SECURITIES AND EXCHANGE COMMISSION

                          Washington, D.C.  20549

                                 FORM 10-Q

(Mark One)

  [x]             QUARTERLY REPORT PURSUANT TO SECTION 13 OR
                 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended   September 30, 1998
                                --------------------

                                    OR


  [ ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to

                   Commission file number      1-8594
                                               -------


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

       Delaware                                        13-1954619
       ---------                                       ----------
(State or other jurisdiction of                    (I.R.S. Employer
  incorporation or organization)                   Identification No.)

  180 South Broadway, White Plains, New York              10605
  ------------------------------------------              ------
  (Address of principal executive offices)              (Zip Code)

Registrant's telephone number, indicating area code     914-948-1300
                                                        ------------

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

The number of shares outstanding of each of the issuer's classes of common stock
as of the close of business  on  November 6, 1998 was 478,940  shares of Class A
common and 3,121,198 shares of Class B common.


















              PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES




                              Index to Form 10-Q

                          For the Nine Months Ended

                              September 30, 1998



Part I - Financial Information (Unaudited)                
-                                                          

     Consolidated Balance Sheets                           

     Consolidated Statements of Operations                  

     Consolidated Statements of Cash Flows                  

     Notes to Consolidated Financial Statements             

     Management's Discussion and Analysis of
       Financial Condition and Results of Operations       

Part II - Other Information

     Item 6.  Exhibits and Reports on Form 8-K             





<TABLE>
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
<CAPTION>



Assets                                                                         September 30,            December 31,
                                                                                  1998                     1997
                                                                             ----------------         ----------------
<S>                                                                          <C>                      <C>

  Mortgage portfolio (Note 2):
    Sold properties, accrual                                                     $43,545,864              $43,871,400
    Related parties, accrual                                                       1,713,997                2,350,899
    Sold properties, impaired                                                     17,662,927               17,878,458
                                                                             ----------------         ----------------

    Total mortgage portfolio                                                      62,922,788               64,100,757
                                                                             ----------------         ----------------

  Less discounts:
    Sold properties, accrual                                                       4,301,075                5,055,574
    Related parties, accrual                                                         152,419                  160,735
    Sold properties, impaired                                                      7,617,236                7,675,111
                                                                             ----------------         ----------------

    Total discounts                                                               12,070,730               12,891,420
                                                                             ----------------         ----------------

  Less deferred gains:
    Sold properties, accrual                                                      12,546,661               12,550,333
    Related parties, accrual                                                         935,156                1,543,342
    Sold properties, impaired                                                      6,380,679                6,432,055
                                                                             ----------------         ----------------

    Total deferred gains                                                          19,862,496               20,525,730
                                                                             ----------------         ----------------

  Net mortgage portfolio (of which $899,790 in 1998
    and $756,751 in 1997 are due within one year)                                 30,989,562               30,683,607
                                                                             ----------------         ----------------


  Real estate (Note 3)                                                            34,536,464               27,690,535
    Less: accumulated depreciation                                                 6,991,263                6,404,797
                                                                             ----------------         ----------------

  Net real estate                                                                 27,545,201               21,285,738
                                                                             ----------------         ----------------


  Minority partners' interest (Note 4)                                             7,328,615                3,779,408
  Prepaid expenses and deposits in escrow                                          2,311,857                1,190,158
  Other receivables (net of valuation allowance of
    $93,840 in 1998 and $129,484 in 1997)                                            645,147                  715,407
  Other receivables (related party)                                                    7,972                    8,287
  Securities available for sale (Note 5)                                           1,059,763                  226,550
  Cash and cash equivalents                                                        2,311,125                  979,712
  Other assets                                                                     1,999,722                1,140,571
                                                                             ----------------         ----------------

  Total Assets                                                                   $74,198,964              $60,009,438
                                                                             ================         ================





  See notes to consolidated financial statements.
</TABLE>





<TABLE>
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
<CAPTION>

Liabilities and Stockholders' Equity

                                                                                        September 30,            December 31,
                                                                                           1998                      1997
                                                                                      ----------------          ----------------
<S>                                                                                   <C>                       <C>

      Liabilities:
        Mortgage debt (Note 6):
          Properties owned                                                                $39,826,031               $26,271,093
          Wrap mortgage debt on sold properties                                             4,790,271                 5,149,217
                                                                                      ----------------          ----------------

        Total (of which $891,878 in 1998 and $1,133,721
          in 1997 are due within one year)                                                 44,616,302                31,420,310

        Note payable to bank (of which $156,552 in 1998
          and $147,190 in 1997 are due within one year) (Note 7)                           10,433,301                10,542,552
        Executive pension plan liability                                                    1,515,235                 1,601,411
        Accrued liabilities                                                                 2,820,840                 2,276,898
        Accrued postretirement costs                                                          566,106                   574,637
        Deferred income                                                                       189,317                   274,097
        Accounts payable                                                                      315,216                   481,248
        Distribution payable on common stock                                                  575,915
        Other liabilities                                                                     785,526                   665,202
                                                                                      ----------------          ----------------

      Total Liabilities                                                                    61,817,758                47,836,355
                                                                                      ----------------          ----------------


      Stockholders' Equity:
        Common stock; par value $.10 per share
          Class A, authorized 700,000 shares, issued and
            outstanding 478,940 shares                                                         47,894                    47,894
          Class B         September 30, 1998        December 31, 1997                         313,175                   311,377
          -----------     ------------------        ---------------------
          Authorized:             10,000,000               10,000,000
          Issued:                  3,131,751                3,113,773
          Treasury:                   11,224                   14,224

        Additional paid-in capital                                                          2,143,714                 2,043,653
        Retained earnings                                                                  10,026,934                 9,943,241
        Net unrealized gain on securities available for sale (Notes 5 and 9)                    1,456                    19,505
        Class B, treasury stock (at cost) (Note 10)                                          (151,967)                 (192,587)
                                                                                      ----------------          ----------------

      Total Stockholders' Equity                                                           12,381,206                12,173,083
                                                                                      ----------------          ----------------

      Total Liabilities and Stockholders' Equity                                          $74,198,964               $60,009,438
                                                                                      ================          ================



        See notes to consolidated financial statements.
</TABLE>







<TABLE>
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<CAPTION>




                                                                                       NINE MONTHS ENDED
                                                                                         SEPTEMBER 30,
                                                                           -----------------------------------

                                                                                1998               1997
                                                                           ---------------    ----------------
Income:
<S>                                                                            <C>                 <C>       
  Rental                                                                       $7,144,012          $6,159,768
  Interest on mortgages - sold properties                                       2,847,079           3,112,030
  Interest on wrap mortgages                                                      960,181             976,361
  Interest on mortgages - related parties                                         372,717             174,021
  Investment income                                                               117,733             105,447
  Other                                                                            34,764              45,969
                                                                           ---------------    ----------------

Total                                                                          11,476,486          10,573,596
                                                                           ---------------    ----------------

Costs and Expenses:
  General and administrative                                                    2,031,474           1,712,657
  Interest on note payable and other                                              849,400             775,050
  Interest on wrap mortgage debt                                                  155,988             172,167
  Amortization of  loan acquisition costs                                          24,344              22,051
  Depreciation on non-rental property                                              18,130              18,406
  Rental property:
    Operating expenses                                                          3,108,535           3,095,087
    Interest on mortgages                                                       1,889,461           1,606,012
    Real estate taxes                                                             655,258             583,510
    Depreciation on real estate                                                   587,410             543,976
    Amortization of mortgage costs                                                174,920             247,248
    Minority interest share of partnership income                                 359,901             285,398
                                                                           ---------------    ----------------

Total                                                                           9,854,821           9,061,562
                                                                           ---------------    ----------------


Income before net gain from sales of properties and securities                  1,621,665           1,512,034

Net gain from sales of properties and securities                                  725,107             562,658
                                                                           ---------------    ----------------

Net Income                                                                     $2,346,772          $2,074,692
                                                                           ===============    ================


Earnings per Common Share (Note 1-C):
  Income before net gain from sales of properties and securities                    $0.45               $0.42

  Net gain from sales of properties and securities                                   0.20                0.16
                                                                           ---------------    ----------------

Net Income per Common Share                                                         $0.65               $0.58
                                                                           ===============    ================

Cash Distributions Declared per Common Share                                        $0.63               $0.60
                                                                           ===============    ================

Weighted Average Number of Shares Outstanding                                   3,589,889           3,560,549
                                                                           ===============    ================



See notes to consolidated financial statements.
</TABLE>



<TABLE>
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<CAPTION>




                                                                                      THREE MONTHS ENDED
                                                                                         SEPTEMBER 30,
                                                                           -----------------------------------

                                                                                1998               1997
                                                                           ---------------    ----------------
Income:
<S>                                                                            <C>                 <C>       
  Rental                                                                       $2,434,424          $2,119,482
  Interest on mortgages - sold properties                                         950,661             929,904
  Interest on wrap mortgages                                                      318,685             324,128
  Interest on mortgages - related parties                                         109,153              58,664
  Investment income                                                                51,140              18,227
  Other                                                                             5,834              11,487
                                                                           ---------------    ----------------

Total                                                                           3,869,897           3,461,892
                                                                           ---------------    ----------------

Costs and Expenses:
  General and administrative                                                      630,373             583,562
  Interest on note payable and other                                              280,744             297,970
  Interest on wrap mortgage debt                                                   50,621              56,063
  Amortization of  loan acquisition costs                                           8,115               8,011
  Depreciation on non-rental property                                               6,353               5,323
  Rental property:
    Operating expenses                                                          1,064,665           1,077,780
    Interest on mortgages                                                         708,341             522,445
    Real estate taxes                                                             215,980             234,172
    Depreciation on real estate                                                   207,755             190,549
    Amortization of mortgage costs                                                 13,561             179,772
    Minority interest share of partnership income                                 145,722              69,742
                                                                           ---------------    ----------------

Total                                                                           3,332,230           3,225,389
                                                                           ---------------    ----------------


Income before net gain from sales of properties and securities                    537,667             236,503

Net gain from sales of properties and securities                                   43,889              54,785
                                                                           ---------------    ----------------

Net Income                                                                       $581,556            $291,288
                                                                           ===============    ================


Earnings per Common Share (Note 1-C):
  Income before net gain from sales of properties and securities                    $0.15               $0.06

  Net gain from sales of properties and securities                                   0.01                0.02
                                                                           ---------------    ----------------

Net Income per Common Share                                                         $0.16               $0.08
                                                                           ===============    ================

Cash Distributions Declared per Common Share                                        $0.32               $0.30
                                                                           ===============    ================



See notes to consolidated financial statements.
</TABLE>







<TABLE>
 PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<CAPTION>


                                                                                   NINE MONTHS ENDED SEPTEMBER 30,
                                                                                  ----------------------------------------
                                                                                      1998                     1997
                                                                                  --------------           --------------
 Cash Flows from Operating Activities:
<S>                                                                                  <C>                      <C>       
   Cash received from rental properties                                              $6,961,116               $6,286,420
   Interest received                                                                  3,434,791                3,153,392
   Miscellaneous income                                                                  30,892                   58,412
   Interest paid on rental property mortgages                                        (1,853,848)              (1,601,631)
   Interest paid on wrap mortgage debt                                                 (155,988)                (172,167)
   Interest paid on note payable                                                       (694,486)                (621,470)
   Cash disbursed for rental property operations                                     (4,436,811)              (3,525,980)
   Cash disbursed for general and administrative costs                               (1,363,154)              (1,250,233)
                                                                                  --------------           --------------

 Net cash provided by operating activities                                            1,922,512                2,326,743
                                                                                  --------------           --------------


 Cash Flows from Investing Activities:
   Payments received on notes receivable                                              1,226,401                2,243,184
   Payments disbursed for investments in notes receivable                               (60,000)              (3,009,946)
   Payments disbursed for additions and improvements                                   (355,398)              (1,373,328)
   Proceeds from sale of property                                                        74,550
   Purchase of property                                                              (6,549,637)
   Proceeds from sales of securities                                                     23,986                  645,943
   Purchases of securities                                                             (853,812)                 (79,202)
   Purchase of 1% interest in partnership                                                                        (60,000)
                                                                                  --------------           --------------

 Net cash used in investing activities                                               (6,493,910)              (1,633,349)
                                                                                  --------------           --------------

 Cash Flows from Financing Activities:
   Principal payments on mortgage debt:
     Properties owned                                                                  (331,237)                (435,575)
     Wrap mortgage debt on sold properties                                             (358,946)                (346,305)
   Mortgage debt payment from proceeds of mortgage refinancing                      (10,788,825)              (7,771,546)
   Mortgage proceeds                                                                 24,675,000                8,120,000
   Mortgage refinancing repairs and replacement escrows                                (558,730)
   Mortgage costs                                                                      (574,612)                (192,875)
   Note payable proceeds                                                                                       2,500,000
   Principal payments on note payable                                                  (109,251)                (479,376)
   Cash distributions on common stock                                                (2,263,079)              (2,138,126)
   Proceeds from dividend reinvestment and share purchase plan                          121,599                  133,531
   Distributions to minority partners                                                (3,909,108)                (304,411)
                                                                                  --------------           --------------

 Net cash provided by (used in) financing activities                                  5,902,811                 (914,683)
                                                                                  --------------           --------------


 Net Increase (Decrease) in Cash and Cash Equivalents                                 1,331,413                 (221,289)

 Cash and Cash Equivalents, Beginning of Period                                         979,712                1,392,135
                                                                                  --------------           --------------

 Cash and Cash Equivalents, End of Period                                            $2,311,125               $1,170,846
                                                                                  ==============           ==============



 See notes to consolidated financial statements.
</TABLE>






<TABLE>
PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<CAPTION>


                                                                                     NINE MONTHS ENDED SEPTEMBER 30,
                                                                                    -----------------------------------------
                                                                                         1998                      1997
                                                                                    ---------------           ---------------

<S>                                                                                 <C>                       <C>

Reconciliation of Net Income to Net Cash
  Provided by Operating Activities

Net Income                                                                              $2,346,772                $2,074,692
                                                                                    ---------------           ---------------


Adjustments  to  reconcile   net  income  to  net  cash  
provided  by  operating activities:
    Depreciation and amortization                                                          804,804                   831,681
    Gain from sales of properties and securities                                          (725,107)                 (562,658)
    Issuance of treasury stock                                                              15,660
    Amortization of discounts on notes and fees                                           (820,690)               (1,122,928)
    Decrease in accounts receivable                                                         70,575                    55,190
    Increase in accounts payable and accrued liabilities                                   283,203                   415,405
    Decrease in deferred income                                                            (84,780)                  (61,617)
    Increase in prepaid expenses, deposits in escrow
      and deferred charges                                                                (644,656)                 (205,451)
    Increase in security deposit restricted funds                                         (378,363)
    Increase in security deposit liabilities                                               124,196                    68,723
    Minority share of partnership income                                                   359,901                   285,398
    Distribution payable on common stock                                                   575,915                   535,864
    Other                                                                                   (4,918)                   12,444
                                                                                    ---------------           ---------------

Total adjustments                                                                         (424,260)                  252,051
                                                                                    ---------------           ---------------


Net cash provided by operating activities                                               $1,922,512                $2,326,743
                                                                                    ===============           ===============


Supplemental noncash disclosures:

    Property received in satisfaction of debt                                              $11,569                   $45,765
                                                                                    ===============           ===============

    Net carrying value of foreclosed properties
          reclassified to real estate                                                                               $588,683
                                                                                                              ===============


See notes to consolidated financial statements.
</TABLE>




PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. General - Presidential Realty Corporation  ("Presidential" or the "Company"),
a Real Estate Investment Trust ("REIT"),  is engaged  principally in the holding
of notes and  mortgages  secured by real estate and in the  ownership  of income
producing real estate.

B. Principles of Consolidation - The consolidated  financial  statements include
the  accounts  of   Presidential   Realty   Corporation  and  its  wholly  owned
subsidiaries.  Additionally,  the accompanying consolidated financial statements
include  100% of the  account  balances  of UTB  Associates  and PDL,  Inc.  and
Associates Limited Co-Partnership ("Home Mortgage Partnership" formerly known as
Metmor Plaza  Associates),  partnerships  in which  Presidential or PDL, Inc., a
wholly owned subsidiary of Presidential, is the General Partner.

All significant intercompany balances and transactions have been eliminated.

C. Net  Income  Per  Share - Basic net  income  per share  data is  computed  by
dividing the net income by the weighted  average number of shares of Class A and
Class B common  stock  outstanding  and common  stock  equivalents  during  each
period. Basic net income per share and diluted income per share are the
same for the nine months ended September 30, 1998 and 1997.  The dilutive effect
of stock options is calculated using the treasury stock method.

D. Basis of Presentation - The  accompanying  unaudited  consolidated  financial
statements have been prepared in accordance with generally  accepted  accounting
principles for interim financial information.  In the opinion of management, all
adjustments  (consisting of only normal recurring accruals) considered necessary
for a fair  presentation  of the results for the  respective  periods  have been
reflected.  These financial  statements and accompanying notes should be read in
conjunction with the Company's Form 10-K for the year ended December 31, 1997.

E. Management Estimates - In preparing the consolidated  financial statements in
conformity with generally accepted accounting principles, management is required
to make estimates and assumptions that affect the reported amounts of assets and
liabilities  and disclosure of contingent  assets and liabilities as of the date
of the  consolidated  balance  sheets  and the  reported  amounts  of income and
expense  for the  reporting  period.  Actual  results  could  differ  from those
estimates.

2. MORTGAGE PORTFOLIO

The Company's mortgage portfolio includes notes receivable - sold properties and
notes receivable - related parties and includes both accrual and impaired loans.

Notes receivable - sold properties consist of:

(1) Long-term purchase money notes from sales of properties  previously owned by
the Company or notes  purchased by the Company.  These purchase money notes have
varying interest rates with balloon payments due at maturity.

(2) Notes  receivable  from sales of cooperative  apartment  units.  These notes
generally  have market  interest  rates and the majority of these notes amortize
monthly with balloon payments due at maturity.



Notes receivable - related parties are all due from Ivy Properties, Ltd. or its
affiliates (collectively "Ivy") and consist of:

(1)  Purchase  money  notes  resulting  from sales of  property  or  partnership
interests to Ivy.

(2) Notes receivable  relating to loans made by the Company to Ivy in connection
with Ivy's cooperative conversion business.

The Woodland notes  receivable were modified in March,  1998, as a result of the
sale of the  property and the  assumption  of the notes by the  purchasers.  The
interest  rate on the notes was  increased  from 9% to 10% through 2001 and will
increase to 10.25% thereafter.

At September 30, 1998, all of the notes in the Company's  mortgage portfolio are
current with the exception of two sold properties  notes,  the Fairfield  Towers
Second  Mortgage  and the  Grant  House  wraparound  mortgage  note,  which  are
classified as impaired  loans.  These two loans are in the  aggregate  amount of
$17,662,927  and  have  a net  carrying  value  of  $3,665,012  after  deducting
discounts  of  $7,617,236  and  deferred  gains of  $6,380,679.  The Grant House
wraparound mortgage note wraps around and is subordinate to a first mortgage
with an outstanding principal balance of $2,260,248 at September 30, 1998, which
is equal to the net  carrying  value of the  Grant  House  wraparound  note.  At
September 30, 1998,  all payments due on the first  mortgage have been paid. The
Company has  determined  that no  allowances  for credit losses are required for
these  impaired loans because the net carrying value of these loans is less than
the estimated fair value of the underlying collateral.

The Company recognizes income on the impaired loans only to the extent that such
income is actually received. The average recorded investment in
impaired loans during the nine months ended September 30, 1998 and September 30,
1997 was $17,760,442 and $16,162,040, respectively.

There have been no significant changes in the status of the impaired loans since
December 31,  1997.  There were no  condominium  sales at the  Fairfield  Towers
property during the nine months ended September 30, 1998.

The following table reflects the activity in impaired loans:












<TABLE>
IMPAIRED LOANS
--------------
<CAPTION>

                                                          Impaired                                     Impaired
                                                          Loan                  Additions              Loan
                                                          Balance               (Payments)             Balance
Loan Description                                          12/31/97              1998                   9/30/98
------------------------------------------------          -----------------     -----------------      -----------------
<S>                                                       <C>                   <C>                    <C>

Notes receivable-sold properties:
  Properties previously owned-
    Fairfield Towers Second Mortgage                           $14,488,337             ($109,251)           $14,379,086
    Grant House (1)                                              3,390,121              (106,280)             3,283,841
                                                          -----------------     -----------------      -----------------

Total                                                          $17,878,458             ($215,531)           $17,662,927
                                                          =================     =================      =================



                                                          Discount                                     Net
                                                          on                    Deferred               Carrying
                                                          Loans                 Gain                   Value
Loan Description                                          9/30/98               9/30/98                9/30/98
------------------------------------------------          -----------------     -----------------      -----------------

Notes receivable-sold properties:
  Properties previously owned-
    Fairfield Towers Second Mortgage                           ($7,617,236)          ($5,357,086)            $1,404,764
    Grant House (1)                                                                   (1,023,593)             2,260,248
                                                          -----------------     -----------------      -----------------

Total                                                          ($7,617,236)          ($6,380,679)            $3,665,012
                                                          =================     =================      =================






                                                                                Nine months ended September 30,
                                                                                ----------------------------------------

                                                                                      1998                   1997
                                                                                -----------------      -----------------

Reported Interest Income and
Amortization of Discount (Cash Basis)
----------------------------------------------------------


Fairfield Towers Second Mortgage - interest income                                       $12,401                $62,579
Fairfield Towers Second Mortgage - amortization of discount                               57,875                 64,397
Grant House - interest income (1)                                                         51,923
Overlook - interest income (2)                                                                                   70,869
Overlook - additional interest income (2)                                                                        17,527
                                                                                -----------------      -----------------

Total                                                                                   $122,199               $215,372
                                                                                =================      =================



Recognized Gain from Sale of Property
----------------------------------------------------------


Fairfield Towers Second Mortgage                                                         $51,376                $57,166
Overlook (2)                                                                                                     17,840
                                                                                -----------------      -----------------

Total                                                                                    $51,376                $75,006
                                                                                =================      =================



Nonreported Interest Income and Amortization of Discount
--------------------------------------------------------------------------------

The  following  additional  amounts  would have been reported if these loans had
been fully performing:

Fairfield Towers Second Mortgage - interest income                                      $731,394               $683,043
Fairfield Towers Second Mortgage - additional interest income                                                    69,634
Fairfield Towers Second Mortgage - amortization of discount                              950,757                792,046
Grant House - interest income (1)                                                         56,250
                                                                                -----------------      -----------------

Total                                                                                 $1,738,401             $1,544,723
                                                                                =================      =================


<FN>
(1)  Grant House was classified as an impaired loan at December 31, 1997 and, as
     a result, no amounts are listed for the 1997 period. The interest income of
     $51,923 reported for the 1998 period  represents  interest  received on the
     wraparound  first mortgage debt. The net carrying value of this  wraparound
     mortgage note is equal to the first  mortgage  debt of $2,260,248  which it
     wraps around.

(2) The Overlook loan was reclassified to accrual status at December 31, 1997.
</FN>
</TABLE>






3. REAL ESTATE

   Real estate is comprised of the following:

                                          September 30,     December 31,
                                              1998              1997
                                          ------------      -----------

Land                                       $ 5,454,549      $ 3,774,779
Buildings and leaseholds                    28,853,829       23,729,409
Furniture and equipment                        228,086          186,347
                                           -----------      -----------
Total real estate                          $34,536,464      $27,690,535
                                           ===========      ===========

In August, 1998, the Company purchased Sunwood Apartments,  a 105 unit apartment
building  complex  in  Miami,  Florida,  for a  purchase  price  of  $6,100,000.
Presidential obtained a $4,875,000 first mortgage loan on the property.


4. MINORITY PARTNERS' INTEREST

Presidential  is the General  Partner of UTB  Associates and Pdl, Inc., a wholly
owned  subsidiary  of  Presidential,  is the  General  Partner of Home  Mortgage
Partnership. Presidential has a 66-2/3% interest in UTB Associates. Presidential
and PDL, Inc. have an aggregate  26% interest in Home Mortgage  Partnership.  As
the  General  Partner  of  these  partnerships,   Presidential  and  PDL,  Inc.,
respectively,   exercise   effective   control   over  the   business  of  these
partnerships,  and,  accordingly,  Presidential has included 100% of the account
balances of these  partnerships in the accompanying  financial  statements.  The
minority  partners'  interest  reflects  the  minority  partners'  equity in the
partnerships.

The minority partners'  interest in the Home Mortgage  Partnership is a negative
interest and therefore,  minority  partners' interest is a net receivable on the
Company's financial  statements.  The negative basis for each partner's interest
in the Home Mortgage  Partnership  is due to the  refinancing of the mortgage on
the property and the distribution of the proceeds to the partners.  The mortgage
debt, which is included in the Company's financial statements,  is substantially
in excess of the historical cost of the property and the estimated fair value of
the  property is  significantly  greater than the  mortgage  debt.  The minority
partners'  interest should be recovered if the partnership sold the property and
the partnership is liquidated.

Minority partners' interest is comprised of the following:

                                                September 30,   December 31,
                                                     1998           1997
                                                ------------    -----------

Home Mortgage Partnership                        $7,506,989      $3,963,378
UTB Associates                                     (178,374)       (183,970)
                                                 ----------      ----------
Total minority partners' interest                $7,328,615      $3,779,408
                                                 ==========      ==========






5. SECURITIES AVAILABLE FOR SALE

The cost and fair value of securities available for sale are as follows:

                                                September 30,    December 31,
                                                    1998             1997
                                                ------------      -----------
Cost                                             $1,058,307       $207,045
Gross unrealized gains                               12,798         19,612
Gross unrealized losses                             (11,342)          (107)
                                                 ----------       --------
Fair value                                       $1,059,763       $226,550
                                                 ==========       ========

Sales activity results for securities available for sale are as follows:

                                           Nine Months Ended September 30,
                                           -------------------------------
                                                     1998       1997
                                                     ----       ----
Gross sales proceeds                                $23,986    $649,110
                                                    =======    ========

Gross realized gains                                $21,436    $ 52,420
Gross realized losses                                           (37,264)
                                                    -------    --------
Net realized gain                                   $21,436    $ 15,156
                                                    =======    ========


6. MORTGAGE DEBT

In March,  1998,  the Company  obtained a  $2,300,000  mortgage on its  Fairlawn
Gardens  property  (formerly Kent  Terrace).  The mortgage bears interest at the
rate of 7.06% per annum,  requires monthly payments of principal and interest of
$15,395 and matures on April 1, 2008 with a  $2,012,668  balloon  payment due at
maturity.

In April,  1998,  the  Company  refinanced  the  mortgage  on the Home  Mortgage
property  (formerly  known as Metmor  Plaza).  The  prior  mortgage  balance  of
$10,788,825 was paid from the proceeds of the new $17,500,000 mortgage.  The new
mortgage  bears  interest at the rate of 7.38% per annum for the first ten years
and requires  monthly  payments of principal and interest of $120,928  until the
anticipated  repayment date of May 11, 2008, at which time the then  outstanding
principal balance of $15,445,099 is expected to be repaid. However, the maturity
date of the  mortgage is May 11, 2028 and if the mortgage is not repaid in 2008,
the  interest  rate will be increased by 2% and  additional  repayments  will be
required from the surplus cash flows from the operations of the property  (after
payment  of  operating  expenses)  which  will  be  applied  to the  outstanding
principal amount.

In  connection  with its  acquisition  of Sunwood  Apartments  in August,  1998,
Presidential  obtained a $4,875,000 first mortgage.  The mortgage bears interest
at the rate of 6.55%,  requires  monthly  payments of principal  and interest of
$30,974 and matures on September 1, 2008 with a $4,146,347  balloon  payment due
at maturity.





7. NOTE PAYABLE TO BANK

In connection with the Company's purchase of the Fairfield Towers First Mortgage
in 1996, the Company obtained a bank loan from Fleet Bank, N.A.  ("Fleet").  The
note,  which matures on October 30, 2001, is secured by a collateral  assignment
of the Fairfield Towers First Mortgage and is nonrecourse to Presidential except
for a limited guarantee, the amount of which reduces as the principal balance is
repaid. This limited guarantee was $1,403,583 at
September 30, 1998.  The interest rate is variable and is based at the Company's
election on either the bank's  prime rate plus 1%, a cost of funds rate plus 3%,
or various  LIBOR  rates plus 3%. The note  amortizes  monthly  based on a 9.25%
interest  rate for a 25 year term.  In  addition,  upon the sale of  condominium
units, the Company is required to make principal  payments to Fleet in an amount
equal to the  amount  of  principal  payments  received  by the  Company  on the
Fairfield  Towers First  Mortgage.  At September  30, 1998 payments on the Fleet
note payable were current.  The  outstanding  note balance at September 30, 1998
and December 31, 1997 was $10,433,301 and $10,542,552, respectively.

The  Company  obtained  an  unsecured  $250,000  line of  credit  from a lending
institution  in 1997.  The interest rate is 1% above the prime rate and the line
of credit expires in February,  1999.  Presidential pays a 1% annual fee for the
line of credit.  At September 30, 1998, no advances are outstanding on this line
of credit.


8. INCOME TAXES

Presidential has elected to qualify as a Real Estate  Investment Trust under the
Internal Revenue Code. A REIT which  distributes at least 95% of its real estate
investment trust taxable income to its shareholders  each year by the end of the
following  year and which meets  certain other  conditions  will not be taxed on
that portion of its taxable income which is distributed to its shareholders.

Upon  filing the  Company's  income tax return for the year ended  December  31,
1997,  Presidential  applied its available 1997 stockholders'  distributions and
elected  to apply  (under  Section  858 of the  Internal  Revenue  Code) all but
approximately  $199,000 of its 1998  stockholders'  distributions  to reduce its
taxable income for 1997 to zero.

Furthermore,   the  Company  had  taxable   income  (before   distributions   to
stockholders)  for the nine months  ended  September  30, 1998 of  approximately
$1,483,000 ($.41 per share), which included approximately $687,000 ($.19 per
share) of capital  gains.  This amount will be reduced by the $199,000 ($.06 per
share)  of its  1998  distributions  that  were not  utilized  in  reducing  the
Company's  1997 taxable income and by any eligible 1999  distributions  that the
Company may elect to utilize as a reduction of its 1998 taxable income.

Presidential  intends to continue to  maintain  its REIT status and  although no
assurances can be given at this time, the Company  expects that it will not have
to pay  Federal  income  taxes for 1998  because  its  present  intention  is to
distribute  all of its 1998 taxable income during 1998 and 1999.  Therefore,  no
provision for income taxes has been made at September 30, 1998.

Presidential  has, for tax purposes,  reported the gain from the sale of certain
of its properties using the installment method.





9. COMPREHENSIVE INCOME

The  Company  adopted  Statement  of  Financial  Accounting  Standards  No. 130,
"Reporting  Comprehensive  Income" in the first  quarter of 1998.  The Company's
only element of other comprehensive  income is the change in the unrealized gain
on the Company's  securities  available for sale.  Thus,  comprehensive  income,
which consists of net income plus or minus other  comprehensive  income, for the
nine months ended  September 30, 1998 and 1997 was  $2,328,723  and  $2,066,166,
respectively.


10. TREASURY STOCK

In March, 1998, three directors of the Company were each given 1,000 shares of
the Company's Class B common stock as partial payment for directors fees for the
1998  year.  Such  shares  had  been  held in  treasury  at an  average  cost of
approximately  $13.54 per share. The average market value for the previous month
of the Class B common stock, on which the fees were based,  was $6.96 per share.
As a result of this  transaction,  the  Company  recorded  $20,880  for  prepaid
directors  fees (to be amortized  during 1998) based on the average market value
of the stock.  Treasury  stock was reduced by a cost of $40,620  and  additional
paid-in  capital was charged  $19,740 for the excess of the cost over the market
value.


11. COMMITMENTS AND CONTINGENCIES

The Company has incurred costs for  environmental  site  investigations  and the
related  response  action outcome for  potentially  hazardous drums found at one
site on its Mapletree Industrial Center property in Palmer, Massachusetts. As of
December 31, 1997, the site investigation work was completed and remedial action
was  in  progress   and  the  Company  had  a  balance  of  $35,600  in  accrued
environmental  costs.  At September 30, 1998,  there have been no changes to the
1997 estimated costs. Actual costs incurred may vary from these estimates due to
the inherent uncertainties involved.










PRESIDENTIAL REALTY CORPORATION AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997

Results of Operations

Financial Information for the nine months ended September 30, 1998 and 1997:
-------------------------------------------------------------------------------

Revenue  increased by $902,890 from  $10,573,596  in 1997 to $11,476,486 in 1998
primarily as a result of increases in rental  income and interest on  mortgages-
related  parties.  These  increases  were  offset by a decrease  in  interest on
mortgages-sold properties.

Rental  income  increased by $984,244  from  $6,159,768 in 1997 to $7,144,012 in
1998 primarily as a result of increases of $429,967 at the Home Mortgage
property  (formerly  Metmor  Plaza) and  increases  of $263,810 at the  Fairlawn
Gardens  property  (formerly  Kent  Terrace).  On August 31,  1998,  the Company
purchased Sunwood Apartments,  a 105 unit apartment property in Miami,  Florida.
Rental income from the Sunwood property was $81,455. In addition,  rental income
increased at all other properties by $209,012.

Interest on  mortgages-related  parties  increased by $198,696  from $174,021 in
1997 to $372,717 in 1998  primarily  as a result of increases in interest on the
Consolidated Loans of $153,451 and increases in interest on the Overlook loan of
$52,951.

Interest on mortgages-sold  properties  decreased by $264,951 from $3,112,030 in
1997 to  $2,847,079  in  1998  primarily  due to the  $382,796  amortization  of
discount on the  Cedarbrooke  note which was recorded in 1997 as a result of the
prepayment of the Cedarbrooke note in 1997. In addition, there was a decrease of
$50,178 of interest  received on the  Fairfield  Towers Second  Mortgage.  These
decreases  were  offset by  increases  of $83,538 in  interest  income  from the
Fairfield  Towers First Mortgage and $94,154 from the  amortization of discounts
on the mortgage portfolio.

Costs and expenses  increased by $793,259 from  $9,061,562 in 1997 to $9,854,821
in 1998 primarily due to increases in general and administrative expenses,
interest on note  payable  and other,  interest  on  mortgages,  real estate tax
expense,  depreciation  expense and an increase  in minority  interest  share of
partnership  income.  These  increases  were  partially  offset by a decrease in
amortization of mortgage costs.

General and administrative expenses increased by $318,817 from $1,712,657 in
1997 to $2,031,474  in 1998  primarily due to increases in franchise tax expense
of $221,935,  resulting  from the  partnership  distribution  received  from the
proceeds of the mortgage refinancing on the Home Mortgage property and the taxes
thereon.  In addition,  there were  increases  in salary  expense of $76,900 (of
which  $77,122  pertains to  increases  in executive  bonuses),  stationery  and
printing  expenses  increased  by $7,233 and there was an increase in  directors
fees of $7,530.  In the 1998  period,  three  directors of the Company were each
given 1,000 shares of the Company's  Class B common stock as partial payment for
directors  fees.  Such shares had been held in  treasury  at an average  cost of
$13.54 per share. The average market value of the Class B common stock, on which
the fees were based,  was $6.96 per share.  As a result,  the  Company  recorded
$20,880  in prepaid  directors  fees based on the  average  market  value of the
stock,  treasury stock was reduced by a cost of $40,620 and  additional  paid-in
capital was charged $19,740 for the excess of the cost over the market value. At
September 30, 1998, $15,660 of the prepaid directors fees were expensed.

Interest on note payable and other increased by $74,350 from $775,050 in 1997 to
$849,400 in 1998 primarily due to a $44,269  increase in interest expense on the
note payable as a result of the additional  $2,500,000 loan advanced in 1997. In
addition,  the  amortization  of  discounts  on deferred  payables  increased by
$29,173.

Mortgage  interest  expense  increased by $283,449  from  $1,606,012  in 1997 to
$1,889,461  in 1998 as a result of the  refinancing  of the mortgage on the Home
Mortgage  property in April of 1998,  the new mortgage  obtained on the Fairlawn
Gardens  property  in  March  of  1998  and the  mortgage  obtained  on  Sunwood
Apartments, which was purchased in August of 1998. Mortgage interest on the Home
Mortgage  property  increased by $185,297.  Mortgage interest was $87,806 on the
Fairlawn Gardens property and $27,496 on the Sunwood Apartments property.

Real estate tax expense  increased by $71,748 from  $583,510 in 1997 to $655,258
in 1998 primarily as a result of increases in real estate tax expense at the
Crown Court and Home Mortgage properties.  The 1997 real estate tax expense 
included refunds of $46,143 for prior years' taxes at the Crown Court property.

Depreciation  on real  estate  increased  by $43,434  from  $543,976  in 1997 to
$587,410  in  1998  as a  result  of  improvements  and  additions  made  to the
properties in 1997 and 1998. The addition of the Sunwood Apartments  property in
1998 also increased depreciation expense by $13,557.

Amortization  of mortgage  costs  decreased by $72,328 from  $247,248 in 1997 to
$174,920 in 1998  primarily  as a result of the  $146,097  write-off  in 1997 of
unamortized mortgage costs associated with the prior mortgage on the Continental
Gardens  property,  which was refinanced in July, 1997. This decrease was offset
by the $107,412 write-off in 1998 of unamortized  mortgage costs associated with
the prior mortgage on the Home Mortgage property, which was refinanced in April,
1998.  In  addition,  mortgage  costs for the  refinanced  mortgage  on the Home
Mortgage  property were less than the mortgage costs on the prior mortgage which
resulted in a $44,593 decrease in amortization of mortgage costs.

Minority share of partnership  income increased by $74,503 from $285,398 in 1997
to $359,901 in 1998 primarily as a result of an increase in  partnership  income
on the Home Mortgage property.

Net gain from sales of properties and securities are sporadic (as they depend on
the timing of sales or the receipt of  installments  or  prepayments on purchase
money notes).  In 1998, the net gain from sales of properties and securities was
$725,107  compared  with  $562,658  in 1997.  In the 1998  period,  the  Company
recognized a gain of $40,435 from the sale of a  cooperative  apartment  unit at
Sherwood House. In addition, the Company recognized
deferred gains of $608,186 and $51,376,  respectively,  from principal  payments
received on the Overlook loan and the Fairfield Towers Second  Mortgage.  In the
1997 period, the Company  recognized  $472,497 of deferred gain from the sale of
the  Cedarbrooke  property  as a result  of a  $1,074,200  principal  prepayment
received on that note. In addition,  the Company  recognized  deferred  gains of
$17,840 and  $57,166,  respectively,  from  principal  payments  received on the
Overlook loan and the Fairfield Towers Second Mortgage.






Financial Information for the three months ended September 30, 1998 and 1997:
-------------------------------------------------------------------------------

Revenue  increased by $408,005  from  $3,461,892  in 1997 to  $3,869,897 in 1998
primarily   as  a  result  of   increases   in  rental   income,   interest   on
mortgages-related parties and investment income.

Rental income increased by $314,942 from $2,119,482 in 1997 to $2,434,424 in
1998  primarily  as a result  of  increases  of  $179,731  at the Home  Mortgage
property,  rental  income of  $81,455 at the  Sunwood  Apartments  property  and
increases at all other properties of $53,756.

Interest on mortgages-related  parties increased by $50,489 from $58,664 in 1997
to  $109,153  in 1998  primarily  as a result of  increases  in  interest on the
Consolidated Loans of $55,975.

Investment  income  increased by $32,913 from $18,227 in 1997 to $51,140 in 1998
primarily as a result of increases in cash and cash equivalents and the interest
earned thereon.

Costs and expenses  increased by $106,841 from  $3,225,389 in 1997 to $3,332,230
in 1998 primarily due to increases in general and administrative expenses,
interest on mortgages and minority interest share of partnership  income.  These
increases  were  offset by  decreases  in interest  expense on note  payable and
other, real estate taxes and amortization of mortgage costs.

General and administrative expenses increased by $46,811 from $583,562 in
1997 to $630,373 in 1998  primarily  due to an increase of $62,063 in  franchise
tax  expense  resulting  from the  partnership  distribution  received  from the
proceeds of the mortgage refinancing on the Home Mortgage property and the taxes
thereon. This increase was offset by a $17,719 decrease in professional fees.

Interest on note payable and other decreased by $17,226 from $297,970 in 1997 to
$280,744 in 1998 primarily due to a $27,487 decrease in interest expense on
the note payable.  This decrease was offset by a $9,725 increase in the 
amortization of discounts on deferred payables.

Mortgage  interest  expense  increased  by  $185,896  from  $522,445  in 1997 to
$708,341  in 1998 as a result of the  refinancing  of the  mortgage  on the Home
Mortgage  property in April,  1998 and the new mortgage obtained on the Fairlawn
Gardens property in March, 1998. Mortgage interest on the Home Mortgage property
increased by $108,579 and mortgage interest on the Fairlawn Gardens property was
$41,831. In addition, the purchase of the Sunwood Apartments property in August,
1998, resulted in mortgage interest of $27,496.

Real estate tax expense decreased by $18,192 from $234,172 in 1997 to $215,980
in 1998  primarily as a result of a $34,870  decrease in real estate tax expense
at the  Cambridge  Green  property.  This  decrease was  partially  offset by an
increase  in real  estate tax  expense of  $10,413 at the  Continential  Gardens
property  and  $7,434 of real  estate tax  expense  for the  Sunwood  Apartments
property.

Amortization  of mortgage  costs  decreased by $166,211 from $179,772 in 1997 to
$13,561 in 1998 as a result of the  $146,097  write-off  in 1997 of  unamortized
mortgage costs  associated  with the prior mortgage on the  Continental  Gardens
property and a $24,302 decrease in amortized mortgage costs on the Home Mortgage
property.

Minority interest share of partnership  income increased by $75,980 from $69,742
in 1997 to $145,722 in 1998  primarily as a result of an increase in partnership
income on the Home Mortgage property.

Net gain from sales of properties and securities are sporadic (as they depend on
the timing of sales or the receipt of  installments  or  prepayments on purchase
money notes). In 1998, the net gain from sales of properties and
securities  was $43,889  compared with $54,785 in 1997. In the 1998 period,  the
Company  recognized  deferred  gains of $4,973 and $17,478,  respectively,  from
principal payments received on the Overlook loan and the Fairfield Towers Second
Mortgage.  In the 1997 period, the Company  recognized  deferred gains of $6,081
and $22,915, respectively, from principal payments received on the Overlook loan
and the Fairfield Towers Second Mortgage.

Balance Sheet

Real estate  increased by $6,845,929  from  $27,690,535  at December 31, 1997 to
$34,536,464 at September 30, 1998 due to the purchase of Sunwood  Apartments,  a
105 unit apartment property in Miami,  Florida, in August, 1998. The capitalized
cost of this property was  $1,680,000  for land and $4,860,251 for buildings and
improvements. Additions and improvements to other properties were $305,678.

The  receivable for minority  partners'  interest  increased by $3,549,207  from
$3,779,408 at December 31, 1997 to $7,328,615 at September 30, 1998, as a result
of the  $3,670,400  distribution  made  to the  minority  partners  of the  Home
Mortgage  Partnership  from the proceeds from the refinancing of the mortgage on
the Home Mortgage property.

Prepaid  expenses and deposits in escrow increased by $1,121,699 from $1,190,158
at  December  31,  1997 to  $2,311,857  at  September  30,  1998 as a result  of
increases of $70,874 in prepaid franchise taxes, increases of $37,193 in prepaid
expenses  as a  result  of the  addition  of the  Sunwood  Apartments  property,
increases of $455,983 in mortgagee real estate tax and insurance  escrows and an
increase  of $561,570 in  replacement  reserve  mortgagee  escrow  funds.  These
increases were a result of the mortgages  obtained in 1998 on the Home Mortgage,
Fairlawn Gardens and the Sunwood Apartments properties.

Securities  available  for sale  increased by $833,213 from $226,550 at December
31, 1997 to $1,059,763  at September  30, 1998.  This increase was the result of
purchases of  marketable  debt  securities  of  $853,812,  offset by the sale of
securities at a cost of $2,550 and the reduction in the fair value of securities
available for sale of $18,049.

Cash and cash equivalents increased by $1,331,413 from $979,712 at December
31, 1997 to  $2,311,125  at  September  30,  1998,  primarily as a result of the
$2,300,000  mortgage  obtained  from  the  financing  of  the  Fairlawn  Gardens
property. The Company also received a $1,006,276  partnership  distribution (net
of taxes paid) from the Home Mortgage Partnership as a result of the refinancing
of the mortgage on the Home Mortgage property and principal payments of $608,186
were received on the Overlook loan.  The additions to cash and cash  equivalents
were partially  offset by the $1,834,214 of funds  disbursed for the purchase of
Sunwood  Apartments  and the $853,812 paid for the purchase of  marketable  debt
securities, primarily interest-bearing corporate bonds.

Other  assets  increased  by $859,151  from  $1,140,571  at December 31, 1997 to
$1,999,722 at September 30, 1998 primarily as a result of a $574,612 increase in
mortgage costs for the mortgages  obtained in 1998,  which were partially offset
by the  $199,264  amortization  of  mortgage  and  loan  acquisition  costs.  In
addition,  $274,814 of tenant  security  deposits at the Home Mortgage  property
were  transferred  from  cash and  cash  equivalents  to  restricted  funds,  in
accordance  with the terms of the  refinanced  mortgage  and  $98,599  of tenant
security  deposits were deposited for the security  deposits held at the Sunwood
Apartments  property.  Office  furniture and equipment  increased by $36,662 and
deferred charges increased by $86,908.

Mortgage debt on properties owned increased by $13,554,938 from $26,271,093 at
December 31, 1997 to  $39,826,031  at September 30, 1998.  This increase was the
result of the  refinancing of the Home Mortgage  property,  which  increased the
mortgage debt on that property by $6,711,175, the new $2,300,000 mortgage on the
Fairlawn  Gardens  property and the  $4,875,000  mortgage on the Sunwood  Apart-
ments property. These increases were offset by principal payments of $331,237.

Year 2000 Compliance

The  year  2000  issue  occurred  as a  result  of  computer  software  programs
recognizing a two-digit date code instead of a four-digit  code.  Therefore,  in
date  sensitive  software,  the year 2000 would be  recognized as the year 1900.
Many  computer  systems and software  programs will have to be updated to comply
with the Year 2000 requirements.

Readiness
The  Company's  business and  information  technology  systems  ("IT") have been
assessed for Year 2000 compliance and the Company  anticipates that the required
changes will be completed by June, 1999.  During the fourth quarter of 1998, the
Company will continue to assess the  non-information  technology systems ("NIT")
that may have Year 2000  problems and address such  problems.  In addition,  the
Company  will  contact all third  parties  that have an effect on the  Company's
business transactions for verification of their compliance with the Year 2000.

Phase I
The Company has completed its assessment of its  headquarters  IT system,  which
includes accounts payable, accounts receivable, general ledger, spreadsheets and
financial  information  systems. All updates to systems are near completion with
the exception of the Company's accounts receivable system, which is estimated to
be completed by June,  1999.  Management  believes that the  telephone  systems,
communication systems and data collection systems at the Company's  headquarters
are Year 2000 compliant.

Phase II
During the fourth  quarter of 1998,  the  Company  will  continue  to assess its
non-information  technology systems . These systems are located at the Company's
properties and would include  elevators,  heating and air conditioning  systems,
lighting  and  security  systems.  It is  anticipated  that the  assessment  and
remedial  action  (if  required)  would be  completed  by the end of  1998.  The
majority of the  Company's  properties  are  apartment  properties  with limited
technology systems.

Phase III
In  addition,  during the fourth  quarter of 1998,  the Company  will be sending
requests  to  tenants,  mortgagors,  and all third  party  vendors  for  written
verification  that their  systems are Year 2000  compliant  in relation to their
activities with the Company. This phase is also estimated to be completed by the
end of 1998.

Costs
At September 30, 1998, the costs related to the Year 2000  compliance  have been
minimal.  The Company has capitalized  approximately  $30,600 for replacement of
equipment  and  has  expensed  approximately  $2,000  for the  upgrading  of its
systems.  The estimated costs to complete Phase I is  approximately  $10,000 and
the  estimated  costs  to  assess  Phases  II and III  are  minimal.  Until  the
assessment of Phase II is completed,  the Company cannot  estimate the costs for
remedial  action if such action is  required.  The Company  does not  anticipate
these costs to have a material  effect on the Company's  consolidated  financial
statements.

Risk Factors and Contingency Plan
The Company does not  anticipate  any problems in finalizing the updating of its
IT or NIT systems by the projected target date and intends to test these systems
prior to the year 2000.  However,  the Company's  business  operations  could be
affected if financial  institutions,  utility  companies and major  suppliers of
services, which are utilized by the Company, fail to become Year 2000 compliant.
The effect of non-compliance by these third party vendors is not determinable at
this time. The Company does not anticipate that the Year 2000 issue will have an
adverse  effect on the ability of its mortgagors or tenants to make payments due
to the Company in a timely fashion.

At this time, no formal contingency plan has been developed by the Company. Upon
completion  of Phase II and Phase III,  the Company  will analyze the need for a
contingency plan.

Forward-Looking Statements

Certain   statements  made  in  this  report  may  constitute   "forward-looking
statements"  within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking  statements include statements  regarding the intent,  belief or
current  expectations  of the Company and its  management  and involve known and
unknown  risks,  uncertainties  and other  factors  which  may cause the  actual
results,  performance or achievements of the Company to be materially  different
from any future  results,  performance or  achievements  expressed or implied by
such forward-looking  statements.  Such factors include, among other things, the
following:  general  economic and business  conditions,  which will, among other
things,  affect the demand for retail space or retail  goods,  availability  and
creditworthiness  of  prospective  tenants,   lease  rents  and  the  terms  and
availability of financing; adverse changes in the real estate markets including,
among  other  things,  competition  with other  companies;  risks of real estate
development  and  acquisition;   governmental   actions  and  initiatives;   and
environment/safety requirements.

Liquidity and Capital Resources

Management  believes  that the  Company  has  sufficient  liquidity  and capital
resources  to  carry  on its  existing  business  and,  barring  any  unforeseen
circumstances,  to pay the  dividends  required to  maintain  REIT status in the
foreseeable  future.  The  Company is seeking  to expand its  portfolio  of real
estate equities and plans to utilize for this purpose a portion of its available
funds and  additional  funds that the Company may receive from balloon  payments
due on the Company's notes receivable as they mature,  as well as funds that may
be available from external sources.  However,  the Company's plans to expand its
portfolio of real estate  equities may be adversely  affected by  limitations on
its ability to obtain funds for investment on  satisfactory  terms from external
sources.  Except  as  discussed  herein,  management  is not  aware of any other
trends, events, commitments or uncertainties that will have a significant effect
on liquidity.

Presidential obtains funds for working capital and investment from its available
cash and cash  equivalents,  from  operating  activities,  from  refinancing  of
mortgage loans on its real estate equities,  and from repayments of its mortgage
portfolio.  The Company  also has at its disposal a $250,000  unsecured  line of
credit from a lending institution.

At September 30, 1998,  Presidential  had  $2,311,125 in available cash and cash
equivalents,  an increase of $1,331,413  from the $979,712 at December 31, 1997.
This increase in cash and cash equivalents was due to cash provided by
operating  activities of  $1,922,512  and  financing  activities of  $5,902,811,
offset by cash used in investing activities of $6,493,910.

Operating Activities

Presidential's  principal  source  of cash  from  operating  activities  is from
interest on its mortgage portfolio, which was $2,584,317 in 1998, net of
interest  payments on wrap  mortgage debt and note  payable.  In 1998,  net cash
received  from  rental  property  operations  was  $431,749,  which  is  net  of
distributions  from  partnership  operations  to  minority  partners  but before
additions and improvements and mortgage amortization. The net cash received from
rental property  operations  includes an expenditure of $274,814 for the funding
of security deposits for the Home Mortgage property in accordance with the terms
of the refinanced mortgage on that property.

Investing Activities

Presidential  holds a  portfolio  of mortgage  notes  receivable  which  consist
primarily of notes arising from sales of real properties previously owned by the
Company.  Some  of  these  notes  wrap  around  underlying  mortgage  debt  (the
"Underlying  Debt") which is paid by Presidential  only out of funds received on
its mortgage portfolio relating to the Underlying Debt. During 1998, the Company
received  principal  payments of $867,455 on its mortgage  portfolio (net of any
principal  payments  attributable  to the  Underlying  Debt),  of which $744,686
represented  prepayments,  which are  sporadic  and  cannot be relied  upon as a
regular source of liquidity.

On August  31,  1998,  the  Company  purchased  Sunwood  Apartments,  a 105 unit
apartment  property in Miami,  Florida.  The purchase  price of the property was
$6,100,000 and the Company obtained a new $4,875,000 first mortgage loan secured
by the property.  While the Company has only operated the property  since August
31,  the  property  has a solid and stable  operating  history  and the  Company
believes  that  it will  contribute  to the  Company's  cash  flow  in 1998  and
subsequent years.

During 1998, the Company invested  $355,398 in additions and improvements to its
properties. The Company sold one cooperative apartment at Sherwood House in Long
Beach, New York and received net proceeds of $74,550.

The Company  also holds a portfolio  of  marketable  equity and debt  securities
which  increased by $833,213 from $226,550 at December 31, 1997 to $1,059,763 at
September  30, 1998 as a result of the  purchase of debt  securities  (primarily
interest-bearing  corporate  bonds) of $853,812 offset by a decrease in the fair
value of securities of $18,049 and the sale of securities at a cost of $2,550.

Financing Activities

The  Company's  indebtedness  at September  30, 1998,  includes  $44,616,302  of
mortgage debt (including $4,790,271 of underlying indebtedness on properties not
owned by the Company but on which the Company holds wraparound  mortgages).  The
mortgage debt, which is secured by individual properties,  is nonrecourse to the
Company with the exception of the $275,212 Mapletree Industrial Center mortgage,
which is secured by the property  and a guarantee of repayment by  Presidential.
In addition,  some of the Company's mortgages provide for personal liability for
damages   resulting  from  specified   acts  or   circumstances,   such  as  for
environmental  liabilities  and fraud.  Generally,  mortgage  debt  repayment is
serviced with cash flow from the operations of the individual properties. During
1998,  the Company  made  $331,237  of  principal  payments on mortgage  debt on
properties which it owns.

The Company  obtained a $2,300,000  mortgage on its Fairlawn Gardens property in
March of 1998.  The mortgage  matures in April,  2008 with a balloon  payment of
$2,012,668 due at maturity.  The mortgage requires monthly payments of principal
and interest of $15,395 and has an interest rate of 7.06% per annum. In April of
1998, the Company completed the refinancing of the mortgage on the Home Mortgage
property  and the  prior  mortgage  balance  of  $10,788,825  was paid  from the
proceeds of the new $17,500,000 mortgage. The new mortgage bears interest at the
rate of 7.38% per annum for the first ten years,  requires  monthly  payments of
principal and interest of $120,928 until the  anticipated  repayment date of May
11, 2008 at which time the then outstanding  principal balance of $15,445,099 is
expected to be repaid.  However,  the  maturity  date of the mortgage is May 11,
2028 and if the  mortgage  is not  repaid  in 2008,  the  interest  rate will be
increased by 2% and additional repayments will be required from the surplus cash
flows from the operations of the property (after payment of operating  expenses)
which will be applied to the  outstanding  principal  amount.  In August,  1998,
Presidential  obtained a $4,875,000  mortgage in connection with its acquisition
of Sunwood  Apartments.  The  mortgage  bears  interest at the rate of 6.55% per
annum,  requires  monthly  payments  of  principal  and  interest of $30,974 and
matures on September 1, 2008 with a $4,146,347 balloon payment due at maturity.

The mortgages on the Company's properties are self-liquidating at fixed rates of
interest with the exception of the mortgages on Home Mortgage, Building
Industries Center, Fairlawn Gardens, Continental Gardens and Sunwood Apartments,
which have balloon payments due at maturity.

The Company's  indebtedness  at September  30, 1998 includes a $10,433,301  bank
loan  payable  to Fleet.  The note,  which  matures  on  October  30,  2001,  is
nonrecourse to Presidential except for a limited guarantee,  the amount of which
reduces as the principal balance is repaid and was limited to
$1,403,583 at September 30, 1998.  The interest rate is variable and is based at
the Company's  election on either the bank's prime rate plus 1%, a cost of funds
rate plus 3%, or various LIBOR rates plus 3%. The note  amortizes  monthly based
on a 9.25% interest rate for a 25 year term with additional  principal  payments
due upon the sale of condominium units.  During 1998, the Company made principal
payments of $109,251.

During 1998,  Presidential  declared cash distributions of $2,263,079 (including
$575,915  payable  in the  fourth  quarter)  to its  shareholders  and  received
proceeds from its dividend reinvestment and share purchase plan of $121,599.

Fairfield Towers

The Company's  financial  performance and liquidity in 1998 and subsequent years
will be affected  by the  results of the  condominium  conversion  of  Fairfield
Towers  Apartments  in Brooklyn,  New York by the owner of that property and the
rental  operations of the unsold  condominium  units. At September 30, 1998, the
outstanding  principal  balances on the Fairfield  Towers First Mortgage and the
Fairfield Towers Second Mortgage were $17,176,884 and $14,379,086, respectively.
The Fairfield Towers First Mortgage provides for monthly interest payments of 1%
above the prime rate and principal repayments prior to maturity upon the sale of
individual  condominium  units.  Until the  Fairfield  Towers First  Mortgage is
repaid,  Presidential will receive basic interest on the Fairfield Towers Second
Mortgage  only out of net cash flow from  operations of the property and release
payments  upon the sale of each  condominium  unit in the  amount of $3,000  per
unit.  All unpaid basic  interest  and  additional  interest  (which is based on
percentages of gross sales  proceeds) will be deferred until after  repayment of
the Fairfield Towers First Mortgage.

Since the conversion of the property to  condominium  status in 1994, a total of
155 units had been sold and 997 units are owned by the sponsor,  the majority of
which are occupied as rental units.

Environmental Matters

At September 30, 1998, the Company is continuing with its environmental  project
for the  investigation  and removal of potentially  hazardous drums found at one
site on its  Mapletree  Industrial  Center  property  in Palmer,  Massachusetts.
Accrued  liabilities for  environmental  matters have been recorded in operating
expenses  when it is probable  that a liability has been incurred and the amount
of the liability can be reasonably  estimated.  These estimates are exclusive of
claims against third parties and have not been discounted. Actual costs incurred
may vary from these estimates due to the inherent  uncertainties  involved.  The
Company  believes that any  additional  liability in excess of amounts  provided
which may result  from the  resolution  of this  matter will not have a material
adverse  effect on the  financial  condition,  liquidity or the cash flow of the
Company.  The site  investigation  at the Mapletree  Industrial  Center site was
completed and remedial action is in progress.  At December 31, 1997, the accrued
expense for the remedial action was $35,600. For the nine months ended September
30, 1998, there were no environmental costs charged to operations.








PART II - OTHER INFORMATION



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

(a)    Exhibit 27.  Financial Data Schedule.

(b)    No reports on form 8-K have been filed during the quarter ended September
       30, 1998.



SIGNATURES


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


PRESIDENTIAL REALTY CORPORATION
       (Registrant)


DATE:  November 12, 1998             By:  /s/ Jeffrey F. Joseph
                                          ---------------------
                                          Jeffrey F. Joseph 
                                          President



DATE:  November 12, 1998             By:  /s/ Elizabeth Delgado
                                          ---------------------
                                          Elizabeth Delgado
                                          Treasurer