<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-Q


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 1-10328

                           BRADLEY REAL ESTATE, INC.
             (Exact name of registrant as specified in its charter)


        Maryland                                           04-6034603
(State of Organization)                              (I.R.S. Identification No.)


                  40 Skokie Blvd., Northbrook, Illinois 60062
             (Address of Registrant's Principal Executive Offices)

Registrant's telephone number, including area code; (847) 272-9800

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.

                                Yes  X    No 
                                    ---      ---

Indicate the number of Shares outstanding of each class of Common Stock as of
September 30, 1998:

    Shares of Common Stock, $.01 par value:  23,846,760 Shares outstanding.







                                       1
<PAGE>   2

                           BRADLEY REAL ESTATE, INC.
                          CONSOLIDATED BALANCE SHEETS
                   (Dollars in thousands, except share data)
                                  (UNAUDITED)


<TABLE>
<CAPTION>

                                                                             September 30,    December 31,
ASSETS                                                                           1998            1997
                                                                                 ----            ----
<S>                                                                       <C>                <C>
Real estate investments-at cost
Accumulated depreciation and amortization                                    $   904,704     $   626,247
Net real estate investments                                                      (53,741)        (40,574)
                                                                             -----------     -----------
                                                                                 850,963         585,673

Real estate investments held for sale                                             49,476          52,692


Other assets:                                                                   
  Cash and cash equivalents                                                        3,283           4,747
  Rents and other receivables, net of allowance for doubtful accounts              
    of $3,486 for 1998 and $2,438 for 1997                                        13,349          13,038
  Investment in partnership                                                       13,260               -
  Deferred charges, net and other assets                                          17,982          12,641
                                                                             -----------     -----------
Total assets                                                                 $   948,313     $   668,791
                                                                             ===========     ===========

LIABILITIES AND SHARE OWNERS' EQUITY                                         

Mortgage loans                                                                   97,640          51,227
Unsecured notes payable                                                         199,527          99,783
Line of credit                                                                  153,400         151,700
Accounts payable, accrued expenses and other liabilities                         32,399          25,086
                                                                            -----------     -----------
Total liabilities                                                               482,966         327,796
                                                                            -----------     -----------


Minority interest                                                                20,693          21,170
                                                                            -----------     -----------


Share owners' equity:                                                            
  Shares of preferred stock and paid-in capital, par value $.01 per share;  
   liquidation preference $25.00 per share:                                      
     Authorized 20,000,000 shares; 3,480,210 shares issued and outstanding       86,882               -
  Shares of common stock and paid-in capital, par value $.01 per share:          
     Authorized 80,000,000 shares; issued and outstanding,                      
       23,846,760 at September 30, 1998 and 22,999,120 at December 31, 1997     346,887         333,452
  Shares of excess stock, par value $.01 per share:                              
     Authorized 50,000,000 shares; 0 shares issued and outstanding                    -               -
  Retained earnings (distributions in excess of accumulated earnings)            10,885         (13,627)
                                                                            -----------     -----------

Total share owners' equity                                                      444,654         319,825
                                                                            -----------     -----------
Total liabilities and share owners' equity                                  $   948,313     $   668,791
                                                                            ===========     ===========  
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
     statements.





                                       2
<PAGE>   3

                           BRADLEY REAL ESTATE, INC.
                       CONSOLIDATED STATEMENTS OF INCOME
                 (Dollars in thousands, except per share data)
                                  (UNAUDITED)




<TABLE>
<CAPTION>
                                                               Three months ended                      Nine months ended
                                                                  September 30,                          September 30,
                                                                  -------------                          -------------
                                                               1998               1997               1998                 1997
                                                               ----               ----               ----                 ----
<S>                                                        <C>               <C>                  <C>               <C>
Income:                                                                                          
   Rental income                                           $    33,305       $    24,033           $   92,642        $   69,922
   Other income                                                    634               451                1,693             1,093
                                                           -----------       -----------          -----------       -----------
                                                                33,939            24,484               94,335            71,015
                                                           -----------       -----------          -----------       -----------

Expenses:
   Operations, maintenance and management                        4,510             3,479               13,286            10,478
   Real estate taxes                                             5,665             4,025               16,441            13,652
   Mortgage and other interest                                   7,424             4,362               19,567            11,593
   General and administrative                                    2,107             1,536                5,227             3,795
   Depreciation and amortization                                 5,752             4,244               16,346            12,099
                                                           -----------       -----------          -----------        ----------
                                                                25,458            17,646               70,867            51,617
                                                           -----------       -----------          -----------        ----------



Income before equity in earnings of partnership and
  net gain on sale of properties                                 8,481             6,838               23,468            19,398
Equity in earnings of partnership                                  247                 -                  247                 -
Net gain on sale of properties                                  30,555                 -               29,680             1,773
                                                           -----------       -----------          -----------        ----------


Income before allocation to minority interest                   39,283             6,838               53,395            21,171
Income allocated to minority interest                          (2,095)             (277)               (2,892)             (658)
                                                           -----------       -----------          -----------        ----------


Net income                                                      37,188             6,561               50,503            20,513
Preferred share distributions                                  (1,096)                 -               (1,096)                -
Net income attributable to common share owners             -----------       -----------          -----------        ----------
                                                           $    36,092       $     6,561           $   49,407        $   20,513
                                                           ===========       ===========          ===========        ==========


Basic net income per common share                          $      1.52       $      0.30           $     2.09        $     0.95
                                                           ===========       ===========           ==========        ==========

Diluted net income per common share                        $      1.44       $      0.30           $     2.07        $     0.94
                                                           ===========       ===========           ==========        ==========

</TABLE>


  The accompanying notes are an integral part of these consolidated financial
     statements.







                                       3
<PAGE>   4



                           BRADLEY REAL ESTATE, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN SHARE OWNERS' EQUITY
                 (Dollars in thousands, except per share data)
                                  (UNAUDITED)



<TABLE>
<CAPTION>
                                                                                         Retained
                                                                                         earnings
                                                                                       (distributions
                                                       Preferred          Common        in excess of
                                                       shares and       shares and      accumulated
                                                     paid-in capital  paid-in capital    earnings)         Total
                                                     ---------------  ---------------    ---------         -----
<S>                                                  <C>              <C>               <C>            <C>
Balance at December 31, 1997                                      -    $   333,452       $ (13,627)    $  319,825
  Net income                                                      -              -           6,351          6,351
  Distributions on common stock ($.35 per share)                  -              -          (8,276)        (8,276)
  Issuance of common stock, net of offering                       
    costs of $112                                                 -          7,489               -          7,489
  Dividend reinvestment participation                             -          1,093               -          1,093
  Exercise of stock options                                       -              4               -              4
  Reallocation of minority interest                               -           (653)              -           (653)
  Shares issued in exchange for Limited                                                                           
      Partnership units                                           -          2,585               -          2,585
                                                          ---------    -----------      ----------     ----------
Balance at March 31, 1998                                         -        343,970         (15,552)       328,418





  Net income                                                      -              -           6,964          6,964
  Distributions on common stock ($.35 per share)                  -              -          (8,295)        (8,295)
  Dividend reinvestment participation                             -          1,617               -          1,617
  Reallocation of minority interest                               -            (29)              -            (29)
  Shares issued in exchange for Limited                   
      Partnership units                                           -              7               -              7
                                                          ---------    -----------      ----------     ----------
Balance at June 30, 1998                                          -        345,565         (16,883)       328,682




  Net income                                                      -              -          37,188         37,188
  Distributions on common stock ($.35 per share)                  -              -          (8,324)        (8,324)
  Distributions on preferred stock ($.525 per share)              -              -          (1,096)        (1,096)
  Issuance of preferred stock, net of offering                  
    costs of $123                                            86,882              -               -         86,882
  Dividend reinvestment participation                             -          1,312               -          1,312
  Reallocation of minority interest                               -            (18)              -            (18)
  Shares issued in exchange for Limited                           
      Partnership units                                           -             28               -             28
                                                          ---------    -----------      ----------     ----------
Balance at September 30, 1998                             $  86,882    $   346,887      $   10,885     $  444,654
                                                          =========    ===========      ==========     ==========
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.







                                       4
<PAGE>   5


                           BRADLEY REAL ESTATE, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
                                  (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                            For the nine months ended
                                                                                                 September 30,
                                                                                                 -------------
                                                                                             1998              1997
                                                                                             ----              ----
<S>                                                                                      <C>              <C>
Cash flows from operating activities:
  Net income                                                                            $   50,503         $  20,513
  Adjustments to reconcile net income to net cash provided by operating activities:       
    Depreciation and amortization                                                           16,346            12,099
    Equity in earnings of partnership                                                         (247)                -
    Amortization of debt premiums net of discounts                                            (176)                -
    Net gain on sale of properties                                                         (29,680)           (1,773)
    Income allocated to minority interest                                                    2,892               658
  Changes in operating assets and liabilities, net of the effect of the                     
    Mid-America acquisition:                                                                
     Increase in rents and other receivables                                                (1,878)           (2,791)
     Increase in accounts payable, accrued expenses and other liabilities                    6,660                88
     Increase in deferred charges                                                           (1,022)           (1,722)
                                                                                        ----------         ---------
       Net cash provided by operating activities                                            43,398            27,072
                                                                                        ----------         ---------





Cash flows from investing activities:                                                   
  Expenditures for real estate investments                                                (160,639)          (76,599)
  Cash used for purchase of Mid-America                                                    (28,578)                -
  Expenditures for capital improvements                                                     (7,110)           (6,431)
  Cash distributions from partnership                                                          350                 -
  Net proceeds from sale of properties                                                      83,959            17,260
                                                                                        ----------         ---------
       Net cash used in investing activities                                              (112,018)          (65,770)
                                                                                        ----------         ---------



Cash flows from financing activities:                                                     
  Borrowings from line of credit                                                           216,750            78,300
  Payments under line of credit                                                           (215,050)          (20,000)
  Proceeds from issuance of unsecured notes payable                                         99,051                 -
  Expenditures for financing costs                                                          (6,222)             (391)
  Distributions paid to common share owners                                                (24,895)          (21,454)
  Distributions paid to minority interest holders                                           (1,449)             (742)
  Distributions paid to preferred share owners                                              (1,751)                -
  Net proceeds from public offering                                                          7,489                 -
  Proceeds from shares issued under dividend reinvestment plan                               4,022               249
  Exercise of stock options                                                                      4               155
  Pay-off of secured mortgage loans                                                        (10,031)                -
  Principal payments on mortgage loans                                                        (762)             (477)
                                                                                        ----------         ---------
       Net cash provided by financing activities                                            67,156            35,640
                                                                                        ----------         ---------

Net decrease in cash and cash equivalents                                                   (1,464)           (3,058)

Cash and cash equivalents:                                                                  
  Beginning of period                                                                        4,747             7,462
                                                                                        ----------         ---------
  End of period                                                                         $    3,283         $   4,404
                                                                                        ==========         =========
Supplemental cash flow information:                                                         
  Interest paid, net of amount capitalized                                              $   15,663         $  11,613
                                                                                        ==========         =========     
                                                                                                                     
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
     statements.







                                       5
<PAGE>   6

                           BRADLEY REAL ESTATE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1998
                                  (UNAUDITED)


NOTE 1 - BASIS OF PRESENTATION

The accompanying interim financial statements have been prepared by the Company,
without audit, and in the opinion of management reflect all normal recurring
adjustments necessary for a fair presentation of results for the unaudited
interim periods presented.  Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. It is suggested
that these condensed financial statements be read in conjunction with the
financial statements and the notes thereto for the fiscal year ended December
31, 1997.

NOTE 2 - EARNINGS PER SHARE

Basic earnings per share ("EPS") is computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
for the period.  Diluted EPS is computed by reflecting the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the Company.  A reconciliation of the
numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation, is as follows:


<TABLE>
<CAPTION>
                                                      Nine Months Ended September 30,
                                 ------------------------------------------------------------------------
                                                 1998                                 1997
                                 -----------------------------------  -----------------------------------
                                   Numerator  Denominator  Per share    Numerator  Denominator  Per share
                                 -----------  -----------  ---------  -----------  -----------  ---------
<S>                           <C>          <C>           <C>        <C>          <C>          <C>
Basic EPS:
    Net income                   $49,407,000   23,597,218  $    2.09  $20,513,000   21,671,144  $    0.95

Effect of dilutive securities:
    Dilutive options exercised             -       48,338                       -       31,527
    Convertible preferred stock    1,096,000      728,756                       -            -
    Conversion of LP Units         2,892,000    1,398,890                 658,000      700,998
                                 -----------  -----------             -----------  -----------

Diluted EPS:
    Net income                   $53,395,000   25,773,202  $    2.07  $21,171,000   22,403,669  $    0.94
                                 ===========  ===========  =========  ===========  ===========  =========
</TABLE>


For the nine months ended September 30, 1998 and 1997, options to purchase
153,500 shares of common stock at prices ranging from $21.25 to $21.35 and
80,500 shares of common stock at prices ranging from $19.35 to $21.25 were
outstanding during each of the respective periods but were not included in the
computation of diluted EPS because the options' exercise prices were greater
than the average market prices of the common shares during those periods.


<TABLE>
<CAPTION>
                                                     Three Months Ended September 30,
                                 -----------------------------------------------------------------------
                                                 1998                                1997
                                 -----------------------------------  ----------------------------------
                                  Numerator   Denominator  Per share   Numerator  Denominator  Per share
                                 -----------  -----------  ---------  ----------  -----------  ---------
<S>                           <C>            <C>           <C>      <C>         <C>           <C>
Basic EPS:
    Net income                   $36,092,000   23,782,221  $   1.52   $6,561,000   21,676,427  $    0.30

Effect of dilutive securities:
    Dilutive options exercised             -       46,466                      -       33,149
    Convertible preferred stock    1,096,000    2,162,504                      -            -
    Conversion of LP Units         2,095,000    1,380,609                277,000      914,849
                                 -----------  -----------             ----------  -----------

Diluted EPS:
    Net income                   $39,283,000   27,371,800  $   1.44   $6,838,000   22,624,425  $    0.30
                                 ===========  ===========  ========   ==========  ===========  =========
</TABLE>


For the three months ended September 30, 1998 and 1997, options to purchase
153,500 shares of common stock at prices ranging from $21.25 to $21.35 and
80,500 shares of common stock at prices ranging from $19.35 to $21.25 were
outstanding during each of the respective quarters but were not included in the
computation of diluted EPS because the options' exercise prices were greater
than the average market prices of the common shares during those quarters.






                                       6
<PAGE>   7


Income allocated to the minority interest reflects weighted average limited
partnership units ("LP Units") of interest in Bradley Operating Limited
Partnership (the "Operating Partnership") outstanding of 1,398,890 and 700,998
for the nine months ended September 30, 1998 and 1997, respectively, and
1,380,609 and 914,849 for the three months ended September 30, 1998 and 1997,
respectively.  As of September 30, 1998, there were 1,379,242 LP Units
outstanding.  The Operating Partnership is a limited partnership of which the
Company currently owns an approximate 95% general partner interest.

NOTE 3 - MID-AMERICA MERGER AND ISSUANCE OF PREFERRED STOCK

On August 6, 1998, pursuant to an Agreement and Plan of Merger dated May 30,
1998, the Company completed the merger acquisition (the "Merger") of Mid-America
Realty Investments, Inc. ("Mid-America").  The Merger and the Merger Agreement
were approved by the stockholders of Mid-America at its special meeting of
stockholders held on August 5, 1998.  Upon completion of the Merger, the Company
acquired Mid-America's 22 retail properties located primarily in the Midwest,
and succeeded to Mid-America's 50% general partner interest in Mid-America
Bethal Limited Partnership, a joint venture which owns two neighborhood shopping
centers and one enclosed mall.

Pursuant to the terms of the merger agreement each of the approximately
8,286,000 outstanding shares of Mid-America common stock were exchanged for 0.42
shares of a newly created 8.4% Series A Convertible Preferred Stock ("Series A
Preferred Stock").  The Series A Preferred Stock pays an annual dividend equal
to 8.4% of the $25.00 liquidation preference and is convertible into shares of
Bradley's common stock at a conversion price of $24.49 per share, subject to
certain adjustments.  At any time after five years, the Series A Preferred Stock
is redeemable at Bradley's option for $25.00 per share so long as the Bradley
common stock is trading at or above the conversion price.  In connection with
the Merger, Bradley assumed all of Mid-America's outstanding liabilities and
paid certain transaction costs, making the total purchase price approximately
$157 million.  The merger was structured as a tax-free transaction and was
treated as a purchase for accounting purposes. Accordingly, the purchase price
was allocated to the assets purchased and the liabilities assumed based upon the
fair value at the date of acquisition.  The results of operations of Mid-America
have been included in the Company's consolidated financial statements from
August 6, 1998.

The following table sets forth certain summary unaudited pro forma operating
data for the Company as if the Merger had occurred as of January 1, 1998 and
1997 (dollars in thousands, except per share data):


<TABLE>
                                          Nine Months Ended September 30,
                              ---------------------------------------------------------
                              Historical      Pro Forma        Historical     Pro Forma
                                 1998           1998              1997          1997
                              ----------      ----------       ----------     ---------
<S>                           <C>            <C>             <C>              <C>
Total revenue                    $94,335       $107,756          $71,015       $ 88,433

Net income                       $49,407       $ 50,085          $20,513       $ 21,559

Basic net income per share         $2.09       $   2.12            $0.95       $   0.99

Diluted net income per share       $2.07       $   2.05            $0.94       $   0.99
</TABLE>


The unaudited pro forma operating data is presented for comparative purposes
only and is not necessarily indicative of what the actual results of operations
would have been for the nine months ended September 30, 1998 and 1997, nor does
such data purport to represent the results to be achieved in future periods.

The Merger resulted in the following non-cash effect on the Company's
consolidated balance sheet (dollars in thousands):


Assets acquired                                                      $ (159,433)
Liabilities assumed                                                      43,973
Preferred stock and paid-in capital issued, net of costs                 86,882
                                                                     ----------
Cash used for purchase of Mid-America                                 $ (28,578)
                                                                     ==========






                                       7
<PAGE>   8


NOTE 4 - INVESTMENT IN PARTNERSHIP

In connection with the Merger acquisition of Mid-America, the Company succeeded
to Mid-America's 50% general partner interest in Mid-America Bethal Limited
Partnership (renamed Bradley Bethal Limited Partnership), a joint venture which
owns two neighborhood shopping centers and one enclosed mall.  The enclosed mall
is held for sale and is, therefore, not depreciated for financial reporting
purposes.  In accordance with the purchase method of accounting, the investment
in the joint venture has been reflected on the consolidated balance sheet of the
Company based upon the fair value of the investment at the date of acquisition,
and the Company's share of the results of operations of the partnership have
been included on the Company's consolidated statement of income from August 6,
1998.  Summarized financial information for Bradley Bethal Limited Partnership
is as follows:

Balance Sheet (dollars in thousands)
                                                    September 30, 1998
                                                    ------------------       
Assets:
    Cash                                                $       447
    Real estate investments, net                             25,549
    Other assets                                                565
                                                        -----------
    Total assets                                        $    26,561
                                                        ===========

Liabilities and Partners' Capital:
    Accounts payable and other liabilities              $        41
    Partners' capital                                        26,520
                                                        -----------
    Total liabilities and partners' capital             $    26,561
                                                        ===========

Statement of Income (dollars in thousands)
                                                For the period August 6, 1998
                                                  through September 30, 1998
                                                -----------------------------

Total revenues                                             $   746
                                                           =======

Net income                                                 $   494
                                                           =======

Equity in earnings of partnership                          $   247
                                                           =======

NOTE 5 - SUPPLEMENTAL CASH FLOW DISCLOSURE

During the nine months ended September 30, 1998, 143,151 shares of common stock
were issued in exchange for an equivalent number of LP Units held by the
minority interest.  Also during the nine months ended September 30, 1998, the
acquisitions of two shopping centers included the aggregate assumption of
$19,492,000 of non-recourse mortgage indebtedness.

NOTE 6 - PROPERTY ACQUISITIONS AND DISPOSITIONS

During the first three quarters of 1998, in addition to the properties acquired
in connection with the Merger, the Company completed the acquisitions of
nineteen shopping centers located in Illinois, Indiana, Kansas, Kentucky,
Michigan, Missouri, Ohio, and Wisconsin aggregating 2.6 million square feet for
a total purchase price of approximately $178.9 million, increasing the total
number of properties with ownership interests by the Company to 95, located in
16 states, aggregating over 15 million square feet of rentable space.  The
Company has several additional property acquisitions under contract; however,
there can be no assurance that any such property acquisitions will be completed.

In May 1998, the Company sold a 46,000 square-foot property located in Iowa for
a net sales price of $1.9 million, resulting in a provision for loss of $875,000
in the first quarter.  On July 31, 1998, the Company completed the sale of One
North State, a 640,000 square-foot mixed-use property located in the "loop" area
of downtown Chicago, Illinois for a net sales price of approximately $82.1
million, resulting in a gain on sale of approximately $30.6 million for
financial reporting purposes. The net proceeds from the sales were used to
reduce outstanding borrowings under the line of credit.

NOTE 7 - REAL ESTATE INVESTMENTS HELD FOR SALE

As of September 30, 1998, the Company was holding for sale seven non-core
properties, consisting of four enclosed malls and three community shopping
centers, all acquired in connection with the Merger acquisition of Mid-America.
The net book value of these 







                                       8
<PAGE>   9


properties, $49.5 million, has been classified on the consolidated balance sheet
as "Real estate investments held for sale."  The Company expects to use the net
proceeds from such sale or sales to reduce outstanding indebtedness under the
line of credit with the expectation that the increased borrowing capacity under
the line of credit would be used to acquire additional shopping centers (or
partial interests in real estate assets through participation in joint venture
transactions) within the target market and that are more in keeping with the
Company's grocery-anchored community shopping center focus.  Properties held for
sale are not depreciated for financial reporting purposes.

NOTE 8 - ISSUANCE OF UNSECURED NOTES PAYABLE

On January 28, 1998, the Operating Partnership issued $100 million, 7.2%
ten-year unsecured Notes maturing January 15, 2008.  The issue was rated "BBB-"
by Standard & Poor's Investment Services and "Baa3" by Moody's Investors
Service.  The effective interest rate on the unsecured Notes is approximately
7.611%.  Proceeds from the offering were used to reduce outstanding borrowings
under the line of credit.

NOTE 9 - ISSUANCE OF COMMON STOCK

On February 18, 1998, the Company issued 392,638 shares of common stock to a
unit investment trust at a price based upon the then market value of $20.375 per
share.  Net proceeds from the offering of approximately $7.6 million were used
to reduce outstanding borrowings under the line of credit.  During 1998, the
Company has also issued an aggregate of 197,301 shares under its Dividend
Reinvestment and Stock Purchase Plan, providing net proceeds of approximately
$4.0 million.






                                       9
<PAGE>   10


ITEM 2  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS



RESULTS OF OPERATIONS

On August 6, 1998, pursuant to an Agreement and Plan of Merger dated May 30,
1998, the Company completed the merger acquisition (the "Merger") of Mid-America
Realty Investments, Inc. ("Mid-America").  The Merger and the Merger Agreement
were approved by the stockholders of Mid-America at its special meeting of
stockholders held on August 5, 1998.  Upon completion of the Merger, the Company
acquired Mid-America's 22 retail properties located primarily in the Midwest,
and succeeded to Mid-America's 50% general partner interest in Mid-America
Bethal Limited Partnership, a joint venture which owns two neighborhood shopping
centers and one enclosed mall.  Under the purchase method of accounting, the
results of operations of Mid-America have been included in the Company's
consolidated financial statements from the date of acquisition.

Pursuant to the terms of the merger agreement each of the approximately
8,286,000 outstanding shares of Mid-America common stock were exchanged for 0.42
shares of a newly created 8.4% Series A Convertible Preferred Stock ("Series A
Preferred Stock").  The Series A Preferred Stock pays an annual dividend equal
to 8.4% of the $25.00 liquidation preference and is convertible into shares of
Bradley's common stock at a conversion price of $24.49 per share, subject to
certain adjustments.

Throughout 1997, the Company acquired 25 shopping centers at an aggregate cost
of approximately $189.3 million, and completed the sales of four shopping
centers for net sales proceeds of approximately $25.3 million.  During the first
three quarters of 1998, in addition to the properties acquired in connection
with the Merger, the Company acquired 19 shopping centers at an aggregate cost
of approximately $178.9 million, and completed the sales of two properties for
net sales proceeds of approximately $83.9 million, consisting of the following:

Acquisition and Disposition Activities:

                  Acquisitions                                       Date
        --------------------------------------                 -----------------
        
        Kings Plaza, Richmond, IN                              February 13, 1998
        Sagamore Park, West Lafayette, IN                      March 5, 1998
        Oak Creek Centre, Oak Creek, WI                        March 13, 1998
        Courtyard Shopping Center, Burton, MI                  March 31, 1998
        Midtown Mall, Ashland, KY                              March 31, 1998
        Redford Plaza, Redford, MI                             April 10, 1998
        Butterfield Plaza, Libertyville, IL                    May 13, 1998
        Camelot Center, Louisville, KY                         May 13, 1998
        Dixie Plaza, Louisville, KY                            May 13, 1998
        Plainview Village, Louisville, KY                      May 13, 1998
        Bartonville Square, Peoria, IL                         May 28, 1998
        Garden Plaza, Franklin, WI                             June 10, 1998
        Fox River Plaza, Burlington, WI                        June 23, 1998
        Lincoln Park Plaza, New Haven, IN                      June 26, 1998
        Mid-America (25 properties)                            August 6, 1998
        Midtown Plaza, Shawnee, KS                             August 19, 1998
        Ellisville Square, Ellisville, MO                      August 21, 1998
        Doubletree Plaza, Winfield, IN                         August 28, 1998
        Clocktower Plaza, Lima, OH                             September 1, 1998
        Salem Consumer Square, Dayton, OH                      September 4, 1998

                 Dispositions                                        Date
        --------------------------------------                 -----------------
        Holiday Plaza, Cedar Falls, IA                         May 14, 1998
        One North State, Chicago, IL                           July 31, 1998

For the nine months ended September 30, 1998, net income attributable to common
share owners increased $28,894,000 from $20,513,000 in 1997 to $49,407,000 in
1998.  For the three months ended September 30, 1998, net income attributable to
common share owners increased $29,531,000 from $6,561,000 in 1997 to $36,092,000
in 1998.  Results for the nine month period in 1998 included a net gain on sale
of properties of $29,680,000 compared with a net gain on the sale of properties
in 1997 of $1,773,000.  Results for the three month period in 1998 included a
net gain on sale of properties of $30,555,000.  Income before the net gain on
sale and before income 






                                       10
<PAGE>   11


allocated to minority interest, increased $4,317,000, or 22%, from $19,398,000
for the nine months ended September 30, 1997 to $23,715,000 for the nine months
ended September 30, 1998. Income before the net gain on sale, and before income
allocated to minority interest, increased $1,890,000, or 28%, from $6,838,000
for the quarter ended September 30, 1997 to $8,728,000 for the quarter ended
September 30, 1998. Distributions on the newly created Series A Preferred Stock
for the period August 6, 1998 through September  30, 1998 amounted to
$1,096,000.  Basic net income per share increased from $0.95 per share for the
nine months ended September 30, 1997 to $2.09 per share for the same period in
1998, and increased from $0.30 per share for the quarter ended September 30,
1997 to $1.52 per share for the same period in 1998.  The computation of diluted
net income per share resulted in a $0.08 per share reduction in the Company's
basic net income per share from $1.52 per share to $1.44 per share for the
quarter ended September 30, 1998 but had no effect on the Company's basic net
income per share for the quarter ended September 30, 1997.  The computation of
diluted net income per share resulted in a $0.02 reduction in the Company's
basic net income per share from $2.09 to $2.07 for the nine months ended
September 30, 1998, and resulted in a $0.01 reduction from $0.95 per share to
$0.94 per share for the nine months ended September 30, 1997.


Results of operations for properties consolidated for financial reporting
purposes and held throughout both nine month periods ended September 30, 1998
and 1997 included 29 properties.  Results of operations for properties
consolidated for financial reporting purposes and purchased or sold subsequent
to January 1, 1997 through September 30, 1998 included 69 properties.

Property Specific Revenues and Expenses (in thousands of dollars):


<TABLE>
<CAPTION>
                                                      
                                       Nine months ended
                                         September 30,                                              Properties
                                      -------------------                       Acquisitions/       held both
                                      1998           1997       Difference      dispositions         periods
                                      ----           ----       ----------      ------------        ----------
<S>                               <C>            <C>             <C>             <C>              <C>
Rental income                       $92,642        $69,922        $22,720          $22,535            $  185
Operations, maintenance and
  management                         13,286         10,478          2,808            2,875               (67)
Real estate taxes                    16,441         13,652          2,789            2,436               353
Depreciation and amortization        16,346         12,099          4,247            2,869             1,378
</TABLE>

Results of operations for properties consolidated for financial reporting
purposes and held throughout both three month periods ended September 30, 1998
and 1997 included 36 properties.  Results of operations for properties
consolidated for financial reporting purposes and purchased or sold subsequent
to July 1, 1997 through September 30, 1998 included 62 properties.


<TABLE>
<CAPTION>
                                      Three months ended                                            Properties
                                         September 30,                          Acquisitions/       held both
                                      -------------------       Difference      dispositions         periods
                                      1998           1997       ----------      -------------       ----------
                                      ----           ----
<S>                              <C>            <C>              <C>            <C>                 <C>
Rental income                       $33,305        $24,033         $9,272           $9,135            $  137
Operations, maintenance and
  management                          4,510          3,479          1,031            1,175              (144)
Real estate taxes                     5,665          4,025          1,640              701               939
Depreciation and amortization         5,752          4,244          1,508            1,203               305
</TABLE>

Results attributable to acquisition and disposition activities:

Rental income increased from $69,922,000 in the first three quarters of 1997 to
$92,642,000 in the first three quarters of 1998, and from $24,033,000 for the
three months ended September 30, 1997 to $33,305,000 for the three months ended
September 30, 1998.  Approximately $27,773,000 of the increase for the nine
month period was attributable to the Company's acquisition activities, partially
offset by $5,238,000 attributable to disposition activities, primarily One North
State.  Approximately $12,366,000 of the increase for the three month period was
attributable to the Company's acquisition activities, including $3,792,000 for
properties acquired in the Merger acquisition of Mid-America, partially offset
by $3,231,000 attributable to disposition activities.

Operations, maintenance and management expense increased from $10,478,000 in the
first three quarters of 1997 to $13,286,000 in the first three quarters of 1998.
Operations, maintenance and management expenses incurred for properties acquired
during the nine month period, net of such expenses eliminated for properties
disposed, of approximately $2,875,000 accounted for substantially all of the
increase.  For the three month period ended September 30, 1998, operations,
maintenance and management expense increased $1,031,000 to $4,510,000 from
$3,479,000 for the same period in 1997, despite incurring a net increase of
approximately $1,175,000 due to acquisition and disposition activities.






                                       11
<PAGE>   12



Real estate taxes increased $2,789,000 from $13,652,000 in the first three
quarters of 1997 to $16,441,000 in the first three quarters of 1998.  Real
estate taxes increased $1,640,000 from $4,025,000 for the three month period
ended September 30, 1997, to $5,665,000 for the same period in 1998.
Approximately $2,436,000 of the increase during the first three quarters of 1998
compared with 1997, and approximately $701,000 of the increase for the third
quarter of 1998 compared with the third quarter of 1997, was attributable to
acquisition and disposition activities.

Depreciation and amortization increased from $12,099,000 in the first three
quarters of 1997 to $16,346,000 in the first three quarters of 1998.
Approximately $2,869,000 of the increase was attributable to the Company's
acquisition and disposition activities, and $1,378,000 was attributable to
properties held both periods.  For the three month period ended September 30,
1998, depreciation and amortization increased to $5,752,000 from $4,244,000 for
the same period in 1997, of which $1,203,000 resulted from acquisition and
disposition activities, and $305,000 was attributable to properties held
throughout both periods.

Results for properties fully operating throughout both periods:

On May 22, 1998, the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board ruled under Issue No. 98-9, Accounting for Contingent
Rent in Interim Financial Periods, that despite the fact that the achievement of
a future specified sales target of a lessee may be considered as probable and
reasonably estimable at some earlier point in the year, a lessor should defer
recognition of contingent rental income until such specified targets are met.
The pronouncement was effective May 23, 1998.  Previously, the Company
recognized percentage rental income each period based on reasonable estimates of
tenant sales.  Largely due to the implementation of EITF No. 98-9, percentage
rental income for properties held throughout both nine and three month periods
ended September 30, 1998 decreased approximately $427,000 and $416,000,
respectively.

Although the increase in rental income for properties held throughout both nine
month periods ended September 30, 1998 and 1997 was less than 1% (including the
aforementioned reduction for percentage rental income), decreases in rental
income of $441,000 at Heritage Square, $422,000 at Sun Ray Shopping Center, and
$216,000 at High Point Centre were offset by increases of $529,000 at Westview
Center, $365,000 at Grandview Plaza, and $217,000 at Rivercrest Shopping Center.
The decrease at Heritage Square was caused by an expected vacancy of Montgomery
Ward in the first quarter of 1998, following the tenant's declaration of
bankruptcy in 1997.  A 62,000 square-foot lease with Carson Pirie Scott was
signed in the third quarter of 1998, expected to commence in the second half of
1999, to replace approximately one half the space previously occupied by
Montgomery Ward.  The decrease at Sun Ray Shopping Center was primarily due to a
$172,500 termination payment received in the second quarter of 1997 combined
with a reduction in real estate tax recoveries of $269,000 resulting from the
negotiation of real estate tax reductions of $369,000 compared with the prior
year.  The decrease in rental income at High Point Centre was due to the
termination of a lease with T.J. Maxx in the second quarter of 1998.  Increases
in real estate tax recoveries at Westview Center and Rivercrest Shopping Center
resulted from an increase in real estate taxes of $355,000 and $193,000,
respectively, due to the negotiation of tax reductions at these centers in the
prior year nine month period.  The increase in rental income at Westview Center
is also attributable to a 60,000 square-foot lease with Waccamaw Pottery
commencing in the fourth quarter of 1997.  The increase at Grandview Plaza was
primarily due to the commencement of a 30,000 square-foot lease with OfficeMax
in the fourth quarter of 1997.

For the three month period, the aforementioned decrease in percentage rental
income, and decreases in rental income at Heritage Square and High Point Centre
were more than offset by increases at Westview Center, Grandview Plaza, and
Rivercrest Shopping Center.  However, an additional decrease during the three
month period at Har Mar Mall of $186,000, resulting from the expected vacancy of
HomePlace in August, which declared bankruptcy in January 1998, kept the
increase in rental income below 1%.  While lease negotiations are ongoing for a
replacement tenant, a reduction in rental income at this property is expected in
future quarters.  An increase in rental income is expected at the Commons of
Crystal Lake, where a 30,000 square-foot lease was signed with Toys 'R' Us in
the third quarter of 1998, expected to commence in the first quarter of 1999, to
occupy half of the space formerly occupied by Jewel, which had a grand opening
for their newly expanded 71,000 square-foot space at this center in the third
quarter of 1998.  Rental income is expected to increase at Rollins Crossing due
to a 71,000 square-foot lease with Regal Cinema commencing in October 1998, and
at Sun Ray Shopping Center due to a newly signed lease for 26,000 square feet
with Bally's Total Fitness, expected to commence in the first half of 1999.

The remaining increase in real estate taxes of $353,000, or 4%, for the nine
month period ended September 30, 1998, compared with the same period in 1997,
and $939,000, or 34%, for the three months ended September 30, 1998, compared
with the same period in 1997, was primarily attributable to the aforementioned
increases at Westview Center of $355,000 and $500,000 for the nine and three
month periods, respectively, and increases at Rivercrest Shopping Center of
$193,000 and $254,000 for the nine and three month periods, respectively, both
due to the negotiation of tax reductions at these centers in the third quarter
of 1997, partially offset by the aforementioned reduction of real estate taxes
at Sun Ray Shopping Center of $369,000 during the nine month period due to an
abatement received in the first quarter of 1998.







                                       12
<PAGE>   13



The remaining increases in depreciation and amortization of $1,378,000 and
$305,000 for the nine and three month periods, respectively, ended September 30,
1998, compared with the same periods in 1997, were primarily a result of new
construction and leasing at Grandview Plaza, Village Shopping Center, Westview
Center, and Har Mar Mall, combined with the write-off of costs in previous
quarters for HomePlace at Har Mar Mall and Montgomery Ward at Heritage Square.

Non-Property Specific Revenues and Expenses:

Other income increased from $1,093,000 in the first three quarters of 1997 to
$1,693,000 in the first three quarters of 1998, and from $451,000 for the three
months ended September 30, 1997 to $634,000 for the three months ended September
30, 1998.  Other income contains both property specific and non-property
specific income; however, the increases are primarily attributable to property
specific sources, including, for the nine month period, an increase in sales tax
sharing revenue generated at Rollins Crossing and insurance proceeds in excess
of the net book value of assets destroyed and costs incurred for a fire at
Grandview Plaza in 1997, and, for both the nine and three month periods, other
income generated at Spring Mall, a shopping center acquired in December 1997, as
well as from various other shopping centers acquired during 1997 and 1998.

Mortgage and other interest expense increased to $19,567,000 for the nine months
ended September 30, 1998, from $11,593,000 during the same period in 1997, and
to $7,424,000 from $4,362,000 during the three month period ended September 30,
1998, compared with the same period in 1997.  In November 1997, the Company
prepaid a $100 million, 7.23% REMIC mortgage note primarily with the proceeds of
an offering by Bradley Operating Limited Partnership (the "Operating
Partnership") of $100 million, 7% seven-year unsecured Notes due November 15,
2004.  Interest on the REMIC mortgage note for the nine and three month periods
of 1997 amounted to $5,425,000 and $1,808,000, respectively.  In addition, in
January 1998, the Operating Partnership issued $100 million, 7.2% ten-year
unsecured Notes maturing January 15, 2008.  Proceeds from the offering were used
to reduce outstanding borrowings under the line of credit, which had been
increased throughout the prior year primarily to fund acquisition activity.
Interest incurred on the unsecured Notes for the nine and three month periods of
1998 amounted to $10,530,000 and $3,701,000.  A higher weighted average balance
outstanding on the line of credit during the first three quarters of 1998
compared with the first three quarters of 1997, partially offset by a lower
weighted average interest rate, resulted in increases in interest expense on the
line of credit of $1,091,000 and $235,000 for the nine and three month periods,
respectively.  Mortgage debt assumed upon the acquisitions of Spring Mall,
Southgate Shopping Center, and Elk Park in December 1997, and Fox River Plaza in
June 1998, and Salem Consumer Square in September 1998, as well as eight
mortgage notes assumed in connection with the Merger acquisition of Mid-America
contributed to increases in interest expense of $1,725,000 and $917,000 for the
nine and three month periods, respectively. The Company's weighted average
interest rate decreased to 7.21% for the third quarter of 1998 from 7.52% for
the third quarter of 1997.

General and administrative expense increased from $3,795,000 during the nine
months ended September 30, 1997, to $5,227,000 during the nine months ended
September 30, 1998, and from $1,536,000 for the three months ended September 30,
1997, to $2,107,000 for the three months ended September 30, 1998.  The
increases are primarily a result of the growth of the Company, including
increases in salaries for additional personnel, investor relations for a larger
shareholder base, and franchise taxes and related fees for a larger equity base
and expanded geographic market.  Further, the increased focus on acquisition
activity involves costs incurred in the evaluation process which are
non-recoverable and charged to general and administrative expense in the case of
acquisitions that are not consummated.  During the third quarter of 1998,
several potential property acquisitions were abandoned, resulting in a charge to
general and administrative expense of approximately $200,000.  The potential
acquisitions were abandoned as a result of a softening in the equity capital
markets and general decrease in liquidity in the debt capital markets, as the
Company decided to reevaluate the utilization of capital resources and protect
its liquidity.  Additionally, the Company had historically capitalized portions
of salaries of certain internal personnel dedicated to the acquisition of
properties on a successful efforts basis allocated to completed acquisitions. On
March 19, 1998, the EITF of the Financial Accounting Standards Board ruled under
Issue No. 97-11, Accounting for Internal Costs Relating to Real Estate Property
Acquisitions, that internal costs of identifying and acquiring operating
properties should be expensed as incurred.  The pronouncement was effective
March 19, 1998.

The equity in earnings of partnership of $247,000 during the three and nine
month periods ended September 30, 1998, consists of the Company's 50% general
partner interest in Bradley Bethal Limited Partnership, a partnership interest
assumed in connection with the Merger acquisition of Mid-America.  The equity in
earnings comprises 50% of the operations of the partnership from the date of the
Merger.

The income allocated to minority interest represents the net income allocated to
the limited partners in the Operating Partnership, and is based on the weighted
average number of limited partnership units in the Operating Partnership ("LP
Units") outstanding during the period.  The increase during the three and nine
month periods ended September 30, 1998 compared with the same periods in 1997,
is primarily attributable to the proportionate allocation of the $30,555,000 net
gain on the sale of One North State in the third quarter of 1998.






                                       13
<PAGE>   14

LIQUIDITY AND CAPITAL RESOURCES

General

The Company funds operating expenses and distributions primarily from operating
cash flows, although its bank line of credit may also be used for these
purposes.  The Company funds acquisitions and capital expenditures primarily
from the line of credit and, to a lesser extent, operating cash flows, as well
as through the issuance of securities.  The Company may also acquire properties
through the direct issuance of securities of the Company, or through the
issuance of LP Units.  Additionally, the Company may dispose of certain non-core
properties, reinvesting the proceeds from such dispositions into properties with
better growth potential and that are more consistent with the Company's
strategic focus.  In addition, the Company may acquire partial interests in real
estate assets through participation in joint venture transactions.

The Company focuses its investment activities on community and neighborhood
shopping centers primarily located in the Midwestern United States anchored by
regional and national grocery store chains.  The Company will continue to seek
acquisition opportunities of individual properties and property portfolios and
of private and public real estate entities in both primary and secondary Midwest
markets, where management can utilize its extensive experience in shopping
center renovation, expansion, re-leasing and re-merchandising to achieve
long-term cash flow growth and favorable investment returns. Additionally, the
Company may engage in development activities, either directly or through
contractual relationships with independent development companies, to develop
community and neighborhood shopping centers in selected Midwest markets, where
value can be created from new developments more effectively than from
acquisitions of existing shopping center properties.

As of September 30, 1998, financial liquidity was provided by $3,283,000 in cash
and cash equivalents and by the Company's unused balance on the line of credit
of $46,600,000.  Management is in the process of increasing the availability on
the line of credit to $250 million from $200 million, which is expected to
provide additional liquidity to the Company.  The remaining terms under the line
of credit, including interest rate clauses, covenants, and the maturity date,
are expected to remain substantially the same as those under the current line of
credit facility.  In addition, the Company has an effective "shelf" registration
statement under which the Company may issue up to $201,412,000 in equity
securities and an additional "shelf" registration statement under which the
Operating Partnership may issue up to $400,000,000 in unsecured, non-convertible
investment grade debt securities.  The "shelf" registration statements provide
the Company and its Operating Partnership with the flexibility to issue
additional equity or debt securities from time to time when management
determines that market conditions and the opportunity to utilize the proceeds
from the issuance of such securities are favorable. During the third quarter of
1998, the Company's Operating Partnership implemented a Medium-Term Note Program
providing the Company and its Operating Partnership with the added flexibility
of issuing Medium-Term Notes due nine months or more from date of issue in small
amounts in an aggregate principal amount of up to $150 million from time to time
using the debt "shelf" registration in an efficient and expeditious manner.

The mortgage debt outstanding at September 30, 1998 consisted of fixed-rate
notes totaling $97,640,000 with a weighted average interest rate of 7.52%
maturing at various dates through 2016.  In September 1998, approximately
$10,031,000 of mortgage indebtedness, with an interest rate of 9.875%, was
paid-off upon maturity with cash provided by the line of credit.  Short-term
liquidity requirements include debt service payments due within one year.
Scheduled principal amortization of mortgage debt totaled $762,000 during the
nine months ended September 30, 1998, with another $563,000 scheduled principal
amortization due for the remainder of the year.  Management currently expects to
fund such debt service requirements with operating cash flow and the line of
credit.

Operating Activities

Net cash flows provided by operating activities increased to $43,398,000 during
the first three quarters of 1998, from $27,072,000 during the same period in
1997.  The increase is primarily due to the growth of the Company's portfolio,
from interests in 34 properties at January 1, 1997, to 95 properties at
September 30, 1998.

Funds from operations ("FFO") increased $7,373,000, or 24% from $30,927,000 to
$38,300,000 for the nine months ended September 30, 1998, compared with the same
period in 1997, and $2,288,000, or 21%, from $10,898,000 to $13,186,000 for the
three months ended September 30, 1998, compared with the same period in 1997.
The Company generally considers FFO to be a relevant and meaningful supplemental
measure of the performance of an equity REIT because it is predicated on a cash
flow analysis, contrasted with net income, a measure predicated on generally
accepted accounting principles which gives effect to non-cash items such as
depreciation.  In response to the recently issued Statement of Financial
Accounting Standards No. 128, Earnings Per Share ("Statement No. 128"), the
Company has modified its presentation of the calculation of FFO to reflect the
potential dilution of the weighted average shares outstanding that could occur
if LP Units were converted into common stock on a one-for-one basis as provided
in the Operating Partnership Agreement.  The effect on the calculation of FFO
assuming the conversion of LP Units into common stock results in the addition to
net income of the income allocated to minority interest since, for the Company,
such allocation represents the income allocated 





                                       14
<PAGE>   15


to the LP Unit holders.  Therefore, FFO, as defined by the National Association
of Real Estate Investment Trusts ("NAREIT"), as modified by the effects of
Statement No. 128, and as followed by the Company, represents income before
allocation to minority interest (computed in accordance with generally accepted
accounting principles), excluding gains or losses from debt restructuring and
sales of property, plus depreciation and amortization, and after preferred stock
distributions and adjustments for unconsolidated partnerships.  Adjustments for
unconsolidated partnerships are calculated to reflect FFO on the same basis.  In
computing FFO, the Company does not add back to net income the amortization of
costs incurred in connection with the Company's financing activities or
depreciation of non-real estate assets, but does add back to net income
significant non-recurring events that materially distort the comparative
measurement of company performance over time.  The effect of applying Statement
No. 128 to weighted average shares results in the addition of the weighted
average LP Units outstanding during the reporting period to the weighted average
shares outstanding used in the basic EPS computation, resulting in no effect on
FFO per share compared with the previous method of presentation.  The Company
intends to restate all comparative prior periods in future financial reports to
reflect the modification to the presentation of the FFO calculation.  FFO does
not represent cash generated from operating activities in accordance with
generally accepted accounting principles and should not be considered as an
alternative to cash flow as a measure of liquidity.  Since the definition of FFO
is a guideline, computation of FFO may vary from one REIT to another.  FFO is
not necessarily indicative of cash available to fund cash needs.

Investing Activities

Net cash flows from investing activities decreased to a use of cash of
$112,018,000 during the first three quarters of 1998, from a use of cash of
$65,770,000 during the same period of 1997.

During the first three quarters of 1998, in addition to the properties acquired
in connection with the Merger acquisition of Mid-America, the Company completed
the acquisitions of nineteen shopping centers located in Illinois, Indiana,
Kansas, Kentucky, Michigan, Missouri, Ohio and Wisconsin aggregating 2.6 million
square feet for a total purchase price of approximately $178,900,000. Also,
during the first three quarters of 1998, the Company completed the sales of a
640,000 square-foot mixed-use property located in the "loop" area of downtown
Chicago, Illinois for a net sales price of approximately $82,090,000, and a
46,000 square-foot shopping center located in Iowa, for a net sales price of
approximately $1,869,000.

Financing Activities

Net cash flows provided by financing activities increased to $67,156,000 during
the first three quarters of 1998, from $35,640,000 during the same period in
1997.  Distributions to common and preferred share owners as well as to the
minority interest (treated as a reduction in cash flows from financing
activities in the Company's financial statements) were $28,095,000 in the first
three quarters of 1998, and $22,196,000 in the first three quarters of 1997.

The Merger acquisition of Mid-America was financed through the issuance of
approximately 3.5 million shares of Series A Preferred Stock with a $25.00
liquidation value, the assumption of Mid-America's liabilities including
approximately $66 million of debt of which $28 million was prepaid at close, and
the payment of certain transaction costs.

Of the nineteen additional shopping centers acquired during the first three
quarters of 1998, seventeen were acquired with cash from financing provided by
the Company's unsecured bank line of credit.  Two shopping centers were acquired
with cash provided by the Company's unsecured bank line of credit and the
assumption of $19,492,000 in non-recourse mortgage indebtedness.

On January 28, 1998, the Operating Partnership issued $100 million, 7.2%
ten-year unsecured Notes maturing January 15, 2008 from a "shelf" registration
filed in September 1997.  The January issue was rated "BBB-" by Standard &
Poor's Investment Services ("Standard & Poor's") and "Baa3" by Moody's Investors
Service ("Moody's").  The effective interest rate on the unsecured Notes is
approximately 7.611%.  Proceeds from the offering were used to reduce
outstanding borrowings under the line of credit.

On February 18, 1998, the Company issued 392,638 shares of common stock to a
unit investment trust at a price based upon the then market value of $20.375 per
share from a "shelf" registration filed in May 1997.  During 1998, the Company
has also issued an aggregate of 197,301 shares under its Dividend Reinvestment
and Stock Purchase Plan.  Net proceeds from these issuances of approximately
$7,600,000 and $4,022,000, respectively, were used to reduce outstanding
borrowings under the line of credit.

Capital Strategy

As of September 30, 1998, the Company was holding for sale seven non-core
properties, consisting of four enclosed malls and three community shopping
centers, all acquired in connection with the Merger acquisition of Mid-America.
The net book value of these properties, $49.5 million, has been classified on
the consolidated balance sheet as "Real estate investments held for sale."  The
Company 






                                       15
<PAGE>   16



expects to use the net proceeds from such sale or sales to reduce outstanding
indebtedness under the line of credit with the expectation that the increased
borrowing capacity under the line of credit would be used to acquire additional
shopping centers (or partial interests in real estate assets through
participation in joint venture transactions) within the target market and that
are more in keeping with the Company's grocery-anchored community shopping
center focus.  Although the spread between the yield generated by the four
enclosed malls and the immediate and ultimate redeployment of the sales proceeds
may be dilutive to earnings in the near term, management believes the proceeds
can be better invested in properties with higher growth potential and risk
adjusted returns.

Management believes that the Company's recent growth and operating performance
have enhanced the Company's ability to further raise both equity and debt
capital in the public markets at such time as management determines that market
conditions and the opportunity to utilize the proceeds for the issuance of
securities are favorable.  As indicated above, the Company has positioned itself
to take advantage of favorable opportunities by increasing the dollar amount of
debt securities that it may issue pursuant to a "shelf" registration statement
and by implementing a Medium-Term Note Program providing the Company and its
Operating Partnership with the added flexibility of issuing Medium-Term Notes
due nine months or more from date of issue in small amounts in an aggregate
principal amount of up to $150 million from time to time using the debt "shelf"
registration in an efficient and expeditious manner.  However, a recent
softening in the equity capital markets and general reduction in liquidity in
the debt capital markets has limited the Company's ability to raise new capital
from external sources.  As a result, the Company is evaluating various joint
venture alternatives in order to conserve liquidity while taking advantage of
favorable investment opportunities and alternative sources of investment
capital.  In addition, the Company is seeking to increase the availability under
its line of credit from $200 to $250 million, further increasing its liquidity
which the Company believes is prudent given the difficult capital markets
environment.  The Company will continue to judiciously use its flexibility in
evaluating investment opportunities in order to maximize value to its share
owners.

Year 2000 Issues

The statements under this caption include "Year 2000 readiness disclosure"
within the meaning of the Year 2000 Information and Readiness Disclosure Act.

Many existing computer software programs and operating systems were designed
such that the year 1999 is the latest year for which many computer systems will
be able to process dates accurately.  In the conduct of its own operations, the
Company relies on equipment manufacturers and commercial computer software
primarily provided by independent software vendors, and has undertaken an
assessment of its vulnerability to the so-called "Year 2000 issue" with respect
to its equipment and computer systems.

The Company has undertaken a five-step program in order to achieve Year 2000
readiness including:

*    Awareness - Education involving all levels of Bradley personnel regarding
     Year 2000 implications.

*    Inventory - Creating a checklist and conducting surveys to identify Year
     2000 compliance issues in all systems, including both mechanical and
     information systems.  The surveys were also designed to identify critical
     outside parties such as banks, tenants, suppliers and other parties with
     whom the Company does a significant amount of business, for purposes of
     determining potential exposure in the event such parties are not Year 2000
     compliant.

*    Assessment - Based upon the results of the inventory and surveys, assessing
     the nature of identified Year 2000 issues and developing strategies to
     bring the Company's systems into substantial compliance with respect to
     Year 2000.

*    Correction and Testing - Implementing the strategy developed during the
     assessment phase.

*    Implementation - Incorporating repaired or replaced systems into the
     Company's systems environment.

The program, which is ongoing, has yielded the following conclusions:

With respect to its potential exposure to information technology systems,
including the Company's accounting and lease management systems, the Company
believes that such commercial software is either Year 2000 compliant or expected
to be Year 2000 compliant no later than December 31, 1998.  The assessment was
based upon formal and informal communications with software vendors and
literature supplied with certain software.  The Company has incurred minimal
costs associated with bringing its information technology systems to be Year
2000 compliant, and based on communications with software providers, the Company
does not expect to incur significant costs to become fully Year 2000 compliant
itself.

In the operation of its properties, the Company has acquired equipment with
embedded technology such as microcontrollers which operate heating, ventilation
and air conditioning systems ("HVAC"), fire alarms, security systems, telephones
and other equipment 







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<PAGE>   17


utilizing time-sensitive technology.  The Company has substantially completed
its evaluation of its potential exposure to such non-information technology
systems and does not expect to incur significant costs to become Year 2000
compliant.

The Company is in the process of surveying tenants, suppliers and other parties
with whom the Company does a significant amount of business to identify the
potential exposure in the event such parties are not Year 2000 compliant in a
timely manner.  At this time, the Company is not aware of any party that is
anticipating a material Year 2000 compliance issue. Although the investigations
and assessments of possible Year 2000 issues are in a preliminary stage, the
Company does not anticipate a material impact on its business, operations or
financial condition even if one or more parties is not Year 2000 compliant in a
timely manner due to the number and nature of the Company's diverse tenant base,
and because the Company does not rely on a concentration of suppliers and other
parties to conduct its business.

Although the Company is aware that it may not, in fact, be Year 2000 compliant
upon the year 2000, at this time the Company has not adopted a contingency plan
for the conduct of its own operations because the Company expects to be Year
2000 compliant in advance of the year 2000.  However, the Company will continue
to monitor its progress and state of readiness, and will be prepared to adopt a
contingency plan with respect to areas in which evidence arises that it may not
become Year 2000 compliant in sufficient time.  With respect to its tenants,
suppliers and other parties with whom the Company conducts business, the Company
does not yet have sufficient information to identify the types of problems it
may encounter in the event these third parties are not Year 2000 complaint.  As
information is obtained that may indicate such parties may not become Year 2000
compliant in sufficient time, the Company is prepared to develop contingency
plans, accordingly.

FORWARD-LOOKING STATEMENTS

Statements made or incorporated in this Form 10-Q include "forward-looking"
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934.  Forward-looking statements
include, without limitation, statements containing the words "anticipates",
"believes", "expects", "intends", "future", and words of similar import which
express management's belief, expectations or intentions regarding the Company's
future performance or future events or trends.  Reliance should not be placed on
forward-looking statements because they involve known and unknown risks,
uncertainties and other factors, which may cause actual results, performance or
achievements of the Company to differ materially from anticipated future
results, performance or achievements expressed or implied by such
forward-looking statements.  Certain factors that might cause such a difference
include, but are not limited to, the following: Real estate investment
considerations, such as the effect of economic and other conditions in general
and in the Midwestern United States in particular; the financial viability of
the Company's tenants; the continuing availability of retail center acquisitions
and development opportunities in the Midwest on favorable terms; the
availability of equity and debt capital in the public markets; the need to renew
leases or relet space upon the expiration of current leases; and the financial
flexibility to refinance debt obligations when due.






                                       17
<PAGE>   18



PART II - OTHER INFORMATION


Item 1.  LEGAL PROCEEDINGS
            Not applicable

Item 2.  CHANGES IN SECURITIES 

            In connection with the Merger, the Company issued approximately
            3,480,210 shares of 8.4% Series A Preferred Stock, as to which the
            Company filed a Form 8-A registration statement dated July 9, 1998
            under Section 12(b) of the Securities Exchange Act of 1934 and whose
            terms are described in Registration Statement on Form S-4
            (Registration No. 333-57125) filed under the Securities Act of 1933
            on June 18, 1998, which description is incorporated herein by
            reference.  Except to the extent the Company is required by the
            terms of the Series A Preferred Stock to make periodic or
            liquidating distributions with respect to the Series A Preferred
            Stock prior to making periodic or liquidating distributions with
            respect to Common Stock, the issuance of the Series A Preferred
            Stock does not materially limit or qualify the rights of holders of
            Common Stock (the Company believing that the voting rights and
            conversion rights of the Series A Preferred stock do not limit or
            qualify rights of holders of Common Stock).

Item 3.  DEFAULTS UPON SENIOR SECURITIES
            Not applicable

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
            Not applicable

Item 5.  OTHER INFORMATION
            Not applicable

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)                Exhibit No.                Description
                            -----------           -----------------------
                                27                Financial Data Schedule

         (b) Reports on Form 8-K

             The following Form 8-K Reports were filed by the registrant during
             the period July 1, 1998 through September 30, 1998:

             1)    July 31, 1998 (filed August 7, 1998), reporting in Item 2.,
                   the consummation of the merger acquisition of Mid-America
                   Realty Investments, Inc. and the disposition of One North
                   State property.

             2)    February 13, 1998 (filed September 24, 1998), reporting in
                   Item 5. and Item 7., a combined financial statement,
                   consistent with Regulation S-X, Rule 3.14, for properties
                   accounting for over 50% of the aggregate acquisition cost of
                   a series of properties acquired (or whose acquisition the
                   Company considers probable) during the period January 1, 1998
                   through September 23, 1998, in the aggregate exceeding 10% of
                   the total assets of the Company and its subsidiaries
                   consolidated at December 31, 1997.

             3)    September 28, 1998 (filed September 29, 1998), reporting in
                   Item 5., the filing by Bradley Operating Limited Partnership
                   a Prospectus Supplement to the Partnership's Prospectus dated
                   May 14, 1998, for the commencement of a Medium-Term Note
                   Program which provides that the Partnership may offer and
                   sell from time to time its Medium-Term Notes due nine months
                   or more from date of issue in an aggregate principal amount
                   of up to $150 million.







                                       18
<PAGE>   19

                                   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 thereto duly authorized.

Date:  September 13, 1998


                                                  Bradley Real Estate, Inc.
                                                  Registrant



                                                  By:   /s/ Thomas P. D'Arcy
                                                     ------------------------
                                                        Thomas P. D'Arcy
                                                        Chairman and CEO



                                                  By:   /s/ Irving E. Lingo, Jr.
                                                     ------------------------
                                                        Irving E. Lingo, Jr.
                                                        Chief Financial Officer




                                       19