U.S. SECURITIES AND EXCHANGE COMMISSION
                                     Washington, D.C. 20549


                                            FORM 10-Q

(Mark One)

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

         For the quarterly period ended     June 30, 1998

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

         For the transition period from __________________  to  ________________

                           Commission file number     1-10641


                                    MILESTONE PROPERTIES, INC.
                     (Exact Name of Registrant as Specified in its Charter)


              Delaware                                    65-0158204
(State or Other Jurisdiction of          (I.R.S. Employer Identification Number)
  Incorporation or Organization)

150 E. Palmetto Park Rd. 4th Floor, Boca Raton, FL                       33432
   (Address of Principal Executive Offices)                           (Zip Code)

                                         (561) 394-9533
                      (Registrant's Telephone Number, Including Area Code)

              (Former name, former address and former fiscal year,
                          if changed since last report)

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

As of August 10, 1998,  4,250,445 shares of the  registrant's  common stock, par
value $.01 per share, and 3,000,251 shares of the registrant's  $.78 Convertible
Series A preferred stock, par value $.01 per share, were outstanding.

<PAGE>

Part I: Financial Information
Item 1. Financial Statements

                   MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                 June 30, 1998 (Unaudited) and December 31, 1997
<TABLE>
<CAPTION>

                                                                   June 30, 1998                  December 31, 1997
Assets:
Current Assets:
<S>                                                                <C>                          <C>               
    Cash and cash equivalents                                      $ 12,865,320                 $       13,435,237
    Restricted cash                                                     222,000                            222,000
    Loans receivable                                                  1,479,274                          1,512,744
    Accounts receivable                                                 897,520                          1,265,625
    Accrued interest receivable                                       3,779,958                          8,465,528
    Due from related party                                              485,444                            391,851
    Prepaid expenses and other                                        1,625,507                          1,034,613
                                                                     ----------                         ----------
         Total current assets                                        21,355,023                         26,327,598

    Property, improvements and equipment, net                        23,167,422                         19,610,060
    Wraparound notes, net                                            52 874,991                         59,402,931
    Deferred income tax asset, net                                    5,114,060                          4,058,358
    Investments in preferred stock                                    1,337,600                          2,228,600
    Management contract rights, net                                     242,316                            290,926
    Goodwill and other, net                                             601,938                            304,639
                                                                    -----------                        -----------
         Total assets                                               $104,693,350                $      112,223,112
                                                                    ===========                        ===========
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
    Accounts payable and accrued expenses                      $      1,097,264                 $        2,015,942
    Accrued interest payable                                            242,019                            259,116
    Master lease payable                                              6,911,321                         13,637,564
    Current portion of mortgages and notes payable                   37,742,544                         38,456,766
    Income taxes payable                                              2,822,119                          2,822,119
                                                                     ----------                         ----------
         Total current liabilities                                   48,815,267                         57,191,507

    Mortgages and notes payable                                      31,700,071                         29,282,798
                                                                     ----------                         ----------
         Total liabilities                                           80,515,338                         86,474,305
                                                                     ----------                         ----------
Commitments and Contingencies

Stockholders' equity:
    Common stock ($0.01 par value, 10,000,000 shares
       authorized, 4,943,036 and 4,905,959 issued and
       outstanding in 1998 and 1997, respectively)                       49,431                             49,060
    Preferred stock (Series A $0.01 par value, $10
       liquidation preference 10,000,000 shares
        authorized, 3,000,251 and 3,033,995 shares issued
       and outstanding in 1998 and 1997, respectively)                   30,004                             30,341
    Additional paid-in surplus                                       48,105,395                         48,105,428
    Accumulated deficit                                             (20,566,400)                       (18,995,604)
    Shares held in treasury - 692,591 shares at cost                 (3,440,418)                        (3,440,418)
                                                                   ------------                        -----------
         Total stockholders' equity                                  24,178,012                         25,748,807
                                                                   ------------                        -----------
         Total liabilities and stockholders' equity                $104,693,350                     $  112,223,112
                                                                   ============                        ===========
</TABLE>

           See Accompanying Notes to Consolidated Financial Statements


                                        1

<PAGE>

                   MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF REVENUES AND EXPENSES
                                   (Unaudited)
                For the Three Months Ended June 30, 1998 and 1997
<TABLE>
<CAPTION>

                                                                   June 30, 1998             June 30, 1997
REVENUES:
<S>                                                           <C>                         <C>            
     Rent                                                     $       2,598,415           $     2,476,066
     Interest income                                                  2,227,375                 3,293,194
     Revenue from management company operations                          99,203                    83,751
     Tenant reimbursements                                              276,218                   200,745
     Management and reimbursement income                                 26,935                    45,011
     Percentage rent                                                    201,759                   131,363
     Amortization of discount - available-for-sale securities                 0                    90,136
     Unrealized (loss) on treasury notes sold short                           0                  (354,065)
                                                                      ---------                 ---------
     Total revenues                                                   5,429,905                 5,966,201
                                                                      ---------                 ---------

EXPENSES:
     Master lease expense                                             3,445,833                 3,445,833
     Interest expense                                                 1,581,007                 2,375,655
     Depreciation and amortization                                      197,948                   187,808
     Salaries, general and administrative                               588,632                   661,902
     Property expenses                                                  548,846                   458,172
     Expenses for management company operations                         294,431                   298,818
     Professional fees                                                  308,294                   228,844
                                                                      ---------                 ---------
     Total expenses                                                   6,964,991                 7,657,032
                                                                      ---------                 ---------
Loss before income taxes                                             (1,535,086)               (1,690,831)

(Benefit) provision for income taxes                                   (498,584)                  416,309
                                                                      ---------                ----------
Net loss                                                      $      (1,036,502)          $    (2,107,140)
                                                                      =========                 =========
Loss attributable to common stockholders                      $           (0.25)          $         (0.50)
                                                                      =========                 =========
Weighted average common shares outstanding                            4,225,727                 4,192,211
                                                                      =========                 =========
</TABLE>

           See Accompanying Notes to Consolidated Financial Statements

                                        2
<PAGE>

                   MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF REVENUES AND EXPENSES
                                   (Unaudited)
                 For the Six Months Ended June 30, 1998 and 1997

<TABLE>
<CAPTION>
                                                                   June 30, 1998             June 30, 1997
REVENUES:
<S>                                                           <C>                         <C>            
     Rent                                                     $       5,344,220           $     5,347,516
     Interest income                                                  4,467,931                 6,669,521
     Revenue from management company operations                         295,045                   284,442
     Tenant reimbursements                                              533,602                   558,734
     Management and reimbursement income                                 55,986                   308,143
     Percentage rent                                                    311,007                   201,439
     Amortization of discount - available-for-sale securities                 0                   179,436
     Unrealized gain on treasury notes sold short                             0                    49,365
     Gain on realization of wraparound notes                             81,890                         0
     Loss on sale of available-for-sale securities                            0                  (784,122)
                                                                     ----------                ----------
     Total revenues                                                  11,089,681                12,814,474
                                                                     ----------                ----------

EXPENSES:
     Master lease expense                                             6,891,666                 6,977,659
     Interest expense                                                 3,100,605                 4,638,932
     Depreciation and amortization                                      406,021                   380,916
     Salaries, general and administrative                             1,164,960                 1,192,209
     Property expenses                                                  992,512                   892,896
     Expenses for management company operations                         562,696                   658,869
     Professional fees                                                  527,639                   435,782
                                                                     ----------                ----------
     Total expenses                                                  13,646,099                15,177,263
                                                                     ----------                ----------
Loss before income taxes                                             (2,556,418)               (2,362,789)

(Benefit) provision for income taxes                                   (985,622)                   93,388
                                                                     ----------                ----------
Net loss                                                      $      (1,570,796)          $    (2,456,177)
                                                                     ===========               ===========
Loss attributable to common stockholders                      $           (0.37)          $         (0.59)
                                                                     ===========               ===========
Weighted average common shares outstanding                            4,219,548                 4,192,211
                                                                     ===========               ===========
</TABLE>

           See Accompanying Notes to Consolidated Financial Statements

                                        3

<PAGE>

                   MILESTONE PROPERTIES, INC AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                   (Unaudited)

                     For the Six Months Ended June 30, 1998

<TABLE>
<CAPTION>

                                     Common Stock     Preferred Stock    Treasury Stock     Additional
                                                                                            Paid-in      Accumulated   Stockholders'
                                  Shares   Amount    Shares    Amount   Shares     Cost      Surplus        Deficit      Equity

<S>             <C>            <C>        <C>       <C>       <C>     <C>       <C>          <C>           <C>           <C>        
Balance January 1, 1998        4,905,959  $49,060   3,033,995 $30,341 (692,591) $(3,440,418) $48,105,428  $(18,995,604)  $25,748,807


Conversion of preferred stock
  into common stock               37,077      371    (33,744)    (337)                               (33)

Net loss for the six months
 ended June 30, 1998                                                                                        (1,570,796)  (1,570,796)

                               --------- --------  ---------- ------- --------- ------------ -----------  -------------  -----------
Balance June 30, 1998          4,943,036  $49,431   3,000,251 $30,004 (692,591) $(3,440,418) $48,105,395  $(20,566,400)  $24,178,012
                               ========= ========  ========== ======= ========= ============ ===========  =============  ===========

</TABLE>

           See Accompanying Notes to Consolidated Financial Statements

                                        4

<PAGE>
                   MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                 For the Six Months Ended June 30, 1998 and 1997

<TABLE>
<CAPTION>

CASH FLOWS FROM OPERATING ACTIVITIES                                                   June 1998                June 1997

<S>                                                                      <C>                                <C>           
Net loss                                                                 $            (1,570,796)           $  (2,456,177)
Adjustments to reconcile net loss to net cash
used in operating activities:
     Depreciation and amortization                                                       406,021                  380,916
     Deferred benefit taxes                                                           (1,055,702)                 138,407
     Unrealized gain on treasury notes sold short                                              0                  (49,365)
     Amortization of discount-available-for-sale securities                                    0                 (179,436)
     Realized loss on sale of available-for-sale securities                                    0                  784,122
     Gain on sale of property                                                             81,890                        0
     Change in operating assets and liabilities, net:
       Decrease in accounts receivable                                                   368,105                  680,112
       Increase in due from related party                                                (93,592)                (141,642)
       Decrease in accrued interest receivable                                         4,685,570                4,921,944
       (Increase) decrease in prepaid expenses and other                                (925,335)                 294,830
       Decrease in accounts payable and accrued expenses                                (918,678)              (1,410,540)
       Decrease in accrued interest payable                                              (17,097)                (338,319)
       Decrease in master lease payable                                               (6,726,243)              (7,264,000)
       Decrease in income taxes payable                                                        0                 (816,371)
       Decrease in due to related party                                                        0                  (61,688)
                                                                                     -----------               ----------
       Net cash used in operating activities                                          (5,765,857)              (5,517,207)
                                                                                     -----------               ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Principal repayments on loans receivable                                             33,470                  139,680
     Principal repayments on wraparound notes                                          5,025,520                4,727,684
     Issuance of wraparound notes                                                         25,410                        0
     Purchase of building and land                                                    (3,650,000)                       0
     Purchase of leasehold improvements                                                 (227,631)                 (43,668)
     Proceeds from realization of wraparound notes                                        75,000                        0
     Proceeds from the sale of available-for-sale securities                                   0                9,498,529
     Proceeds from redemption of investments in preferred stock                          891,000                  839,834
     Proceeds from redemption of reverse repurchase agreements                                 0                9,436,884
     Purchase of treasury notes                                                                0               (9,166,017)
                                                                                     -----------              -----------
       Net cash provided by investing activities                                       2,172,769               15,432,926
                                                                                     -----------              -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from mortgages and notes payable                                         6,497,746
     Principal payments on mortgages and notes payable                               (3,474,575)               (1,517,846)
     Principal payment on loans payable                                                        0               (5,985,822)
     Amounts received on treasury notes payable                                                0                   49,365
                                                                                     -----------              -----------
       Net provided by (cash used in) financing activities                             3,023,171               (7,454,303)
                                                                                     -----------              -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                    (569,917)               2,461,416

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                        13,435,237                3,141,839
                                                                                     -----------              -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                  $           12,865,320           $    5,603,255
                                                                                     ===========              ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

       Cash paid during the period for interest                          $             3,117,702           $    4,977,251
                                                                                     ===========              ===========
       Cash paid during the period for income taxes                      $                70,080           $      793,651
                                                                                     ===========              ===========

</TABLE>
           See Accompanying Notes to Consolidated Financial Statements

                                        5

<PAGE>
                           MILESTONE PROPERTIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)

The accompanying consolidated financial statements of Milestone Properties, Inc.
("Milestone") and its wholly owned  subsidiaries  (together,  Milestone with its
subsidiaries  is herein  referred  to as the  "Company")  have been  prepared in
accordance with generally accepted  accounting  principles for interim financial
information and with the  instructions to Form 10-Q and Rule 10-01 of Regulation
S-X.  Accordingly,  they do not include  all of the  information  and  footnotes
required by generally  accepted  accounting  principles  for complete  financial
statements. In the opinion of management,  all adjustments (consisting of normal
recurring  accruals)  considered  necessary  for a fair  presentation  have been
included. The financial statements as of and for the periods ended June 30, 1998
and 1997 are unaudited.  The results of operations  for the interim  periods are
not  necessarily  indicative of the results of  operations  for the fiscal year.
Certain  information  for 1997  has been  reclassified  to  conform  to the 1998
presentation.   These  consolidated  financial  statements  should  be  read  in
conjunction with the financial  statements and footnotes included thereto in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.

The  Company  is  engaged  in  the  business  of  owning,  acquiring,  managing,
developing  and  investing  in  commercial  real estate and real estate  related
assets. As of June 30, 1998 (and currently),  the Company possessed interests in
33 commercial  real estate  properties  consisting of (i) six fee interests (the
"Fee  Properties")  and (ii)  Wrap  Debt (as  defined  herein)  interests  in 27
commercial real properties (the "Underlying Properties").  At June 30, 1997, the
Company possessed  interests in 33 commercial real estate properties  consisting
of (i)  three Fee  Properties  and (ii) Wrap  Debt  interests  in 30  Underlying
Properties.  The Underlying  Properties are secured by and subject to wraparound
notes  (the  "Wraparound  Notes")  and  wraparound  mortgages  (the  "Wraparound
Mortgages" and,  together with the Wraparound  Notes, the "Wrap Debt").  Most of
the Fee Properties are  multi-tenanted as compared to the Underlying  Properties
of which most are single-tenanted.

       1. Acquisition and Disposition of Real Estate Related Assets

On July 15, 1998,  the Company  completed the purchase of Teeca Plaza,  a 22,589
square foot shopping center located in Boca Raton,  Florida (Palm Beach County),
from an unrelated  party for $2,075,000.  In connection  with the purchase,  the
Company obtained a $1,800,000 first mortgage loan which bears interest at a rate
of 7.39% per annum.  Such first mortgage requires monthly principal and interest
payments of $12,450 based upon a 30 year self liquidating amortization schedule,
with a  balloon  payment  of  approximately  $1,591,100  due July 1,  2008.  The
shopping  center is currently  97% occupied by local  tenants who are subject to
operating leases ranging from three to 28 years with various renewal options.

On July 7,  1998,  the  Company  completed  the sale of its  Mountain  View Mall
property located in Bend, Oregon (the "Bend Property") to an unrelated party for
$17,750,000.  The Company  realized net proceeds from the sale of  approximately
$319,200,  after  paying off the  balance of the  underlying  first  mortgage of
$17,065,000  (which  represented   approximately  23%  of  the  Company's  total
liabilities) and using a portion of the funds for closing  costs and net credits
to  the  buyer.  At  the  time  of  the  sale,  the  Bend  Property  represented
approximately  17% of the Company's total assets with a carrying  value,  net of
accumulated depreciation, of approximately $16,482,000. As a result of the sale,
the  Company  will  realize a book gain of  approximately  $948,000 in the third
quarter of 1998.



                                                               6

<PAGE>



On May 1, 1998, the Company secured a $1,160,000 first mortgage loan on its Pine
Oak property located in Sunrise Florida, which bears interest at a rate of 7.48%
per annum.  Such first mortgage requires monthly principal and interest payments
of $8,095 based upon a 30 year self liquidating  amortization  schedule,  with a
balloon payment of approximately $1,027,700 due May 1, 2008.

On April 17, 1998,  the Company  completed  the purchase of Orange Park Shopping
Center,  a 21,509 square foot shopping  center  located in Orange Park,  Florida
(Clay County),  from an unrelated party for  $1,500,000.  In connection with the
purchase,  the Company  obtained a $1,300,000  first  mortgage  loan which bears
interest  at a rate of 7.39% per annum.  Such first  mortgage  requires  monthly
principal and interest  payments of $8,992 based upon a 30 year self liquidating
amortization  schedule,  with a balloon payment of approximately  $1,147,600 due
April 1, 2008.  The shopping  center is currently  95% occupied by local tenants
who are subject to operating  leases  ranging from two to six years with various
renewal options.

On April 17, 1998, the wraparound  mortgagor (i.e. the Partnership that owns the
related  Underlying  Property)  completed the refinancing of Morgantown Plaza, a
92,646 square foot shopping center located in Natchez, Mississippi, on behalf of
the Company,  as the wraparound  mortgagee.  The $2,200,000  first mortgage loan
bears interest at a rate of 7.59% per annum, and requires monthly  principal and
interest payments of $15,519 based upon a 30 year self liquidating  amortization
schedule,  with a balloon payment of  approximately  $1,951,900 due May 1, 2008.
The Company also extended the Wraparound Mortgage on such property to mature May
1, 2008.

On April 1, 1998,  the Company  completed  the purchase of Regency Walk Shopping
Center,  a 34,436 square foot shopping center located in  Jacksonville,  Florida
(Duval County),  from an unrelated  party for $2,150,000.  On April 2, 1998, the
Company secured a $1,840,000  first mortgage loan which bears interest at a rate
of 7.87% per annum.  Such first mortgage requires monthly principal and interest
payments of $13,335 based upon a 30 year self liquidating amortization schedule,
with a balloon payment of approximately  $1,643,700 due May 1, 2008.The shopping
center,  which is currently 92%  occupied,  is occupied by local tenants who are
subject to operating  leases ranging from two to nine years with various renewal
options.

On February 9, 1998, the Company  realized its position in its  wraparound  note
that had a carrying  value of $1,477,010 on the property  located in Chili,  New
York as a result of the assignment of the wraparound note on such property to an
unrelated  party  for  $75,000.  The  assignment  resulted  in the  relief  of a
non-recourse  underlying  mortgage on such property that had a principal balance
outstanding  of  $1,477,010,  which  resulted  in a book gain of  $81,890 to the
Company.

As previously reported,  the Company and Societe Generale Securities Corporation
("SGSC")  entered into an agreement  (the "SGSC  Agreement") on January 9, 1998,
effective as of December 24, 1997,  pursuant to which  Milestone  and certain of
its  affiliates  retained SGSC to act as a financial  advisor to the Company and
certain of its affiliates (the  "Affiliates") in connection with any transaction
involving  a proposed  sale (a  "Proposed  Sale") by the  Affiliates  of certain
shopping  center  properties  and any proposed  sale by Milestone of certain Fee
Properties owned by Milestone.  The shopping center properties to be sold by the
Affiliates are subject to Wrap Debt secured by Underlying Properties.  Such Wrap
Debt is  held  by the  Company  and  would  need  to be  released  prior  to the
consummation of any transaction.  The properties to be sold and the Wrap Debt to
be repaid in  connection  with a Proposed  Sale could  represent  a  substantial
portion of the Company's real estate related assets.  Currently, the Company and
the Affiliates are negotiating  the terms of a Proposed Sale.  However there can
be no  assurance  that such  negotiation  will result in a sale  contract  for a
Proposed Sale, nor can there be any assurance that if a sale contract is reached
that a Proposed Sale will be consummated.



                                                               7

<PAGE>



2.   Legal Proceedings

As  previously  reported,  on January 30, 1996,  Milestone,  certain  former and
present  members of its Board of Directors and executive  officers,  and Concord
Assets Group, Inc. ("Concord"),  a New York corporation,  the executive officers
and directors of which are also  executive  officers and directors of Milestone,
were named as defendants in a purported class action and derivative lawsuit (the
"Winston  Action")  which was  brought by a Series A  Preferred  Stockholder  on
behalf of himself and purportedly on behalf of all holders of the Company's $.78
Convertible Series A Preferred Stock (the "Series A Preferred Stock"), par value
$.01 per  share,  $10  liquidation  preference,  and  derivatively  on behalf of
Milestone,  in connection  with (i)  Milestone's  acquisition in October 1995 of
certain wraparound notes,  wraparound  mortgages and fee properties from certain
affiliates  of Concord,  (ii) the  transfer in August and October  1995 of 16 of
Milestone's retail properties to Union Property Investors,  Inc. ("UPI"), a then
wholly-owned   Delaware   subsidiary  of  Milestone  and  (iii)  the  subsequent
distribution of all of the issued and  outstanding  shares of UPI's common stock
to  Milestone's  common  stockholders  on a  share-for-share  basis  and  for no
consideration  (the events  referred  to in clauses (i) through  (iii) above are
collectively referred to herein as the "Transactions").

On October 30, 1997,  Milestone had entered into a Stipulation  and Agreement of
Settlement  (the  "Initial  Winston  Settlement  Agreement")  providing  for the
settlement of the Winston  Action.  In April 1998,  counsel for the plaintiff to
the Winston Action advised the Company that the plaintiff would not proceed with
such settlement and counsel for the Company advised the Court of Chancery of the
State of Delaware  that the parties would resume  litigation  of the matter.  If
such settlement had been approved and consummated, the Winston Action would have
been  dismissed  and  Milestone's  stockholders  who  did  not  opt  out of such
settlement  would  have  been  required  to  surrender  each  share of  Series A
Preferred Stock held by such  stockholder and release all claims against any and
all of the  defendants  in the Winston  Action  arising in  connection  with the
Transactions  in  exchange  for $0.75 per share in cash from  Milestone  and one
share of preferred  stock of an  affiliate  of Concord  having a $2.25 per share
liquidation  preference  and which  would have been  required  to be redeemed at
$2.25 per share after five years.

On July 14, 1998,  the Company  announced  that it had reached a new  settlement
(the "Winston  Settlement")  with  plaintiff's  counsel  relating to the Winston
Action.  On August 5, 1998,  a  Stipulation  and  Agreement of  Settlement  (the
"Winston  Settlement  Agreement")  was entered  into  between the parties to the
Winston  Action setting forth the terms of the Winston  Settlement.  Pursuant to
the Winston  Settlement,  each holder of Series A  Preferred  Stock  eligible to
participate  in the  Winston  Settlement  who  does  not opt out of the  Winston
Settlement  will be required to surrender each share of Series A Preferred Stock
held by such  stockholder  and  release  all  claims he or she may have  against
Milestone and the other named  defendants in connection  with the Winston Action
in exchange  for $3.00 in cash,  payable by  Milestone.  The  defendants in the
Winston  Action and their  affiliates  are not  eligible to  participate  in the
Winston  Settlement.  The Winston Settlement is subject to approval by the Court
of Chancery of the State of Delaware  after a hearing,  and is also subject to a
number of  conditions  which may be waived at the  option of  Milestone  and the
other defendants, including the condition that stockholders owning more than 10%
of the Series A Preferred  Stock do not opt out of the Winston  Settlement.  The
ultimate   consummation  of  the  Winston  Settlement  is  subject  to  numerous
conditions,  some  of  which  are not in the  control  of the  Company,  such as
approval by the Court of Chancery of the State of  Delaware,  and  therefore  is
inherently uncertain.

The foregoing description of the Winston Settlement is qualified in its entirety
by reference to the Winston Settlement Agreement, a copy of which is being filed
as Exhibit 10.01 hereto.

As previously reported,  on January 29, 1998,  Milestone,  along with certain of
its directors,  commenced a lawsuit in the United States  District Court for the
Southern District of New York against National Union Fire Insurance

                                                               8

<PAGE>



Company of  Pittsburgh,  Pa.  ("National  Union") and  Stonewall  Surplus  Lines
Insurance  Company  ("Stonewall").  National  Union had issued a  directors  and
officers insurance and company  reimbursement policy (the "National Policy") for
Milestone and its directors with a limit of $2,000,000.  Stonewall had issued an
excess directors and officers  liability and company  reimbursement  policy (the
"Stonewall  Policy") for Milestone and its directors with a limit of $2,000,000.
Pursuant  to  the  Initial  Winston  Settlement  Agreement,  had  such  proposed
settlement been consummated, Milestone would have paid approximately $2,225,000,
plus  plaintiff's  legal fees in an amount not to exceed $650,000 and would have
incurred other legal expenses. Milestone believes that the amount it and certain
of its directors would have paid pursuant to the initial proposed settlement and
as a result of the litigation,  had such proposed  settlement been  consummated,
would have been  covered  losses  under both the  National  Union Policy and the
Stonewall Policy. In addition,  the Company incurred  approximately  $550,000 in
legal fees in  defending  Milestone  and its  directors in  connection  with the
Winston Action, which it believes is a covered loss under the National Union and
Stonewall  policies.  National  Union  refused to  contribute  to such  proposed
settlement, as set forth in the Initial Winston Settlement Agreement,  asserting
that such proposed  settlement did not encompass any covered loss (as defined in
the National  Policy).  Stonewall  also refused to  contribute  to such proposed
settlement.  In the complaint,  the  plaintiffs  alleged that National Union and
Stonewall wrongfully failed to contribute to the initial proposed settlement and
sought reimbursement from National Union and Stonewall up to the limits of their
respective  policies.  National  Union and Stonewall both answered the complaint
and denied  liability.  As a result of the  termination  of the Initial  Winston
Settlement Agreement,  Milestone, on one hand, and Stonewall and National Union,
on the other hand,  agreed to dismiss  such action  without  prejudice  and such
action was dismissed on May 29, 1998 by the United States District Court for the
Southern  District  of New  York.  The  Company  has  given  National  Union and
Stonewall notice of the Winston  Settlement and has provided each of them with a
copy of the Winston Settlement  Agreement.  It is possible that the Company will
assert a claim against  National Union and Stonewall in connection  with covered
losses  under the  National  Policy and the  Stonewall  Policy  relating  to the
Winston Settlement.  At this time, the Company is not in a position to render an
opinion as to the outcome of such an action if one is commenced.

If the Winston Settlement is consummated and all of the holders of shares of the
Series A Preferred  Stock  eligible  to  participate  in the Winston  Settlement
participate  in such  settlement,  the  total  amount  of  funds  necessary  for
Milestone  to acquire such shares of Series A Preferred  Stock is  approximately
$9,000,000.  Additional expenses of approximately  $1,200,000 are anticipated to
be incurred in connection with the Winston Settlement.  The source of such funds
necessary  to  effectuate  the Winston  Settlement  would be from the  Company's
existing cash reserves.

3.     Recently Issued Accounting Pronouncements

In June 1997,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting Standards No. 130 "Reporting  Comprehensive  Income" ("SFAS
No. 130").  SFAS No. 130  establishes  standards for reporting and displaying of
comprehensive  income  and  its  components  in a full  set of  general  purpose
financial statements.  SFAS No. 130 mandates that all items that are required to
be recognized under accounting  standards as components of comprehensive  income
be reported in a financial  statement that is displayed in equal prominence with
all other financial  statements.  It does not require a specific format for such
financial  statements,  but  requires  that  an  enterprise  display  an  amount
representing  total  comprehensive  income  for the  period in such a  financial
statement.  SFAS No.  130 is  effective  for both  interim  and  annual  periods
beginning after December 15, 1997. Comparative financial statements provided for
earlier  periods are required to be  reclassified  to reflect the  provisions of
SFAS No. 130. 

The  Company  adopted  SFAS No. 130 in the first  quarter of 1998.  There are no
components of comprehensive income for the three months or six months ended June
30, 1998. For the three months ended June 30, 1997 the Company had components of
comprehensive income, as defined in SFAS No. 130, of approximately $577,000 

                                       9
          
<PAGE>



of unrealized gains (net of tax of $385,000 ) on available-for-sale  securities.
Under  SFAS  No.  130 the  Company  has a  comprehensive  loss of  approximately
$1,530,000  for the three months  ended June 30, 1997.  For the six months ended
June 30, 1997 the Company had components of comprehensive  income, as defined in
SFAS No.  130, of  approximately  $906,000  of  unrealized  gains (net of tax of
$609,000) on available-for-sale securities. Under SFAS No. 130 the Company has a
comprehensive loss of approximately $1,550,000 for the six months ended June 30,
1997.


Item 2.  Management's Discussion and Analysis of Financial Condition and
 Results of Operation.

General

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

The  Company  is  engaged  in  the  business  of  owning,  acquiring,  managing,
developing  and  investing  in  commercial  real estate and real estate  related
assets. As of June 30, 1998 (and currently),  the Company possessed interests in
33 commercial  real estate  properties  consisting of (i) six fee interests (the
"Fee  Properties")  and (ii)  Wrap  Debt (as  defined  herein)  interests  in 27
commercial real properties (the "Underlying Properties").  At June 30, 1997, the
Company possessed  interests in 33 commercial real estate properties  consisting
of (i)  three Fee  Properties  and (ii) Wrap  Debt  interests  in 30  Underlying
Properties.  The Underlying  Properties are secured by and subject to wraparound
notes  (the  "Wraparound  Notes")  and  wraparound  mortgages  (the  "Wraparound
Mortgages" and,  together with the Wraparound  Notes, the "Wrap Debt").  Most of
the Fee Properties are  multi-tenanted as compared to the Underlying  Properties
of which most are single-tenanted.

Year 2000 Compliance

The Company has and will  continue to make certain  investments  in its software
systems and  applications to ensure that the Company is year 2000 compliant.  It
is  anticipated  that the project will be completed  by internal  staff  without
significant contributions from outside contractors. Management believes that the
financial  impact to the Company of ensuring  its year 2000  compliance  has not
been and will not be material to the Company's  financial position or results of
operations.

Recent Developments

On August 5, 1998,  Milestone  and the other  parties to a  purported  class and
derivative  lawsuit (the "Winston Action") which was brought against  Milestone,
certain  former and  present  members of its Board of  Directors  and  executive
officers,  and Concord Assets Group Inc.  ("Concord"),  a New York  corporation,
entered into a Stipulation and Agreement of Settlement (the "Winston  Settlement
Agreement"), setting forth the terms of a

                                                               10

<PAGE>



proposed  settlement (the "Winston  Settlement")  relating to the Winston Action
which was publicly  announced on July 14, 1998.  In April 1998,  counsel for the
plaintiff to the Winston Action had advised the Company that the plaintiff would
not proceed with a previous settlement. Pursuant to the Winston Settlement, each
holder of shares of Milestone's $.78  Convertible  Series A preferred stock (the
"Series  A  Preferred  Stock),   par  value  $.01  per  share,  $10  liquidation
preference,  who is eligible to  participate  in the Winston  Settlement and who
does not opt out of the Winston  Settlement will be required to surrender all of
such  holders'  shares of Series A  Preferred  Stock and release all claims such
holder may have against  Milestone and the other named  defendants in connection
with the Winston Action in exchange for $3.00 in cash, payable by Milestone. The
Winston  Settlement is subject to approval by the Court of Chancery of the State
of Delaware after a hearing, and is also subject to a number of conditions which
may be waived at the option of Milestone and the other defendants, including the
condition that stockholders owning more than 10% of the Series A Preferred Stock
do not opt out of the  Winston  Settlement.  The  ultimate  consummation  of the
Winston Settlement is subject to numerous  conditions,  some of which are not in
the  control of the  Company,  such as  approval by the Court of Chancery of the
State of Delaware,  and  therefore is  inherently  uncertain.  See Part II-Other
Information, Item 1. Legal Proceedings.

If the Winston Settlement is consummated and all of the holders of shares of the
Series A Preferred  Stock  eligible  to  participate  in the Winston  Settlement
participate  in such  settlement,  the  total  amount  of  funds  necessary  for
Milestone  to  acquire  such  shares  of  Series  A  Preferred  Stock  would  be
approximately  $9,000,000.  Additional expenses of approximately  $1,200,000 are
anticipated to be incurred in connection with the Winston Settlement. The source
of such funds necessary to effectuate the Winston  Settlement  would be from the
Company's  existing cash reserves.  See Part  I-Financial  Information,  Item 2.
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operation, Liquidity and Capital Resources.

On July 15, 1998,  the Company  completed the purchase of Teeca Plaza,  a 22,589
square foot shopping center located in Boca Raton,  Florida (Palm Beach County),
from an unrelated party for  $2,0750,000.  In connection with the purchase,  the
Company obtained a $1,800,000 first mortgage loan which bears interest at a rate
of 7.39% per annum.  Such first mortgage requires monthly principal and interest
payments of $12,450 based upon a 30 year self liquidating amortization schedule,
with a  balloon  payment  of  approximately  $1,591,100  due July 1,  2008.  The
shopping  center is currently  97% occupied by local  tenants who are subject to
operating leases ranging from three to 33 years with various renewal options.

On July 7,  1998,  the  Company  completed  the sale of its  Mountain  View Mall
property located in Bend, Oregon (the "Bend Property") to an unrelated party for
$17,750,000.  The Company  realized net proceeds from the sale of  approximately
$319,200,  after  paying off the  balance of the  underlying  first  mortgage of
$17,065,000  (which  represented   approximately  23%  of  the  Company's  total
liabilities) and using a portion of the funds for closing  costs and net credits
to  the  buyer.  At  the  time  of  the  sale,  the  Bend  Property  represented
approximately  17% of the Company's total assets with a carrying  value,  net of
accumulated depreciation, of approximately $16,482,000. As a result of the sale,
the  Company  will  realize a book gain of  approximately  $948,000 in the third
quarter of 1998.

The New York Stock Exchange (the "Exchange")  suspended trading in shares of the
Series A Preferred Stock and Common Stock prior to the market opening on July 6,
1998 because the Exchange had determined that Milestone had fallen below certain
of its  continued  listing  criteria  relating to net income and market value of
publicly  held  shares of the Series A  Preferred  Stock and Common  Stock.  The
Exchange  subsequently  applied to the  Securities  and Exchange  Commission  to
delist the Series A Preferred  Stock and Common  Stock.  The Company has learned
that on or about July 6, 1998,  a market was being made for shares of the Series
A Preferred Stock and Common Stock on the  Over-The-Counter  Bulletin Board with
the ticker symbols MPRPP and MPRP, respectively.


                                                               11

<PAGE>





On April 17, 1998,  the Company  completed  the purchase of Orange Park Shopping
Center,  a 21,509 square foot shopping  center  located in Orange Park,  Florida
(Clay County),  from an unrelated party for  $1,500,000.  In connection with the
purchase,  the Company  obtained a $1,300,000  first  mortgage  loan which bears
interest  at a rate  of  7.39%  annum.  Such  first  mortgage  requires  monthly
principal and interest  payments of $8,992 based upon a 30 year self liquidating
amortization  schedule,  with a balloon payment of approximately  $1,147,600 due
April 1, 2008.The shopping center is currently 95% occupied by local tenants who
are  subject to  operating  leases  ranging  from two to six years with  various
renewal options.

On April 1, 1998,  the Company  completed  the purchase of Regency Walk Shopping
Center,  a 34,436 square foot shopping center located in  Jacksonville,  Florida
(Duval County),  from an unrelated  party for $2,150,000.  On April 2, 1998, the
Company secured a $1,840,000  first mortgage loan which bears interest at a rate
of 7.87% per annum.  Such first mortgage requires monthly principal and interest
payments of $13,335 based upon a 30 year self liquidating amortization schedule,
with a balloon payment of approximately  $1,643,700 due May 1, 2008.The shopping
center,  which is currently 92%  occupied,  is occupied by local tenants who are
subject to operating  leases ranging from two to nine years with various renewal
options.

On February 9, 1998, the Company  realized its position in its  wraparound  note
that had a carrying  value of $1,477,010 on the property  located in Chili,  New
York as a result of the assignment of the wraparound note on such property to an
unrelated  party  for  $75,000.  The  assignment  resulted  in the  relief  of a
non-recourse  underlying  mortgage on such property that had a principal balance
outstanding  of  $1,477,010,  which  resulted  in a book gain of  $81,890 to the
Company.

As previously reported,  the Company and Societe Generale Securities Corporation
("SGSC")  entered into an agreement  (the "SGSC  Agreement") on January 9, 1998,
effective as of December 24, 1997,  pursuant to which  Milestone  and certain of
its  affiliates  retained SGSC to act as a financial  advisor to the Company and
certain of its affiliates (the "Affiliates"), in connection with any transaction
involving  a proposed  sale (a  "Proposed  Sale") by the  Affiliates  of certain
shopping  center  properties  and any proposed  sale by Milestone of certain Fee
Properties owned by Milestone.  The shopping center properties to be sold by the
Affiliates are subject to Wrap Debt secured by Underlying Properties.  Such Wrap
Debt is  held  by the  Company  and  would  need  to be  released  prior  to the
consummation of any transaction.  The properties to be sold and the Wrap Debt to
be repaid in  connection  with a Proposed  Sale could  represent  a  substantial
portion of the Company's real estate related assets.  Currently, the Company and
the Affiliates are negotiating  the terms of a Proposed Sale.  However there can
be no assurance that such  negotiation  will result in a contract for a Proposed
Sale,  nor can there be any assurance  that if a sale contract is reached that a
Proposed Sale will be consummated.

Results of Operations

Three Months Ended June 30, 1998 Compared to Three Months Ended June 30, 1997

The Company  recognized a net loss of $1,036,502 for the three months ended June
30, 1998 as compared to a net loss of $2,107,140 for the same period in 1997 due
to the following factors:

Revenues for the three months ended June 30, 1998 were $5,429,905, a decrease of
$536,296 or 9%, from  $5,966,201 for the three months ended June 30, 1997.  Such
decrease was primarily  due to the net of: (1) a decrease in interest  income of
$1,065,819  comprised  mostly of a  decrease  in  interest  income  of  $951,500
resulting from a decrease in the number of available-for-sale securities held by
the  Company to none for the three  months  ended June 30, 1998 from two for the
same period in 1997;  (2) an increase  in rents of  $122,349  resulting  from an
increase  in the number of Fee  Properties  owned by the  Company to six for the
three months ended June 30, 1998 from three for the same period in 1997;  (3) an
increase in tenant reimbursements of $75,473 resulting

                                                               12

<PAGE>



from an increase in the number of Fee Properties owned by the Company to six for
the three months ended June 30, 1998 from three for the same period in 1997; (4)
an increase in  percentage  rents,  as a function  of annual  sales  reported by
certain  tenants,  of $70,396 for the three months ended June 30, 1998 resulting
from increased  annual sales reported by certain tenants as compared to the same
period in 1997; (5) no amortization of discount on available-for-sale securities
for the three months ended June 30, 1998 compared to amortization of $90,136 for
the same  period  in 1997 and (6) no  unrealized  gain or loss on U.S.  Treasury
Notes  sold  short for the three  months  ended  June 30,  1998  compared  to an
unrealized  holding loss of $354,065 on U.S.  Treasury  Notes sold short for the
same period in 1997.

Operating expenses for the three months ended June 30, 1998 were $5,186,036,  an
increase of $92,467,  or 2%, from $5,093,569 for the three months ended June 30,
1997. Such increase was primarily due to the net of: (1) a decrease in salaries,
general and administrative  expenses of approximately  $73,270 due to the net of
(a) a decrease in rental  expense  for the  corporate  offices of  approximately
$147,000 for the three months ended June 30, 1998 compared to the same period in
1997;  (b) an increase in  insurance  expense of  approximately  $19,000 for the
three months ended June 30, 1998  compared to the same period in 1997 due to the
increase in the number of Fee Properties owned by the Company to six from three,
respectively and (c) an increase in closing costs of  approximately  $46,000 for
the three months ended June 30, 1998  compared to the same period in 1997 due to
the increase in the number of Fee  Properties  purchased by the Company to three
from none, respectively;  (2) an increase in property expenses of $90,674 due to
the increase in the number of Fee Properties owned by the Company to six for the
three  months ended June 30, 1998 from three for the same period in 1997 and (3)
an increase in  professional  fees of $79,450  due to fees  associated  with the
Winston Settlement with plaintiff's counsel relating to the Winston Action.

Interest  expense for the three  months  ended June 30, 1998 was  $1,581,007,  a
decrease of $794,648,  or 33%, from  $2,375,655  for the three months ended June
30,  1997.   Such  decrease  was  primarily  due  to  a  decrease  in  financing
arrangements related to the available-for-sale securities held by the Company to
none for the three  months  ended June 30,  1998 from two for the same period in
1997 resulting in a decrease in interest expense of approximately $672,000.

Depreciation  and  amortization  for the three  months  ended June 30,  1998 was
$197,948,  an increase of $10,140,  or 5%, from  $187,808  for the three  months
ended June 30, 1997.  Such increase was  primarily  due to property  improvement
purchases made during 1997.

Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997

The Company  recognized a net loss of  $1,570,796  for the six months ended June
30, 1998 as compared to a net loss of $2,456,177 for the same period in 1997 due
to the following factors:

Revenues for the six months ended June 30, 1998 were $11,089,681,  a decrease of
$1,724,793 or 13%, from $12,814,474 for the six months ended June 30, 1997. Such
decrease was primarily  due to the net of: (1) a decrease in interest  income of
$2,201,590  comprised  mostly of (a) a decrease in interest income of $1,867,068
resulting from a decrease in the number of available-for-sale securities held by
the Company to none for the six months ended June 30, 1998 from two for the same
period in 1997 and (b) a decrease  in the  number of  properties  with  interest
bearing  wraparound  notes to 27 for the six months  ended June 30, 1998 from 30
for the same  period in 1997  resulting  in a  decrease  in  interest  income of
approximately $199,000; (2) a decrease in management and reimbursement income of
$252,157  resulting  primarily from the  termination of the Management  Services
Agreement  between Union  Property  Investors,  Inc. and the Company in February
1997;  (3) an  increase  in  percentage  rents,  as a function  of annual  sales
reported by certain tenants,  of $109,568 for the six months ended June 30, 1998
resulting  from  increased  annual  sales  reported  by the  certain  tenants as
compared  to the same  period  in  1997;  (4) no  amortization  of  discount  on
available-for-sale securities for the six months ended June 30,

                                                               13

<PAGE>



1998 compared to  amortization  of $179,436 for the same period in 1997;  (5) no
unrealized  gain or loss on U.S.  Treasury  Notes  sold short for the six months
ended June 30, 1998  compared to an  unrealized  holding gain of $49,365 on U.S.
Treasury  Notes  sold  short  for the same  period  in  1997;  (6) a gain on the
realization  of wraparound  notes of $81,890  compared to no gain or loss on the
realization  of wraparound  notes for the same period in 1997 and (7) no gain or
loss on the sale of available-for-sale  securities for the six months ended June
30,  1998  compared  to a loss of  $784,122  on the  sale of  available-for-sale
securities for the six months ended June 30, 1997.

Operating  expenses for the six months ended June 30, 1998 were  $10,139,473,  a
decrease of $17,942, or 0.2%, from $10,157,415 for the six months ended June 30,
1997.  Such  decrease was  primarily due to the net of: (1) a decrease in master
lease expense of $85,993 due to a decrease in the number of properties leased by
the  Company to 27 for the six months  ended June 30,  1998 from 30 for the same
period in 1997; (2) a decrease in salaries,  general and administrative expenses
of  approximately  $118,081 due to the net of: (a) a decrease in rental  expense
for the corporate offices for the six months ended June 30, 1998 compared to the
same  period  in  1997  of  $281,110;  (b)  an  increase  in  closing  costs  of
approximately  $24,000 for the six months  ended June 30,  1998  compared to the
same  period  in  1997  due to the  increase  in the  number  of Fee  Properties
purchased  to three from  none,  respectively;  (c) a decrease  in the number of
employees  from  1998 to 1997  resulting  in a  decrease  in salary  expense  of
approximately  $37,000;  (d) an increase in insurance  expense of  approximately
$49,000 for the six months  ended June 30,  1998  compared to the same period in
1997 due to the increase in the number of Fee Properties owned by the Company to
six from three,  respectively  and (e) an increase in other office expense (i.e.
relocation,  computers,  storage, etc.) related to the corporate offices move in
January  1998 of  approximately  $53,000 for the six months ended June 30, 1998;
(3) an increase in property expenses of $99,616 due to an increase in the number
of Fee Properties  owned by the Company to six for the six months ended June 30,
1998 as  compared  to three for the same  period in 1997 and (4) an  increase in
professional fees of $91,857 due to fees associated with the Winston  Settlement
with plaintiff's counsel relating to the Winston Action.

Interest  expense  for the six months  ended  June 30,  1998 was  $3,100,605,  a
decrease of  $1,538,327,  or 33%, from  $4,638,932 for the six months ended June
30,  1997.   Such  decrease  was  primarily  due  to  a  decrease  in  financing
arrangements related to the available-for-sale securities held by the Company to
none for the six months ended June 30, 1998 from two for the same period in 1997
resulting in a decrease in interest expense of approximately $1,271,000.

Depreciation  and  amortization  for the six  months  ended  June  30,  1998 was
$406,021,  an increase of $25,105, or 7%, from $380,916 for the six months ended
June 30, 1997. Such increase was primarily due to property improvement purchases
made during 1997.

Liquidity and Capital Resources

The  Company,  as the holder of 133,860  shares of Kranzco  Series C  Cumulative
Redeemable Preferred Shares as of June 30, 1998, is entitled to receive from the
redemption of such shares,  in three equal  installments over the next 7 months,
an aggregate amount of cash equal to approximately $1,338,600,  plus interest at
the rate of 8% per annum on the applicable outstanding balance of such shares.

The first mortgage loan on the Underlying  Property located in Quincy,  Illinois
matured on July 1, 1998 and the first mortgage loan on the  Underlying  Property
located in South  Williamson,  Kentucky  is due to mature  October 1, 1998.  The
Company, as the wraparound mortgagee, is seeking either an extension of terms on
the first  mortgage  loans or to realize  its  position in its Wrap Debt on both
properties.

Milestone  has no present  intention  to declare  or pay cash  dividends  on the
Series  A  Preferred  Stock  or  Common  Stock in the  foreseeable  future.  The
cumulative period relating to the payment of dividends on the Series A Preferred
Stock expired on September 30, 1995. If Milestone  declares further dividends on
the Series A

                                                               14

<PAGE>



Preferred  Stock or the Common Stock and the payment  thereof  utilizes  all, or
substantially  all, of its  available  cash flow after taxes and  expenses,  the
Company  will  require  other  sources  of  funding  to allow it to  effect  the
contemplated  purchases of additional  commercial real estate and accomplish its
other  long-term  goals.  Accordingly,  no assurance can be given that Milestone
will declare or pay dividends on the Series A Preferred Stock or, subject to the
preference on the Series A Preferred Stock, the Common Stock, in the future, and
currently  has no intention  to do so. Any decision as to the future  payment of
dividends  on the Series A  Preferred  Stock or Common  Stock will depend on the
results  of  operations,  investment  opportunities  for  available  funds,  the
financial  condition of the Company and such other factors as Milestone's  Board
of  Directors  deems  relevant.  See Part  II-Other  Information,  Item 5. Other
Information.

Cash  generated  by the  (i)  redemption  of the  Kranzco  Series  C  Cumulative
Redeemable  Preferred  Stock and (ii) the cash on hand at June 30, 1998,  may be
used  to  fund  (a)  the  Company's  real  estate  investment,  acquisition  and
development  activities,  (b) costs  associated  with the Winston Action and the
Winston  Settlement  of (w)  approximately  $9,000,000,  payable by Milestone to
Series A Preferred Stockholders (assuming all eligible stockholders  participate
in the Winston  Settlement),  (x) approximately  $750,000 in plaintiff  attorney
fees,  (y)  approximately  $300,000  in the  Company's  attorney  fees  and  (z)
approximately $150,000 in accounting,  printing, mailing and other miscellaneous
fees and expenses,  and (c) other general corporate purposes.  See Part II-Other
Information,  Item 1. Legal  Proceedings  for a discussion of the Winston Action
and the Winston Settlement.

The  Company's  existing  borrowings  and  the  encumbrances  on the  properties
securing  those  borrowings  may  inhibit  or result in  increased  costs to the
Company in connection with its ability to incur future indebtedness and/or raise
substantial equity capital in the marketplace.

The Company has invested available funds in secure, short-term, interest bearing
investments.  The Company believes that its levels of working capital, liquidity
and funds from operations are sufficient to support present operations, make any
payments  required  by the  Winston  Settlement  and to  continue to fund future
growth and business  opportunities as the Company seeks to maximize  shareholder
value.

Other than as described  herein,  management  is not aware of any other  trends,
events,  commitments or  uncertainties  that will, or are likely to,  materially
impact the Company's liquidity.

Cash Flows

Net cash used in operating  activities  of  $5,765,857  for the six months ended
June  30,  1998  included  (1) a net loss of  $1,570,796;  (2)  adjustments  for
non-cash  items  of  $567,791  and (3) a net  change  in  operating  assets  and
liabilities of $3,627,270,  compared to net cash used in operating activities of
$5,517,207 for the six months ended June 30, 1997, which included (1) a net loss
of  $2,456,177;  (2)  adjustments of $1,074,644 for non-cash items and (3) a net
change of $4,135,674 in operating assets and liabilities.

Net cash provided by investing activities of $2,172,769 for the six months ended
June  30,  1998  included  (1)  proceeds  from  principal  repayments  on  loans
receivable  and wraparound  notes of $5,058,990;  (2) the issuance of wraparound
notes of $25,410; (3) the purchase of building and land for $3,650,000;  (4) the
purchase  of  leasehold   improvements  of  $227,631;   (5)  proceeds  from  the
realization of wraparound  notes of $75,000 and (6) proceeds from  redemption of
investment  in  preferred  stock of $891,000,  compared to net cash  provided by
investing  activities  of  $15,432,926  for the six months  ended June 30, 1997,
which included:  (1) principal  repayments of $4,867,364 on loans receivable and
wraparound  notes;  (2) the purchase of leasehold  improvements of $43,668;  (3)
proceeds  of  $9,498,529  from the sale of  available-for-sale  securities;  (4)
proceeds of $839,834  from  redemption of  investment  in preferred  stock;  (5)
proceeds of $9,436,884 from the redemption of reverse repurchase  agreements and
(6) purchase of U.S. Treasury Notes for $9,166,017.


                                                               15

<PAGE>



Net cash provided by financing activities of $3,023,171 for the six months ended
June 30, 1998 included  proceeds from  mortgages and notes payable of $6,497,746
and principal payments on mortgages and notes payable of $3,474,575, compared to
net cash used in financing  activities  of  $7,454,303  for the six months ended
June 30, 1997, which included (1) principal  payments of $1,517,846 on mortgages
and notes payable; (2) principal payments of $5,985,822 on loans payable and (3)
$49,365 received on U.S. Treasury Notes payable.

See Part  II-Other  Information,  Item 1.  Legal  Proceedings  and Item 5. Other
Information for a description of certain  transactions which occurred subsequent
to June 30, 1998 which may impact the Company's future cash flows.


Item 3.            Quantitative and Qualitative Disclosure About Market Risk.

                    Not applicable.

                                                               16
<PAGE>

PART II - OTHER INFORMATION

Item 1.       Legal Proceedings

As  previously  reported,  on January 30, 1996,  Milestone,  certain  former and
present members of its Board of Directors and executive officers, and Concord, a
New York  corporation,  the  executive  officers and directors of which are also
executive  officers and directors of Milestone,  were named as defendants in the
Winston  Action which was brought by a Series A Preferred  Stockholder on behalf
of himself  and  purportedly  on behalf of all holders of the Series A Preferred
Stock,  and  derivatively  on  behalf  of  Milestone,  in  connection  with  (i)
Milestone's  acquisition in October 1995 of certain wraparound notes, wraparound
mortgages  and fee  properties  from  certain  affiliates  of Concord,  (ii) the
transfer in August and October 1995 of 16 of  Milestone's  retail  properties to
Union Property Investors,  Inc. ("UPI"), a then wholly-owned Delaware subsidiary
of  Milestone  and (iii) the  subsequent  distribution  of all of the issued and
outstanding shares of UPI's common stock to Milestone's common stockholders on a
share-for-share  basis  and for no  consideration  (the  events  referred  to in
clauses  (i)  through  (iii)  above are  collectively  referred to herein as the
"Transactions").

On October 30, 1997,  Milestone had entered into a Stipulation  and Agreement of
Settlement  (the  "Initial  Winston  Settlement  Agreement")  providing  for the
settlement of the Winston  Action.  In April 1998,  counsel for the plaintiff to
the Winston Action advised the Company that the plaintiff would not proceed with
such settlement and counsel for the Company advised the Court of Chancery of the
State of Delaware  that the parties would resume  litigation  of the matter.  If
such settlement had been approved and consummated, the Winston Action would have
been  dismissed  and  Milestone's  stockholders  who  did  not  opt  out of such
settlement  would  have  been  required  to  surrender  each  share of  Series A
Preferred Stock held by such  stockholder and release all claims against any and
all of the  defendants  in the Winston  Action  arising in  connection  with the
Transactions  in  exchange  for $0.75 per share in cash from  Milestone  and one
share of preferred  stock of an  affiliate  of Concord  having a $2.25 per share
liquidation  preference  and which  would have been  required  to be redeemed at
$2.25 per share after five years.

On July  14,  1998,  the  Company  announced  that it had  reached  the  Winston
Settlement with plaintiff's counsel relating to the Winston Action. On August 5,
1998, the Winston  Settlement  Agreement was entered into between the parties to
the Winston Action setting forth the terms of the Winston  Settlement.  Pursuant
to the Winston  Settlement,  each holder of Series A Preferred Stock eligible to
participate  in the  Winston  Settlement  who  does  not opt out of the  Winston
Settlement  will be release all claims he or she may have against  Milestone and
the other named defendants in connection with the Winston Action in exchange for
$3.00 in cash,  payable by Milestone.  The  defendants in the Winston Action and
their affiliates are not eligible to participate in the Winston Settlement.  The
Winston  Settlement is subject to approval by the Court of Chancery of the State
of Delaware after a hearing, and is also subject to a number of conditions which
may be waived at the option of Milestone and the other defendants, including the
condition that stockholders owning more than 10% of the Series A Preferred Stock
do not opt out of the  Winston  Settlement.  The  ultimate  consummation  of the
Winston Settlement is subject to numerous  conditions,  some of which are not in
the  control of the  Company,  such as  approval by the Court of Chancery of the
State of Delaware, and therefore is inherently uncertain.

The foregoing description of the Winston Settlement is qualified in its entirety
by reference to the Winston Settlement Agreement, a copy of which is being filed
as Exhibit 10.01 hereto.

As previously reported,  on January 29, 1998,  Milestone,  along with certain of
its directors,  commenced a lawsuit in the United States  District Court for the
Southern  District of New York against National Union Fire Insurance  Company of
Pittsburgh, Pa. ("National Union") and Stonewall Surplus Lines Insurance Company
("Stonewall").  National Union had issued a directors and officers insurance and
company reimbursement policy (the "National

                                                               17

<PAGE>



Policy") for Milestone and its directors with a limit of  $2,000,000.  Stonewall
had issued an excess directors and officers liability and company  reimbursement
policy (the "Stonewall  Policy") for Milestone and its directors with a limit of
$2,000,000.  Pursuant  to the Initial  Winston  Settlement  Agreement,  had such
proposed  settlement been consummated,  Milestone would have paid  approximately
$2,225,000,  plus plaintiff's legal fees in an amount not to exceed $650,000 and
would have incurred other legal expenses.  Milestone believes that the amount it
and certain of its directors  would have paid  pursuant to the initial  proposed
settlement and as a result of the litigation,  had such proposed settlement been
consummated, would have been covered losses under both the National Union Policy
and the  Stonewall  Policy.  In  addition,  the Company  incurred  approximately
$550,000 in legal fees in defending  Milestone  and its  directors in connection
with the Winston Action,  which it believes is a covered loss under the National
Union and  Stonewall  policies.  National  Union  refused to  contribute to such
proposed settlement,  as set forth in the Initial Winston Settlement  Agreement,
asserting  that such proposed  settlement did not encompass any covered loss (as
defined in the National  Policy).  Stonewall  also refused to contribute to such
proposed  settlement.  In the complaint,  the  plaintiffs  alleged that National
Union and Stonewall  wrongfully  failed to  contribute  to the initial  proposed
settlement and sought  reimbursement from National Union and Stonewall up to the
limits of their respective policies.  National Union and Stonewall both answered
the  complaint  and  denied  liability.  As a result of the  termination  of the
Initial Winston Settlement Agreement,  Milestone, on one hand, and Stonewall and
National  Union,  on the other  hand,  agreed to  dismiss  such  action  without
prejudice  and such action was  dismissed  on May 29, 1998 by the United  States
District  Court for the  Southern  District  of New York.  The Company has given
National Union and Stonewall  notice of the Winston  Settlement and has provided
each of them with a copy of the  Winston  Settlement  Agreement.  It is possible
that the Company will assert a claim  against  National  Union and  Stonewall in
connection  with  covered  losses under the  National  Policy and the  Stonewall
Policy relating to the Winston Settlement. At this time, the Company is not in a
position  to render an  opinion  as to the  outcome  of such an action if one is
commenced.

Item 5.             Other Information

Milestone's Board of Directors determined not to pay any dividends on the Series
A Preferred  Stock during the years ended December 31, 1996 and 1997 and for the
six months ended June 30, 1998. The last dividend  declared by Milestone was for
the quarter ended  December 31, 1995 and was paid on February 15, 1996 at $0.195
per share of Series A Preferred Stock.

After  September  30,  1995,  holders of the Series A Preferred  Stock  having a
liquidation  preference of $10.00 per share,  were no longer entitled to receive
dividends on a cumulative basis.  Pursuant to the Certificate of Designations of
the Series A Preferred  Stock,  after such date, no cash dividend may be paid on
the Common Stock unless full  dividends of $0.195 on all  outstanding  shares of
Series A Preferred  Stock for the then  current  quarterly  dividend  period are
declared  and either paid or  sufficient  sums for the  payment  thereof are set
apart. As a result of Milestone's Board of Directors' determination not to pay a
dividend for the quarter  ended June 30, 1997,  which was the sixth  consecutive
quarter for which no dividend was paid, the number of persons  entitled to serve
as directors on  Milestone's  Board of Directors has been  increased by one, and
the holders of the Series A Preferred  Stock,  who currently elect one member of
the Board of  Directors,  are entitled to elect a second  member of the Board of
Directors to fill such newly created directorship. Any decision as to the future
payment of dividends on the Series A Preferred  Stock will depend on the results
of operations and the financial  condition of the Company and such other factors
as Milestone's Board of Directors,  in its discretion,  deems relevant. See Part
I-Financial  Information,  Item  2.  Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operation, Liquidity and Capital Resources.




                                                               18

<PAGE>



Item 6.       Exhibits and Reports on Form 8-K

            (a)The following exhibits are included herein:

          Exhibit 10.01 - Stipulation and Agreement of Settlement,  dated August
               5, 1998, by and among John Winston and Leonard S. Mandor,  Robert
               A.  Mandor,  Joan  LeVine,  Harvey  Jacobson,   Gregory  McMahon,
               Geoffrey S.  Aaronson,  Milestone  Properties,  Inc.  and Concord
               Assets Group, Inc.

               Exhibit 27 -  Financial  Data  Schedule  Article 5  included  for
               Electronic  Data  Gathering,   Analysis,  and  Retrieval  (EDGAR)
               purposes  only.   This  Schedule   contains   summary   financial
               information  extracted from the  consolidated  balance sheets and
               consolidated  statements  of revenues and expenses of the Company
               as of and for the six month period  ended June 30,  1998,  and is
               qualified  in  its  entirety  by  reference  to  such   financial
               statements.

            (b)Reports on Form 8-K:

               On April  29,  1998,  a Form 8-K was  filed  with the  Commission
               reporting  that the  plaintiff  in the  Winston  Action  will not
               proceed with a previously announced settlement agreement.

               On July 21,  1998,  a Form  8-K was  filed  with  the  Commission
               reporting;  (i)  the  Sale of the  Mountain  View  Mall  property
               located  in Bend,  Oregon;  (ii)  the  proposed  settlement  with
               plaintiff's  counsel relating to the Winston Action and (iii) the
               suspension  of trading of shares of the Series A Preferred  Stock
               and Common Stock by the New York Stock Exchange.



                                                               19

<PAGE>
                                                           SIGNATURES

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






                                                  MILESTONE PROPERTIES, INC.
                                                              (Registrant)





Date: August 14, 1998             /s/ Robert A. Mandor
                                        Robert A. Mandor
                                        President and Chief Financial Officer


Date: August 14, 1998              /s/ Patrick S. Kirse
                                        Patrick S. Kirse
                                        Vice President of Accounting
                                        (Principal Accounting Officer)




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