SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549



                                    FORM 10-Q

(Mark One)

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

For the quarterly period ended     September 30, 1998                           

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

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 No.)
  Incorporation or Organization)


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


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

              (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 November 11, 1998,  4,251,042 shares of the  registrant's  common
stock, par value $.01 per share and 2,999,707  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
              September 30, 1998 (Unaudited) and December 31, 1997
<TABLE>
<CAPTION>

                                                                                 September 30, 1998  December 31, 1997
                                                                                -------------------  -----------------
Assets:
Current Assets:
<S> ............................................................................                <C>                <C>
    Cash and cash equivalents .................................................. $       13,199,644 $       13,435,237
    Restricted cash ............................................................            222,000            222,000
    Loans receivable ...........................................................          1,462,031          1,512,744
    Accounts receivable ........................................................            828,205          1,265,625
    Accrued interest receivable ................................................          5,557,352          8,465,528
    Due from related party .....................................................            651,976            391,851
    Prepaid expenses and other .................................................          2,026,246          1,034,613
                                                                                -------------------   ----------------

         Total current assets ..................................................         23,947,454         26,327,598

    Property, improvements and equipment, net ..................................          9,991,104         19,610,060
    Wraparound notes, net ......................................................         51,657,136         59,402,931
    Deferred income tax asset, net .............................................          5,572,999          4,058,358
    Investments in preferred stock .............................................            892,100          2,228,600
    Management contract rights, net ............................................            220,909            290,926
    Goodwill and other, net ....................................................            793,614            304,639
                                                                                -------------------   ----------------

         Total assets ..........................................................$        93,075,316      $ 112,223,112
                                                                                ===================   ================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
    Accounts payable and accrued expenses ......................................$         1,392,197   $      2,015,942
    Accrued interest payable ...................................................            299,182            259,116
    Master lease payable .......................................................         10,148,536         13,637,564
    Current portion of mortgages and notes payable .............................         20,539,980         38,456,766
    Income taxes payable .......................................................          2,822,119          2,822,119
                                                                                -------------------   ----------------

         Total current liabilities .............................................         35,202,014         57,191,507

    Mortgages and notes payable ................................................         33,323,838         29,282,798
                                                                                -------------------   ----------------

         Total liabilities .....................................................         68,525,852         86,474,305
                                                                                -------------------   ----------------

Commitments and Contingencies

Stockholders' equity:
    Common stock ($0.01 par value, 10,000,000 shares
       authorized, 4,943,633 and 4,905,959 issued and
       outstanding in 1998 and 1997, respectively) .............................             49,436             49,060
    Preferred stock (Series A $0.01 par value, $10
       liquidation preference 10,000,000 shares
        authorized, 2,999,707 and 3,033,995 shares issued
       and outstanding in 1998 and 1997, respectively) .........................             29,999             30,341
    Additional paid-in surplus .................................................         48,105,394         48,105,428
    Accumulated deficit ........................................................        (20,194,947        (18,995,604)
    Shares held in treasury - 692,591 shares at cost ...........................         (3,440,418         (3,440,418)
                                                                                -------------------   ----------------

         Total stockholders' equity ............................................         24,549,464         25,748,807
                                                                                -------------------   ----------------

         Total liabilities and stockholders' equity ............................$        93,075,316      $ 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 September 30, 1998 and 1997

<TABLE>
<CAPTION>

                                                                                 September 30, 1998  September 30, 1997
REVENUES:
<S>                                                                                       <C>         <C>             
     Rent ...................................................................... $        2,414,928   $      2,621,451
     Interest income ...........................................................          2,216,211          3,301,217
     Revenue from management company operations ................................            143,012            166,223
     Tenant reimbursements .....................................................            200,322            228,049
     Management and reimbursement income .......................................             26,480             49,085
     Percentage rent ...........................................................             46,050             87,090
     Gain on sale of real estate and real estate related assets ................          1,284,617                  0
     Amortization of discount - available-for-sale securities ..................                  0             99,273
     Unrealized (loss) on treasury notes sold short ............................                  0           (243,438)
                                                                                -------------------   ----------------

     Total revenues ............................................................          6,331,620          6,308,950
                                                                                -------------------   ----------------


EXPENSES:
     Master lease expense ......................................................          3,421,815          3,445,833
     Interest expense ..........................................................          1,345,002          2,266,653
     Depreciation and amortization .............................................             87,881            221,518
     Salaries, general and administrative ......................................            583,014            641,704
     Property expenses .........................................................            348,797            388,318
     Expenses for management company operations ................................            242,988            244,578
     Professional fees .........................................................            298,491            119,512
                                                                                -------------------    ---------------

     Total expenses ............................................................          6,327,988          7,328,116
                                                                                -------------------   ----------------

Income (loss) before income taxes ..............................................              3,632         (1,019,166)

(Benefit) provision for income taxes ...........................................           (367,821)           166,297
                                                                                -------------------   ----------------

Net Income (loss) ..............................................................$           371,453   $     (1,185,463)
                                                                                ===================   ================

Income (loss) attributable to common stockholders ..............................$              0.09   $          (0.28)
                                                                                ===================   ================

Weighted average common shares outstanding .....................................          4,230,245          4,211,275
                                                                                ===================   ================


</TABLE>


           See Accompanying Notes to Consolidated Financial Statements


                                        2
<PAGE>

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

<TABLE>
<CAPTION>

                                                                                 September 30, 1998   September 30, 1997
REVENUES:
<S>                                                                             <C>                   <C>             
     Rent ......................................................................$         7,759,148   $      7,968,967
     Interest income ...........................................................          6,684,142          9,970,738
     Revenue from management company operations ................................            358,016            450,665
     Tenant reimbursements .....................................................            733,924            786,783
     Management and reimbursement income .......................................             82,466            357,228
     Percentage rent ...........................................................            357,057            288,528
     Gain on sale of real estate and real estate related assets ................          1,366,507                  0
     Amortization of discount - available-for-sale securities ..................                  0            278,709
     Unrealized loss on treasury notes sold short ..............................                  0           (194,073)
     Loss on sale of available-for-sale securities .............................                  0           (784,121)
                                                                                -------------------   ----------------

     Total revenues ............................................................         17,341,260         19,123,424
                                                                                -------------------   ----------------


EXPENSES:
     Master lease expense ......................................................         10,313,481         10,423,492
     Interest expense ..........................................................          4,445,607          6,905,585
     Depreciation and amortization .............................................            493,902            602,434
     Salaries, general and administrative ......................................          1,787,370          1,924,738
     Property expenses .........................................................          1,261,268          1,281,214
     Expenses for management company operations ................................            766,288            812,622
     Professional fees .........................................................            826,130            555,294
                                                                                -------------------   ----------------

     Total expenses ............................................................         19,894,046         22,505,379
                                                                                -------------------   ----------------

Loss before income taxes .......................................................         (2,552,786)        (3,381,955)

(Benefit) provision for income taxes ...........................................         (1,353,443)           259,685

Net loss .......................................................................$        (1,199,343)  $     (3,641,640)
                                                                                ===================   ================

Loss attributable to common stockholders .......................................$             (0.28   $          (0.87)
                                                                                ===================   ================

Weighted average common shares outstanding .....................................          4,229,979          4,196,233
                                                                                ===================   ================
</TABLE>

           See Accompanying Notes to Consolidated Financial Statements

                                        3
<PAGE>

                   MILESTONE PROPERTIES, INC AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                   (Unaudited)

                  For the Nine Months Ended September 30, 1998

<TABLE>
<CAPTION>


                                                               Common Stock          Preferred Stock           Treasury Stock       
                                                                                                                                    
                                                             Shares      Amount       Shares      Amount       Shares        Cost   

<S>                                                       <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)


Conversion of preferred stock into common stock              37,674         376      (34,342)       (342)                           

Net loss for the nine months ended September 30, 1998                                                                               




Balance  September 30, 1998                               4,943,633     $ 49,436   2,999,653    $ 29,999      (692,591) $(3,440,418)
                                                         ==========     ========   =========   =========      ========= ============

                                                          Additional                                                        
                                                           Paid-in              Accumulated       Stockholders'                     
                                                           Surplus                Deficit            Equity                         
                                                                                                                                    
<S>                                                       <C>                   <C>              <C>                                
Balance January 1, 1998                                   $ 48,105,428          $ (18,995,604)   $   25,748,807                     
                                                                                                                            
                                                                                                                            
Conversion of preferred stock into common stock                    (34)                   
                                                                                                                            
Net loss for the nine months ended September 30, 1998                             (1,199,343)        (1,199,343)         
                                                                                                                            
                                                                                                                            
                                                                                                                            
                                                                                                                            
Balance  September 30, 1998                                 $ 48,105,394        $ (20,194,947)     $ 24,549,464     
                                                           =============        ==============     ============                     
                                                         
</TABLE>


           See Accompanying Notes to Consolidated Financial Statements

                                        4

<PAGE>

                   MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
              For the Nine Months Ended September 30, 1998 and 1997

<TABLE>
<CAPTION>

                                                                                          September 30, 1998  September 30, 1997
                                                                                           ------------------ -------------------
CASH FLOWS FROM OPERATING ACTIVITIES 
<S>                                                                                        <C>                   <C>              
Net loss ..................................................................................$       (1,199,343)   $     (3,641,640)
Adjustments to reconcile net loss to net cash
used in operating activities:
     Depreciation and amortization ........................................................           493,902             602,434
     Deferred benefit taxes ...............................................................        (1,514,641)            334,282
     Unrealized gain on treasury notes sold short .........................................                 0             194,073
     Amortization of discount-available-for-sale securities ...............................                 0            (278,709)
     Realized loss on sale of available-for-sale securities ...............................                 0             784,122
     Gain on sale of real estate and real estate related assets ...........................        (1,366,507)                  0
     Change in operating assets and liabilities, net:
       Decrease in accounts receivable ....................................................           437,420             386,047
       (Increase) decrease in due from related party ......................................          (260,125)            282,621
       Decrease in accrued interest receivable ............................................         2,908,176           2,794,080
       Increase in prepaid expenses and other .............................................        (1,536,320)             (2,405)
       Decrease in accounts payable and accrued expenses ..................................          (542,624)           (859,880)
       Increase (decrease) in accrued interest payable ....................................            40,066            (648,716)
       Decrease in master lease payable ...................................................        (3,489,028)         (4,021,859)
       Decrease in income taxes payable ...................................................                 0            (906,819)
       Decrease in due to related party ...................................................                 0             (61,688)
                                                                                           ------------------    ----------------

       Net cash used in operating activities ..............................................        (6,029,024)         (5,044,057)
                                                                                           ------------------    ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Principal repayments on loans receivable .............................................            50,713             155,601
     Principal repayments on wraparound notes .............................................         5,017,620           4,727,684
     Investment in wraparound notes .......................................................          (108,838)                  0
     Purchase of building and land ........................................................        (6,825,000)         (1,100,000)
     Purchase of leasehold improvements ...................................................          (302,465)           (183,836)
     Proceeds from realization of wraparound notes ........................................           950,334                   0
     Proceeds from the sale of property ...................................................           319,230                   0
     Proceeds from the sale of available-for-sale securities ..............................                 0           9,498,529
     Proceeds from redemption of investments in preferred stock ...........................         1,336,500           1,285,334
     Proceeds from redemption of reverse repurchase agreements ............................                 0           9,415,301
     Purchase of treasury notes ...........................................................                 0          (9,166,015)
                                                                                           ------------------    ----------------

       Net cash provided by investing activities ..........................................           438,094          14,632,598
                                                                                           ------------------    ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from mortgages and notes payable ............................................         9,180,000                   0
     Principal payments on mortgages and notes payable ....................................        (3,824,663)         (2,084,200)
     Principal payment on loans payable ...................................................                 0          (4,436,882)
     Amounts received on treasury notes payable ...........................................                 0             194,073
                                                                                           ------------------    ----------------

       Net provided by (cash used in) financing activities ................................         5,355,337          (6,327,009)
                                                                                           ------------------    ----------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ......................................          (235,593)          3,261,532

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ............................................        13,435,237           3,141,839
                                                                                           ------------------    ----------------

CASH AND CASH EQUIVALENTS, END OF PERIOD ..................................................$       13,199,644    $      6,403,371
                                                                                           ==================    ================


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

       Cash paid during the period for interest ...........................................$        4,405,541    $      7,554,301
                                                                                           ==================    ================

       Cash paid during the period for income taxes .......................................$          185,472    $        854,429
                                                                                           ==================    ================
</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 hereinafter  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 September 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.  Currently, the Company possesses 35 interests in commercial real estate
properties  consisting of (i) 10 fee interests (the "Fee  Properties")  and (ii)
Wrap Debt (as defined  herein)  interests in 25 commercial  real properties (the
"Underlying Properties").  At September 30, 1998 the Company possessed interests
in 33 commercial real estate  properties  consisting of (i) seven Fee Properties
and (ii) Wrap Debt interests in 26 Underlying Properties. At September 30, 1997,
the  Company  possessed  interests  in  32  commercial  real  estate  properties
consisting  of (i) four  Fee  Properties  and (ii)  Wrap  Debt  interests  in 28
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 November  10, 1998,  the Company  completed  the purchase of Lincoln  Park, a
46,190 square foot shopping center located in Davie,  Florida (Broward  County),
from an unrelated  party for $3,840,000.  In connection  with the purchase,  the
Company obtained a $3,219,000 first mortgage loan which bears interest at a rate
of 7.58% per annum.  Such first mortgage requires monthly principal and interest
payments of $22,684 based upon a 30 year self liquidating amortization schedule,
with a balloon  payment of  approximately  $2,800,000  due November 1, 2008. The
shopping  center is currently  97% occupied by local  tenants who are subject to
operating leases ranging from one to five years with various renewal options.

On October 27, 1998, the Company  completed the purchase of Pine Crest, a 40,408
square  foot  shopping  center  located  in Fort  Lauderdale,  Florida  (Broward
County),  from an  unrelated  party  for  $3,200,000.  In  connection  with  the
purchase,  the Company  obtained a $2,400,000  first  mortgage  loan which bears
interest  at a rate of 7.0% per annum.  Such  first  mortgage  requires  monthly
principal and interest payments of $15,967 based upon a 30 year self liquidating
amortization  schedule,  with a balloon payment of approximately  $2,063,428 due
November  11,  2008.  The  shopping  center is  currently  97% occupied by local
tenants who are subject to  operating  leases  ranging from one to 19 years with
various renewal options.

                                                               6

<PAGE>




On October 13, 1998, the Company completed the purchase of Mandarin  Central,  a
63,346 square foot  shopping  center  located in  Jacksonville,  Florida  (Duval
County),  from an  unrelated  party  for  $4,650,000.  In  connection  with  the
purchase,  the Company  obtained a $3,950,000  first  mortgage  loan which bears
interest  at a rate of 8.0% per annum.  Such  first  mortgage  requires  monthly
principal and interest payments of $28,984 based upon a 30 year self liquidating
amortization  schedule,  with a balloon payment of approximately  $3,542,488 due
October 1, 2008. The shopping  center is currently 99% occupied by local tenants
who are subject to  operating  leases  ranging from one to 16 years with various
renewal options.

On October 1, 1998,  a wraparound  note held by the Company on a 285,655  square
foot shopping center property located in South Williamson,  Kentucky (the "South
Williamson Property"),  was paid as a result of the sale of the South Williamson
Property by its owner, an affiliate of the Company (the  partnership  that owned
the South  Williamson  Property),  to an unrelated party. In connection with the
sale of the South Williamson  Property,  the Company,  as the master lessee on a
master lease on the South Williamson  Property,  canceled such master lease. The
negotiated  sale  price  of the  South  Williamson  Property  was  approximately
$14,873,655  which included  acquiring the property  subject to the  $14,773,655
remaining  balance  of the  underlying  mortgage  debt on the  South  Williamson
Property (which represented approximately 21% of the Company's total liabilities
at such time). The wraparound note on the South Williamson Property  represented
approximately 13% of the Company's total assets at such time. As a result of the
sale of the South  Williamson  Property,  the payment of the wraparound note and
the  satisfaction  of  the  underlying   mortgage  debt,  the  Company  realized
approximately  $100,000  in cash and will  realize a book gain of  approximately
$4,400,000 in the fourth quarter of 1998.

On September 21, 1998, a wraparound  note held by the Company on a 35,946 square
foot shopping center property located in Vestivia Hills,  Alabama (the "Vestivia
Hills  Property"),  was  paid as a  result  of the  sale of the  Vestivia  Hills
Property by its owner, an affiliate of the Company (the  partnership  that owned
the Vestivia Hills Property), to an unrelated party. In connection with the sale
of the Vestivia Hills  Property,  the Company,  as the master lessee on a master
lease on the Vestivia Hills Property, canceled such master lease. The negotiated
sale price of the Vestivia Hills Property was approximately  $1,640,000.  Of the
gross proceeds, $722,638 was used to satisfy the underlying mortgage debt on the
Vestivia Hills Property  (which  represented  approximately  1% of the Company's
total  liabilities).   The  wraparound  note  on  the  Vestivia  Hills  Property
represented  approximately  3% of the Company's  total assets at such time. As a
result of the sale of the Vestivia Hills Property, the payment of the wraparound
note and the satisfaction of the underlying  mortgage debt, the Company realized
net cash  proceeds of  approximately  $875,000 and a book gain of  approximately
$338,000 in the third quarter of 1998.

On  September  11, 1998,  the Company  completed  the purchase of Country  Grove
Plaza, a 16,642 square foot shopping center located in West Palm Beach,  Florida
(Palm Beach County), from an unrelated party for $1,100,000.  In connection with
the purchase,  the Company  obtained a $880,000  first mortgage loan which bears
interest  at a rate of 7.51% per annum.  Such first  mortgage  requires  monthly
principal and interest  payments of $6,159 based upon a 30 year self liquidating
amortization  schedule,  with a balloon  payment of  approximately  $780,150 due
September  1, 2008.  The  shopping  center is  currently  96%  occupied by local
tenants who are subject to  operating  leases  ranging from one to 13 years with
various renewal options.



                                                               7

<PAGE>




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 approximately 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
approximately $17,750,000.  The Company realized cash 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  at such  time) and used 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 realized a book gain of  approximately  $947,000
in the third quarter of 1998.

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  approximately  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 on its Regency Walk property
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 is currently  approximately  92%
occupied by local tenants who are subject to operating  leases  ranging from two
to nine years with various renewal options.

On February 9, 1998, a wraparound  note held by the Company on a 128,864  square
foot shopping center property located in Chili, New York (the "Chili Property"),
was assigned to an  unrelated  party for $75,000 in cash.  The  Company,  as the
master lessee on a master lease on the Chili  Property,  terminated  such master
lease on April 30, 1996. The assignment resulted in the relief of the underlying
mortgage  debt,  by the  Company,  on the  Chili  Property.  As a result  of the
assignment  of the  wraparound  note on the Chili  Property,  the payment of the
wraparound  note and the relief of the  underlying  mortgage  debt,  the Company
realized a book gain of approximately $82,000 in the first quarter of 1998.



                                                               8

<PAGE>




As previously reported,  the Company and Societe Generale Securities Corporation
("SGSC") entered into an 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  of the 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. In September 1998, certain negotiations in
connection  with a Proposed  Sale between the Company and the  Affiliates on one
hand and an unrelated third party on the other hand terminated.

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 July 14, 1998, the Company  announced  that it had reached a 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, if it is approved and consummated, (i) each holder of Series
A Preferred Stock eligible to participate in the Winston Settlement who does not
properly opt out of the Winston  Settlement  and who owns shares of the Series A
Preferred Stock on the date that the Winston  Settlement is consummated would 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 Transactions in exchange for $3.00
in cash,  payable by  Milestone,  (ii) all of the Company's  stockholders  would
release all derivative  claims against  Milestone and the other named defendants
in  connection  with the  Transactions,  (iii) each holder of Series A Preferred
Stock between  October 23, 1995 and the date on which the Winston  Settlement is
consummated  would  release any claims he or she may have against  Milestone and
the other name  defendants in connection  the  Transaction  and (iv) the Winston
Action  would be  dismissed.  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  eligible to participate in the Winston  Settlement
and  owning  more than 10% of the  Series A  Preferred  Stock as of the close of
business  on  August  25,  1998 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.

                                                               9

<PAGE>




The foregoing description of the Winston Settlement is qualified in its entirety
by reference to the Winston Settlement  Agreement,  a copy of which was filed as
Exhibit  10.01 to the  Company's  Quarterly  Report on Form 10-Q for the  period
ended June 30, 1998.

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  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.  As  previously
reported,  pursuant to an earlier proposed settlement of the Winston Action (the
"Initial Winston  Settlement") which was never consummated  because  independent
counsel for the Series A  Preferred  Stockholders  withdrew  its support of such
earlier proposed settlement, 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 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,  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. National Union has
reviewed the Winston Settlement  Agreement and has informed the Company that its
basic position,  denying coverage, has not changed and, therefore,  it is likely
that the Company will assert a claim against  National  Union. If Stonewall also
asserts that the Winston  Settlement  is not a covered loss under the  Stonewall
Policy, it is likely that the Company would assert a claim against Stonewall. At
this  time,  the  Company  is not in a  position  to render an opinion as to the
likelihood of success of any such 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  would  be
approximately  $9,000,000.  Additional expenses of approximately  $1,400,000 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 and proceeds from the redemption of the Kranzco
Series C Cumulative Redeemable Preferred Stock.



                                                               10

<PAGE>




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 nine months ended
September  30, 1998.  For the three months ended  September 30, 1997 the Company
had  components  of  comprehensive  income,  as  defined  in SFAS  No.  130,  of
approximately  $1,207,500  of  unrealized  gains  (net  of tax of  $805,000)  on
available-for-sale  securities. Under SFAS No. 130 the Company had comprehensive
income of  approximately  $1,599,000  for the three months ended  September  30,
1997. For the nine months ended September 30, 1997 the Company had components of
comprehensive income, as defined in SFAS No. 130, of approximately $2,113,000 of
unrealized  gains (net of tax of $1,414,000) on  available-for-sale  securities.
Under  SFAS No.  130 the  Company  had  comprehensive  income  of  approximately
$934,000 for the nine months ended September 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,  and Section 21E of the  Securities  Exchange Act of 1934,  as amended.
Such forward-looking  statements include statements regarding the intent, belief
or current  expectations of 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.



                                                               11

<PAGE>




The  Company  is  engaged  in  the  business  of  owning,  acquiring,  managing,
developing  and  investing  in  commercial  real estate and real estate  related
assets.  Currently, the Company possesses 35 interests in commercial real estate
properties  consisting of (i) 10 fee interests (the "Fee  Properties")  and (ii)
Wrap Debt (as defined  herein)  interests in 25 commercial  real properties (the
"Underlying Properties"). At September 30, 1998, the Company possessed interests
in 33 commercial real estate  properties  consisting of (i) seven Fee Properties
and (ii) Wrap Debt interests in 26 Underlying Properties. At September 30, 1997,
the  Company  possessed  interests  in  32  commercial  real  estate  properties
consisting  of (i) four  Fee  Properties  and (ii)  Wrap  Debt  interests  in 28
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

Year  2000  compliance  programs  and  information  systems  modifications  were
initiated  by the  Company  in early  1998 in an  attempt  to ensure  that these
systems and key processes will remain functional.  This objective is expected to
be achieved  either by modifying  present  systems using  existing  internal and
external  programming  resources or by installing new systems, and by monitoring
supplier and other third party  interfaces.  Review of the systems affecting the
Company and its properties is progressing.  The costs of the Company's Year 2000
program to date have not been material and the Company does not anticipate  that
the  costs  of any  required  modifications  to its  information  technology  or
embedded technology systems will have a material adverse effect on its financial
position,  results  of  operations  or  liquidity,  although  there  can  be  no
assurances that this will be the case.

In the event that the Company or material  third parties fail to complete  their
Year 2000 compliance programs successfully and on time, the Company's ability to
operate its  properties  or to bill or collect  its  revenue in a timely  manner
could be adversely  affected.  Management  does not expect that any such failure
would have a  material  adverse  effect on the  financial  position,  results of
operations or liquidity of the Company,  although there can be no assurance that
this will be the case. The Company has day-to-day operational contingency plans,
and  management is in the process of updating these plans for possible Year 2000
specific operational requirements.

Recent Developments

On November  10, 1998,  the Company  completed  the purchase of Lincoln  Park, a
46,190 square foot shopping center located in Davie,  Florida (Broward  County),
from an unrelated  party for $3,840,000.  In connection  with the purchase,  the
Company obtained a $3,219,000 first mortgage loan which bears interest at a rate
of 7.58% per annum.  Such first mortgage requires monthly principal and interest
payments of $22,684 based upon a 30 year self liquidating amortization schedule,
with a balloon  payment of  approximately  $2,800,000  due November 1, 2008. The
shopping  center is currently  97% occupied by local  tenants who are subject to
operating leases ranging from one to five years with various renewal options.



                                                               12

<PAGE>



On October 28, 1998,  the Company  dismissed the  accounting  firm of Deloitte &
Touche LLP as the Company's independent auditor to audit the Company's financial
statements.  The  dismissal  of  Deloitte & Touche LLP was not the result of any
disagreements  between the  Company  and  Deloitte & Touche LLP on any matter of
accounting principles or practices,  financial statement disclosure, or auditing
scope or procedure.  On November 2, 1998,  the Company  retained the  accounting
firm of Ahearn,  Jasco + Company,  P.A. as its new independent  auditor to audit
the Company's financial statements for the fiscal year ending December 31, 1998.
The decision to change accounting firms as the Company's  independent auditor to
audit the Company's financial  statements was approved by the Audit Committee of
the Company's Board of Directors on October 27, 1998.

On October 27, 1998, the Company  completed the purchase of Pine Crest, a 40,408
square  foot  shopping  center  located  in Fort  Lauderdale,  Florida  (Broward
County),  from an  unrelated  party  for  $3,200,000.  In  connection  with  the
purchase,  the Company  obtained a $2,400,000  first  mortgage  loan which bears
interest  at a rate of 7.0% per annum.  Such  first  mortgage  requires  monthly
principal  and  interest  payments  of  $15,967.26  based  upon a 30  year  self
liquidating  amortization  schedule,  with a balloon  payment  of  approximately
$2,063,428 due November 11, 2008. The shopping  center is currently 97% occupied
by local  tenants who are subject to  operating  leases  ranging  from one to 19
years with various renewal options.

On October 13, 1998, the Company completed the purchase of Mandarin  Central,  a
63,346 square foot  shopping  center  located in  Jacksonville,  Florida  (Duval
County),  from an  unrelated  party  for  $4,650,000.  In  connection  with  the
purchase,  the Company  obtained a $3,950,000  first  mortgage  loan which bears
interest  at a rate of 8.0% per annum.  Such  first  mortgage  requires  monthly
principal and interest payments of $28,984 based upon a 30 year self liquidating
amortization  schedule,  with a balloon payment of approximately  $3,542,488 due
October 1, 2008. The shopping  center is currently 99% occupied by local tenants
who are subject to  operating  leases  ranging from one to 16 years with various
renewal options.

On October 1, 1998,  a wraparound  note held by the Company on a 285,655  square
foot shopping center property located in South Williamson,  Kentucky (the "South
Williamson Property"),  was paid as a result of the sale of the South Williamson
Property by its owner, an affiliate of the Company (the  partnership  that owned
the South  Williamson  Property),  to an unrelated party. In connection with the
sale of the South Williamson  Property,  the Company,  as the master lessee on a
master lease on the South Williamson  Property,  canceled such master lease. The
negotiated  sale  price  of the  South  Williamson  Property  was  approximately
$14,873,655  which included  acquiring the property  subject to the  $14,773,655
remaining  balance  of the  underlying  mortgage  debt on the  South  Williamson
Property (which represented approximately 21% of the Company's total liabilities
at such time). The wraparound note on the South Williamson Property  represented
approximately 13% of the Company's total assets at such time. As a result of the
sale of the South  Williamson  Property,  the payment of the wraparound note and
the  satisfaction  of  the  underlying   mortgage  debt,  the  Company  realized
approximately  $100,000  in cash and will  realize a book gain of  approximately
$4,400,000 in the fourth quarter of 1998.

On September 21, 1998, a wraparound  note held by the Company on a 35,946 square
foot shopping center property located in Vestivia Hills,  Alabama (the "Vestivia
Hills  Property"),  was  paid as a  result  of the  sale of the  Vestivia  Hills
Property by its owner, an affiliate of the Company (the  partnership  that owned
the Vestivia Hills Property), to an unrelated party. In connection with the sale
of the Vestivia Hills  Property,  the Company,  as the master lessee on a master
lease on the Vestivia Hills Property, canceled such master lease. The negotiated
sale price of the Vestivia Hills Property was approximately  $1,640,000.  Of the
gross proceeds, $722,638 was used to satisfy the underlying mortgage debt on the
Vestivia Hills Property  (which  represented  approximately  1% of the Company's
total  liabilities).   The  wraparound  note  on  the  Vestivia  Hills  Property
represented  approximately  3% of the Company's  total assets at such time. As a
result of the sale of the Vestivia Hills Property, the payment of the wraparound
note and the satisfaction of the underlying  mortgage debt, the Company realized
net cash  proceeds of  approximately  $875,000 and a book gain of  approximately
$338,000 in the third quarter of 1998.


                                                               13

<PAGE>



On  September  11, 1998,  the Company  completed  the purchase of Country  Grove
Plaza, a 16,642 square foot shopping center located in West Palm Beach,  Florida
(Palm Beach County), from an unrelated party for $1,100,000.  In connection with
the purchase,  the Company  obtained a $880,000  first mortgage loan which bears
interest  at a rate of 7.51% per annum.  Such first  mortgage  requires  monthly
principal and interest  payments of $6,159 based upon a 30 year self liquidating
amortization  schedule,  with a balloon  payment of  approximately  $780,150 due
September  1, 2008.  The  shopping  center is  currently  96%  occupied by local
tenants who are subject to  operating  leases  ranging from one to 13 years with
various renewal options.

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 approximately 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
approximately $17,750,000.  The Company realized cash 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  at such  time) and used 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 realized a book gain of  approximately  $947,000
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
Company has learned that on or about July 6, 1998, a market began to be 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.  The
Exchange  subsequently  applied to the Securities and Exchange  Commission  (the
"Commission")  to delist the Series A  Preferred  Stock and Common  Stock and on
September  10, 1998,  the  Commission  issued an order  granting the  Exchange's
application to delist the Series A Preferred  Stock and Common Stock.  Effective
as of the opening of the trading  session on September  11,  1998,  the Series A
Preferred Stock and Common Stock were delisted from the Exchange.

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  approximately  95% occupied by
local tenants who are subject to operating  leases ranging from two to six years
with various renewal options.



                                                               14

<PAGE>




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 on its Regency Walk property
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 is currently  approximately  92%
occupied by local tenants who are subject to operating  leases  ranging from two
to nine years with various renewal options.

On February 9, 1998, a wraparound  note held by the Company on a 128,864  square
foot shopping center property located in Chili, New York (the "Chili Property"),
was assigned to an  unrelated  party for $75,000 in cash.  The  Company,  as the
master lessee on a master lease on the Chili  Property,  terminated  such master
lease on April 30, 1996. The assignment resulted in the relief of the underlying
mortgage  debt,  by the  Company,  on the  Chili  Property.  As a result  of the
assignment  of the  wraparound  note on the Chili  Property,  the payment of the
wraparound  note and the relief of the  underlying  mortgage  debt,  the Company
realized a book gain of approximately $82,000 in the first quarter of 1998.

As previously reported,  the Company and Societe Generale Securities Corporation
("SGSC") entered into an 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  of the 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. In September 1998, certain negotiations in
connection  with a Proposed  Sale between the Company and the  Affiliates on one
hand and an unrelated third party on the other hand terminated.

Results of Operations

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

The  Company  recognized  net  income of  $371,453  for the three  months  ended
September 30, 1998 as compared to a net loss of  $1,185,463  for the same period
in 1997 due to the following factors:

Revenues for the three  months  ended  September  30, 1998 were  $6,331,620,  an
increase of $22,670 or less than 1% from  $6,308,950  for the three months ended
September  30,  1997.  Such  increase  was  primarily  due to the net of:  (1) a
decrease in rent revenue of $206,523  resulting  primarily from the net of (a) a
decrease in rent  revenue of  approximately  $419,000  from the sale of the Bend
Property on July 7, 1998 and (b) an increase  in rent  revenue of  approximately
$248,000 from an increase in the number of Fee  Properties  owned by the Company
to seven for the three  months ended  September  30, 1998 from four for the same
period in 1997;  (2) a  decrease  in  interest  income of  $1,085,006  resulting
primarily from a decrease in the number of available-for-sale securities held by
the Company to none for the three months ended  September  30, 1998 from two for
the same  period in 1997;  (3) a decrease  in revenue  from  management  company
operations of $23,211 due to the sale of the Bend Property on July 7, 1998;  (4)
a decrease in tenant  reimbursements of $27,727 resulting primarily from (a) the
sale of the Bend  Property  on July 7, 1998 and (b) an increase in the number of
Fee  Properties  owned  by the  Company  to seven  for the  three  months  ended
September  30,  1998 from four for the same  period in 1997;  (5) a decrease  in
percentage  rent revenue of $41,040 due to the sale of the Bend Property on July
7, 1998; (6) a gain on the sale of real estate and real estate related assets of
$1,284,617 for the three months ended September 30, 1998

                                                               15

<PAGE>



compared  to no gain or loss on the sale of real estate  related  assets for the
same  period  in  1997;   (7)  a  decrease  in   amortization   of  discount  on
available-for-sale  securities  of $99,273 for the three months ended  September
30, 1998 due to a decrease in the number of  available-for-sale  securities held
to none for the three  months  ended  September  30,  1998 from two for the same
period in 1997 and (8) no unrealized  gain or loss on U.S.  Treasury  Notes sold
short for the three months ended  September  30, 1998  compared to an unrealized
holding loss of $243,438 on U.S.  Treasury  Notes sold short for the same period
in 1997.

Operating   expenses  for  the  three  months  ended  September  30,  1998  were
$4,895,105,  an increase of $55,160,  or 1% from $4,839,945 for the three months
ended  September 30, 1997.  Such increase was primarily due to the net of: (1) a
decrease in master lease  expenses of $24,018 due to a decrease in the number of
properties  leased by the Company to 26 for the three months ended September 30,
1998 from 28 for the same period in 1997;  (2) a decrease in  salaries,  general
and  administrative  expenses of  approximately  $58,690 due  primarily to (a) a
decrease in rental expense for the corporate  offices of approximately  $141,000
for the three months  ended  September  30, 1998  compared to the same period in
1997;  (b) an increase  in  acquisition  and  financing  costs of  approximately
$27,000 for the three  months  ended  September  30,  1998  compared to the same
period in 1997 due to the increase in the number of Fee Properties  purchased by
the Company to two from one,  respectively  and (c) an increase of approximately
$54,000 in general operating expenses of the Company; (3) a decrease in property
expenses of $39,521 due to (a) an increase in the number of Fee Properties owned
by the Company to seven for the three months ended  September 30, 1998 from four
in the same period in 1997 and (b) the sale of the Bend Property on July 7, 1998
and (4) an increase in professional fees of $178,979 due to fees associated with
the settlement (the "Winston  Settlement")  of a certain  purported class action
and derivative  lawsuit (the "Winston  Action")  brought  against  Milestone and
certain of its present and former  directors  and  officers.  See Part  II-Other
Information,  Item 1. Legal  Proceedings  for a discussion of the Winston Action
and Winston Settlement.

Interest expense for the three months ended September 30, 1998 was $1,345,002, a
decrease  of  $921,651,  or 41%  from  $2,266,653  for the  three  months  ended
September  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  September 30, 1998 from two for the same period
in 1997 resulting in a decrease in interest expense of approximately $702,000.

Depreciation and  amortization  expense for the three months ended September 30,
1998 was  $87,881,  a decrease of $133,637,  or 60% from  $221,518 for the three
months ended  September 30, 1997. Such decrease was primarily due to the sale of
the Bend  Property on July 7, 1998 which  represented  approximately  17% of the
Company's total assets.

Nine Months Ended September 30, 1998 Compared to Nine Months Ended September 30,
1997

The  Company  recognized  a net loss of  $1,199,343  for the nine  months  ended
September 30, 1998 as compared to a net loss of  $3,641,640  for the same period
in 1997 due to the following factors:

Revenues  for the nine  months  ended  September  30, 1998 were  $17,341,260,  a
decrease  of  $1,782,164  or 9% from  $19,123,424  for  the  nine  months  ended
September  30,  1997.  Such  decrease  was  primarily  due to the net of:  (1) a
decrease in rent  revenue of $209,819 for the nine months  ended  September  30,
1998 resulting  from the net of (a) a decrease in rent revenue of  approximately
$633,000 as a result of various property sales as well as unit vacancies and (b)
an increase in rent revenue of approximately  $423,000 due to an increase in the
number of fee properties  owned at September 30, 1998 to seven from four for the
same period in 1997; (2) a decrease in interest  income of $3,286,596  resulting
primarily from (a) a decrease in interest income of $2,835,963  resulting from a
decrease in the number of  available-for-sale  securities held by the Company to
none for the nine months ended  September  30, 1998 from two for the same period
in 1997 and (b) a decrease in interest income of

                                                               16

<PAGE>



approximately  $266,000  resulting  primarily  from a decrease  in the number of
properties  with  interest  bearing  wraparound  notes to 26 for the nine months
ended  September 30, 1998 from 28 for the same period in 1997; (3) a decrease in
management and  reimbursement  income of $274,762  resulting  primarily from the
termination  of  the  Management   Services  Agreement  between  Union  Property
Investors, Inc. and the Company in February 1997; (4) a gain on the sale of real
estate and real estate  related  assets of $1,366,507  for the nine months ended
September  30,  1998  compared to no gain or loss on the sale of real estate and
real  estate  related  assets for the same  period in 1997;  (5) a  decrease  in
amortization  of discount on  available-for-sale  securities of $278,709 for the
nine  months  ended  September  30,  1998 due to a  decrease  in the  number  of
available-for-sale  securities  held by the  Company to none for the nine months
ended September 30, 1998 from two for the same period in 1997; (6) no unrealized
gain or loss on U.S.  Treasury  Notes  sold  short  for the  nine  months  ended
September 30, 1998  compared to an  unrealized  holding loss of $194,073 on U.S.
Treasury Notes sold short for the same period in 1997 and (7) no gain or loss on
the sale of  available-for-sale  securities for the nine months ended  September
30,  1998  compared  to a loss of  $784,122  on the  sale of  available-for-sale
securities for the nine months ended September 30, 1997.

Operating   expenses  for  the  nine  months  ended   September  30,  1998  were
$14,954,537,  a decrease of $42,823,  or less than 1% from  $14,997,360  for the
nine months ended September 30, 1997. Such decrease was primarily due to the net
of: (1) a decrease in master lease  expense of $110,011 due to a decrease in the
number of  properties  leased by the  Company  to 26 for the nine  months  ended
September  30,  1998 from 28 for the same  period  in 1997;  (2) a  decrease  in
salaries,  general and administrative  expenses of approximately $137,368 due to
the net of (a) a decrease in rental  expense of  approximately  $422,000 for the
corporate  offices for the nine months ended  September 30, 1998 compared to the
same period in 1997;  (b) an  increase in  acquisition  and  financing  costs of
approximately  $86,000 for the nine months ended  September 30, 1998 compared to
the same  period in 1997 due to the  increase  in the  number of Fee  Properties
purchased to four from one,  respectively  and (c) an increase of  approximately
$197,000  in general  operating  expenses  of the  Company;  (3) a  decrease  in
property expenses of $19,946 due to (a) the sale of the Bend Property in July of
1998 and (b) an increase in the number of Fee Properties owned by the Company to
seven for the nine months ended  September  30, 1998 as compared to four for the
same  period in 1997;  (4) a  decrease  of $46,344 in  expenses  for  management
company  operations due to a decrease in general  operating  expenses and (5) an
increase  in  professional  fees of  $270,836  due to fees  associated  with the
Winston Settlement. See Part II-Other Information, Item 1. Legal Proceedings for
a discussion of the Winston Action and Winston Settlement.

Interest expense for the nine months ended September 30, 1998 was $4,445,607,  a
decrease  of  $2,459,978,  or 36%  from  $6,905,585  for the nine  months  ended
September  30,  1997.  Such  decrease  was  primarily  due to: (1) a decrease in
interest  expense of  approximately  $1,973,000  due to a decrease in  financing
arrangements related to the available-for-sale securities held by the Company to
none for the nine months ended  September  30, 1998 from two for the same period
in 1997 and (2) a decrease in interest expense of approximately  $467,000 due to
(a) the sale of the Bend  Property  in July of 1998 and (b) an  increase  in the
number of Fee Properties owned by the Company to seven for the nine months ended
September 30, 1998 as compared to four for the same period in 1997.

Depreciation  and  amortization  expense for the nine months ended September 30,
1998 was  $493,902,  a decrease of $108,532,  or 18% from  $602,434 for the nine
months ended  September 30, 1997. Such decrease was primarily due to the sale of
the Bend  Property in July of 1998 which  represented  approximately  17% of the
Company's total assets.




                                                               17

<PAGE>




Liquidity and Capital Resources

The  Company,  as the  holder of 89,360  shares of Kranzco  Series C  Cumulative
Redeemable  Preferred  Shares as of September  30, 1998,  is entitled to receive
from the redemption of such shares,  in two equal  installments  over the next 4
months,  an  aggregate  amount of cash  equal to  approximately  $893,600,  plus
interest at the rate of 8% per annum on the  applicable  outstanding  balance of
such shares.

On July 1, 1998, the first mortgage loan on the Underlying  Property  located in
Quincy,   Illinois,  (the  "Quincy  Property")  matured.  The  Company,  as  the
wraparound mortgagee, is seeking to realize its position in its Wrap Debt on the
Quincy property.

On May 1, 1998,  the Company  secured a $1,160,000  first  mortgage  loan on its
16,994  square foot shopping  center  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 May 1,  1998,  the  first  mortgage  loan  on the  Fee  Property  located  in
Zanesville, Ohio, (the "Zanesville Property") matured. The Company, as the owner
of the Zanesville Property, is seeking to extend the terms of the first mortgage
loan.

On April 17, 1998,  the owner of the 92,646 square foot shopping  center located
in Natchez,  Mississippi (the "Natchez  Property"),  an affiliate of the Company
(the partnership that owns the Natchez  Property),  completed the refinancing of
the  underlying  mortgage debt on behalf of the Company.  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.

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.

Cash  generated  by the  (i)  redemption  of the  Kranzco  Series  C  Cumulative
Redeemable  Preferred Stock and (ii) the cash on hand at September 30, 1998, may
be used to fund (a) 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 and the Winston Settlement is consummated), (x) approximately
$750,000 in plaintiff  attorney fees (if the Winston Settlement is consummated),
(y) approximately  $500,000 in the Company's attorney fees and (z) approximately
$150,000  in  accounting,  printing,  mailing and other  miscellaneous  fees and
expenses, (b) the Company's real estate investment,  acquisition and development
activities (to the extent that funds are not used to pay the Winston  Settlement
if consummated),  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 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.


                                                               18

<PAGE>




The Company  believes that  immediately  subsequent to the  consummation  of the
Winston  Settlement it would have sufficient  cash to continue  operating in the
ordinary course of business.  However, the Company is considering  opportunities
to acquire additional properties which would require it to raise funds through a
public  or  private  sale of debt or equity  securities,  by  conducting  rights
offerings,  by selling or  realizing  on assets  (including,  but not limited to
sales  of its  properties  and  interests  in  the  Wraparound  Notes),  through
corporate borrowings, or by other means. Because of the current condition of the
domestic  financial  markets which, in the Company's belief, is not favorable to
other  alternatives,  the Company would probably conduct a rights offering if it
decided that it would be beneficial  to raise  additional  capital.  In a rights
offering, the Company would offer existing holders of shares of its Common Stock
rights to acquire additional shares of its Common Stock in exchange for monetary
consideration in order to obtain funds to be used to finance potential  property
acquisitions.  The foregoing is a forward looking  statement and there can be no
assurances that the Company will be able to undertake  successfully,  if at all,
such a transaction.  If the Company conducts a rights offering, it would need to
issue  additional  shares  of  Common  Stock  and to amend  its  Certificate  of
Incorporation  in order to authorize the issuance of such  additional  shares of
Common Stock. The Company's Certificate of Incorporation currently authorizes it
to issue up to  10,000,000  shares of Common Stock and, as of November 11, 1998,
4,251,042  shares  thereof were  outstanding.  If the Company  conducts such a
rights  offering,  holders of shares of the  Company's  Common  Stock who do not
participate  therein  would have the  aggregate  value of their shares of Common
Stock, as well as their ownership interest in the Company, diluted.

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  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.

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  $6,029,024  for the nine months ended
September 30, 1998 included (1) a net loss of $1,199,343;  (2)  adjustments  for
non-cash  items of  $2,387,246  and (3) a net  change in  operating  assets  and
liabilities of $2,442,435,  compared to net cash used in operating activities of
$5,044,057  for the nine months ended  September 30, 1997,  which included (1) a
net loss of $3,641,640; (2) adjustments of $1,636,202 for non-cash items and (3)
a net change of $3,038,619 in operating assets and liabilities.



                                                               19

<PAGE>




Net cash provided by investing  activities of $438,094 for the nine months ended
September  30, 1998  included (1) proceeds  from  principal  repayments on loans
receivable and wraparound  notes of  $5,068,333;  (2)  investments in wraparound
notes of $108,838; (3) the purchase of building and land for $6,825,000; (4) the
purchase  of  leasehold   improvements  of  $302,465;   (5)  proceeds  from  the
realization  of  wraparound  notes of $950,334;  (6)  proceeds  from the sale of
property  of  $319,320  and (6)  proceeds  from  redemption  of  investments  in
preferred  stock of  $1,336,500,  compared  to net cash  provided  by  investing
activities of $14,632,598  for the nine months ended  September 30, 1997,  which
included:  (1)  principal  repayments  of  $4,883,285  on loans  receivable  and
wraparound  notes; (2) the purchase of building and land of $1,100,000;  (3) the
purchase of leasehold  improvements of $183,836; (4) proceeds of $9,498,529 from
the sale of  available-for-sale  securities;  (5)  proceeds of  $1,285,334  from
redemption of investments in preferred  stock;  (6) proceeds of $9,415,301  from
the  redemption  of  reverse  repurchase  agreements  and (7)  purchase  of U.S.
Treasury Notes for $9,166,015.

Net cash  provided by financing  activities  of  $5,355,337  for the nine months
ended  September 30, 1998 included (1) proceeds from mortgages and notes payable
of  $9,180,000  and (2)  principal  payments on mortgages  and notes  payable of
$3,824,663,  compared to net cash used in financing activities of $6,327,009 for
the nine months ended September 30, 1997, which included (1) principal  payments
of  $2,084,200  on  mortgages  and notes  payable;  (2)  principal  payments  of
$4,436,882 on loans  payable and (3) $194,073  received on U.S.  Treasury  Notes
payable.



Item 3.            Quantitative and Qualitative Disclosure About Market Risk.

                    Not applicable.

                                                               20

<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 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,  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,
if it is approved and  consummated,  (i) each holder of Series A Preferred Stock
eligible to participate in the Winston  Settlement who does not properly opt out
of the Winston Settlement and who owns shares of the Series A Preferred Stock on
the date  that the  Winston  Settlement  is  consummated  would 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  Transactions  in exchange for $3.00 in cash,
payable by Milestone,  and (ii) all of the Company's  stockholders would release
all  derivative  claims  against  Milestone  and the other named  defendants  in
connection with the Transactions,  (iii) each holder of Series A Preferred Stock
between  October  23,  1995 and the  date on which  the  Winston  Settlement  is
consummated  would  release any claims he or she may have against  Milestone and
the other named  defendants in  connection  with the  Transactions  and (iv) the
Winston  Action would be dismissed.  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  eligible to participate in the Winston  Settlement
and  owning  more than 10% of the  Series A  Preferred  Stock as of the close of
business  on  August  25,  1998 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 was filed as
Exhibit  10.01 to the  Company's  Quarterly  Report on Form 10-Q for the  period
ended June 30, 1998.



                                                               21

<PAGE>




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  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.  As  previously
reported,  pursuant to an earlier proposed settlement of the Winston Action (the
"Initial Winston  Settlement") which was never consummated  because  independent
counsel for the Series A  Preferred  Stockholders  withdrew  its support of such
earlier proposed settlement, 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 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,  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. National Union has
reviewed the Winston Settlement  Agreement and has informed the Company that its
basic position,  denying coverage, has not changed and, therefore,  it is likely
that the Company will assert a claim against  National  Union. If Stonewall also
asserts that the Winston  Settlement  is not a covered loss under the  Stonewall
Policy, it is likely that the Company would assert a claim against Stonewall. At
this  time,  the  Company  is not in a  position  to render an opinion as to the
likelihood of success of any such 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  would  be
approximately  $9,000,000.  Additional expenses of approximately  $1,400,000 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 and proceeds from the redemption of the Kranzco
Series C Cumulative Redeemable Preferred Stock.

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 during
the nine  months  ended  September  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.



                                                               22

<PAGE>




After September 30, 1995,  holders of the Series A Preferred Stock,  which has 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 are generally entitled to elect
one member of the Board of Directors,  became  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.


Item 6.       Exhibits and Reports on Form 8-K

            (a)The following exhibits are included herein:

               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 nine month period ended September 30, 1998, and
               is  qualified  in its  entirety by  reference  to such  financial
               statements.

            (b)Reports on Form 8-K:

               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  Winston  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.

               On October  16,  1998,  a Form 8-K was filed with the  Commission
               reporting the sale of the South  Williamson  property  located in
               South Williamson, Kentucky.

               On  November  4, 1998,  a Form 8-K was filed with the  Commission
               reporting changes in the Company's certifying accountant.







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<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: November 16, 1998                    By  /s/ Robert A. Mandor             
                                           -------------------------------------
                                           Robert A. Mandor
                                           President and Chief Financial Officer


Date: November 16, 1998                    By  /s/ Patrick S. Kirse             
                                           -------------------------------------
                                           Patrick S. Kirse
                                           Vice President of Accounting
                                           (Principal Accounting Officer)




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