---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

---

FORM 10-K/A

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999

OR
[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  to

Commission File No. 1-12328

---

CHELSEA GCA REALTY, INC.(Exact name of registrant as specified in its charter)

|Maryland(State or other jurisdiction
of incorporation or organization) | 22-3251332(I.R.S. Employer
Identification No.)
|---------------------------------------------------------------------- | ----------------------------------------------

103 Eisenhower Parkway, Roseland, New Jersey 07068(Address of principal executive offices - zip code)

(973) 228-6111(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

`Name of each exchange
Title of each class                                    on which registered
-------------------                                    ---------------------

Common stock, $0.01 par value                          New York Stock Exchange`

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

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

Indicate by check mark if the disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]

Based on the closing sales price on February 24, 2000 of $25.938 per share
the aggregate market value of the voting stock held by non-affiliates of the
registrant was $411,371,389.

The number of shares outstanding of the registrant's common stock, $0.01 par
value was 15,934,133 at February 24, 2000.

Portions of the registrant's definitive Proxy Statement relating to its 2000
Annual Meeting of Shareholders are incorporated by reference into Part III as
set forth herein.

---

PART I

Item 1.  Business

The Company

Chelsea GCA Realty, Inc. (the Company) is a
self-administered and self-managed real estate investment trust
(REIT) formed through the merger of The Chelsea Group
(Chelsea) and Ginsburg Craig Associates (GCA). The
Company made its initial public offering of common stock on November 2, 1993
(the IPO) and simultaneously became the managing general partner of
Chelsea GCA Realty Partnership, L.P. (the Operating Partnership or
OP), a partnership that owns, develops, redevelops, leases, markets
and manages upscale and fashion-oriented manufacturers outlet centers. At
the end of 1999, the Company owned and operated 19 centers (the
Properties) with approximately 5.2 million square feet of gross
leasable area (GLA) in 11 states. At December 31, 1999, the Company
had approximately 424,000 square feet of wholly-owned new GLA under
construction, comprising the 232,000 square foot first phase of Allen Premium
Outlets (Allen, Texas  located on US Highway 75 approximately 30 miles
north of Dallas), the 104,000 square-foot third phase of Leesburg Corner and
expansions totaling 88,000 square feet at two centers; these openings and
expansions are part of a total of approximately 550,000 square feet of
wholly-owned new space scheduled for completion in 2000. Additionally,
construction is underway on Orlando Premium Outlets (OPO), a 430,000
square-foot upscale outlet center located on Interstate 4 midway between Walt
Disney World/EPCOT and Sea World in Orlando, Florida and phase one of Gotemba
Premium Outlets (GPO) a 220,000 square foot center located in
Gotemba, outside of Tokyo, Japan. OPO is a joint venture project between the
Company and Simon Property Group, Inc. (Simon) and is scheduled to
open as a single phase in mid-2000. GPO is a joint venture project 40% owned by
the Company and 30% each by Mitsubishi Estate Co., Ltd. and Nissho Iwai
Corporation, and is scheduled to open mid-2000. The Companys existing
portfolio includes properties in or near New York City, Los Angeles, San
Francisco, Sacramento, Boston, Portland (Oregon), Atlanta, Washington DC,
Cleveland, Honolulu, Napa Valley, Palm Springs and the Monterey
Peninsula.

The Companys executive offices are located at 103
Eisenhower Parkway, Roseland, New Jersey 07068 (telephone 973-228-6111). The
Company was incorporated in Maryland on August 24, 1993.

The Company is taxed as a REIT under the provisions of the
Internal Revenue Code. The Company generally will not be taxed at the corporate
level on income it currently distributes to its shareholders, provided it
distributes at least 95% of its taxable income each year.

Recent Developments

Between January 1, 1999 and December 31, 1999, the Company added
340,000 square feet of GLA to its portfolio as a result of four expansions.

A summary of expansion activity from January 1, 1999 through
December 31, 1999 is contained below:

`Opening         GLA         Number
Property                           Date(s)      (Sq. Ft.)    of Stores   Tenants(1)
--------                           -------      ---------    ---------   ----------
As of January 1, 1999                           4,876,000       1,282
Expansions:
   Wrentham Village                  5/99         120,000          35    Banana Republic, Guess, Eddie Bauer,
                                                                         Zales
   North Georgia                   9-12/99       103,000           26    Banana Republic, Lego, Nike, Zales
   Leesburg Corner                   11/99        55,000           15    Adidas, Bose, Cole-Haan, Movado,
                                                                         Williams-Sonoma
   Camarillo Premium Outlets         11/99        45,000            9    Banana Republic, Coach, Polo Ralph
                                                                         Lauren, Tommy Hilfiger
   Other (net)                                    17,000           (3)
                                                  ------           --
        Total expansions                         340,000           82
                                                 -------           --

As of December 31, 1999                        5,216,000       1,364
                                               =========       =====

(1)  consists of the largest tenants who lease more than 5,000 square feet of GLA
     and have estimated sales of more than $377 per square foot, which was the
     weighted average sales generated by the Company's tenants in 1999.  Most tenants
     pay a fixed base rent based on the square feet leased by them and also pay a
     percentage rent based on sales.`

The most recent newly developed or expanded centers are
discussed below:

Wrentham Village Premium Outlets, Wrentham,
Massachusetts. Wrentham Village Premium Outlets, a 473,000 square foot
center containing 125 stores, opened in three phases in October 1997, May 1998
and May 1999. The center is located near the junction of Interstates 95 and 495
between Boston and Providence. The populations within a 30-mile, 60-mile and
100-mile radius are approximately 3.9 million, 6.9 million and 10.3 million,
respectively. Average household income within a 30-mile radius is approximately
$52,000.

North Georgia Premium Outlets, Dawsonville, Georgia.
North Georgia Premium Outlets, a 537,000 square foot center containing 135
stores, opened in four phases, in May 1996, May 1997, October 1998 and September
1999. The center is located 40 miles north of Atlanta on Georgia State Highway
400 bordering Lake Lanier, at the gateway to the North Georgia mountains. The
populations within a 30-mile, 60-mile and 100-mile radius are approximately
700,000, 3.6 million and 5.8 million, respectively. Average household income
within a 30-mile radius is approximately $55,000.

Leesburg Corner Premium Outlets, Leesburg, Virginia.
Leesburg Corner Premium Outlets, a 325,000 square foot center containing 73
stores, opened in two phases, in October 1998 and November 1999. The center is
located 35 miles northwest of Washington, DC at the intersection of Routes 7 and
15. The populations within a 30-mile, 60-mile and 100-mile radius are
approximately 2.4 million, 7.1 million and 9.8 million, respectively. Average
household income within a 30-mile radius is approximately $78,000.

Camarillo Premium Outlets, Camarillo, California.
Camarillo Premium Outlets, a 454,000 square foot center containing 124 stores,
opened in eight phases, from March 1995 through November 1999. The center is
located 48 miles north of Los Angeles, about 55 miles south of Santa Barbara on
Highway 101. The populations within a 30-mile, 60-mile and 100-mile radius are
approximately 1.1 million, 8.3 million and 14.6 million, respectively. Average
household income within a 30-mile radius is approximately $66,000.

The Company has started construction on approximately 424,000
square feet of wholly-owned new GLA scheduled for completion in 2000, including
the 232,000 square-foot first phase of Allen Premium Outlets, the 104,000
square-foot third phase of Leesburg Corner and expansions totaling 88,000 square
feet at two centers. In addition, construction is well underway on two joint
venture projects, Orlando Premium Outlets, a 430,000 square-foot center located
in Orlando, Florida and the 220,000 square-foot first phase of Gotemba Premium
Outlets, located outside Tokyo, Japan. These projects, and others, are in
various stages of development and there can be no assurance they will be
completed or opened, or that there will not be delays in opening or completion.

Strategic Alliance and Joint Ventures

In June 1999, the Company signed a definitive agreement with
Mitsubishi Estate Co., Ltd. and Nissho Iwai Corporation to jointly develop, own
and operate premium outlet centers in Japan. The joint venture, known as Chelsea
Japan Co., Ltd. (Chelsea Japan) is developing its initial project in
the city of Gotemba. In conjunction with the agreement, the Company contributed
$1.7 million in equity. In addition, an equity investee of the Company entered
into a 4 billion yen (US $40 million) line of credit guaranteed by the Company
and OP to fund its share of construction costs. At December 31, 1999, no amounts
were outstanding under the loan. In December 1999, construction began on the
220,000 square-foot first phase of Gotemba Premium Outlets with opening
scheduled for mid-2000. Gotemba is located on the Tomei Expressway,
approximately 60 miles west of Tokyo and midway between Mt. Fuji and the Hakone
resort area. Subject to governmental and other approvals, Chelsea Japan also
expects to announce during the next quarter a project outside Osaka, the
second-largest city in Japan, to open in late 2000.

In May 1997, the Company announced the formation of a strategic
alliance with Simon to develop and acquire high-end outlet centers with GLA of
500,000 square feet or more in the United States. The Company and Simon are
co-managing general partners, each with 50% ownership of the joint venture and
any entities formed with respect to specific projects; the Company will have
primary responsibility for the day-to-day activities of each project. In
conjunction with the alliance, on June 16, 1997, the Company completed the sale
of 1.4 million shares of common stock to Simon for an aggregate price of $50
million. Proceeds from the sale were used to repay borrowings under the Credit
Facilities. Simon is one of the largest publicly traded real estate companies in
North America as measured by market capitalization, and at February 2000 owned,
had an interest in and/or managed approximately 184 million square feet of
retail and mixed-use properties in 36 states.

The Company announced in October 1998 that it sold its interest
in and terminated the development of Houston Premium Outlets, a joint venture
project with Simon. Under the terms of the agreement, the Company will receive
non-compete payments totaling $21.4 million from The Mills Corporation; $3.0
million was received at closing, and four annual installments of $4.6 million
are to be received on each January 2, through 2002. The Company has also been
reimbursed for its share of land costs, development costs and fees related to
the project.

Construction is underway on Orlando Premium Outlets
(OPO), a 430,000 square-foot upscale outlet center located on
Interstate 4 midway between Walt Disney World/EPCOT and Sea World in Orlando,
Florida. OPO is a joint venture project between the Company and Simon and is
scheduled to open as a single phase in mid-2000. In February 1999, the joint
venture entered into a $82.5 million construction loan agreement that is
expected to fund approximately 75% of the project costs. The loan is 50%
guaranteed by each of the Company and Simon and as of December 31, 1999, $20.8
million was outstanding.

Organization of the Company

The Company was organized to combine Chelsea and GCA, two
leading outlet center development companies, into the Operating Partnership,
providing for greater access to the public and private capital markets.
Virtually all of the Companys assets are held by and all of its business
activities conducted through the Operating Partnership. The Company is the sole
general partner of the Operating Partnership (which owned 82.6% in the Operating
Partnership as of December 31, 1999) and has full and complete control over the
management of the Operating Partnership and each of the Properties, excluding
joint ventures.

The Manufacturers Outlet Business

Manufacturers outlets are manufacturer-operated retail
stores that sell primarily first-quality, branded goods at significant discounts
from regular department and specialty store prices. Manufacturers outlet
centers offer numerous advantages to both consumer and manufacturer: by
eliminating the third party retailer, manufacturers are often able to charge
customers lower prices for brand name and designer merchandise; manufacturers
benefit by being able to sell first quality in-season, as well as out-of-season,
overstocked or discontinued merchandise without compromising their relationships
with department stores or hampering the manufacturers brand name. In
addition, outlet stores enable manufacturers to optimize the size of production
runs while maintaining control of their distribution channels.

Business of the Company

The Company believes its strong tenant relationships,
high-quality property portfolio and managerial expertise give it significant
advantages in the manufacturers outlet business.

Strong Tenant Relationships. The Company
maintains strong tenant relationships with high-fashion, upscale manufacturers
that have a selective presence in the outlet industry, such as Armani, Brooks
Brothers, Cole Haan, Donna Karan, Gap/Banana Republic, Gucci, Jones New York,
Nautica, Polo Ralph Lauren, Tommy Hilfiger and Versace, as well as with national
brand-name manufacturers such as Adidas, Carters, Nike, Phillips-Van
Heusen (Bass, Izod, Gant, Van Heusen), Timberland and Sara Lee (Champion, Hanes,
Coach Leather). The Company believes that its ability to draw from both groups
is an important factor in providing broad customer appeal and higher tenant
sales.

High Quality Property Portfolio. The
Properties generated weighted average reported tenant sales during 1999 of $377
per square foot, the highest among the three publicly traded outlet companies.
As a result, the Company has been successful in attracting some of the
worlds most sought-after brand-name designers, manufacturers and retailers
and each year has added new names to the outlet business and its centers. The
Company believes that the quality of its centers gives it significant advantages
in attracting customers and negotiating multi-lease transactions with tenants.

Management Expertise. The Company believes it has
a competitive advantage in the manufacturers outlet business as a result
of its experience in the business, long-standing relationships with tenants and
expertise in the development and operation of manufacturers outlet
centers. Management developed a number of the earliest and most successful
outlet centers in the industry, including Liberty Village (one of the first
manufacturers outlet centers in the U.S.) in 1981, Woodbury Common in
1985, and Desert Hills and Aurora Farms in 1990. Since the IPO, the Company has
added significantly to its senior management in the areas of development,
leasing and property management without increasing general and administrative
expenses as a percentage of total revenues; additionally, the Company intends to
continue to invest in systems and controls to support the planning, coordination
and monitoring of its activities.

Growth Strategy

The Company seeks growth through increasing rents in its
existing centers; developing new centers and expanding existing centers; and
acquiring and re-developing centers.

Increasing Rents at Existing
Centers. The Companys leasing strategy includes aggressively
marketing available space and maintaining a high level of occupancy; providing
for inflation-based contractual rent increases or periodic fixed contractual
rent increases in substantially all leases; renewing leases at higher base rents
per square foot; re-tenanting space occupied by underperforming tenants; and
continuing to sign leases that provide for percentage rents.

Developing New Centers and
Expanding Existing Centers. The Company believes that there
continue to be significant opportunities to develop manufacturers outlet
centers across the United States. The Company intends to undertake such
development selectively, and believes that it will have a competitive advantage
in doing so as a result of its development expertise, tenant relationships and
access to capital. The Company expects that the development of new centers and
the expansion of existing centers will continue to be a substantial part of its
growth strategy. The Company believes that its development experience and strong
tenant relationships enable it to determine site viability on a timely and
cost-effective basis. However, there can be no assurance that any development or
expansion projects will be commenced or completed as scheduled.

International Development. The Company
intends to develop, own and operate premium outlet centers in Japan through its
joint venture company, Chelsea Japan Co., Ltd. Chelsea Japan is currently
developing its first outlet center in Gotemba, located outside Tokyo, and is
seeking governmental approval on another site outside Osaka, Japan. The Company
believes that there are significant opportunities to develop manufacturers
outlet centers in Japan and intends to pursue these opportunities as viable
sites are identified.

The Company has minority interests ranging from 5 to 15% in
several outlet centers and outlet development projects in Europe. Two outlet
centers, Bicester Village outside of London, England and La Roca Company Stores
outside of Barcelona, Spain, are currently open and operated by Value Retail PLC
and its affiliates. Three new European projects and expansions of the two
existing centers are in various stages of development and are expected to open
within the next two years. The Companys total investment in Europe as of
February 2000 is approximately $4.5 million. The Company has also agreed to
provide up to $22 million in limited debt service guarantees under a standby
facility for loans arranged by Value Retail PLC to construct outlet centers in
Europe. The term of the standby facility is three years and guarantees shall not
be outstanding for longer than five years after project completion. As of
February 2000, the Company has provided limited debt service guarantees of
approximately $20 million for three projects.

Acquiring and Redeveloping Centers.
The Company intends to selectively acquire individual properties and portfolios
of properties that meet its strategic investment criteria as suitable
opportunities arise. The Company believes that its extensive experience in the
outlet center business, access to capital markets, familiarity with real estate
markets and advanced management systems will allow it to evaluate and execute
acquisitions competitively. Furthermore, management believes that the Company
will be able to enhance the operation of acquired properties as a result of its
(i) strong tenant relationships with both national and upscale fashion
retailers; and (ii) development, marketing and management expertise as a
full-service real estate organization. Additionally, the Company may be able to
acquire properties on a tax-advantaged basis through the issuance of Operating
Partnership units. However, there can be no assurance that any acquisitions will
be consummated or, if consummated, will result in an advantageous return on
investment for the Company.

Operating Strategy

The Companys primary business objectives is to enhance the
value of its properties and operations by increasing cash flow. The Company
plans to achieve these objectives through continuing efforts to improve tenant
sales and profitability, and to enhance the opportunity for higher base and
percentage rents.

Leasing. The Company pursues an active leasing strategy
through long-standing relationships with a broad range of tenants including
manufacturers of mens, womens and childrens ready-to-wear,
lifestyle apparel, footwear, accessories, tableware, housewares, linens and
domestic goods. Key tenants are placed in strategic locations to draw customers
into each center and to encourage shopping at more than one store. The Company
continually monitors tenant mix, store size, store location and sales
performance, and works with tenants to improve each center through re-sizing,
re-location and joint promotion.

Market and Site Selection. To ensure
a sound long-term customer base, the Company generally seeks to develop sites
near densely-populated, high-income metropolitan areas, and/or at or near major
tourist destinations. While these areas typically impose numerous restrictions
on development and require compliance with complex entitlement and regulatory
processes, the Company believes that these areas provide the most attractive
long-term demographic characteristics. The Company generally seeks to develop
sites that can support at least 400,000 square feet of GLA and that offer the
long-term opportunity to dominate their respective markets through a critical
mass of tenants.

Marketing. The Company pursues an active,
property-specific marketing strategy using a variety of media including
newspapers, television, radio, billboards, regional magazines, guide books and
direct mailings. The centers are marketed to tour groups, conventions and
corporations; additionally, each property participates in joint destination
marketing efforts with other area attractions and accommodations. Virtually all
consumer marketing expenses incurred by the Company are reimbursable by tenants.

Property Design and Management. The
Company believes that effective property design and management are significant
factors in the success of its properties and works continually to maintain or
enhance each centers physical plant, original architectural theme and high
level of on-site services. Each property is designed to be compatible with its
environment and is maintained to high standards of aesthetics, ambiance and
cleanliness in order to promote longer visits and repeat visits by shoppers. Of
the Companys 388 full-time and 99 part-time employees, 286 full-time and
97 part-time employees are involved in on-site maintenance, security,
administration and marketing. Centers are generally managed by an on-site
property manager with oversight from a regional operations director.

Financing

The Company seeks to maintain a strong, flexible financial
position by: (i) maintaining a conservative level of leverage, (ii) extending
and sequencing debt maturity dates, (iii) managing floating interest rate
exposure and (iv) maintaining liquidity. Management believes these strategies
will enable the Company to access a broad array of capital sources, including
bank or institutional borrowings, secured and unsecured debt and equity
offerings.

On September 3, 1999, the OP completed a private sale of $65
million of Series B Cumulative Redeemable Preferred Units (Preferred
Units) to an institutional investor. The private placement took the form
of 1.3 million Preferred Units at a stated value of $50 each. The Preferred
Units may be called at par on or after September 3, 2004, have no stated
maturity or mandatory redemption and pay a cumulative quarterly dividend at an
annualized rate of 9.0%. The Preferred Units are exchangeable into Series B
Cumulative Redeemable Preferred Stock of the Company after ten years. Proceeds
from the sale were used to pay down borrowings under the Senior Credit Facility.

In November 1998, the OP obtained a $60 million term loan that
expires April 2000 and bears interest at a rate of London Interbank Offered Rate
(LIBOR) plus 1.40% (7.53% at December 31, 1999). Proceeds from the loan were
used to pay down borrowings under the Senior Credit Facility. The Company is
currently exploring several refinancing alternatives including an extension or
payoff of this loan.

On March 30, 1998, the OP replaced its two unsecured bank
revolving lines of credit, totaling $150 million (the Credit
Facilities), with a $160 million senior unsecured bank line of credit (the
Senior Credit Facility). The Senior Credit Facility expires on March
30, 2002 and the OP has an annual right to request a one-year extension of the
Senior Credit Facility which may be granted at the option of the lenders. The OP
has requested and expects approval to extend the Facility until March 30, 2003.
The Facility bears interest on the outstanding balance, payable monthly, at a
rate equal of LIBOR plus 1.05% (7.24% at December 31, 1999) or the prime rate,
at the OPs option. The LIBOR rate spread ranges from 0.85% to 1.25%
depending on the Companys Senior Debt rating. A fee on the unused portion
of the Senior Credit Facility is payable quarterly at rates ranging from 0.15%
to 0.25% depending on the balance outstanding. At December 31, 1999, $94 million
was available under the Senior Credit Facility.

Also on March 30, 1998, the OP entered into a $5 million term
loan (the Term Loan) which carries the same interest rate and
maturity as the Senior Credit Facility. The Lender has credit committee approval
to extend the Term Loan to March 30, 2003.

In October 1997, the OP completed a $125 million offering of
7.25% unsecured term notes due October 2007 (the 7.25% Notes). The
7.25% Notes were priced to yield 7.29% to investors. Net proceeds from the
offering were used to repay substantially all borrowings under the
Companys Credit Facilities, redeem $40 million of Reset Notes and for
general corporate purposes.



In October 1997, the Company issued 1.0 million shares of
non-voting 8.375% Series A Cumulative Redeemable Preferred Stock (the
Preferred Stock), par value $0.01 per share, with a liquidation
preference of $50.00 per share. The Preferred Stock has no stated maturity and
is not convertible into any other securities of the Company. The Preferred Stock
is redeemable on or after October 15, 2027 at the Companys option. Net
proceeds from the offering were used to repay borrowings under the
Companys Credit Facilities.

In January 1996, the OP completed a $100 million offering of
7.75% unsecured term notes due January 2001 (the 7.75% Notes), which
are guaranteed by the Company. The five-year non-callable 7.75% Notes were
priced to yield 7.85% to investors.

Competition

The Properties compete for retail consumer spending on the basis
of the diverse mix of retail merchandising and value oriented pricing.
Manufacturers outlet centers have established a niche capitalizing on
consumers desire for value-priced goods. The Properties compete for
customer spending with other outlet locations, traditional shopping malls,
off-price retailers, and other retail distribution channels. The Company
believes that the Properties generally are the leading manufacturers
outlet centers in each market. The Company carefully considers the degree of
existing and planned competition in each proposed market before deciding to
build a new center.

Environmental Matters

The Company is not aware of any environmental liabilities
relating to the Properties that would have a material impact on the
Companys financial position and results of operations.

Personnel

As of December 31, 1999, the Company had 388 full-time and 99
part-time employees. None of the employees are subject to any collective
bargaining agreements, and the Company believes it has good relations with its
employees.

Item 2.  Properties

The Properties are upscale, fashion-oriented manufacturers
outlet centers located near large metropolitan areas, including New York City,
Los Angeles, San Francisco, Boston, Washington DC, Atlanta, Sacramento, Portland
(Oregon), and Cleveland, or at or near tourists destinations, including
Honolulu, Napa Valley, Palm Springs and the Monterey Peninsula. The Properties
were 99% leased as of December 31, 1999 and contained approximately 1,400 stores
with approximately 450 different tenants. During 1999 and 1998, the Properties
generated weighted average tenant sales of $377 and $360 per square foot,
respectively. As of December 31, 1999, the Company had 19 operating outlet
centers. Of the 19 operating centers, 18 are owned 100% in fee; and one,
American Tin Cannery Premium Outlets, is held under a long-term lease expiring
December 2004. The Company manages all of its Properties.

Approximately 34% and 35% of the Companys revenues for the
years ended December 31, 1999 and 1998, respectively, were derived from the
Companys two centers with the highest revenues, Woodbury Common Premium
Outlets and Desert Hills Premium Outlets. The loss of either center or a
material decrease in revenues from either center for any reason might have a
material adverse effect on the Company. In addition, approximately 30% and 34%
of the Companys revenues for the years ended December 31, 1999 and 1998,
respectively, were derived from the Companys centers in California,
including Desert Hills.

Additionally, Woodbury Common Premium Outlets and Desert Hills
Premium Outlets either contributed 10% or more of the Companys aggregate
gross revenues during 1999 or had a book value equal to 10% or more of the total
assets of the Company at year-end 1999. No tenant at these centers leases more
than 10% of such centers GLA. The following chart shows certain
information for these centers.

`Woodbury Common             Desert Hills
                                  Premium Outlets            Premium Outlets
                                  ---------------            ---------------
                          Average       Avg. Annual    Average      Avg. Annual
Fiscal                   Occupancy          Rent      Occupancy         Rent
Year                        Rate         Per sq.ft.      Rate        Per sq.ft.
------                   ---------      -----------   ---------     -----------
1995................       99.7%          $25.97         99.0%        $21.48
1996................      100.0            27.74        100.0          22.16
1997................       98.8            31.42        100.0          23.37
1998................      100.0            33.16        100.0          24.74
1999................       99.5            35.61        100.0          26.26`

Woodbury Common Premium Outlets opened in four phases in 1985,
1993, 1995 and 1998 and contains 841,000 square feet of GLA. As of June 30,
2000, the center was leased to 214 tenants. Woodbury Common is located
approximately 50 miles north of New York City at the Harriman exit of the New
York State Thruway. The populations within a 30-mile, 60-mile and 100-mile
radius are approximately 2.5 million, 17.3 million and 25.2 million,
respectively. Average household income within the 30-mile radius is
approximately $83,000.

Desert Hills Premium Outlets is located on Interstate 10, 16
miles west of Palm Springs, and 75 miles east of Los Angeles. The property
opened in three phases in 1990, 1995 and 1997 and contains 475,000 square feet
of GLA. As of June 30, 2000, the center was leased to 121 tenants. The center
serves the population of southern California as well as tourists. The
populations within a 30-mile, 60-mile and 100-mile radius total approximately
1.0 million, 4.8 million and 17.5 million, respectively. Average annual
household income within the 30-mile radius is approximately $50,000.

The following tables show lease expiration data as of June 30,
2000 for Woodbury Common Premium Outlets and Desert Hills Premium Outlets for
the next ten years (assuming that none of the tenants exercise renewal options).

`Woodbury Common Premium Outlets
                                                --------------------------------
                                                                                   % of Annual
                                                  Contractual           No. of        "CBR"
                                              Base Rents ("CBR")        Leases     Represented by
                                         ----------------------------  -------    ----------------
Expiration Year                 GLA      Per Sq. Ft.       Total        Expiring   Expiring Leases
--------------                  ---      -----------       -----        --------   ----------------
2000........................   42,608     $21.85         $931,153         11            3.6%
2001........................   43,673      34.90        1,524,284         13            5.9
2002........................   45,280      25.50        1,154,555         13            4.4
2003........................  293,989      31.22        9,178,313         70           35.4
2004........................   39,589      32.58        1,289,768         12            5.0
2005........................  102,511      35.06        3,593,710         26           13.8
2006........................   17,066      37.50          639,930          8            2.5
2007........................   32,997      39.36        1,298,868         11            5.0
2008........................  111,795      34.00        3,801,135         23           14.6
2009........................   41,956      40.09        1,682,110         14            6.5`

`Desert Hills Premium Outlets
                                                        -----------------------------
                                                                                     % of Annual
                                                     Contractual        No. of         "CBR"
                                                 Base Rents ("CBR")     Leases      Represented by
Expiration Year                   GLA       Per Sq. Ft.      Total     Expiring     Expiring Leases
---------------                   ---       -----------      -----     --------     ---------------
2000..........................   44,344        $21.29        $944,079     17           9.1%
2001..........................   40,159         23.13         928,731     10           8.9
2002..........................   94,326         24.37       2,298,613     27          22.1
2003..........................   38,468         23.33         897,357     11           8.6
2004..........................   55,314         19.28       1,066,648      8          10.3
2005..........................  105,263         22.24       2,341,108     28          22.5
2006..........................   20,985         24.77         519,786      4           5.0
2007..........................   18,790         20.12         378,138      5           3.6
2008..........................    7,724         33.82         261,238      3           2.5
2009..........................   12,057         45.15         544,361      5           5.2`

Depreciation on Woodbury Common Premium Outlets and Desert Hills
Premium Outlets is calculated using the straight line method over the estimated
useful life of the real property and land improvements which ranges from 10 to
40 years. At December 31, 1999, the Federal tax basis in these centers was as
follows: Woodbury Common Premium Outlets - $129,508,887 and Desert Hills Premium
Outlets - $55,340,210.

The realty tax rate on the above centers is approximately $4.73
per $100 of assessed value for Woodbury Common Premium Outlets and $1.16 per
$100 of assessed value for Desert Hills Premium Outlets. Estimated 2000 taxes
for these centers are as follows: $3,270,000 for Woodbury Common Premium Outlets
and $907,000 for Desert Hills Premium Outlets.

The Company believes the Properties are adequately covered by
insurance.

The Company does not consider any single store lease to be
material; no individual tenant, combining all of its store concepts, accounts
for more than 5% of the Companys gross revenues or total GLA; and only two
tenants occupy more than 4% of the Companys total GLA. As a result, and
considering the Companys past success in re-leasing available space, the
Company believes the loss of any individual tenant would not have a significant
effect on future operations.

Set forth in the table below is certain property information as of December
31,1999:

`Year        GLA      No. of
Name/Location                          Opened    (Sq. Ft.)   Stores   Tenants
                                       --------  ---------- --------- ---------------------------------------

Woodbury Common                         1985      841,000      213    Brooks Brothers, Calvin Klein, Coach
 Central Valley, NY (New York City                                     Leather, Gap, Gucci, Last Call
 metro area)                                                            Neiman Marcus, Polo Ralph Lauren

North Georgia                           1996      537,000      135    Brooks Brothers, Donna Karan, Gap,
 Dawsonville, GA (Atlanta metro area)                                  Nautica, Off  5th-Saks Fifth Avenue,
                                                                       Williams-Sonoma

Desert Hills                            1990      475,000      120    Burberry, Coach Leather, Giorgio
 Cabazon, CA (Palm Springs-Los Angeles                                 Armani, Gucci, Nautica, Polo
 area)                                                                 Ralph Lauren, Tommy Hilfiger


Wrentham Village                        1997      473,000      125    Brooks Brothers, Calvin Klein, Donna
 Wrentham, MA (Boston/Providence metro                                 Karan, Gap, Polo Jeans Co., Sony,
 area)                                                                 Versace


Camarillo Premium Outlets               1995      454,000      124    Ann Taylor, Barneys New York, Bose,
 Camarillo, CA (Los Angeles metro area)                                Cole-Haan, Donna Karan, Jones NY,
                                                                       Off 5th-Saks Fifth Avenue

Leesburg Corner                         1998      325,000       73    Banana Republic, Brooks Brothers, Gap,
 Leesburg, VA (Washington DC area)                                     Donna Karan, Off 5th-Saks Fifth
                                                                       Avenue

Aurora Premium Outlets                  1987      297,000       69    Ann Taylor, Bose, Brooks Brothers,
 Aurora, OH (Cleveland metro area)                                     Carters, Liz Claiborne, Nautica, Off
                                                                       5th-Saks Fifth Avenue

Clinton Crossing                        1996      272,000       67    Coach Leather, Crate & Barrel, Donna
 Clinton, CT (I-95/NY-New England                                      Karan, Gap, Off 5th-Saks Fifth
 corridor)                                                             Avenue,  Polo Ralph Lauren

Folsom Premium Outlets                  1990      246,000       68    Bass, Donna Karan, Gap, Liz Claiborne,
 Folsom, CA (Sacramento metro area)                                    Nike, Off 5th-Saks Fifth Avenue

Waikele Premium Outlets (1)             1997      214,000       52    Barneys New York, Bose, Donna Karan,
 Waipahu, HI (Honolulu area)                                           Guess, Polo Jeans Co., Off 5th-Saks
                                                                       Fifth Avenue

Petaluma Village                        1994      196,000       51    Ann Taylor, Bose, Brooks Brothers,
 Petaluma, CA (San Francisco metro area                                Donna Karan, Off 5th-Saks Fifth
                                                                       Avenue

Napa Premium Outlets                    1994      171,000       48    Cole-Haan, Dansk, Ellen Tracy,
 Napa, CA (Napa Valley)                                                Esprit, J. Crew, Nautica,
                                                                       Timberland, TSE  Cashmere

Columbia Gorge                          1991      164,000       44    Adidas, Carter's, Gap, Harry &
 Troutdale, OR (Portland metro area)                                   David, Mikasa

Liberty Village                         1981      157,000       56    Calvin Klein, Donna Karan, Ellen
 Flemington, NJ (New York-Phila. metro                                 Tracy, Polo Ralph Lauren,
 area)                                                                 Tommy Hilfiger

American Tin Cannery                    1987      135,000       48    Anne Klein, Bass, Carole Little,
 Pacific Grove, CA (Monterey Peninsula)                                Nine  West, Reebok, Totes

Santa Fe Premium Outlets                1993      125,000       40    Brooks Brothers, Coach Leather,
 Santa Fe, NM                                                          Donna Karan, Liz Claiborne,
                                                                       Nine West

Patriot Plaza                           1986       76,000       11    Lenox, Polo Ralph Lauren,
 Williamsburg, VA (Norfolk-Richmond                                    WestPoint  Stevens
 area)

Mammoth Premium Outlets                 1990       35,000       11    Bass, Polo Ralph Lauren
 Mammoth Lakes, CA (Yosemite National
 Park)

St. Helena Premium Outlets              1992       23,000        9    Brooks Brothers, Coach Leather,
 St. Helena, CA (Napa Valley)                                         Donna Karan, Joan & David
                                                 ---------   -------

   Total                                         5,216,000   1,364
                                                 =========  ========

(1)  Acquired in March 1997`

The Company rents approximately 27,000 square feet of office
space in its headquarters facility in Roseland, New Jersey and approximately
4,000 square feet of office space for its west coast regional development office
in Newport Beach, California.

Item 3.  Legal Proceedings

The Company is not presently involved in any material litigation
other than routine litigation arising in the ordinary course of business and
that is either expected to be covered by liability insurance or to have no
material impact on the Companys financial position and results of
operations.

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

None.

Directors and Executive Officers of the Company

`Name                     Age      Position
  ----                     ---      --------
  David C. Bloom            43      Chairman of the Board (term expires in 2002)
                                    and Chief Executive Officer
  William D. Bloom          37      Vice Chairman
                                    and Director (term expires in 2000)
  Brendan T. Byrne          75      Director (term expires in 2001)
  Robert Frommer            65      Director (term expires in 2000)
  Barry M. Ginsburg         62      Director (term expires in 2002)
  Philip D. Kaltenbacher    62       Director (term expires in 2002)
  Reuben S. Leibowitz       52      Director (term expires in 2000)
  Leslie T. Chao            43      President
  Thomas J. Davis           44      Chief Operating Officer
  Bruce Zalaznick           43      Executive Vice President-International
  Michael J. Clarke         46      Chief Financial Officer
  Christina M. Casey        44      Vice President-Human Resources
  Denise M. Elmer           43      Vice President, General Counsel and Secretary
  Anthony J. Galvin         40      Vice President-Leasing
  Eric K. Helstrom          41      Vice President-Architecture and Construction
  John R. Klein             41      Vice President-Acquisitions and Development
  Gregory C. Link           50      Vice President-Operations
  Michele Rothstein         41      Vice President-Marketing
  Catherine A. Lassi        40      Treasurer
  Sharon M. Vuskalns        36      Controller`

David C. Bloom, Chairman of the Board and
Chief Executive Officer since 1993. Mr. Bloom was a founder and principal of
Chelsea, and was President of Chelsea from 1985 to 1993. As Chairman of the
Board and Chief Executive Officer of the Company, he sets policy and coordinates
and directs all the Companys primary functions. Prior to founding Chelsea,
he was an equity analyst with The First Boston Corporation (now Credit Suisse
First Boston Corporation) in New York. Mr. Bloom graduated from Dartmouth
College and received an MBA from Harvard Business School.

William D. Bloom, Vice Chairman since 2000 and Director
since 1995. Mr. Bloom joined The Chelsea Group in 1986 with responsibility for
the leasing of the Company's projects and was appointed Executive Vice
President-Leasing in 1993 and Executive Vice President-Strategic Relationships
in 1996. Prior to joining Chelsea, he was an institutional bond broker with
Mabon Nugent in New York. Mr. Bloom graduated from Boston University School of
Management.

Brendan T. Byrne, Director since 1993.
Since 1982, Mr. Byrne has been a senior partner in the law firm of Carella,
Byrne, Bain, Gilfillan, Cecchi, Stewart & Olstein. He previously served as
Governor of New Jersey from 1974 to 1982, Prosecutor of Essex County (New
Jersey), President of the Public Utility Commission and Assignment Judge of the
New Jersey Superior Court. He has also served as Vice President of the National
District Attorneys Association; Trustee of Princeton University; Chairman of the
Princeton University Council on New Jersey Affairs; Chairman of the United
States Marshals Foundation; and Chairman of the National Commission on Criminal
Justice Standards and Goals (1977). He serves on a Board of the National
Judicial College, is a former Commissioner of the New Jersey Sports and
Exposition Authority, and was a member of the board of directors of New Jersey
Bell Telephone Company, Elizabethtown Water Company, Ingersoll-Rand Company and
a former director of The Prudential Insurance Company of America. He is a member
of the Board of Mack-Cali, Inc. Mr. Byrne graduated from Princeton University
and received an LL.B. from Harvard Law School.

Robert Frommer, Director since 1993. Mr. Frommer has been
responsible for developing major commercial, residential and mixed-use real
estate projects throughout the "U.S." in such cities as New York, Philadelphia,
Baltimore, Washington, DC, Chicago and Seattle. He has served as President of
the Pebble Beach Co., the Ritz-Carlton Hotel of Chicago and PG&E Properties in
California. Mr. Frommer is a graduate of the Wharton School of the University of
Pennsylvania, and received an LL.B. from Yale Law School.of the Pebble Beach
Co., the Ritz-Carlton Hotel of Chicago and PG&E Properties in California. Mr.
Frommer is a graduate of the Wharton School of the University of Pennsylvania,
and received an LL.B. from Yale Law School.

Barry M. Ginsburg, Director since 1993. Mr. Ginsburg was a
founder and principal of GCA and its predecessor companies from 1986 to 1993 and
Vice Chairman of the Company from 1993 to 1999. From 1966 through 1985, he was
employed by Dansk International Designs, Ltd. and was corporate Chief Operating
Officer and Director from 1980 to 1985. Dansk operated a chain of 31
manufacturers' outlet stores. He is a Director of Liz Lange Maternity and New
Milford (Connecticut) Hospital. Mr. Ginsburg graduated from Colby College and
received an MBA from Cornell University.

Philip D. Kaltenbacher, Director since 1993. Since 1974,
Mr. Kaltenbacher has been Chairman of the Board of Directors and Chief Executive
Officer of Seton Company, a manufacturer of leather; health care products;
industrial foams, films, tapes, adhesives and laminates; and chemicals. Mr.
Kaltenbacher was a Commissioner of The Port Authority of New York and New Jersey
from September 1985 through February 1993, and served as Chairman from September
1985 through April 1990. Mr. Kaltenbacher graduated from Yale University and
received an LL.B. from Yale Law School.

Reuben S. Leibowitz, Director since 1993. Mr. Leibowitz
is a Managing Director of E.M. Warburg, Pincus & Co., LLC ("Warburg, Pincus"), a
venture banking firm. He has been associated with Warburg, Pincus since 1984.
Mr. Leibowitz currently serves on the board of directors of Grubb & Ellis
Company and Lennar Corporation. Mr. Leibowitz graduated from Brooklyn College,
received an MBA from New York University, a JD from Brooklyn Law School, and an
LL.M. from New York University School of Law.

Leslie T. Chao, President since April 1997.
As President of the Company, Mr. Chao oversees the corporate finance,
international development, legal, administrative, investor relations and human
resource functions of the Company. He joined Chelsea in 1987 as Chief Financial
Officer. Prior to joining Chelsea, he was a Vice President in the corporate
finance/treasury area of Manufacturers Hanover Corporation (now The Chase
Manhattan Corporation), a New York bank holding company. Mr. Chao graduated from
Dartmouth College and received an MBA from Columbia Business School.

Thomas J. Davis, Chief Operating Officer
since April 1997. As Chief Operating Officer, Mr. Davis oversees the asset
management activities of the Company including leasing, operations and marketing
as well as development and construction. Mr. Davis joined Chelsea in 1996 as
Executive Vice President-Asset Management. From 1988 to 1995, he held various
senior positions at Phillips-Van Heusen Corporation, most recently as Vice
President-Real Estate. Mr. Davis has over twenty years of factory outlet
industry experience and has served the industry in various trade association
positions including Chairman of Manufacturers Idea Exchange as well as a board
member of the Steering Committee for FOMA (Factory Outlet Marketing
Association). Mr. Davis received the 1995 Value Retail News Award of Excellence
for individual achievement in the outlet industry.

Bruce Zalaznick, Executive Vice
President-International since 1999. Mr. Zalaznick joined the Company in 1994 as
Vice President-Acquisitions responsible for the Companys site acquisition
activities. From 1996 to 1999 he served as Executive Vice President-Real Estate,
responsible for the site selection, development, design and construction
activities of the Company. In July 1999, Mr. Zalaznick was named Executive Vice
President-International and is responsible for the Companys development
outside the United States. From 1990 to 1994, he was Senior Vice President-Site
Acquisition at Prime Retail, Inc., a publicly traded REIT, and in that capacity
was responsible for the acquisition and entitlement of approximately three
million square feet of outlet space in ten states. Mr. Zalaznick graduated from
Cornell University and received an MBA from the Wharton School at the University
of Pennsylvania.

Michael J. Clarke, Chief Financial Officer
since 1999. Since joining the Company in 1994, Mr. Clarke has held various
senior level financial positions. As Chief Financial Officer, he is responsible
for Chelseas financial functions including treasury, accounting,
budgeting, banking and rating agency relations. From 1985 to 1993, he held
various senior positions at Prime Hospitality Corp., a NYSE-listed operator of
hotels, most recently as Executive Vice President & Chief Financial Officer.
Mr. Clarke graduated from Seton Hall University and is a certified public
accountant.

Christina M. Casey, Vice President-Human
Resources since 1998. Ms. Casey joined the Company in 1996 as Director of Human
Resources. As Vice President-Human Resources, she oversees all aspects of the
Companys human resource activities, including recruitment, benefits,
compensation, policy development, training and employee relations. From 1987 to
1996 she held various positions in Human Resources with Boise Cascade
Corporation, Specialty Paperboard and Rock-Tenn Company. Ms. Casey graduated
from Villanova University and received a Masters in Social Service from Bryn
Mawr Graduate School.

Denise M. Elmer, Vice President, General
Counsel and Secretary since 1993. Ms. Elmer joined Chelsea as General Counsel in
1993. As Vice President, General Counsel and Secretary, she oversees the legal
activities of the Company, including those related to property acquisition and
development, leasing, finance and operations. From 1988 to 1993, she was an
attorney in the New York law firm of Stadtmauer Bailkin Levine & Masur,
where she specialized in commercial real estate law and became a partner in
1990. Ms. Elmer graduated from St. Lawrence University and received a JD from
Duke University School of Law.

Anthony J. Galvin, Vice President-Leasing
since 1997. As Vice President-Leasing, Mr. Galvin is responsible for the
management of the Companys leasing activities. From 1995 to 1997, he was
Director of Real Estate for Coach Leather, a division of Sara Lee Corporation.
From 1987 to 1995 he held positions in both real estate and construction at
Phillips-Van Heusen Corporation. Mr. Galvin has served the industry in various
trade association positions including Chairperson of the Northeast Merchants
Association and the Board of Directors of ORMA (Outlet Retail Merchants
Association). Mr. Galvin is a graduate of Glassboro State College (now Rowan
University), where he serves on the Executive Committee of the Alumni Advisory
Council for the School of Business.

Eric K. Helstrom, Vice President-Architecture and
Construction, since 1996. Mr. Helstrom joined the Company in 1995 as
Director-Development and was named Vice President-Architecture and Construction
in 1996. He oversees the design, engineering and construction activities of the
Company. From 1987 to 1995, he held various positions including
Director-Architecture/Construction with Alexander Haagen Properties, an
AMEX-listed REIT. Mr. Helstrom graduated from California Polytechnic San Luis
Obispo and received a Masters in Real Estate Development from the University of
Southern California. Mr. Helstrom is a licensed architect and general
contractor.

John R. Klein, Vice President-Acquisitions and
Development, since 1996. Mr. Klein joined the Company in 1995 as
Director-Acquisitions and was named Vice President-Acquisitions and Development
in 1996. He oversees the Company's acquisitions and development activities
including site selection and entitlements. From 1991 to 1995, he held various
positions at Prime Retail, Inc., most recently as Vice President-Site
Acquisition. At Prime, Mr. Klein was involved in the acquisition and entitlement
of over two million square feet of manufacturers' outlet space in nine states.
Mr. Klein graduated from Columbia University and received an MBA from George
Washington University School of Business.

Gregory C. Link, Vice President-Operations
since 1996. Mr. Link joined the Company in 1994 as Vice President-Leasing
responsible for the management of the Companys leasing activities. In
January 1996, Mr. Link was appointed Vice President-Operations and is
responsible for supervising property management activities at the Companys
operating properties. From 1987 to 1994, he was Chairman, President and Chief
Executive Officer of The Ribbon Outlet, Inc., an affiliate of the worlds
largest ribbon manufacturer, and in that capacity opened over 100 factory outlet
stores across the United States. From 1971 to 1987 he held various senior
merchandising positions with Phillips-Van Heusen Corporation, Westpoint
Pepperell Corporation, May Department Stores and Associated Dry Goods
Corporation. Mr. Link graduated from the College of Business and Public
Administration of the University of Arizona at Tucson.

Michele Rothstein, Vice President-Marketing since
1993. Ms. Rothstein joined Chelsea in 1989 as Vice President-Marketing. As Vice
President-Marketing of the Company, she oversees all aspects of the
Companys marketing and promotion activities. From 1987 to 1989, she was a
product manager at Regina Company and, prior to 1987, was with Waring &
LaRosa Advertising in New York. Ms. Rothstein graduated from the School of
Business at the State University of New York at Albany.

Catherine A. Lassi, Treasurer since 1997. Ms. Lassi
joined Chelsea in 1987, became Controller in 1990 and Treasurer in January 1997.
As Treasurer, she oversees budgeting, forecasting, contract administration, cash
management, banking, information systems and lease accounting activities for the
Company. Ms. Lassi is a certified public accountant and graduated from the
University of South Florida.

Sharon M. Vuskalns, Controller since 1997. Ms. Vuskalns
joined the Company in 1995 as Director of Accounting Services. As Controller,
she oversees the accounting and financial reporting activities for the Company.
Prior to joining Chelsea, she was a Senior Audit Manager with Ernst & Young,
LLP. Ms. Vuskalns graduated from Indiana University and is a certified public
accountant.

David C. Bloom and William D. Bloom are brothers.

PART II

Item 5.  Market for the Registrant's Common Stock and Related Security Matters

The common stock of the Company is traded on the New York Stock
Exchange under the ticker symbol CCG. As of February 24, 2000 there were 545
shareholders of record. The Company believes it has more than 12,000 beneficial
holders of common stock. The following table sets forth the quarterly high and
low closing sales price per share (as derived from the Wall Street Journal) and
the cash distributions declared in 1999 and 1998:

`Sales Price ($)
                                                ---------------
                                                                  Distributions
    Quarter Ended                      High        Low               ($)
    -------------                      ------      -------        -------------

    December 31, 1999                  31-3/4       29               0.72
    September 30, 1999                 38-7/8       30-7/16          0.72
    June 30, 1999                      39           29-5/16          0.72
    March 31, 1999                     35-7/8       27-7/8           0.72

    December 31, 1998                  35-5/8       32-7/16          0.69
    September 30, 1998                 40           31-1/8           0.69
    June 30, 1998                      40-3/16      37-5/8           0.69
    March 31, 1998                     38-13/16     36-3/4           0.69`

While the Company intends to continue paying regular quarterly
dividends, future dividend declarations will be at the discretion of the Board
of Directors and will depend on the cash flow and financial condition of the
Company; capital requirements; annual distribution requirements under the REIT
provisions of the Internal Revenue Code; covenant limitations under the Senior
Credit Facility and the Term Notes; and such other factors as the Board of
Directors deems relevant.

On June 16, 1997, pursuant to a Stock Subscription Agreement
dated May 16, 1997 (the Subscription Agreement) the Company sold to
Simon Property Group, Inc. (Simon) an aggregate of 1,408,450 shares
of Common Stock at a purchase price of $35.50 per share, for an aggregate
purchase price of approximately $50 million. Pursuant to the Subscription
Agreement, the Company agreed not to sell for cash any equity securities (or
securities convertible into or exercisable for equity securities) unless it
offers to Simon the right to buy a pro rata share of such securities. Simon
agreed not to acquire any additional securities of the Company or, directly or
indirectly, seek to acquire control of the Company without prior consent of the
Companys Board of Directors for a period of five years from the date of
the Subscription Agreement (or two years after the Simon joint venture is
terminated). If Simon acquires an aggregate of $100 million of securities of the
Company, it will have the right to elect a director of the Company.

Item 6:  Selected Financial Data

`Chelsea GCA Realty, Inc.
                              (In thousands except per share, and number of centers)


                                                                Year Ended
                                                               December 31,
                                           -------------------------------------------------
Operating Data:                               1999     1998       1997      1996      1995
                                           --------- --------  ---------  -------- --------

Rental revenue............................. $114,485  $99,976    $81,531   $63,792  $51,361
Total revenues.............................  162,926  139,315    113,417    91,356   72,515
Loss on writedown of assets................      694   15,713          -         -        -
Total expenses.............................  115,370  113,879     78,262    59,996   41,814

Income before minority interest and
    extraordinary item.....................   47,556   25,436     35,155    31,360   29,650

Minority interest..........................   (9,275)  (3,803)    (6,595)   (9,899) (10,078)

Income before extraordinary item...........   38,281   21,633     28,560    21,461   19,572

Extraordinary item - loss on retirement
of  debt...................................        -     (283)      (204)     (607)       -

Net income.................................   38,281   21,350     28,356    20,854   19,572

Preferred dividend.........................   (4,188)  (4,188)      (907)        -        -

Net income to common shareholders..........  $34,093  $17,162    $27,449   $20,854  $19,572

Income per common share before
    extraordinary item (diluted) (1).......    $2.14    $1.12      $1.86     $1.79    $1.73
Net income per common share (diluted) (1)..    $2.14    $1.10      $1.85     $1.74    $1.73

Ownership Interest:
REIT common shares.........................   15,908   15,672     14,866    11,964   11,289
Operating Partnership units................    3,389    3,431      3,435     5,316    5,601
                                               -----    -----      -----     -----    -----
Weighted average shares/units outstanding..   19,297   19,103     18,301    17,280   16,890

Balance Sheet Data:
Rental properties before accumulated
    depreciation........................... $848,813 $792,726   $708,933  $512,354 $415,983
Total assets...............................  806,055  773,352    688,029   502,212  408,053
Total liabilities  ........................  426,198  450,410    342,106   240,878  141,577
Minority interest..........................  102,561   42,551     48,253    75,994   89,718
Stockholders'/owners' equity...............  277,296  280,391    297,670   185,340  176,758
Distributions declared per common share....    $2.88    $2.76      $2.58    $2.355   $2.135

Other Data:
Funds from operations to common
shareholders (2)...........................  $79,980  $67,994    $57,417   $48,616  $41,870
Cash flows from:
   Operating activities....................  $87,590  $78,731    $56,594   $53,510  $36,797
   Investing activities....................  (77,578)(119,807)  (199,250)  (99,568) (82,393)
   Financing activities....................  (10,781)  36,169    143,308    55,957   40,474

GLA at end of period.......................    5,216    4,876      4,308     3,610    2,934
Weighted average GLA (3)...................    4,995    4,614      3,935     3,255    2,680
Centers in operation at end of the period..       19       19         20        18       16
New centers opened.........................        -        1          1         2        1
Centers expanded...........................        4        7          5         5        7
Center sold................................        1        -          -         -        1
Centers held for sale......................        1        2          -         -        -
Center acquired............................        -        -          1         -        -

Notes to Selected Financial Data:

(1)  The earnings per share amounts prior to 1997 have been restated as required
     to comply with Statement of Financial Accounting Standards No. 128,
     Earnings Per Share. For further discussion of earnings per share and the
     impact of Statement No. 128, see the notes to the consolidated financial
     statements beginning on page F-6.

(2)  The Company believes that FFO is helpful to investors as a measure of the
     performance of an equity REIT because, along with cash flow from operating
     activities, financing activities and investing activities, it provides
     investors with an indication of the ability of the Company to incur and
     service debt, to make capital expenditures and to fund other cash needs.
     The Company computes FFO in accordance with the current standards
     established by NAREIT which may not be comparable to FFO reported by other
     REIT's that do not define the term in accordance with the current NAREIT
     definition or that interpret the current NAREIT definition differently than
     the Company. FFO does not represent cash generated from operating
     activities in accordance with GAAP and should not be considered as an
     alternative to net income (determined in accordance with GAAP) as an
     indication of the Company's financial performance or to cash flow from
     operating activities (determined in accordance with GAAP) as a measure of
     the Company's liquidity, nor is it indicative of funds available to fund
     the Company's cash needs, including its ability to make cash distributions.
     See Management's Discussion and Analysis for definition of FFO.

(3)  GLA weighted by months in operation.`

Item 7.  Managements Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in connection with the
financial statements and notes thereto appearing elsewhere in this annual
report.

Certain comparisons between periods have been made on a
percentage or weighted average per square foot basis. The latter technique
adjusts for square footage changes at different times during the year.

General Overview

At December 31, 1999 and 1998, the Company operated 19
manufacturers outlet centers, compared to 20 at the end of 1997. The
Companys operating gross leasable area (GLA) at December 31,
1999 was 5.2 million square feet compared to 4.9 million square feet and 4.3
million square feet at December 31, 1998 and 1997, respectively.

From January 1, 1997 to December 31, 1999, the Company grew by
increasing rents at its operating centers, opening two new centers, acquiring
one center and expanding nine centers. Increasing rents at operating centers
resulted in base and percentage rent revenue growth of $13.8 million. The
opening of two new centers, acquisition of one center and expansion of nine
centers increased base and percentage rent revenues by $10.6 million, $6.3
million and $20.0 million, respectively during the three year period ended
December 31, 1999. The 1.6 million square feet (sf) of net GLA added
during the period is detailed as follows:

`Since
                                           January 1,
                                              1997             1999        1998             1997
                                           -------------   ------------   -----------   --------------
Changes in GLA (sf in 000's):

   New centers developed:
         Leesburg Corner                        270                -         270                -
         Wrentham Village                       227                -           -              227
                                           -------------   ------------   -----------    -------------
   Total new centers                            497                -         270              227

   Centers expanded:
         Wrentham Village                       246              120         126                -
         North Georgia                          245              103          31              111
         Leesburg Corner                         55               55           -                -
         Camarillo Premium Outlets              175               45          45               85
         Woodbury Common                        268                -         268                -
         Folsom Premium Outlets                  34                -          19               15
         Columbia Gorge                          16                -          16                -
         Desert Hills                            42                -           6               36
         Liberty Village                         12                -           -               12
         Other                                    -               17         (15)              (2)
                                           -------------   ------------   -----------   --------------
   Total centers expanded                     1,093              340         496              257

   Centers held for sale:
         Solvang Designer Outlets               (52)               -         (52)               -
         Lawrence Riverfront                   (146)               -        (146)               -
                                           -------------   ------------   -----------   --------------
                                               (198)               -        (198)               -

   Center acquired:
         Waikele Premium Outlets                214                -           -              214
                                           -------------   ------------   -----------   --------------
Net GLA added during the period               1,606              340         568              698

Other Data:
         GLA at end of period                                  5,216       4,876            4,308
         Weighted average GLA (1)                              4,995       4,614            3,935
         Centers in operation at end
         of period                                                19          19               20
         New centers opened                                        -           1                1
         Centers expanded                                          4           7                5
         Centers sold                                              1           -                -
         Centers held for sale                                     1           2                -
         Center acquired                                           -           -                1

Note:  (1)  Average GLA weighted by months in operation`

The Companys centers produced weighted average reported
tenant sales of approximately $377 per square foot in 1999 and $360 per square
foot in 1998 and 1997. Weighted average sales is a measure of tenant performance
that has a direct effect on base and percentage rents that can be charged to
tenants over time.

Two of the Companys centers, Woodbury Common and Desert
Hills, generated approximately 34%, 35% and 34% of the Companys total
revenue for the years 1999, 1998 and 1997, respectively. In addition,
approximately 30%, 34%, and 38% of the Companys revenues for the years
ended December 31, 1999, 1998 and 1997, respectively, were derived from the
Companys centers in California, including Desert Hills.

The Company does not consider any single store lease to be
material; no individual tenant, combining all of its store concepts, accounts
for more than 5% of the Companys gross revenues or total GLA; and only two
tenants occupy more than 4% of the Companys total GLA. In view of these
statistics and the Companys past success in re-leasing available space,
the Company believes the loss of any individual tenant would not have a
significant effect on future operations.

The discussion below is based upon operating income before
minority interest and extraordinary item. The minority interest in net income
varies from period to period as a result of changes in Operating Partnership
interests and the Companys 50% investment in Solvang prior to June 30,
1997.

Comparison of year ended December 31, 1999 to year ended December 31, 1998

Operating income before interest, depreciation and amortization
increased $18.6 million, or 19.8%, to $112.2 million in 1999 from $93.6 million
in 1998. This increase was primarily the result of expansions and a new center
opening during 1999 and 1998. Income from operations increased $7.1 million or
17.3% to $48.3 million in 1999 from $41.2 million in 1998. Increased revenues
from expansions and a new center opening during 1999 and 1998 were offset by
higher interest costs.

Base rentals increased $12.2 million, or 14.1%, to $98.8 million
in 1999 from $86.6 million in 1998 due to expansions, a new center opening in
1998 and higher average rents. Base rental revenue per weighted average square
foot increased to $19.79 in 1999 from $18.77 in 1998 as a result of higher
rental rates on new leases and renewals.

Percentage rents increased $2.3 million, or 16.9%, to $15.7
million in 1999 from $13.4 million in 1998. The increase was primarily due to a
new center opening in 1998, expansions of existing centers and increase in
tenants contributing percentage rents.

Expense reimbursements, representing contractual recoveries from
tenants of certain common area maintenance, operating, real estate tax,
promotional and management expenses, increased $4.4 million, or 12.5%, to $39.7
million in 1999 from $35.3 million in 1998, due to the recovery of operating and
maintenance costs from increased GLA. On a weighted average square foot basis,
expense reimbursements increased 3.9% to $7.96 in 1999 from $7.66 in 1998. The
average recovery of reimbursable expenses was 90.8% in 1999 compared to 91.3% in
1998.

Other income increased $4.7 million to $8.7 million in 1999 from
$4.0 million in 1998. The increase was primarily due to income from the
agreement not to compete with the Mills Corporation in the Houston, Texas area.

Interest, in excess of amounts capitalized, increased $4.2
million to $24.2 million in 1999 from $20.0 million in 1998, due to higher debt
balances from increased GLA in operation.

Operating and maintenance expenses increased $5.1 million, or
13.1%, to $43.8 million in 1999 from $38.7 million in 1998. The increase was
primarily due to costs related to increased GLA. On a weighted average square
foot basis, operating and maintenance expenses increased 4.4% to $8.76 in 1999
from $8.39 in 1998 as a result of increased real estate tax and promotion costs.

General and administrative expenses were $4.8 million during
1999 and 1998 due to stabilized overhead costs during 1999.

Depreciation and amortization expense increased $7.2 million to
$39.7 million in 1999 from $32.5 million in 1998. The increase was due to
depreciation of expansions and a new center opened in 1998.

The loss on writedown of assets of $0.7 million in 1999 and
$15.7 million in 1998 was attributable to the re-valuation of two centers held
for sale at their estimated fair values and the write-off of pre-development
costs of an abandoned site.

Other expenses remained stable at $2.1 million during 1999 and
1998.

Comparison of year ended December 31, 1998 to year ended December 31, 1997

Operating income before interest, depreciation and amortization
increased $18.2 million, or 24.2%, to $93.6 million in 1998 from $75.4 million
in 1997. This increase was primarily the result of expansions and new center
openings during 1997 and 1998. Income from operations increased $6.0 million, or
17.1%, to $41.2 million in 1998 from $35.2 million in 1997. Increased revenues
from expansions and new center openings in 1997 and 1998 were offset by
increased interest costs.

Base rentals increased $15.9 million, or 22.5%, to $86.6 million
in 1998 from $70.7 million in 1997 due to expansions, new center openings in
1997 and 1998, one acquired center and higher average rents. Base rental revenue
per weighted average square foot increased to $18.77 in 1998 from $17.97 in 1997
as a result of higher rental rates on new leases and renewals.

Percentage rents increased $2.6 million, or 23.5%, to $13.4
million in 1998 from $10.8 million in 1997. The increase was primarily due to a
new center opening in 1997, increased tenant sales and a higher number of
tenants contributing percentage rents.

Expense reimbursements, representing contractual recoveries from
tenants of certain common area maintenance, operating, real estate tax,
promotional and management expenses, increased $6.3 million, or 21.9%, to $35.3
million in 1998 from $29.0 million in 1997, due to the recovery of operating and
maintenance costs from increased GLA. On a weighted average square foot basis,
expense reimbursements increased 4.1% to $7.66 in 1998 from $7.36 in 1997. The
average recovery of reimbursable expenses was 91.3% in 1998 compared to 92.2% in
1997.

Other income increased $1.1 million to $4.0 million in 1998 from
$2.9 million in 1997. The increase was due to income from the agreement not to
compete with the Mills Corporation in the Houston, Texas area and a $0.3 million
increase in outparcel income during 1998.

Interest, in excess of amounts capitalized, increased $4.6
million to $20.0 million in 1998 from $15.4 million in 1997, due to higher debt
balances from increased GLA in operation.

Operating and maintenance expenses increased $7.3 million, or
23.2%, to $38.7 million in 1998 from $31.4 million in 1997. The increase was
primarily due to costs related to increased GLA. On a weighted average square
foot basis, operating and maintenance expenses increased 5.0% to $8.39 in 1998
from $7.99 in 1997 as a result of increased real estate tax and promotion costs.

Depreciation and amortization expense increased $7.5 million to
$32.5 million in 1998 from $25.0 million in 1997. The increase was due to
depreciation of expansions and new centers opened in 1997 and 1998.

General and administrative expenses increased $1.0 million to
$4.8 million in 1998 from $3.8 million in 1997. On a weighted average square
foot basis, general and administrative expenses increased 8.2% to $1.05 in 1998
from $0.97 in 1997 primarily due to increased personnel, overhead costs and
accrual for deferred compensation.

The loss on writedown of assets of $15.7 million in 1998 was
attributable to the re-valuation of two centers held for sale at their estimated
fair values and the write-off of pre-development costs of an abandoned site.

Other expenses decreased $0.4 million to $2.2 million in 1998
from $2.6 million in 1997. The decrease was primarily due to recoveries of bad
debts previously written off.

Liquidity and Capital Resources

The Company believes it has adequate financial resources to fund
operating expenses, distributions, and planned development and construction
activities over the short-term, which is less than 12 months and the long-term,
which is 12 months or more. Operating cash flow in 1999 of $87.6 million is
expected to increase with a full year of operations of the 340,000 square feet
of GLA added during 1999 and scheduled openings of approximately 853,000 square
feet in 2000, which includes the Companys 50% ownership share in Orlando
Premium Outlets and 40% ownership share in Gotemba Premium Outlets. The Company
has adequate funding sources to complete and open all of its current development
projects through the use of available cash of $8.9 million; construction loans
for the Orlando and Allen projects up to a maximum borrowing of $82.5 million
and $40.0 million, respectively; a yen-denominated line of credit totaling 4
billion yen (US $40 million) for the Companys share of projects in Japan;
and approximately $90 million available under its Senior Credit Facility.
Chelsea also has the ability to access the public markets through its $175
million debt shelf registration and if current market conditions become
favorable through its $200 million equity shelf registration.

Operating cash flow is expected to provide sufficient funds for
dividends and distributions in accordance with REIT federal income tax
requirements. In addition, the Company anticipates retaining sufficient
operating cash to fund re-tenanting and lease renewal tenant improvement costs,
as well as capital expenditures to maintain the quality of its centers.

Common distributions declared and recorded in 1999 were $55.2
million or $2.88 per share or unit. The Companys 1999 distribution payout
ratio as a percentage of net income before minority interest, loss on writedown
of assets and depreciation and amortization, exclusive of amortization of
deferred financing costs, (FFO) was 69%. The Senior Credit Facility
limits aggregate dividends and distributions to the lesser of (i) 90% of FFO on
an annual basis or (ii) 100% of FFO for any two consecutive quarters.

The Companys ratio of earnings to fixed charges for each
of the three years ended December 31, 1999, 1998 and 1997 was 2.5, 2.3 and 2.4,
respectively. For purposes of computing the ratio, earnings consist of income
from continuing operations after depreciation and before minority interest and
fixed charges, exclusive of interest capitalized and amortization of loan costs
capitalized. Fixed charges consist of interest expense, including interest costs
capitalized, the portion of rent expense representative of interest and total
amortization of debt issuance costs expensed and capitalized.

On September 3, 1999, the OP completed a private sale of $65
million of Series B Cumulative Redeemable Preferred Units (Preferred
Units) to an institutional investor. The private placement took the form
of 1.3 million Preferred Units at a stated value of $50 each. The Preferred
Units may be called at par on or after September 3, 2004, have no stated
maturity or mandatory redemption and pay a cumulative quarterly dividend at an
annualized rate of 9.0%. The Preferred Units are not convertible to any other
securities of the OP or Company. Proceeds from the sale were used to pay down
borrowings under the Senior Credit Facility.

On March 30, 1998, the OP replaced its two unsecured bank
revolving lines of credit, totaling $150 million (the Credit
Facilities), with a new $160 million senior unsecured bank line of credit
(the Senior Credit Facility). The Senior Credit Facility expires on
March 30, 2002 and the OP has an annual right to request a one-year extension of
the Senior Credit Facility which may be granted at the option of the lenders.
The OP has requested and expects approval to extend the Facility until March 30,
2003. The Facility bears interest on the outstanding balance, payable monthly,
at a rate equal to the London Interbank Offered Rate (LIBOR) plus
1.05% (7.24% at December 31, 1999) or the prime rate, at the OPs option.
The LIBOR spread ranges from 0.85% to 1.25% depending on the Operating
Partnerships Senior Debt rating. A fee on the unused portion of the Senior
Credit Facility is payable quarterly at rates ranging from 0.15% to 0.25%
depending on the balance outstanding.

In November 1998, the OP obtained a $60 million term loan which
expires April 2000 and bears interest on the outstanding balance at a rate equal
to LIBOR plus 1.40% (7.53% at December 31, 1999). Proceeds from the loan were
used to pay down borrowings under the Senior Credit Facility. The Company is
currently exploring several refinancing alternatives including extension and
payoff of this loan.

The Company is in the process of planning development for 2000
and beyond. At December 31, 1999, approximately 424,000 square feet of the
Companys planned 2000 development was under construction including the
232,000 square foot first phase of Allen Premium Outlets (Allen, Texas 
located on US Highway 75 approximately 30 miles north of Dallas), the 104,000
square foot third phase of Leesburg Corner and expansions totaling 88,000 square
feet at two other centers. These projects are under development and there can be
no assurance that they will be completed or opened, or that there will not be
delays in opening or completion. Excluding separately financed joint venture
projects, the Company anticipates 2000 development and construction costs of $40
million to $50 million. Funding is currently expected from borrowings under the
Senior Credit Facility, additional debt offerings, and/or equity offerings,
except Allen Premium Outlets. In February 2000, Chelsea Allen Development L.P.,
a subsidiary of the Company entered into a $40 million construction loan
agreement that is expected to fund approximately 75% of the costs of the Allen
project. The loan, guaranteed by the OP, matures February 2003 and bears
interest at LIBOR plus 1.625% .

Construction is also underway on Orlando Premium Outlets
(OPO), a 430,000 square-foot upscale outlet center located on
Interstate 4 midway between Walt Disney World/EPCOT and Sea World in Orlando,
Florida. OPO is a joint venture project between the Company and Simon and is
scheduled to open as a single phase in mid-2000. In February 1999, the joint
venture entered into a $82.5 million construction loan agreement that is
expected to fund approximately 75% of the costs of the project and as of
December 31, 1999, $20.8 million was outstanding. The loan which matures March
2002 and bears interest at LIBOR plus 1.50% is 50% guaranteed by each of the
Company and Simon.

In June 1999, the Company signed a definitive agreement with
Mitsubishi Estate Co., Ltd. and Nissho Iwai Corporation to jointly develop, own
and operate premium outlet centers in Japan. The joint venture, known as Chelsea
Japan Co., Ltd. (Chelsea Japan) intends to develop its initial
project in the city of Gotemba. In conjunction with the agreement, the Company
contributed $1.7 million in equity. In addition, Chelsea International Operating
Corp., a subsidiary of the Company entered into a 4 billion yen (US $40 million)
line of credit guaranteed by the Company and OP to fund its share of
construction costs. The line of credit bears interest at yen LIBOR plus 1.35%
and matures April 2002. At December 31, 1999, no amounts were outstanding under
the loan. In December 1999, construction began on the 220,000 square-foot first
phase of Gotemba Premium Outlets with opening scheduled for mid-2000. Gotemba is
located on the Tomei Expressway, approximately 60 miles west of Tokyo and midway
between Mt. Fuji and the Hakone resort area. Subject to governmental and other
approvals, Chelsea Japan also expects to announce a project outside Osaka, the
second-largest city in Japan, to open in late 2000.

The Company has minority interests ranging from 5 to 15% in
several outlet centers and outlet development projects in Europe. Two outlet
centers, Bicester Village outside of London, England and La Roca Company Stores
outside of Barcelona, Spain, are currently open and operated by Value Retail PLC
and its affiliates. Three new European projects and expansions of the two
existing centers are in various stages of development and are expected to open
within the next two years. The Companys total investment in Europe as of
February 2000 is approximately $4.5 million. The Company has also agreed to
provide up to $22 million in limited debt service guarantees under a standby
facility for loans arranged by Value Retail PLC to construct outlet centers in
Europe. The term of the standby facility is three years and guarantees shall not
be outstanding for longer than five years after project completion. As of
February 2000, the Company has provided limited debt service guarantees of
approximately $20 million for three projects.

The Company announced in October 1998 that it sold its interest
in and terminated the development of Houston Premium Outlets, a joint venture
project with Simon. Under the terms of the agreement, the Company will receive
non-compete payments totaling $21.4 million from The Mills Corporation; $3.0
million was received at closing, and four annual installments of $4.6 million
will be received on each January 2, 1999 through 2002. The Company has also been
reimbursed for its share of land costs, development costs and fees related to
the project.

To achieve planned growth and favorable returns in both the
short and long-term, the Companys financing strategy is to maintain a
strong, flexible financial position by: (i) maintaining a conservative level of
leverage; (ii) extending and sequencing debt maturity dates; (iii) managing
exposure to floating interest rates; and (iv) maintaining liquidity. Management
believes these strategies will enable the Company to access a broad array of
capital sources, including bank or institutional borrowings and secured and
unsecured debt and equity offerings, subject to market conditions.

Net cash provided by operating activities was $87.6 million and
$78.7 million for the years ended December 31, 1999 and 1998, respectively. The
increase was primarily due to the growth of the Companys GLA to 5.2
million square feet in 1999 from 4.9 million square feet in 1998 and receipt of
payment on a non-compete receivable. Net cash used in investing activities
decreased $42.2 million for the year ended December 31, 1999 compared to the
corresponding 1998 period, as a result of decreased construction activity,
proceeds from sale of a center and receipt of payment on a note receivable. For
the year ended December 31, 1999, net cash provided by financing activities
decreased by $47.0 million primarily due to higher borrowings during 1998 offset
in part by the sale of preferred units in September 1999. Proceeds from the sale
were used to repay borrowings under the Companys Senior Credit Facility.

Net cash provided by operating activities was $78.7 million and
$56.6 million for the years ended December 31, 1998 and 1997, respectively. The
increase was primarily due to the growth of the Companys GLA to 4.9
million square feet in 1998 from 4.3 million square feet in 1997. Net cash used
in investing activities decreased $79.4 million for the year ended December 31,
1998 compared to the corresponding 1997 period, primarily as a result of the
Waikele Factory Outlets acquisition in March 1997. For the year ended December
31, 1998, net cash provided by financing activities decreased by $107.1 million
primarily due to borrowings for the Waikele Factory Outlets acquisition and
excess capital raised for development during 1997.

Year 2000 Compliance

In prior years, the Company discussed the nature and progress of
its plans to become Year 2000 ready. In late 1999, the Company completed its
remediation and testing of systems. As a result of those planning and
implementation efforts, the Company experienced no significant disruptions in
mission-critical information technology and non-information technology systems
and believes those systems successfully responded to the Year 2000 date change.
The Company expensed less than $100,000 during 1999 in connection with
remediating its systems. The Company is not aware of any material problems
resulting from Year 2000 issues, either with its internal systems, or the
products and services of third parties. The Company will continue to monitor its
mission critical computer applications and those of its suppliers and vendors
throughout the year 2000 to ensure that any latent Year 2000 matters that may
arise are addressed promptly.

Funds from Operations

Management believes that funds from operations (FFO)
should be considered in conjunction with net income, as presented in the
statements of operations included elsewhere herein, to facilitate a clearer
understanding of the operating results of the Company. The White Paper on Funds
from Operations (FFO) approved by the Board of Governors of NAREIT
in October 1999 defines FFO as net income (loss) (computed in accordance with
GAAP), excluding gains (or losses) from debt restructuring and sales of
properties, plus real estate related depreciation and amortization and after
adjustments for unconsolidated partnerships and joint ventures. The Company
believes that FFO is helpful to investors as a measure of the performance of an
equity REIT because, along with cash flow from operating activities, financing
activities and investing activities, it provides investors with an indication of
the ability of the Company to incur and service debt, to make capital
expenditures and to fund other cash needs. The Company computes FFO in
accordance with the current standards established by NAREIT which may not be
comparable to FFO reported by other REITs that do not define the term in
accordance with the current NAREIT definition or that interpret the current
NAREIT definition differently than the Company. FFO does not represent cash
generated from operating activities in accordance with GAAP and should not be
considered as an alternative to net income (determined in accordance with GAAP)
as an indication of the Companys financial performance or to cash flow
from operating activities (determined in accordance with GAAP) as a measure of
the Companys liquidity, nor is it indicative of funds available to fund
the Companys cash needs, including its ability to make cash distributions.

`Year Ended December 31,
                                                                        1999           1998
                                                                   -------------   ------------

Income to common shareholders before extraordinary item.......       $34,093         $17,445
Add:
  Depreciation and amortization...............................        39,716          32,486
  Amortization of deferred financing costs and depreciation
    of non-rental real estate assets..........................        (1,849)         (1,453)
  Loss on writedown of assets.................................           694          15,713
  Minority interest...........................................         9,275           3,803
  Preferred unit distribution.................................        (1,949)              -
                                                                   -------------   ------------
FFO...........................................................       $79,980         $67,994
                                                                   =============   ============
Average shares/units outstanding..............................        19,297          19,103
Dividends declared per share..................................         $2.88           $2.76`

Economic Conditions

Substantially all leases contain provisions, including
escalations of base rents and percentage rentals calculated on gross sales, to
mitigate the impact of inflation. Inflationary increases in common area
maintenance and real estate tax expenses are substantially all reimbursed by
tenants.

Virtually all tenants have met their lease obligations and the
Company continues to attract and retain quality tenants. The Company intends to
reduce operating and leasing risks by continually improving its tenant mix,
rental rates and lease terms, and by pursuing contracts with creditworthy
upscale and national brand-name tenants.

Item 7-A.  Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to changes in interest rates primarily
from its floating rate debt arrangements. Under its current policies, the
Company does not use interest rate derivative instruments to manage exposure to
interest rate changes. A hypothetical 100 basis point adverse move (increase) in
US Treasury and LIBOR rates would adversely affect the Companys annual
interest cost by approximately $1.3 million annually.

`Expected Maturity Date
                         ---------------------------------------------------------
                            2000      2001    2002      2003    2004    Thereafter    Total     Fair Value
                            ----      ----    ----      ----    ----    ----------    -----     ----------
Fixed Rate Debt:               -   $99,905       -         -       -    $124,744    $224,649    $212,905
Average Interest Rate:         -     7.75%       -         -       -       7.25%       7.47%
Variable Rate Debt:      $60,000         -       -   $71,035       -          -     $131,035    $131,035
Average Interest Rate:     7.53%         -       -     7.24%       -          -        7.37%`

Item 8.  Financial Statements and Supplementary Data

The financial statements and financial information of the
Company for the years ended December 31, 1999, 1998 and 1997 and the Report of
the Independent Auditors thereon are included elsewhere herein. Reference is
made to the financial statements and schedules in Item 14.

Item 9.  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None.

PART III

Items 10, 11, 12 and 13.

The required information in the following items will appear in
the Companys Proxy Statement furnished to shareholders in connection with
the 2000 Annual Meeting, and is incorporated by reference in this Form 10-K
Annual Report.

Item 10.  Directors and Executive Officers of the
Registrant*

Item 11.  Executive Compensation

Item 12.  Security Ownership of Certain Beneficial Owners and
Management

Item 13.  Certain Relationships and Related Transactions

* Certain information regarding Directors and Officers is included at the end
of Part I.

PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on
Form 8-K

(a)  1 and 2.  The response to this portion of Item 14 is submitted as a separate
section of this report.

| | 3. | Exhibits
| | -- | --------

| | 3.1 | Articles of Incorporation of the Company, as amended, including
Articles Supplementary relating to 8 3/8% Series A Cumulative Redeemable
Preferred Stock and Articles Supplementary relating to 9% Series B Cumulative
Redeemable Preferred Stock.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.2 | By-laws of the Company. Incorporated by reference to Exhibit
3.2 to Registration Statement filed by the Company on Form S-11 under the
Securities Act of 1933 (file No. 33-67870) (S-11).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.3 | Agreement of Limited Partnership for the Operating Partnership.
Incorporated by reference to Exhibit 3.3 to S-11.
| | --- | -----------------------------------------------------------------------------------------------------------------

| | 3.4 | Amendments No. 1 and No. 2 to Partnership Agreement dated March
31, 1997 and October 7, 1997. Incorporated by reference to Exhibit 3.4 to Form
10K for the year ended December 31, 1997.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.5 | Amendment No. 3 to Partnership Agreement dated September 3,
1999.
| | --- | -----------------------------------------------------------------

| | 4.1 | Form of Indenture among the Company, Chelsea GCA Realty
Partnership, L.P., and State Street Bank and Trust Company, as Trustee.
Incorporated by reference to Exhibit 4.4 to Registration Statement filed by the
Company on Form S-3 under the Securities Act of 1933 (File No.
33-98136).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.1 | Registration Rights Agreement among the Company and recipients
of Units. Incorporated by reference to Exhibit 4.1 to S-11.
| | ---- | --------------------------------------------------------------------------------------------------------------------------

| | 10.2 | Term Loan Agreement dated November 3, 1998 among Chelsea
GCA Realty Partnership, L.P., BankBoston, N.A., individually and as an agent,
and other Lending Institutions listed therein. Incorporated by reference to
Exhibit 10.2 to Form 10K for the year ended December 31, 1998 (1998
10K).
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.3 | Credit Agreement dated March 30, 1998 among Chelsea GCA
Realty Partnership, L.P., BankBoston, N.A, individually and as an agent, and
other Lending Institutions listed therein. Incorporated by reference to Exhibit
10.3 to 1998 10K.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.4 | Agreement dated October 23, 1998, among Chelsea GCA Realty
Partnership, L.P., Chelsea GCA Realty, Inc., Simon Property Group, L.P., the
Mills Corporation and related parties. Incorporated by reference to Exhibit 10.4
to 1998 10K.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.5 | Limited Liability Company Agreement of Simon/Chelsea
Development Co., L.L.C. dated May 16, 1997 between Simon DeBartolo Group, L.P.
and Chelsea GCA Realty Partnership, L.P. Incorporated by reference to Exhibit
10.3 to Form 10K for the year ended December 31, 1997.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.6 | Subscription Agreement dated as of March 31, 1997 by and
among Chelsea GCA Realty Partnership, L.P., WCC Associates and KM Halawa
Partners. Incorporated by reference to Exhibit 1 to current report on Form 8-K
reporting on an event which occurred March 31, 1997.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.7 | Stock Subscription Agreement dated May 16, 1997 between Chelsea
GCA Realty, Inc. and Simon DeBartolo Group, L.P. Incorporated by reference to
Exhibit 10.5 to Form 10K for the year ended December 31, 1997.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.8 | Contribution Agreement by and among an institutional investor
and Chelsea GCA Realty Partnership, L.P. and Chelsea GCA Realty, Inc. dated
September 3, 1999.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.9 | Joint Venture Agreement among Chelsea GCA Realty Partnership,
L.P., Mitsubishi Estate Co., Ltd. and Nissho Iwai Corporation dated June 16,
1999.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------

| | 23.1 | Consent of Ernst & Young LLP.
| | ---- | -----------------------------

|(b) | Reports on Form 8-K.None | 
|--- | ------------------------ | 

|(c) | ExhibitsSee (a) 3 | 
|--- | ----------------- | 

|(d) | Financial Statement Schedules - The response to this portion of
Item 14 is submitted as a separate schedule of this report. | 
|--- | --------------------------------------------------------------------------------------------------------------------------- | 

Item 8, Item 14(a)(1) and (2) and Item 14(d)

(a)1.   Financial Statements

| | Form 10-KReport Page | 
| | -------------------- | 

|Consolidated Financial Statements-Chelsea GCA Realty, Inc. | 
|---------------------------------------------------------- | 

|Report of Independent Auditors | F-1 | 
|------------------------------ | --- | 

|Consolidated Balance Sheets as of December 31, 1999 and 1998 | F-2 | 
|------------------------------------------------------------ | --- | 

|Consolidated Statements of Income for the years ended December 31, 1999,
     1998 and 1997 | F-3 | 
|------------------------------------------------------------------------------------------- | --- | 

|Consolidated Statements of Stockholders' Equity for the years ended
     December 31, 1999, 1998 and 1997 | F-4 | 
|--------------------------------------------------------------------------------------------------------- | --- | 

|Consolidated Statements of Cash Flows for the years ended December 31, 1999,
     1998 and 1997 | F-5 | 
|----------------------------------------------------------------------------------------------- | --- | 

|Notes to Consolidated Financial Statements | F-6 | 
|------------------------------------------ | --- | 

(a)2 and (d) Financial Statement Schedule

|Schedule III-Consolidated Real Estate and Accumulated Depreciation | F-20
and F-21 | 
|------------------------------------------------------------------ | ------------- | 

All other schedules are omitted since the required information
is not present or is not present in amounts sufficient to require submission of
the schedule, or because the information required is included in the consolidated
financial statements and notes thereto.

Report of Independent Auditors

Board of Directors
Chelsea GCA Realty, Inc.

We have audited the accompanying consolidated balance sheets of
Chelsea GCA Realty, Inc. as of December 31, 1999 and 1998, and the related
consolidated statements of income, stockholders equity and cash flows for
each of the three years in the period ended December 31, 1999. Our audits also
included the financial statement schedule listed in the Index as Item 14(a).
These financial statements and schedule are the responsibility of the management
of Chelsea GCA Realty, Inc. Our responsibility is to express an opinion on the
financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Chelsea GCA Realty, Inc. as of December 31, 1999 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

Ernst & Young LLP

New York, New York
February 2, 2000

`Chelsea GCA Realty, Inc.
                                              Consolidated Balance Sheets
                                          (In thousands, except per share data)

                                                                                        December 31,
                                                                                   1999           1998
                                                                                   ----           ----
Assets
Rental properties:
     Land..................................................................      $ 118,494    $ 109,318
     Depreciable property..................................................        730,319      683,408
                                                                                   -------      -------
Total rental property......................................................        848,813      792,726
Accumulated depreciation...................................................       (138,221)    (102,851)
                                                                                  --------     --------
Rental properties, net.....................................................        710,592      689,875
Cash and cash equivalents..................................................          8,862        9,631
Notes receivable-related parties...........................................          2,213        4,500
Deferred costs, net........................................................         14,290       17,766
Properties held for sale...................................................          3,388        8,733
Other assets...............................................................         66,710       42,847
                                                                                    ------       ------
Total assets...............................................................      $ 806,055    $ 773,352
                                                                                 =========    =========

Liabilities and stockholders' equity
Liabilities:
     Unsecured bank debt...................................................      $ 131,035    $ 151,035
     7.75% Unsecured Notes due 2001........................................         99,905       99,824
     7.25% Unsecured Notes due 2007........................................        124,744      124,712
     Construction payables.................................................          9,277       12,927
     Accounts payable and accrued expenses.................................         27,127       19,769
     Obligation under capital lease........................................          3,233        9,612
     Accrued dividend and distribution payable.............................          3,813        3,274
     Other liabilities.....................................................         27,064       29,257
                                                                                    ------       ------
Total liabilities..........................................................        426,198      450,410

Commitments and contingencies

Minority interest..........................................................        102,561       42,551

Stockholders' equity:
     8.375% series A cumulative redeemable preferred stock, $0.01 par value,
          authorized 1,000 shares, issued and outstanding 1,000 shares
          in 1999 and 1998 (aggregate liquidation preference $50,000)......             10           10
     Common stock, $0.01 par value, authorized 50,000 shares,
          issued and outstanding 15,932 in 1999 and 15,608 in 1998.........            159          156
     Paid-in-capital.......................................................        347,725      339,490
     Distributions in excess of net income.................................        (70,598)     (59,265)
                                                                                   -------      -------
Total stockholders' equity.................................................        277,296      280,391
                                                                                   -------      -------
Total liabilities and stockholders' equity.................................      $ 806,055    $ 773,352
                                                                                 =========    =========

The accompanying notes are an integral part of the financial statements.`

`Chelsea GCA Realty, Inc.
                                                  Consolidated Statements of Income
                                                (In thousands, except per share data)

                                                                         Year ended December 31,
                                                                 1999               1998               1997
                                                                 ----               ----               ----
   Revenues:
        Base rent......................................        $98,838            $86,592            $70,693
        Percentage rent................................         15,647             13,384             10,838
        Expense reimbursements.........................         39,748             35,342             28,981
        Other income...................................          8,693              3,997              2,905
                                                                 -----              -----              -----
   Total revenues......................................        162,926            139,315            113,417

   Expenses:
        Interest.......................................         24,208             19,978             15,447
        Operating and maintenance......................         43,771             38,704             31,423
        Depreciation and amortization..................         39,716             32,486             24,995
        General and administrative.....................          4,853              4,849              3,815

        Other..........................................          2,128              2,149              2,582
                                                                 -----              -----              -----
   Total operating expenses............................        114,676             98,166             78,262

   Income from operations.............................          48,250             41,149             35,155
   Loss on writedown of assets.........................            694             15,713                  -
                                                                   ---             ------             ------
   Income before minority interest and
        extraordinary item.............................         47,556             25,436             35,155
   Minority interest...................................         (9,275)            (3,803)            (6,595)
                                                                ------             ------             ------

   Income before extraordinary item....................         38,281             21,633             28,560
   Extraordinary item-loss on early extinguishment of
        debt, net of minority interest in the amount of
        $62 in 1998 and $48 in 1997....................              -               (283)              (204)
                                                               --------              ----               ----

   Net income..........................................         38,281             21,350             28,356
   Preferred dividend requirement......................         (4,188)            (4,188)              (907)
                                                                ------             ------               ----

   Net income to common shareholders...................        $34,093            $17,162            $27,449
                                                               =======            =======            =======

   Earnings per share
   Basic:
   Income per common share before extraordinary item ..          $2.17              $1.13              $1.89
   Extraordinary item per common share.................              -              (0.02)             (0.01)
                                                                 ------             -----              -----
   Net income per common share.........................          $2.17              $1.11              $1.88
                                                                 =====              =====              =====

   Weighted average common shares outstanding..........         15,742             15,440             14,605
                                                                ======             ======             ======
   Diluted:
   Income per common share before extraordinary item ..          $2.14              $1.12              $1.86
   Extraordinary item per common share.................              -              (0.02)             (0.01)
                                                                 ------             -----              -----

   Net income per common share.........................          $2.14              $1.10              $1.85
                                                                 =====              =====              =====

   Weighted average common shares outstanding..........         15,908             15,672             14,866
                                                                ======             ======             ======


The accompanying notes are an integral part of the financial statements.`

`Chelsea GCA Realty, Inc.
                              Consolidated Statements of Stockholders' Equity
                                  (In thousands, except per share data)

                                               Preferred  Common                Distrib. in  Total
                                               Stock At   Stock At   Paid-in-   Excess of    Stockholders'
                                               Par Value Par Value   Capital    Net Income   Equity
                                               --------- ----------  ---------  ----------   -------------

Balance December 31, 1996....................  $   -       $124      $207,910     (22,694)     $185,340
Net income...................................      -          -             -      28,356        28,356
Preferred dividend requirement...............      -          -             -        (907)         (907)
Cash distributions declared ($2.58 per common
     share of which $0.49
     represented a return of capital for
     federal income tax purposes)............      -          -             -     (38,475)      (38,475)
Exercise of stock options....................      -          -         1,205           -         1,205
Shares issued in exchange for units of the
     Operating Partnership...................      -         15        19,984           -        19,999
Sales of stock (net of costs)................     10         14        98,382           -        98,406
Shares issued through dividend
     reinvestment program....................      -          1         3,745           -         3,746
                                                 -----      -----      -----        -----         -----
Balance December 31, 1997....................     10        154       331,226                   297,670

Net income...................................        -        -             -      21,350        21,350
Preferred dividend requirement...............        -        -             -      (4,188)       (4,188)
Cash distributions declared ($2.76 per common
     share of which $0.30 represented
     a return of capital for federal income
     tax purposes)...........................        -        -             -     (42,707)      (42,707)
Exercise of stock options....................        -        -           849           -           849
Shares issued through dividend
     reinvestment program....................        -        2         7,415           -         7,417
                                                 -----      -----      -----        -----         -----
Balance December 31, 1998....................     10        156       339,490     (59,265)      280,391

Net income...................................        -        -             -      38,281        38,281
Preferred dividend requirement...............        -        -             -      (4,188)       (4,188)
Cash distributions declared ($2.88 per common
     share of which $0.86 represented a
     return of capital for federal income
     tax purposes)...........................        -        -             -     (45,426)      (45,426)
Exercise of stock options....................        -        -         1,286           -         1,286
Shares issued through dividend
     reinvestment program....................        -        3         5,987           -         5,990
Shares issued in exchange for units
     of the Operating Partnership............        -        -           903           -           903
Shares issued through Employee Stock Purchase
     Plan (net of costs).....................        -        -            59           -            59
                                                 -----      -----      -----        -----         -----

Balance December 31, 1999....................    $10       $159      $347,725    ($70,598)     $277,296
                                                 ===       ====      ========    ========      ========

The accompanying notes are an integral part of the financial statements.`

`Chelsea GCA Realty, Inc.
                                            Consolidated Statements of Cash Flows
                                                       (In thousands)

                                                                             Year ended December 31,
                                                                     1999           1998         1997
                                                                     ----           ----         ----

Cash flows from operating activities
Net income..................................................      $38,281        $21,350      $28,356
Adjustments to reconcile net income to
  net cash provided by operating activities:
  net cash provided by operating activities:
     Depreciation and amortization..........................       39,716         32,486       24,995
     Minority interest in net income........................        9,275          3,803        6,547
     Loss on writedown of assets............................          694         15,713            -
     Proceeds from non-compete receivable...................        4,600              -            -
     Amortization of non-compete revenue....................       (5,136)          (856)           -
     Extraordinary loss on early extinguishment of debt.....            -            345          252
     Additions to deferred lease costs......................       (2,771)        (3,178)      (6,629)
     Other operating activities.............................          511            460          319
     Changes in assets and liabilities:
      Straight-line rent receivable.........................       (1,554)        (1,900)      (1,523)
      Other assets..........................................       (3,076)         1,094          287
      Accounts payable and accrued expenses.................        7,050          9,414        3,990
                                                                    -----          -----        -----
Net cash provided by operating activities...................       87,590         78,731       56,594

Cash flows from investing activities
Additions to rental properties..............................      (62,119)      (116,339)    (195,058)
Additions to deferred development costs.....................         (753)        (3,468)      (2,237)
Proceeds from sale of center................................        4,483              -            -
Loans to related parties....................................       (2,213)             -            -
Payments from related parties...............................        4,500              -            -
Additions to investments in joint ventures..................      (21,476)             -            -
Other investing activities..................................            -              -       (1,955)
                                                                    -----        -----         ------
Net cash used in investing activities.......................      (77,578)      (119,807)    (199,250)

Cash flows from financing activities
Net proceeds from sale of preferred units...................       63,315              -            -
Net proceeds from sale of common stock......................        7,335          8,287       54,951
Net proceeds from sale of preferred stock...................            -              -       48,406
Distributions...............................................      (60,752)       (56,366)     (48,791)
Debt proceeds ..............................................       49,000        154,000      261,710
Repayments of debt..........................................      (69,000)       (68,000)    (172,000)
Additions to deferred financing costs.......................         (679)        (1,695)        (855)
Other financing activities..................................            -            (57)        (113)
                                                                   ------            ---         ----
Net cash (used in) provided by financing activities.........      (10,781)        36,169      143,308

Net (decrease) increase in cash and cash equivalents........         (769)        (4,907)         652
Cash and cash equivalents, beginning of period..............        9,631         14,538       13,886
                                                                    -----         ------       ------
Cash and cash equivalents, end of period....................       $8,862         $9,631      $14,538
                                                                   ======         ======      =======


The accompanying notes are an integral part of the financial statements.`

Notes to Financial Statements

1.  Organization and Basis of Presentation

Organization

Chelsea GCA Realty, Inc. (the Company) is engaged in
the development, ownership, acquisition and operation of manufacturers
outlet centers. As of December 31, 1999 the Company operated 19
manufacturers outlet centers in 11 states. The Company is a
self-administered and self-managed real estate investment trust
(REIT). The Company is the sole general partner in Chelsea GCA
Realty Partnership, L.P. (the Operating Partnership or
OP).

Basis of Presentation

All of the Companys assets are held by, and all of its
operations conducted through, the Operating Partnership. Due to the
Companys ability, as the sole general partner, to exercise financial and
operational control over the Operating Partnership, the Operating Partnership is
consolidated in the accompanying financial statements. All significant
intercompany transactions and accounts have been eliminated in consolidation.
The Company accounts for its non-controlling investments under the equity
method. Such investments are included in other assets in the financial
statements.

Disclosure about fair value of financial instruments is based on
pertinent information available to management as of December 31, 1999 and 1998
using available market information and appropriate valuation methodologies.
Although management is not aware of any factors that would significantly affect
the reasonable fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that date and current
estimates of fair value may differ significantly from the amounts presented
herein.

2.  Summary of Significant Accounting Principles

Rental Properties

Rental properties are presented at cost net of accumulated
depreciation. Depreciation is computed on the straight-line basis over the
estimated useful lives of the assets. The Company uses 25-40 year estimated
lives for buildings, and 15- and 5-7 year estimated lives for improvements and
equipment, respectively. Expenditures for ordinary maintenance and repairs are
charged to operations as incurred, while significant renovations and
enhancements that improve and/or extend the useful life of an asset are
capitalized and depreciated over the estimated useful life. Statement of
Financial Accounting Standards No. 121 (SFAS No. 121), Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of, requires that the Company review real estate assets for impairment wherever
events or changes in circumstances indicate that the carrying value of assets to
be held and used may not be recoverable. Impaired assets are reported at the
lower of cost or fair value. Assets to be disposed of are reported at the lower
of cost or fair value less cost to sell.

Gains and losses from sales of real estate are recorded when
title is conveyed to the buyer, subject to the buyers financial commitment
being sufficient to provide economic substance to the sale.

Cash and Equivalents

All demand and money market accounts and certificates of deposit
with original terms of three months or less from the date of purchase are
considered cash equivalents. At December 31, 1999 and 1998 cash equivalents
consisted of repurchase agreements which were held by one financial institution,
commercial paper and U.S. Government agency securities which matured
in January of the following year. The carrying amount of such investments
approximated fair value.

Development Costs

Development costs, including interest, taxes, insurance and
other costs incurred in developing new properties, are capitalized. Upon
completion of construction, development costs are amortized on a straight-line
basis over the useful lives of the respective assets.

Capitalized Interest

Interest, including the amortization of deferred financing costs
for borrowings used to fund development and construction, is capitalized as
construction in progress and allocated to individual property costs.

Foreign Currency Translation

The Company conforms to the requirements of the Statement of
Financial Accounting Standards No. 52 (SFAS 52) entitled Foreign Currency
Translation. Accordingly, assets and liabilities of foreign equity
investees are translated at prevailing year-end rates of exchange. Gains and
losses related to foreign currency were not material for the three year period
ending December 31, 1999.

Rental Expense

Deferred Lease Costs

Deferred lease costs consist of fees and direct costs incurred
to initiate and renew operating leases, and are amortized on a straight-line
basis over the initial lease term or renewal period as appropriate.

Deferred Financing Costs

Deferred financing costs are amortized as interest costs on a
straight-line basis over the terms of the respective agreements. Unamortized
deferred financing costs are expensed when the associated debt is retired before
maturity.

Revenue Recognition

Leases with tenants are accounted for as operating leases. Base
rent revenue is recognized on a straight-line basis over the lease term
according to the provisions of the lease. Due and unpaid rents are included in
other assets in the accompanying balance sheet. Certain lease agreements contain
provisions for rents which are calculated on a percentage of sales and recorded
on the accrual basis. These rents are accrued monthly once the required
thresholds per the lease agreement are exceeded. Virtually all lease agreements
contain provisions for additional rents representing reimbursement of real
estate taxes, insurance, advertising and common area maintenance costs.

Bad Debt Expense

Bad debt expense included in other expense totaled $0.8 million,
$0.6 million and $0.8 million for the years ended December 31, 1999, 1998 and
1997, respectively. The allowance for doubtful accounts included in other assets
totaled $1.0 million and $1.1 million at December 31, 1999 and 1998,
respectively.

Income Taxes

The Company is taxed as a REIT under Section 856(c) of the
Internal Revenue Code of 1986, as amended, commencing with the tax year ended
December 31, 1993. As a REIT, the Company generally is not subject to federal
income tax. To maintain qualification as a REIT, the Company must distribute at
least 95% of its REIT taxable income to its stockholders and meet certain other
requirements. If the Company fails to qualify as a REIT in any taxable year, the
Company will be subject to federal income tax on its taxable income at regular
corporate rates. The Company may also be subject to certain state and local
taxes on its income and property. Under certain circumstances, federal income
and excise taxes may be due on its undistributed taxable income. At December 31,
1999 and 1998, the Company was in compliance with all REIT requirements and was
not subject to federal income taxes.

Net Income Per Common Share

In 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share. Statement 128 replaced the calculation of
primary and fully diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share.

Basic earnings per common share is computed using the weighted
average number of shares outstanding. Diluted earnings per common share is
computed using the weighted average number of shares outstanding adjusted for
the incremental shares attributed to outstanding options to purchase common
stock of 0.2 million in 1999 and 1998 and 0.3 million in 1997, respectively.

The following table sets forth the computation of basic and
diluted earnings per share for the periods indicated:

`(In thousands, except per share amounts)                         1999           1998          1997
   Numerator
   Numerator for basic and diluted earnings per share -
      net income to common shareholders....................       $34,093        $17,162       $27,449

   Denominator
   Denominator for basic earnings per share - weighted
      average shares.......................................        15,742         15,440        14,605
   Effect of dilutive securities:
      Stock options........................................           166            232           261
   Denominator for diluted earnings per share - adjusted
      weighted-average shares and assumed conversions......        15,908         15,672        14,866
   Per share amounts:

      Net income - basic...................................         $2.17          $1.11         $1.88

      Net income - diluted.................................         $2.14          $1.10         $1.85`

Stock Option Plan

The Company follows Accounting Principles Board Opinion No. 25
(Accounting for Stock Issued to Employees) and the related interpretations in
accounting for its employee stock options. In accordance with SFAS No. 123
(Accounting for Stock-Based Compensation), the Company has provided the required
footnote disclosure for the compensation expense related to the fair value of
the outstanding stock options.

Concentration of Companys Revenue and Credit
Risk

Approximately 34%, 35% and 34% of the Companys revenues
for the years ended December 31, 1999, 1998 and 1997, respectively, were derived
from the Companys two centers with the highest revenues, Woodbury Common
and Desert Hills. The loss of either center or a material decrease in revenues
from either center for any reason may have a material adverse effect on the
Company. In addition, approximately 30%, 34% and 38% of the Companys
revenues for the years ended December 31, 1999, 1998 and 1997, respectively,
were derived from the Companys centers in California, which includes
Desert Hills.

Management of the Company performs ongoing credit evaluations of
its tenants and requires certain tenants to provide security deposits. Although
the Companys tenants operate principally in the retail industry, there is
no dependence upon any single tenant.

Use of Estimates

The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.

Minority Interest

Minority interest is comprised of the following:

| | o | The common unitholders interest in the OP which was
issued in exchange for the assets contributed to the OP on November 2, 1993 and
additional units exchanged for property acquisitions during 1997. The
unitholders interest at December 31, 1999 and 1998 was 17.4% and 18.0%
(3,357 units and 3,429 units), respectively. Common shares are reserved for the
potential conversion of the units. Units may be exchanged for shares of the
Companys common stock on a one for one basis. Upon exchange, shares are
valued at the book value of the units on the date of the exchange. During the
years ended December 31, 1999, 1998 and 1997, the Company made the following
distributions per unit:
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`1999         1998        1997
               Distributions per unit         $2.88        $2.76       $2.58
               Return of capital              (0.86)       (0.30)      (0.49)
                                             --------     -------     -------
               Ordinary income                $2.02        $2.46       $2.09
                                             ========     =======     =======`

| | o | The preferred unitholders interest in the OP issued in a private sale of
$65 million of Series B Cumulative Redeemable Preferred Units to an
institutional investor in September 1999.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | Through June 30, 1997, the Company was the sole general partner
and had a 50% interest in Solvang Designer Outlets (Solvang), a
limited partnership. Accordingly, the accounts of Solvang were included in the
consolidated financial statements of the Company. On June 30, 1997, the Company
acquired the remaining 50% interest in Solvang. Solvang is not material to the
operations or financial position.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Segment Information

Effective January 1, 1998, the Company adopted the Financial
Accounting Standards Boards Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related Information
(Statement 131). Statement 131 superseded FASB Statement No. 14,
Financial Reporting for Segments of a Business Enterprise. Statement 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. Statement 131 also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
The adoption of Statement 131 did not affect results of operations, financial
position or disclosure of segment information as the Company is engaged in the
development, ownership, acquisition and operation of manufacturers outlet
centers and has one reportable segment, retail real estate. The Company
evaluates real estate performance and allocates resources based on net operating
income and weighted average sales per square foot. The primary sources of
revenue are generated from tenant base rents, percentage rents and reimbursement
revenue. Operating expenses primarily consist of common area maintenance, real
estate taxes and promotional expenses. The retail real estate business segment
meets the quantitative threshold for determining reportable segments. The
Companys investment in foreign operations is not material to the
consolidated financial statements.

Comprehensive Income

In 1997, the FASB issued Statement No. 130, Reporting
Comprehensive Income (Statement 130) which is effective of
fiscal years beginning after December 15, 1997. Statement 130 established
standards for reporting comprehensive income and its components in a full set of
general-purpose financial statements. Statement 130 requires that all components
of comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. The adoption of this
standard had no impact on the Companys financial position or results of
operations.

Recently Issued Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities
(as amended by FASB Statement No. 137), which is required to be adopted in years
beginning after June 15, 2000. Statement 133 permits early adoption as of the
beginning of any fiscal quarter after its issuance. The Company expects to adopt
the new Statement effective January 1, 2001. The Statement will require the
Company to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If a derivative is a hedge, depending on the nature of the hedge, changes in the
fair value of the derivative will either be offset against the change in fair
value of the hedged asset, liability, or firm commitment through earnings, or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivatives change in fair value
will be immediately recognized in earnings. The Company does not anticipate that
the adoption of the Statement will have a significant effect on its results of
operations or financial position.

In December 1999, the SEC staff issued Staff Accounting Bulletin
101 (SAB 101), Revenue Recognition. SAB 101 discusses the SEC
staff views on certain revenue recognition transactions. The Company is required
to adopt SAB 101 no later than the second quarter of 2000 and any change in
accounting would be recognized as a cumulative effect of a change in accounting
principle as of January 1, 2000. The Company does not anticipate that the
adoption of the SAB will have a material effect of its results of operations or
financial position.

3.  Rental Properties

The following summarizes the carrying values of rental properties as of December
31 (in thousands):

`1999             1998
                                                               ----             ----
Land and improvements................................        $266,441         $245,814
Buildings and improvements...........................         552,240          512,080
Construction-in-process..............................          19,288           25,534
Equipment and furniture..............................          10,844            9,298
                                                               ------            -----
Total rental property................................         848,813          792,726
Accumulated depreciation and amortization............        (138,221)        (102,851)
                                                             --------         --------
Total rental property, net...........................        $710,592         $689,875
                                                             ========         ========`

Interest costs capitalized as part of buildings and improvements
were $3.1 million, $5.2 million and $4.8 million for the years ended December
31, 1999, 1998 and 1997, respectively.

Commitments for land, new construction, development, and
acquisitions, excluding separately financed joint venture activity, totaled
approximately $6.2 million at December 31, 1999.

Depreciation expense (including amortization of the capital
lease) amounted to $35.6 million, $29.2 million and $22.3 million for the years
ended December 31, 1999, 1998 and 1997, respectively.

4.  Waikele Acquisition

Pursuant to a Subscription Agreement dated as of March 31, 1997,
the Company acquired Waikele Factory Outlets, a manufacturers outlet
shopping center located in Hawaii. The consideration paid by the Company
consisted of the assumption of $70.7 million of indebtedness outstanding with
respect to the property (which indebtedness was repaid in full by the Company
immediately after the closing) and the issuance of special partnership units in
the Operating Partnership, having a fair market value of $0.5 million.
Immediately after the closing, the Company paid a special cash distribution of
$5.0 million on the special units. The cash used by the Company in the
transaction was obtained through borrowings under the Companys Credit
Facilities.

The following condensed pro forma (unaudited) information
assumes the acquisition had occurred on January 1, 1997:

`1997
                                                                   ----

    Total revenue....................................          $115,349

    Income to common shareholders before                         28,137
         extraordinary items.........................

    Net income to common shareholders................            27,933

    Earnings per share:
    Basic:
         Income before extraordinary items...........              $1.93
         Net income..................................              $1.91

    Diluted:
         Income before extraordinary items...........              $1.89
         Net income..................................              $1.88`

5.  Deferred Costs

`1999          1998
                                                                      ----          ----

Lease costs....................................................    $19,838       $17,601
Financing costs................................................     11,557        10,879
Development costs..............................................        967         3,675
Other..........................................................      1,172         1,172
                                                                     -----         -----
Total deferred costs...........................................     33,534        33,327
Accumulated amortization.......................................    (19,244)      (15,561)
                                                                   -------       -------
Total deferred costs, net......................................    $14,290       $17,766
                                                                   =======       =======`

6.  Properties Held for Sale

As of December 31, 1999, properties held for sale represented
the fair value, less estimated costs to sell, of Solvang Designer Outlets
(Solvang). As of December 31, 1998, Lawrence Riverfront Plaza was
also included in properties held for sale; the property was sold on March 26,
1999.

During the second quarter of 1998, the Company accepted an offer
to purchase Solvang, a 51,000 square foot center in Solvang, California, for a
net selling price of $5.6 million. The center had a book value of $10.5 million,
resulting in a writedown of $4.9 million in the second quarter of 1998. During
the fourth quarter of 1998, the initial purchase offer was withdrawn and the
Company received another offer for a net selling price of $4.0 million,
requiring a further writedown of $1.6 million. In January 2000, the center was
sold for a net selling price of $3.3 million resulting in an additional
writedown of $0.7 million recognized in the fourth quarter of 1999. For the
years ended December 31, 1999 and 1998, Solvang accounted for less than 1% of
the Companys revenues and net operating income.

Management decided to sell these two properties during 1998 as
part of the Companys long-term objective of devoting resources to and
focusing on productive properties. Management determined that the time and
effort necessary to support these two underperforming centers was not worth the
economic benefit to the Company. Management also concluded that these centers
would be more useful as office and/or residential space, which are outside the
Companys area of expertise.

7.  Non-Compete Agreement

In October 1998, the Company signed a definitive agreement to
terminate the development of Houston Premium Outlets, a joint venture project
with Simon Property Group, Inc. (Simon). Under the terms of the
agreement, the Company withdrew from the Houston development partnership and
agreed to certain restrictions on competing in the Houston market through 2002.
The Company will receive non-compete payments totaling $21.4 million from The
Mills Corporation; $3.0 million was received at closing, the first of four
annual installments of $4.6 million was received in January 1999 and the
remaining installments are to be received on each January 2, through 2002. The
Company has also been reimbursed for its share of land costs, development costs
and fees related to the project. The revenue is being recognized on a
straight-line basis over the term of the non-compete agreement and the Company
recognized income of $5.1 million and $0.9 million during the years ended
December 31, 1999 and 1998, respectively. Such amounts are included in other
income.

8.  Debt

On March 30, 1998, the OP replaced its two unsecured bank
revolving lines of credit, totaling $150 million (the Credit
Facilities), with a $160 million senior unsecured bank line of credit (the
Senior Credit Facility). The Senior Credit Facility expires on March
30, 2001 and the OP has an annual right to request a one-year extension of the
Senior Credit Facility which may be granted at the option of the lenders. The OP
has requested and expects approval to extend the Facility until March 30, 2003.
The Facility bears interest on the outstanding balance, payable monthly, at a
rate equal to the London Interbank Offered Rate (LIBOR) plus 1.05%
(7.24% at December 31, 1999) or the prime rate, at the OPs option. The
LIBOR rate spread ranges from 0.85% to 1.25% depending on the Companys
Senior Debt rating. A fee on the unused portion of the Senior Credit Facility is
payable quarterly at rates ranging from 0.15% to 0.25% depending on the balance
outstanding. At December 31, 1999, $94 million was available under the Senior
Credit Facility.

Also on March 30, 1998, the OP entered into a $5 million term
loan (the Term Loan) which carries the same interest rate and
maturity as the Senior Credit Facility. The Lender has credit committee approval
to extend the Term Loan to March 30, 2003.

In November 1998, the OP obtained a $60 million term loan that
expires April 2000 and bears interest on the outstanding balance at a rate equal
to LIBOR plus 1.40% (7.53% at December 31, 1999). Proceeds from the loan were
used to pay down borrowings under the Senior Credit Facility. The Company is
currently exploring several alternatives regarding refinancing or payoff of this
loan.

In January 1996, the OP completed a $100 million offering of
7.75% unsecured term notes due January 2001 (the 7.75% Notes), which
are guaranteed by the Company. The five-year non-callable 7.75% Notes were
priced to yield 7.85% to investors. At December 31, 1999, in the opinion of
management, the 7.75% Notes approximated fair value.

In October 1997, the Companys OP completed a $125 million
debt offering of 7.25% unsecured term notes due October 2007 (the 7.25%
Notes). The 7.25% Notes were priced to yield 7.29% to investors, 120 basis
points over the 10-year U.S. Treasury rate. At December 31, 1999, in the opinion
of management, the fair value of the 7.25% Notes was approximately $113 million.

9.  Preferred Units

On September 3, 1999, the OP completed a private sale of $65
million of Series B Cumulative Redeemable Preferred Units (Preferred
Units) to an institutional investor. The private placement took the form
of 1.3 million Preferred Units at a stated value of $50 each. The Preferred
Units may be called at par on or after September 3, 2004, have no stated
maturity or mandatory redemption and pay a cumulative quarterly dividend at an
annualized rate of 9.0%. The Preferred Units are exchangeable into Series B
Cumulative Redeemable Preferred Stock of the Company after ten years. The
proceeds from the sale were used to pay down borrowings under the Senior Credit
Facility. Activity related to the Preferred Units is included in Minority
Interest.

10.  Preferred Stock

In October 1997, the Company issued 1.0 million shares of
nonvoting 8.375% Series A Cumulative Redeemable Preferred Stock (the
Preferred Stock), par value $0.01 per share, having a liquidation
preference of $50.00 per share. The Preferred Stock has no stated maturity and
is not convertible into any other securities of the Company. The Preferred Stock
is redeemable on or after October 15, 2027 at the Companys option. Net
proceeds from the offering were used to repay borrowings under the
Companys Credit Facilities.

11.  Lease Agreements

The Company is the lessor and sub-lessor of retail stores under
operating leases with term expiration dates ranging from 2000 to 2018. Most
leases are renewable for five years after expiration of the initial term at the
lessees option. Future minimum lease receipts under non-cancelable
operating leases as of December 31, 1999, exclusive of renewal option periods,
were as follows (in thousands):

`2000............      $99,382
          2001............       92,716
          2002............       81,106
          2003............       64,251
          2004............       45,936
          Thereafter......       89,907
                                 ------
                               $473,298
                               ========`

In 1987, a Predecessor partnership entered into a lease
agreement for property in California. Land was estimated to be approximately 37%
of the fair market value of the property, and accordinglythe portion of the
lease attributed to land is classified as an operating lease.The portion
attributed to building is classified as a capital lease as the present value of
payments related to the building exceeded 90% of its fair value at inception of
the lease. The initial lease term is 25 years with two options of 5 and 4 1/2
years, respectively. The lease provides for additional rent based on specific
levels of income generated by the property. No additional rental payments were
incurred during 1999, 1998 or 1997. The Company has the option to cancel the
lease upon six months written notice and six months advance payment of the then
fixed monthly rent. If the lease is canceled, the building and leasehold
improvements revert to the lessor. In August 1999, the Company amended its
capital lease resulting in a writedown of the asset and obligation of $2.7
million and $6.0 million, respectively. The difference of $3.3 million will be
recognized on a straight-line basis over the remaining term of the amended lease
which ends December 2004.

Operating Leases

Future minimum rental payments under operating leases for land
and administrative offices as of December 31, 1999 were as follows (in
thousands):

`2000...........        $1,021
          2001...........         1,121
          2002...........         1,068
          2003...........         1,058
          2004...........         1,058
          Thereafter.....           529
                                    ---
                                 $5,855
                                 ======`

Rental expense amounted to $0.9 million for the year ended
December 31, 1999 and $1.0 million for the years ended December 31, 1998 and
1997.

Capital Lease

`1999              1998
                                                    ----              ----

Building.................................         $6,796            $8,621
Less accumulated amortization............         (4,830)           (3,937)
                                                  ------            ------
Leased property, net.....................         $1,966            $4,684
                                                  ======            ======`

Future minimum payments under the capitalized building lease,
including the present value of net minimum lease payments as of
December 31, 1999 are as follows (in thousands):

`2000.................................................    $819
          2001.................................................    819
          2002.................................................    819
          2003.................................................    819
          2004.................................................    819
                                                                   ---
          Total minimum lease payments.........................  4,095
          Amount representing interest.........................   (862)
                                                                  ----
          Present value of net minimum capital lease payments.. $3,233
                                                                =======`

12.  Commitments and Contingencies

The Company has agreed under a standby facility to provide up to
$22 million in limited debt service guarantees for loans provided to Value
Retail PLC, an affiliate, to construct outlet centers in Europe. The term of the
standby facility is three years and guarantees shall not be outstanding for
longer than five years after project completion. As of December 31, 1999, the
Company has provided guarantees of approximately $20 million for three projects.

In June 1999, the Company signed a definitive agreement with
Mitsubishi Estate Co., Ltd. and Nissho Iwai Corporation to jointly develop, own
and operate premium outlet centers in Japan. The joint venture, known as Chelsea
Japan Co., Ltd. (Chelsea Japan) intends to develop its initial
project in the city of Gotemba, approximately 60 miles west of Tokyo.
Groundbreaking for the 220,000 square-foot first phase took place in November
1999, with opening scheduled for mid-2000. In conjunction with the agreement,
the Company contributed $1.7 million in equity. In addition, an equity investee
of the Company entered into a 4 billion yen (US $40 million) line of credit
guaranteed by the Company and OP to fund its share of construction costs. At
December 31, 1999, no amounts were outstanding under the loan.

Construction is underway on Orlando Premium Outlets
(OPO), a 430,000 square foot 50/50 joint venture project between the
Company and Simon. OPO is located on Interstate 4, midway between Walt Disney
World/EPCOT and Sea World in Orlando, Florida and is scheduled to open mid-2000.
In February 1999, the joint venture entered into a $82.5 million construction
loan agreement that is expected to fund approximately 75% of the costs of the
project. The loan is 50% guaranteed by each of the Company and Simon and as of
December 31, 1999, $20.8 million was outstanding.

The Company is not presently involved in any material litigation
nor, to its knowledge, is any material litigation threatened against the Company
or its properties, other than routine litigation arising in the ordinary course
of business. Management believes the costs, if any, incurred by the Company
related to any of this litigation will not materially affect the financial
position, operating results or liquidity of the Company.

13.  Related Party Information

During the second quarter of 1999, the OP established a $6
million secured loan facility for the benefit of certain unitholders. At
December 31, 1999, loans made to two unitholders totaled $2.2 million. Each
unitholder issued a note that is secured by OP units, bears interest at a rate
of LIBOR plus 200 basis points per annum, payable quarterly, and is due June
2004. The carrying amount of such loans approximated fair value at December 31,
1999.

In September 1995, the Company transferred property with a book
value of $4.8 million to its former President (a current unitholder) in exchange
for a $4.0 million note secured by units in the Operating Partnership (the
Secured Note) and an $0.8 million unsecured note receivable (the
Unsecured Note). In January 1999, the Company received $4.5 million
as payment in full for the two notes. The remaining $0.3 million write-off was
recognized in December 1998.

On June 30, 1997 the Company forgave a $3.3 million related
party note and paid $2.4 million in cash to acquire the remaining 50% interest
in Solvang. The Company also collected $0.8 million in accrued interest on the
note.

The Company had space leased to related parties of approximately
56,000 square feet during the years ended December 31, 1999 and 1998 and 61,000
square feet during the year ended December 31, 1997. Rental income from those
tenants, including reimbursement for taxes, common area maintenance and
advertising, totaled $1.8 million during the years ended December 31, 1999 and
1998 and $1.5 million during the year ended December 31, 1997.

At December 31, 1999 the Company had a receivable from an equity
investee of $4.0 million that is included in other assets. In January 2000 the
Company received payment of $3.0 million on this receivable.

Certain Directors and unitholders guarantee Company obligations,
which existed prior to the formation of the Company, under leases for one of the
properties. The Company has indemnified these parties from and against any
liability which they may incur pursuant to these guarantees.

14.  Dividend Reinvestment Plan

Shareholders who own at least 100 shares of the Companys
common stock are eligible to reinvest dividends quarterly. Administration costs
associated with the plan are paid by the Company.

15.  Stock Option Plan

The Companys 1993 Stock Option Plan provides for an
aggregate of 1.4 million authorized shares reserved for issuance. The exercise
price per share of initial grants of non-qualified options will be fixed by the
Compensation Committee on the date of grant. The exercise price per share of
incentive stock options will not be less than the fair market value of the
common stock on the date of grant, except in the case of incentive stock options
granted to individuals owning more than 10% of the total voting shares of the
Company. Their exercise price will be at least 110% of the fair market value at
the date of grant. Non-qualified and incentive stock options are exercisable for
a period of ten years from the date of grant. On the first anniversary of the
grant date, 20% of the options may be exercised and an additional 20% may be
exercised on or after each of the second through fifth anniversaries.

Pro forma information regarding net income and earnings per
share is required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 1998
and 1997, respectively: risk-free interest rate of 6.00% and dividend yield of
8% for both years; volatility factor of the expected market price of the
Companys common stock based on historical results of 0.164 and 0.174; and
an expected life of the option of four years. The Company granted no options
during 1999.

The Black-Scholes option valuation model was developed for use
in estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including expected stock price
volatility. Because the Companys employee stock options have
characteristics significantly different from those of traded options, and
changes in the subjective input assumptions can materially affect the fair value
estimate, management believes the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value
of the options is amortized to expense over the options vesting period.
The Companys pro forma information follows (in thousands except for
earnings per share information):

`1999          1998           1997
                                            ----          ----           ----

      Pro forma net income                 $33,853       $16,884        $27,318
      Pro forma earnings per share:
           Basic                              2.15          1.09           1.87
           Diluted                            2.13          1.08           1.84`

A summary of the Company's stock option activity, and related information for
the years ended December 31 follows:

`1997                   1998                   1999
                                                 ----                   ----                   ----
                                        Options    Wtd-avg      Options    Wtd-avg       Options    Wtd-avg
                                        (000's)    Ex. price    (000's)    Ex. price     (000's)    Ex. price
                                        -------    ---------    -------    ---------     -------    ---------

Outstanding beginning of year            839.9       $24.88      829.8       $26.16     1,061.6       $28.97
Granted                                   75.0       $37.60      280.0       $36.33          -            -
Exercised                                (52.1)      $25.29      (36.2)      $23.38       (52.4)      $23.38
Forfeited                                (33.0)      $23.88      (12.0)      $23.38          -            -
                                         -----                   -----                   ------

Outstanding end of year                  829.8       $26.16    1,061.6       $28.97     1,009.2       $29.26

Exercisable at end of year               380.8       $24.97      540.2       $25.36       695.2       $26.35

Weighted average fair value of
  options granted during the year        $2.65                   $2.35                        -`

Exercise prices for options outstanding as of December 31, 1999
ranged from $23.38 to $38.69 per share. The weighted average remaining
contractual life of the options was 6.1 years.

16.  Employee Stock Purchase Plan

The Companys Board of Directors and shareholders approved
an Employee Stock Purchase Plan (the Purchase Plan), effective July
1, 1998. The Purchase Plan covers an aggregate of 500,000 shares of common
stock. Eligible employees have been in the employ of the Company or a
participating subsidiary for five months or more and customarily work more than
20 hours per week. The Purchase Plan excludes employees who are highly
compensated employees or own 5% or more of the voting power of the
Companys stock. Eligible employees will purchase shares through automatic
payroll deductions up to a maximum of 10% of weekly base pay. The Purchase Plan
will be implemented by consecutive three-month offerings (each an Option
Period). The price at which shares may be purchased shall be the lower of
(a) 85% of the fair market value of the stock on the first day of the Option
Period or (b) 85% of the fair market value of the stock on the last day of the
Option Period. As of December 31, 1999, 48 employees were enrolled in the
Purchase Plan and $1,300 expense has been incurred and is included in the
financial statements. The Purchase Plan will terminate after five years unless
terminated earlier by the Board of Directors.

17.  401(k) Plan

The Company maintains a defined contribution 401(k) savings plan
(the Plan), which was established to allow eligible employees to
make tax-deferred contributions through voluntary payroll withholdings. All
employees of the Company are eligible to participate in the Plan after
completing one year of service and attaining age 21. Employees who elect to
enroll in the Plan may elect to have from 1% to 15% of their pre-tax gross pay
contributed to their account each pay period. As of January 1, 1998 the Plan was
amended to include an employer discretionary matching contribution in an amount
not to exceed 100% of each participants first 6% of yearly compensation to
the Plan. Matching contributions of approximately $97,000 in 1999 and $150,000
in 1998 are included in the Companys general and administrative expense.

18.  Extraordinary Item

Deferred financing costs of $0.3 million (net of minority
interest of $62,000), and $0.2 million (net of minority interest of $48,000) for
the years ended December 31, 1998 and 1997, respectively, were expensed as a
result of early debt extinguishments, and are reflected in the accompanying
financial statements as an extraordinary item.

19.  Quarterly Financial Information (Unaudited)

The following summary represents the results of operations,
expressed in thousands except per share amounts, for each quarter during 1999
and 1998:

`March 31      June 30   September 30      December 31
                                                     --------      ------    ------------      -----------
1999
----
Base rental revenue............................       $24,555      $24,580      $24,687          $25,016
Total revenues.................................        36,963       38,880       40,384           46,699
Income before extraordinary item to
     common shareholders.......................         7,380        7,671        8,540           10,502
Net income to common shareholders..............         7,380        7,671        8,540           10,502
Income before extraordinary item per
     weighted average common share (diluted)...         $0.47        $0.48        $0.53            $0.66
Net income per weighted average
     common share (diluted)....................         $0.47        $0.48        $0.53            $0.66
1998
----
Base rental revenue............................       $19,266      $20,815      $22,561          $23,950
Total revenues.................................        28,506       32,068       34,921           43,820
Income before extraordinary item to
     common shareholders.......................         5,682        2,112        8,104            1,547
Net income to common shareholders..............         5,682        2,112        8,104            1,264
Income before extraordinary item per
     weighted average common share (diluted)...         $0.36        $0.13        $0.52            $0.10
Net income per weighted average
     common share (diluted)....................         $0.36        $0.13        $0.52            $0.08`

20.  Non-Cash Financing and Investing
Activities

In December 1999, 1998 and 1997, the Company declared
distributions per unit of $0.72, $0.69 and $0.69 for each year, respectively.
The limited partners distributions were paid in January of each subsequent
year.

In June 1997, the Company forgave a $3.3 million related party
note receivable as partial consideration to acquire the remaining 50% interest
in Solvang.

Other assets and other liabilities each include $6.2 million and
$6.6 million in 1999 and 1998, respectively, related to a deferred unit
incentive program with certain key officers to be paid in 2002. Also included is
$12.0 million in 1999 and $16.6 million in 1998 related to the present value of
future payments to be received from The Mills Corporation under the Houston
non-compete agreement.

During 1997, the Operating Partnership issued units with an
aggregate fair market value of $0.5 million to acquire properties.

During 1997, 1.4 million Operating Partnership units were converted to common
shares.

Signatures

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

| | CHELSEA GCA REALTY, INC.
By: /s/  Michael J. Clarke
       Michael J. Clarke
       Chief Financial Officer
| | -----------------------------------------------------------------------------------------------------------

Date:  September 20, 2000