GLENBOROUGH REALTY TRUST INC, 424B5, 1997-07-14

GLENBOROUGH REALTY TRUST INC
424B5, 1997-07-14
REAL ESTATE

Previous: MERIT SECURITIES CORP, 8-K, 1997-07-14

Next: ITI TECHNOLOGIES INC, 8-K/A, 1997-07-14

<PAGE> 1
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-19279

PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 21, 1997)

<TABLE>
<S> <C> <C>
LOGO 6,300,000 SHARES
LOGO
COMMON STOCK
(PAR VALUE $.001 PER SHARE)
</TABLE>

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

Glenborough Realty Trust Incorporated is a self-administered and
self-managed real estate investment trust that owns a portfolio of 64 office,
industrial, retail, multi-family and hotel properties located in 19 states
throughout the country. In addition, two associated companies provide
comprehensive asset, partnership and property management services for 58
additional properties that are not owned by the Company. The combined portfolios
encompass over 12 million rentable square feet in 22 states.

The Company has entered into a definitive agreement, subject to a number of
contingencies, to purchase a portfolio of 27 properties aggregating
approximately 2,888,000 square feet for a total acquisition cost of
approximately $146.8 million. See "Recent Activities -- Pending Acquisition."
The Company intends to fund this acquisition in part with a portion of the
proceeds of this offering and expects to complete such acquisition in the third
quarter of 1997.

The 6,300,000 shares of Common Stock of the Company offered hereby are all
being sold by the Company. The Company plans to use the net proceeds of this
offering to fund acquisition activities, repay outstanding indebtedness and for
general corporate purposes. The Common Stock is listed on the New York Stock
Exchange under the symbol "GLB." On July 10, 1997, the last reported sale price
of the Common Stock on the New York Stock Exchange was $22 5/8 per share. The
Company currently pays regular quarterly distributions representing an
annualized distribution of $1.28 per share. See "Price Range of Common Stock and
Distribution History."

To assist the Company in maintaining its status as a real estate investment
trust for federal income tax purposes, ownership by any person generally is
limited to 9.75% of the issued and outstanding shares of Common Stock. See
"Description of Common Stock -- Restrictions on Ownership and Transfer of Common
Stock" in the accompanying Prospectus.

SEE "RISK FACTORS" BEGINNING ON PAGE 6 OF THE ACCOMPANYING PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE COMMON STOCK.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<S> <C> <C> <C>
================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- ----------------------------------------------------------------------------------------------------------------
Per Share.................................. $22.625 $1.14 $21.485
Total(3)................................... $142,537,500 $7,182,000 $135,355,500
================================================================================================================
</TABLE>

(1) The Company and the Operating Partnership have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at
$600,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
945,000 additional shares of Common Stock to cover over-allotments, if any.
If all of these shares are purchased, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $163,918,125,
$8,259,300, and $155,658,825, respectively. See "Underwriting."
------------------------------
The shares of Common Stock are offered severally by the Underwriters,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters, subject to approval of certain legal matters by counsel for the
Underwriters and certain other conditions. The Underwriters reserve the right to
withdraw, cancel or modify such offer and to reject orders in whole or in part.
It is expected that delivery of the shares of Common Stock will be made against
payment therefor on or about July 16, 1997 at the offices of Bear, Stearns & Co.
Inc., 245 Park Avenue, New York, New York 10167.
------------------------------

BEAR, STEARNS & CO. INC.
ROBERTSON, STEPHENS & COMPANY
SALOMON BROTHERS INC
JEFFERIES & COMPANY, INC.

THE DATE OF THIS PROSPECTUS SUPPLEMENT IS JULY 10, 1997
<PAGE> 2

[CHART/GRAPH]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS AND THE
IMPOSITION OF PENALTY BIDS. SEE "UNDERWRITING."

S-2
<PAGE> 3

PROSPECTUS SUPPLEMENT SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus
Supplement and the accompanying Prospectus and incorporated by reference herein
and therein. Unless indicated otherwise, the information contained in this
Prospectus Supplement assumes that the Underwriters' over-allotment option is
not exercised. As used herein, the term "Company" means Glenborough Realty Trust
Incorporated, a Maryland corporation, and its consolidated subsidiaries for the
periods from and after December 31, 1995 (the date of the Consolidation referred
to below) and the Company's predecessor partnerships and companies for periods
prior to the Consolidation, and the term "Operating Partnership" means
Glenborough Properties, L.P. in which the Company holds a 1% interest as sole
general partner and an approximate 88% limited partner interest. The offering of
6,300,000 shares of Common Stock, par value $.001 per share (the "Common
Stock"), made hereby is herein referred to as the "Offering." The last reported
sale price on the New York Stock Exchange (the "NYSE") on July 10, 1997 was
$22 5/8 per share. Unless otherwise indicated, ownership percentages of the
Common Stock have been computed on a fully converted basis, assuming an exchange
of Operating Partnership units for shares of Common Stock on a one-for-one
basis. This Prospectus Supplement and the accompanying Prospectus, and the
documents incorporated herein and therein, contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities and Exchange Act of 1934 (the "Exchange Act"), which
statements involve risks and uncertainties. The Company's actual results could
differ materially from those anticipated in these forward-looking statements as
a result of certain factors, including those set forth under "Risk Factors" in
the accompanying Prospectus and elsewhere in this Prospectus Supplement and the
accompanying Prospectus.

THE COMPANY

The Company is a self-administered and self-managed real estate investment
trust ("REIT") that owns a diversified portfolio of 64 office, industrial,
retail, multi-family and hotel properties (the "Properties" and each a
"Property") located in 19 states throughout the country. In addition, two
associated companies (the "Associated Companies") provide comprehensive asset,
partnership and property management services for a diversified portfolio of 58
additional properties that are not owned by the Company. The combined portfolios
encompass over 12 million rentable square feet in 22 states.

The Company's principal growth strategy is to capitalize on the opportunity
to acquire diversified portfolios or individual properties on attractive terms.
This strategy has evolved from the Company's predecessors' experience since 1978
in managing real estate partnerships and their assets and, since 1989, in
acquiring portfolios and management interests from third parties. In particular,
unlike most other REITs, the Company seeks to purchase diversified portfolios of
properties. The Company believes such diversified portfolios can be acquired
from partnerships as well as other REITs and life insurance companies and other
institutions.

The Company believes it can acquire diversified property portfolios at
attractive prices because it can provide liquidity to the owners who otherwise
face a limited market for such portfolios, and can, through the Company's UPREIT
structure, address the current owners' tax concerns and structure transactions
that may defer taxable gains. Consistent with its acquisition strategy, the
Company intends to use a portion of the proceeds of the Offering to finance in
part the Company's pending acquisition of a portfolio of 27 properties (the "T.
Rowe Price Properties") aggregating approximately 2,888,000 square feet for a
total purchase price of approximately $146.8 million and consisting of five
office properties, 19 industrial properties and three retail properties located
in 12 states. This acquisition is subject to a number of contingencies.
Accordingly, there can be no assurance that the acquisition of all or any of
these properties will be completed. See "Recent Activities -- Pending
Acquisition." If this acquisition is completed, then, upon its completion, the
Company will have acquired over $400 million of properties since it commenced
operations on December 31, 1995.

S-3
<PAGE> 4

The following table sets forth certain information with respect to the
Company's Properties as of the date of this Prospectus Supplement, assuming that
the acquisition of the T. Rowe Price Properties had been completed. For similar
information regarding only the Properties the Company owned as of the date of
this Prospectus Supplement, see "Properties -- General."

PRO FORMA PROPERTY TABLE BY TYPE OF PROPERTY(1)

<TABLE>
<CAPTION>
ANNUALIZED
RENTABLE PROPERTY REVENUES(2) OCCUPANCY RATE
NUMBER OF SQUARE ----------------------- AS OF
TYPE OF PROPERTY PROPERTIES FEET/UNITS AMOUNT PERCENT MAY 31, 1997(3)
- ------------------------------------------------ ---------- ---------- ----------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Office.......................................... 23 1,851,104 $29,137,260 37.6% 94%
Industrial...................................... 49 5,323,597 26,047,728 33.6 95
Retail.......................................... 9 954,821 9,571,788 12.4 92
Multi-family.................................... 4 866 6,096,878(4) 7.9 95(5)
Hotels.......................................... 6 726 6,581,040(4) 8.5 78(6)
-- --
----------- ----
Total/Weighted Average.......................... 91 $77,434,694 100.0% 94%(7)
== =========== ==== ==
</TABLE>

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

(1) Includes 27 properties expected to be acquired. See "Recent
Activities -- Pending Acquisition."

(2) Based on Property revenues for the month ended May 31, 1997, as annualized,
except multi-family and hotel Properties. For Properties acquired or to be
acquired after May 31, 1997, represents revenues produced prior to
acquisition.

(3) Represents economic occupancy. Includes May 31, 1997 occupancy rates of
Properties acquired or to be acquired after May 31, 1997.

(4) Represents revenues for the 12 months ended May 31, 1997. For properties
acquired after May 31, 1996, includes revenues produced prior to
acquisition.

(5) Represents average economic occupancy (calculated using month-end actual
occupancy rates) for the 12 months ended May 31, 1997. For Properties
acquired after May 31, 1996, average occupancy rates were calculated based
in part on occupancy rates prior to acquisition.

(6) Represents average economic occupancy for the 12 months ended May 31, 1997.
For Properties acquired after May 31, 1996, average occupancy was calculated
based in part on occupancy rates prior to acquisition.

(7) Excludes hotel Properties and multi-family Properties.

The Company believes its strategy of acquiring Properties that are broadly
diversified with respect to type and location reduces the risks otherwise
associated with focusing on a single property type or a single geographical
region.

The Company commenced operations on December 31, 1995 through the merger of
eight public limited partnerships and a management company with and into the
Company (the "Consolidation"). Since the Consolidation, the Company has:

- Increased its annualized quarterly distributions from $1.20 per share to
$1.28 per share;

- Completed two follow-on offerings of Common Stock in October 1996 and
March 1997 (respectively, the "October 1996 Offering" and the "March 1997
Offering"), with aggregate gross proceeds of approximately $121.7
million;

- Obtained a $50 million revolving line of credit (the "Line of Credit")
and a $60 million term loan with Wells Fargo Bank, N.A. ("Wells Fargo
Bank"); and

- Increased its rentable square feet, number of multi-family units and
number of hotel suites through the acquisition of (i) 17 office
Properties, 21 industrial Properties and three retail Properties
aggregating approximately 3,485,000 rentable square feet, (ii) three
multi-family Properties aggregating 762 units and (iii) two hotels
aggregating 227 rooms.

The total return to the Company's stockholders from the completion of the
Company's March 1997 Offering to July 10, 1997 was 13.5%, including share price
appreciation and assuming reinvestment of distributions. Past performance,
however, is not necessarily indicative of the results that will be obtained in
the future from an investment in the Company's Common Stock, and no assurance
can be given that an investor

S-4
<PAGE> 5

in the Offering will achieve similar results. See "Risk Factors" in the
accompanying Prospectus for a discussion of risks associated with the Company's
future performance.

The Company's seven executive officers collectively own approximately 11%
of the Company's Common Stock and will own approximately 7% after giving effect
to the Offering. The executive officers have been with the Company or its
predecessors for an average of ten years. The Company and the Associated
Companies employ an experienced staff of approximately 430 employees who provide
a full range of real estate services from their headquarters in San Mateo,
California and from 29 property management offices located across the country.

RECENT ACTIVITIES

The following is a summary of the Company's acquisition and financing
activities since the Consolidation through the date of this Prospectus
Supplement.

PENDING ACQUISITION

T. Rowe Price Properties. In April 1997, the Company entered into
definitive agreements with five limited partnerships, two general partnerships
and one private REIT, each organized by affiliates of T. Rowe Price, to acquire
the T. Rowe Price Properties, a portfolio of 27 properties aggregating
approximately 2,888,000 square feet. The total acquisition cost, including
capitalized costs, is expected to be approximately $146.8 million, which it is
anticipated will be paid entirely in cash from a combination of the proceeds of
the Offering and mortgage debt. The T. Rowe Price Properties consist of five
office properties, 19 industrial properties (including eight office/industrial
complexes) and three retail properties located in 12 states. This acquisition is
subject to a number of contingencies, including approval of the acquisition by
the limited partners, general partners or stockholders of the sellers, as the
case may be, satisfactory completion of title and environmental due diligence
and customary closing conditions. Accordingly, there can be no assurance that
any or all of T. Rowe Price Properties will be acquired. See "Risk
Factors -- Risks Associated with the T. Rowe Price Properties Acquisition" in
the accompanying Prospectus.

1997 COMPLETED ACQUISITIONS

Centerstone Property. In July 1997, the Company acquired an office property
containing 157,579 square feet (the "Centerstone Property") located in Irvine,
California. The total acquisition cost, including capitalized costs, was
approximately $30.4 million, which consisted of (i) approximately $5.5 million
in the form of 275,000 partnership units in the Operating Partnership (based on
an agreed per unit value of $20.00), and (ii) the balance in cash from a
combination of borrowings under the Line of Credit and the net proceeds of the
sale of certain assets (see " -- Redeployment of Assets").

CRI Properties. In June 1997, the Company acquired from Carlsberg Realty,
Inc. a portfolio of three Properties, aggregating approximately 245,600 square
feet (the "CRI Properties"). The total acquisition cost, including capitalized
costs, was approximately $14.8 million, which was paid entirely in cash from
borrowings under the Line of Credit. The CRI Properties consist of one office
Property in California and two industrial Properties in Arizona. The CRI
Properties have been managed by Glenborough Corporation, one of the Associated
Companies, since November 1996.

E&L Properties. In April 1997, the Company acquired from seven partnerships
and their general partner, a Southern California syndicator, a portfolio of 11
Properties, aggregating approximately 522,000 square feet, together with
associated management interests (the "E&L Properties"). The total acquisition
cost, including capitalized costs, was approximately $22.2 million, which
consisted of (i) approximately $12.8 million of mortgage debt assumed, (ii)
approximately $6.7 million in the form of 352,197 partnership units in the
Operating Partnership (based on an agreed per unit value of $19.075), (iii)
approximately $633,000 in the form of approximately 33,198 shares of Common
Stock of the Company (based on an agreed per share value of $19.075), and (iv)
the balance in cash. The cash portion was paid from borrowings under

S-5
<PAGE> 6

the Line of Credit. The E&L Properties consist of one office and ten industrial
Properties, all located in Southern California.

CIGNA Properties. In April 1997, the Company acquired from two partnerships
formed and managed by affiliates of CIGNA a portfolio of six Properties,
aggregating approximately 616,000 square feet and 224 multi-family units (the
"CIGNA Properties"). The total acquisition cost, including capitalized costs,
was approximately $45.4 million, which was paid entirely in cash from the
proceeds of a new $40 million unsecured loan from Wells Fargo Bank (the "CIGNA
Acquisition Financing") and borrowings under the Line of Credit. The CIGNA
Properties consist of two office Properties, two industrial Properties, a
shopping center and a multi-family Property, and are located in four states.

Lennar Properties. In April 1997, the Company acquired from two limited
partnerships and one limited liability company managed by affiliates of Lennar
Partners a portfolio of three Properties, aggregating approximately 282,000
square feet (the "Lennar Properties"). The total acquisition cost, including
capitalized costs, was approximately $23.2 million, which was paid in cash from
the proceeds of the March 1997 Offering. The Lennar Properties consist of one
office Property located in Virginia and two industrial Properties located in
Massachusetts.

Riverview Property. In April 1997, the Company acquired from a private
seller a 15-story office property containing 227,129 square feet located in
Bloomington, Minnesota (the "Riverview Property"). The total acquisition cost,
including capitalized costs, was approximately $20.5 million, of which
approximately $16.3 million was paid in cash from the proceeds of the March 1997
Offering, and the balance was paid in cash from borrowings under the Line of
Credit.

Scottsdale Hotel. In February 1997, the Company acquired a 163-suite hotel
Property (the "Scottsdale Hotel"), which began operations in January 1996 and is
located in Scottsdale, Arizona. The total acquisition cost, including
capitalized costs, was approximately $12.1 million, which consisted of
approximately $4.6 million of mortgage debt assumed, and the balance in cash.
The cash portion was financed through advances under the Line of Credit and the
retirement of a mortgage receivable (see " -- Redeployment of Assets"). The
Scottsdale Hotel and four of the Company's other hotel Properties are marketed
as Country Suites by Carlson.

1996 ACQUISITIONS

In 1996, the Company acquired 20 Properties for an aggregate purchase price
of approximately $93.4 million consisting of (i) nine office Properties, six
industrial Properties and two retail Properties aggregating approximately
1,438,000 rentable square feet, (ii) two multi-family Properties aggregating 538
units and (iii) one hotel Property containing 64 rooms.

OTHER ACQUISITION OPPORTUNITIES

Acquisition Pipeline. The Company maintains an active acquisition
department which identifies, evaluates, negotiates and consummates portfolio and
individual property investments. Currently, other than the T. Rowe Price
Properties, the Company has no potential acquisitions under either letter of
intent or definitive agreement, but is considering acquisitions involving, in
the aggregate, in excess of $600 million in total capitalized costs. Any future
acquisition would be subject to a number of contingencies, including a review of
the physical and economic characteristics of the properties involved,
negotiation of detailed terms and formal documentation. There can be no
assurance that any of the acquisitions under consideration will ultimately be
consummated. See "Risk Factors -- Risks Associated with Acquisitions" in the
accompanying Prospectus.

Possible Tender Offer Acquisitions. In addition to its current program of
negotiated property and portfolio acquisitions, the Company intends to consider
opportunities to acquire interests in properties and portfolios of properties
through tender offers for public and private limited partnerships. Depending
upon the opportunity and the circumstances, these offers may be made with or
without the cooperation of the general partner. As the Company is currently
evaluating this addition to its acquisition strategy and no tender offer
transactions have been initiated, there is no certainty that the Company will
adopt this strategy or that any

S-6
<PAGE> 7

such transactions will be completed. See "Risk Factors -- Risks Associated with
Tender Offers" in the accompanying Prospectus.

REDEPLOYMENT OF ASSETS

The Company periodically reviews its current portfolio of investments for
opportunities to redeploy capital from certain existing Properties or mortgage
receivables to other properties or investments that the Company believes have
characteristics more suited to its overall growth strategy and operating goals.
Consistent with this strategy, in February 1997 the Company acquired the
Scottsdale Hotel using in part the proceeds from the retirement of a mortgage
receivable which the Company had acquired in connection with the Consolidation
and which it believed did not fit the Company's overall strategy. In addition,
the Company recently sold from its retail portfolio six Atlanta Auto Care Center
Properties and nine of the ten QuikTrip Properties for an aggregate sales price
of approximately $12.1 million. The Company expects to sell its remaining
QuikTrip Property by August 31, 1997 for a sales price of approximately $1.1
million. The Company intends to use the net proceeds from the sale of such
Properties to fund the acquisition of properties which the Company believes have
greater growth potential. The Company also has entered into a definitive
agreement to sell the Shannon Crossing Property, which is a retail Property.
This sale is subject to a number of contingencies, and there can be no assurance
that such sale will be consummated.

FINANCING ACTIVITIES

Wells Fargo Bank Debt Financing. Wells Fargo Bank has substantially
completed underwriting and due diligence for a $60 million mortgage loan to the
Company (the "$60 Million Mortgage") to be secured by the Lennar Properties, the
Riverview Property, the Centerstone Property and five of the CIGNA Properties.
In the interim, Wells Fargo Bank funded on June 19, 1997 a $60 million unsecured
"bridge" loan, which was used to (i) repay all principal and accrued interest
under the $40 million CIGNA Acquisition Financing, and (ii) reduce the
outstanding balance under the Company's Line of Credit by approximately $20
million.

The terms of the $60 Million Mortgage are set forth in a non-binding letter
of intent which provides, among other things, for a 10-year term, interest at a
fixed annual rate of 7.5% and monthly payments based on a 25-year amortization
schedule. The Company anticipates that documentation and closing of the $60
Million Mortgage will be completed by July 31, 1997. The $60 million unsecured
bridge loan, which will be replaced by the $60 Million Mortgage, bears interest
at a 7.44% fixed annual rate and matures on July 31, 1997, subject to a 90-day
extension at the Company's option. In addition, Wells Fargo Bank is in the
process of underwriting additional mortgage financing to be secured by certain
of the T. Rowe Price Properties. The Company anticipates that the amount of this
financing will be at least $16 million and could be as much as $35 million if
the Company makes additional acquisitions (such additional mortgage financing
and the $60 Million Mortgage, collectively, the "Wells Fargo Financing").

March 1997 Offering. In March 1997, the Company completed a public offering
of 3,500,000 shares of its Common Stock at a price of $20.25 per share. The net
proceeds of approximately $66.1 million were used for the acquisition of certain
Properties and to repay approximately $24.9 million of the then outstanding
balance under the Line of Credit.

Increased Distributions. In January 1997, the Company announced a 6.7%
increase in its regular quarterly distribution from $.30 to $.32 per share of
Common Stock. See "Distribution Policy."

S-7
<PAGE> 8

THE OFFERING

All of the shares of Common Stock offered hereby are being sold by the
Company. None of the Company's stockholders is selling any shares of Common
Stock in the Offering.

<TABLE>
<S> <C>
Shares of Common Stock Offered.................... 6,300,000
Shares of Common Stock Outstanding
Before the Offering(1).......................... 14,466,009
Shares of Common Stock Outstanding
After the Offering(1)........................... 20,766,009
Use of Proceeds................................... To fund in part the acquisition of the T. Rowe
Price Properties, reduce outstanding
indebtedness and for general corporate purposes.
See "Use of Proceeds."
NYSE Symbol....................................... "GLB"
</TABLE>

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

(1) Assumes the exchange of all 1,271,317 units of the Operating Partnership not
owned by the Company for shares of Common Stock.

RISK FACTORS

See "Risk Factors" beginning at page 6 of the accompanying Prospectus for
certain factors relating to an investment in the Common Stock.

S-8
<PAGE> 9

THE COMPANY

The Company is a self-administered and self-managed REIT that owns a
diversified portfolio of 64 office, industrial, retail, multi-family and hotel
Properties located in 19 states throughout the country. In addition, the two
Associated Companies provide comprehensive asset, partnership and property
management services for a diversified portfolio of 58 additional properties that
are not owned by the Company. The combined portfolios encompass over 12 million
rentable square feet in 22 states.

The Company was incorporated in the state of Maryland on August 26, 1994.
On December 31, 1995, the Company completed the Consolidation in which
Glenborough Corporation, a California corporation ("Old GC"), and eight public
limited partnerships (collectively with Old GC, the "GRT Predecessor Entities")
merged with and into the Company. A portion of the Company's operations are
conducted through the Operating Partnership, in which the Company holds a 1%
interest as the sole general partner and an approximate 88% limited partnership
interest. The Company's executive offices are located at 400 South El Camino
Real, Suite 1100, San Mateo, California 94402-1708, and its telephone number is
(415) 343-9300.

GROWTH STRATEGY

The Company seeks to achieve sustainable long-term growth in Funds from
Operations primarily through the following strategies:

- Acquiring diversified portfolios or individual properties on attractive
terms, often from public and private partnerships as well as from other
REITs and life insurance companies and other institutions;

- Acquiring properties from entities controlled by Glenborough Corporation,
one of the Associated Companies;

- Improving the performance of Properties in the Company's portfolio; and

- Constantly reviewing the Company's current portfolio for opportunities to
redeploy capital from certain existing Properties into other properties
which the Company believes have characteristics more suited to its
overall growth strategy and operating goals.

Acquisitions

Acquisition Characteristics. The Company primarily seeks to acquire
diversified portfolios and individual properties with certain of the following
characteristics: (i) a stable stream of income, both historical and projected;
(ii) existing management fees and costs that, when internalized, would augment
the Company's investment return; (iii) properties generally constructed after
1970; (iv) little or no exposure to hazardous materials; (v) prudent debt
levels; (vi) potential for substantial overhead savings that could be converted
to distributions; (vii) low-to-moderate vacancy levels; (viii) diversified
tenant risk; (ix) low-to-moderate deferred maintenance; (x) substantial
geographic overlap with the Company's existing portfolio, to capitalize on the
Company's existing management capabilities; and (xi) predominantly comprised of
office, industrial, retail, multi-family properties, and/or hotel properties.

Portfolio Acquisitions. The Company seeks to grow by acquiring diversified
property portfolios, and believes there are significant acquisition
opportunities for such portfolios. The Company believes that public and private
partnerships, other REITs and life insurance companies and other institutions
own diversified portfolios which represent significant acquisition
opportunities. For example, according to Robert A. Stanger & Co., Inc.
("Stanger"), a substantial percentage of public and private partnerships,
representing original equity investments in excess of $70 billion, own
portfolios that are diversified geographically or by property type or both.

The Company believes that it can acquire diversified portfolios on
attractive terms because it can provide liquidity to the owners who otherwise
face a limited market for their portfolios and can, through the Company's UPREIT
structure, address the current owners' tax concerns and structure transactions
that may defer taxable gains. The Company further believes that there is a
limited number of purchasers who seek to buy diversified portfolios. For
example, most REITs pursue a strategy that focuses either on specific property

S-9
<PAGE> 10

types or geographic regions or both, and thus do not provide an outlet for bulk
sales by diversified portfolio owners. For a diversified portfolio seller that
is seeking to liquidate, an alternative to a bulk sale would be a gradual
sell-off of assets. Such an approach, however, may require an extended period of
time and be prohibitively expensive.

The Company believes that, in particular, limited partnerships and the
limited partners in such partnerships face difficult liquidity alternatives.
According to Stanger, few of the private partnerships, and less than half of the
public partnerships, are traded in any active secondary market. The Company
believes the majority of the limited partners in these partnerships would be
interested in solutions providing liquidity. The principal options available to
such limited partners include (i) selling their units for cash on the secondary
market, which according to Stanger, has a pricing structure that typically
discounts unit values relative to underlying asset values, and (ii) more
recently, selling their units for cash to large, well-financed investors who
solicit limited partners to sell their interests at prices that are higher than
prevailing secondary market prices but generally lower than the seller's
underlying asset value. In addition to their discounted pricing structure, these
solutions may not be preferred by limited partners who, as a result of past tax
benefits or other factors, may incur significant tax liabilities as a result of
such sale.

Given the limited alternatives available to partnerships and other holders
of diversified portfolios as described above, the Company believes that its
emphasis on diversified portfolios, its long-term investment strategy and
self-managed structure enable it to compete effectively for the acquisition in
bulk of diversified portfolios. The Company believes it can offer consideration
(in the form of units of the Operating Partnership, Common Stock of the Company
and/or cash) which both exceeds that otherwise available to diversified
portfolio owners and meets the Company's investment criteria.

Individual Property Acquisitions. From time to time the Company will
acquire individual properties that it believes will enhance the Company's
profitability and take advantage of existing management resources.

Possible Tender Offer Acquisitions. In addition to its current program of
negotiated portfolio and individual property acquisitions, the Company intends
to consider opportunities to acquire interests in portfolios and individual
properties through tender offers for public and private limited partnerships.
Depending upon the opportunity and the circumstances, such offers may be made
with or without the cooperation of the general partner of such partnerships. As
the Company is currently evaluating this addition to its acquisition strategy
and no tender offer transactions have been initiated, there is no certainty that
the Company will adopt this strategy or that any such transactions will be
completed. See "Risk Factors -- Risks Relating to Tender Offers" in the
accompanying Prospectus.

The Associated Companies

Glenborough Corporation. The Company seeks to acquire properties from
entities controlled by Glenborough Corporation ("GC"), a California corporation
formerly known as Glenborough Realty Corporation, which (i) serves as general
partner of several real estate limited partnerships for whom it provides
management services, asset management and property management services, (ii)
provides property management services for a limited portfolio of properties
owned by unaffiliated third parties, and (iii) provides management services for
certain partnerships sponsored by Rancon Financial Corporation, an unaffiliated
corporation which has significant real estate assets in the Inland Empire region
of Southern California (the "Rancon Partnerships"); these services include asset
management, property development, Securities and Exchange Commission reporting,
accounting, investor relations and property management services. The services to
the Rancon Partnerships were previously provided by Glenborough Inland Realty
Corporation ("GIRC"), a California corporation, which merged with GC effective
June 30, 1997. In the merger between GC and GIRC, the Company received preferred
stock of GC in exchange for its preferred stock of GIRC, on a one-for-one basis.
Following the merger, the Company holds the same preferences with respect to
dividends and liquidation distributions paid by GC as it previously held with
respect to GC and GIRC combined.

The Company owns 100% of the 38,000 shares (representing 95% of total
outstanding shares) of non-voting preferred stock of GC. GC also has 2,000
shares (representing 5% of total outstanding shares) of voting common stock
outstanding. One individual owns 33 1/3% of such common stock, and four
individuals, two of

S-10
<PAGE> 11

whom, Sandra L. Boyle and Frank Austin, are executive officers of the Company,
each own 16 2/3% of the common stock. The Company, through its ownership of
preferred stock of GC, is entitled to receive cumulative, preferred annual
dividends of $1.133 per share, which GC must pay before it pays any dividends
with respect to the common stock of GC. Once GC pays the required cumulative
preferred dividend, it will pay any additional dividends in equal amounts per
share on both the preferred stock and the common stock at 95% and 5%,
respectively. Through the preferred stock, the Company is also entitled to
receive a preferred liquidation value of $114.50 per share plus all cumulative
and unpaid dividends. The preferred stock is subject to redemption at the option
of GC after December 31, 2005, for a redemption price of $114.50 per share.

Glenborough Hotel Group. The Company, through the Operating Partnership,
leases its hotel properties to Glenborough Hotel Group ("GHG"). The Operating
Partnership holds a first mortgage on another hotel, which is managed by GHG
under a contract with its owner. GHG also manages one other hotel owned by
Outlook Income Fund 9, a partnership whose general partner is GC, as well as two
resort condominium hotels.

The Company owns 100% of the 50 shares of non-voting preferred stock of
GHG. Three individuals, one of whom, Terri Garnick, is an executive officer of
the Company, each own 33 1/3% of the 1,000 shares of voting common stock of GHG.
The Company, through its ownership of preferred stock, is entitled to receive
cumulative, preferred annual dividends of $600 per share, which GHG must pay
before it pays any dividends with respect to the common stock. Once GHG pays the
required cumulative preferred dividend, it will pay 75% of any additional
dividends to holders of the preferred stock, and 25% to holders of the common
stock. Through the preferred stock, the Company is also entitled to receive a
preferred liquidation value of $40,000 per share plus all cumulative and unpaid
dividends. The preferred stock will be subject to redemption at the option of
GHG after December 31, 1999, for a redemption price of $40,000 per share.

Ownership Structure of the Associated Companies. The Company intends for
its ownership interest in each of the Associated Companies to comply with REIT
qualification standards. As the holder of preferred stock in an Associated
Company, the Company has no voting power with respect to the election of the
directors of the Associated Company, thus, all power to elect directors of an
Associated Company is held by the respective owners of the common stock of the
Associated Company. The ownership structure of the Associated Companies is
intended to provide the Company with a significant portion of economic benefits
of each of the Associated Companies. The Company accounts for the financial
results of each of the Associated Companies using the equity method.

Internal Growth

The Company seeks market rent increases as leases are renewed. In addition,
many of the commercial leases provide for rent increases that are either fixed
or based on a consumer price index ("CPI"). Such increases, together with
anticipated future rents from space now vacant, provide an opportunity for
increased revenues. The leases for the hotel portfolio provide the Company with
either a base rent amount or a percentage of the hotel's revenue, whichever is
higher, thus, the Company will participate in any increase in hotel revenues.

Redeployment of Assets

The Company periodically reviews the existing Properties, and sells certain
Properties and reinvests the proceeds in other properties which the Company
believes have characteristics more suited to its overall growth strategy and
operating goals. For example, the Company may: (i) sell properties that have
matured beyond a point of significant future growth potential and replace them
with properties with comparable cash flow but higher growth potential; (ii) sell
some smaller or management intensive properties and replace them with larger or
more management-efficient properties; and (iii) seek to reduce the number of
cities in which it does business. By redeploying assets in this manner, the
Company believes it can achieve certain economies of scale with respect to
staffing and overhead levels. See "Recent Activities -- Redeployment of Assets."

S-11
<PAGE> 12

FINANCING POLICIES

Conservative Debt Strategy. On a pro forma basis, giving effect to the pro
forma adjustments described in "Selected Historical and Pro Forma Financial and
Other Data" for the unaudited pro forma balance sheet data as of March 31, 1997,
the Company's total indebtedness as of March 31, 1997 would have been $144.1
million, which represents a debt to total market capitalization (debt divided by
the sum of market value of equity plus debt) ratio of approximately 23.4%. This
ratio is consistent with the Company's conservative strategy of maintaining its
debt to total market capitalization ratio at a level of 30% or less. In
addition, the Company's Articles of Incorporation (the "Charter") limits the
Company's ability to incur additional debt if the Company's total debt would
exceed 50% of the greater of the Company's fair market value or total market
capitalization (sum of market value of equity plus debt), as defined in the
Charter. This debt limitation contained in the Company's Charter cannot be
changed without the affirmative vote of the stockholders of the Company in
accordance with Maryland General Corporation Law.

Limited Floating Interest Rate Debt. The Company seeks to limit the amount
of its indebtedness that is subject to floating interest rates. On a pro forma
basis, giving effect to the pro forma adjustments described in "Selected
Historical and Pro Forma Financial and Other Data" for the unaudited pro forma
balance sheet data as of March 31, 1997, $21.0 million, or 14.6% of the
Company's aggregate indebtedness as of March 31, 1997 would have been subject to
floating interest rates.

INVESTMENT POLICIES

The Company seeks to invest in income-producing property, both directly and
through joint ventures with unaffiliated third parties, including institutional
investors. Prospective real estate investment opportunities undergo an
underwriting process that evaluates the following: (i) reasonably anticipated
levels of net cash and ultimate sales value, based on evaluation of a range of
factors including, but not limited to, rental levels under existing leases; (ii)
financial strength of tenants; (iii) levels of expense required to maintain
operating services and routine building maintenance at competitive levels; and
(iv) levels of capital expenditures required to maintain the capital components
of the building in good working order and in conformance with building codes,
health, safety and environmental and other standards.

The Company conducts physical site inspections of each property under
consideration and also engages outside professionals to independently inspect
properties prior to acquisition. The Company either engages outside
professionals to conduct Phase I environmental assessments for all acquisitions,
or relies on either: (i) the availability of a recent report prepared for a
third party; or (ii) in the case of a property managed by an Associated Company,
the experience of the Associated Company in managing the property, when the
incremental benefit of obtaining a report is believed by the Company to be
outweighed by the cost. Based upon the results of these inspections,
assessments, reports and experience, the Company evaluates the risks associated
with a proposed acquisition prior to its completion and takes appropriate
corrective measures.

The Company emphasizes equity real estate investments, but may also invest
in mortgages, securitized mortgage portfolios or other assets consistent with
maintaining qualification as a REIT. The Company will not invest in derivative
financial instruments except for the limited purpose of prudently hedging
interest rate risk under variable interest rate debt. The Company has no plans
to invest in derivative financial instruments.

The Board of Directors of the Company reviews the investment policies of
the Company periodically to determine that the investment policies being
followed by the Company at any time are in the best interests of the Company's
stockholders. The Board of Directors may alter the Company's investment policies
if it determines in the future that such a change is in the best interests of
the Company and its stockholders. The methods of implementing the Company's
investment policies may vary as new investment and financing techniques are
developed or for other reasons.

The Company has also adopted a policy that no acquisition of properties
from GPA, Ltd. or Robert or Andrew Batinovich or their families or from other
entities in which they have an interest will be made without the approval of at
least two-thirds of the Company's independent directors.

S-12
<PAGE> 13

ORGANIZATIONAL DIAGRAM
(on a pro forma basis as of July 10, 1997)

LOGO
- ---------------

(1) On a pro forma basis, giving effect to the Offering and the use of the net
proceeds therefrom as described in "Use of Proceeds," the remaining
interests in the Operating Partnership, other than the interests held by the
Company, are: (i) a 3.16% limited partner interest held by GPA, Ltd., a
California limited partnership, (ii) a 0.07% limited partner interest held
by Robert Batinovich, and (iii) an aggregate of 3.71% of limited partner
interests held by certain other persons. GPA, Ltd. is owned by Robert
Batinovich, who holds a 1% general partner interest, and Glenborough
Partners, a California limited partnership, which holds a 99% limited
partner interest. The Company owns a 4.0% limited partner interest in
Glenborough Partners, and Robert Batinovich and Andrew Batinovich and
members of their immediate families own an approximate 21% aggregate
interest (including both general partner and limited partner interests) in
Glenborough Partners. The remaining 75% interests in Glenborough Partners
are held in aggregate by approximately 400 private investors.

S-13
<PAGE> 14

RECENT ACTIVITIES

Consistent with the Company's strategy for growth, the Company has, during
1997 through the date of this Prospectus Supplement, acquired, or entered into
definitive agreements to acquire, 53 properties, aggregating approximately 4.9
million rentable square feet, 224 multi-family units, and 163 hotel rooms, for
an aggregate total purchase price of approximately $315 million. In addition, in
March 1997, the Company completed the March 1997 Offering of 3,500,000 shares of
Common Stock, and in June 1997, the Company obtained a $60 million term loan
with Wells Fargo Bank.

The following is a summary of the Company's acquisition and financing
activities since the Consolidation through the date of this Prospectus
Supplement.

PENDING ACQUISITION

T. Rowe Price Properties. In April 1997, the Company entered into
definitive agreements with five limited partnerships, two general partnerships
and one private REIT, each organized by affiliates of T. Rowe Price, to acquire
the T. Rowe Price Properties, a portfolio of 27 properties, aggregating
approximately 2,888,000 square feet. The total acquisition cost, including
capitalized costs, is expected to be approximately $146.8 million, which it is
anticipated will be paid entirely in cash from a combination of the proceeds of
the Offering and mortgage debt. The T. Rowe Price Properties consist of five
office properties, 19 industrial properties (including eight office/industrial
complexes) and three retail properties located in 12 states. This acquisition is
subject to a number of contingencies, including approval of the acquisition by
the limited partners, general partners or stockholders of the sellers, as the
case may be, satisfactory completion of title and environmental due diligence
and customary closing conditions. Accordingly, there can be no assurance that
any or all of T. Rowe Price Properties will be acquired. See "Risk
Factors -- Risks Associated with the T. Rowe Price Properties Acquisition."

The following table sets forth certain information for each of the T. Rowe
Price Properties:

T. ROWE PRICE PROPERTIES

<TABLE>
<CAPTION>
ANNUALIZED
OCCUPANCY PROPERTY REVENUES(3)
RENTABLE RATE AS AVERAGE ANNUALIZED
YEAR SQUARE OF RENT/LEASED BASE ---------------------
PROPERTY CITY ST COMPLETED FEET 5/31/97(1) SQUARE FEET RENT(2) AMOUNT PERCENT
- ---------------- ------------------ ---- --------- --------- --------- ----------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OFFICE
Buschwood
II.......... Tampa FL 1989 76,930 100% $ 14.81 $ 1,139,316 $ 1,216,188 5.3%
Montgomery.... Gaithersburg MD 1982 116,348 90 13.95 1,461,192 1,502,784 6.6
Gatehall I.... Parsipanny NJ 1983 113,604 85 15.77 1,523,184 1,609,296 7.1
Clark
Avenue...... King of Prussia PA 1965 40,000 100 6.23 249,204 296,424 1.3
Post Oak
Place....... Houston TX 1971 56,449 78 16.17 711,888 706,416 3.1
--------- --- ------ ----------- ----------- ----
Subtotal/Weighted
Average..... 403,331 90% $ 14.04 $ 5,084,784 $ 5,331,108 23.4%
--------- --- ------ ----------- ----------- ----
INDUSTRIAL
Baseline...... Tempe AZ 1984 100,204 93 6.88 641,076 647,412 2.8
Springdale.... Santa Fe Springs CA 1985 144,000 100 4.55 655,260 759,960 3.3
Coronado...... Anaheim CA 1975 95,732 100 3.84 367,608 440,304 1.9
Scripps
Terrace..... San Diego CA 1986 56,796 90 6.71 343,164 433,140 1.9
Tierrasanta... San Diego CA 1985 104,236 62 7.52 486,168 562,104 2.5
Valley
Business
Center...... Denver CO 1984 202,540 96 5.20 1,011,792 1,275,696 5.6
Newport
Center...... Deerfield Beach FL 1984 62,411 98 6.87 420,300 607,596 2.7
Business
Plaza....... Ft. Lauderdale FL 1982 66,372 91 9.26 559,548 741,360 3.3
Burnham....... Boca Raton FL 1980 71,168 100 3.99 283,956 328,512 1.4
Airport
Perimeter... College Park GA 1982 120,986 78 4.59 433,548 485,004 2.1
The Business
Park........ Gwinett County GA 1984 157,153 96 7.48 1,128,972 1,253,172 5.5
Atlantic...... Gwinett County GA 1975 187,844 100 3.42 642,192 670,164 2.9
Oakbrook
Corners..... Norcross GA 1984 123,948 83 6.42 660,192 734,628 3.2
Bonnie Lane... Elk Grove Village IL 1981 119,590 100 3.99 477,588 743,112 3.3
Glenn
Avenue...... Wheeling IL 1981 82,000 100 3.84 315,108 588,408 2.6
Wood Dale..... Wood Dale IL 1979 89,718 70 5.07 318,576 380,724 1.7
Riverview..... St. Paul MN 1978 113,700 100 3.97 451,884 718,560 3.1
Winnetka...... Crystal MN 1982 188,260 100 3.87 728,568 1,272,300 5.6
Kent Park..... Kent WA 1981 138,157 100 4.61 636,900 771,624 3.4
--------- --- ------ ----------- ----------- ----
Subtotal/Weighted
Average..... 2,224,815 93% $ 5.09 $10,562,400 $13,413,780 58.8%
--------- --- ------ ----------- ----------- ----
RETAIL
River Run..... Miramar FL 1988 92,787 93 8.37 722,640 1,051,344 4.6
Westbrook
Commons..... Westchester IL 1983 121,538 98 11.42 1,360,224 2,320,548 10.2
Goshen........ Gaithersburg MD 1988 45,546 88 14.22 569,784 692,484 3.0
--------- --- ------ ----------- ----------- ----
Subtotal/Weighted
Average..... 259,871 94% $ 10.81 $ 2,652,648 $ 4,064,376 17.8%
--------- --- ------ ----------- ----------- ----
Total/Weighted
Average....... 2,888,017 93% $ 6.82 $18,299,832 $22,809,264 100%
========= === ====== =========== =========== ====
</TABLE>

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

(1) Represents economic occupancy.

(2) Represents Base Rent for the month ended May 31, 1997, as annualized. As
used herein, "Base Rent" represents base rent less concessions.

(3) Represents Property revenues for the month ended May 31, 1997, as
annualized.

S-14
<PAGE> 15

The following table sets forth combined financial information for the T.
Rowe Price Properties for the periods indicated. Certain of the T. Rowe Price
Properties ("Group A") have a September 30 fiscal year end, and the remaining T.
Rowe Price Properties ("Group B") have a December 31 fiscal year end.

COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
OF THE T. ROWE PRICE PROPERTIES, GROUPS A AND B
(IN THOUSANDS)

<TABLE>
<CAPTION>
GROUP A GROUP B
SIX MONTHS GROUP A THREE MONTHS GROUP B
ENDED YEAR ENDED ENDED YEAR ENDED
MARCH 31, 1997 SEPTEMBER 30, 1996 MARCH 31, 1997 DECEMBER 31, 1996
(UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED)
-------------- ------------------ -------------- -----------------
<S> <C> <C> <C> <C>
REVENUES........................... $2,191 $4,246 $4,340 $16,751
CERTAIN EXPENSES:
Operating........................ 489 990 689 3,112
Real estate taxes................ 194 460 668 2,661
------ ------ ------ -------
683 1,450 1,357 5,773
------ ------ ------ -------
REVENUES IN EXCESS OF CERTAIN
EXPENSES......................... $1,508 $2,796 $2,983 $10,978
====== ====== ====== =======
</TABLE>

The following table sets forth contractual lease expirations for the T.
Rowe Price Properties for the remainder of 1997 and thereafter, as of May 31,
1997.

T. ROWE PRICE LEASE EXPIRATIONS

S-15
<PAGE> 16

<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL
RENTABLE SQUARE ANNUAL BASE RENT
YEAR OF NUMBER OF FOOTAGE SUBJECT TO ANNUAL BASE RENT REPRESENTED BY
LEASE EXPIRATION LEASES EXPIRING EXPIRING LEASES UNDER EXPIRING LEASES EXPIRING LEASES(1)
--- --------- ----------- -----
<S> <C> <C> <C> <C>
INDUSTRIAL
1997(2).................... 46 250,814 $ 1,403,938 13.6%
1998....................... 81 564,512 2,911,260 28.1
1999....................... 88 567,146 2,797,628 27.0
2000....................... 37 344,179 1,616,663 15.6
2001....................... 18 131,645 674,448 6.5
2002....................... 6 65,737 303,503 2.9
2003....................... 2 122,957 479,234 4.7
2004....................... 3 27,357 148,355 1.4
2005....................... -- -- -- 0.0
2006....................... 1 2,306 23,060 0.2
Thereafter................. -- -- -- --
--- --------- ----------- -----
Subtotal................ 282 2,076,653(3) $10,358,089(4) 100.0%
--- --------- ----------- -----
RETAIL
1997(2).................... 7 12,583 $ 200,473 7.3%
1998....................... 17 36,043 506,561 18.5
1999....................... 17 21,884 345,321 12.6
2000....................... 9 9,934 149,796 5.5
2001....................... 9 14,778 222,986 8.2
2002....................... 1 900 13,500 0.5
2003....................... 2 3,700 64,048 2.4
2004....................... 3 54,515 408,519 15.0
2005....................... 3 11,090 175,292 6.4
2006....................... 2 6,750 75,600 2.8
Thereafter................. 5 72,805 569,033 20.8
--- --------- ----------- -----
Subtotal................ 75 244,982(3) $ 2,731,129(4) 100.0%
--- --------- ----------- -----
Total.............. 436 2,678,226(3) $18,567,547(4) 100.0%
=== ========= =========== =====
</TABLE>

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

(1) Annual Base Rent expiring during each period, divided by total Base Rent for
the property type (both adjusted for contractual increases).

(2) Reflects leases expiring after May 31, 1997 and includes leases that have
initial terms of less than one year.

(3) This figure is based on square footage actually leased (which excludes
vacant space), and thus differs from "Rentable Square Feet" in the preceding
T. Rowe Price Properties table (which includes vacant space).

(4) This figure is based on square footage actually leased (which excludes
vacant space) and incorporates contractual rent increases arising after
1997, and thus differs from "Annualized Base Rent" in the preceding T. Rowe
Price Properties table, which is based on May 31, 1997 rents.

1997 COMPLETED ACQUISITIONS

Centerstone Property. In July 1997, the Company acquired the Centerstone
Property, an office property containing 157,579 square feet and located in
Irvine, California. The total acquisition cost, including capitalized costs, was
approximately $30.4 million, which consisted of (i) approximately $5.5 million
in the form of 275,000 partnership units in the Operating Partnership (based on
an agreed per unit value of $20.00), and (ii) the balance in cash from a
combination of borrowings under the Line of Credit and the net proceeds of the
sale of certain assets (see " -- Redeployment of Assets").

The Operating Partnership units issued in connection with the Centerstone
Property acquisition are accompanied by an option permitting a holder of the
units to require the Operating Partnership to redeem the units. If the holder
requests redemption, the Company, as general partner of the Operating
Partnership, will

S-16
<PAGE> 17

have the option to acquire the units by delivering shares of Common Stock on a
one-for-one basis, or causing the Operating Partnership to distribute cash in an
amount equal to the fair market value of the units being redeemed. The shares of
the Company's Common Stock to be issued upon redemption of the Operating
Partnership units will have certain piggy back and demand registration rights.

CRI Properties. In June 1997, the Company acquired the CRI Properties, a
portfolio of three Properties, aggregating approximately 245,600 square feet.
The total acquisition cost, including capitalized costs, was approximately $14.8
million, which was paid entirely in cash from borrowings under the Line of
Credit. The CRI Properties consist of one office Property in California and two
industrial Properties in Arizona. The CRI Properties have been managed by GC,
one of the Associated Companies, since November 1996.

E&L Properties. In April 1997, the Company acquired from seven partnerships
and their general partner, a Southern California syndicator, the E&L Properties,
a portfolio of 11 Properties, aggregating approximately 522,000 square feet,
together with associated management interests. The total acquisition cost,
including capitalized costs, was approximately $22.2 million, which consisted of
(i) approximately $12.8 million of mortgage debt assumed, (ii) approximately
$6.7 million in the form of 352,197 partnership units in the Operating
Partnership (based on an agreed per unit value of $19.075), (iii) approximately
$633,000 in the form of approximately 33,198 shares of Common Stock of the
Company (based on an agreed per share value of $19.075), and (iv) the balance in
cash. The cash portion was paid from borrowings under the Line of Credit. The
E&L Properties consist of one office and ten industrial Properties, all located
in Southern California.

The Operating Partnership units issued in connection with the E&L
Properties acquisition are accompanied by an option permitting a holder of the
units to require the Operating Partnership to redeem the units. If the holder
requests redemption, the Company, as general partner of the Operating
Partnership, will have the option to acquire the units by delivering shares of
Common Stock on a one-for-one basis, or causing the Operating Partnership to
distribute cash in an amount equal to the fair market value of the units being
redeemed. The shares of the Company's Common Stock to be issued upon redemption
of the Operating Partnership units will have certain piggy back and demand
registration rights. The shares of the Company's Common Stock issued in
connection with the E&L Properties acquisition are unregistered, but the holders
of these shares have similar piggy back and demand registration rights as
applicable to the Operating Partnership units issued in the transaction.

CIGNA Properties. In April 1997, the Company acquired from two partnerships
formed and managed by affiliates of CIGNA the CIGNA Properties, a portfolio of
six Properties, aggregating approximately 616,000 square feet and 224
multi-family units. The total acquisition cost, including capitalized costs, was
approximately $45.4 million, which was paid entirely in cash from the CIGNA
Acquisition Financing and borrowings under the Line of Credit. The CIGNA
Properties consist of two office Properties, two industrial Properties, a
shopping center and a multi-family Property, and are located in four states.

Lennar Properties. In April 1997, the Company acquired from two limited
partnerships and one limited liability company managed by affiliates of Lennar
Partners the Lennar Properties, a portfolio of three Properties, aggregating
approximately 282,000 square feet. The total acquisition cost, including
capitalized costs, was approximately $23.2 million, which was paid in cash from
the proceeds of the March 1997 Offering. The Lennar Properties consist of one
office Property located in Virginia and two industrial Properties located in
Massachusetts.

Riverview Property. In April 1997, the Company acquired from a private
seller the Riverview Property, a 15-story office property containing 227,129
square feet located in Bloomington, Minnesota. The total acquisition cost,
including capitalized costs, was approximately $20.5 million, of which
approximately $16.3 million was paid in cash from the proceeds of the March 1997
Offering, and the balance was paid in cash from borrowings under the Line of
Credit.

Scottsdale Hotel. In February 1997, the Company acquired the Scottsdale
Hotel, a 163-suite hotel Property which began operations in January 1996 and is
located in Scottsdale, Arizona. The total acquisition cost, including
capitalized costs, was approximately $12.1 million, which consisted of
approximately $4.6 mil-

S-17
<PAGE> 18

lion of mortgage debt assumed, and the balance in cash. The cash portion was
financed through advances under the Line of Credit and the retirement of a
mortgage receivable (see " -- Redeployment of Assets"). The Scottsdale Hotel and
four of the Company's other hotel Properties are marketed as Country Suites by
Carlson.

1996 ACQUISITIONS

OTHER ACQUISITION OPPORTUNITIES

REDEPLOYMENT OF ASSETS

The Company periodically reviews its current portfolio of investments for
opportunities to redeploy capital from certain existing Properties or mortgage
receivables to other properties or investments that the Company believes have
characteristics more suited to its overall growth strategy and operating goals.
Consistent with this strategy, in February 1997 the Company acquired the
Scottsdale Hotel using in part the proceeds from the retirement of a mortgage
receivable which the Company had acquired in connection with the Consolidation
and which it believed did not fit the Company's overall strategy. In addition,
the Company has sold from its retail portfolio six Atlanta Auto Care Center
Properties and nine of the ten QuikTrip Properties for an aggregate sales price
of approximately $12.1 million. The Company expects to sell its remaining
QuikTrip Property by August 31, 1997 for a sales price of approximately $1.1
million. The Company intends to use the net proceeds from the sale of such
Properties to fund the acquisition of properties which the Company believes have
greater growth potential. The Company also has entered into a definitive
agreement to sell the Shannon Crossing Property, which is a retail Property.
This sale is subject to a number of contingencies, and there can be no assurance
that such sale will be consummated.

FINANCING ACTIVITIES

Wells Fargo Bank Debt Financing. Wells Fargo Bank has substantially
completed underwriting and due diligence for the $60 Million Mortgage loan to
the Company to be secured by the Lennar Properties, the Riverview Property, the
Centerstone Property and five of the CIGNA Properties. In the interim, Wells
Fargo Bank funded on June 19, 1997 a $60 million unsecured "bridge" loan, which
was used to (i) repay all

S-18
<PAGE> 19

principal and accrued interest under the $40 million CIGNA Acquisition
Financing, and (ii) reduce the outstanding balance under the Company's Line of
Credit by approximately $20 million.

Increased Distributions. In January 1997, the Company announced a 6.7%
increase in its regular quarterly distribution from $.30 to $.32 per share of
Common Stock. See "Distribution Policy."

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Common Stock offered
hereby are expected to be approximately $134.8 million (approximately $155.1
million if the Underwriters' over-allotment option is exercised in full). The
Company intends to contribute such proceeds to the Operating Partnership to
purchase an additional proportionate interest in the Operating Partnership. The
Operating Partnership will use the net proceeds to fund in part the acquisition
of the T. Rowe Price Properties, reduce borrowings under the Line of Credit and
for general corporate purposes.

The only indebtedness to be repaid with a portion of the net proceeds from
the Offering are outstanding borrowings under the Line of Credit. As of June 30,
1997, the interest rate on the Line of Credit was 7.44% and the initial maturity
date of the Line of Credit was July 14, 1998, subject to certain extension
provisions.

The Company is continuously engaged, in the ordinary course of its
business, in the evaluation of properties for acquisition. Pending application
of any remaining portion of net proceeds, the Company will invest that portion
in interest-bearing accounts and short-term, interest-bearing securities that
are consistent with the Company's intention to continue to qualify for taxation
as a REIT. Such investments may include, for example, government and government
agency securities, certificates of deposit and interest-bearing bank deposits.

S-19
<PAGE> 20

PRICE RANGE OF COMMON STOCK AND DISTRIBUTION HISTORY

The Company's Common Stock is listed on the NYSE under the symbol "GLB." On
July 10, 1997, the last reported sale price per share of the Company's Common
Stock on the NYSE was $22 5/8. The following table sets forth the high and low
closing prices per share of the Company's Common Stock for the periods
indicated, as reported on the NYSE composite tape, and the distributions per
share paid by the Company with respect to the periods indicated.

<TABLE>
<CAPTION>
QUARTERLY PERIOD HIGH LOW DISTRIBUTIONS
---------------------------------------------------- ---- --- -------------
<S> <C> <C> <C>
1996
First Quarter(1).................................. $14 1/4 $13 $0.30
Second Quarter.................................... 15 1/8 13 1/2 0.30
Third Quarter..................................... 14 5/8 13 3/8 0.30
Fourth Quarter.................................... 17 5/8 13 5/8 0.32

1997
First Quarter..................................... 20 1/2 16 3/4 0.32
Second Quarter.................................... 25 1/4 19 3/8 (2)
Third Quarter(3).................................. 24 9/16 22 5/8 (2)
</TABLE>

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

(1) Although the Consolidation occurred on December 31, 1995 and the Company
began paying distributions on its Common Stock based on earnings in the
first quarter of 1996, the Common Stock did not begin trading on the NYSE
until January 31, 1996.

(2) Distributions for the quarters ending June 30, 1997 and September 30, 1997
had not been declared as of July 10, 1997.

(3) High and low stock closing prices through July 10, 1997.

DISTRIBUTION POLICY

Since the Consolidation, the Company has paid regular quarterly
distributions to holders of its Common Stock. The Company paid quarterly
distributions of $0.30 per share for the first, second and third quarters of
1996 on May 13, 1996, August 14, 1996 and October 15, 1996, respectively. In
January 1997, the Company announced a 6.7% increase in its regular quarterly
distribution, increasing the quarterly distribution from $0.30 to $0.32 per
share. The distributions for the fourth quarter of 1996 and first quarter of
1997 of $0.32 per share were paid on February 19, 1997 and May 13, 1997.
Distributions are declared quarterly by the Company based on financial results
for the prior calendar quarter. The Company currently pays quarterly
distributions representing an annualized distribution of $1.28 per share.

The Company makes distributions to stockholders if, as and when declared by
its Board of Directors out of funds legally available therefor. The Company
expects to continue its policy of paying quarterly distributions, but there can
be no assurance that distributions will continue or be paid at any specific
level.

The Board of Directors, in setting the level of the stockholders'
distributions, takes into account, among other things, the Company's financial
performance, debt covenants and its need of funds for working capital reserves,
capital improvements and new investment opportunities. At present, the Company
intends to retain from net cash receipts from operations amounts necessary for
working capital reserves, debt payments and capital improvements and
replacements for existing properties, and to distribute the balance to
stockholders as distributions. The Company does not, however, intend to
distribute net cash receipts from sales or refinancings of assets, but instead
to retain such funds to make new investments or for other corporate purposes,
taking into account the income tax impact, if any, of reinvesting such proceeds
rather than distributing them. These policies are within the discretion of the
Board of Directors and may be changed from time to time subject only to the
distribution requirements under the REIT provisions of the Internal Revenue Code
of 1986, as amended (the "Code") and other legal restrictions. See "Federal
Income Tax Consequences -- Annual Distribution Requirements" in the accompanying
Prospectus.

The Company believes it will have sufficient available cash to make
distributions at a level necessary to maintain REIT status. Additionally, the
Company would be required to make a special distribution with

S-20
<PAGE> 21

respect to accumulated earnings and profits, if any, from any portion of a year
in which it does not elect REIT status, including any earnings and profits
attributable to the Company and GC.

Although the Company believes that a small portion of its distributions for
1997 will be classified as a return of capital for federal income tax purposes,
it cannot currently predict the portion of 1997 or future distributions that may
be so classified. See "Federal Income Tax Consequences -- Taxation of
Stockholders -- Taxation of Taxable Domestic Stockholders" in the accompanying
Prospectus. No part of the 1996 distributions were classified as a return of
capital for federal income tax purposes.

HISTORICAL TOTAL RETURN

An investor who purchased shares of the Company's Common Stock in the March
1997 Offering experienced a total return from March 21, 1997 through July 10,
1997 of 13.5%, including share appreciation and assuming reinvestment of
distributions. Past performance, however, is not necessarily indicative of the
results that will be obtained in the future from an investment in the Company's
Common Stock, and no assurance can be given that an investor in the Offering
will achieve similar results. See "Risk Factors" in the accompanying prospectus
for a discussion of risks associated with the Company's future performance.

S-21
<PAGE> 22

CAPITALIZATION

The following table sets forth the historical capitalization of the Company
as of March 31, 1997, and on a pro forma basis as if (i) the acquisition of the
T. Rowe Price Properties, the Centerstone Property, the E&L Properties, the
CIGNA Properties, the Lennar Properties, and the Riverview Property, (ii)
consummation of the Wells Fargo Financing, and (iii) the Offering and the
application of the net proceeds therefrom as described in "Use of Proceeds" had
each been completed on March 31, 1997. This capitalization table should be read
in conjunction with all financial statements and notes thereto included in this
Prospectus Supplement and the accompanying Prospectus or incorporated herein and
therein by reference.

<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
---------------------------
HISTORICAL PRO FORMA
------------ ----------
(IN THOUSANDS)
<S> <C> <C>
DEBT:
Line of Credit(1)................................... $ -- $ 11,254
Mortgage loans(2)................................... 59,007 56,828
Wells Fargo Financing(3)............................ -- 76,000
-------- --------
Total debt.................................. 59,007 144,082
-------- --------
MINORITY INTEREST(4).................................. 8,856 21,074
-------- --------
STOCKHOLDERS' EQUITY:
Common stock: $0.001 par value, 50,000,000 shares
authorized, 13,161,553 and 19,494,692 issued and
outstanding, respectively(5)..................... 13 19
Additional paid-in capital.......................... 172,257 307,640
Deferred compensation............................... (352) (352)
Retained deficit.................................... (8,692) (7,832)
-------- --------
Total stockholders' equity.................. 163,226 299,475
-------- --------
TOTAL CAPITALIZATION................................ $231,089 $464,631
======== ========
</TABLE>

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

(1) The pro forma balance reflects borrowings under the Line of Credit due to
acquisitions completed after March 31, 1997 and a partial repayment of these
borrowings with the use of proceeds from the Wells Fargo Financing and the
Offering.

(2) The pro forma balance reflects the assumption of mortgage loans in
connection with the acquisition of the E&L Properties and assumes the payoff
of $6,120 of mortgage debt in connection with the sale of the QuikTrip
Properties.

(3) The pro forma balance reflects the Wells Fargo Financing, comprised of the
$60 Million Mortgage and an estimated additional $16 million in mortgage
financing.

(4) The pro forma minority interest reflects the issuance of 627,197 units of
partnership interest in the Operating Partnership in connection with the E&L
Properties and Centerstone Property acquisitions.

(5) The pro forma outstanding Common Stock includes the issuance of 33,198
shares of Common Stock in connection with the E&L Properties acquisition.

S-22
<PAGE> 23

SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OTHER DATA

The following table sets forth selected financial and other data on a
historical, as adjusted and pro forma basis for the Company, and on a historical
combined basis for the GRT Predecessor Entities.

The following unaudited pro forma operating and other data for the three
months ended March 31, 1997 and for the year ended December 31, 1996 have been
prepared to reflect (i) all property acquisitions (including the debt assumed in
connection therewith) completed in 1997, as described under the caption "Recent
Activities," with the exception of the CRI Properties, and the Property
acquisitions completed in 1996, as described in footnote one of the Notes and
Adjustments to Pro Forma Consolidated Balance Sheet as of March 31, 1997, (ii)
the pending acquisition of the T. Rowe Price Properties described under the
caption "Recent Activities," (iii) the Offering, and the application of the net
proceeds therefrom as set forth in "Use of Proceeds," the March 1997 Offering
and the October 1996 Offering, (iv) the Wells Fargo Financing and the repayment
of borrowings on the Line of Credit and the CIGNA Acquisition Financing, as
described under the caption "Recent Activities," (v) the sale of the two All
American Industrial Properties, the six Atlanta Auto Care Center Properties and
the ten QuikTrip Properties, and the use of the sale proceeds for the repayment
of mortgage debt and (vi) the collection of the Hovpark mortgage loan
receivable, as if each of such transactions had been completed on January 1,
1996. The unaudited pro forma balance sheet data as of March 31, 1997 has been
prepared to reflect (i) all property acquisitions (including the debt assumed in
connection therewith) completed in 1997, as described under the caption "Recent
Activities," with the exception of the CRI Properties, (ii) the pending
acquisition of the T. Rowe Price Properties described under the caption "Recent
Activities," (iii) the Offering, and the application of the net proceeds
therefrom as set forth in "Use of Proceeds," (iv) the Wells Fargo Financing and
the repayment of borrowings on the Line of Credit and the CIGNA Acquisition
Financing, as described under the caption "Recent Activities," (v) the sale of
the six Atlanta Auto Care Center properties and ten QuikTrip properties, and
(vi) the use of the sale proceeds for the repayment of mortgage debt, as if each
of such transactions had been completed on March 31, 1997. In the opinion of
management, all adjustments necessary to reflect the effects of the transactions
have been made.

The following unaudited as adjusted operating data, balance sheet data, and
other data have been prepared to reflect the Consolidation and related
transactions as if each of such transactions had occurred on January 1, 1994.

The pro forma selected financial and other data is unaudited and is not
necessarily indicative of the consolidated results which would have occurred if
the transactions had been consummated in the periods presented, or on any
particular date in the future, nor does it purport to represent the financial
position, results of operations or cash flows for future periods. The following
table should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations and with all financial statements
and notes thereto included in this Prospectus Supplement and the accompanying
Prospectus or incorporated herein and therein by reference.

S-23
<PAGE> 24
<TABLE>
<CAPTION>
AS OF AND FOR THE THREE MONTHS AS OF AND FOR THE YEAR ENDED DECEMBER 31,
ENDED MARCH 31, ---------------------------------------------------------
----------------------------------- AS AS
PRO FORMA HISTORICAL HISTORICAL PRO FORMA HISTORICAL ADJUSTED HISTORICAL ADJUSTED
1997 1997 1996 1996 1996 1995 1995 1994
--------- ---------- ---------- --------- ---------- -------- ---------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Rental Revenue................. $ 18,660 $ 7,907 $ 3,589 $ 71,213 $ 17,943 $13,495 $ 15,454 $ 12,867
Fees and reimbursements........ 187 187 66 311 311 260 16,019 260
Interest and other income...... 294 498 191 822 1,401 982 2,698 1,109
Equity in earnings of
Associated Companies......... 189 145 425 1,640 1,598 1,691 -- 1,649
Total Revenues(1).............. 19,330 8,737 4,271 73,986 21,253 16,428 34,171 15,885
Property operating expenses.... 5,797 2,382 1,017 23,001 5,266 4,084 8,576 3,673
General and administrative..... 814 651 281 2,201 1,393 983 15,947 954
Interest expense............... 2,888 1,573 722 11,624 3,913 2,767 2,129 2,767
Depreciation and
Amortization................. 3,366 1,537 897 12,953 4,575 3,654 4,762 3,442
Income (loss) from operations
before minority interest and
extraordinary income......... 6,465 2,594 (5,883) 24,207 (1,131) 4,077 524 4,516
Net income (loss)(2)........... $ 6,083 $ 2,363 $ (5,984) $ 22,816 $ (1,609) $ 3,796 $ 524 $ (3,093)
Per share(3):
Net income (loss) before
extraordinary items........ $ 0.31 $ 0.23 $ (1.04) $ 1.15 $ (0.21) $ 0.66 -- $ 0.72
Net income (loss)............ $ 0.31 $ 0.23 $ (1.04) $ 1.15 $ (0.24) $ 0.66 -- $ (0.54)
Distributions(4)............. $ 0.32 $ 0.32 $ 0.30 $ 1.28 $ 1.22 $ 1.20 -- $ 1.20

HISTORICAL HISTORICAL HISTORICAL
1994 1993 1992
---------- ---------- ----------

<S> <C> <C> <C>
OPERATING DATA:
Rental Revenue................. $ 13,797 $ 13,546 $ 13,759
Fees and reimbursements........ 13,327 15,439 14,219
Interest and other income...... 3,557 3,239 3,150
Equity in earnings of
Associated Companies......... -- -- --
Total Revenues(1).............. 30,681 32,224 31,128
Property operating expenses.... 6,782 7,553 8,692
General and administrative..... 13,454 14,321 13,496
Interest expense............... 1,140 1,301 1,466
Depreciation and
Amortization................. 4,041 4,572 4,933
Income (loss) from operations
before minority interest and
extraordinary income......... 1,580 2,144 (2,139)
Net income (loss)(2)........... $ 1,580 $ 4,418 $ (2,681)
Per share(3):
Net income (loss) before
extraordinary items........ -- -- --
Net income (loss)............ -- -- --
Distributions(4)............. -- -- --
BALANCE SHEET DATA:
Net investment in real
estate....................... $449,756 $ 173,316 -- -- $ 161,945 -- $ 77,574 --
Mortgage loans receivable,
net.......................... 3,454 3,454 -- -- 9,905 -- 7,465 --
Total assets................... 469,789 234,442 -- -- 185,520 -- 105,740 --
Total debt..................... 144,082 59,007 -- -- 75,891 -- 36,168 --
Stockholders' equity........... 299,475 163,226 -- -- 97,600 -- 55,628 --
OTHER DATA:
EBIDA(5)....................... $ 12,719 $ 5,550 $ 2,973 $ 48,784 $ 14,273 $11,361 $ 9,291 $ 11,258
Cash flow provided by (used
for):
Operating activities......... 9,642 724 (307) 35,520 4,138 4,656 (10,608) 5,742
Investing activities......... (325) (990) (402) (327,406) (61,833) 3,263 8,656 1,710
Financing activities......... (35,867) 41,514 (2,552) 330,075 54,463 (7,933) (17,390) (6,408)
FFO(6)......................... 10,456 4,600 2,535 38,413 11,491 9,638 7,162 9,536
CAD(7),(8)..................... 9,326 4,133 2,332 33,946 10,497 8,856 3,237 8,754
Debt to total market
capitalization(9)............ 23.4% 17.6% -- -- 29.5% -- -- --

<CAPTION>
BALANCE SHEET DATA:
<S> <C> <C> <C>
Net investment in real
estate....................... $ 63,994 $ 70,245 $ 75,022
Mortgage loans receivable,
net.......................... 19,953 18,825 18,967
Total assets................... 117,321 102,635 108,168
Total debt..................... 17,906 12,172 15,350
Stockholders' equity........... 80,558 85,841 87,172
OTHER DATA:
EBIDA(5)....................... $ 10,269 $ 10,326 $ 8,815
Cash flow provided by (used
for):
Operating activities......... 22,426 12,505 6,891
Investing activities......... (1,947) (2,002) (1,437)
Financing activities......... (2,745) (8,927) (9,476)
FFO(6)......................... 9,129 9,025 7,349
CAD(7),(8)..................... 6,919 6,921 4,731
Debt to total market
capitalization(9)............ -- -- --
</TABLE>

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

(1) Certain revenues which are included in the historical combined amounts for
1995 and prior are not included on an as adjusted basis. These revenues are
included in unconsolidated Associated Companies, on an as adjusted basis,
from which the Company receives lease payments and dividend income.

(2) Historical 1996 and as adjusted 1994 net losses reflect $7,237 of
Consolidation and litigation costs incurred in connection with the
Consolidation. As adjusted 1994 data give effect to the Consolidation and
related transactions as if such transactions had occurred on January 1,
1994, whereas historical 1996 data reflect such transactions in the periods
they were expensed. The Consolidation and litigation costs were expensed on
January 1, 1996, the Company's first day of operations. Net loss in 1992
includes a non-recurring writedown of $4,282 on GPI's investment in the
master agreement that resulted from GPI's in-substance foreclosure on the
AFP Partners' properties.

(3) Pro Forma net income per share is based upon pro forma weighted average
shares outstanding of 21,047,352 for the three months ended March 31, 1997
and the year ended December 31, 1996. As adjusted net income per share is
based upon as adjusted weighted average shares outstanding of 5,753,709 for
1995 and 1994. The differences between primary and fully diluted per share
amounts, as well as the effects of implementing Statement of Financial
Accounting Standards No. 128 "Earnings Per Share" are not material to
reported amounts.

(4) Consists of distributions declared for the period then ended.

(5) EBIDA represents and is computed as earnings before interest expense,
depreciation, amortization, loss provisions and minority interests. The
Company believes that in addition to cash flows and net income, EBIDA is a
useful financial performance measurement for assessing the operating
performance of an equity REIT because, together with net income and cash
flows, EBIDA provides investors with an additional basis to evaluate the
ability of a REIT to incur and service debt and to fund acquisitions and
other capital expenditures. To evaluate EBIDA and the trends it depicts, the
components of EBIDA, such as rental revenues, rental expenses, real estate
taxes and general and administrative expenses, should be considered. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Excluded from EBIDA are financing costs such as interest as
well as depreciation and amortization, each of which can significantly
affect a REIT's results of operations and liquidity and should be considered
in evaluating a REIT's operating performance. Further, EBIDA does not
represent net income or cash flows from operating, financing and investing
activities as defined by generally accepted accounting principles

S-24
<PAGE> 25

and does not necessarily indicate that cash flows will be sufficient to fund
cash needs. It should not be considered as an alternative to net income as
an indicator of the Company's operating performance or to cash flows as a
measure of liquidity.

(6) Funds from Operations ("FFO") represents income (loss) from operations
before minority interests and extraordinary items plus depreciation and
amortization except amortization of deferred financing costs and loss
provisions. In 1996, Consolidation and litigation costs were also added back
to net income to determine FFO. Management generally considers FFO to be a
useful financial performance measure of the operating performance of an
equity REIT because, together with net income and cash flows, FFO provides
investors with an additional basis to evaluate the ability of a REIT to
incur and service debt and to fund acquisitions and other capital
expenditures. FFO does not represent net income or cash flows from
operations as defined by GAAP and does not necessarily indicate that cash
flows will be sufficient to fund cash needs. It should not be considered as
an alternative to net income as an indicator of the Company's operating
performance or to cash flows as a measure of liquidity. FFO does not measure
whether cash flow is sufficient to fund all of the Company's cash needs
including principal amortization, capital improvements and distributions to
stockholders. FFO also does not represent cash flows generated from
operating, investing or financing activities as defined by GAAP. Further,
FFO as disclosed by other REITs may not be comparable to the Company's
calculation of FFO.

(7) Cash available for distribution ("CAD") represents net income (loss)
(computed in accordance with GAAP), excluding extraordinary gains or losses
or loss provisions, plus depreciation and amortization including
amortization of deferred financing costs, less lease commissions and capital
expenditures. CAD should not be considered an alternative to net income as a
measure of the Company's financial performance or to cash flow from
operating activities (computed in accordance with GAAP) as a measure of the
Company's liquidity, nor is it necessarily indicative of sufficient cash
flow to fund all of the Company's cash needs.

(8) CAD for the year ended December 31, 1995 excludes approximately $6,782 that
represents the net proceeds received from the prepayment of the Finley
mortgage loan and the repayment of the wrap note payable.

(9) Debt to total market capitalization is calculated as total debt at period
end divided by total debt plus the market value of the Company's outstanding
common stock, on a fully converted basis, based upon a sales price of the
Company's Common Stock of $22.625 per share on a pro forma basis on March
31, 1997 and the closing price of the Common Stock of $20.00 on March 31,
1997 and $17.625 on December 31, 1996.

S-25
<PAGE> 26

PRO FORMA FINANCIAL INFORMATION

The following unaudited, pro forma consolidated balance sheet as of March
31, 1997 has been prepared to reflect (i) all property acquisitions (including
the debt assumed in connection therewith) completed in 1997, as described under
the caption "Recent Activities," with the exception of the CRI Properties, (ii)
the pending acquisition of the T. Rowe Price Properties described under the
caption "Recent Activities," (iii) the Offering, and the application of the net
proceeds therefrom as set forth in "Use of Proceeds," (iv) the Wells Fargo
Financing and the repayment of borrowings on the Line of Credit and the CIGNA
Acquisition Financing, as described under the caption "Recent Activities," and
(v) the sale of the six Atlanta Auto Care Center properties and ten QuikTrip
properties, and use of sale proceeds for the repayment of mortgage debt as if
such transactions had been completed on March 31, 1997. The following unaudited,
pro forma consolidated statements of operations for the three months ended March
31, 1997, and for the year ended December 31, 1996, have been prepared to
reflect (i) all property acquisitions (including the debt assumed in connection
therewith) completed in 1997, as described under the caption "Recent
Activities," with the exception of the CRI Properties, and the Property
acquisitions completed in 1996, as described in footnote one of the Notes and
Adjustments to Pro Forma Consolidated Balance Sheet as of March 31, 1997, (ii)
the pending acquisition of the T. Rowe Price Properties described under the
caption "Recent Activities," (iii) the Offering, and the application of the net
proceeds therefrom as set forth in "Use of Proceeds," the March 1997 Offering,
and the October 1996 Offering, (iv) the Wells Fargo Financing and the repayment
of borrowings on the Line of Credit and the CIGNA Acquisition Financing, as
described under the caption "Recent Activities," (v) the sale of the two All
American Industrial Properties, the six Atlanta Auto Care Center properties and
ten QuikTrip properties, and use of sale proceeds for the repayment of mortgage
debt, and (vi) the collection of the Hovpark mortgage loan receivable, as if
each of such transactions had been completed on January 1, 1996. These
unaudited, pro forma consolidated financial statements should be read in
conjunction with the financial statements and related notes of the Company,
included in the Company's filings under the Exchange Act, which are incorporated
by reference in this Prospectus Supplement and the accompanying Prospectus. In
the opinion of management, all adjustments necessary to reflect the effects of
the transactions have been made.

The pro forma consolidated financial information is unaudited and is not
necessarily indicative of the results of which would have occurred if the
transactions had been consummated in the periods presented, or on any particular
date in the future, nor does it purport to represent the financial position,
results of operations, or cash flows for future periods.

S-26
<PAGE> 27

GLENBOROUGH REALTY TRUST INCORPORATED

PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
COMPLETED PENDING REPAYMENT OTHER
ACQUISI- ACQUISI- WELLS FARGO OF ADJUST-
HISTORICAL(1) TIONS(2) TIONS(3) OFFERING(4) FINANCING(5) DEBT(6) MENTS(7) PRO FORMA
-------------- --------- --------- ------------ ------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Rental property,
net............... $173,316 $141,721 $ 146,823 $ -- $ -- $ -- $(12,104) $449,756
Investments in
Associated
Companies......... 6,864 -- -- -- -- -- -- 6,864
Mortgage loans
receivable, net... 3,454 -- -- -- -- -- -- 3,454
Cash and cash
equivalents....... 42,603 (48,295) (130,508) 134,756 60,000 (64,650) 6,844 750
Other Assets........ 8,205 -- 760 -- -- -- -- 8,965
-------- -------- --------- -------- ------- -------- -------- --------
Total
Assets..... $234,442 $ 93,426 $ 17,075 $134,756 $60,000 $(64,650) $ (5,260) $469,789
======== ======== ========= ======== ======= ======== ======== ========
LIABILITIES
Line of Credit........ $ -- $ 35,904 $ -- $ -- $ -- $(24,650) $ -- $ 11,254
Mortgage loans........ 59,007 3,941 -- -- -- -- (6,120) 56,828
Wells Fargo
Financing........... -- -- 16,000 -- 60,000 -- -- 76,000
CIGNA Acquisition
Financing........... -- 40,000 -- -- -- (40,000) -- --
Other liabilities..... 3,353 730 1,075 -- -- -- -- 5,158
-------- -------- --------- -------- ------- -------- -------- --------
Total
Liabilities... 62,360 80,575 17,075 -- 60,000 (64,650) (6,120) 149,240
-------- -------- --------- -------- ------- -------- -------- --------
MINORITY INTEREST..... 8,856 12,218 -- -- -- -- -- 21,074
-------- -------- --------- -------- ------- -------- -------- --------
STOCKHOLDERS' EQUITY
Common stock........ 13 -- -- 6 -- -- -- 19
Additional paid-in
capital........... 172,257 633 -- 134,750 -- -- -- 307,640
Deferred
compensation...... (352) -- -- -- -- -- -- (352)
Retained earnings
(deficit)......... (8,692) -- -- -- -- -- 860 (7,832)
-------- -------- --------- -------- ------- -------- -------- --------
Total
Equity..... 163,226 633 -- 134,756 -- -- 860 299,475
-------- -------- --------- -------- ------- -------- -------- --------
Total
liabilities
and
Stockholders'
Equity..... $234,442 $ 93,426 $ 17,075 $134,756 $60,000 $(64,650) $ (5,260) $469,789
======== ======== ========= ======== ======= ======== ======== ========
</TABLE>

S-27
<PAGE> 28

GLENBOROUGH REALTY TRUST INCORPORATED

NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997
(UNAUDITED)

1. Reflects the historical consolidated balance sheet of the Company as of
March 31, 1997, which includes the acquisitions of the following properties
and property portfolios:

<TABLE>
<CAPTION>
PURCHASE PRICE
PROPERTY (IN 000'S) DATE ACQUIRED
---------------------------------------------------- -------------- -------------------
<S> <C> <C>
Scottsdale Hotel.................................... $ 12,100 February 28, 1997
Carlsberg Properties................................ 23,200 November 19, 1996
TRP Properties...................................... 43,800 October 17, 1996
Bond Street Property................................ 3,200 September 24, 1996
Kash n' Karry Property.............................. 1,600 August 2, 1996
San Antonio Hotel................................... 2,800 August 1, 1996
UCT Property........................................ 18,800 July 15, 1996
</TABLE>

Scottsdale Hotel. In February 1997, the Company acquired the Scottsdale
Hotel, a 163-suite hotel Property, which began operations in January 1996
and is located in Scottsdale, Arizona. The total acquisition cost,
including capitalized costs, was approximately $12.1 million, which
consisted of approximately $4.6 million of mortgage debt assumed, and the
balance in cash. The cash portion was financed through advances under the
Line of Credit and the retirement of a mortgage receivable. Like four of
the Company's other hotel Properties, the Scottsdale Hotel is marketed as a
Country Suites by Carlson.

Carlsberg Properties. In November 1996, the Company acquired the Carlsberg
Properties (the "Carlsberg Properties"), a portfolio of six Properties
(including one property on which the Company made a mortgage loan which
included a purchase option), aggregating approximately 342,000 square feet,
together with associated management interests. The total acquisition cost
including the mortgage loan and capitalized costs, was approximately $23.2
million, which consisted of (i) approximately $8.9 million of mortgage debt
assumed, (ii) approximately $350,000 in the form of 24,844 shares of Common
Stock of the Company (based on a per share value of $14.09) and (iii) the
balance in cash. The cash portion was financed through advances under the
Line of Credit. The Carlsberg Properties consist of five office Properties
and one retail Property, located in two states. Concurrently with the
Company's acquisition of the Carlsberg Properties, one of the Associated
Companies assumed management of a portfolio of 13 additional properties
with an aggregate of one million square feet under a venture with an
affiliate of the seller. In June 1997, the Company acquired three of these
properties for an aggregate purchase price of $14.8 million.

TRP Properties. In October 1996, the Company acquired the TRP Properties
(the "TRP Properties"), a portfolio of 12 Properties, aggregating
approximately 784,000 square feet and 538 multi-family units, together with
associated management interests. The total acquisition cost, including
capitalized costs, was approximately $43.8 million, which consisted of (i)
approximately $16.3 million of mortgage debt assumed, (ii) approximately
$760,000 in the form of 52,387 partnership units in the Operating
Partnership (based on a per unit value of $14.50), (iii) approximately $2.6
million in the form of 182,000 shares of Common Stock of the Company (based
on a per share value of $14.50) and (iv) the balance in cash. The cash
portion was financed through advances under the Line of Credit. The TRP
Properties consist of three office, six industrial, one retail and two
multi-family Properties, located in six states.

Bond Street Property. In September 1996, the Company acquired the Bond
Street Property, a two-story, 40,595 square foot office building, in
Farmington Hills, Michigan. The total acquisition cost, including
capitalized costs, was approximately $3.2 million, which consisted of
approximately $391,000 in the form

S-28
<PAGE> 29

GLENBOROUGH REALTY TRUST INCORPORATED

NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET -- (CONTINUED)
AS OF MARCH 31, 1997
(UNAUDITED)

of 26,067 partnership units in the Operating Partnership (based on a per
unit value of $15.00), and the balance paid in cash.

Kash n' Karry Property. In August 1996, the Company also expanded an
existing shopping center in Tampa, Florida through a purchase-leaseback
transaction with the anchor tenant. The Company's initial acquisition cost,
including capitalized costs, was approximately $1.6 million, all of which
was paid in cash and financed through advances under the Line of Credit. In
addition, the Company committed an additional $1.8 million for future
expansion and tenant improvements, which the Company expects will also be
paid in cash.

San Antonio Hotel. In August 1996, the Company acquired the San Antonio
Hotel, a 64-room hotel Property, which is located in San Antonio, Texas.
The total acquisition cost, including capitalized costs, was approximately
$2.8 million, which was paid in cash. The acquisition was financed with an
advance on the Line of Credit.

UCT Property. In July 1996, the Company acquired the UCT Property, a
23-story, 272,443 square foot office building, in St. Louis, Missouri. The
total acquisition cost, including capitalized costs, was approximately
$18.8 million, which consisted of approximately $350,000 in the form of
23,333 partnership units in the Operating Partnership (based on a per unit
value of $15.00), and the balance paid in cash. The cash portion was
financed through advances under the Line of Credit.

2. Reflects the completed acquisitions of the following properties and property
portfolios:

<TABLE>
<CAPTION>
DATE ACQUIRED
PURCHASE PRICE ---------------
--------------
(IN 000'S)
<S> <C> <C>
Centerstone Property........................... $ 30,400 July 1, 1997
CIGNA Properties............................... 45,400 April 29, 1997
E&L Properties................................. 22,200 April 18, 1997
Riverview Property............................. 20,500 April 14, 1997
Lennar Properties.............................. 23,200 April 8, 1997
</TABLE>

Pro forma data does not include the acquisition of the CRI Properties.

These acquisitions were funded with approximately $49.0 million of the net
proceeds from the March 1997 Offering and from the sale of the Atlanta Auto
Care Center Properties and the QuikTrip Properties (see Footnote 7),
assumption of approximately $3.9 million of mortgage debt, approximately
$40 million of proceeds from the CIGNA Acquisition Financing, approximately
$35.9 million of borrowings under the Line of Credit, the issuance of
352,197 Operating Partnership units with an aggregate approximate value of
$6.7 million (based on $19.075 per unit value), the issuance of 275,000
Operating Partnership units with an aggregate approximate value of $5.5
million (based on $20.00 per unit value) and 33,198 shares of unregistered
Common Stock with an aggregate approximate value of $633,000 (based on
$19.075 per share value). The assumed mortgages bear interest at rates of
7.3% to 8.4% and mature between 2006 and 2017. The Line of Credit and the
CIGNA Acquisition Financing bear interest at LIBOR plus 2.375% (assumed to
be 7.80%). Subsequent to December 31, 1996, this interest rate was reduced
to LIBOR plus 1.75% (assumed to be 7.50%). The CIGNA Acquisition Financing
is assumed to be repaid in full with proceeds from the Wells Fargo
Financing (see Footnote 6).

Tenant security deposits of approximately $730,000 related to these
acquisitions are reflected as cash and other liabilities.

S-29
<PAGE> 30

GLENBOROUGH REALTY TRUST INCORPORATED

NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET -- (CONTINUED)
AS OF MARCH 31, 1997
(UNAUDITED)

3. Reflects the pending acquisition of the T. Rowe Price Properties:

This acquisition is expected to be funded with approximately $130.8 million
of the net proceeds from the Offering (see Footnote 4) and approximately
$16 million of proceeds from the Wells Fargo Financing.

Tenant security deposits of approximately $1,075,000 related to this
acquisition are reflected as an increase in cash and other liabilities. The
$760,000 of estimated fees and costs related to the Wells Fargo Financing
is shown as a reduction of cash and an increase in other assets.

4. Reflects the net proceeds from the Offering of 6,300,000 shares of the
Company's Common Stock at a price of $22.625 per share. In connection with
the Offering, the Company is expected to incur costs of approximately $7.8
million.

5. Reflects the $60 Million Mortgage, the first portion of the Wells Fargo
Financing. For further discussion see Footnote 4 in Notes and Adjustments to
Pro Forma Consolidated Statements of Operations.

6. Reflects the repayment of the $40 million CIGNA Acquisition Financing and of
borrowings on the Line of Credit of approximately $24.7 million using
proceeds from the Wells Fargo Financing and the Offering.

7. Reflects the sale of the Atlanta Auto Care Center Properties and the
QuikTrip Properties which had a net book value of approximately $12.1
million at March 31, 1997. The net proceeds from the sale of these
properties is expected to be approximately $6.8 million (net of
approximately $300,000 of selling costs and the repayment of approximately
$6.1 million of mortgage debt), with a resulting gain on sale of
approximately $860,000.

S-30
<PAGE> 31

GLENBOROUGH REALTY TRUST INCORPORATED

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
COMPLETED PENDING DEBT OTHER
ACQUISI- ACQUISI- TRANS- ADJUST-
HISTORICAL(1) TIONS(2) TIONS(3) ACTIONS(4) MENTS(5) PRO FORMA
------------- --------- ------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Rental revenue.................... $ 7,907 $ 5,741 $5,436 $ -- $ (424) $ 18,660
Equity in earnings of Associated
Companies....................... 145 -- -- -- 44 189
Fees, interest and other income... 531 -- -- -- (50) 481
---------- ------ ------ ---- ----- ----------
Total Revenue........... 8,583 5,741 5,436 -- (430) 19,330
---------- ------ ------ ---- ----- ----------
OPERATING EXPENSES
Operating expenses................ 2,382 1,746 1,699 -- (30) 5,797
General and administrative........ 651 -- -- -- 163 814
Depreciation and amortization..... 1,537 945 979 (95) 3,366
Interest expense.................. 1,573 1,561 312 (429) (129) 2,888
---------- ------ ------ ---- ----- ----------
Total operating
expenses.............. 6,143 4,252 2,990 (429) (91) 12,865
---------- ------ ------ ---- ----- ----------
Income from operations before
minority interest............... 2,440 1,489 2,446 429 (339) 6,465
Minority interest................. (231) -- -- -- (151) (382)
---------- ------ ------ ---- ----- ----------
Net income(6)..................... $ 2,209 $ 1,489 $2,446 $429 $ (490) $ 6,083
========== ====== ====== ==== ===== ==========
Primary net income per common
share(7)........................ $ 0.22 $ 0.31
========== ==========
Primary weighted average common
shares outstanding(7)........... 10,256,129 19,776,035
========== ==========
Fully diluted net income per
common share(7)................. $ 0.21 $ 0.31
========== ==========
Fully diluted weighted average
common shares outstanding(7).... 10,295,124 21,047,352
========== ==========
</TABLE>

S-31
<PAGE> 32

GLENBOROUGH REALTY TRUST INCORPORATED

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
COMPLETED PENDING DEBT OTHER
ACQUISI- ACQUISI- TRANS- ADJUST-
HISTORICAL(1) TIONS(2) TIONS(3) ACTIONS(4) MENTS(5) PRO FORMA
------------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Rental revenue..................... $ 17,943 $34,193 $20,997 $ -- $ (1,920) $ 71,213
Equity in earnings of Associated
Companies........................ 1,598 -- -- -- 42 1,640
Fees, interest and other income.... 1,391 -- -- -- (258) 1,133
--------- ------- ------- ------ ------- ----------
Total Revenue............ 20,932 34,193 20,997 -- (2,136) 73,986
--------- ------- ------- ------ ------- ----------
OPERATING EXPENSES
Operating expenses................. 5,266 10,787 7,223 -- (275) 23,001
General and administrative......... 1,393 -- -- -- 808 2,201
Depreciation and amortization...... 4,575 4,891 3,915 -- (428) 12,953
Interest expense................... 3,913 8,315 1,248 (1,318) (534) 11,624
--------- ------- ------- ------ ------- ----------
Total operating
expenses............... 15,147 23,993 12,386 (1,318) (429) 49,779
--------- ------- ------- ------ ------- ----------
Income from operations before
minority interests............... 5,785 10,200 8,611 1,318 (1,707) 24,207
Minority interest.................. (292) -- -- -- (1,099) (1,391)
--------- ------- ------- ------ ------- ----------
Net income(6)...................... $ 5,493 $10,200 $ 8,611 $1,318 $ (2,806) $ 22,816
========= ======= ======= ====== ======= ==========
Primary net income per common
share(7)......................... $ 0.83 $ 1.15
========= ==========
Primary weighted average common
shares outstanding(7)............ 6,632,707 19,776,035
========= ==========
Fully diluted net income per common
share(7)......................... $ 1.15
==========
Fully diluted weighted average
common shares outstanding(7)..... 21,047,352
==========
</TABLE>

S-32
<PAGE> 33

GLENBOROUGH REALTY TRUST INCORPORATED

NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS)

1. Reflects the historical consolidated operations of the Company for the three
months ended March 31, 1997, excluding the gain on collection of the Hovpark
mortgage loan receivable of $154, and reflects the historical consolidated
operations of the Company for the year ended December 31, 1996, excluding
the gain on the sale of the All American Industrial Properties of $321, an
extraordinary loss on refinancing of debt of $186, Consolidation costs of
$6,082 and litigation costs of $1,155. Consolidation and litigation costs
all related to the formation of the Company and are non-recurring.

2. Reflects the historical operations of the Centerstone Property, CIGNA
Properties, E&L Properties, Riverview Property and Lennar Properties for the
three months ended March 31, 1997, and the historical 1997 operations of the
Scottsdale Hotel for the period prior to acquisition. Excludes the CRI
Properties acquired in June 1997.

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997
(OR PORTION OF 1997 PRIOR TO ACQUISITION)
--------------------------------------------------------------------------------------
CENTERSTONE CIGNA E&L RIVERVIEW LENNAR SCOTTSDALE COMBINED
PROPERTY PROPERTIES PROPERTIES PROPERTY PROPERTIES HOTEL TOTAL
----------- ---------- ---------- --------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues..................... $ 955 $1,946 $ 751 $ 977 $ 901 $211 $ 5,741
Operating expenses........... (211) (635) (240) (414) (188) (58) (1,746)
----- ------ ----- ----- ----- ---- -------
$ 744 $1,311 $ 511 $ 563 $ 713 $153 $ 3,995
===== ====== ===== ===== ===== ==== =======
</TABLE>

Reflects the historical operations of the Centerstone Property, CIGNA
Properties, E&L Properties, Riverview Property, Lennar Properties and
Scottsdale Hotel for the year ended December 31, 1996, and the historical
1996 operations of the Carlsberg Properties, TRP Properties, Bond Street
Property, Kash n' Karry Property, San Antonio Hotel and UCT Property
(collectively, the "1996 Acquisitions") for the period prior to
acquisition. Excludes the CRI Properties acquired in June 1997.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
(OR PORTION OF 1996 PRIOR TO ACQUISITION)
-----------------------------------------------------------------------------------------------------
CENTERSTONE CIGNA E&L RIVERVIEW LENNAR SCOTTSDALE 1996 COMBINED
PROPERTY PROPERTIES PROPERTIES PROPERTY PROPERTIES HOTEL ACQUISITIONS TOTAL
----------- ---------- ---------- --------- ---------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues......... $ 3,745 $ 7,811 $2,925 $ 2,768 $3,443 $1,558 $ 11,943 $34,193
Operating
expenses....... (856) (2,676) (575) (1,421) (704) (231) (4,324) (10,787)
------ ------- ------ ------- ------ ------ ------- --------
$ 2,889 $ 5,135 $2,350 $ 1,347 $2,739 $1,327 $ 7,619 $23,406
====== ======= ====== ======= ====== ====== ======= ========
</TABLE>

Also, reflects estimated annual depreciation and amortization, based upon
estimated useful lives of 30-40 years on a straight-line basis.

Also, reflects the estimated interest on the pro forma mortgage debt
assumed in connection with the acquisition of the E&L Properties,
Scottsdale Hotel, TRP Properties and the Carlsberg Properties; the $40,000
CIGNA Acquisition Financing and the pro forma advances under the Line of
Credit in connection with the various 1997 and 1996 property acquisitions.
The estimated interest on the mortgage loans assumed is based upon an
assumed weighted average rate of 8.20%. The Line of Credit and the CIGNA
Acquisition Financing bear interest at LIBOR plus 2.375% (assumed to be
7.80%) for the year ended December 31, 1996 and LIBOR plus 1.75% (assumed
to be 7.50%) for the three months ended March 31, 1997. The CIGNA
Acquisition Financing is assumed to be repaid in full with proceeds from
the Wells Fargo Financing (see Footnote 4).

S-33
<PAGE> 34

GLENBOROUGH REALTY TRUST INCORPORATED

NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS -- CONTINUED
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS)

3. Reflects the historical operations of the T. Rowe Price Properties for the
three months ended March 31, 1997 and for the year ended December 31, 1996,
respectively.

<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Revenues.................................. $ 5,436 $20,997
Operating Expenses........................ (1,699) (7,223)
------- -------
$ 3,737 $13,774
======= =======
</TABLE>

Certain of the T. Rowe Price Properties' operating results reflect the year
ended September 30, 1996 rather than December 31, 1996. These have been
combined as if the year ends of all properties were the same. In the
opinion of management, the operations of these properties is not seasonal.

Also, reflects estimated annual depreciation and amortization based upon
estimated useful lives of 30 years on a straight-line basis.

Also, reflects the estimated interest on the $16,000 mortgage financing (a
portion of the Wells Fargo Financing) in connection with the acquisition of
the T. Rowe Price Properties. The mortgage financing is assumed to bear
interest at a fixed rate equal to 10-year Treasuries plus 110 basis points
(assumed to be 7.80%).

4. Reflects the estimated interest on the pro forma repayment of the Company's
original secured bank line with the borrowings on the Line of Credit and
$6,120 of mortgage debt for the year ended December 31, 1996. Also, reflects
the estimated interest on the pro forma repayment of the CIGNA Acquisition
Financing with the proceeds from the $60 Million Mortgage (the first portion
of the Wells Fargo Financing), as well as repayments on the Line of Credit
from proceeds from the Offering and the $60 Million Mortgage for the three
months ended March 31, 1997 and the year ended December 31, 1996. The
repayments result in a net decrease in interest expense consisting of the
following:

<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Interest differential..................... $ 740 $ 3,488
Interest on repayments.................... (1,212) (5,043)
Amortization of new loan fees............. 19 177
Amortization of old loan fees............. -- (37)
Unused Line of Credit fees................ 24 97
------- -------
$ (429) $(1,318)
======= =======
</TABLE>

The Line of Credit is renewable from year to year at the option of Wells
Fargo Bank, provides for maximum borrowings of up to $50,000, but is
limited to a specified borrowing base ($50,000 on a pro forma basis), and
bears interest at LIBOR plus 2.375% (assumed to be 7.80%) prior to December
31, 1996, and LIBOR plus 1.75% (assumed to be 7.50%) subsequent to December
31, 1996. So long as credit is available under the Line of Credit, the Line
of Credit requires monthly interest-only payments and annual unused Line of
Credit fees equal to 0.25% of the unused Line of Credit balance. If the
Line of Credit is not renewed, then at the option of the Company and
subject to certain underwriting conditions, the outstanding balance thereof
is repayable either (i) at the same interest rate, fully amortized over a
three-year period, or (ii) at a fixed interest rate equal to 10 year
Treasuries plus 275 basis points, with a 10 year maturity and a 20 year
amortization schedule. The $6,120 of mortgage debt has a term of two

S-34
<PAGE> 35

GLENBOROUGH REALTY TRUST INCORPORATED

years and bears interest on the same current terms as the Line of Credit.
In connection with obtaining the Line of Credit and $6,120 of mortgage
debt, the Company incurred commitment fees and other costs totaling
approximately $1,121.

The CIGNA Acquisition Financing bears interest at the same current terms as
the Line of Credit. The $60 Million Mortgage is assumed to have a term of
ten years and assumed to bear interest at a fixed rate of 7.50%. In
connection with the $60 Million Mortgage and the $16 million additional
mortgage financing discussed in Footnote 3, the Company will incur
commitment fees and other costs of approximately $760.

The amortization of the new loan fees is based upon total estimated fees
and costs of $1,881 over the respective terms of the related Line of
Credit, $6,120 of mortgage debt and Wells Fargo Financing. The unused Line
of Credit fees are based upon 0.25% of the pro forma unused Line of Credit
capacity as of March 31, 1997 of approximately $50,000. The $6,120 of
mortgage debt is included in Mortgage Loans in the accompanying pro forma
balance sheet.

5. Reflects the following adjustments:

<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Rental revenue
Elimination of revenues of All American
Industrial Properties........................ $ -- $ (260)
Elimination of revenues of Atlanta Auto Care
Center and QuikTrip Properties............... (424) (1,660)
----- -------
Net reduction in rental revenue................... $ (424) $(1,920)
===== =======
</TABLE>

S-35
<PAGE> 36

GLENBOROUGH REALTY TRUST INCORPORATED

<TABLE>
<CAPTION>
THREE
MONTHS ENDED YEAR ENDED
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
<S> <C> <C>
Equity in earnings of the Associated Companies
GHG
Addition of the Scottsdale Hotel....................... $ 77 $ 168
Addition of the San Antonio Hotel...................... -- (158)
GC
Addition of the Carlsberg fee managed properties....... -- 141
Sale of the UCT Property to the Company................ -- (77)
---- -----
Net additional income................................ 77 74
Provision for income taxes........................... (33) (32)
---- -----
Net additional equity in earnings to the Company............ $ 44 $ 42
==== =====
Fees, interest and other income
Additional Interest on Grunow note receivable relating to
the Carlsberg Properties acquisition at 11% per
annum.................................................. $ -- $ 347
Reduction of interest due to collection of Hovpark note
receivable at 8% per annum............................. (50) (605)
---- -----
Net decrease in fees, interest and other income............. $ (50) $(258)
==== =====
Operating expenses
Elimination of expenses of All American Industrial
Properties............................................. $ -- $(128)
Elimination of expenses of Atlanta Auto Care Center and
QuikTrip Properties.................................... (51) (232)
Additional expenses of the E&L Properties.............. 21 85
---- -----
Net decrease in operating expenses.......................... $ (30) $(275)
==== =====
General and administrative expenses attributable to 1996 and
1997 acquisitions......................................... $ 163 $ 808
==== =====
Depreciation and amortization
Elimination of expenses of All American Industrial
Properties............................................. $ -- $ (50)
Elimination of expenses of Atlanta Auto Care Center and
QuikTrip Properties.................................... (95) (378)
---- -----
Net decrease in depreciation and amortization............... $ (95) $(428)
==== =====
Interest expense and loan fee amortization expense reduction
due to repayment of $6,120 of mortgage debt from proceeds
from sale of QuikTrip Properties.......................... $ (129) $(534)
==== =====
</TABLE>

S-36
<PAGE> 37

GLENBOROUGH REALTY TRUST INCORPORATED

6. The pro forma taxable income before dividends paid deduction for the Company
for the three months ended March 31, 1997 and for the year ended December
31, 1996 is calculated as follows:

<TABLE>
<CAPTION>
THREE
MONTHS ENDED YEAR ENDED
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
<S> <C> <C>
Pro forma net income from operations.................. $6,083 $22,816
Add: GAAP basis depreciation and amortization....... 3,366 12,953
Less: Tax basis depreciation and amortization......... (2,392) (9,569)
Other book-to-tax differences......................... 24 111
------ -------
Pro forma taxable income.............................. $7,081 $26,311
====== =======
</TABLE>

7. Primary per share amounts reflect the dilutive effects of outstanding stock
options on a historical basis as of March 31, 1997 and December 31, 1996,
respectively based upon the average price per common share for the period
presented. Pro forma primary per share amounts for the same periods assume
an average price per share of $22.625. On an historical basis, there was no
dilutive effect resulting from the outstanding stock options for the year
ended December 31, 1996.

Fully diluted per share amounts reflect the dilutive effects of the units
of the Operating Partnership and outstanding options based upon an ending
stock price of $20.00 per share for the three months ended March 31, 1997
on an historical basis and $22.625 per share on a pro forma basis for the
three months ended March 31, 1997 and the year ended December 31, 1996. On
an historical basis, the units of the Operating Partnership were
antidilutive for the three months ended March 31, 1997. Also on an
historical basis, there was no dilutive effect resulting from either
outstanding options or units of the Operating Partnership for the year
ended December 31, 1996.

The impact on reported per share amounts resulting from the adoption of
Statement of Financial Accounting Standards No. 128 -- "Earnings Per Share"
will not be material.

S-37
<PAGE> 38

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with "Selected
Historical and Pro Forma Financial and Other Data" and the Company's financials
included elsewhere in this Prospectus Supplement or the accompanying Prospectus
or incorporated by reference in this Prospectus Supplement or the accompanying
Prospectus.

BACKGROUND

The Company commenced operations on December 31, 1995 through the merger of
eight public limited partnerships and a management company with and into the
Company. A portion of the Company's operations is conducted through the
Operating Partnership in which the Company holds a 1% interest as the sole
general partner and an approximate 88% limited partner interest. The Company
elected treatment as a REIT when it filed its tax return for the year ended
December 31, 1996.

The statements of operations, equity and cash flows for the years ended
December 31, 1995, 1994 and 1993 of the GRT Predecessor Entities include the
historical operations of Old GC and the Partnerships. These statements have been
adjusted to reflect the consolidation of two joint ventures which were, in
aggregate, wholly owned by the Partnerships. The statements of operations,
equity and cash flows for the years ended December 31, 1995, 1994 and 1993 of
the GRT Predecessor entities are included as the Consolidation of these entities
to form the Company did not occur until December 31, 1995.

Certain components of the Company's results of operations are not
comparable to those of the GRT Predecessor Entities. The primary reason for the
difference is the segregation in 1996 of the operations (management fees and
reimbursements, as well as related expenses) of the Associated Companies, all of
which were combined in the GRT Predecessor Entities 1995 financial statements.
Effective January 1, 1996, the Company owns 100% of the preferred stock in each
of the Associated Companies and accounts for its interests under the equity
method. Also, contributing to the comparability difference is the change in the
operational structure of three original hotel properties, not including the San
Antonio Hotel which was acquired in 1996 and the Irving, Texas Hotel (the
"Hotels"). The Hotels were wholly owned by the GRT Predecessor Entities and,
thus, the operations of the Hotels were included in the financial statements of
the GRT Predecessor Entities. In order for the Company to qualify as a REIT,
neither the Company nor the Operating Partnership can operate the Hotels. Under
the current structure, the Company owns the Hotels but leases them to GHG. The
Company includes only the related lease payments earned from GHG in its
statement of operations. When comparing historical year ended December 31, 1996
to historical years ended December 31, 1995 and 1994, the decreases in fees and
reimbursements, property operating expenses and general and administrative
expenses are the primary components affected by these changes in structure.

S-38
<PAGE> 39

RESULTS OF OPERATIONS

COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1997 TO THE THREE MONTHS
ENDED MARCH 31, 1996.

The following table sets forth net operating income by property type, for
comparative purposes, presenting the results for the three months ended March
31, 1997 and 1996.

RESULTS OF OPERATIONS BY PROPERTY TYPE
THREE MONTHS ENDED MARCH 31, 1997 AND 1996

<TABLE>
<CAPTION>
MULTI- PROPERTY ELIMINATING TOTAL
OFFICE INDUSTRIAL RETAIL FAMILY HOTEL TOTAL ENTRY(1) REPORTED
---------- ---------- ---------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 HISTORICAL
Revenue................ $2,342,654 $1,435,492 $1,466,612 $1,129,909 $1,530,826 $7,905,493 1,475 $7,906,968
Operating Expenses..... 1,082,311 279,377 373,556 447,290 455,836 2,638,370 (256,904) 2,381,466
Net Operating Income... 1,260,343 1,156,115 1,093,056 682,619 1,074,990 5,267,123 258,379 5,525,502
Percentage of Total
NOI................ 24% 22% 21% 13% 20% 100%
1996 HISTORICAL
Revenue................ $ 357,683 $1,005,970 $ 826,483 $ 193,911 $1,205,115 $3,589,162 -- $3,589,162
Operating Expenses..... 163,457 208,274 228,088 91,312 424,675 1,115,806 (93,940) 1,021,866
Net Operating Income... 194,226 797,696 598,395 102,599 780,440 2,473,356 93,940 2,567,296
Percentage of Total
NOI................ 8% 32% 24% 4% 32% 100%
</TABLE>

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

(1) Eliminating entry represents internal market level property management fees
included in operating expenses to provide comparison to industry
performance.

Rental Revenues. Rental Revenues increased $4,318,000, or 120%, to
$7,907,000 for the three months ended March 31, 1997, from $3,589,000 for the
three months ended March 31, 1996. The increase included growth in revenues from
the office, industrial, retail, multi-family and hotel Properties of $1,985,000,
$433,000, $639,000, $936,000 and $326,000, respectively. Of this increase,
$4,069,000 represents rental revenues generated from the 1996 Acquisitions in
the third and fourth quarters of 1996, and $237,000 represents rental revenues
generated from the acquisition of the Scottsdale Hotel in February 1997.

Fees and Reimbursements. Fees and reimbursements revenue consists primarily
of property management fees and asset management fees paid to the Company by a
controlled partnership. This revenue increased $121,000, or 183%, to $187,000
for the three months ended March 31, 1997, from $66,000 for the three months
ended March 31, 1996. The increase consisted of an increase in the asset
management fees of $55,000 and property management fees of $76,000; in 1996,
such fees were paid to GC, an Associated Company, and during the first quarter
of 1997, they were paid to the Company.

Interest and Other Income. Interest and other income consists primarily of
interest on mortgage loans receivable and increased $153,000, or 80%, to
$344,000 for the three months ended March 31, 1997, from $191,000 for the three
months ended March 31, 1996. The increase was primarily due to a $50,000 loan
fee received for the extension of the Hovpark mortgage loan receivable and
$99,000 of interest income on the Carlsberg Properties, Ltd. mortgage loan
receivable, both of which were received during the three months ended March 31,
1997. The Carlsberg Properties, Ltd. mortgage loan receivable originated on
November 19, 1996.

Equity in Earnings of Associated Companies. Equity in earnings from
Associated Companies decreased $280,000, or 66%, to $145,000 for the three
months ended March 31, 1997, from $425,000 for the three months ended March 31,
1996. This decrease is primarily due to GC's write-off of the unamortized
balance of its investment in a management contract.

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

S-39
<PAGE> 40

Property Operating Expenses. Property operating expenses increased
$1,365,000, or 134%, to $2,382,000 for the three months ended March 31, 1997,
from $1,017,000 for the three months ended March 31, 1996. Of this increase,
$1,456,000 represents the property operating expenses of the 1996 Acquisitions,
offset in part by the reduction in expenses resulting from the sale of the All
American Self Storage industrial properties which were sold in 1996.

General and Administrative Expenses. General and administrative expenses
increased $370,000, or 132%, to $651,000 for the three months ended March 31,
1997, from $281,000 for the three months ended March 31, 1996. The increase is
primarily due to increased overhead costs resulting from the 1996 Acquisitions
and the growth of the Company.

Depreciation and Amortization. Depreciation and amortization increased
$640,000, or 71%, to $1,537,000 for the three months ended March 31, 1997, from
$897,000 for the three months ended March 31, 1996. The increase is primarily
due to depreciation and amortization associated with the 1996 Acquisitions.

Interest Expense. Interest expense increased $851,000, or 118%, to
$1,573,000 for the three months ended March 31, 1997, from $722,000 for the
three months ended March 31, 1996. Substantially all of the increase was the
result of higher average borrowings during the three months ended March 31, 1997
as compared to the three months ended March 31, 1996. The increased borrowings
primarily resulted from new debt and assumption of debt related to the 1996
Acquisitions.

Consolidation Costs. Consolidation costs during the three months ended
March 31, 1996 consisted of the costs associated with preparing, printing and
mailing the Prospectus/Consent Solicitation Statement and other documents
related to the Consolidation, and all other costs incurred in the forwarding of
the Prospectus/Consent Solicitation Statement to investors.

Litigation Costs. Litigation costs during the three months ended March 31,
1996 consisted of the legal fees incurred in connection with defending two class
action complaints filed by investors in certain of the Company's predecessor
entities, as well as an accrual for the proposed settlement in one case.

LIQUIDITY AND CAPITAL RESOURCES

The Company expects to meet its short-term liquidity requirements generally
through its working capital, its Line of Credit and cash generated by
operations. As of March 31, 1997, the Company had no material commitments for
capital improvements other than certain expansion related improvements estimated
at approximately $1,750,000 at its existing shopping center in Tampa, Florida.
Other planned capital improvements consist of tenant improvements, expenditures
necessary to lease and maintain the Properties and expenditures for furniture
and fixtures and building improvements at the hotel Properties.

The Company's principal sources of funding for acquisitions, development,
expansion and renovation of properties are its Line of Credit, permanent secured
debt financings, public equity and privately placed financing, the issuance of
partnership units in the Operating Partnership and cash flow provided by
operations.

Mortgage loans receivable decreased from $9,905,000 at December 31, 1996,
to $3,454,000 at March 31, 1997. This decrease was primarily due to the payoff
of the Hovpark mortgage loan receivable which had a net carrying value of
$6,700,000. This decrease is partially offset by draws on the Grunow mortgage
loan receivable leasing and interest reserves by the borrower of $249,000.

Mortgage loans payable increased from $54,584,000 at December 31, 1996, to
$59,007,000 at March 31, 1997. This increase resulted from the assumption of a
$4,612,000 mortgage loan in connection with the acquisition of the Scottsdale
Hotel in February 1997, partially offset by scheduled principal payments.
Outstanding borrowings under the Line of Credit decreased from $21,307,000 at
December 31, 1996, to $0 at March 31, 1997, due to the paydown of the Line of
Credit from the net proceeds of the Company's equity offering in March 1997.
Borrowings under the Line of Credit currently bear interest at an annual rate of
LIBOR plus 1.75%.

In October 1996, the Company completed a public equity offering of
3,666,000 shares of Common Stock at an offering price of $13.875 per share. The
net proceeds from the offering of approximately $47.8 million

S-40
<PAGE> 41

were used to fund certain of the 1996 Acquisitions and to repay outstanding
indebtedness. In March 1997, the Company completed a public equity offering of
3,500,000 shares of Common Stock at an offering price of $20.25 per share. The
net proceeds from the offering of approximately $66.1 million were used to fund
certain 1997 acquisitions and to repay outstanding indebtedness.

In January 1997, the Company filed a shelf registration statement (the
"January 1997 Shelf Registration Statement") with the Securities and Exchange
Commission to register $250.0 million of equity securities of the Company. The
January 1997 Shelf Registration Statement was declared effective by the
Securities and Exchange Commission on February 25, 1997. After the completion of
the March 1997 Offering, the Company has the capacity pursuant to the January
1997 Shelf Registration Statement to issue up to approximately $179.1 million in
equity securities.

In May 1997, the Company filed a shelf registration statement (the "May
1997 Shelf Registration Statement") to register an additional $350.0 million of
equity securities of the Company. This shelf registration statement was declared
effective by the Securities and Exchange Commission on May 21, 1997. The Company
has an aggregate capacity pursuant to the January 1997 Shelf Registration
Statement and May 1997 Shelf Registration Statement of approximately $529.1
million in equity securities.

At March 31, 1997, the Company's total indebtedness included fixed-rate
debt of $44,498,000, or 75% of the Company's aggregate indebtedness, and
floating-rate indebtedness of $14,509,000, or 25% of the Company's aggregate
indebtedness.

INFLATION

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

S-41
<PAGE> 42

THE PROPERTIES

GENERAL

The 64 Properties owned by the Company consist of 18 office Properties, 30
industrial Properties, 6 retail Properties, four multi-family Properties and six
hotel Properties, and are located in numerous local markets among four
geographic regions and 19 states.

The following table sets forth certain information with respect to the
Company's Properties as of the date of this Prospectus Supplement.

PROPERTY TABLE BY TYPE OF PROPERTY

<TABLE>
<CAPTION>
ANNUALIZED
PROPERTY REVENUES(1) OCCUPANCY RATE
NUMBER OF RENTABLE SQUARE ----------------------- AS OF
TYPE OF PROPERTY PROPERTIES FEET/UNITS AMOUNT PERCENT MAY 31, 1997(2)
- ----------------------------- ---------- --------------- ----------- ------- ---------------
<S> <C> <C> <C> <C> <C>
Office....................... 18 1,447,773 $23,806,152 43.6% 95%
Industrial................... 30 3,098,782 12,633,948 23.1 95
Retail....................... 6 694,950 5,507,412 10.1 92
Multi-family................. 4 866 6,096,878(3) 11.2 95(4)
Hotels....................... 6 726 6,581,040(3) 12.0 78(5)
-- --
----------- ---
Total/Weighted Average..... 64 $54,625,430 100% 94%(6)
== =========== === ==
</TABLE>

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

(1) Based on Property revenues for the month ended May 31, 1997, as annualized,
except multi-family and hotel Properties. For Properties acquired after May
31, 1997, represents property revenues annualized from revenues produced
prior to acquisition.

(2) Represents economic occupancy. Includes May 31, 1997 occupancy rates for
Properties acquired after May 31, 1997.

(3) Represents Property revenues for the 12 months ended May 31, 1997. For
Properties acquired after May 31, 1996, property revenues include revenues
produced prior to acquisition.

(4) Represents average economic occupancy (calculated using month-end actual
occupancy rates) for the 12 months ended May 31, 1997. For Properties
acquired after May 31, 1996, average economic occupancy rates were
calculated based in part on occupancy rates prior to acquisition.

(5) Represents average economic occupancy for the 12 months ended May 31, 1997.
For Properties acquired after May 31, 1996, average economic occupancy rates
were calculated based in part on occupancy rates prior to acquisition.

(6) Excludes hotel Properties and multi-family Properties.

The following table sets forth the region and type of the Company's
Properties by rentable square feet and/or units as of the date of this
Prospectus Supplement.

PROPERTIES BY RENTABLE SQUARE FEET

<TABLE>
<CAPTION>
RENTABLE SQUARE FEET
------------------------------------- MULTI-FAMILY HOTEL NO. OF
REGION OFFICE INDUSTRIAL RETAIL UNITS ROOMS PROPERTIES
- ---------------------------- ---------- ----------- -------- ------------ ----- ----------
<S> <C> <C> <C> <C> <C> <C>
East........................ 219,595 499,950 0 0 0 5
South....................... 0 746,384 300,728 0 286 12
Midwest..................... 682,446 904,914 0 0 0 11
West........................ 545,732 947,534 394,222 866 440 36
--
-------- --------- ------- --- ---
Total............. 1,447,773 3,098,782 694,950 866 726 64
======== ========= ======= === === ==
No. of Properties........... 18 30 6 4 6 64
</TABLE>

OFFICE PROPERTIES

The Company owns 18 office Properties aggregating 1,447,773 rentable square
feet. The leases for spaces within the office Properties have terms ranging from
one to 13 years. The office space leases generally require the tenant to
reimburse the Company for increases in building operating costs over a base
amount. Many of the leases contain fixed or CPI-based rent increases.

S-42
<PAGE> 43

The following table sets forth information regarding the office Properties
of the Company as of the date of this Prospectus Supplement.

OFFICE PROPERTIES

<TABLE>
<CAPTION>
OCCUPANCY AVERAGE ANNUALIZED
RENTABLE RATE BASE ANNUALIZED PROPERTY REVENUES(3)
YEAR SQUARE AS OF RENT/LEASED BASE ---------------------
PROPERTY CITY ST COMPLETED FEET 5/31/97(1) SQUARE FEET RENT(2) AMOUNT PERCENT
- --------------- ----------------- ---- --------- ---------- ---------- ----------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4500 Plaza..... Salt Lake City UT 1983 70,001 95% $ 13.16 $ 875,052 $ 936,936 3.9%
Regency
Westpointe... Omaha NE 1981 35,937 100 15.32 550,572 555,120 2.3
Bond Street.... Farmington Hills MI 1986 40,595 87 16.25 573,876 583,248 2.5
UCT............ St. Louis MO 1974 272,740 94 13.19 3,380,436 4,265,436 17.9
Globe.......... Mercer Island WA 1979 24,779 98 17.24 418,740 426,252 1.8
Warner......... Fountain Valley CA 1977 32,272 92 17.00 504,840 512,424 2.2
One
Professional... Omaha NE 1980 34,836 97 12.48 421,728 449,736 1.9
Vintage
Pointe....... Phoenix AZ 1985 55,948 92 9.56 492,192 511,044 2.2
Dallidet....... San Luis Obispo CA 1993 23,051 85 20.03 392,436 407,028 1.7
Hillcrest...... Fullerton CA 1974 34,623 90 13.08 407,472 408,504 1.7
Tradewinds..... Phoenix AZ 1986 17,778 94 20.48 342,240 342,972 1.4
Academy
Center....... Rolling Hills CA 1974 29,185 83 15.26 369,684 369,684 1.6
Westford
Corporate.... Westford MA 1987 163,247 100 8.73 1,425,312 1,803,072 7.6
Woodlands
Plaza........ St. Louis MO 1993 71,209 98 15.60 1,088,304 1,088,304 4.6
South
Washington... Alexandria VA 1989 56,348 100 23.29 1,312,500 1,703,316 7.1
Riverview
Tower........ Bloomington MN 1973 227,129 96 11.20 2,441,064 4,224,312 17.7
Centerstone
Plaza........ Irvine CA 1988 157,579 99 22.33 3,484,152 3,797,844 15.9
University Tech
Center....... Pomona CA 1986 100,516 85 16.31 1,393,440 1,420,920 6.0
--------- --- ------ ----------- ----------- ----
Total/Weighted
Average.... 1,447,773 95% $ 14.47 $19,874,040 $23,806,152 100%
========= === ====== =========== =========== ====
</TABLE>

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

(1) Represents economic occupancy. Includes May 31, 1997 occupancy rates for
Properties acquired after May 31, 1997.

(2) Represents Base Rent for the month ended May 31, 1997, as annualized. For
Properties acquired after May 31, 1997, represents Base Rent annualized from
Base Rent produced prior to acquisition.

(3) Represents Property revenues for the month ended May 31, 1997, as
annualized. For Properties acquired after May 31, 1997, represents property
revenues annualized from revenues produced prior to acquisition.

The following table sets forth historical rent and occupancy information
for the office Properties owned by the Company during each of the years
indicated.

OFFICE PROPERTIES
HISTORICAL RENT AND OCCUPANCY

<TABLE>
<CAPTION>
TOTAL
AVERAGE OCCUPANCY AVERAGE ANNUAL BASE
TOTAL RENTABLE RATE FOR THE RENT/LEASED RENT
YEAR SQUARE FEET PERIOD SQ. FT.(1) ($000S)(2)
------------------------ -------------- ----------------- ----------- ---------------
<S> <C> <C> <C> <C>
1997(3)................. 1,447,773 95% $ 14.47 $19,874
1996(4)................. 641,923 94 13.19 7,918
1995.................... 106,076 97 11.91 1,228
1994.................... 105,770 88 11.44 1,065
1993.................... 104,666 80 12.04 1,008
1992.................... 104,754 80 11.10 930
</TABLE>

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

(1) Total annual Base Rent divided by occupancy in square feet.

(2) Total annual Base Rent adjusted for any free rent given for the period.

(3) Occupancy is as of May 31, 1997. Includes May 31, 1997 occupancy rates for
Properties acquired after May 31, 1997. Total annual Base Rent represents
total Base Rent for the month ended May 31, 1997, as annualized. For
Properties acquired after May 31, 1997, represents Base Rent annualized from
Base Rent produced prior to acquisition.

(4) Includes the Carlsberg Properties acquired in November 1996 and the TRP
Properties acquired in October 1996. For these Properties, occupancy rates
are presented as of December 31, 1996, and Base Rents are presented on an
annualized basis based on results since the acquisition, as this information
is not available for the year ended December 31, 1996.

S-43
<PAGE> 44

The following table sets forth the contractual lease expirations for the
office Properties for the remainder of 1997 and thereafter, as of May 31, 1997.

OFFICE PROPERTIES
LEASE EXPIRATIONS

<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL
RENTABLE SQUARE ANNUAL BASE RENT ANNUAL BASE RENT
NUMBER OF FOOTAGE SUBJECT TO UNDER EXPIRING REPRESENTED BY
YEAR OF LEASE EXPIRATION LEASES EXPIRING EXPIRING LEASES LEASES ($000S) EXPIRING LEASES(1)
- ---------------------------------- --------------- ------------------ ---------------- ------------------
<S> <C> <C> <C> <C>
1997(2)........................... 145 140,204 $ 2,281 11.0%
1998.............................. 68 255,042 3,370 16.2
1999.............................. 70 266,962 3,947 19.0
2000.............................. 48 162,596 2,772 13.3
2001.............................. 49 264,967 3,683 17.7
2002.............................. 19 71,396 1,012 4.9
2003.............................. 6 41,016 861 4.1
2004.............................. 5 31,336 776 3.7
2005.............................. 5 28,608 521 2.5
2006.............................. 11 34,332 1,057 5.1
Thereafter........................ 3 72,584 520 2.5
--- --------- ------- -----
Total................... 429 1,369,043(3) $ 20,800(4) 100.0%
=== ========= ======= =====
</TABLE>

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

(1) Annual Base Rent expiring during each period, divided by total annual Base
Rent (both adjusted for contractual increases).

(2) Reflects leases expiring after May 31, 1997 and includes leases that have
initial terms of less than one year.

(3) This figure is based on square footage actually leased (which excludes
vacant space) and thus differs from "Rentable Square Feet" in the preceding
Office Properties table (which includes vacant space).

(4) This figure is based on square footage actually leased (which excludes
vacant space) and incorporates contractual rent increases arising after
1997, and thus differs from the information for "Annualized Base Rent" in
the preceding Office Properties table, which is based on 1997 rents.

The following table sets forth the capitalized tenant improvements and
leasing commissions paid by the Company on the office Properties for the periods
indicated.

OFFICE PROPERTIES
CAPITALIZED TENANT IMPROVEMENTS AND LEASING COMMISSIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FIVE MONTHS
------------------------------------------------------- ENDED MAY 31,
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Square footage renewed or
re-leased.............. 26,989 23,909 18,384 79,745 39,706 48,221
Capitalized tenant
improvements and
commissions (in
thousands)............. $ 192 $ 59 $ 58 $ 468(1) $ 617(2) $ 230
Average per square foot
of renewed or re-leased
space.................. $ 7.12 $ 2.47 $ 3.18 $ 5.87 $ 15.54(2) $ 4.77
</TABLE>

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

(1) The significant increase in capitalized tenant improvements and commissions
in 1995 over the previous year is primarily the result of re-leasing 15,491
square feet at Regency Westpointe. The re-lease is for a term of ten years.
There were no commissions paid in this transaction. Tenant improvements
totaled $405,000. This tenant occupies 43% of Regency Westpointe.

(2) The significant increase in capitalized tenant improvements and commissions
in 1996 over the previous years is primarily the result of tenant
improvements provided in connection with a lease extension of space for the
principal tenant of the UCT Property. The lease was extended ten years and
expires in 2010.

S-44
<PAGE> 45

INDUSTRIAL PROPERTIES

The Company owns 30 industrial Properties aggregating 3,098,782 square
feet. The industrial Properties are designed for warehouse, distribution and
light manufacturing, ranging in size from 23,826 square feet to 474,426 square
feet. As of the date of this Prospectus Supplement, 21 of the industrial
Properties were leased to multiple tenants, nine were leased to single tenants,
and all nine of the single-tenant Properties are adaptable in design to
multi-tenant use.

The following table lists the industrial Properties of the Company as of
the date of this Prospectus Supplement.

INDUSTRIAL PORTFOLIO

<TABLE>
<CAPTION>
OCCUPANCY AVERAGE ANNUALIZED
RENTABLE RATE BASE PROPERTY REVENUES(3)
YEAR SQUARE AS OF RENT/LEASED ANNUALIZED --------------------
PROPERTY CITY ST COMPLETED FEET 5/31/97(1) SQUARE FEET BASE RENT(2) AMOUNT PERCENT
- -------------------------- -------------- ---- --------- --------- ---------- ------------ ------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Benicia Industrial Park... Benicia CA 1980 156,800 100% $ 3.26 $ 510,912 $514,128 4.1%
Case Equipment Corp....... Kansas City KS 1975 199,750 100 1.95 389,184 389,184 3.1
Case Equipment Corp....... Memphis TN 1950 205,594 100 1.71 352,104 352,104 2.8
Navistar International
Trans. Corp............. W. Chicago IL 1977 474,426 100 2.20 1,044,852 1,044,852 8.3
Navistar International
Trans. Corp............. Baltimore MD 1962 274,000 100 1.59 434,484 434,484 3.4
Park 100 - Building 42.... Indianapolis IN 1980 37,200 85 6.79 214,584 240,036 1.9
Park 100 - Building 46.... Indianapolis IN 1981 102,400 100 3.42 350,208 350,208 2.8
Sea Tac II(4)............. Seattle WA 1984 41,657 100 5.76 240,000 286,632 2.3
Hoover.................... Mesa AZ 1985 57,441 100 4.82 277,008 292,044 2.3
Walnut Creek.............. Austin TX 1984 100,000 100 5.30 529,800 650,328 5.1
Rancho Bernardo........... Rancho CA 1982 52,865 83 6.82 299,052 362,100 2.9
Bernardo
Mercantile................ Dallas TX 1970 236,092 95 2.90 650,304 674,832 5.3
Pinewood.................. Arlington TX 1971 46,060 100 2.64 121,668 121,704 1.0
Quaker.................... Dallas TX 1974 42,083 100 0.63 26,496 27,528 0.2
Chatsworth Industrial
Park.................... Chatsworth CA 1975 29,764 100 5.63 167,544 167,544 1.3
Sandhill Industrial
Park.................... Carson CA 1975 90,922 100 4.46 405,780 405,780 3.2
San Dimas Industrial
Center.................. San Dimas CA 1980 35,996 46 10.15 167,488 167,488 1.3
Kraemer Industrial Park... Anaheim CA 1974 55,246 69 7.48 304,272 304,272 2.4
Belshaw Industrial........ Carson CA 1973 23,826 100 3.63 86,400 86,400 0.7
Dominguez Industrial...... Carson CA 1973 85,120 50 10.72 456,324 456,324 3.6
Dunn Way Industrial....... Placentia CA 1968 59,832 71 5.19 220,560 220,560 1.8
Monroe Industrial......... Placentia CA 1988 38,655 100 5.26 203,136 203,136 1.6
Upland Industrial......... Upland CA 1978 27,414 90 4.74 116,880 116,880 0.9
Glassell Industrial
Center.................. Orange CA 1976 46,912 70 12.23 401,640 401,640 3.2
Woodlands Tech............ St. Louis MO 1986 91,138 100 8.18 745,752 745,752 5.9
Lake Point................ Orlando FL 1985 116,555 100 9.57 1,115,808 1,279,176 10.1
Fisher-Pierce............. Weymouth MA 1988 79,825 100 7.45 594,696 613,884 4.9
Southworth-Milford(5)..... Milford MA 1989 146,125 100 6.72 981,732 981,732 7.8
Magnolia.................. Phoenix AZ 1984 35,385 100 4.56 161,328 245,196 1.9
Fifth Street.............. Phoenix AZ 1986 109,699 100 3.48 381,384 497,520 3.9
--------- --- ----- ----------- ----------- ---
Total/Weighted
Average............... 3,098,782 95% $ 4.04 $11,951,880 $12,633,948 100%
========= === ===== =========== =========== ===
</TABLE>

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

(1) Represents economic occupancy. Includes May 31, 1997 occupancy rates for
Properties acquired after May 31, 1997.

(2) Represents Base Rent for the month ended May 31, 1997, as annualized. For
Properties acquired after May 31, 1997, represents Base Rent annualized from
Base Rent produced prior to acquisition.

(4) Mortgage receivable accounted for as real estate under GAAP. The property is
owned by a partnership managed by one of the Associated Companies.

(5) The tenant at the Southworth-Milton Property has an option to purchase this
property at 100% of fair market value.

S-45
<PAGE> 46

Four of the single-tenant Properties have eight years remaining on leases
whose original terms were 20 years and include rent increases every three years
based on all or a percentage of the change in the CPI. Under these leases the
tenants are required to pay for all of the Properties' operating costs, such as
common area maintenance, property taxes, insurance, and all repairs including
structural repairs. These four Properties are leased to Navistar International
Transportation Corporation ("Navistar"), but two of the leases have been assumed
by Case Equipment Corporation ("Case"). Navistar has options under its leases to
purchase either or both of the Properties on March 1, 1999, and 2002. The option
price is equal to the lesser of (i) the greater of the appraised value or a
specified option floor price; or (ii) a price derived by applying a specified
capitalization rate to a specified rental amount. The Case leases give the
tenant a purchase option exercisable on March 1, 1999, and 2002 for an amount
equal to the greater of the appraised value or a specified minimum price.
Management believes, based on discussions with both tenants, that neither tenant
has any present intention to exercise any option to purchase.

The remaining warehouse Properties have leases whose terms range from one
to ten years. Most of the leases are "triple net" leases whereby the tenants are
required to pay their pro rata share of the Properties' operating costs, common
area maintenance, property taxes, insurance, and non-structural repairs. Some of
the leases are "industrial gross" leases whereby the tenant pays as additional
rent its pro rata share of common area maintenance and repair costs and its
share of the increase in taxes and insurance over a specified base year cost.
Many of these leases call for fixed or CPI-based rent increases.

The Company holds fee title to all of the industrial Properties except a
41,657 square-foot warehouse facility in Seattle known as Sea Tac II. This
property is owned by a partnership managed by one of the Associated Companies.
The Company holds a participating first mortgage interest in Sea Tac II. In
accordance with GAAP, the Company accounts for the property as though it held
fee title, as substantially all risks and rewards of ownership have been
transferred to the Company as a result of the terms of the mortgage. The
participating mortgage had a principal balance of $2,333,338 as of May 31, 1997
and accrued interest of $1,277,687 as of May 31, 1997, as compared with an
appraised value of $2,000,000 as of June 30, 1994. The loan, which was modified
in early 1994 and accrues interest at 10%, allows the borrower to defer the
payment of any interest in excess of the property's cash flow. The loan also
allows the Company to receive 75% of the property value over the total loan
balance at maturity. The loan is due March 31, 2001, but the borrower may extend
the loan for five one-year periods for payment of a fee equal to 0.25% of the
then outstanding principal balance for each extension.

The following table sets forth historical rent and occupancy information
for the industrial Properties owned by the Company during each of the years
indicated.

INDUSTRIAL PROPERTIES
HISTORICAL RENT AND OCCUPANCY

<TABLE>
<CAPTION>
AVERAGE OCCUPANCY AVERAGE TOTAL
TOTAL RENTABLE RATE FOR THE RENT/LEASED ANNUAL BASE
YEAR SQUARE FEET PERIOD SQ. FT.(1) RENT($000S)(2)
------------------ -------------- ----------------- ----------- --------------
<S> <C> <C> <C> <C>
1997(3)........... 3,098,782 95% $4.04 $ 12,634
1996(4)........... 2,026,368 99 2.70 5,414
1995.............. 1,491,827 100 2.29 3,405
1994.............. 1,491,827 100 2.29 3,401
1993.............. 1,491,827 98 2.24 3,294
1992.............. 1,491,827 96 2.14 3,075
</TABLE>

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

(1) Total annual Base Rent divided by occupancy in square feet.

(2) Total annual Base Rent adjusted for any free rent given for the period.

S-46
<PAGE> 47

(4) Includes the Carlsberg Properties and the TRP Properties. For these
Properties, occupancy rates are presented as of December 31, 1996, and Base
Rents are presented on an annualized basis based on results since the
acquisition, as this information is not available for the year ended
December 31, 1996.

The following table sets forth the contractual lease expirations for the
industrial Properties for the remainder of 1997 and thereafter, as of May 31,
1997.

INDUSTRIAL PROPERTIES
LEASE EXPIRATIONS

<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL
NUMBER OF RENTABLE SQUARE ANNUAL BASE RENT ANNUAL BASE RENT
YEAR OF LEASES FOOTAGE SUBJECT TO UNDER EXPIRING REPRESENTED BY
LEASE EXPIRATION EXPIRING EXPIRING LEASES LEASES(5000S) EXPIRING LEASES(1)
----------------- --------- ------------------ ---------------- -------------------
<S> <C> <C> <C> <C>
1997(2).......... 78 351,829 $ 1,770 14.3%
1998............. 56 447,134 2,307 18.7
1999............. 32 209,478 977 7.9
2000............. 20 221,766 996 8.1
2001............. 14 159,125 857 6.9
2002............. 10 228,986 1,220 9.9
2003............. -- -- -- 0.0
2004............. 6 1,402,295 3,576 29.0
2005............. -- -- -- 0.0
2006............. 2 27,613 259 2.1
Thereafter....... 1 27,360 382 3.1
--- --------- ------- -----
Total... 219 3,075,586(3) $ 12,344(4) 100.0%
=== ========= ======= =====
</TABLE>

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

(1) Annual Base Rent expiring during each period, divided by total annual Base
Rent (both adjusted for contractual increases).

(2) Reflects leases expiring after May 31, 1997 and includes leases that have
initial terms of less than one year.

(3) This figure is based on square footage actually leased (which excludes
vacant space), and thus differs from "Rentable Square Feet" in the preceding
Industrial Portfolio table (which includes vacant space).

(4) This figure is based on square footage actually leased (which excludes
vacant space) and incorporates contractual rent increases arising after
1997, and thus differs from the information for "Annualized Base Rent" in
the preceding Industrial Portfolio table, which is based on 1997 rents.

The following table sets forth the capitalized tenant improvements and
leasing commissions paid by the Company on the industrial Properties owned by
the Company for the period indicated.

INDUSTRIAL PROPERTIES
CAPITALIZED TENANT IMPROVEMENTS AND LEASING COMMISSIONS

<TABLE>
<CAPTION>
FIVE
MONTHS
YEAR ENDED DECEMBER 31, ENDED
--------------------------------------------------- MAY 31,
1992 1993 1994 1995 1996 1997
------ ------ ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Square footage renewed or re-leased...................... 52,491 66,500 89,000 141,523 69,000 136,453
Capitalized tenant improvements and commissions
(in thousands)......................................... $ 21 $ 64 $ 60 $ 114 $ 74 $ 198
Average per square foot of renewed or released space..... $ 0.40 $ 0.96 $ 0.67 $ 0.81 $ 1.07 $ 1.45
</TABLE>

S-47
<PAGE> 48

RETAIL PROPERTIES

The retail portfolio consists of 6 Properties with a total of 694,950
square feet. The following table sets forth information regarding the retail
Properties of the Company as of the date of this Prospectus Supplement.

RETAIL PROPERTIES

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

(1) Based on economic occupancy.

(2) Represents Base Rent for the month ended May 31, 1997, as annualized.

(3) Represents Property revenues for the month ended May 31, 1997, as
annualized.

(4) Mortgage receivable accounted for as real estate under GAAP. The Property is
owned by a partnership managed by one of the Associated Companies.

(5) The Company has entered into a definitive agreement to sell this Property.
This sale is subject to a number of contingencies, and there can be no
assurance such sale will be consummated.

(6) Includes a space at which the tenant has ceased operations and filed
bankruptcy. In connection with the Company's acquisition, a principal of the
former owner of the Property guaranteed the tenant's rental obligations
under the lease. Subsequently, the tenant's leasehold interest under the
lease was sold to a third party, who kept payments to the Company under the
lease current through April 30,1997, when the Company purchased the
leasehold in order to continue negotiations under a signed letter of intent
with an existing subtenant for relocation and expansion into the space.

The Company holds fee title to all of the retail Properties except the Park
Center community center. Park Center is owned by a partnership managed by one of
the Associated Companies. The Company holds a participating first mortgage
interest in Park Center. In accordance with GAAP, the Company accounts for Park
Center as though it held fee title, as substantially all risks and rewards of
ownership have been transferred to the Company as a result of the terms of the
mortgage. The participating mortgage had a principal balance of $5,448,427 as of
May 31, 1997 and accrued interest of $2,871,394 as of May 31, 1997, as compared
with an appraised value of $3,550,000 as of June 30, 1994. The loan, which was
modified in mid-1994 and accrues interest at 10%, allows the borrower to defer
the payment of any interest in excess of the property's cash flow. The loan also
allows the Company to receive 75% of the property value over the total loan
balance at maturity. The loan is due March 31, 2001, but the borrower may extend
the loan for five one-year periods for payment of a fee equal to 0.25% of the
then outstanding principal balance, for each extension.

Five of the retail Properties, representing 543,950 rentable square feet,
or 78% of the total rentable area, are anchored community shopping centers. The
anchor tenants of these centers are national or regional supermarkets and drug
stores.

S-48
<PAGE> 49

The following table sets forth historical rent and occupancy information
for the retail Properties owned by the Company during each of the years
indicated.

RETAIL PROPERTIES
HISTORICAL RENT AND OCCUPANCY

<TABLE>
<CAPTION>
AVERAGE OCCUPANCY AVERAGE TOTAL
TOTAL RENTABLE RATE FOR THE RENT/LEASED ANNUAL BASE
YEAR SQUARE FEET PERIOD SQ. FT.(1) RENT($000S)(2)
------------------------ -------------- ----------------- ----------- --------------
<S> <C> <C> <C> <C>
1997(3)................. 694,950 92% $ 6.62(4) $4,220
1996.................... 630,700 96 7.82(4) 4,726
1995.................... 285,658 95 10.76 2,915
1994.................... 285,722 94 10.76 2,890
1993.................... 285,722 90 11.11 2,858
1992.................... 285,722 88 11.12 2,823
</TABLE>

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

(1) Total annual Base Rent divided by occupancy in square feet.

(2) Total annual Base Rent adjusted for any free rent given for the period.

(3) Occupancy is as of May 31, 1997. Total annual Base Rent represents Base Rent
for the month ended May 31, 1997, as annualized.

(4) Average effective Base Rent per leased square foot declined in 1996 and 1997
due to the acquisitions of Properties with lower Base Rents.

The following table sets forth the contractual lease expirations for the
retail Properties for the remainder of 1997 and thereafter, as of May 31, 1997.

RETAIL PROPERTIES
LEASE EXPIRATIONS

<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL
RENTABLE SQUARE ANNUAL BASE RENT ANNUAL BASE RENT
NUMBER OF FOOTAGE SUBJECT TO UNDER EXPIRING REPRESENTED BY
YEAR OF LEASE EXPIRATION LEASES EXPIRING LEASES ($000S) LEASES ($000S) EXPIRING LEASES(1)
-------------------------- --------------- ------------------ ---------------- -------------------
<S> <C> <C> <C> <C>
1997(2)................... 11 14,899 $ 168 3.7%
1998...................... 15 44,168 295 6.6
1999...................... 27 52,975 571 12.7
2000...................... 14 27,666 324 7.2
2001...................... 20 84,523 644 14.4
2002...................... 4 8,000 79 1.8
2003...................... 4 26,675 129 2.9
2004...................... 8 142,144 621 13.8
2005...................... 4 35,133 388 8.7
2006...................... 1 2,400 27 0.6
Thereafter................ 5 196,677 1,239 27.6
--- ------- ------ -----
Total........... 113 635,260(3) $4,485(4) 100.0%
=== ======= ====== =====
</TABLE>

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

(1) Annual Base Rent expiring during each period, divided by total annual Base
Rent (both adjusted for contractual increases).

(2) Reflects leases expiring after May 31, 1997 and includes leases that have
initial terms of less than one year.

(3) This figure is based on square footage actually leased (which excludes
vacant space), and thus differs from "Rentable Square Feet" set forth in the
preceding Retail Properties table (which includes vacant space).

(4) This figure is based on square footage actually leased (which excludes
vacant space) and incorporates contractual rent increases arising after
1997, and thus differs from the information for "Annualized Base Rent" set
forth in the preceding Retail Properties table, which is based on 1997
rents.

S-49
<PAGE> 50

The following table sets forth the capitalized tenant improvements and
leasing commissions paid by the Company on the retail Properties owned by the
Company for the periods indicated.

RETAIL PROPERTIES
CAPITALIZED TENANT IMPROVEMENTS AND LEASING COMMISSIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
FIVE MONTHS
ENDED MAY 31,
1992 1993 1994 1995 1996 1997
------ ------ ------ ------ ------ -------------
<S> <C> <C> <C> <C> <C> <C>
Square footage renewed or re-leased....... 26,403 31,443 46,833 33,294 32,998 7,543
Capitalized tenant improvements and
commissions (in thousands).............. $ 63 $ 59 $ 59 $ 98 $ 83 $ 15
Average per square foot of renewed or
released space.......................... $ 2.38 $ 1.87 $ 1.87 $ 2.94 $ 2.53 $ 1.99
</TABLE>

MULTI-FAMILY PROPERTIES

The Company owns four multi-family Properties, aggregating 866 units, and
731,142 square feet of space. All of the units are rented to residential tenants
on either a month-to-month basis or for terms of one year or less. The following
table sets forth information regarding the multi-family Properties of the
Company as of the date of this Prospectus Supplement.

MULTI-FAMILY PORTFOLIO

<TABLE>
<CAPTION>
ANNUALIZED
PROPERTY
RENTABLE REVENUES(2)
YEAR # OF SQUARE OCCUPANCY --------------------
PROPERTY CITY ST COMPLETED UNITS FEET RATE(1) AMOUNT PERCENT
- ----------------------------------- --------------- ---- --------- ----- -------- --------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Summerbreeze....................... No. Hollywood CA 1981 104 73,284 95% $ 804,710 13.2%
Sahara Gardens..................... Las Vegas NV 1983 312 277,056 95 2,028,454 33.3
Villas de Mission.................. Las Vegas NV 1979 226 192,370 97 1,599,157 26.2
Overlook........................... Scottsdale AZ 1988 224 188,432 94 1,664,556 27.3
--
--- ------- --------- -----
Total/Weighted Average......... 866 731,142 95% $6,096,877 100.0%
=== ======= == ========= =====
</TABLE>

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

(1) Represents average economic occupancy (calculated using month-end actual
occupancy rates) for the 12 months ended May 31, 1997. For Properties
acquired after May 31, 1996, average occupancy rates were calculated using
occupancy rates prior to acquisition.

(2) Represents revenues for the 12 months ended May 31, 1997. For Properties
acquired after May 31, 1996, property revenues include revenues produced
prior to acquisition.

S-50
<PAGE> 51

The following table sets forth historical rent and occupancy information
for the multi-family Properties owned by the Company during each of the years
indicated.

MULTI-FAMILY PROPERTIES
HISTORICAL RENT AND OCCUPANCY

<TABLE>
<CAPTION>
MONTHLY
AVERAGE TOTAL
AVERAGE OCCUPANCY BASE RENT/ ANNUAL BASE
YEAR TOTAL UNITS RATE FOR THE PERIOD LEASED UNIT(1) RENT ($000S)(2)
----------------- ----------- -------------------- -------------- ---------------
<S> <C> <C> <C> <C>
1997............. 866 95% $617 $ 6,097
1996............. 642 94 598(3) 4,328
1995............. 104 94 630 739
1994............. 104 98 632 774
1993............. 104 93 632 734
1992............. 104 98 633 758
</TABLE>

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

(1) Total annual Base Rent divided by average occupied unit.

(2) Total annual Base Rent adjusted for any free rent given for the period.

(3) Average effective monthly Base Rent per unit declined in 1996 due to the
acquisition of Properties with lower Base Rents.

HOTELS

The hotel portfolio consists of six hotels ranging from 64 to 163 rooms,
comprising a total of 326,701 square feet of space and 726 rooms. Five of the
hotels are all-suite hotels which consist primarily of one-bedroom suites, but
each also includes some studio suites and two-bedroom suites. All of the hotels
operate under license agreements with Country Lodging by Carlson, Inc. The five
all-suite hotels are marketed as Country Suites by Carlson and the sixth hotel
is marketed as Country Inns and Suites by Carlson. Country Lodging is part of
the Carlson Companies, based in Minneapolis, Minnesota. The Carlson Companies
own, operate, and franchise Radisson Hotels, TGI Friday's Restaurants, Country
Kitchen Restaurants, and the Carlson Travel Agency Network. Currently there are
a total of more than 85 Country Inns and Suites, with 30 additional under
construction.

The following table sets forth information regarding the Company's hotel
Properties, as of the date of this Prospectus Supplement.

HOTEL PORTFOLIO

<TABLE>
<CAPTION>
LEASE REVENUES
FOR THE 12 MONTHS
ENDED 5/31/97
YEAR # OF SQUARE AVERAGE ---------------------
PROPERTY CITY ST COMPLETED ROOMS FEET OCC.(1) AMOUNT PERCENT ADR(2) REVPAR(3)
- ----------------------------- ------------ ---- --------- ----- ------- -------- ---------- ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Country Suites by
Carlson(4)................. Scottsdale AZ 1995 163 80,568 91% $1,558,000(5) 23.7% $91.93 $ 61.13
Country Suites by
Carlson(5)................. Tucson AZ 1986 157 61,552 89 1,437,652 21.8 66.04 52.43
Country Suites by
Carlson(5)................. Ontario CA 1985 120 54,019 78 545,059 8.3 58.71 44.55
Country Suites by
Carlson(5)................. Arlington TX 1986 132 56,200 65 735,484 11.2 68.64 45.50
Country Suites by
Carlson(6)................. Irving TX 1986 90 45,032 65 1,992,845 30.3 75.75 47.46
Country Inns and Suites by
Carlson(4)................. San Antonio TX 1994 64 29,330 63 312,000(5) 4.7 55.66 31.09
--
--- ------- ---------- ----- ------ ------
Total/Weighted Average....... 726 326,701 78% $6,581,040 100.0% $69.46 $ 47.03
=== ======= == ========== ===== ====== ======
</TABLE>

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

(1) Represents average economic occupancy for the 12 months ended May 31, 1997.

(2) Average daily rate ("ADR"). Amount reflects average for the 12 months ended
May 31, 1997.

(3) Revenue per available room ("REVPAR"). Amounts reflect average for the 12
months ended May 31, 1997.

(4) Results of operation amounts include results from months prior to
acquisition. Lease revenues reported consist of lease payments that would
have been received had the leases commenced on June 1, 1996. Revenue
reported consists of the lease payments received from GHG, which leases the
hotel from the Company and operates it for its own account.

(5) Revenue reported consists of the lease payments received from GHG, which
leases the hotel from the Company and operates it for its own account.

(6) Mortgage receivable accounted for as real estate under GAAP. The Property is
owned by a partnership managed by one of the Associated Companies.

S-51
<PAGE> 52

The Company holds fee title to five of the six hotels. The sixth, the
Country Suites in Irving, Texas, is owned by a partnership managed by one of the
Associated Companies. The Company holds a participating first mortgage interest
in the Property. In accordance with GAAP, the Company accounts for the Property
as though it held fee title, as substantially all the risks and rewards of
ownership have been transferred to the Company as a result of the terms of the
mortgage. The participating mortgage had a principal balance of $5,039,434 as of
May 31, 1997, with accrued interest of $2,657,629 as of May 31, 1997, as
compared with an appraised value of $2,650,000 as of June 30, 1994. The loan,
which was modified in early 1994 and accrues interest at 10%, allows the
borrower to defer the payment of any interest in excess of the Property's cash
flow. The loan also allows the Company to receive 75% of the Property value over
the total loan balance at maturity. The loan is due March 31, 2001, but the
borrower may extend the loan for five one-year periods for payment of a fee
equal to 0.25% of the then outstanding principal balance for each extension. The
hotels owned in fee title are leased to GHG; the Irving, Texas hotel is managed
by GHG under terms of a pre-existing contract.

The following table contains, for the periods indicated, average occupancy,
ADR and REVPAR information for the Company's Hotels as well as comparative
information for all U.S. hotels and all Country Lodging hotels.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, TWELVE MONTHS
---------------------------------------------------- ENDED MAY 31,
1992 1993 1994 1995 1996 1997
------ ------ ------ ------ ------ -------------
<S> <C> <C> <C> <C> <C> <C>
Scottsdale, AZ(1)
Occupancy.......................... -- -- -- -- 63% 91%
ADR................................ -- -- -- -- $88.11 $ 91.93
REVPAR............................. -- -- -- -- $53.22 $ 61.13
Tucson, AZ
Occupancy.......................... 72% 77% 77% 79% 81% 89%
ADR................................ $54.38 $54.46 $57.21 $58.93 $63.85 $ 66.04
REVPAR............................. $39.05 $42.16 $44.29 $46.53 $50.42 $ 52.43
Ontario, CA
Occupancy.......................... 59% 60% 56% 66% 72% 78%
ADR................................ $52.93 $51.61 $52.02 $48.38 $54.89 $ 58.71
REVPAR............................. $31.42 $30.74 $29.35 $31.67 $38.95 $ 44.55
Arlington, TX
Occupancy.......................... 68% 61% 63% 70% 69% 65%
ADR................................ $57.85 $51.58 $62.73 $64.96 $67.61 $ 68.64
REVPAR............................. $39.14 $31.46 $39.79 $45.63 $45.75 $ 45.50
Irving, TX
Occupancy.......................... 66% 76% 78% 76% 75% 65%
ADR................................ $53.53 $50.22 $58.52 $66.55 $76.56 $ 75.75
REVPAR............................. $35.37 $38.33 $45.36 $50.57 $57.28 $ 47.46
San Antonio, TX(2)
Occupancy.......................... -- -- -- 53%(5) 55%(6) 63%
ADR................................ -- -- -- $57.80(5) $58.68(6) $ 55.66
REVPAR............................. -- -- -- $30.79(5) $32.03(6) $ 31.09
All U.S. Hotels(3)
Occupancy.......................... 62% 64% 65% 66% 66% 60%(7)
ADR................................ $59.65 $60.99 $63.63 $66.88 $71.66 $ 69.99(7)
REVPAR............................. $37.04 $38.85 $41.49 $44.14 $47.06 $ 42.27(7)
Country Lodging System(4)
Occupancy.......................... 67% 71% 75% 75% 73% 65%(7)
ADR................................ $50.62 $50.00 $53.00 $56.00 $62.42 $ 65.80(7)
REVPAR............................. $33.94 $35.72 $39.75 $41.00 $45.45 $ 42.90(7)
</TABLE>

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

(1) The Scottsdale Hotel opened in January 1996.

(2) The San Antonio Hotel opened in 1995.

S-52
<PAGE> 53

(3) Source: Smith Travel Research and Country Hospitality.

(4) Source: Country Hospitality. Data for all years is limited to U.S.
properties.

(5) Information supplied for historical comparison only, as this hotel was not
acquired by the Company until August 1996.

(6) Information represents a full year of operations including operations prior
to the Company's acquisition of the hotel in August 1996.

(7) Information presented as of March 31, 1997.

In order for the Company to qualify as a REIT, neither the Company nor the
Operating Partnership can operate the hotels. Therefore, the Operating
Partnership has leased five of the hotels to GHG, each for a term of five years
pursuant to percentage leases (the "Percentage Leases"), which provide for rent
equal to the greater of the Base Rent (as defined in the Percentage Leases)
(such Base Rent is defined herein as "Hotel Base Rent") or a specified
percentage of room revenues (the "Percentage Rent"). Each hotel is separately
leased to GHG. GHG's ability to make rent payments will, to a large degree,
depend on its ability to generate cash flow from the operations of the hotels.
Each Percentage Lease contains the provisions described below.

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

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

The table below sets forth the annual Hotel Base Rent and the Percentage
Rent formulas for each of the five hotels owned by the Company.

HOTEL LEASE RENT PROVISIONS

<TABLE>
<CAPTION>
AMOUNT OF
ANNUAL PERCENTAGE RENT INCURRED
BASE FOR THE TWELVE MONTHS ENDED
HOTEL LOCATION RENT ANNUAL PERCENTAGE RENT FORMULAS MAY 31, 1997
- ------------------ -------- --------------------------------------- ---------------------------
<S> <C> <C> <C>
Ontario, CA....... $240,000 24% of room revenue up to $1,575,000 $ 305,000
plus
40% of room revenue above $1,575,000
and
5% of other revenue
San Antonio, TX... $312,000 33% of room revenue up to $1,200,000 $ 0(1)
plus
40% of room revenue above $1,200,000
and
5% of other revenue.
Arlington, TX..... $360,000 27% of room revenue up to $1,600,000 $ 375,000
plus
42% of room revenue above $1,600,000
and
5% of other revenue.
Tucson, AZ........ $600,000 40% of room revenue up to $1,350,000 $ 838,000
plus
46% of room revenue above $1,350,000
and
5% of other revenue.
Scottsdale, AZ.... $360,000 45% of room revenue up to $3,200,000 $ 1,198,000(1)
plus
60% of room revenue above $3,200,000
and
5% of other revenue.
</TABLE>

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

(1) Percentage lease revenue is shown on a pro forma basis assuming the hotel
was purchased on June 1, 1996.

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

S-53
<PAGE> 54

Under the Percentage Leases, the Company is required to maintain the
underground utilities and the structural elements of the improvements, including
exterior walls (excluding plate glass) and roof. In addition, the Company must
fund periodic capital improvements to the buildings and grounds, and the
periodic repair, replacement and refurbishment of furniture, fixtures and
equipment, up to the following amounts per quarter for the first year of the
Percentage Lease: Ontario -- $22,750; Arlington -- $25,000; San
Antonio -- $10,500; Tucson -- $28,500; and Scottsdale -- $24,500. These amounts
increase annually in accordance with the CPI. These obligations carry forward to
the extent not expended, and any unexpended amounts remain the property of the
Company upon termination of the Percentage Leases. Except for capital
improvements and maintenance of structural elements and underground utilities,
GHG bears the obligation, at its expense, to maintain the hotels in good order
and repair, except for ordinary wear and tear, and to make non-structural,
foreseen and unforeseen, and ordinary and extraordinary repairs which may be
necessary and appropriate to keep the hotels in good order and repair.

GHG will not be permitted to sublet all or any part of the hotels or assign
its interest under any of the Percentage Leases, other than to an affiliate of
the lessee, without the prior written consent of the Company. No assignment or
subletting will release GHG from any of its obligations under the Percentage
Leases.

If the Company enters into an agreement to sell or otherwise transfer a
hotel, the Company has the right to terminate the Percentage Lease with respect
to such hotel upon paying GHG the fair market value of its leasehold interest in
the remaining term of the Percentage Lease to be terminated.

GHG is the licensee under the franchise licenses on the hotels. The
franchise agreements are assignable to the Company, another lessee or a new
owner, with a payment of $2,500 per hotel.

MORTGAGE RECEIVABLES

Although the Company does not intend to engage in the business of making
real estate loans, the Company holds three notes receivable secured by first
priority real property liens, which had a total outstanding principal balance at
May 31, 1997 of $4,027,000. Effective February 1, 1997, as the result of
repayment of principal by the borrower, the principal balance of the Hovpark
loan was reduced to $500,000, and the maturity was extended to February 1, 2009.
All payments are current on all loans. In connection with the Grunow loan, the
Company entered into an Option Agreement which provides the Company with the
option to purchase the Grunow Medical building based upon an agreed upon
formula. The following table summarizes these three mortgages.

SUMMARY OF MORTGAGE RECEIVABLES

<TABLE>
<CAPTION>
COLLATERAL PROPERTIES PRINCIPAL BALANCE
- ------------------------------------------------ INTEREST -------------------------
NAME TYPE RATE MATURITY 5/31/97 5/31/96
- ---------------------------- ------------------ --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Hovpark(1).................. Industrial/Office 8.0% 01/01/09 $ 498,000 $7,563,000
Laurel Cranford............. Industrial 9.0% 06/01/01 $ 506,000 $ 517,000
Grunow...................... Medical Office 11.0% 11/19/99 $3,023,000 N/A
</TABLE>

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

(1) This loan was assigned to a third party in connection with the CRI
Properties acquisition in June 1997.

S-54
<PAGE> 55

MANAGEMENT BUSINESS

The Company conducts its management operations through the Associated
Companies. The Company holds 100% of the preferred stock of each of the
Associated Companies. Although the Company holds none of the voting common stock
of the Associated Companies, the Company has the right, through its preferred
stock holdings, to receive a significant portion of the economic benefits of the
Associated Companies' operations. The voting common stock of the Associated
Companies is held by individuals. See "Growth Strategy -- The Associated
Companies."

The Associated Companies control a substantial asset management and
property management portfolio by virtue of GC's general partner interests in
certain limited partnerships, and through contracts with unaffiliated owners.
The current management operations of the Company, the Operating Partnership and
the Associated Companies are summarized in the following table.

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

(1) Properties owned by the Operating Partnership or the Company (including the
T. Rowe Price Properties to be acquired) and either (i) leased to GHG, in
the case of hotels, or (ii) managed by the Company.

(2) Properties owned by partnerships of which GC or an affiliate is the general
partner, or by third parties, and managed by GC or GHG.

The portfolio of 58 properties managed by the Associated Companies includes
501 hotel rooms, approximately 4.3 million square feet of retail, industrial and
office properties, more than 1,871 multi-family residential units, and
approximately 257.72 acres of undeveloped land. The Associated Companies each
receive substantial fees for their management services. The Associated
Companies, in turn, pay a portion of their income to their stockholders,
including the Company, through dividends on their capital stock.

S-55
<PAGE> 56

MANAGEMENT PORTFOLIO

The following table lists the properties managed by the Associated
Companies as of the date of this Prospectus Supplement, indicating property
name, city, state, approximate square footage, size or number of units, if
applicable, and acreage, if applicable. Some of the properties listed on this
table may be marketed for sale from time to time.

MANAGEMENT PORTFOLIO

<TABLE>
<CAPTION>
ASSET CITY STATE SQ. FT.(1)
------------------------------------- ------------------- ----- ----------
<S> <C> <C> <C>
OFFICE
One West Madison..................... Phoenix AZ 25,000
GSK Corporate Plaza.................. Phoenix AZ 31,234
Grunow Medical Building.............. Phoenix AZ 47,479
Civic Center II...................... Rancho Cucamonga CA 17,857
Gateway Professional Center.......... Sacramento CA 50,556
Park Plaza........................... Sacramento CA 67,688
Carnegie Business Center I........... San Bernardino CA 62,605
Carnegie Business Center II.......... San Bernardino CA 50,804
One Vanderbilt Way................... San Bernardino CA 73,809
Two Vanderbilt Way................... San Bernardino CA 69,050
Lakeside Tower....................... San Bernardino CA 112,814
One Carnegie Plaza................... San Bernardino CA 102,511
Two Carnegie Plaza................... San Bernardino CA 68,925
One Parkside......................... San Bernardino CA 70,069
Santa Fe Railway..................... San Bernardino CA 36,288
Inland Regional Center............... San Bernardino CA 81,079
Bristol Medical Center............... Santa Ana CA 52,311
26th Street Office................... Santa Monica CA 14,573
Montrose Office Building............. Rockville MD 187,161
Directors Plaza...................... Memphis TN 131,727
Poplar Towers I...................... Memphis TN 100,901
Bluemound Commerce Center............ Brookfield WI 48,113
---------
Total...................... 1,502,554
=========
INDUSTRIAL
San Sevaine Business Park............ Mira Loma CA 172,057
Rancon Centre Ontario................ Ontario CA 245,000
SkyPark Airport Parking.............. San Bruno CA 216,780
Wakefield Engineering Building....... Temecula CA 44,200
Esplanade............................ Tustin CA 141,700
Bryant Lake Phases I & II............ Eden Prairie MN 80,057
Bryant Lake Phase III................ Eden Prairie MN 91,732
Black Satchel........................ Charlotte NC 228,800
North Park Business Center........... Charlotte NC 319,960
The Commons at Great Valley.......... Malvern PA 200,000
Totem Valley Business Center......... Kirkland WA 121,645
---------
Total...................... 1,861,931
=========
</TABLE>

S-56
<PAGE> 57

<TABLE>
<CAPTION>
ASSET CITY STATE SQ. FT.(1)
------------------------------------- ------------------- ---------
<S> <C> <C> <C>
RETAIL
Baseline Mercado..................... Mesa AZ 22,886
Mountain View Plaza.................. Mojave CA 57,456
Weist Plaza.......................... Riverside CA 145,778
TGI Friday's......................... San Bernardino CA 9,386
Promotional Retail Center............ San Bernardino CA 66,265
Service Retail Center................ San Bernardino CA 20,780
Outback Steak House.................. San Bernardino CA 6,500
Bally's Health Club.................. San Bernardino CA 25,000
Circuit City......................... San Bernardino CA 38,600
Aztec Shopping Center................ San Diego CA 23,789
RCC Auto Center...................... Temecula CA 25,761
Town & Country Center................ Arlington Heights IL 323,591
Glenlake Plaza....................... Indianapolis IN 93,593
Heritage Square...................... San Antonio TX 75,528
---------
Total...................... 934,913
=========

NO. UNITS
---------
MULTI-FAMILY
Green Meadows........................ Davis CA 120
Huntington Breakers.................. Huntington Beach CA 342
Villa La Jolla....................... La Jolla CA 385
La Jolla Canyon...................... La Jolla CA 157
Pacific Bay Club..................... San Diego CA 159
Shadowridge Woodbend................. Vista CA 240
Promontory Point..................... Henderson NV 180
Georgetown Apartments................ Omaha NE 288
---------
Total...................... 1,871
=========
HOTEL
Country Suites By Carlson............ Tempe AZ 139
Condominium Resort Hotel............. Galveston TX 276
Condominium Resort Hotel............. Port Aransas TX 86
---------
Total...................... 501
=========
</TABLE>

S-57
<PAGE> 58

<TABLE>
<CAPTION>
ASSET CITY STATE ACREAGE
------------------------------------- ------------------- ----- ----------
<S> <C> <C> <C>
LAND(2)
Lake Elsinore Square (Retail)........ Lake Elsinore CA 24.79
Mountain View Plaza (Retail)......... Mojave CA 8.99
Perris -- 4th Avenue
(Comm./Retail)..................... Perris CA 17.67
Perris -- Ethanac (Comm./Retail)..... Perris CA 23.76
Perris -- Nuevo (Comm./Retail)....... Perris CA 60.41
Rancon Centre Ontario (Industrial)... Ontario CA 41.02
Rancon Center (Office)............... Rancho Cucamonga CA 1.83
Rancon Center (Retail)............... Rancho Cucamonga CA 4.98
Rancon Commerce Center
(Industrial)....................... Temecula CA 15.52
Rancon Towne Village (Retail)........ Temecula CA 9.50
Tippecanoe (Commercial).............. San Bernardino CA 8.79
Tri-City Corporate Center
(Office/Retail).................... San Bernardino CA 40.46
---------
Total...................... 257.72
=========
</TABLE>

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

(1) Total square footage of the management portfolio is approximately six
million square feet, including approximately 1.7 million square feet of
hotel and multi-family properties as of June 30, 1997.

(2) The 58 properties listed as actively managed elsewhere in this Prospectus
Supplement do not include the land portfolio.

S-58
<PAGE> 59

MANAGEMENT

The following table sets forth certain information with respect to the
directors and the executive officers of the Company.

<TABLE>
<CAPTION>
NAME AGE PRINCIPAL POSITION
----------------------- --- ----------------------------------------------
<S> <C> <C>
Robert Batinovich...... 61 Chairman, President and Chief Executive
Officer
Andrew Batinovich...... 38 Director, Executive Vice President, Chief
Operating Officer and Chief Financial Officer
Sandra L. Boyle........ 49 Senior Vice President
Frank E. Austin........ 49 Senior Vice President
Terri Garnick.......... 36 Secretary Senior Vice President, Treasurer and
Chief Accounting Officer
Stephen R. Saul........ 43 Vice President
Anna Cheng............. 42 Vice President
Patrick Foley.......... 65 Director
Richard A. Magnuson.... 39 Director
Laura Wallace.......... 44 Director
</TABLE>

S-59
<PAGE> 60

UNDERWRITING

The Underwriters named below (the "Underwriters") have severally agreed,
subject to the terms and conditions of the Underwriting Agreement, to purchase
from the Company the number of shares of Common Stock set forth opposite their
respective names below. The Underwriting Agreement provides that the obligations
of the Underwriters are subject to certain conditions precedent, and that the
Underwriters are committed to purchase all of such shares if any are purchased.

<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER COMMON STOCK
------------------------------------------------------------- ----------------
<S> <C>
Bear, Stearns & Co. Inc...................................... 2,520,000
Robertson, Stephens & Company LLC............................ 1,575,000
Salomon Brothers Inc......................................... 1,575,000
Jefferies & Company, Inc..................................... 630,000
----------------
Total.............................................. 6,300,000
=============
</TABLE>

The Underwriters have advised the Company that the Underwriters propose to
offer the Common Stock to the public at the public offering price set forth on
the cover page of this Prospectus Supplement and to certain dealers at that
price less a concession not in excess of $0.69 per share. The Underwriters may
allow, and such dealers may reallow, a discount not in excess of $0.10 per share
on sales to certain other dealers. After the initial offering to the public, the
public offering price, concession and discount may be changed.

The Company has granted to the Underwriters an option, exercisable for 30
days after the date of this Prospectus Supplement, to purchase up to 945,000
additional shares of Common Stock (the "Option Shares") to cover
over-allotments, if any, at the public offering price per share set forth on the
cover page of this Prospectus Supplement, less the underwriting discount. If the
Underwriters exercise this option, each of the Underwriters will have a firm
commitment, subject to certain conditions, to purchase approximately the same
percentage of total Option Shares that the number of shares of Common Stock to
be purchased by it shown in the foregoing table bears to the Common Stock
initially offered hereby.

In the Underwriting Agreement, the Company and the Operating Partnership
have agreed to indemnify the several Underwriters against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended
or to contribute to payments the Underwriters may be required to make in respect
thereof.

The Company and the Operating Partnership have agreed not to, directly or
indirectly, issue, sell, offer or agree to sell, grant any option to purchase,
or otherwise dispose (or announce any offer, sale, grant of an option to
purchase or other disposition) of, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock for a period of
90 days after the date of this Prospectus Supplement without the prior written
consent of Bear Stearns (except for issuances by the Company upon the exercise
of outstanding stock options, in connection with bona fide acquisitions of real
property or interests therein, of shares of Common Stock or partnership units in
the Operating Partnership such that the aggregate number of shares of Common
Stock issued, or which may be issued upon conversion or exchange of such units,
will not exceed 3,500,000). All directors and officers and certain stockholders
of the Company have agreed subject to certain exceptions not to directly or
indirectly issue, sell, offer or agree to sell, grant any option to purchase or
otherwise dispose of any shares of Common Stock (or any securities convertible
into, exercisable for or exchangeable for shares of Common Stock) until after
December 31, 1997 without the prior written consent of Bear Stearns. In
addition, Robert Batinovich, Andrew Batinovich and certain family members agreed
not to sell any of their shares of Common Stock until after December 31, 1997.

In order to facilitate an offering of Common Stock, certain persons
participating in the Offering may engage in transactions that stabilize,
maintain, or otherwise affect the price of the Common Stock during and after the
Offering. Specifically, the Underwriters may over-allot or otherwise create a
short position in the Common Stock for their own account by selling more shares
of Common Stock than have been sold to them by the Company. The Underwriters may
elect to cover any such short position by purchasing shares of Common Stock in
the open market or by exercising any over-allotment option granted to the
Underwriters. In addition, such persons may stabilize or maintain the price of
the Common Stock by bidding for or purchasing

S-60
<PAGE> 61

shares of Common Stock in the open market and may impose penalty bids, under
which selling concessions allowed to syndicate members or other broker-dealers
participating in the Offering are reclaimed if shares of Common Stock previously
distributed in the Offering are repurchased in connection with stabilization
transactions or otherwise. The effect of these transactions may be to stabilize
or maintain the market price of the Common Stock at a level above that which
might otherwise prevail in the open market. The imposition of a penalty bid may
also affect the price of the Common Stock to the extent that it discourages
resales thereof. No representation is made as to the magnitude or effect of any
such stabilization or other transactions. Such transactions may be effected on
the NYSE or otherwise and, if commenced, may be discontinued at any time.

Bear Stearns and Robertson Stephens have provided various financial
advisory services to the Company or affiliates of the Company, for which they
have received customary compensation. Bear, Stearns Funding, Inc., an affiliate
of Bear Stearns, has loaned the Company $20,000,000 at an interest rate of 7.57%
with a maturity date of January 1, 2006. Bear Stearns Funding has also made
certain loans to limited partnerships for which GC provides management services.

LEGAL MATTERS

The legality of the Common Stock offered by this Prospectus Supplement will
be passed upon for the Company by Morrison & Foerster LLP, Palo Alto,
California, and certain matters will be passed upon for the Underwriters by
Latham & Watkins, San Francisco, California. Morrison & Foerster LLP will rely
upon the opinion of Hogan & Hartson LLP, Baltimore, Maryland as to certain
matters of Maryland law. In addition, Morrison & Foerster LLP will provide an
opinion as the basis of the description of federal income tax consequences
contained in the accompanying Prospectus in the section entitled "Federal Income
Tax Consequences."

EXPERTS

The financial statements of the Company, the GRT Predecessor Entities,
Glenborough Hotel Group, Atlantic Pacific Assurance Company Limited and
Glenborough Inland Realty Corporation and related financial statement schedules
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1996, incorporated by reference herein, have been audited by Arthur Andersen
LLP, independent public accountants, to the extent and for the periods indicated
in their reports, and have been incorporated herein in reliance on such reports
given on the authority of that firm as experts in accounting and auditing.

In addition, the respective statements of revenues and certain expenses of
the T. Rowe Price Properties and the Centerstone Property included in this
Prospectus Supplement, to the extent and for the periods indicated in their
reports, have also been audited by Arthur Andersen LLP, independent public
accountants, and are included herein in reliance on such reports given on the
authority of that firm as experts in accounting and auditing.

In addition, the respective statements of revenues and certain expenses of
the UCT Property, the TRP Properties, the Carlsberg Properties, the CIGNA
Properties, the E&L Properties, the Lennar Properties and the Riverview
Property, included in various Current Reports on Form 8-K/A, incorporated by
reference herein, have also been audited by Arthur Andersen LLP, independent
public accountants, to the extent and for the periods indicated in their
reports, and have been incorporated herein, in reliance on such reports given on
the authority of that firm as experts in accounting and auditing.

S-61
<PAGE> 62

GLENBOROUGH REALTY TRUST INCORPORATED

INDEX TO FINANCIAL INFORMATION

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES OF THE T. ROWE PRICE PROPERTIES,
GROUPS A AND B:
Report of Independent Public Accountants............................................ F-2
Combined Statement of Revenues and Certain Expenses of the T. Rowe Price Properties,
Groups A and B................................................................... F-3
Notes to Combined Statement of Revenues and Certain Expenses of the T. Rowe Price
Properties, Groups A and B....................................................... F-4
COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES OF THE CENTERSTONE PROPERTY FOR
THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND THE YEAR ENDED DECEMBER 31,
1996:
Report of Independent Public Accountants............................................ F-6
Combined Statement of Revenue and Certain Expenses of the Centerstone Property for
the three months ended March 31, 1997 (unaudited) and the year ended December 31,
1996............................................................................. F-7
Notes to Combined Statement of Revenue and Certain Expenses of the Centerstone
Property for the three months ended March 31, 1997 (unaudited) and the year ended
December 31, 1996................................................................ F-8
</TABLE>

F-1
<PAGE> 63

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Glenborough Realty Trust Incorporated:

We have audited the accompanying combined statements of revenues and
certain expenses of the T. Rowe Price Properties, Groups A and B, as defined in
Note 1, for the years ended September 30, 1996, and December 31, 1996,
respectively. These combined financial statements are the responsibility of the
management of the Company. Our responsibility is to express an opinion on these
combined financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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.

The accompanying combined statements of revenues and certain expenses have
been prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, as described in Note 1, and are not intended
to be a complete presentation of the revenues and expenses of the T. Rowe Price
Properties, Groups A and B.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the revenues and certain expenses of the T.
Rowe Price Properties, Groups A and B for the years ended September 30, 1996,
and December 31, 1996, respectively, in conformity with generally accepted
accounting principles.

ARTHUR ANDERSEN LLP

San Francisco, California
June 20, 1997

F-2
<PAGE> 64

GLENBOROUGH REALTY TRUST INCORPORATED

COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES OF
THE T. ROWE PRICE PROPERTIES, GROUPS A AND B
(IN THOUSANDS)

<TABLE>
<CAPTION>
GROUP A GROUP A GROUP B GROUP B
SIX MONTHS ENDED YEAR ENDED THREE MONTHS YEAR ENDED
MARCH 31, SEPTEMBER 30, ENDED MARCH 31, DECEMBER 31,
1997 1996 1997 1996
(UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED)
----------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
REVENUES...................... $ 2,191 $4,246 $ 4,340 $ 16,751
CERTAIN EXPENSES:
Operating..................... 489 990 689 3,112
Real estate taxes............. 194 460 668 2,661
------ ------ ------ -------
683 1,450 1,357 5,773
------ ------ ------ -------
REVENUES IN EXCESS OF CERTAIN
EXPENSES.................... $ 1,508 $2,796 $ 2,983 $ 10,978
====== ====== ====== =======
</TABLE>

The accompanying notes are an integral part of this statement.

F-3
<PAGE> 65

GLENBOROUGH REALTY TRUST INCORPORATED

NOTES TO COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES OF
THE T. ROWE PRICE PROPERTIES, GROUPS A AND B

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICY

Property Acquired -- The accompanying combined statements of revenues and
certain expenses includes the operations (see "Basis of Presentation" below) of
the following T. Rowe Price Properties to be acquired by the Company from T.
Rowe Price Partnerships, an unaffiliated third party.

<TABLE>
<CAPTION>
PROPERTY CITY STATE TYPE
--------------------------------------- ------------------ ----- -----------
<S> <C> <C> <C>
GROUP A
Springdale............................. Santa Fe Springs CA Industrial
Newport Center......................... Deerfield Beach FL Industrial
Airport Perimeter...................... College Park GA Industrial
The Business Park...................... Gwinnett County GA Industrial
Montgomery............................. Gaithersburg MD Office
GROUP B
Baseline............................... Tempe AZ Industrial
Coronado............................... Anaheim CA Industrial
Scripps Terrace........................ San Diego CA Industrial
Tierrasanta............................ San Diego CA Industrial
Valley Business Center................. Denver CO Industrial
Business Plaza......................... Ft. Lauderdale FL Industrial
River Run.............................. Miramar FL Retail
Burnham................................ Boca Raton FL Industrial
Buschwood II........................... Tampa FL Office
Atlantic............................... Gwinnett County GA Industrial
Oakbrook Corners....................... Norcross GA Industrial
Bonnie Lane............................ Elk Grove Village IL Industrial
Glenn Avenue........................... Wheeling IL Industrial
Wood Dale.............................. Wood Dale IL Industrial
Westbrook Commons...................... Westchester IL Retail
Goshen................................. Gaithersburg MD Retail
Winnetka............................... Crystal MN Industrial
Riverview.............................. St. Paul MN Industrial
Gatehall I............................. Parsipanny NJ Office
Clark Avenue........................... King of Prussia PA Office
Post Oak Place......................... Houston TX Office
Kent Park.............................. Kent WA Industrial
</TABLE>

Basis of Presentation -- The accompanying combined statements of revenues
and certain expenses are not intended to be a complete presentation of the
actual operations of the T. Rowe Price Properties for the periods presented.
Certain expenses may not be comparable to the expenses expected to be incurred
by the Company in the future operations of the T. Rowe Price Properties;
however, the Company is not aware of any material factors relating to the T.
Rowe Price Properties that would cause the reported financial information not to
be indicative of future operating results. Excluded expenses consist of property
management fees, interest expense, depreciation and amortization and other costs
not directly related to the future operations of the T. Rowe Price Properties.

F-4
<PAGE> 66

GLENBOROUGH REALTY TRUST INCORPORATED

NOTES TO COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES OF
THE T. ROWE PRICE PROPERTIES, GROUPS A AND B -- CONTINUED

These combined financial statements have been prepared for the purpose of
complying with certain rules and regulations of the Securities and Exchange
Commission.

Revenue Recognition -- All leases are classified as operating leases.
Rental revenue is recognized as earned over the terms of the leases.

2. LEASING ACTIVITY

The minimum future rental revenues from leases in effect as of April 1,
1997 are as follows (in thousands):

<TABLE>
<CAPTION>
YEAR AMOUNT
--------------------------------------------------- -------
<S> <C>
1997............................................... $11,221
1998............................................... 11,775
1999............................................... 7,676
2000............................................... 4,596
2001............................................... 2,868
Thereafter......................................... 12,760
-------
Total.................................... $50,896
=======
</TABLE>

In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $259
(unaudited) for the six months ended March 31, 1997 and $501 the year ended
September 30, 1996 for Group A, and $974 (unaudited) for the three months ended
March 31, 1997 and $3,696 the year ended December 31, 1996 for Group B. Certain
leases contain lessee renewal options.

F-5
<PAGE> 67

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Glenborough Realty Trust Incorporated:

We have audited the accompanying statement of revenues and certain expenses
of the Centerstone Property, as defined in Note 1, for the year ended December
31, 1996. This financial statement is the responsibility of the management of
the Company. Our responsibility is to express an opinion on this financial
statement based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis for our opinion.

The accompanying statement of revenues and certain expenses has been
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, as described in Note 1, and is not intended
to be a complete presentation of the revenues and expenses of the Centerstone
Property.

In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of the Centerstone
Property for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.

ARTHUR ANDERSEN LLP

San Francisco, California
June 30, 1997

F-6
<PAGE> 68

GLENBOROUGH REALTY TRUST INCORPORATED

STATEMENT OF REVENUES AND CERTAIN EXPENSES OF
THE CENTERSTONE PROPERTY
FOR THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
AND THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS YEAR
ENDED ENDED
MARCH 31, DECEMBER 31,
1997 1996
(UNAUDITED) (AUDITED)
------------ ------------
<S> <C> <C>
REVENUES........................................................... $955 $3,745
CERTAIN EXPENSES:
Operating........................................................ 174 706
Real estate taxes................................................ 37 150
---- ------
211 856
---- ------
REVENUES IN EXCESS OF CERTAIN EXPENSES............................. $744 $2,889
==== ======
</TABLE>

The accompanying notes are an integral part of this statement.

F-7
<PAGE> 69

GLENBOROUGH REALTY TRUST INCORPORATED

NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES OF
THE CENTERSTONE PROPERTY
FOR THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
AND THE YEAR ENDED DECEMBER 31, 1996

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICY

Property Acquired -- The accompanying statement of revenues and certain
expenses includes the operations (see "Basis of Presentation" below) of the
Centerstone Property located in Irvine, California, acquired by the Company from
an unaffiliated third party.

Basis of Presentation -- The accompanying statement of revenues and certain
expenses is not intended to be a complete presentation of the actual operations
of the Centerstone Property for the periods presented. Certain expenses may not
be comparable to the expenses expected to be incurred by the Company in the
future operations of the Centerstone Property; however, the Company is not aware
of any material factors relating to the Centerstone Property that would cause
the reported financial information not to be indicative of future operating
results. Excluded expenses consist of property management fees, interest
expense, depreciation and amortization and other costs not directly related to
the future operations of the Centerstone Property.

This financial statement has been prepared for the purpose of complying
with certain rules and regulations of the Securities and Exchange Commission.

Revenue Recognition -- All leases are classified as operating leases.
Rental revenue is recognized as earned over the terms of the leases.

2. LEASING ACTIVITY

The minimum future rental revenues from leases in effect as of April 1,
1997 are as follows (in thousands):

<TABLE>
<CAPTION>
YEAR AMOUNT
--------------------------------------------------- -------
<S> <C>
1997............................................... $ 2,686
1998............................................... 3,380
1999............................................... 2,659
2000............................................... 2,321
2001............................................... 2,254
Thereafter......................................... 7,848
-------
Total.................................... $21,148
=======
</TABLE>

In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $94
(unaudited) for the three months ended March 31, 1997 and $374 for the year
ended December 31, 1996. Certain leases contain lessee renewal options.

F-8
<PAGE> 70

PROSPECTUS

<TABLE>
<S> <C> <C>
LOGO $529,125,000
LOGO
PREFERRED STOCK, COMMON STOCK AND WARRANTS
</TABLE>

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

Glenborough Realty Trust Incorporated (the "Company") may from time to time
offer in one or more series or classes (i) shares or fractional shares of its
preferred stock, par value $.001 (the "Preferred Stock"), (ii) shares of its
common stock, par value $0.001 per share (the "Common Stock") and (iii) warrants
to purchase shares of Preferred Stock or Common Stock (the "Warrants") in
amounts, at prices and on terms to be determined at the time of offering, with
an aggregate public offering price of up to $529,125,000. The Preferred Stock,
Common Stock and Warrants (collectively, the "Offered Securities") may be
offered, separately or together, in separate series in amounts, at prices and on
terms to be set forth in one or more supplements to the Prospectus (each a
"Prospectus Supplement").

The specific terms of the Offered Securities in respect to which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable (i) in the case of Preferred
Stock, the specific title and stated value, any dividend, liquidation,
redemption, conversion, voting and other rights, and any initial public offering
price; (ii) in the case of Common Stock, the specific title and stated value and
any initial public offering price and (iii) in the case of Warrants, the
duration, offering price, exercise price and detachability. In addition, such
specific terms may include limitations on direct or beneficial ownership and
restrictions on transfer of the Offered Securities, in each case as may be
appropriate to preserve the status of the Company as a real estate investment
trust ("REIT") for federal income tax purposes.

The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States Federal Income Tax Consequences relating
to, and any listing on a securities exchange of, the Offered Securities covered
by such Prospectus Supplement.

The Offered Securities may be offered directly, through agents designated
from time to time by the Company or the Operating Partnership, or to or through
underwriters or dealers. If any agents or underwriters are involved in the sale
of any of the Offered Securities, their names, and any applicable purchase
price, fee, commission or discount arrangement between or among them, will be
set forth or will be calculable from the information set forth in the applicable
Prospectus Supplement. See "Plan of Distribution." No Offered Securities may be
sold without delivery of the applicable Prospectus Supplement describing the
method and terms of the offering of such Offered Securities.

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE OFFERED SECURITIES.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------

THE DATE OF THIS PROSPECTUS IS MAY 21, 1997.
<PAGE> 71

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR AN APPLICABLE PROSPECTUS
SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE OPERATING
PARTNERSHIP OR ANY UNDERWRITER, DEALER OR AGENT. THIS PROSPECTUS AND ANY
APPLICABLE PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR
ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR THE OPERATING PARTNERSHIP SINCE THE DATE HEREOF OR
THEREOF.

2
<PAGE> 72

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith the Company files proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The Registration
Statement, and exhibits and schedules forming a part thereof and the reports,
proxy statements and other information filed with the Commission in accordance
with the Exchange Act can be inspected and copied at the Commission's Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C., 20549, and at the
following regional offices of the Commission: Seven World Trade Center, 13th
Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The address of the Commission's Web Site is
(http://www.sec.gov). In addition, the Common Stock is listed on the New York
Stock Exchange and similar information concerning the Company can be inspected
and copied at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005.

The Company has filed with the Commission registration statements on Form
S-3 (the "Registration Statements") (of which this Prospectus is a part) under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Offered Securities. This Prospectus does not contain all of the information
set forth in the Registration Statements, certain portions of which have been
omitted as permitted by the rules and regulations of the Commission. Statements
contained in this Prospectus as to the contents of any contract or other
documents are not necessarily complete, and in each instance reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statements, each such statement being qualified in all respects by
such reference and the exhibits and schedules thereto. For further information
regarding the Company and the Offered Securities, reference is hereby made to
the Registration Statements and such exhibits and schedules which may be
obtained from the Commission at its principal office in Washington, D.C., upon
payment of the fees prescribed by the Commission.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The documents listed below have been filed by the Company under the
Exchange Act with the Commission and are incorporated herein by reference:

a. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996;

b. The Company's Current Reports on Form 8-K, filed with the
Commission on February 5, 1997, March 19, 1997, April 23, 1997, April 24,
1997, April 25, 1997 and May 2, 1997, respectively;

c. The Company's Current Reports on Form 8-K/A, filed with the
Commission on February 24, 1997;

d. The description of the Registrant's Common Stock contained in the
Company's Registration Statement on Form 8-A (File No. 1-14162).

All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Offered Securities shall be
deemed to be incorporated by reference in this Prospectus and to be part hereof
from the date of filing such documents.

Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in the applicable Prospectus Supplement) or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus (or in the applicable Prospectus
Supplement).

3
<PAGE> 73

Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner, to whom this
Prospectus is delivered upon written or oral request. Requests should be
directed to the Vice President, Capital Markets, Glenborough Realty Trust
Incorporated, 400 South El Camino Real, Suite 1100, San Mateo, California
95402-1708, telephone number (415) 343-9300.

As used herein, the term "Company" means Glenborough Realty Trust
Incorporated, a Maryland real estate investment trust, and its consolidated
subsidiaries for the periods from and after December 31, 1995 (the date of the
merger of eight public limited partnerships and Glenborough Corporation, a
California corporation, (the "Predecessors") with and into the Company (the
"Consolidation")). This Prospectus and the documents incorporated herein contain
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act, which statements involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this Prospectus.
Unless otherwise indicated, ownership percentages of the Company's Common Stock
have been computed on a fully converted basis, using an exchange of Operating
Partnership units for Common Stock on a one-for-one basis.

4
<PAGE> 74

THE COMPANY

The Company is a self-administered and self-managed real estate investment
trust (a "REIT") that owns a portfolio of 76 office, industrial, retail,
multifamily and hotel properties (the "Properties") located in 20 states
throughout the country, as of April 30, 1997. The Company's principal growth
strategy is to capitalize on the opportunity to acquire portfolios or single
properties from public and private partnerships on attractive terms. This
strategy has evolved from the Company's predecessors' experience since 1978 in
managing real estate partnerships and their assets and, since 1989, in acquiring
management interests from third parties. In addition, three associated companies
(the "Associated Companies") provide comprehensive asset, partnership and
property management services for 65 other properties that are not owned by the
Company.

A portion of the Company's operations is conducted through a subsidiary
operating partnership (the "Operating Partnership"), in which the Company holds
a 1% interest as the sole general partner and in which the Company holds an
approximate 90.5% limited partner interest, as of April 30, 1997.

The Common Stock is listed on the New York Stock Exchange under the Symbol
"GLB." The Company commenced operations on December 31, 1995, through the merger
of eight public limited partnerships and a management company with and into the
Company. The Company's executive offices are located at 400 South El Camino
Real, Suite 1100, San Mateo, California 94402-1708 and its telephone number is
(415) 343-9300.

TAX STATUS OF THE COMPANY

The Company will elect to be taxed as a REIT under Sections 856 through 860
of the Internal Revenue Code of 1986, as amended (the "Code"), commencing with
its taxable year ended December 31, 1996. As a REIT, the Company generally will
not be subject to Federal income tax on net income that it distributes to its
stockholders. Even if the Company qualifies for taxation as a REIT, the Company
may be subject to certain Federal, state and local taxes on its income and
property. See "Federal Income Tax Consequences."

5
<PAGE> 75

RISK FACTORS

Prospective investors should read this entire Prospectus carefully,
including all appendices and supplements hereto, and should consider carefully
the following factors before purchasing the Offered Securities offered hereby.

RISKS ASSOCIATED WITH ACQUISITIONS

RISKS ASSOCIATED WITH THE ADDITION OF A SUBSTANTIAL NUMBER OF NEW
PROPERTIES

The Company is currently experiencing a period of rapid growth. Since the
Consolidation on December 31, 1995, the Company has invested approximately $262
million in properties and, upon the completion of the T. Rowe Price Properties
acquisition, the Company will have invested an additional approximately $146.8
million. The Company's ability to manage its growth effectively will require it
to apply successfully its experience managing its existing portfolio to new
markets and to an increased number of properties. There can be no assurance that
the Company will be able to manage these operations effectively. The Company's
inability to effectively manage its expansion could have an adverse effect on
the Company's results of operations and financial condition.

RISKS ASSOCIATED WITH THE T. ROWE PRICE PROPERTIES ACQUISITION

The Company has entered into definitive agreements to acquire the T. Rowe
Price Properties, a portfolio of 27 properties aggregating approximately
2,888,000 square feet for a total acquisition cost of approximately $146.8
million, which the Company anticipates will be paid entirely in cash in part
from a portion of the proceeds of the Offering. This acquisition is subject to
approval of the acquisition by the limited partners, general partners or
stockholders of the sellers, as the case may be, and customary closing
conditions. Accordingly, there can be no assurance that the acquisition of any
or all of the T. Rowe Price Properties will be consummated. If this acquisition
is not consummated, or if consummated, is not consummated within the Company's
intended time frame, and the Company is unable to redeploy the proceeds from the
Offering to other properties or investments with the same return anticipated
from the T. Rowe Price Properties, the Company's results of operations could be
negatively affected.

ACQUISITIONS COULD ADVERSELY AFFECT OPERATIONS OR STOCK VALUE

Consistent with its growth strategy, the Company is continually pursuing
and evaluating potential acquisition opportunities, and is from time to time
actively considering the possible acquisition of specific properties, which may
include properties managed or controlled by one of the Associated Companies or
owned by affiliated parties. It is possible that one or more of such possible
future acquisitions, if completed, could adversely affect the Company's funds
from operations or cash available for distribution, in the short term or the
long term or both, or increase the Company's debt, or be perceived negatively
among investors such that such an acquisition could be followed by a decline in
the market value of the Common Stock.

CONFLICT OF INTEREST

The Company has acquired, and from time to time may acquire, properties
from partnerships that Robert Batinovich, the Company's Chief Executive Officer,
and Andrew Batinovich, the Company's Chief Operating Officer, control, and in
which they and members of their families have substantial interests. It is also
possible that the Company may enter into transactions to acquire other
properties controlled by these individuals or in which they or members of their
families have substantial interests in the future. These transactions involve or
will involve conflicts of interest. These transactions may provide substantial
economic benefits such as the payments or unit issuances, relief or deferral of
tax liabilities, relief of primary or secondary liability for debt, and
reduction in exposure to other property-related liabilities. Despite the
presence of appraisals or fairness opinions or review by parties who have no
interest in the transactions, the transactions will not be the product of
arm's-length negotiation and there can be no assurance that these transactions
will be as favorable to the Company as transactions that the Company negotiates
with unrelated parties or will not result in undue benefit to Robert and Andrew
Batinovich and members of their families. Neither Robert Batinovich nor Andrew

6
<PAGE> 76

Batinovich has guaranteed that any properties acquired from entities they
control or in which they or their families have a significant interest will be
as profitable as other investments made by the Company or will not result in
losses.

ASSUMPTION OF GENERAL PARTNER LIABILITIES

The Company and its predecessors have acquired a number of their properties
by acquiring partnerships that own the properties or by first acquiring general
partnership interests and at a later date acquiring the properties, and the
Company may pursue acquisitions in this manner in the future. When the Company
uses this acquisition technique, a subsidiary of the Company becomes a general
partner. As a general partner the Company's subsidiary becomes generally liable
for the debts and obligations of the partnership, including debts and
obligations that may be contingent or unknown at the time of the acquisition. In
addition, the Company's subsidiary assumes obligations under the partnership
agreements, which may include obligations to make future contributions for the
benefit of other partners. The Company undertakes detailed due diligence reviews
to ascertain the nature and extent of obligations that its subsidiary will
assume when it becomes a general partner, but there can be no assurance that the
obligations assumed will not exceed the Company's estimates or that the assumed
liabilities will not have an adverse effect on the Company's results of
operations or financial condition. In addition, an Associated Company may enter
into management agreements pursuant to which it assumes certain obligations as
manager of properties. There can be no assurance that these obligations will not
have an adverse effect on the Associated Companies' results of operations or
financial condition, which could adversely affect the value of the Company's
preferred stock interest in those companies.

RISKS RELATING TO TENDER OFFERS

The Company may, as part of its growth strategy, acquire properties and
portfolios of properties through tender offer acquisitions of interests in
public and private partnerships. Tender offers often result in competing tender
offers, as well as litigation initiated by limited partners in the subject
partnerships or by competing bidders. Due to the inherent uncertainty of
litigation, the Company could be subject to adverse judgments in substantial
amounts. As the Company has not yet attempted an acquisition through the tender
offer process, and because of competing offers and possible litigation, there
can be no assurance that, if undertaken, the Company would be successful in
acquiring properties through a tender offer or that the tender offer process
would not result in litigation and a significant judgment adverse to the
Company.

LITIGATION RELATED TO CONSOLIDATION

Recent business reorganizations sponsored by others involving the
conversion of partnerships into corporations have given rise to a number of
investor lawsuits. These lawsuits have included claims against the general
partners of the participating partnerships, the partnerships themselves and
related persons involved in the structuring of or benefiting from the conversion
or reorganization, as well as claims against the surviving entity and its
directors and officers. The lawsuits have included, among others, claims that
the structure of the reorganizations, as well as the manner in which they were
submitted for investor approval, involved violations of federal and state
securities laws, common law fraud and negligent misrepresentations, breaches of
fiduciary duty, unfair and deceptive trade practices, negligence and waste,
breaches of the partnership documents of the participating partnerships, failure
to comply with applicable reporting requirements, violations of the rules of the
NASD on suitability and fair practices, and violations of the Racketeer
Influenced and Corrupt Organizations Act. Two lawsuits have been filed
contesting the fairness of the Consolidation, one in California state court and
one in federal court. A settlement of the state court action has been approved
by the court, but objectors to the settlement have appealed that approval. The
Company and the other defendants in the state court action have filed a
responsive brief and the appeal is now pending. The federal court action has
been stayed pursuant to stipulation of the parties pending resolution of the
state court action.

From time to time the Company is involved in other litigation arising out
of its business activities. It is possible that this litigation and the other
litigation previously described could result in significant losses in

7
<PAGE> 77

excess of amounts reserved, which could have an adverse effect on the Company's
results of operations and the financial condition of the Company.

CHAPTER 11 REORGANIZATION OF PARTNERSHIP CONSOLIDATION BY SENIOR MANAGEMENT

Robert and Andrew Batinovich, two of the senior officers of the Company,
were also senior members of a management team that formed a publicly registered
limited partnership in 1986 to consolidate a number of predecessor partnerships.
That public partnership was involved in litigation with its primary creditor and
in order to prevent foreclosure filed a petition for reorganization under
Chapter 11 of the United States Bankruptcy Code in May of 1992. The public
partnership, the primary subsidiary of which is GPA, Ltd., which owns an
approximately 4.9% limited partner interest in the Operating Partnership along
with other substantial real estate assets, settled the litigation and obtained
confirmation of a plan of reorganization in January 1994. Investors in the
Common Stock should consider that the consolidation of partnerships into GPA,
Ltd.'s parent partnership did not achieve all of the objectives stated at the
time and should further consider the relevance of that fact to their investment
in the Common Stock of the Company.

CERTAIN TAX RISKS

CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT

The Company intends to elect to be treated as a REIT under the Code
commencing with its taxable year ending December 31, 1996. No assurance can be
given, however, that the Company will be able to operate in a manner which would
permit it to qualify to make this election. Qualification as a REIT involves the
satisfaction of numerous requirements (some on an annual and quarterly basis)
established under highly technical and complex Code provisions for which only
limited judicial or administrative interpretation exists, and involves the
determination of various factual matters and circumstances not entirely within
the Company's control. The Company will receive nonqualifying management fee
income and will own nonqualifying preferred stock in the Associated Companies.
As a result, the Company may approach the income and asset test limits imposed
by the Code and could be at risk of not satisfying those tests. In order to
avoid exceeding the asset test limit, for example, the Company may have to
reduce its interest in the Associated Companies. The Company is relying on the
opinion of its tax counsel regarding its ability to qualify as a REIT. This
legal opinion is not binding on the IRS. See "Federal Income Tax
Consequences -- Taxation of the Company."

If the Company were to fail to qualify as a REIT in any taxable year, the
Company would be subject to federal income tax (including any applicable
alternative minimum tax) on its taxable income at corporate rates. Moreover,
unless entitled to relief under certain statutory provisions, the Company also
would be disqualified from treatment as a REIT for the four taxable years
following the year during which qualification is lost. This treatment would
reduce the net earnings of the Company available for investment or distribution
to stockholders because of the additional tax liability to the Company for the
years involved. In addition, distributions to stockholders would no longer be
required to be made. See "Federal Income Tax Consequences -- Failure to
Qualify."

Even if the Company qualifies as a REIT, it will be subject to certain
federal, state and local taxes on its income and property. See "Federal Income
Tax Consequences -- Taxation of the Company."

POSSIBLE CHANGES IN TAX LAWS

Income tax treatment of REITs may be modified, prospectively or
retroactively, by legislative, judicial or administrative action at any time. No
assurance can be given that legislation, regulations, administrative
interpretations or court decisions will not significantly change the tax laws
with respect to the qualification as a REIT or the federal income tax
consequences of this qualification. In addition to any direct effects the
changes might have, the changes might also indirectly affect the market value of
all real estate investments, and consequently the ability of the Company to
realize its investment objectives.

8
<PAGE> 78

RISKS RELATING TO REAL ESTATE

ENVIRONMENTAL MATTERS

All of the Properties presently owned by the Company have been subject to
Phase I environmental assessments by independent environmental consultants. Some
of the Phase I environmental assessments recommended further investigations in
the form of Phase II environmental assessments, including soil and groundwater
sampling, and all of these investigations have been completed by the Company or
are in the process of being completed. Certain of the Properties owned by the
Company have been found to contain ACMs. The Company believes that these
materials have been adequately contained and that an ACM operations and
maintenance program has been implemented or is in the process of being
implemented for the Properties found to contain ACMs.

Some, but not all, of the properties owned by partnerships managed by the
Associated Companies have been subject to Phase I environmental assessments by
independent environmental consultants. The Associated Companies determine on a
case-by-case basis whether to obtain Phase I environmental assessments on these
properties and whether to undertake further investigation or remediation.
Certain of these properties contain ACMs. In each case the responsible
Associated Company believes that these materials have been adequately contained
and that an ACM operations and maintenance program has been implemented for the
properties found to contain ACMs.

Six of the Properties owned by the Company are leased in whole or in part
to an operator of auto care centers which include oil change and tune-up
facilities, and ten of the Properties are leased to operators of convenience
stores which sell petroleum-based fuels. These Properties and other of the
Properties contain, and/or may have contained in the past, underground storage
tanks for the storage of petroleum products and/or other hazardous or toxic
substances which create a potential for release of petroleum products and/or
other hazardous or toxic substances. Some of the Properties owned by the Company
are adjacent to or near properties that have contained in the past or currently
contain, underground storage tanks used to store petroleum products or other
hazardous or toxic substances. Several of the Properties have been contaminated
with petroleum products or other hazardous or toxic substances from on-site
operations or operations on adjacent or nearby properties. In addition, certain
of the Properties are on, adjacent to or near properties upon which others have
engaged or may in the future engage in activities that may release petroleum
products or other hazardous or toxic substances.

Although tenants of the Properties owned by the Company generally are
required by their leases to operate in compliance with all applicable federal,
state and local environmental laws, ordinances and regulations and to indemnify
the Company against any environmental liability arising from the tenants'
activities on the Properties, the Company could nevertheless be subject to
environmental liability relating to its management of the Properties or strict
liability by virtue of its ownership interest in the Properties and there can be
no assurance that the tenants would satisfy their indemnification obligations
under the leases. There can be no assurance that any environmental assessments
of the Properties owned by the Company, properties being considered for
acquisition by the Company, or the properties owned by the partnerships managed
by the Associated Companies have revealed all potential environmental
liabilities, that any prior owner or prior or current operator of such
properties did not create an environmental condition not known to the Company or
that an environmental condition does not otherwise exist as to any one or more
of such properties that could have an adverse effect on the Company's results of
operations and financial condition, either directly (with respect to properties
owned by the Company), or indirectly (with respect to properties owned by
partnerships managed by an Associated Company) by adversely affecting the
financial condition of the Associated Company and thus the value of the
Company's preferred stock interest in the Associated Company. Moreover, there
can be no assurance that (i) future environmental laws, ordinances or
regulations will not have an adverse effect on the Company's results of
operations and financial condition or (ii) the current environmental condition
of such properties will not be affected by tenants and occupants of such
properties, by the condition of land or operations in the vicinity of the
properties (such as the presence of underground storage tanks), or by third
parties unrelated to the Company.

9
<PAGE> 79

RISKS RELATED TO OWNERSHIP AND FINANCING OF REAL ESTATE

The Company is subject to risks generally incidental to the ownership of
real estate, including changes in general economic or local conditions, changes
in supply of or demand for similar or competing properties in an area, the
impact of environmental protection laws, changes in interest rates and
availability of financing which may render the sale or financing of a property
difficult or unattractive, changes in tax, real estate and zoning laws, and the
creation of mechanics' liens or similar encumbrances placed on the property by a
lessee or other parties without the Company's knowledge and consent. Should any
of these events occur, there could be an adverse effect on the Company's results
of operations and financial condition.

AVAILABILITY OF REAL ESTATE FOR ACQUISITIONS

The Company's growth is dependent upon acquisitions. There can be no
assurance that properties will be available for acquisition or, if available,
that the Company will be able to purchase such properties on favorable terms. If
such acquisitions are not available it could have a negative impact on the
growth of the Company, which could have an adverse effect on the performance of
the Company's Common Stock.

COMPETITION FOR ACQUISITION OF REAL ESTATE

The Company faces competition from other businesses, individuals, fiduciary
accounts and plans and other entities in the acquisition, operation and sale of
its properties. Some of the Company's competitors are larger and have greater
financial resources than the Company. This competition may result in a higher
cost for properties the Company wishes to purchase.

COMPETITION FOR TENANTS

The Company is subject to the risk that when space becomes available at its
properties the leases may not be renewed, the space may not be let or relet, or
the terms of the renewal or reletting (including the cost of required
renovations or concessions to tenants) may be less favorable to the Company.
Although the Company has established annual property budgets that include
estimates of costs for renovation and reletting expenses that it believes are
reasonable in light of each property's situation, no assurance can be given that
these estimates will sufficiently cover these expenses. If the Company is unable
to promptly lease all or substantially all of the space at its properties, if
the rental rates are significantly lower than expected, or if the Company's
reserves for these purposes prove inadequate, then there could be an adverse
effect on the Company's results of operations and financial condition.

TENANTS' DEFAULTS

The ability of the Company to manage its assets is subject to federal
bankruptcy laws and state laws affecting creditors' rights and remedies
available to real property owners. In the event of the financial failure or
bankruptcy of a tenant, there can be no assurance that the Company could
promptly recover the tenant's premises from the tenant or from a trustee or
debtor-in-possession in any bankruptcy proceeding filed by or against that
tenant, or that the Company would receive rent in the proceeding sufficient to
cover its expenses with respect to the premises. In the event of the bankruptcy
of a tenant, the Company will be subject to the provisions of the federal
bankruptcy code, which in some instances may restrict the amount and
recoverability of claims held by the Company against the tenant. If any tenant
defaults on its obligations to the Company, there could be an adverse effect on
the Company's results of operations and financial condition.

MANAGEMENT, LEASING AND BROKERAGE RISKS; LACK OF CONTROL OF ASSOCIATED
COMPANIES

The Company is subject to the risks associated with the property
management, leasing and brokerage businesses. These risks include the risk that
management contracts or service agreements may be terminated, that contracts
will not be renewed upon expiration or will not be renewed on terms consistent
with current terms, and that leasing and brokerage activity generally may
decline. Acquisition of properties by the Company from the Associated Companies
could result in a decrease in revenues to the Associated Companies and a
corresponding decrease in dividends received by the Company from the Associated
Companies. Each of

10
<PAGE> 80

these developments could have an adverse effect on the Company's results of
operations and financial condition.

To qualify for and to maintain the Company's status as a REIT while
realizing income from the Company's third-party management business, the capital
stock of Glenborough Hotel Group, a Nevada corporation ("GHG"), Glenborough
Corporation, a California corporation ("GC") and Glenborough Inland Realty
Corporation, a California corporation ("GIRC," and collectively with GHG and GC,
the "Associated Companies") (which conduct the Company's third-party management,
leasing and brokerage businesses) is divided into two classes. All of the voting
common stock of the Associated Companies, representing 5% of the total equity of
GC and GIRC, and 25% of the total equity of GHG, is held by individual
stockholders. Nonvoting preferred stock representing the remaining equity of
each Associated Company is held entirely by the Company. Although the Company
holds a majority of the equity interest in each Associated Company, the Company
is not able to elect directors of any Associated Company and, consequently, the
Company has no ability to influence the day-to-day decisions of each entity.

UNINSURED LOSS

The Company or in certain instances tenants of the properties carry
comprehensive liability, fire and extended coverage with respect to the
Company's properties, with policy specification and insured limits customarily
carried for similar properties. There are, however, certain types of losses
(such as from earthquakes and floods) that may be either uninsurable or not
economically insurable. Further, certain of the properties are located in areas
that are subject to earthquake activity and floods. Should a property sustain
damage as a result of an earthquake or flood, the Company may incur losses due
to insurance deductibles, co-payments on insured losses or uninsured losses.
Should an uninsured loss occur, the Company could lose some or all of its
capital investment, cash flow and anticipated profits related to one or more
properties, which could have an adverse effect on the Company's results of
operations and financial condition.

ILLIQUIDITY OF REAL ESTATE

Real estate investments are relatively illiquid and, therefore, will tend
to limit the ability of the Company to vary its portfolio promptly in response
to changes in economic or other conditions. In addition, the Internal Revenue
Code of 1986, as amended (the "Code"), and individual agreements with sellers of
properties place limits on the Company's ability to sell properties, which may
adversely affect returns to holders of Common Stock. Twenty-four of the
properties owned by the Operating Partnership were acquired on terms and
conditions under which they can be disposed of only in a like-kind exchange or
other non-taxable transaction.

POTENTIAL LIABILITY UNDER THE AMERICANS WITH DISABILITIES ACT

As of January 26, 1992, all of the Company's properties were required to be
in compliance with the Americans With Disabilities Act (the "ADA"). The ADA
generally requires that places of public accommodation be made accessible to
people with disabilities to the extent readily achievable. Compliance with the
ADA requirements could require removal of access barriers and non-compliance
could result in imposition of fines by the federal government, an award of
damages to private litigants and/or a court order to remove access barriers.
Because of the limited history of the ADA, the impact of its application to the
Company's properties, including the extent and timing of required renovations,
is uncertain. Pursuant to certain lease agreements with tenants in certain of
the "single-tenant" Properties, the tenants are obligated to comply with the ADA
provisions. If the Company's costs are greater than anticipated or tenants are
unable to meet their obligations, there could be an adverse effect on the
Company's results of operations and financial condition.

ADDITIONAL CAPITAL REQUIREMENTS

The Company's future growth depends in large part upon its ability to raise
additional capital on satisfactory terms or at all. There can be no assurance
that the Company will be able to raise sufficient capital to achieve its
objectives. If the Company were to raise additional capital through the issuance
of additional

11
<PAGE> 81

equity securities, or securities convertible into or exercisable for equity
securities, the interests of holders of the Offered Securities could be diluted.
Likewise, the Company's Board of Directors is authorized to cause the Company to
issue Preferred Stock in one or more series and to determine the distributions
and voting and other rights of the Preferred Stock. Accordingly, the Board of
Directors may authorize the issuance of Preferred Stock with voting,
distribution and other similar rights which could be dilutive to or otherwise
adversely affect the interests of holders of Offered Securities. If the Company
were to raise additional capital through debt financing, the Company will be
subject to the risks described below, among others.

LIMITATION ON OWNERSHIP OF COMMON STOCK MAY PRECLUDE ACQUISITION OF CONTROL

Provisions of the Company's Articles of Incorporation are designed to
assist the Company in maintaining its qualification as a REIT under the Code by
preventing concentrated ownership of the Company which might jeopardize REIT
qualification. Among other things, these provisions provide that (a) any
transfer or acquisition of Common Stock that would result in the
disqualification of the Company as a REIT under the Code will be void, and (b)
if any person attempts to acquire shares of Common Stock that after the
acquisition would cause the person to own or to be deemed to own, by operation
of certain attribution rules set out in the Code, an amount of Common Stock in
excess of a predetermined limit, which, pursuant to Board action, currently is
9.75% of the outstanding shares of Common Stock (the "Ownership Limitation" and
as to the Common Stock, the transfer of which would cause any person to actually
own Common Stock in excess of the Ownership Limitation, the "Excess Shares"),
the transfer shall be void and the Common Stock subject to the transfer shall
automatically be transferred to an unaffiliated trustee for the benefit of a
charitable organization designated by the Board of Directors of the Company
until sold by the trustee to a third party or purchased by the Company. Robert
Batinovich, his spouse and children (including Andrew Batinovich) and
individuals or entities whose ownership of Common Stock is attributed to Robert
Batinovich in determining the number of shares of Common Stock owned by him for
purposes of compliance with Section 856 of the Code (the "Attributed Owners"),
are exempt from these restrictions, but are prohibited from acquiring shares of
Common Stock if, after the acquisition, they would own in excess of 10.50% of
the outstanding shares of Common Stock. This limitation on the ownership of
Common Stock may have the effect of precluding the acquisition of control of the
Company by a third party without the consent of the Board of Directors. If the
Board of Directors waives the Ownership Limitation for any person, the Ownership
Limitation shall be proportionally and automatically reduced with regard to all
other persons such that no five persons may own more than 49% of the Common
Stock (the aggregate Ownership Limitations as to all of these persons, as
adjusted, the "Adjusted Ownership Limitation"). See "Description of Common
Stock -- Restrictions on Ownership and Transfer of Common Stock" and "Federal
Income Tax Consequences."

OTHER RISKS

DEBT FINANCING

The Company intends to incur additional indebtedness in the future,
including through borrowings under a credit facility, if a credit facility is
available, to finance property acquisitions. As a result, the Company expects to
be subject to risks associated with debt financing, including the risk that
interest rates may increase, the risk that the Company's cash flow will be
insufficient to meet required payments on its debt and the risk that the Company
may be unable to refinance or repay the debt as it comes due. The Company's
current $50 million secured revolving line of credit with Wells Fargo Bank, N.A.
provides that distributions may not exceed 90% of funds from operations and
that, in the event of a failure to pay principal or interest on borrowings
thereunder when due (subject to any applicable grace period), the Company and
its subsidiaries may not pay any distributions on the Common Stock or the
Preferred Stock. If the Company is unable to obtain acceptable financing to
repay indebtedness at maturity, the Company may have to sell properties to repay
indebtedness or properties may be foreclosed upon, which could have an adverse
effect on the Company's results of operations and financial condition.

12
<PAGE> 82

DEPENDENCE ON EXECUTIVE OFFICERS

The Company is dependent on the efforts of Robert and Andrew Batinovich,
its President and Chief Executive Officer and its Executive Vice President,
Chief Financial Officer and Chief Operating Officer, respectively, and of its
other executive officers. The loss of the services of any of them could have an
adverse effect on the results of operations and financial condition of the
Company.

BOARD OF DIRECTORS MAY CHANGE INVESTMENT POLICIES

The descriptions in this Prospectus of the major policies and the various
types of investments to be made by the Company reflect only the current plans of
the Company's Board of Directors. The Company's Board of Directors may change
the investment policies of the Company without a vote of the stockholders. If
the Company changes its investment policies, the risks and potential rewards of
an investment in the Company may also change. In addition, the methods of
implementing the Company's investment policies may vary as new investment
techniques are developed.

EFFECT OF MARKET INTEREST RATES ON PRICE OF COMMON STOCK

One of the factors that may influence the market price of the shares of
Common Stock in public markets will be the annual yield on the price paid for
shares of Common Stock from distributions by the Company. An increase in market
interest rates may lead prospective purchasers of the Common Stock to seek a
higher annual yield from their investments. Such circumstances may adversely
affect the market price of the Common Stock.

SHARES AVAILABLE FOR FUTURE SALE

No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock or future conversions or exercises of securities for
future sales, including shares of Common Stock issuable upon exchange of
Operating Partnership units, will have on the market price of the Common Stock
prevailing from time to time. Sales of substantial amounts of Common Stock, or
the perception that such sales could occur, may adversely affect the prevailing
market price for the Common Stock.

USE OF PROCEEDS

Unless otherwise indicated in the applicable Prospectus Supplement, the
Company intends to invest the net proceeds from any sale of the Offered
Securities for general corporate purposes including, without limitation, the
acquisition and development of properties and the repayment of debt. Net
proceeds from the sale of the Offered Securities initially may be temporarily
invested in short-term securities.

RATIO OF EARNINGS TO FIXED CHARGES

The Company's ratio of earnings to fixed charges for the year ended
December 31, 1996 and for the three-month period ended March 31, 1997 was 2.56x
and 2.65x, respectively. Prior to the Consolidation, the Company's Predecessors'
combined ratio of earnings to fixed charges for 1992, 1993, 1994 and 1995 was
(0.37x), 2.67x, 2.58x and 1.41x, respectively. The ratio of earnings to fixed
charges is computed as income from operations, before minority interest, income
taxes and extraordinary items, plus fixed charges (primarily interest expense)
divided by fixed charges. The ratio of earnings to fixed charges was less than
1.0 in 1992 due to a non-recurring loss provision that did not affect cash flow.
To date, the Company has not issued any shares of preferred stock; therefore,
the ratios of earnings to combined fixed charges and preferred share dividends
are unchanged from the ratios presented in this section.

13
<PAGE> 83

DESCRIPTION OF PREFERRED STOCK

Subject to limitations prescribed by Maryland law and the Company's
Articles of Incorporation and Articles Supplementary (collectively, the
"Charter"), the Board of Directors is authorized to issue, from the authorized
but unissued capital stock of the Company, Preferred Stock in such classes or
series as the Board of Directors may determine and to establish from time to
time the number of shares of Preferred Stock to be included in any such class or
series and to fix the designation and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of the shares of any such class or
series, and such other subjects or matters as may be fixed by resolution of the
Board of Directors. The issuance of Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the Company.

Preferred Stock, upon issuance against full payment of the purchase price
therefor, will be fully paid and nonassessable. The specific terms of a
particular class or series of Preferred Stock will be described in the
Prospectus Supplement relating to that class or series, including a Prospectus
Supplement providing that Preferred Stock may be issuable upon the exercise of
Warrants issued by the Company. The description of Preferred Stock set forth
below and the description of the terms of a particular class or series of
Preferred Stock set forth in a Prospectus Supplement do not purport to be
complete and are qualified in their entirety by reference to the articles
supplementary relating to that class or series.

The rights, preferences, privileges and restrictions of the Preferred Stock
of each class or series will be fixed by the articles supplementary relating to
such class or series. A Prospectus Supplement, relating to each class or series,
will specify the terms of the Preferred Stock as follows:

(1) The title and stated value of such Preferred Stock;

(2) The number of shares of such Preferred Stock offered, the
liquidation preference per share and the offering price of such Preferred
Stock;

(3) The dividend rate(s), period(s), and/or payment date(s) or
method(s) of calculation thereof applicable to such Preferred Stock;

(4) Whether such Preferred Stock is cumulative or not and, if
cumulative, the date from which dividends on such Preferred Stock shall
accumulate;

(5) The procedures for any auction and remarketing, if any, for such
Preferred Stock;

(6) The provision for a sinking fund, if any, for such Preferred
Stock;

(7) The provision for redemption, if applicable, of such Preferred
Stock;

(8) Any listing of such Preferred Stock on any securities exchange;

(9) The terms and conditions, if applicable, upon which such Preferred
Stock will be converted into Common Stock of the Company, including the
conversion price (or manner of calculation thereof);

(10) A discussion of any material federal income tax consequences
applicable to such Preferred Stock;

(11) Any limitations on direct or beneficial ownership and
restrictions on transfer, in each case as may be appropriate to preserve
the status of the Company as a REIT;

(12) The relative ranking and preferences of such Preferred Stock as
to dividend rights and rights upon liquidation, dissolution or winding up
of the affairs of the Company;

(13) Any limitations on issuance of any class or series of preferred
stock ranking senior to or on a parity with such class or series of
Preferred Stock as to dividend rights and rights upon liquidation,
dissolution or winding up of the affairs of the Company;

(14) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock; and

14
<PAGE> 84

(15) Any voting rights of such Preferred Stock.

Unless otherwise specified in the Prospectus Supplement, the Preferred
Stock will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of the Company, rank (i) senior to all classes or
series of Common Stock and Excess Stock of the Company, and to all equity
securities ranking junior to such Preferred Stock with respect to dividend
rights or rights upon liquidation, dissolution or winding up of the Company;
(ii) on a parity with all equity securities issued by the Company the terms of
which specifically provide that such equity securities rank on a parity with the
Preferred Stock with respect to dividends rights or rights upon liquidation,
dissolution or winding up of the Company; and (iii) junior to all equity
securities issued by the Company the terms of which specifically provide that
such equity securities rank senior to the Preferred Stock with respect to
dividend rights or rights upon liquidation, dissolution or winding up of the
Company.

The terms and conditions, if any, upon which shares of any class or series
of Preferred Stock are convertible into Common Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include the
number of shares of Common Stock into which the Preferred Stock is convertible,
the conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of the
Preferred Stock or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such Preferred Stock.

All certificates representing shares of Preferred Stock will bear a legend
referring to the restrictions described above.

All persons who own, directly or by virtue of the attribution provisions of
the Code, more than 5% of the outstanding Common Stock and Preferred Stock (or
1% if there are fewer than 2,000 stockholders) must file an affidavit with the
Company containing the information specified in the Charter within 30 days after
December 31 of each year. In addition, each stockholder shall upon demand be
required to disclose to the Company in writing such information with respect to
the direct, indirect and constructive ownership of shares as the Board of
Directors deems necessary to determine the Company's status as a real estate
investment trust and to insure compliance with the Ownership Limit.

The articles supplementary, if applicable, for the Offered Securities may
also contain provisions that further restrict the ownership and transfer of the
Offered Securities. The applicable Prospectus Supplement will specify any
additional ownership limitation relating to the Offered Securities.

DESCRIPTION OF COMMON STOCK

The following description of the Common Stock sets forth certain general
terms and provisions of the Common Stock to which any Prospectus Supplement may
relate, including a Prospectus Supplement providing that Common Stock will be
issuable upon conversion of Preferred Stock or upon the exercise of Warrants
issued by the Company. This description is in all respects subject to and
qualified in its entirety by reference to the applicable provisions of the
Company's Charter and its Bylaws. The Common Stock is listed on the New York
Stock Exchange under the symbol "GLB." Registrar and Transfer Company is the
Company's transfer agent.

GENERAL

The Company's Charter authorizes the Company to issue up to 50,000,000
shares of Common Stock with a par value of $.001 per share. As of April 30, 1997
there were 13,194,692 shares of Common Stock issued and outstanding, and no
shares of Excess Stock were issued and outstanding. Under Maryland law,
stockholders generally are not liable for the Company's debts or obligations.

The holders of shares of Common Stock are entitled to one vote per share on
all matters voted on by stockholders, including election of directors, and,
except as provided in the Charter in respect of any other class of or series of
stock, the holders of these shares exclusively possess all voting power. The
Charter does not

15
<PAGE> 85

provide for cumulative voting in the election of directors. Subject to any
preferential rights of any outstanding shares or series of stock, holders of
shares of Common Stock are entitled to receive distributions, when and as
declared by the Board of Directors, out of funds legally available therefor.
Upon any liquidation, dissolution or winding up of the Company, the holders of
Common Stock are entitled to receive pro rata all assets of the Company legally
available for distribution to its stockholders after payment of, or adequate
provisions for, all known debts and liabilities of the Company. All shares of
Common Stock now outstanding are fully paid and nonassessable, as will be the
shares of Common Stock offered by this Prospectus or any Prospectus Supplement
when issued. The holders of the Common Stock offered hereby will have no
preemptive rights to subscribe to additional stock or securities issued by the
Company at a subsequent date.

RESTRICTIONS ON OWNERSHIP AND TRANSFER OF COMMON STOCK

For the Company to qualify as a REIT under the Code, not more than 50% of
the value of its outstanding shares of capital stock may be owned, directly or
indirectly, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of a taxable year (other than the first
year) or during a proportionate part of a shorter taxable year. Shares of
capital stock must be beneficially owned by 100 or more persons during at least
335 days of a taxable year of 12 months (other than the first year) or during a
proportionate part of a shorter taxable year. See "Federal Income Tax
Consequences -- Taxation of the Company -- Requirements for Qualification."

Because the Board of Directors believes it is essential for the Company to
qualify as a REIT, the Charter, subject to certain exceptions, provides that no
holder, other than Robert Batinovich and the individuals or entities whose
ownership of shares of Common Stock is attributed to Mr. Batinovich under the
Code (the "Attributed Owners"), may own an amount of Common Stock in excess of
the Ownership Limitation, which, pursuant to Board action, currently is 9.75% of
the outstanding shares of Common Stock. A qualified trust (as defined in the
Charter) generally may own up to 9.9% of the outstanding shares of Common Stock.
The Ownership Limitation provides that Robert Batinovich and the Attributed
Owners may hold up to 10.50% of the outstanding shares of Common Stock,
including shares which Robert Batinovich and the Attributed Owners may acquire
pursuant to an option held by GPA, Ltd. or Mr. Batinovich to cause the Company
to redeem their respective partnership interests in the Operating Partnership,
assuming GPA, Ltd. then dissolves and distributes these shares to the partners
of GPA, Ltd.

The Board of Directors may waive the Ownership Limitation if evidence
satisfactory to the Board of Directors and the Company's tax counsel is
presented that such ownership will not jeopardize the Company's status as a
REIT. As a condition to such waiver, the Board of Directors may require opinions
of counsel satisfactory to it and/or an undertaking from the applicant with
respect to preserving the REIT status of the Company. The Ownership Limitation
will not apply if the Board of Directors and the stockholders determine that it
is no longer in the best interests of the Company to attempt to qualify, or to
continue to qualify, as a REIT. Any transfer of Common Stock that would (a)
create actual or constructive ownership of Common Stock in excess of the
Ownership Limitation, (b) result in the Common Stock being owned by fewer than
100 persons, or (c) result in the Company's being "closely held" under Section
856(h) of the Code, shall be null and void, and the intended transferee will
acquire no rights to the Common Stock.

The Charter also provides that Common Stock involved in a transfer or
change in capital structure that results in a person (other than Robert
Batinovich and the Attributed Owners) owning in excess of the Ownership
Limitation or would cause the Company to become "closely held" (within the
meaning of Section 856(h) of the Code) will automatically be transferred to a
trustee for the benefit of a charitable organization until purchased by the
Company or sold to a third party without violation of the Ownership Limitation.
While held in trust, the Excess Shares will remain outstanding for purposes of
any stockholder vote or the determination of a quorum for such vote and the
trustee will be empowered to vote the Excess Shares. Excess Shares shall be
entitled to distributions, provided that such distributions shall be paid to a
charitable organization selected by the Board of Directors as beneficiary of the
trust. The trustee may transfer the Excess Shares to any individual (a
"Permitted Transferee") whose ownership of Common Stock would be permitted under
the Ownership Limitation and would not cause the Company to become "closely
held." In addition, the Company would have the right, for a period of 90 days,
to purchase all or any portion of the

16
<PAGE> 86

Excess Shares from the trustee at the lesser of (i) where (a) the intended
transferee gave value for the Excess Shares, the price paid for the Excess
Shares by the intended transferee or (b) the intended transferee did not give
value for the Excess Shares, the price per share equal to the average of the
market price for the Common Stock for the five consecutive trading days ending
on the date of the purported transfer to the intended transferee and (ii) the
average of the closing market price for the Common Stock for the five
consecutive trading days ending the date the Company exercises its option to
purchase. The intended transferee would be entitled to receive from the trustee
the lesser of (i) where (a) the intended transferee gave value for the Excess
Shares, the price paid for the Excess Shares by the intended transferee or (b)
the intended transferee did not give value for the Excess Shares, the price per
share equal to the average of the closing market price for the Common Stock for
the five consecutive trading days ending on the date of the purported transfer
to the intended transferee and (ii) the price per share received by the trustee
from the transfer of the Excess Shares to a Permitted Transferee.

The Ownership Limitation will not be automatically removed even if the REIT
provisions of the Code are changed so as to no longer contain any ownership
concentration limitation or if the ownership concentration limitation is
increased. Except as otherwise described above, any change in the Ownership
Limitation would require an amendment to the Charter. Such amendments require
the affirmative vote of stockholders owning a majority of the outstanding Common
Stock. In addition to preserving the Company's status as a REIT, the Ownership
Limitation may have the effect of precluding an acquisition of control of the
Company by a third party without the approval of the Board of Directors.

All certificates representing shares of Common Stock will bear a legend
referring to the restrictions described above.

All stockholders of record who own 5% or more of the value of the
outstanding Common Stock (or 1% if there are fewer than 2,000 stockholders of
record but more than 200, or 1/2% if there are 200 or fewer stockholders of
record) must file written notice with the Company containing the information
specified in the Charter by January 30 of each year. In addition, each
stockholder shall upon demand be required to disclose to the Company in writing
such information with respect to the direct, indirect and constructive ownership
of Common Stock as the Board of Directors deems necessary to determine the
effect, if any, of such ownership on the Company's status as a REIT and to
ensure compliance with the Ownership Limitation. The Company intends to use its
best efforts to enforce the Ownership Limitation and will make prohibited
transferees aware of their obligation to pay over any distributions received,
will not give effect on its books to prohibited transfers, will institute
proceedings to enjoin any transfer violating the Ownership Limitation, and will
declare all votes of prohibited transferees invalid.

DESCRIPTION OF WARRANTS

The Company has no Warrants outstanding (other than options issued under
the Company's employee stock option plan), as of April 30, 1997. The Company may
issue Warrants for the purchase of Preferred Stock or Common Stock. Warrants may
be issued independently or together with any other Offered Securities offered by
any Prospectus Supplement and may be attached to or separate from such Offered
Securities. Each series of Warrants will be issued under a separate warrant
agreement (each, a "Warrant Agreement") to be entered into between the Company
and a warrant agent specified in the applicable Prospectus Supplement (the
"Warrant Agent"). The Warrant Agent will act solely as an agent of the Company
in connection with the Warrants of such series and will not assume any
obligation or relationship of agency or trust for or with any provisions of the
Warrants offered hereby. Further terms of the Warrants and the applicable
Warrant Agreements will be set forth in the applicable Prospectus Supplement.

The applicable Prospectus Supplement will describe the terms of the
Warrants in respect of which this Prospectus is being delivered, including,
where applicable, the following:

(1) The title of such Warrants;

(2) The aggregate number of such Warrants;

17
<PAGE> 87

(3) The price or prices at which such Warrants will be issued;

(4) The designation, number of terms of the shares of Preferred Stock
or Common Stock purchasable upon exercise of such Warrants;

(5) The designation and terms of the Offered Securities, if any, with
which such Warrants are issued and the number of such Warrants issued with
each such Offered Security;

(6) The date, if any, on and after which such Warrants and the related
Preferred Stock or Common Stock will be separately transferable;

(7) The price at which each share of Preferred Stock or Common Stock
purchasable upon exercise of such Warrants may be purchased;

(8) The date on which the right to exercise such Warrants shall
commence and the date on which such right shall expire;

(9) The minimum or maximum amount of such Warrants which may be
exercised at any one time;

(10) Information with respect to book-entry procedures, if any;

(11) A discussion of certain federal income tax consequences; and

(12) Any other terms of such Warrants, including terms, procedures and
limitations relating to the exchange and exercise of such Warrants.

CERTAIN PROVISIONS OF THE COMPANY'S CHARTER AND BYLAWS

Certain provisions of the Company's Charter and Bylaws might discourage
certain types of transactions that involve an actual or threatened change in
control of the Company that might involve a premium price for the Company's
capital stock or otherwise be in the best interest of the stockholders. See
"Description of Common Stock -- Restrictions on Ownership and Transfer of Common
Stock." The issuance of shares of preferred stock or other capital stock by the
Board of Directors may also have the effect of delaying, depriving or preventing
a change in control of the Company. The Bylaws of the Company contain certain
advance notice requirements in the nomination of persons for election to the
Board of Directors which could have the effect of discouraging a takeover or
other transaction in which holders of some, or a majority, of the Common Stock
might receive a premium for their Common Stock over the prevailing market price,
or which such holders might believe to be otherwise in their best interests.

FEDERAL INCOME TAX CONSEQUENCES

GENERAL

The following summary of material federal income tax consequences is based
on current law and does not purport to deal with all aspects of taxation that
may be relevant to particular stockholders in light of their personal investment
or tax circumstances, or to certain types of stockholders (including insurance
companies, financial institutions and broker-dealers) subject to special
treatment under the federal income tax laws.

EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OF THE PURCHASE, OWNERSHIP AND
SALE OF THE OFFERED SECURITIES.

The Company believes that since January 1, 1996, it has operated in a
manner that permits it to satisfy the requirements for taxation as a REIT under
the applicable provisions of the Code. The Company intends to continue to
operate to satisfy such requirements. No assurance can be given, however, that
such requirements will be met.

The sections of the Code relating to qualification and operation as a REIT
are highly technical and complex. The following sets forth the material aspects
of the Code sections that govern the federal income tax

18
<PAGE> 88

treatment of a REIT and its stockholders. This summary is qualified in its
entirety by the applicable Code provisions, rules and regulations thereunder,
and administrative and judicial interpretations thereof. Morrison & Foerster LLP
has acted as tax counsel to the Company in connection with Company's election to
be taxed as a REIT.

In the opinion of Morrison & Foerster LLP, commencing with the Company's
taxable year that ended on December 31, 1996, the Company has been organized in
conformity with the requirements for qualification as a REIT, and its method of
operation has and will enable it to continue to meet the requirements for
qualification and taxation as a REIT under the Code. It must be emphasized that
this opinion is based on various assumptions and is conditioned upon certain
representations made by the Company as to factual matters. Moreover, such
qualification and taxation as a REIT depends upon the Company's ability to meet,
through actual annual operating results, distribution levels and diversity of
stock ownership, and various qualification tests imposed under the Code
discussed below, the results of which will not be reviewed by Morrison &
Foerster LLP. Accordingly, no assurance can be given that the actual results of
the Company's operations for any particular taxable year will satisfy such
requirements. See "-- Failure to Qualify."

In brief, if certain detailed conditions imposed by the REIT provisions of
the Code are satisfied, entities, such as the Company, that invest primarily in
real estate and that otherwise would be treated for federal income tax purposes
as corporations, are generally not taxed at the corporate level on their "REIT
Taxable Income" that is currently distributed to stockholders. This treatment
substantially eliminates the "double taxation" (i.e., taxation at both the
corporate and stockholder levels) that generally results from the use of
corporate investment vehicles.

If the Company fails to qualify as a REIT in any year, however, it will be
subject to federal income tax as if it were a domestic corporation, and its
stockholders will be taxed in the same manner as stockholders of ordinary
corporations. In this event, the Company could be subject to potentially
significant tax liabilities and the amount of cash available for distribution to
its stockholders could be reduced.

TAXATION OF THE COMPANY

GENERAL

In any year in which the Company qualifies as a REIT, in general, it will
not be subject to federal income tax on that portion of its net income that it
distributes to stockholders. This treatment substantially eliminates the "double
taxation" on income at the corporate and stockholder levels that generally
results from investment in a corporation. However, the Company will be subject
to federal income tax as follows: First, the Company will be taxed at regular
corporate rates on any undistributed REIT Taxable Income, including
undistributed net capital gains. Second, under certain circumstances, the
Company may be subject to the "alternative minimum tax" on its items of tax
preference. Third, if the Company has (i) net income from the sale or other
disposition of "foreclosure property" which is held primarily for sale to
customers in the ordinary course of business or (ii) other nonqualifying income
from foreclosure property, it will be subject to tax at the highest corporate
rate on such income. Fourth, if the Company has net income from "prohibited
transactions" (which are, in general, certain sales or other dispositions of
property held primarily for sale to customers in the ordinary course of business
other than foreclosure property), such income will be subject to a 100% tax.
Fifth, if the Company should fail to satisfy the 75% gross income test or the
95% gross income test (as discussed below), and has nonetheless maintained its
qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on an amount equal to (a) the gross income
attributable to the greater of the amount by which the Company fails the 75%
gross income test or the 95% gross income test, multiplied by (b) a fraction
intended to reflect the Company's profitability. Sixth, if the Company should
fail to distribute during each calendar year at least the sum of (i) 85% of its
real estate investment trust ordinary income for such year, (ii) 95% of its real
estate investment trust capital gain net income for such year, and (iii) any
undistributed taxable income from prior periods, the Company would be subject to
a 4% excise tax on the excess of such required distribution over the amounts
actually distributed. Seventh, if the Company acquires any asset from a C
corporation (i.e., generally a corporation subject to full corporate-level tax)
in a transaction in which the basis of the asset in the Company's hands is
determined by reference to the basis of

19
<PAGE> 89

the asset (or any other property) in the hands of the C corporation, and the
Company recognizes gain on the disposition of such asset during the 10 year
period beginning on the date on which such asset was acquired by the Company,
then, to the extent of any built-in gain at the time of acquisition, such gain
will be subject to tax at the highest regular corporate rate.

REQUIREMENTS FOR QUALIFICATION

The Code defines a REIT as a corporation, trust or association (1) which is
managed by one or more trustees or directors; (2) the beneficial ownership of
which is evidenced by transferable shares, or by transferable certificates of
beneficial interest; (3) which would be taxable as a domestic corporation, but
for Sections 856 through 860 of the Code; (4) which is neither a financial
institution nor an insurance company subject to certain provisions of the Code;
(5) the beneficial ownership of which is held by 100 or more persons; (6) not
more than 50% in value of the outstanding stock of which is owned, directly or
indirectly, by five or fewer individuals (as defined in the Code) at any time
during the last half of each taxable year; and (7) which meets certain other
tests, described below, regarding the nature of income and assets. The Code
provides that conditions (1) to (4), inclusive, must be met during the entire
taxable year and that condition (5) must be met during at least 335 days of a
taxable year of 12 months, or during a proportionate part of a taxable year of
less than 12 months. Conditions (5) and (6) will not apply until after the first
taxable year for which an election is made by the Company to be taxed as a REIT.

In order to assist the Company in complying with the ownership tests
described above, the Company has placed certain restrictions on the transfer of
the Common Stock and the Company's preferred stock to prevent further
concentration of stock ownership. Moreover, to evidence compliance with these
requirements, the Company must maintain records which disclose the actual
ownership of its outstanding Common Stock and preferred stock. In fulfilling its
obligations to maintain records, the Company must and will demand written
statements each year from the record holders of designated percentages of its
Common Stock and preferred stock disclosing the actual owners of such Common
Stock and preferred stock. A list of those persons failing or refusing to comply
with such demand must be maintained as part of the Company's records. A
stockholder failing or refusing to comply with the Company's written demand must
submit with his or her tax returns a similar statement disclosing the actual
ownership of Common Stock and preferred stock and certain other information. In
addition, the Company's Charter provides restrictions regarding the transfer of
its shares that are intended to assist the Company in continuing to satisfy the
share ownership requirements. See "Description of Common Stock -- Restrictions
on Ownership and Transfer of Common Stock."

In the case of a REIT that is a partner in a partnership, Treasury
Regulations provide that the REIT will be deemed to own its proportionate share
of the assets of the partnership and will be deemed to be entitled to the income
of the partnership attributable to such share. In addition, the character of the
assets and gross income of the partnership shall retain the same character in
the hands of the REIT for purposes of Section 856 of the Code, including
satisfying the gross income tests and the asset tests, described below. Thus,
the Company's proportionate share of the assets, liabilities and items of income
of the Operating Partnership will be treated as assets, liabilities and items of
income of the Company for purposes of applying the requirements described below.

ASSET TESTS

At the close of each quarter of the Company's taxable year, the Company
must satisfy two tests relating to the nature of its assets. First, at least 75%
of the value of the Company's total assets must be represented by interests in
real property, interests in mortgages on real property, shares in other REITs,
cash, cash items and government securities (as well as certain temporary
investments in stock or debt instruments purchased with the proceeds of new
capital raised by the Company). Second, although the remaining 25% of the
Company's assets generally may be invested without restriction, securities in
this class may not exceed either (i) 5% of the value of the Company's total
assets as to any one non-government issuer or (ii) 10% of the outstanding voting
securities of any one issuer. The Company's investment in real property through
its interest in the Operating Partnership constitutes qualified assets for
purposes of the 75% asset test. In addition, the Company may own 100% of
"qualified REIT subsidiaries" as defined in the Code. All assets, liabilities,
and items of income,

20
<PAGE> 90

deduction, and credit of such a qualified REIT subsidiary will be treated as
owned and realized directly by the Company.

The Company has analyzed the impact of its ownership interests in the
Associated Companies on its ability to satisfy the asset tests. Based upon its
analysis of the estimated value of the Company's total assets as well as its
estimate of the value of the respective nonvoting preferred stock interests in
the Associated Companies, the Company believes that none of such preferred stock
interests will exceed 5% of the value of the Company's total assets on the last
day of any calendar quarter in 1996. The Company intends to monitor compliance
with the 5% test on a quarterly basis and believes that it will be able to
manage its operations in a manner to comply with the tests, either by managing
the amount of its qualifying assets or reducing its interests in the Associated
Companies, although there can be no assurance that such steps will be
successful. In rendering its opinion as to the qualification of the Company as a
REIT, counsel has relied upon the Company's representation as to the value of
its assets and the value of its interests in the Associated Companies. Counsel
has discussed with the Company its valuation analysis and the future actions
available to it to comply with the 5% tests but it has not independently
verified the valuations.

GROSS INCOME TESTS

There are three separate percentage tests relating to the sources of the
Company's gross income which must be satisfied for each taxable year. For
purposes of these tests, where the Company invests in a partnership, the Company
will be treated as receiving its share of the income and loss of the
partnership, and the gross income of the partnership will retain the same
character in the hands of the Company as it has in the hands of the partnership.
See "-- Tax Aspects of the Company's Investment in the Operating Partnerships --
General."

The 75% Test. At least 75% of the Company's gross income for the taxable
year must be "qualifying income." Qualifying income generally includes (i)
"rents from real property" (except as modified below); (ii) interest on
obligations collateralized by mortgages on, or interests in, real property;
(iii) gains from the sale or other disposition of interests in real property and
real estate mortgages, other than gain from property held primarily for sale to
customers in the ordinary course of the Company's trade or business ("dealer
property"); (iv) dividends or other distributions on shares in other REITs, as
well as gain from the sale of such shares; (v) abatements and refunds of real
property taxes; (vi) income from the operation, and gain from the sale, of
property acquired at or in lieu of a foreclosure of the mortgage collateralized
by such property ("foreclosure property"); and (vii) commitment fees received
for agreeing to make loans collateralized by mortgages on real property or to
purchase or lease real property.

Rents received from a tenant will not, however, qualify as rents from real
property in satisfying the 75% test (or the 95% gross income test described
below) if the Company, or an owner of 10% or more of the Company, directly or
constructively owns 10% or more of such tenant (a "related party tenant"). In
addition, if rent attributable to personal property, leased in connection with a
lease of real property, is greater than 15% of the total rent received under the
lease, then the portion of rent attributable to such personal property will not
qualify as rents from real property. Moreover, an amount received or accrued
generally will not qualify as rents from real property (or as interest income)
for purposes of the 75% and 95% gross income tests if it is based in whole or in
part on the income or profits of any person. Rent or interest will not be
disqualified, however, solely by reason of being based on a fixed percentage or
percentages of receipts or sales. Finally, for rents received to qualify as
rents from real property, the Company generally must not operate or manage the
property or furnish or render services to tenants, other than through an
"independent contractor" from whom the Company derives no revenue. The
"independent contractor" requirement, however, does not apply to the extent that
the services provided by the Company are "usually or customarily rendered" in
connection with the rental of space for occupancy only, and are not otherwise
considered "rendered to the occupant."

The Company will be deemed to provide certain services which are actually
provided by the Operating Partnership with respect to properties owned by the
Operating Partnership. The Company believes that the services provided by the
Operating Partnership are usually or customarily rendered in connection with the
rental of space of occupancy only, and therefore that the provision of such
services will not cause the rents

21
<PAGE> 91

received with respect to its properties to fail to qualify as rents from real
property for purposes of the 75% and 95% gross income tests. The Company does
not intend to rent to related party tenants or to charge rents that would not
qualify as rents from real property because the rents are based on the income or
profits of any person (other than rents that are based on a fixed percentage or
percentages of receipts or sales).

Pursuant to the percentage leases ("Percentage Leases"), GHG leases from
the Operating Partnership the land, buildings, improvements, furnishings, and
equipment comprising the Hotels for a five-year period with a five-year renewal
option. The Percentage Leases provide that the lessee will be obligated to pay
to the Operating Partnership (a) the greater of a fixed rent (the "Base Rent")
or a percentage rent (the "Percentage Rent") (collectively, the "Rents") and (b)
certain other amounts, including interest accrued on any late payments or
charges (the "Additional Charges"). The Percentage Rent is calculated by
multiplying fixed percentages by the gross revenues from the operations of the
Hotels in excess of certain levels. The Base Rent accrues and is required to be
paid monthly. Percentage Rent is due quarterly; however, the lessee will not be
in default for non-payment of Percentage Rent due in any calendar year if the
lessee pays, within 90 days of the end of the calendar year, the excess of
Percentage Rent due and unpaid over the Base Rent with respect to such year.

In order for the Base Rent, the Percentage Rent, and the Additional Charges
to constitute rents from real property, the Percentage Leases must be respected
as true leases for federal income tax purposes and not treated as service
contracts, joint ventures or some other type of arrangement. The determination
of whether the Percentage Leases are true leases depends on an analysis of all
the surrounding facts and circumstances. In making such a determination, courts
have considered a variety of factors, including the following: (a) the intent of
the parties, (b) the form of the agreement, (c) the degree of control over the
property that is retained by the property owner (e.g., whether the lessee has
substantial control over the operation of the property or whether the lessee was
required simply to use its best efforts to perform its obligations under the
agreement), and (d) the extent to which the property owner retains the risk of
loss of the property (e.g., whether the lessee bears the risk of increases in
operating expenses or the risk of damage to the property).

In addition, Section 7701(e) of the Code provides that a contract that
purports to be a service contract (or a partnership agreement) is treated
instead as a lease of property if the contract is properly treated as such,
taking into account all relevant factors, including whether or not: (a) the
service recipient is in physical possession of the property, (b) the service
recipient controls the property, (c) the service recipient has a significant
economic or possessory interest in the property (e.g., the property's use is
likely to be dedicated to the service recipient for a substantial portion of the
useful life of the property, the recipient shares the risk that the property
will decline in value, the recipient shares in any appreciation in the value of
the property, the recipient shares in savings in the property's operating costs,
or the recipient bears the risk of damage to or loss of the property), (d) the
service provider does not bear any risk of substantially diminished receipts or
substantially increased expenditures if there is nonperformance under the
contract, (e) the service provider does not use the property concurrently to
provide significant services to entities unrelated to the service recipient, and
(f) the total contract price does not substantially exceed the rental value of
the property for the contract period. Since the determination of whether a
service contract should be treated as a lease is inherently factual, the
presence or absence of any single factor may not be dispositive in every case.

Counsel is of the opinion that the Percentage Leases will be treated as
true leases for federal income tax purposes. Such opinion is based, in part, on
the following facts: (a) the Operating Partnership and the lessee intend for
their relationship to be that of a lessor and lessee and such relationship will
be documented by lease agreements, (b) the lessee has the right to exclusive
possession and use and quiet enjoyment of the Hotels during the term of the
Percentage Leases, (c) the lessee bears the cost of, and will be responsible
for, day-to-day maintenance and repair of the Hotels, other than the cost of
maintaining underground utilities, structural elements and exterior painting,
and will dictate how the Hotels are operated, maintained, and improved, (d) the
lessee bears all of the costs and expenses of operating the Hotels (including
inventory costs) during the term of the Percentage Leases (other than real
property taxes, personal property taxes on property owned by the Operating
Partnership, casualty insurance and the cost of replacement or refurbishment of
furniture, fixtures and equipment, to the extent such costs do not exceed the
allowance for such costs provided by the Operating Partnership under the
Percentage Leases), (e) the lessee will benefit from any savings in the costs

22
<PAGE> 92

of operating the Hotels during the term of the Percentage Leases, (f) in the
event of damage or destruction to a Hotel which renders the Hotel unsuitable for
continued use, the lessee will be at economic risk because the Operating
Partnership can elect to terminate the Percentage Lease as to such Hotel, in
which event the lessee can elect to rebuild at its cost less any insurance
proceeds, or accept such termination, (g) the lessee will indemnify the
Partnership against all liabilities imposed on the Partnership during the term
of the Percentage Leases by reason of (i) injury to persons or damage to
property occurring at the Hotels or (ii) the lessee's use, management,
maintenance or repair of the Hotels, (h) the lessee is obligated to pay
substantial fixed rent for the period of use of the Hotels, and (i) the lessee
stands to incur substantial losses (or reap substantial gains) depending on how
successfully it operates the Hotels. The Company has represented that the lessee
has and will have its own employees, physically distinct and separate office
space, furniture and equipment, and directors. Further, the Company has
represented that neither the Company nor the Operating Partnership will furnish
or render services to either the lessee or its customers.

Investors should be aware that there are no controlling Treasury
Regulations, published rulings, or judicial decisions involving leases with
terms substantially the same as the Percentage Leases that discuss whether such
leases constitute true leases for federal income tax purposes. Therefore, the
opinion of counsel with respect to the relationship between the Operating
Partnership and the lessee is based upon all of the facts and circumstances, and
rulings and judicial decisions involving situations that are considered to be
analogous. Opinions of counsel are not binding upon the Service or any court,
and there can be no assurance that the Service will not assert successfully a
contrary position. If the Percentage Leases are recharacterized as service
contracts or partnership agreements, rather than true leases, part or all of the
payments that the Partnership receives from the lessee may not be considered
rent or may not otherwise satisfy the various requirements for qualification as
rents from real property. In that case, the Company likely would not be able to
satisfy either the 75% or 95% gross income tests and, as a result, could lose
its REIT status.

In order for the Rents to constitute rents from real property, several
other requirements also must be satisfied. One requirement is that the Rents
attributable to personal property leased in connection with the lease of the
real property comprising a Hotel must not be greater than 15% of the Rents
received under the Percentage Lease. The Rents attributable to the personal
property in a Hotel is the amount that bears the same ratio to total rent for
the taxable year as the average of the adjusted bases of the personal property
in the Hotel at the beginning and at the end of the taxable year bears to the
average of the aggregate adjusted bases of both the real and personal property
comprising the Hotel at the beginning and at the end of such taxable year (the
"Adjusted Basis Ratio"). Management has obtained an appraisal of the personal
property at each Hotel indicating that the appraised value of the personal
property at each Hotel is less than 15% of the value at which such Hotel is
acquired. However, the Company has represented that the Operating Partnership
will in no event acquire additional personal property for a Hotel to the extent
that such acquisition would cause the Adjusted Basis Ratio for that Hotel to
exceed 15%. There can be no assurance, however, that the Service would not
assert that the personal property acquired from a particular partnership had a
value in excess of the appraised value, or that a court would not uphold such
assertion. If such a challenge were successfully asserted, the Company could
fail the 15% Adjusted Basis Ratio as to one or more of the Percentage Leases,
which in turn potentially could cause it to fail to satisfy the 95% or 75% gross
income test and thus could lose its REIT status.

Another requirement for qualification of the Rents as rents from real
property is that the Percentage Rent must not be based in whole or in part on
the income or profits of any person. The Percentage Rent, however, will qualify
as rents from real property if it is based on percentages of receipts or sales
and the percentages (a) are fixed at the time the Percentage Leases are entered
into, (b) are not renegotiated during the term of the Percentage Leases in a
manner that has the effect of basing Percentage Rent on income or profits, and
(c) conform with normal business practice. More generally, the Percentage Rent
will not qualify as rents from real property if, considering the Percentage
Leases and all the surrounding circumstances, the arrangement does not conform
with normal business practice, but is in reality used as a means of basing the
Percentage Rent on income or profits. Since the Percentage Rent is based on
fixed percentages of the gross revenues from the Hotels that are established in
the Percentage Leases, and the Company has represented that the percentages (i)
will not be renegotiated during the terms of the Percentage Leases in a manner
that has the

23
<PAGE> 93

effect of basing the Percentage Rent on income or profit and (ii) conform with
normal business practice, the Percentage Rent should not be considered based in
whole or in part on the income or profits of any person. Furthermore, the
Company has represented that, with respect to other hotel properties that it
acquires in the future, it will not charge rent for any property that is based
in whole or in part on the income or profits of any person (except by reason of
being based on a fixed percentage of gross revenue, as described above).

A further requirement for qualification of Rents as rents from real
property limits the relationship between the Company and its tenants. In the
case of a corporate tenant, the Company must not own 10% or more of the total
combined voting power of the tenant's stock and must not own 10% or more of the
total number of shares of all classes of the tenant's stock outstanding. In the
case of a tenant that is not a corporation, the Company must not own 10% or more
in interest of the tenant's assets or net profits. The Company intends to limit
its ownership interest in GHG to nonvoting preferred stock, which constitutes
less than 10% of the total number of outstanding shares of GHG stock. The common
stock of GHG, which is the only voting stock of GHG, is owned by persons who are
not related to the Company within the definition in the applicable statute. The
common stockholders have a significant economic interest in GHG and elect the
board of directors of GHG. Based upon the foregoing, counsel is of the opinion
that rental payments from GHG will not constitute rent from a party related to
the Company.

The Company will receive nonqualifying management fee income. As a result,
the Company may approach the income test limits and could be at risk of not
satisfying such tests and thus not qualifying as a REIT. Counsel's opinion is
based on the Company's representation that the actual amount of nonqualifying
income will not exceed such limits.

The 95% Test. In addition to deriving 75% of its gross income from the
sources listed above, at least 95% of the Company's gross income for the taxable
year must be derived from the above-described qualifying income, or from
dividends, interest or gains from the sale or disposition of stock or other
securities that are not dealer property. Dividends and interest on any
obligation not collateralized by an interest on real property are included for
purposes of the 95% test, but not for purposes of the 75% test. For purposes of
determining whether the Company complies with the 75% and 95% income tests,
gross income does not include income from prohibited transactions. A "prohibited
transaction" is a sale of dealer property, excluding certain property held by
the Company for at least four years and foreclosure property. See "-- Taxation
of the Company" and "-- Tax Aspects of the Company's Investment in the Operating
Partnership -- Sale of Properties."

The Company believes that it and the Operating Partnership has held and
managed its properties in a manner that has given rise to rental income
qualifying under the 75% and 95% gross income tests. Gains on sales of
properties will generally qualify under the 75% and 95% gross income tests.

Even if the Company fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may still qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. These relief
provisions will generally be available if: (i) the Company's failure to comply
was due to reasonable cause and not to willful neglect; (ii) the Company reports
the nature and amount of each item of its income included in the 75% and 95%
gross income tests on a schedule attached to its tax return; and (iii) any
incorrect information on this schedule is not due to fraud with intent to evade
tax. It is not possible, however, to state whether in all circumstances the
Company would be entitled to the benefit of these relief provisions. If these
relief provisions apply, the Company will, however, still be subject to a
special tax upon the greater of the amount by which it fails either the 75% or
95% gross income test for that year.

The 30% Test. The Company must derive less than 30% of its gross income for
each taxable year from the sale or other disposition of (i) real property held
for less than four years (other than foreclosure property and involuntary
conversions), (ii) stock or securities held for less than one year, and (iii)
property in a "prohibited transaction." In this regard, certain of the Company's
assets are subject to existing purchase options. Although the Company believes,
based on the historical experience of certain predecessor partnerships, that it
will satisfy this 30% test, if, contrary to expectations, large numbers of such
options are exercised, more than 30% of the Company's gross income in a taxable
year could be derived from a proscribed source. The Company will, however, use
its best efforts to ensure that it will continue to satisfy each of the
foregoing income requirements.

24
<PAGE> 94

ANNUAL DISTRIBUTION REQUIREMENTS

The Company, in order to qualify as a REIT, is required to make
distributions (other than capital gain distributions) to its stockholders each
year in an amount at least equal to (A) the sum of (i) 95% of the Company's REIT
Taxable Income (computed without regard to the dividends paid deduction and the
REIT's net capital gain) and (ii) 95% of the net income (after tax), if any,
from foreclosure property, minus (B) the sum of certain items of non-cash
income. Such distributions must be paid in the taxable year to which they
relate, or in the following taxable year if declared before the Company timely
files its tax return for such year and if paid on or before the first regular
distribution payment after such declaration. To the extent that the Company does
not distribute all of its net capital gain or distributes at least 95%, but less
than 100%, of its REIT Taxable Income, as adjusted, it will be subject to tax on
the undistributed amount at regular capital gains or ordinary corporate tax
rates, as the case may be. Furthermore, if the REIT should fail to distribute
during each calendar year at least the sum of (i) 85% of its REIT ordinary
income for such year, (ii) 95% of its REIT capital gain income for such year,
and (iii) any undistributed taxable income from prior periods, the REIT would be
subject to a 4% excise tax on the excess of such required distribution over the
amounts actually distributed. For such purposes, dividends declared to
shareholders of record in October, November, or December of one calendar year
and paid by January 31 of the following calendar year are deemed paid as of
December 31 of the initial calendar year.

The Company believes that it has made and will make timely distributions
sufficient to satisfy the annual distribution requirements. In this regard, the
partnership agreement of the Operating Partnership authorizes the Company, as
general partner, to take such steps as may be necessary to cause the Operating
Partnership to distribute to its partners an amount sufficient to permit the
Company to meet these distribution requirements. It is possible that in the
future the Company may not have sufficient cash or other liquid assets to meet
the 95% distribution requirement, due to timing differences between the actual
receipt of income and actual payment of expenses on the one hand, and the
inclusion of such income and deduction of such expenses in computing the
Company's REIT taxable income on the other hand. Further, as described below, it
is possible that, from time to time, the Company may be allocated a share of
taxable income attributable to the sale of depreciated property that exceeds its
allocable share of cash attributable to that sale. To avoid any problem with the
95% distribution requirement, the Company will closely monitor the relationship
between its REIT Taxable Income and cash flow and, if necessary, will borrow
funds (or cause the Operating Partnership or other affiliates to borrow funds)
in order to satisfy the distribution requirement. The Company (through the
Operating Partnership) may be required to borrow funds at times when market
conditions are not favorable.

If the Company fails to meet the 95% distribution requirement as a result
of an adjustment to the Company's tax return by the Service, the Company may
retroactively cure the failure by paying a "deficiency dividend" (plus
applicable penalties and interest) within a specified period.

FAILURE TO QUALIFY

If the Company fails to qualify for taxation as a REIT in any taxable year
and the relief provisions do not apply, the Company will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to stockholders in any year in which the
Company fails to qualify will not be deductible by the Company, nor will they be
required to be made. In such event, to the extent of the Company's current and
accumulated earnings and profits, all distributions to stockholders will be
taxable as ordinary income, and, subject to certain limitations in the Code,
corporate distributees may be eligible for the dividends-received deduction.
Unless entitled to relief under specific statutory provisions, the Company will
also be disqualified from taxation as a REIT for the four taxable years
following the year during which qualification was lost. It is not possible to
state whether the Company would be entitled to such statutory relief. Under
certain legislative proposals, if enacted, the Company will also be effectively
precluded from re-electing REIT status following a termination of its REIT
qualification. See "Possible Legislative or Other Actions Affecting Tax
Consequences."

25
<PAGE> 95

TAX ASPECTS OF THE COMPANY'S INVESTMENT IN THE OPERATING PARTNERSHIP

The following discussion summarizes certain federal income tax
considerations applicable solely to the Company's investment in the Operating
Partnership.

GENERAL

The Company holds a direct ownership interest in the Operating Partnership.
In general, partnerships are "pass-through" entities which are not subject to
federal income tax. Rather, partners are allocated their proportionate shares of
the items of income, gain, loss, deduction and credit of a partnership, and are
potentially subject to tax thereon, without regard to whether the partners
receive a distribution from the partnership. The Company includes its
proportionate share of the foregoing Operating Partnership items for purposes of
the various REIT income tests and in the computation of its REIT Taxable Income.
See "-- Requirements for Qualification" and "-- Gross Income Tests." Any
resultant increase in the Company's REIT Taxable Income increases its
distribution requirements (see "-- Requirements for Qualification" and
"-- Annual Distribution Requirements"), but is not subject to federal income tax
in the hands of the Company provided that such income is distributed by the
Company to its stockholders. Moreover, for purposes of the REIT asset tests (see
"-- Requirements for Qualification" and "-- Asset Tests"), the Company includes
its proportionate share of assets held by the Operating Partnership.

TAX ALLOCATIONS WITH RESPECT TO CERTAIN PROPERTIES

Pursuant to Section 704(c) of the Code, income, gain, loss and deduction
attributable to appreciated or depreciated property that is contributed to a
partnership in exchange for an interest in the partnership, must be allocated in
a manner such that the contributing partner is charged with, or benefits from,
respectively, the unrealized gain or unrealized loss associated with the
property at the time of the contribution. The amount of such unrealized gain or
unrealized loss is generally equal to the difference between the fair market
value of contributed property at the time of contribution and the adjusted tax
basis of such property at the time of contribution (a "Book-Tax Difference").
Such allocations are solely for federal income tax purposes and do not affect
the book capital accounts or other economic or legal arrangements among the
partners. The Operating Partnership was formed by way of contributions of
appreciated property. Consequently, the partnership agreement of the Operating
Partnership requires such allocations to be made in a manner consistent with
Section 704(c) of the Code.

In general, the limited partners of the Operating Partnership will be
allocated lower amounts of depreciation deductions for tax purposes and
increased taxable income and gain on sale by the Operating Partnership of the
contributed assets. This will tend to eliminate the Book-Tax Difference over the
life of the Operating Partnership. However, the special allocation rules under
Section 704(c) do not always entirely rectify the Book-Tax Difference on an
annual basis or with respect to a specific taxable transaction such as a sale.
Thus, the carryover basis of the contributed assets in the hands of the
Operating Partnership may cause the company to be allocated lower depreciation
and other deductions, and possibly greater amounts of taxable income in the
event of a sale of such contributed assets in excess of the economic or book
income allocated to it as a result of such sale. This may cause the Company to
recognize taxable income in excess of cash proceeds, which might adversely
affect the Company's ability to comply with the REIT distribution requirements.
See "-- Requirements for Qualification" and "-- Annual Distribution
Requirements." In addition, the application of Section 704(c) to the Operating
Partnership is not entirely clear and may be affected by authority that may be
promulgated in the future.

BASIS IN OPERATING PARTNERSHIP INTEREST

The Company's adjusted tax basis in its partnership interest in the
Operating Partnership generally (i) is equal to the amount of cash and the basis
of any other property contributed to the Operating Partnership by the Company,
(ii) is increased by (a) its allocable share of the Operating Partnership's
income and (b) increases in its allocable share of indebtedness of the Operating
Partnership and (iii) is reduced, but not below zero, by the Company's allocable
share of (a) the Operating Partnership's losses and (b) the amount of

26
<PAGE> 96

cash distributed to the Company, and by constructive distributions resulting
from a reduction in the Company's share of indebtedness of the Operating
Partnership.

If the allocation of the Company's distributive share of the Operating
Partnership's losses would reduce the adjusted tax basis of the Company's
partnership interest in the Operating Partnership below zero, the recognition of
such losses will be deferred until such time as the recognition of such loss
would not reduce the Company's adjusted tax basis below zero. To the extent that
the Operating Partnership's distributions, or any decrease in the Company's
share of the indebtedness of the Operating Partnership (each such decrease being
considered a constructive cash distribution to the partners), would reduce the
Company's adjusted tax basis below zero, such distributions (including such
constructive distributions) constitute taxable income to the Company. Such
distributions and constructive distributions will normally be characterized as a
capital gain, and if the Company's partnership interest in the Operating
Partnership has been held for longer than the long-term capital gain holding
period (currently one year), the distributions and constructive distributions
will constitute long-term capital gains.

SALE OF PROPERTIES

Generally, any gain realized by the Operating Partnership on the sale of
property held by the Operating Partnership for more than one year will be
long-term capital gain, except for any portion of such gain that is treated as
depreciation or cost recovery recapture. The Company's share of any gain
realized by the Operating Partnership on the sale of any dealer property
generally will be treated as income from a prohibited transaction that is
subject to a 100% penalty tax. See "Taxation of the Company" and
"-- Requirements for Qualification" and "-- Gross Income Tests -- The 95% Test."
Under existing law, whether property is dealer property is a question of fact
that depends on all the facts and circumstances with respect to the particular
transaction. The Operating Partnership intends to hold its properties for
investment with a view to long-term appreciation, to engage in the business of
acquiring, developing, owning and operating its properties, and to make such
occasional sales of properties as are consistent with the Company's investment
objectives. Based upon such investment objectives, the Company believes that in
general the Operating Partnership's properties should not be considered dealer
property and that the amount of income from prohibited transactions, if any,
will not be material.

TAXATION OF STOCKHOLDERS

TAXATION OF TAXABLE DOMESTIC STOCKHOLDERS

As long as the Company qualifies as a REIT, distributions made to the
Company's taxable domestic stockholders out of current or accumulated earnings
and profits (and not designated as capital gain dividends) will be taken into
account by them as ordinary income. Stockholders that are corporations will not
be entitled to a dividends-received deduction with respect to any distributions
from the Company. Distributions that are designated as capital gain dividends
will be taxed as long-term capital gains (to the extent they do not exceed the
Company's actual net capital gain for the taxable year) without regard to the
period for which the stockholder has held its stock. However, corporate
stockholders may be required to treat up to 20% of certain capital gain
dividends as ordinary income. To the extent that the Company makes distributions
in excess of current and accumulated earnings and profits, these distributions
are treated first as a tax-free return of capital to the stockholder, reducing
the tax basis of a stockholder's shares of Company stock by the amount of such
distribution (but not below zero), with distributions in excess of the
stockholder's tax basis taxable as capital gains (if the shares of Company stock
are held as a capital asset). In addition, any dividend declared by the Company
in October, November or December of any year and payable to a stockholder of
record on a specific date in any such month shall be treated as both paid by the
Company and received by the stockholder on December 31 of such year, provided
that the dividend is actually paid by the Company during January of the
following calendar year. Stockholders may not include in their own income tax
returns any net operating losses or capital losses of the Company.

In general, any loss upon a sale or exchange of shares of Company stock by
a stockholder who has held such stock for six months or less (after applying
certain holding period rules) will be treated as a long-term

27
<PAGE> 97

capital loss, to the extent of distributions from the Company required to be
treated by such stockholder as long-term capital gains.

BACKUP WITHHOLDING

The Company will report to its domestic stockholders and to the Service the
amount of dividends paid during each calendar year, and the amount of tax
withheld, if any, with respect thereto. Under the backup withholding rules, a
stockholder may be subject to backup withholding at the rate of 31% with respect
to dividends paid and redemption proceeds unless such stockholder (a) is a
corporation or comes within certain other exempt categories and, when required,
demonstrates this fact, or (b) provides a taxpayer identification number,
certifies as to no loss of exemption from backup withholding, and otherwise
complies with applicable requirements of the backup withholding rules.
Notwithstanding the foregoing, the Company will institute backup withholding
with respect to a stockholder if advised do so by the Service. A stockholder
that does not provide the Company with a correct taxpayer identification number
may also be subject to penalties imposed by the Service. Any amount paid as
backup withholding will be creditable against the stockholder's income tax
liability.

TAXATION OF TAX-EXEMPT STOCKHOLDERS

The IRS has issued a revenue ruling in which it held that amounts
distributed by a REIT to a tax-exempt employees' pension trust do not constitute
unrelated business taxable income ("UBTI"). Revenue rulings, however, are
interpretive in nature and are subject to revocation or modification by the
Service. Based upon the ruling and the analysis therein, distributions by the
Company to a stockholder that is a tax-exempt entity should not constitute UBTI,
provided that the tax exempt entity has not financed the acquisition of its
shares of Company stock with "acquisition indebtedness" within the meaning of
the Code, and that the shares of the Company stock are not otherwise used in an
unrelated trade or business of the tax-exempt entity. In addition, REITs
generally treat the beneficiaries of qualified pension trusts as the beneficial
owners of REIT shares owned by such pension trusts for purposes of determining
if more than 50% of the REIT's shares are owned by five or fewer individuals.
However, if a pension trust owns more than 10% of the REIT's shares, it can be
subject to UBTI on all or a portion of REIT dividends made to it, if the REIT is
treated as a "pension-held REIT." In view of the Ownership Limitation, the
Company does not expect to be treated as a "pension-held REIT." Consequently, a
pension trust stockholder should not be subject to UBTI on dividends that it
receives from the Company. However, because the Common Stock is publicly traded,
no assurance can be given to this effect.

TAXATION OF FOREIGN STOCKHOLDERS

The rules governing United States federal income taxation of nonresident
alien individuals, foreign corporations, foreign partnerships and other foreign
stockholders are complex and no attempt is made herein to provide more than a
summary of such rules. Prospective foreign investors ("Non-U.S. Stockholders")
should consult with their own tax advisors to determine the impact of federal,
state, local and any foreign income tax laws with regard to an investment in the
Company, including any reporting requirements.

Distributions that are not attributable to gain from sales or exchanges by
the Company or the Operating Partnership of "United States real property
interests" ("USRPIs"), as defined in the Code, and not designated by the Company
as capital gains dividends will be treated as dividends of ordinary income to
the extent they are made out of current or accumulated earnings and profits of
the Company. Such distributions will ordinarily be subject to a tax equal to 30%
of the gross amount of the distribution unless an applicable tax treaty reduces
or eliminates that tax. However, if income from the investment in the shares is
treated as effectively connected with the Non-U.S. Stockholder's conduct of a
United States trade or business (or, if an income tax treaty applies, is
attributable to a United States permanent establishment of the Non-U.S.
Stockholder), the Non-U.S. Stockholder generally will be subject to a tax at
graduated rates, in the same manner as U.S. stockholders are taxed with respect
to such distributions (and may also be subject to the 30% branch profits tax in
the case of a stockholder that is a foreign corporation). The Company expects to
withhold United States income tax at the rate of 30% on the gross amount of any
distributions of ordinary

28
<PAGE> 98

income made to a Non-U.S. Stockholder unless (i) a lower treaty rate applies and
proper certification is provided or (ii) the Non-U.S. Stockholder files an IRS
Form 4224 with the Company claiming that the distribution is effectively
connected with the Non-U.S. Stockholder's conduct of a United States trade or
business (or, if an income tax treaty applies, is attributable to a United
States permanent establishment of the Non-U.S. Stockholder). Pursuant to current
Treasury Regulations, dividends paid to an address in a country outside the
United States are generally presumed to be paid to a resident of such country
for purposes of ascertaining the requirement of withholding discussed above and
the applicability of a tax treaty rate. Under proposed Treasury Regulations, not
currently in effect, however, a Non-U.S. Stockholder who seeks to claim the
benefit of an applicable treaty rate would be required to satisfy certain
certification and other requirements.

Unless Company stock constitutes a USRPI, distributions in excess of
current and accumulated earnings and profits of the Company will not be taxable
to a stockholder to the extent that such distributions do not exceed the
adjusted basis of the stockholder's shares but rather will reduce the adjusted
basis of such shares. To the extent that such distributions exceed the adjusted
basis of a Non-U.S. Stockholder's shares of Company stock, such distributions
will give rise to tax liability if the Non-U.S. Stockholder would otherwise be
subject to tax on any gain from the sale or disposition of his shares, as
described below. If it cannot be determined at the time a distribution is made
whether or not such distribution will be in excess of current and accumulated
earnings and profits, the distributions will be subject to withholding at the
same rate as dividends. If, however, shares of Company stock are treated as a
USRPI, then unless otherwise treated as a dividend for withholding tax purposes
as described below, any distributions in excess of current or accumulated
earnings and profits will be subject to 10% withholding and, to the extent such
distributions also exceed the adjusted basis of a Non-U.S. Stockholder's shares,
they will also give rise to gain from the sale or exchange of the shares, the
tax treatment of which is described below. Amounts withheld may be refundable if
it is subsequently determined that such amounts are in excess of the Non-U.S.
Stockholder's U.S. tax liability.

Distributions that are designated by the Company at the time of
distribution as capital gain dividends (other than those arising from the
disposition of a USRPI) generally will not be subject to taxation, unless (i)
investment in the shares is effectively connected with the Non-U.S.
Stockholder's United States trade or business (or, if an income tax treaty
applies, it is attributable to a United States permanent establishment of the
Non-U.S. Stockholder), in which case the Non-U.S. Stockholder will be subject to
the same treatment as U.S. stockholders with respect to such gain (except that a
stockholder that is a foreign corporation may also be subject to the 30% branch
profits tax), or (ii) the Non-U.S. Stockholder is a non-resident alien
individual whose is present in the United States for 183 days or more during the
taxable year and either has a "tax home" in the United States or sold his or her
shares under circumstances in which the sale was attributable to a U.S. office,
in which case the non-resident alien individual will be subject to a 30% tax on
the individual's capital gains.

For any year in which the Company qualifies as a REIT, distributions that
are attributable to gain from sales or exchanges by the Company of USRPIs will
be taxed to a Non-U.S. Stockholder under the provisions of the Foreign
Investment in Real Property Tax Act of 1980 ("FIRPTA"). Under FIRPTA,
distributions attributable to gain from sales of USRPIs are taxed to a Non-U.S.
Stockholder as gain effectively connected with a United States trade or
business. Non-U.S. Stockholders would thus be taxed at the normal capital gain
rates applicable to U.S. stockholders (subject to applicable alternative minimum
tax and a special alternative minimum tax in the case of nonresident alien
individuals). Also, distributions subject to FIRPTA may be subject to a 30%
branch profits tax in the hands of a foreign corporate stockholder not entitled
to treaty exemption or rate reduction. The Company is required by applicable
Treasury Regulations to withhold 35% of any distribution that could be
designated by the Company as a USRPI capital gains dividend. This amount may be
creditable against the Non-U.S. Stockholder's FIRPTA tax liability.

Gain recognized by a Non-U.S. Stockholder upon a sale of shares of Company
stock will generally not be taxed under FIRPTA if the shares do not constitute a
USRPI. Shares of the Company will not be considered a USRPI if the Company is a
"domestically controlled REIT," or if the shares are part of a class of stock
that is regularly traded on an established securities market and the holder
owned less 5% of the class of stock sold during a specified testing period. A
"domestically controlled REIT" is defined generally as a REIT in which at all
times during a specified testing period less than 50% in value of the stock was
held directly or indirectly by

29
<PAGE> 99

foreign persons. The Company believes that it is a "domestically controlled
REIT," and therefore the sale of shares will not be subject to taxation under
FIRPTA. However, since the Company's Common Stock is publicly traded, no
assurance can be given to this effect. If the gain on the sale of shares were to
be subject to taxation under FIRPTA, the Non-U.S. Stockholder would be subject
to the same treatment as U.S. stockholders with respect to such gain (subject to
applicable alternative minimum tax and a special alternative minimum tax in the
case of nonresident alien individuals). Gain on the sale of Company stock not
subject to FIRPTA will still be taxable to a Non-U.S. Stockholder if (i)
investment in the shares is effectively connected with a United States trade or
business of the Non-U.S. Stockholder (or, if an income tax treaty applies, is
attributable to a United States permanent establishment of the Non-U.S.
Stockholder), in which case the Non-U.S. Stockholder will be subject to the same
treatment as U.S. stockholders with respect to such gain, or (ii) the Non-U.S.
Stockholder is a nonresident alien individual who was present in the United
States for 183 days or more during the taxable year and has a "tax home" in the
United States, in which case the nonresident alien individual will be subject to
a 30% tax on the individual's capital gains

If the proceeds of a disposition of shares of Company stock are paid by or
through a United States office of a broker, the payment is subject to
information reporting and backup withholding unless the disposing Non-U.S.
Stockholder certifies as to his name, address and non-United States status or
otherwise establishes an exemption. Generally, United States information
reporting and backup withholding will not apply to a payment of disposition
proceeds if the payment is made outside the United States through a non-United
States office of a non-United States broker. United States information reporting
requirements (but not backup withholding) will apply, however, to a payment of
disposition proceeds outside the United States if (i) the payment is made
through an office outside the United States of a broker that is either (a) a
United States person, (b) a foreign person that derives 50% or more of its gross
income for certain periods from the conduct of a trade or business in the United
States or (c) a "controlled foreign corporation" for United States federal
income tax purposes, and (ii) the broker fails to obtain documentary evidence
that the stockholder is a Non-U.S. Stockholder and that certain conditions are
met or that the Non-U.S. Stockholder otherwise is entitled to an exemption.

POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING TAX CONSEQUENCES

Prospective investors should recognize that the present federal income tax
treatment of an investment in the Company may be modified by legislative,
judicial or administrative action at any time, and that any such action may
affect investments and commitments previously made. The rules dealing with
federal income taxation are constantly under review by persons involved in the
legislative process and by the Service and the U.S. Treasury Department,
resulting in revisions or regulations and revised interpretations of established
concepts as well as statutory changes. Revisions in federal tax laws and
interpretations thereof could adversely affect the tax consequences of an
investment in the Company. For example, a recent federal budget proposal
contains language, which, if enacted in its present form, would result in the
immediate taxation of all gain inherent in a C corporation's assets upon an
election by the corporation to become a REIT, and thus would effectively
preclude the Company from re-electing REIT status following a termination of its
REIT qualification.

STATE TAX CONSEQUENCES AND WITHHOLDING

The Company and its stockholders may be subject to state or local taxation
in various state or local jurisdictions, including those in which it or they
transact business or reside. The state and local tax treatment of the Company
and its stockholders may not conform to the federal income tax consequences
discussed above. Several states in which the Company may conduct business treat
REITs as ordinary corporations. The Company does not believe, however, that
stockholders will be required to file state tax returns, other than in their
respective states of residence, as a result of the ownership of shares of the
Company's capital stock. However, prospective stockholders should consult their
own tax advisors regarding the effect of state and local tax laws on an
investment in the Company.

EACH INVESTOR IS ADVISED TO CONSULT WITH HIS OR HER TAX ADVISOR REGARDING
THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE OWNERSHIP

30
<PAGE> 100

AND SALE OF COMMON STOCK IN AN ENTITY ELECTING TO BE TAXED AS A REAL ESTATE
INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX
CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE, AND ELECTION AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.

PLAN OF DISTRIBUTION

The Company may sell the Offered Securities to one or more underwriters for
public offering and sale by them or may sell the Offered Securities to investors
directly or through agents, which agents may be affiliated with the Company. Any
such underwriter or agent involved in the offer and sale of the Offered
Securities will be named in the applicable Prospectus Supplement. Direct sales
to investors may be accomplished through subscription offerings or concurrent
rights offerings to the Company's stockholders and direct placements to third
parties.

Sales of Offered Securities offered pursuant to any applicable Prospectus
Supplement may be effected from time to time in one or more transactions on the
New York Stock Exchange or in negotiated transactions or any combination of such
methods of sale, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at other negotiated prices.

Underwriters may offer and sell Offered Securities at a fixed price or
prices which may be changed, at prices related to the prevailing market prices
at the time of sale, or at negotiated prices. The Company also may offer and
sell the Offered Securities in exchange for one or more of its then outstanding
issues of debt or convertible debt securities. The Company also may, from time
to time, authorize underwriters acting as the Company's agents to offer and sell
the Offered Securities upon the terms and conditions as set forth in the
applicable Prospectus Supplement. In connection with the sale of Offered
Securities, underwriters may be deemed to have received compensation from the
Company in the form of underwriting discounts or commissions and may also
receive commissions from purchasers of Offered Securities for whom they may act
as agent. Underwriters may sell Offered Securities to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents.

Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Offered Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable Prospectus Supplement. Underwriters, dealers
and agents participating in the distribution of the Offered Securities may be
deemed to be underwriters, and any discounts and commissions received by them
and any profit realized by them on resale of the Offered Securities may be
deemed to be underwriting discounts and commissions under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements entered into
with the Company, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act. Any such
indemnification agreements will be described in the applicable Prospectus
Supplement.

Unless otherwise specified in the related Prospectus Supplement, each
series of Offered Securities will be a new issue with no established trading
market, other than the Common Stock which is listed on the New York Stock
Exchange. Any shares of Common Stock sold pursuant to a Prospectus Supplement
will be listed on such exchange, subject to official notice of issuance. The
Company may elect to list any series of Preferred Stock or Warrants on any
exchange, but is not obligated to do so. It is possible that one or more
underwriters may make a market in a series of Offered Securities, but will not
be obligated to do so and may discontinue any market making at any time without
notice. Therefore, no assurance can be given as to the liquidity of the trading
market for the Offered Securities.

If so indicated in the applicable Prospectus Supplement, the Company may
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Offered Securities from the Company at the public
offering price set forth in such Prospectus Supplement pursuant to Delayed
Delivery Contracts ("Contracts") providing for payment and delivery on the date
or dates stated in such Prospectus Supplement.

31
<PAGE> 101

Each Contract will be for an amount not less than, and the aggregate principal
amount of Offered Securities sold pursuant to Contracts shall be not less nor
more than, the respective amounts stated in the applicable Prospectus
Supplement. Institutions with whom Contracts, when authorized, may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions, and other
institutions but will in all cases be subject to the approval of the Company.
Contracts will not be subject to any conditions except (i) the purchase by an
institution of the Offered Securities covered by its Contracts shall not at the
time of delivery be prohibited under the laws of any jurisdiction in the United
States to which such institution is subject, and (ii) if the Offered Securities
are being sold to underwriters, the Company shall have sold to such underwriters
the total principal amount of the Offered Securities less the principal amount
thereof covered by Contracts.

Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for, the Company and its
subsidiaries in the ordinary course of business.

In order to facilitate an offering of Offered Securities, certain persons
participating in the offering may engage in transactions that stabilize,
maintain, or otherwise affect the price of the Offered Securities during and
after the offering. Specifically, the underwriters may over-allot or otherwise
create a short position in the Offered Securities for their own account by
selling more Offered Securities than have been sold to them by the Company. The
underwriters may elect to cover any such short position by purchasing Offered
Securities in the open market or by exercising any over-allotment option granted
to the underwriters. In addition, such persons may stabilize or maintain the
price of the Offered Securities by bidding for or purchasing Offered Securities
in the open market and may impose penalty bids, under which selling concessions
allowed to syndicate members or other broker-dealers participating in the
offering are reclaimed if Offered Securities previously distributed in the
offering are repurchased in connection with stabilization transactions or
otherwise. The effect of these transactions may be to stabilize or maintain the
market price of the Offered Securities at a level above that which might
otherwise prevail in the open market. The imposition of a penalty bid may also
affect the price of the Offered Securities to the extent that it discourages
resales thereof. No representation is made as to the magnitude or effect of any
such stabilization or other transactions. Such transactions may be effected on
the New York Stock Exchange or otherwise and, if commenced, may be discontinued
at any time.

EXPERTS

The consolidated financial statements and related financial statement
schedules included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 and the statement of revenues and certain expenses for
the acquired properties included in the Company's Current Reports on Form 8-K/A
filed February 24, 1997 and incorporated by reference herein have been audited
by Arthur Andersen LLP, independent public accountants, to the extent and for
the periods indicated in their reports and have been incorporated herein in
reliance on such reports given on the authority of that firm as experts in
accounting and auditing.

LEGAL MATTERS

The validity of the Offered Securities will be passed upon for the Company
by Morrison & Foerster LLP, Palo Alto, California. In addition, the description
of the Company's qualifications and taxation as a REIT under the Code contained
in the Prospectus under the caption "Federal Income Tax Consequences" is based
upon the opinion of Morrison & Foerster LLP.

32
<PAGE> 102

Inside Front Cover

Map of the United States indicating the location of owned portfolios, portfolios
controlled by the Associated Companies and proposed acquisitions.

Pie chart indicating pro forma contribution to revenue by property type: Retail
12%, Multi-Family 8%, Industrial 34%, Office 37% and Hotel 9%.

Pie chart indicating pro forma square footage by property type: Retail 10%,
Multi-Family 8%, Industrial 58%, Office 20% and Hotel 4%.

Inside Back Cover

Two photographs of recent property acquisitions (Centerstone Plaza, Irvine,CA
and 700 S. Washington, Alexandria, VA) and three photographs of proposed
property acquisitions (Baseline, Tempe, AZ, Post Oak Place, Houston, TX and
Buschwood II, Tampa, FL).

S-13

Organizational Chart of the Company

S-55

Property Diagram
<PAGE> 103

======================================================

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IN CONNECTION WITH THE OFFERING
COVERED BY THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THIS PROSPECTUS
SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS CONSTITUTES AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY JURISDICTION WHERE, OR
TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATIONS THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------

TABLE OF CONTENTS

PROSPECTUS SUPPLEMENT

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Supplement Summary......... S-3
The Company........................... S-9
Recent Activities..................... S-14
Use of Proceeds....................... S-19
Price Range of Common Stock and
Distribution History................ S-20
Capitalization........................ S-22
Selected Historical and Pro Forma
Financial and Other Data............ S-23
Pro Forma Financial Information....... S-26
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... S-38
The Properties........................ S-42
Management............................ S-59
Underwriting.......................... S-60
Legal Matters......................... S-61
Experts............................... S-61
Index to Financial Information........ F-1
</TABLE>

PROSPECTUS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information................. 3
Incorporation of Certain Documents by
Reference........................... 3
The Company........................... 5
Tax Status of the Company............. 5
Risk Factors.......................... 6
Use of Proceeds....................... 13
Ratio of Earnings to Fixed Charges.... 13
Description of Preferred Stock........ 14
Description of Common Stock........... 15
Description of Warrants............... 17
Certain Provisions of the Company's
Charter and Bylaws.................. 18
Federal Income Tax Consequences....... 18
Plan of Distribution.................. 31
Experts............................... 32
Legal Matters......................... 32
</TABLE>

======================================================
======================================================
6,300,000 SHARES
LOGO
LOGO
COMMON STOCK
-----------------------------------------
PROSPECTUS SUPPLEMENT
-----------------------------------------
BEAR, STEARNS & CO. INC.
ROBERTSON, STEPHENS & COMPANY
SALOMON BROTHERS INC
JEFFERIES & COMPANY, INC.
JULY 10, 1997
======================================================