<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 March 31, 1999 or 


     Transition report pursuant to Section 13 or 15(d) of the Securities 
---  Exchange Act of 1934 for the transition period from _____to_____

Commission file 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
March 31, 1999:

     Shares of Common Stock, $.01 par value: 24,055,952 shares outstanding.









                                       1

<PAGE>   2
                            BRADLEY REAL ESTATE, INC.
                           CONSOLIDATED BALANCE SHEETS
                    (Dollars in thousands, except share data)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                            March 31,           December 31,
                                                                                              1999                  1998
                                                                                            ---------           ------------
<S>                                                                                         <C>                   <C>  
ASSETS:

Real estate investments - at cost                                                           $939,398              $936,465
Accumulated depreciation and amortization                                                    (64,548)              (59,196)
                                                                                            --------              --------
Net real estate investments                                                                  874,850               877,269

Real estate investments held for sale                                                         46,492                46,492

Other assets:
    Cash and cash equivalents                                                                    109                     -
    Rents and other receivables, net of allowance for doubtful accounts
      of $4,305 for 1999 and $4,078 for 1998                                                  15,235                14,994
    Investment in partnership                                                                 13,196                13,249
    Deferred charges, net and other assets                                                    16,678                16,676
                                                                                            --------              --------
Total assets                                                                                $966,560              $968,680
                                                                                            ========              ========

LIABILITIES AND SHARE OWNERS' EQUITY:

Mortgage loans                                                                              $102,655              $103,333
Unsecured notes payable                                                                      199,557               199,542
Line of credit                                                                               119,500               169,500
Accounts payable, accrued expenses and other liabilities                                      29,199                29,415
                                                                                            --------              --------
Total liabilities                                                                            450,911               501,790
                                                                                            --------              --------
Exchangeable limited partnership units                                                        20,824                21,573
Series B preferred units                                                                      49,100                     -
                                                                                            --------              --------
Total minority interest                                                                       69,924                21,573
                                                                                            --------              --------
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; issued and outstanding 3,478,471 and
        3,478,493 shares of Series A Convertible Preferred Stock at
        March 31, 1999 and December 31, 1998, respectively                                    86,809                86,809
    Shares of common stock and paid-in capital, par value $.01 per share:
      Authorized 80,000,000 shares; issued and outstanding 24,055,952 and
         23,958,662 shares at March 31, 1999 and December 31, 1998, respectively             350,751               349,254
    Shares of excess stock, par value $.01 per share:
      Authorized 50,000,000 shares; 0 shares issued and outstanding                                -                     -
    Retained earnings                                                                          8,165                 9,254
                                                                                            --------              --------
Total share owners' equity                                                                   445,725               445,317
                                                                                            --------              --------
Total liabilities and share owners' equity                                                  $966,560              $968,680
                                                                                            ========              ========
</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>
                                                                                                      Quarter Ended
                                                                                                        March 31,
                                                                                            --------------------------------
                                                                                                1999                1998
                                                                                            ------------       -------------
<S>                                                                                            <C>                 <C> 
REVENUE:

    Rental income                                                                              $38,710             $28,736
    Other income                                                                                   643                 619
                                                                                            ------------       -------------
                                                                                                39,353              29,355
                                                                                            ------------       -------------

EXPENSES:

    Operations, maintenance and management                                                       6,678               4,333
    Real estate taxes                                                                            6,115               5,481
    Mortgage and other interest                                                                  7,687               5,558
    General and administrative                                                                   2,201               1,403
    Depreciation and amortization                                                                6,457               4,963
                                                                                            ------------       -------------
                                                                                                29,138              21,738
                                                                                            ------------       -------------

Income before equity in earnings of partnership and provision for loss on
    real estate investment                                                                      10,215               7,617
Equity in earnings of partnership                                                                  347                   -
Provision for loss on real estate investment                                                         -                (875)
                                                                                            ------------       -------------

Income before allocation to minority interest                                                   10,562               6,742
Income allocated to exchangeable limited partnership units                                        (469)               (391)
Income allocated to Series B preferred units                                                      (456)                  -
                                                                                            ------------       -------------

Net income                                                                                       9,637               6,351

Preferred share distributions                                                                   (1,826)                  -
                                                                                            ------------       -------------

Net income attributable to common share owners                                                 $ 7,811             $ 6,351
                                                                                            ============       =============

Earnings per share:
    Basic                                                                                      $  0.33             $  0.27
                                                                                            ============       =============
    Diluted                                                                                    $  0.33             $  0.27
                                                                                            ============       =============
</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>
                                                                   Preferred           Common       
                                                                    shares             shares
                                                                      and               and             Retained
                                                                paid-in capital   paid-in capital       earnings           Total
                                                                ----------------  ----------------  ----------------  --------------

<S>                                                                    <C>              <C>                <C>             <C> 
Balance at December 31, 1998                                           $86,809          $349,254           $9,254          $445,317
  Net income                                                                 -                 -            9,637             9,637
  Distributions on common stock ($0.37 per share)                            -                 -           (8,900)           (8,900)
  Distributions on preferred stock ($0.525 per share)                        -                 -           (1,826)           (1,826)
  Exercise of stock options                                                  -               123                -               123
  Dividend reinvestment and stock purchase plan participation                -             1,522                -             1,522
  Reallocation of minority interest                                          -              (154)               -              (154)
  Shares issued in exchange for limited partnership units                    -                 6                -                 6
                                                                ----------------  ----------------  ----------------  --------------

Balance at March 31, 1999                                              $86,809          $350,751           $8,165          $445,725
                                                                ================  ================  ================  ==============
</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>
                                                                                                    Quarter Ended
                                                                                                      March 31,
                                                                                         -----------------------------------
                                                                                              1999                 1998
                                                                                         --------------       --------------
<S>                                                                                            <C>                 <C>
Cash flows from operating activities:
     Net income                                                                                $9,637              $6,351
     Adjustments to reconcile net income to net cash provided by operating activities:
         Depreciation and amortization                                                          6,457               4,963
         Equity in earnings of partnership                                                       (347)                  -
         Amortization of debt premiums, net of discounts                                         (250)                  -
         Provision for loss on real estate investment                                               -                 875
         Income allocated to minority interest                                                    925                 391
     Change in operating assets and liabilities:                                                               
         Increase in rents and other receivables                                                 (241)             (1,079)
         Increase (decrease) in accounts payable, accrued expenses and other liabilities       (1,048)              3,627
         Increase in deferred charges                                                            (959)                (20)
                                                                                         --------------       --------------
              Net cash provided by operating activities                                        14,174              15,108
                                                                                         --------------       --------------

Cash flows from investing activities:
     Expenditures for real estate investments                                                     (11)            (34,392)
     Expenditures for capital improvements                                                     (3,030)             (3,128)
     Cash distributions from partnership                                                          400                   -
                                                                                         --------------       --------------
              Net cash used in investing activities                                            (2,641)            (37,520)
                                                                                         --------------       --------------

Cash flows from financing activities:
     Borrowings from line of credit                                                            17,500              44,000
     Payments under line of credit                                                            (67,500)           (116,600)
     Proceeds from issuance of unsecured notes payable                                              -              99,051
     Expenditures for financing costs                                                             (41)             (5,846)
     Principal payments on mortgage loans                                                        (413)               (261)
     Distributions paid to common share owners                                                 (8,900)             (8,276)
     Distributions to limited partnership unit holders                                           (533)               (484)
     Distributions to preferred unit holders                                                     (456)                  -
     Distributions paid to preferred share owners                                              (1,826)                  -
     Net proceeds from stock offerings                                                              -               7,489
     Proceeds from exercise of stock options                                                      123                   4
     Net proceeds from dividend reinvestment and stock purchase plan                            1,522               1,093
     Net proceeds from issuance of Series B preferred units                                    49,100                   -
                                                                                         --------------       --------------
              Net cash provided by (used in) financing activities                             (11,424)             20,170
                                                                                         --------------       --------------

Net increase (decrease) in cash and cash equivalents                                              109              (2,242)

Cash and cash equivalents:
     Beginning of period                                                                            -               4,747
                                                                                         --------------       --------------
     End of period                                                                             $  109              $2,505
                                                                                         ==============       ==============

Supplemental cash flow information:
     Interest paid, net of amount capitalized                                                  $8,207              $2,281
                                                                                         ==============       ==============
</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
                                 MARCH 31, 1999
                                   (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, 1998.

NOTE 2 - EARNINGS PER SHARE

Basic earnings per share ("EPS") is computed by dividing income available to
common share owners 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>
                                                                                  Quarter Ended March 31,
                                                                            ------------------------------------
                                                                                 1999                1998
                                                                            ----------------    ----------------
<S>                                                                             <C>                 <C>       
NUMERATOR:

Basic
     Net income attributable to common share owners                             $7,811,000          $6,351,000
                                                                            ================    ================
Diluted
     Net income attributable to common share owners                             $7,811,000          $6,351,000
     Income allocated to exchangeable limited partnership units                    469,000             391,000
                                                                            ----------------    ----------------
     Adjusted net income                                                        $8,280,000          $6,742,000
                                                                            ================    ================

DENOMINATOR:

Basic
     Weighted average common shares                                             23,996,976          23,301,629
                                                                            ================    ================
Diluted
     Weighted average common shares                                             23,996,976          23,301,629
     Effect of dilutive securities:
         Stock options                                                              31,294              54,379
         Exchangeable limited partnership units                                  1,440,998           1,435,311
                                                                            ----------------    ----------------
     Weighted average shares and assumed conversions                            25,469,268          24,791,319
                                                                            ================    ================

Basic earnings per share                                                             $0.33               $0.27
                                                                            ================
                                                                                                ================
Diluted earnings per share                                                           $0.33               $0.27
                                                                            ================    ================
</TABLE>


For the quarter ended March 31, 1999, preferred stock distributions of
$1,826,000 and the effect on the denominator of the conversion of the
convertible preferred stock outstanding during the quarter into 3,550,913 shares
of common stock were not included in the computation of diluted EPS because the
impact on basic EPS was anti-dilutive. For the quarters ended March 31, 1999 and
1998, options to purchase 650,800 shares of common stock at prices ranging from
$19.35 to $21.35 and 5,500 shares of common stock at a price of $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.

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 1,440,998 and 1,435,311
for the quarters ended March 31, 1999 and 1998, respectively. As of March 31,
1999 and 1998, there were 1,395,712 and 1,381,742 LP Units outstanding. The
Operating 


                                       6

<PAGE>   7

Partnership is a limited partnership of which the Company currently owns an 87%
economic interest.

NOTE 3 - SUPPLEMENTAL CASH FLOW DISCLOSURE

During the first quarter of 1999, 411 shares of common stock were issued in
exchange for an equivalent number of LP Units held by the minority interest.

NOTE 4 - ACQUISITION AND DISPOSITION ACTIVITY

At March 31, 1999, the Company was holding for sale six properties, all acquired
in connection with the merger acquisition of Mid-America Realty Investments,
Inc. ("Mid-America"). Four of these properties are enclosed malls and are not
aligned with the Company's strategic property focus. The remaining two shopping
center properties are located in the Southeast region of the United States and
are not aligned with the Company's strategic market focus. Subsequent to
quarter-end, the Company completed the sale of Monument Mall, an enclosed mall
located in Scottsbluff, Nebraska, to an independent third party for a sales
price of $11,900,000. The dispositions of the remaining properties are expected
to be completed during 1999, although there can be no assurance that any such
dispositions will occur.

In connection with the merger acquisition of Mid-America, the Company acquired a
50% interest in a joint venture that owns two neighborhood shopping centers and
one enclosed mall. Subsequent to quarter-end, the joint venture sold Imperial
Mall, the enclosed mall located in Hastings, Nebraska, to the same buyer of
Monument Mall for $12,100,000 including the issuance of a $3,100,000 note at
9.0%, secured by a second deed of trust.

NOTE 5 - ISSUANCE OF SERIES B PREFERRED UNITS

On February 23, 1999, the Operating Partnership completed a private placement of
2,000,000 units of its 8.875% Series B Cumulative Redeemable Perpetual Preferred
Units (the "Series B Preferred Units") to two institutional investors at a price
of $25.00 per unit. The units are callable by the Operating Partnership after
five years at a redemption price equal to the redeemed holder's capital account
(initially $25.00 per unit), plus an amount equal to all accumulated, accrued
and unpaid distributions or dividends thereon to the date of redemption. In lieu
of cash, the Operating Partnership may elect to deliver shares of 8.875% Series
B Cumulative Redeemable Perpetual Preferred Stock (the "Series B Preferred
Shares") of the Company on a one-for-one basis, plus an amount equal to all
accumulated, accrued and unpaid distributions or dividends thereon to the date
of redemption. The Series B Preferred Units do not have a stated maturity and do
not include any mandatory redemption or sinking fund provisions. The net
proceeds from the issuance of approximately $49.1 million were used to reduce
outstanding borrowings under the line of credit facility.

Holders of the Series B Preferred Units have the right to exchange Series B
Preferred Units for shares of Series B Preferred Shares on a one-for-one basis.
The exchange right is exercisable, in minimum amounts of 500,000 units, at the
option of holders of the Series B Preferred Units (i) at any time on or after
February 23, 2009, (ii) at any time if full quarterly distributions shall not
have been made for six quarters, whether or not consecutive, or (iii) upon the
occurrence of certain specified events related to the treatment of the Operating
Partnership or the Series B Preferred Units for federal income tax purposes.

NOTE 6 - SEGMENT REPORTING

As of March 31, 1999, the Company owned 98 shopping centers located primarily in
the Midwest region of the United States. Such shopping centers are typically
anchored by grocery and drug stores complemented with stores providing a wide
range of other goods and services to shoppers. During the first quarter of 1998,
the Company also owned a mixed-use office property located in downtown Chicago,
Illinois, which was sold in July 1998. Because this property required a
different operating strategy and management expertise than all other properties
in the portfolio, it was considered a separate reportable segment.

The Company assesses and measures operating results on an individual property
basis for each of its 98 shopping centers without differentiation, based on net
operating income, and then converts such amounts in the aggregate to a
performance measure referred to as Funds from Operations ("FFO"). Since all of
the Company's shopping centers exhibit highly similar economic characteristics,
cater to the day-to-day living needs of their respective surrounding
communities, and offer similar degrees of risk and opportunities for growth, the
shopping centers have been aggregated and reported as one operating segment.

The revenues, net operating income and computation of FFO for the reportable
segments and for the Company, and a reconciliation to net income attributable to
common share owners, are as follows for each of the quarters ended March 31,
1999 and 1998 (dollars in thousands):




                                       7
<PAGE>   8

<TABLE>
<CAPTION>
                                                                                           Quarter Ended March 31,
                                                                                       --------------------------------
                                                                                            1999             1998
                                                                                       ---------------  ---------------
<S>                                                                                    <C>              <C>
TOTAL PROPERTY REVENUE:
Mixed-use office property                                                              $           -    $      3,703
Shopping center properties                                                                    39,065          25,550
                                                                                       ---------------  ---------------
                                                                                              39,065          29,253
                                                                                       ---------------  ---------------

TOTAL PROPERTY OPERATING EXPENSES:
Mixed-use office property                                                                          -           1,552
Shopping center properties                                                                    12,793           8,262
                                                                                       ---------------  ---------------
                                                                                              12,793           9,814
                                                                                       ---------------  ---------------
Net operating income                                                                          26,272          19,439
                                                                                       ---------------  ---------------

NON-PROPERTY (INCOME) EXPENSES:
Other non-property income                                                                       (288)           (102)
Equity in earnings of partnership, excluding depreciation and amortization                      (390)              -
Mortgage and other interest                                                                    7,687           5,558
General and administrative                                                                     2,201           1,403
Amortization of deferred finance and non-real estate related costs                               279             241
Preferred share distributions                                                                  1,826               -
Income allocated to Series B preferred units                                                     456               -
                                                                                       ---------------  ---------------
                                                                                              11,771           7,100
                                                                                       ---------------  ---------------

Funds from Operations                                                                  $      14,501    $     12,339
                                                                                       ===============  ===============

RECONCILIATION TO NET INCOME ATTRIBUTABLE TO COMMON SHARE
   OWNERS:
Funds from Operations                                                                  $      14,501    $     12,339
Depreciation of real estate assets and amortization of tenant improvements                    (5,449)         (3,931)
Amortization of deferred leasing commissions                                                    (431)           (493)
Other amortization                                                                              (298)           (298)
Depreciation and amortization included in equity in earnings of partnership                      (43)              -
Income allocated to exchangeable limited partnership units                                      (469)           (391)
Provision for loss on real estate investment                                                       -            (875)
                                                                                       ---------------  ---------------

Net income attributable to common share owners                                         $       7,811    $      6,351
                                                                                       ===============  ===============
</TABLE>



                                       8

<PAGE>   9
ITEM 2   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

RESULTS OF OPERATIONS

Throughout 1998, we acquired 44 shopping centers and a 50% interest in a joint
venture that owns two neighborhood shopping centers and one enclosed mall for an
aggregate cost of approximately $362 million. Of these acquisitions, we acquired
22 of the shopping centers and the joint venture interest in connection with the
merger acquisition of Mid-America in August 1998. During the second and third
quarters of 1998, we also completed the sales of two properties that did not
meet our strategic goals for an aggregate net sales price of $84 million,
resulting in a net gain of $29.7 million. This gain is net of a provision for
loss on real estate investment of $875,000 reflected in the first quarter of
1998.

Results of operations for the first quarter of 1999 compared with the first
quarter of 1998 were driven in large part from the acquisition activity.
Including the provision for loss on real estate investment in 1998, net income
increased $1,460,000 from $6,351,000 in the first quarter of 1998 to $7,811,000
in the first quarter of 1999. Basic and diluted net income per share increased
$0.06 per share, or 22%, from $0.27 per share in the first quarter of 1998 to
$0.33 per share in the first quarter of 1999. Our results of operations for the
first quarter of 1998 and 1999 reflect 51 properties that were held both
quarters and 46 properties that we purchased or sold between the two periods.

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


<TABLE>
<CAPTION>
                                                   Three months ended                                                          
                                                       March 31,                                                     Properties
                                                -------------------------                         Acquisitions/       Held Both
                                                   1999           1998         Difference          Dispositions        Periods
                                                ----------     ----------      -----------        --------------     -----------
<S>                                             <C>            <C>             <C>                <C>                <C>
Rental income                                    $38,710        $28,736           $9,974               $8,752           $1,222
Operations, maintenance and management           $ 6,678        $ 4,333           $2,345               $1,645           $  700
Real estate taxes                                $ 6,115        $ 5,481           $  634               $  345           $  289
Depreciation and amortization                    $ 6,457        $ 4,963           $1,494               $1,322           $  172
</TABLE>

Results attributable to acquisition and disposition activities:

Rental income increased from $28,736,000 in the first quarter of 1998 to
$38,710,000 in the first quarter of 1999. Approximately $12,553,000 of the
increase was attributable to acquisition activities, including $6,036,000 for
properties acquired in connection with the merger acquisition of Mid-America,
partially offset by $3,801,000 attributable to disposition activities, primarily
One North State.

Operations, maintenance and management expense increased from $4,333,000 in the
first quarter of 1998 to $6,678,000 in the first quarter of 1999. Approximately
$1,645,000 of the increase was attributable to acquisition and disposition
activities, including an increase of $1,136,000 for properties acquired in
connection with the merger acquisition of Mid-America.

Real estate taxes increased from $5,481,000 in the first quarter of 1998 to
$6,115,000 in the first quarter of 1999. Approximately $1,377,000 of the
increase was attributable to acquisition activities, including an increase of
$709,000 for properties acquired in connection with the merger acquisition of
Mid-America, partially offset by a decrease of $1,032,000 for properties sold,
primarily One North State.

Depreciation and amortization increased from $4,963,000 in the first quarter of
1998 to $6,457,000 in the first quarter of 1999. Approximately $1,322,000 of the
increase was attributable to acquisition and disposition activities, including
an increase of $454,000 for properties acquired in connection with the merger
acquisition of Mid-America.

Results for properties fully operating throughout both periods:

Several factors affected the comparability of results for properties fully
operating throughout both quarters ended March 31, 1999 and 1998. Winter storms
in the Midwest occurring during the first quarter of 1999 resulted in an
increase in the level of snow removal expenses of approximately $631,000
compared with the first quarter of 1998. This increase in operations,
maintenance and management expense was mitigated by the recoverability of such
expenses through operating expense reimbursements, contributing $526,000 to an
increase in rental income. Additionally, two large tenants, Montgomery Ward at
Heritage Square, and HomePlace at Har Mar Mall, vacated their respective stores
during 1998 after declaring bankruptcy in July 1997 and January 1998,
respectively. Rental income decreased from the first quarter of 1998 at these
two shopping centers by $322,000 and $109,000, respectively. We expect a 62,000
square-foot lease with Carson Pirie Scott to commence in the second half of
1999, which will replace approximately one half the space 


                                       9

<PAGE>   10
previously occupied by Montgomery Ward. We are currently negotiating leases to
replace the remaining space previously occupied by Montgomery Ward and the space
vacated by HomePlace.

Finally, our company, as well as most other real estate companies, were affected
by a consensus reached by the Emerging Issues Task Force ("EITF") of the
Financial Accounting Standards Board regarding the accounting for percentage
rents. On May 22, 1998, the EITF reached a consensus 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. Because
the majority of our retail tenant leases have sales years ending in December or
January, a substantial portion of percentage rental income from such leases is
now recognized in the first quarter, once it is determined that specified sales
targets have been achieved. Previously, we recognized percentage rental income
each period based on reasonable estimates of tenant sales. Largely due to the
implementation of EITF 98-9, therefore, percentage rental income for properties
held throughout both quarters increased in 1999 by $163,000.

We had a 5% increase in rental income for properties fully operating throughout
both quarters. In addition to the changes in rental income described above,
rental income increased $150,000 at Rollins Crossing and $85,000 at Burning Tree
Plaza, due to a 71,000 square-foot lease with Regal Cinema at Rollins Crossing
and a 24,000 square-foot lease with Dunham's Athleisure at Burning Tree Plaza,
both commencing in the fourth quarter of 1998. Additionally, rental income
increased $156,000 at Sun Ray Shopping Center due to an increase in tax
reimbursements primarily resulting from a tax abatement received in the first
quarter of 1998, contributing to an increase in real estate taxes of $205,000
from the prior year. Rental income increased $96,000 at Brookdale Square
primarily due to the receipt of a termination fee from Brookdale Cinema and the
commencement of a 22,000 square-foot lease with Pep Boys.

Non-Property Specific Revenues and Expenses:

Other income increased from $619,000 during the quarter ended March 31, 1998 to
$643,000 during the quarter ended March 31, 1999, an increase of $24,000. Other
income contains both property specific and non-property specific income;
however, the increase is primarily attributable to property specific sources.
The increase in other income resulted from an increase in other property income
generated from properties acquired during 1998, primarily from four enclosed
malls acquired in connection with the merger acquisition of Mid-America,
partially offset by a reduction in other income of $166,000 at Grandview Plaza
for insurance proceeds in excess of the net book value of assets destroyed and
costs incurred for a fire at Grandview Plaza in 1997 received and recognized in
the first quarter of 1998.

Mortgage and other interest expense increased to $7,687,000 for the quarter
ended March 31, 1999 from $5,558,000 during the same period in the prior year,
an increase of $2,129,000. Mortgage debt of $37,933,000 assumed in connection
with the merger acquisition of Mid-America, as well as $25,753,000 in mortgage
indebtedness assumed upon the acquisitions of three additional shopping centers
during 1998, partially offset by the repayment in third quarter of 1998 of
mortgage notes secured by Richfield Hub and Hub West aggregating $10 million,
contributed to an increase in interest expense of $835,000. A higher weighted
average balance outstanding on the line of credit during the first quarter of
1999 compared with the first quarter of 1998, partially offset by a lower
weighted average interest rate, resulted in an increase in interest expense on
the line of credit of $757,000. On January 28, 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 1997 primarily to fund
acquisition activity. Interest incurred on these unsecured Notes in the first
quarter of 1998 amounted to $1,349,000 compared with $1,903,000 for the full
quarter in 1999, an increase of $554,000. Our total weighted average interest
rate decreased to 7.02% for the first quarter of 1999 from 7.41% for the first
quarter of 1998.

General and administrative expense increased from $1,403,000 during the quarter
ended March 31, 1998 to $2,201,000 during the quarter ended March 31, 1999, an
increase of $798,000. The increase primarily resulted from the growth of the
Company, including increases in salaries for additional personnel, investor
relations for a larger share owner base, and franchise taxes and related fees
for a larger equity base and expanded geographic market.

While the capital markets for REITs have continued to remain challenging, during
February 1999, we took advantage of an opportunity to replace $50 million of
short term floating rate debt under the line of credit with the issuance of
8.875% Series B Cumulative Redeemable Perpetual Preferred Units (the "Series B
Preferred Units"). Although the spread between the interest rate currently
available under the line of credit facility and the rate associated with the
Series B Preferred Units is dilutive in the short-term, the infusion of such
permanent capital reduced the amount of outstanding indebtedness and increased
the capacity under the line of credit, providing us with additional flexibility
to take advantage of the favorable acquisition, development, and redevelopment
opportunities we continue to identify from both prospective acquisitions in our
target markets and from shopping centers in our core portfolio. Distributions on
the Series B Preferred Units were $456,000 during the first quarter of 1999; on
a going-forward basis, such distributions are projected to be approximately $1.1
million for each full quarterly period that the Series B Preferred Units are
outstanding.

                                       10

<PAGE>   11
Distributions on the Series A Convertible Preferred Stock issued in connection
with the merger acquisition of Mid-America in August 1998 were $1,826,000 during
the first quarter of 1999.

LIQUIDITY AND CAPITAL RESOURCES

General

We fund operating expenses and distributions primarily from operating cash
flows, although we may also use our bank line of credit for these purposes. We
fund 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. We may also acquire properties through the direct issuance of
debt and equity securities of the Company, or through the issuance of limited
partnership units in the Operating Partnership to the seller or contributor of
the acquired properties. Additionally, we 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 our strategic focus.
In addition, we may acquire partial interests in real estate assets through
participation in joint venture transactions.

We focus our investment activities on community and neighborhood shopping
centers, primarily located in the midwestern United States, anchored by regional
and national grocery store chains. We 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 we can utilize our extensive experience in shopping center renovation,
expansion, re-leasing and re-merchandising to achieve long-term cash flow growth
and favorable investment returns. Additionally, we expect to 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 we anticipate that value can
be created from new developments more effectively than from acquisitions of
existing shopping center properties.

As of March 31, 1999, our financial liquidity was provided by $109,000 in cash
and cash equivalents and by the unused balance on our bank line of credit of
$130.5 million. As of March 31, 1999, we were holding for sale six properties
with an aggregate book value of $46.5 million. Subsequent to quarter-end, we
completed the sale of one of the enclosed malls, Monument Mall, located in
Scottsbluff, Nebraska, for a sales price of $11,900,000. Also subsequent to
quarter-end, our 50%-owned joint venture, Bradley Bethal Limited Partnership,
sold Imperial Mall, an enclosed mall located in Hastings, Nebraska, for
$12,100,000 including the issuance of a $3,100,000 note at 9.0%, secured by a
second deed of trust. We used the net proceeds from these transactions of
approximately $14.4 million to pay-down the line of credit and for general
corporate purposes. We expect to complete the sales of the remaining five
properties held for sale during 1999, although we can give no assurance that any
such sales will occur. Proceeds received from a sale of any of such properties
would provide us with additional liquidity. In addition, we have an effective
"shelf" registration statement under which the Company may issue up to $201.4
million in equity securities, and an additional "shelf" registration statement
under which the Operating Partnership may issue up to $400 million 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
we determine that market conditions and the opportunity to utilize the proceeds
from the issuance of such securities are favorable. The Operating Partnership
has also implemented a Medium-Term Note program providing it with the added
flexibility of issuing Medium-Term Notes due nine months or more from date of
issue in varying 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.

Mortgage debt outstanding at March 31, 1999 consisted of fixed-rate notes
totaling $102.7 million with a weighted average interest rate of 7.51% maturing
at various dates through 2016. Short-term liquidity requirements include debt
service payments due within one year. Scheduled principal amortization of
mortgage debt totaled $413,000 during the quarter ended March 31, 1999, with
another $1.9 million scheduled principal payments due for the remainder of the
year. We have no maturing debt until February 2000, when $6.0 million in
mortgage debt becomes due, and December 2000, when the line of credit expires.
While we currently expect to fund short-term and long-term liquidity
requirements primarily through a combination of issuing additional investment
grade unsecured debt securities and equity securities and with borrowings under
the bank line of credit, there can be no assurance that we will be able to repay
or refinance indebtedness on commercially reasonable or any other terms.

Operating Activities

Net cash flows provided by operating activities decreased to $14,174,000 during
the first quarter of 1999, from $15,108,000 during the same period in 1998. The
decrease resulted from the payment of $8,207,000 in interest during the first
quarter of 1999 compared with $2,281,000 during the first quarter of 1998, an
increase of $5,926,000, despite an increase of only $2,129,000 in interest
expense to $7,687,000 from $5,558,000. This increase primarily resulted from the
payment of $3,600,000 during the first quarter of 1999 of a semi-annual interest
payment due January 15, on $100 million of 7.2% ten-year unsecured Notes,
accrued in the prior year from the issuance

                                       11


<PAGE>   12


date of January 28, 1998, but not paid. Excluding the semi-annual interest
payment, cash provided by operating activities increased $2,666,000. This
increase is primarily due to the growth of our portfolio, from 53 properties at
January 1, 1998, to 98 properties at March 31, 1999.

For the three months ended March 31, 1999, funds from operations ("FFO")
increased $2,162,000, or 18%, from $12,339,000 to $14,501,000. 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.
We compute FFO in accordance with the March 1995 "White Paper" on FFO published
by the National Association of Real Estate Investment Trusts ("NAREIT"), as
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 computed to
reflect FFO on the same basis. In computing FFO, we do not add back to net
income the amortization of costs incurred in connection with our financing
activities or depreciation of non-real estate assets. 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 NAREIT White Paper provides guidelines
only for computing FFO, the 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 increased to a use of cash of
$2,641,000 during the first quarter of 1999, from a use of cash of $37,520,000
during the same period of 1998. No acquisitions were completed the first quarter
of 1999, compared with the first quarter of 1998, when we completed the
acquisitions of five shopping centers located in Indiana, Kentucky, Michigan,
and Wisconsin aggregating 602,000 square feet for a total purchase price of
approximately $33,500,000.

Financing Activities

Net cash flows provided by financing activities decreased to a use of cash of
$11,424,000 during the first quarter of 1999 from a source of cash of
$20,170,000 during the same period in 1998. Distributions to common and
preferred share owners, as well as to the minority interest, were $11,715,000 in
the first quarter of 1999, and $8,760,000 in the first quarter of 1998.

On February 23, 1999, we issued two million 8.875% Series B Cumulative
Redeemable Perpetual Preferred Units to two institutional investors at a price
of $25.00 per unit. Net proceeds from the issuance of approximately $49.1
million were used to reduce outstanding borrowings under the line of credit,
strengthening our capital structure, replacing floating rate debt with permanent
capital, and thereby adding liquidity, flexibility and additional capital to
fund our acquisition and development activities.

In the prior year period, we issued $100 million, 7.2% ten-year unsecured Notes
maturing January 15, 2008, and issued 392,638 shares of common stock to a unit
investment trust, raising net proceeds of $7,489,000. Proceeds from the
offerings were used to reduce outstanding borrowings under the line of credit.

Capital Strategy

We continue to identify favorable acquisition, development, and redevelopment
opportunities from both prospective acquisitions in our target markets and from
shopping centers in our core portfolio. We have expanded our internal
development capabilities to take advantage of such higher yielding investment
opportunities, which we expect to result in part from our existing relations
with the dominant grocery store operators in our Midwest markets. During the
first quarter of 1999, we completed the necessary leasing transactions to
commence our planned redevelopment of the Commons of Chicago Ridge, a shopping
center in our core portfolio located in metropolitan Chicago. Chicago Ridge is
the type of redevelopment investment opportunity upon which we will continue to
focus. The redevelopment will represent an investment of approximately $9.5
million, and is expected to generate a high return on invested capital while
adding substantial long-term value to an existing center. We also continue to
establish a pipeline of development opportunities and potential acquisitions of
shopping centers where our redevelopment experience can create similar enhanced
returns. We expect to finance these acquisition, development, and redevelopment
opportunities with a combination of proceeds from the sale of non-core assets,
retained cash, external capital and possible joint ventures.

As of March 31, 1999, we were holding for sale six non-core properties,
consisting of four enclosed malls and two community shopping centers, all
acquired in connection with the merger acquisition of Mid-America. Subsequent to
quarter-end, we completed the sale of one of the enclosed malls, Monument Mall,
located in Scottsbluff, Nebraska, for a sales price of $11.9 million. Although
there can be no assurance that any additional sales will be completed, we expect
to complete the sales of the remaining properties during 1999, utilizing


                                       12

<PAGE>   13
the proceeds to reduce outstanding indebtedness under the line of credit with
the expectation that the increased borrowing capacity would be used to acquire
or develop additional shopping centers within our target market that are more in
keeping with our grocery-anchored community shopping center focus, and that
generate higher investment returns in challenging capital markets.

Year 2000 Issues

Many existing computer software programs and operating systems were designed
such that the year 1999 is the maximum date that they will be able to process
accurately. The failure of our computer software programs and operating systems
to process the change in calendar year from 1999 to 2000 may result in system
malfunctions or failures. In the conduct of our operations, we rely on equipment
manufacturers and commercial computer software primarily provided by independent
software vendors, and we have undertaken an assessment of our vulnerability to
the so-called "Year 2000 issue" with respect to our equipment and computer
systems.

We have 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 we do 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
    our 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 our systems
    environment.

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

With respect to our potential exposure to information technology systems,
including our accounting and lease management systems, we believe that such
commercial software is Year 2000 ready. This assessment is based upon
installation and testing of upgraded software provided by software vendors, as
well as formal and informal communications with software vendors and literature
supplied with certain software. We have incurred minimal costs associated with
bringing our information technology systems to be Year 2000 ready.

In the operation of our properties, we have 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 utilizing time-sensitive technology. We have substantially
completed our evaluation of the potential exposure to such non-information
technology systems and do not expect to incur more than $50,000 to become Year
2000 ready. We expect to be Year 2000 ready before June 30, 1999. This
assessment is based upon formal and informal communications with software
vendors, literature supplied with the software, literature supplied in
connection with maintenance contracts, and test evaluations of the software.

The failure of our tenants' or suppliers' computer software programs and
operating systems to process the change in calendar year from 1999 to 2000 may
also result in system malfunctions or failures. Such an occurrence would
potentially affect the ability of the affected tenant or supplier to operate its
business and thereby raise adequate revenue to meet its contractual obligations
to us. As a result, we may not receive revenue or services we had otherwise
expected to receive pursuant to existing leases and contracts. We have completed
an inventory of the tenants, suppliers and other parties with whom we do a
significant amount of business and are in the process of surveying such parties
to identify the potential exposure in the event they are not Year 2000 ready in
a timely manner. We expect to have responses from such parties by May 1999.
However, at this time, we are not aware of any party that is anticipating a
material Year 2000 readiness issue. Although the investigations and assessments
of possible Year 2000 issues are still ongoing, we do not anticipate a material
impact on our business, operations or financial condition even if one or more
parties is not Year 2000 ready in a timely manner, because the number and nature
of our tenant base are diverse, and because we do not rely on a concentration of
suppliers and other parties to conduct our business.

Although we are aware that we may not, in fact, be Year 2000 ready upon the year
2000, at this time we have not adopted a contingency plan for the conduct of our
own operations because we expect to be Year 2000 ready in advance of 2000.
However, we will continue to monitor our progress and state of readiness, and
will be prepared to adopt a contingency plan with respect to areas in which
evidence arises that we may not become Year 2000 ready in sufficient time. It is
possible that an aggregation of tenants, suppliers, and other parties who
experience Year 2000 related system malfunctions or failures may have a material
impact on our business, operations, and financial

                                       13

<PAGE>   14


condition. Although we believe that we will be able to adopt appropriate
contingency plans to deal with any Year 2000 readiness issue that any other
party, excluding public utilities, with whom we have significant relationships
may experience as we continue our Year 2000 assessment and testing, we cannot be
certain at this time that such contingency plans will be effective in limiting
the harm caused by such third parties' system malfunctions and failures.

The reasonably likely worst case scenario that could affect our operations would
be a widespread prolonged power failure affecting a substantial portion of the
midwestern states in which our shopping centers are located. In the event of
such a widespread prolonged power failure, a significant number of tenants may
not be able to operate their stores and, as a result, their ability to pay rent
could be substantially impaired. We are not aware of an economically feasible
contingency plan which could be implemented to prevent such a power failure from
having a material adverse effect on our operations.

FORWARD LOOKING STATEMENTS

Statements made or incorporated in this Form 10-Q include "forward-looking"
statements. Forward-looking statements include, without limitation, statements
containing the words "anticipates," "believes," "expects," "intends," "future,"
and words of similar import which express our belief, expectations or intentions
regarding our future performance or future events or trends. We caution you
that, while forward-looking statements reflect our good faith beliefs, they are
not guarantees of future performance and involve known and unknown risks,
uncertainties and other factors, which may cause actual results, performance or
achievements to differ materially from anticipated future results, performance
or achievements expressed or implied by such forward-looking statements as a
result of factors outside of our control. 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 our 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 fact that
returns from development and acquisition activity may not be at expected levels;
the need to renew leases or relet space upon the expiration of current leases;
and the financial flexibility to refinance debt obligations when due. The
statements made under the caption "Risk Factors" included in the Company's Form
10-K for 1998 are incorporated herein by reference.








                                       14

<PAGE>   15


PART II - OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS
                  Not applicable

Item 2.  CHANGES IN SECURITIES
                  On February 23, 1999, the Operating Partnership issued
                  2,000,000 of its 8.875% Series B Cumulative Redeemable
                  Perpetual Preferred Units (the "Series B Preferred Units") to
                  an institutional investor at a price of $25.00 per unit,
                  resulting in net proceeds to the Operating Partnership of
                  approximately $49.1 million. On or after February 23, 2004,
                  the Operating Partnership may redeem the Series B Preferred
                  Units at its option, in whole or in part, at any time for cash
                  at a redemption price equal to the redeemed holder's capital
                  account (initially $25.00 per unit), plus an amount equal to
                  all accumulated, accrued and unpaid distributions or dividends
                  thereon to the date of redemption. In lieu of cash, the
                  Operating Partnership may elect to deliver shares of 8.875%
                  Series B Cumulative Redeemable Perpetual Preferred Stock of
                  the Company (the "Series B Preferred Shares") on a one-for-one
                  basis, plus an amount equal to all accumulated, accrued and
                  unpaid distributions or dividends thereon to the date of
                  redemption. The Series B Preferred Units do not include any
                  mandatory redemption or sinking fund provisions.

                  Holders of the Series B Preferred Units have the right to
                  exchange Series B Preferred Units for shares of Series B
                  Preferred Shares on a one-for-one basis. The exchange right is
                  exercisable, in minimum amounts of 500,000 units, at the
                  option of holders of the Series B Preferred Units (i) at any
                  time on or after February 23, 2009, (ii) at any time if full
                  quarterly distributions shall not have been made for six
                  quarters, whether or not consecutive, or (iii) upon the
                  occurrence of certain specified events related to the
                  treatment of the Operating Partnership or the Series B
                  Preferred Units for federal income tax purposes. The Series B
                  Preferred Units were issued in reliance on an exemption from
                  registration under Section 4(2) of the Securities Act, and the
                  rules and regulations promulgated thereunder.


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/A and Form 8-K were filed during the 
                  period January 1, 1999 through March 31, 1999:

                  1)    Form 8-K/A filed February 4, 1999 amending Item 7. of 
                        Form 8-K filed September 24, 1998 (earliest event
                        February 13, 1998), 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.

                  2)    Form 8-K filed March 3, 1999 (earliest event February
                        23, 1999), reporting in Item 5., the issuance by Bradley
                        Operating Limited Partnership of 2,000,000 units of
                        8.875% Series B Cumulative Redeemable Perpetual
                        Preferred Units to two institutional investors at a
                        price of $25.00 per unit.



                                       15

<PAGE>   16


                                   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:    May 13, 1999


                                            Bradley Real Estate, Inc.
                                                     Registrant



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


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












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