQ Global.  These rights can be
     exercised at specified times at our option if HQ Global has not completed
     an initial public offering.  A portion of the put is exercisable in late
     2001, with the balance exercisable in June 2002.  Payment for our HQ Global
     stock will be based on the fair market value of our investment and can be
     made either in cash, a short-term note (in case of the 2001 put right) or
     delivery of common stock of FrontLine Capital Group, a NASDAQ-listed
     company and the majority shareholder of HQ Global.

                                       9
<PAGE>

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

(4)  Gain on Sale of Assets and Other Provisions, Net

     We dispose of assets that are inconsistent with our long-term strategic or
     return objectives or where market conditions for sale are favorable.
     During the three months ended June 30, 2001, we disposed of a parcel of
     land held for development.  We recognized a loss of $22,000 on this
     transaction. During the three months ended  June 30, 2000, we disposed of
     three operating properties.  We recognized a gain of $2.4 million, net of
     taxes of $0.9 million on these properties.

     During the six months ended June 30, 2001, we disposed of seven operating
     properties, one property under development and two parcels of land held for
     development.  We recognized a gain of $2.0 million, net of taxes of $2.0
     million. We also recognized an impairment loss of $0.9 million on a parcel
     of land held for development during the six months ended June 30, 2001.
     During the six months ended June 30, 2000, we disposed of five operating
     properties.  We recognized a gain of $7.7 million, net of taxes of $1.3
     million on these properties.

(5)  Segment Information

     Our reportable operating segments are real estate property operations and
     development operations.  Other business activities and operating segments
     that are not reportable are included in other operations.  The real estate
     property operations segment includes the operation and management of rental
     properties.  The development operations segment includes the development of
     new rental properties for us and for unaffiliated companies.  Our
     reportable segments offer different products and services and are managed
     separately because each requires different business strategies and
     management expertise.

     Our operating segments' performance is measured using funds from
     operations.   Funds from operations is defined by the National Association
     of Real Estate Investment Trusts (NAREIT) as follows:

        .  Net income (loss) - computed in accordance with generally accepted
           accounting principles (GAAP);
        .  Less gains (or plus losses) from sales of depreciable operating
           properties and items that are classified as extraordinary items
           under GAAP;
        .  Plus depreciation and amortization of assets uniquely significant to
           the real estate industry;
        .  Plus or minus adjustments for unconsolidated partnerships and joint
           ventures (to reflect funds from operations on the same basis).

     Funds from operations does not represent net income or cash flow generated
     from operating activities in accordance with GAAP.  As such, it should not
     be considered an alternative to net income as an indication of our
     performance or to cash flows as a measure of our liquidity or our ability
     to make distributions.

     Operating results of our reportable segments and our other operations for
     the three and six months ended June 30, 2001 and 2000 are summarized and
     reconciled to net income for the applicable period as follows:

                                       10
<PAGE>

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

<TABLE>
<CAPTION>
                                                  For the three months ended June 30, 2001
                                            -------------------------------------------------------
                                            Real Estate
                                             Property     Development      Other
(In millions)                               Operations    Operations     Operations       Total
                                            ------------  ------------  -------------  ------------
<S>                                         <C>           <C>           <C>            <C>
Operating revenue                            $    123.8           4.6            5.1    $    133.5
Segment expense                                    38.4           1.1           10.8          50.3
                                            ------------  ------------  -------------  ------------
Net segment revenue (expense)                      85.4           3.5           (5.7)         83.2
Interest expense                                   11.3             -            9.8          21.1
Other income (expense), net                         5.4           0.1           (0.4)          5.1
                                            ------------  ------------  -------------  ------------
Funds from operations                        $     79.5           3.6          (15.9)         67.2
                                            ============  ============  =============


Depreciation and amortization                                                                (31.6)
                                                                                       ------------

Income from continuing operations before
  minority interest and loss on sale of
  assets and other provisions, net                                                            35.6
Minority interest and loss on sale of
  assets and other provisions, net                                                            (3.1)
                                                                                       ------------
    Net income                                                                          $     32.5
                                                                                       ============
</TABLE>

<TABLE>
<CAPTION>
                                                   For the three months ended June 30, 2000
                                            -------------------------------------------------------
                                            Real Estate
                                             Property      Development      Other
(In millions)                               Operations     Operations     Operations      Total
                                            ------------  -------------  ------------  ------------
<S>                                         <C>           <C>            <C>           <C>
Operating revenue                            $    139.1            2.1           3.2    $    144.4
Segment expense                                    44.5            1.4          10.6          56.5
                                            ------------  -------------  ------------  ------------
Net segment revenue (expense)                      94.6            0.7          (7.4)         87.9
Interest expense                                   12.1              -          13.0          25.1
Other income (expense), net                         3.9              -          (2.7)          1.2
                                            ------------  -------------  ------------  ------------
Funds from operations                        $     86.4            0.7         (23.1)         64.0
                                            ============  =============  ============
Depreciation and amortization                                                                (34.3)
                                                                                       ------------

Income from continuing operations before
  minority interest and gain on sale of
  assets and other provisions, net                                                            29.7
Minority interest and gain on sale of
  assets and other provisions, net                                                               -
Discontinued operations, net of applicable
  income tax expense                                                                           1.9
Gain on sale of discontinued operations,
  net of applicable income tax expense                                                        31.9
                                                                                       ------------
    Net income                                                                          $     63.5
                                                                                       ============
</TABLE>

                                       11
<PAGE>

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

<TABLE>
<CAPTION>
                                                    For the six months ended June 30, 2001
                                            -------------------------------------------------------
                                            Real Estate
                                             Property      Development      Other
(In millions)                               Operations     Operations     Operations      Total
                                            ------------  -------------  ------------  ------------
<S>                                         <C>           <C>            <C>           <C>
Operating revenue                            $    247.6           10.8           9.0    $    267.4
Segment expense                                    80.1            2.6          23.7         106.4
                                            ------------  -------------  ------------  ------------
Net segment revenue (expense)                     167.5            8.2         (14.7)        161.0
Interest expense                                   22.4              -          19.6          42.0
Other income (expense), net                        12.4            0.3          (1.4)         11.3
                                            ------------  -------------  ------------  ------------
Funds from operations                        $    157.5            8.5         (35.7)        130.3
                                            ============  =============  ============
Depreciation and amortization                                                                (64.0)
                                                                                       ------------

Income from continuing operations before
  minority interest and gain on sale of
  assets and other provisions, net                                                            66.3
Minority interest and gain on sale of
  assets and other provisions, net                                                            (3.5)
                                                                                       ------------
    Net income                                                                          $     62.8
                                                                                       ============
</TABLE>

<TABLE>
<CAPTION>
                                                    For the six months ended June 30, 2000
                                            -------------------------------------------------------
                                            Real Estate
                                             Property      Development      Other
(In millions)                               Operations     Operations     Operations      Total
                                            ------------  -------------  ------------  ------------
<S>                                         <C>           <C>            <C>           <C>
Operating revenue                            $    275.7            4.0           6.3    $    286.0
Segment expense                                    88.7            2.4          19.4         110.5
                                            ------------  -------------  ------------  ------------
Net segment revenue (expense)                     187.0            1.6         (13.1)        175.5
Interest expense                                   24.9              -          27.1          52.0
Other income (expense), net                         5.1              -          (2.6)          2.5
                                            ------------  -------------  ------------  ------------
Funds from operations                        $    167.2            1.6         (42.8)        126.0
                                            ============  =============  ============
Depreciation and amortization                                                                (65.4)
                                                                                       ------------

Income from continuing operations before
  minority interest and gain on sale of
  assets and other provisions, net                                                            60.6
Minority interest and gain on sale of
  assets and other provisions, net                                                             2.3
Discontinued operations, net of applicable
  income tax expense                                                                           0.5
Gain on sale of discontinued operations,
  net of applicable income tax expense                                                        31.9
                                                                                       ------------
    Net income                                                                          $     95.3
                                                                                       ============
</TABLE>

(6)  Supplemental Cash Flow Information

     In April 2001, we exercised an option under a loan agreement to acquire two
     office buildings and related land located in the San Francisco Bay area.
     For financial reporting purposes, we had classified the loan as an
     investment in an unconsolidated entity and accounted for it using the
     equity method.  The investment, which had a carrying value of approximately
     $50.3 million at the date the option was exercised, was reclassified to
     rental property in connection with this transaction.

                                       12
<PAGE>

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

     On June 29, 2001, we contributed land subject to a note payable of
     approximately $26.0 million to a joint venture in exchange for a 30%
     ownership interest.  Our investment in the joint venture amounted to $7.3
     million, the net book value of the asset and liability contributed.

     In the second quarter of 2001, 400,000 shares of our Series A Cumulative
     Convertible Redeemable Preferred Stock were converted to shares of common
     stock.

                                       13
<PAGE>

                     Independent Accountants' Review Report
                     --------------------------------------

The Board of Directors and Stockholders
CarrAmerica Realty Corporation:

We have reviewed the condensed consolidated balance sheet of CarrAmerica Realty
Corporation and subsidiaries as of June 30, 2001, the related condensed
consolidated statements of operations for the three-month and six-month periods
ended June 30, 2001 and 2000, and the related condensed consolidated statements
of cash flows for the six-month periods ended June 30, 2001 and 2000.  These
condensed consolidated financial statements are the responsibility of the
Company's management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants.  A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters.  It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole.  Accordingly, we do not express such an
opinion.

Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with accounting principles generally accepted in the
United States of America.

We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of
CarrAmerica Realty Corporation and subsidiaries as of December 31, 2000, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the year then ended (not presented herein); and in our report dated
February 2, 2001, we expressed an unqualified opinion on those consolidated
financial statements.  In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 2000, is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.



                                                           /s/KPMG LLP

Washington, D.C.
July 26, 2001

                                       14
<PAGE>

                     Management's Discussion and Analysis
--------------------------------------------------------------------------------

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

     The discussion that follows is based primarily on our consolidated
financial statements as of June 30, 2001 and December 31, 2000 and for the three
months and six months ended June 30, 2001 and 2000 and should be read along with
the consolidated financial statements and related notes.  The ability to compare
one period to another may be significantly affected by acquisitions completed,
development properties placed in service and dispositions made during those
periods.

     The discussion and analysis of operating results focuses on our segments as
management believes that segment analysis provides the most effective means of
understanding the business.  Our reportable operating segments are real estate
property operations and development operations.  Other business activities and
operations, which are not reported separately, are included in other operations.
Executive office suites operations are presented as discontinued operations in
our financial statements.

  Our operating segments' performance is measured using funds from operations.
Funds from operations is defined by the National Association of Real Estate
Investment Trusts (NAREIT) as follows:

 .  Net income (loss) - computed in accordance with generally accepted accounting
   principles (GAAP);
 .  Less gains (or plus losses) from sales of depreciable operating properties
   and items that are classified as extraordinary items under GAAP;
 .  Plus depreciation and amortization of assets uniquely significant to the real
   estate industry;
 .  Plus or minus adjustments for unconsolidated partnerships and joint ventures
   (to reflect funds from operations on the same basis).

Funds from operations does not represent net income or cash flow generated from
operating activities in accordance with GAAP.  As such, it should not be
considered an alternative to net income as an indication of our performance or
to cash flows as a measure of our liquidity or our ability to make
distributions.

RESULTS OF OPERATIONS

Real Estate Property Operations

     Operating results of real estate property operations are summarized as
follows:

<TABLE>
<CAPTION>
=======================================================================================================================
                               For the three months ended     Variance       For the six months ended      Variance
                                                           ---------------                              ---------------
                                        June 30,               2001 vs.               June 30,              2001 vs.
                               --------------------------                    ------------------------
(in millions)                   2001            2000               2000            2001          2000           2000
                                ----            ----               ----            ----          ----           ----
<S>                          <C>              <C>            <C>             <C>           <C>            <C>
Operating revenue            $    123.8       $    139.1     $    (15.3)     $    247.6    $    275.7     $    (28.1)
Segment expense                    38.4             44.5           (6.1)           80.1          88.7           (8.6)
Interest expense                   11.3             12.1           (0.8)           22.4          24.9           (2.5)
Other income, net                   5.4              3.9            1.5            12.4           5.1            7.3
=======================================================================================================================
</TABLE>

     Real estate operating revenues decreased $15.3 million (11.0%) for the
three months ended June 30, 2001 as compared to 2000.  This decrease resulted
from the dispositions of interests in properties, including the properties
contributed to Carr Office Park, L.L.C.  In August 2000, we contributed
properties to Carr Office Park, L.L.C., a joint venture in which we have a 35%
interest. The decrease in revenues was partially offset by development
properties being placed in service and "same store" rental growth.  Same store
rental revenues grew by approximately 4.0% (approximately $4.2 million).  This
increase was due primarily to an increase in average rental rates in properties
in the Northern and Southern California markets.

     Real estate operating revenues decreased $28.1 million (10.2%) for the six
months ended June 30, 2001 as compared to 2000.  This decrease was attributable
to the factors mentioned above.  Same store rental revenues grew by
approximately 4.0% (approximately $8.2 million).  This increase was due
primarily to an increase in average rental rates in properties in the Northern
California market.

     Real estate operating expenses decreased $6.1 million (13.7%) for the
second quarter of 2001 as compared to the same period in 2000.  This decrease
was due primarily to the dispositions of interests in properties, including the
properties

                                       15
<PAGE>

                     Management's Discussion and Analysis
--------------------------------------------------------------------------------

contributed to Carr Office Park, L.L.C., partially offset by an increase in
same store operating expenses of approximately $1.5 million (4.7%).

     Real estate operating expenses decreased $8.6 million (9.7%) for the first
six months 2001 as compared to the same period in 2000.  This decrease was also
due primarily to the dispositions of interests in properties, including the
properties contributed to Carr Office Park, L.L.C., partially offset by an
increase in same store operating expenses of approximately $4.4 million (7.1%).
The increase in expenses includes an increase in the provision for uncollectible
accounts of approximately $3.2 million due to tenant bankruptcies and collection
issues.

     Real estate interest expense decreased $0.8 million (6.6%) in the second
quarter of 2001 as compared to the same period in 2000.  This decrease was
principally the result of the retirement of mortgages following certain property
dispositions.

     Real estate interest expense decreased $2.5 million (10.0%) for the first
half of 2001 as compared to the first half of  2000.  This decrease was
principally the result of the retirement of mortgages following certain property
dispositions.

     Real estate other income increased $1.5 million (38.5%) for the three
months ended June 30, 2001 as compared to the three months ended June 30, 2000.
This increase was primarily the result of equity in earnings of unconsolidated
entities (excluding depreciation), primarily from the investment in Carr Office
Park, L.L.C.  For the six months ended June 30, 2001, real estate other income
increased $7.3 million (143.1%) for the same reason.

     During the first half of 2001, demand for office space in each of our
markets, except for downtown Washington, D.C., declined in response to an
overall decline in these markets.  Our results of operations for the second
quarter of 2001 were not adversely impacted by the increased market vacancy
levels, for several reasons.  First, notwithstanding increased vacancies in our
markets generally, the occupancy in our portfolio of properties remained strong,
as it increased to 97.2% at June 30, 2001, as compared to 97.0% at March 31,
2001.  Second, rental rates on space that was re-leased in the second quarter
increased an average of 42.2% over the rates that were in effect under the
expiring leases.

     We expect vacancy rates to continue to increase in most of our markets
through the balance of the year due to expected weak demand.  As a result, we
expect occupancy in our portfolio to decline 1% to 2% between June 30, 2001 and
the end of 2001.  Should demand weaken beyond 2001 or worsen, occupancy levels
may decline further.  We do not expect the softened market conditions to have a
material adverse affect on our operating results for the remainder of 2001. We
continue to expect that space that is re-leased should be re-leased at rental
rates in excess of the rates in effect under the expiring leases.

Development Operations

     Operating results of development operations are summarized as follows:

<TABLE>
<CAPTION>
=======================================================================================================================
                               For the three months ended     Variance       For the six months ended      Variance
                                                           ---------------                              --------------
                                        June 30,               2001 vs.               June 30,              2001 vs.
                               --------------------------                    ------------------------
(in millions)                      2001          2000           2000            2001          2000           2000
                                   ----          ----           ----            ----          ----           ----
<S>                              <C>
Operating revenue                $    4.6      $    2.1       $    2.5        $   10.8       $   4.0       $    6.8
Segment expense                       1.1           1.4           (0.3)            2.6           2.4            0.2
Interest expense                        -             -              -               -             -              -
Other income, net                     0.1             -            0.1             0.3             -            0.3
=======================================================================================================================
</TABLE>


     Revenue from our development operations increased $2.5 million (119.0%) for
the second quarter of 2001 compared to the second quarter of 2000.  This
increase resulted primarily from our expanded operations in this area, including
services provided to Carr Office Park, L.L.C. and other unconsolidated joint
ventures in connection with their development of new properties.  Revenues from
development operations increased $6.8 million (170.0%) for the first six months
of 2001 compared to the same period a year ago for the same reasons.

                                       16
<PAGE>

                     Management's Discussion and Analysis
--------------------------------------------------------------------------------

Other Operations

     Operating results of other operations are summarized as follows:

<TABLE>
<CAPTION>
=======================================================================================================================
                                For the three months ended    Variance        For the six months ended      Variance
                                                            ------------                                 --------------
                                         June 30,              2001 vs.               June 30,               2001 vs.
                                --------------------------                    ------------------------
(in millions)                      2001           2000          2000             2001          2000           2000
                                   ----           ----          ----             ----          ----           ----
<S>                             <C>            <C>           <C>              <C>           <C>            <C>
Operating revenue               $    5.1       $    3.2      $    1.9         $    9.0      $    6.3       $    2.7
Segment expense                     10.8           10.6           0.2             23.7          19.4            4.3
Interest expense                     9.8           13.0          (3.2)            19.6          27.1           (7.5)
Other (expense) income, net         (0.4)          (2.7)          2.3             (1.4)         (2.6)           1.2
=======================================================================================================================
</TABLE>


     Revenues from our other operations increased $1.9 million (59.4%) in the
second quarter of 2001 as compared to the second quarter of 2000.  The increase
in 2001 resulted primarily from expansion of our operations in the area of
managing rental properties for affiliates and others.  In particular, in August
2000, we began providing leasing and management services to Carr Office Park,
L.L.C.  Revenues from other operations for the six months ended June 30, 2001
increased $2.7 million (42.9%) from the same period in 2000 for the same reason

     Expenses of our other operations increased $0.2 million (1.9%) in the three
months ended June 30, 2001 compared to the three months ended June 30, 2000.
The increase was due primarily to our expanded property management operations
discussed above and professional fees associated with internal process
improvement efforts and other initiatives.  For the six months ended June 30,
2001, expenses of our other operations increased $4.3 million (22.2%) from the
same period in 2001 for the same reasons.

     Interest expense decreased $3.2 million (24.6%) during the second quarter
of 2001 compared to the second quarter of 2000 due primarily to lower debt
levels partially offset by a decrease in capitalized interest due to a lower
level of development activity.  Interest expense decreased $7.5 million (27.7%)
for the first six months of 2001 compared to the first six months of 2000 for
the same reasons.

     During the second quarter of 2001, one of our strategic partners, Broadband
Office, Inc. filed for Chapter 11 bankruptcy protection.   The bankruptcy of
Broadband Office, Inc. had no material impact on our operating results nor our
strategic plan.  Broadband Office, Inc. had provided some telecommunications
related services to us.   We arranged with other providers for the same services
with no significant impact on our business.

Depreciation and Amortization

     Depreciation and amortization decreased $2.6 million (7.6%) in the second
quarter of 2001 compared to the second quarter of 2000.  This decrease was due
primarily to dispositions of interests in properties, including the properties
contributed to Carr Office Park, L.L.C., partially offset by development
properties being placed in service.  For the six months ended June 30, 2001,
depreciation and amortization decreased $1.4 million (2.1%) from the same period
a year ago due to the reasons previously stated.

Gain on Sale of Assets and Other Provisions, Net

     We dispose of assets that are inconsistent with our long-term strategic or
return objectives or where market conditions for sale are favorable.  The
proceeds from the sales are redeployed into other properties or used to fund
development operations or to support other corporate needs.   During the three
months ended June 30, 2001, we disposed of a parcel of land held for
development.  We recognized a net loss of $22,000 on this transaction. During
the three months ended  June 30, 2000, we disposed of three operating
properties.  We recognized a gain of $2.4 million, net of taxes of $0.9 million.

     During the six months ended June 30, 2001, we disposed of seven operating
properties, one property under development and two parcels of land held for
development.  We recognized a gain of $2.0 million, net of taxes of $2.0
million. We also recognized an impairment loss of $0.9 million on a parcel of
land held for development during the six months ended June 30, 2001.  During the
six months ended  June 30, 2000, we disposed of five operating properties.  We
recognized a gain of $7.7 million, net of taxes of $1.3 million.

                                       17
<PAGE>

                     Management's Discussion and Analysis
--------------------------------------------------------------------------------

Consolidated Cash Flows

     Consolidated cash flow information is summarized as follows:

<TABLE>
<CAPTION>
===============================================================================================
                                                   For the six months ended      Variance
                                                                              --------------
                                                           June 30,               2001 vs.
                                                   -------------------------
(in millions)                                        2001           2000           2000
                                                     ----           ----           ----
<S>                                               <C>            <C>            <C>
Cash provided by operating activities             $    93.8      $    94.2      $    (0.4)
Cash provided by investing activities                 154.8          334.2         (179.4)
Cash used by financing activities                    (258.8)        (427.4)         168.6
===============================================================================================
</TABLE>

    Operations generated $93.8 million of net cash in 2001 compared to $94.2
million in 2000. The changes in cash flow from operating activities were
primarily the result of factors discussed above in the analysis of operating
results. The level of net cash provided by operating activities is also affected
by the timing of receipt of revenues and payment of expenses, including in 2001,
income taxes relating to sales of certain assets and discontinued operations in
2000.

     Our investing activities provided net cash of $154.8 million in 2001 and
$334.2 million in 2000.  The decrease in net cash provided by investing
activities in 2001 is due primarily to the fact that in 2000, we sold our
investment in HQ Global, generating $377.3 million of cash.  This decrease was
partially offset by a reduction in development activities ($21.1 million),
receipt of a distribution from Carr Office Park, L.L.C. from proceeds of third
party financing of its properties ($77.9 million), an increase in proceeds from
sales of properties ($37.6 million), and a release of restricted deposits ($32.5
million).

     Our financing activities used net cash of $258.8 million in 2001 and $427.4
million in 2000.  The decrease in net cash used by financing activities in 2001
is due primarily to lower repayments on unsecured credit facilities ($231.5
million) and increased proceeds from new mortgage debt ($26.6 million).  The
effect of the changes was partially offset by increased stock repurchase
activities ($90.8 million) and increased mortgage repayments ($7.7 million).

LIQUIDITY AND CAPITAL RESOURCES

     We seek to create and maintain a capital structure that will enable us to
diversify our capital resources.  This should allow us to obtain additional
capital from a number of different sources.  These sources could include
additional equity offerings of common stock and/or preferred stock, public and
private debt financings and possible asset dispositions.  Our management
believes that we will have access to the capital resources necessary to expand
and develop our business, to fund our operating and administrative expenses, to
continue to meet our debt service obligations, to pay dividends in accordance
with REIT requirements, to acquire additional properties and land and to pay for
construction in progress.

     We have three investment grade ratings.  As of June 30, 2001, Duff & Phelps
Credit Rating Co. and Standard & Poors have each assigned their BBB rating to
our prospective senior unsecured debt offerings and their BBB- rating to our
prospective cumulative preferred stock offerings.  Moody's Investor Service has
assigned its Baa2 rating to our prospective senior unsecured debt offerings and
its Ba2 rating to our prospective cumulative preferred stock offerings.

     Our total debt at June 30, 2001 was approximately $1.1 billion, of which
$90.0 million (8.2%) bore a LIBOR-based floating interest rate.  The interest
rate on borrowings on our unsecured credit facility at June 30, 2001 was 4.54%.
The interest rate of the unsecured credit facility is 70 basis points over 30-
day LIBOR.  Our fixed rate mortgage payable debt bore an effective weighted
average interest rate of 8.09% at June 30, 2001.  The weighted average term of
this debt is 6.1 years.  At June 30, 2001, our debt represented 31.0% of our
total market capitalization of $3.6 billion.

     In June 2001, we closed on a new three year $500 million unsecured credit
facility with J.P. Morgan Chase, as agent for a group of banks.  We can extend
the life of the line an additional year at our option.  The line carries an
interest rate of 70 basis points over LIBOR.  The new credit facility has
substantially similar terms as our previous facility.  As of June 30, 2001,
$90.0 million was drawn on the credit facility, $1.8 million in letters of
credit were outstanding and we had $408.2 million available for borrowing.

     Rental revenue and real estate service revenue have been our principal
sources of cash to pay our operating expenses, debt service and capital
expenditures, excluding non-recurring capital expenditures. We believe that our
current sources of revenue will continue to provide the necessary funds for our
operating expenses and debt service.

                                       18
<PAGE>

                     Management's Discussion and Analysis
--------------------------------------------------------------------------------

     We and our affiliates also require capital to invest in our existing
portfolio of operating assets for capital projects.  These capital projects
include such things as large-scale renovations, routine capital expenditures,
deferred maintenance on properties we have recently acquired and tenant related
matters, including tenant improvements, allowances and leasing commissions.  We
believe that operations along with borrowings under our credit facility will
continue to provide the necessary funds for these capital projects.

     We will require a substantial amount of capital for development projects
currently underway and in the future.  As of June 30, 2001, we had approximately
0.4 million square feet of office space in three development projects in
progress.  Our total expected investment on these projects is $54.7 million.
Through June 30, 2001, we had invested $32.5 million or 59.4% of the total
expected investment for these projects.  As of June 30, 2001, we also had 0.9
million square feet of office space under construction in seven projects in
which we own minority interests.  These projects are expected to cost $198.1
million, of which our total investment is expected to be approximately $60.7
million.  Through June 30, 2001, approximately $99.1 million or 50.0% of total
project costs had been expended on these projects.  We have financed our
investment in projects under construction at June 30, 2001 primarily from the
proceeds of asset dispositions and borrowings under our credit facility.  We
expect that these sources and project-specific financing of selected assets will
provide additional funds required to complete the development and to finance the
costs of additional projects.

     Prior to the second quarter of 1998, we primarily met our capital
requirements by accessing the public debt and equity markets.  As a general
matter, conditions in the public equity markets for most REITs have not been
favorable since that time.  In response to these unfavorable conditions, we had
curtailed our acquisition program and satisfied our capital requirements through
the disposition of selected assets, the refinancing of selected assets, prudent
use of joint ventures to reduce our investment requirements and use of our
credit facility.

     In the future, if the debt and equity markets are not favorable, if we
cannot raise the expected funds from the sale of properties and/or if we are
unable to obtain capital from other sources, we believe that we would continue
to have sufficient funds to pay our operating and debt service expenses, our
regular quarterly dividends, to make necessary routine capital improvements with
respect to our existing portfolio of operating assets, and to continue to fund
all of our current development projects.   However, our ability to expand our
development activities or fund additional development in our joint ventures
could be adversely affected if it is necessary for us to access either the
public equity or debt markets at a time when those markets may not be the best
source of capital for us.

     Our Board of Directors has authorized us to spend up to $325 million to
repurchase our common shares, preferred shares, and debt securities. Since the
start of this program in mid-2000 through June 30, 2001, we have acquired
approximately 7.2 million common shares for $209.4 million, representing an
average price of $28.94 per share.

     We pay dividends quarterly.  Funds which we accumulate for distribution are
invested primarily in short-term investments collateralized by securities if the
United States Government or one of its agencies.

Funds From Operations

     We believe that funds from operations is helpful to investors as a measure
of the performance of an equity REIT.  Based on our experience, funds from
operations, along with information about cash flows from operating activities,
investing activities and financing activities, provides investors with an
indication of our ability to incur and service debt, to make capital
expenditures and to fund other cash needs.  Funds from operations is defined by
the National Association of Real Estate Investment Trusts (NAREIT) as follows:

 .    Net income (loss) - computed in accordance with generally accepted
     accounting principles (GAAP);
 .    Less gains (or plus losses) from sales of depreciable operating
     properties and items that are classified as extraordinary items under GAAP;
 .    Plus depreciation and amortization of assets uniquely significant to the
     real estate industry;
 .    Plus or minus adjustments for unconsolidated partnerships and joint
     ventures (to reflect funds from operations on the same basis).

     Our funds from operations may not be comparable to funds from operations
reported by other REITs.  These other REITs may not define the term in
accordance with the current NAREIT definition or may interpret the current
NAREIT definition differently than us. Funds from operations does not represent
net income or cash flow generated from operating activities in accordance with
GAAP.  As such, it should not be considered an alternative to net income as an
indication of our performance or to cash flows as a measure of our liquidity or
our ability to make distributions.

                                       19
<PAGE>

                     Management's Discussion and Analysis
--------------------------------------------------------------------------------


     The following table provides the calculation of our funds from operations
for the periods presented:

<TABLE>
<CAPTION>
                                                                      Three Months Ended             Six Months Ended
                                                                           June 30,                      June 30,
                                                                  ---------------------------  ---------------------------
(In thousands)                                                       2001           2000          2001           2000
                                                                  ------------  -------------  ------------  -------------
<S>                                                               <C>           <C>            <C>           <C>
Net income from continuing operations before minority interest     $   35,636     $   32,178    $   67,355     $   68,385
Adjustments to derive funds from operations:
  Add depreciation and amortization                                    31,751         34,381        64,457         65,823
  Deduct:
    Minority interests' (non Unitholders) share of depreciation,
     amortization and net income                                         (219)          (218)         (501)          (473)
   Loss (gain) on sale of assets and other provisions, net                 22         (2,387)       (1,054)        (7,741)
                                                                  ------------  -------------  ------------  -------------
Funds from operations before allocations to the
  minority Unitholders                                                 67,190         63,954       130,257        125,994
Less: Funds from operations allocable to the
           minority Unitholders                                        (4,507)        (3,794)       (8,344)        (8,231)
                                                                  ------------  -------------  ------------  -------------
Funds from operations allocable to CarrAmerica
  Realty Corporation                                                   62,683         60,160       121,913        117,763
Less: Preferred stock dividends                                        (8,745)        (8,745)      (17,394)       (17,522)
                                                                  ------------  -------------  ------------  -------------
Funds from operations attributable to common shareholders          $   53,938     $   51,415    $  104,519    $   100,241
                                                                  ============  =============  ============  =============
</TABLE>


FORWARD-LOOKING STATEMENTS

     Certain statements contained herein constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act").  Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our, and our affiliates, or the
industry's actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements.  Such factors include, among others,
the following:

  .  National and local economic, business and real estate conditions that will,
     among other things, affect:
        .  Demand for office properties
        .  Availability and creditworthiness of tenants
        .  Level of lease rents
        .  Availability of financing for both tenants and us;
  .  Adverse changes in the real estate markets, including, among other things:
        .  Competition with other companies
        .  Risks of real estate acquisition and development
        .  Failure of pending developments to be completed on time and on
           budget;
  .  Actions, strategies and performance of affiliates that we may not control;
  .  Governmental actions and initiatives; and
  .  Environmental/safety requirements.

                                       20
<PAGE>

          Quantitative and Qualitative Disclosures About Market Risk
--------------------------------------------------------------------------------

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

   Any significant changes in our market risk that have occurred since the
filing of our Annual Report on Form 10-K for the year ended December 31, 2000
are summarized in the Liquidity and Capital Resources section of the
Management's Discussion and Analysis of Financial Condition and Results of
Operations.

                                       21
<PAGE>

                                    Part II

OTHER INFORMATION
-----------------

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

        The 2001 annual meeting of stockholders was held on May 3, 2001. We
        solicited proxies for the meeting pursuant to Regulation 14 under the
        Securities Exchange Act of 1934, as amended; there was no solicitation
        in opposition to our management's nominees as listed in the proxy
        statement and all nominees were elected.

          Proposal One: Election of Directors

          (a) 58,424,019 votes were cast for the election of Thomas A. Carr as a
              Director; 3,136,369 votes were withheld.

          (b) 58,423,669 votes were cast for the election of Caroline S. McBride
              as a Director; 3,136,719 votes were withheld.

          (c) 58,515,314 votes were cast for the election of Wesley S. Williams,
              Jr. as a Director; 3,045,074 votes were withheld.

          Proposal Two: To instate the election of directors annually.

          FOR                   AGAINST            ABSTAIN
          ---                   -------            -------

          21,129,885           34,078,373           92,606

Item 6. Exhibits and Reports on Form 8-K

        (a)   Exhibits

              10.1  Revolving Credit Agreement dated June 28, 2001 among
                    CarrAmerica Realty Corporation, as Borrower, The Chase
                    Manhattan Bank, as Bank and as Administrative Agent for the
                    Banks, J.P. Morgan Securities Inc., as Lead Arranger,
                    Exclusive Advisor and Sole Bookrunner, Bank of America, N.A.
                    as Syndication Agent, PNC Bank, National Association, as
                    Documentation Agent, Commerzbank AG, New York Branch, as
                    Documentation Agent, First Union National Bank, as
                    Documentation Agent, and the Banks Listed in the Revolving
                    Credit Agreement.

              10.2  Guaranty of Payment dated June 28, 2001 by CarrAmerica
                    Realty L.P. in favor of Chase Manhattan Bank.

              15    Letter from KPMG LLP, dated August 14, 2001.

        (b)   Reports on Form 8-K

              Current Report on Form 8-K filed on May 4, 2001 regarding certain
              supplemental data included in the Company's press release dated
              May 4, 2001.

                                       22
<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/Richard F. Katchuk
-------------------------------------------
Richard F. Katchuk, Chief Financial Officer



/s/ Stephen E. Riffee
-------------------------------------------
Stephen E. Riffee, Senior Vice President, Controller and Treasurer
(Principal Accounting Officer)



Date: August 14, 2001

                                       23