<PAGE>   1

--------------------------------------------------------------------------------



                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                               -------------------

                                    FORM 10-Q

                               -------------------

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
               For the Quarterly Period Ended: September 30, 1998

                                       or

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the Transition Period From _____ to _____

                         Commission File Number: 1-13049

                             CCA PRISON REALTY TRUST
       (Exact name of Registrant as specified in its declaration of trust)

              Maryland                                   62-1689525
  (State or other jurisdiction of           (I.R.S. Employer Identification No.)
   incorporation or organization)


          10 Burton Hills Blvd., Suite 100, Nashville, Tennessee 37215
              (Address and zip code of principal executive offices)


                                 (615) 263-0200
              (Registrant's telephone number, including area code)

                                      NONE
               (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 
                                        -----     -----


                                   21,945,569
               (Outstanding shares of the issuer's common shares,
               $0.01 par value per share as of October 31, 1998)


--------------------------------------------------------------------------------


<PAGE>   2




                             CCA PRISON REALTY TRUST
                                    FORM 10-Q
                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998

                                      INDEX

--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION                                                                Page
                                                                                            --------
<S>           <C>                                                                           <C>
     Item 1.  Financial Statements

        a)    Consolidated Balance Sheets                                                       3
              as of September 30, 1998 and December 31, 1997

        b)    Consolidated Statements of Income                                                 4
              for the period from July 18, 1997 to September 30, 1997, the three months
              ended September 30, 1998 and the nine months ended September 30, 1998

        c)    Consolidated Statement of Cash Flows                                              5
              for the nine months ended September 30, 1998

        d)    Notes to Consolidated Financial Statements                                        6


     Item 2.  Management's Discussion and Analysis of Financial                                10
              Condition and Results of Operations


     Item 3.  Quantitative and Qualitative Disclosures About                                   14
              Market Risk

PART II - OTHER INFORMATION

     Item 1.  Legal Proceedings                                                                15

     Item 2.  Changes in Securities and Use of Proceeds                                        15

     Item 3.  Defaults upon Senior Securities                                                  15

     Item 4.  Submission of Matters to a Vote of Security Holders                              15

     Item 5.  Other Information                                                                15

     Item 6.  Exhibits and Reports on Form 8-K                                                 15


SIGNATURE
</TABLE>


                                       2

<PAGE>   3


                         PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS.

                             CCA PRISON REALTY TRUST
                           CONSOLIDATED BALANCE SHEETS
                    SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
                  (AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                 September
                                                                 30, 1998       December 31,
                                                                (Unaudited)         1997
                                                                -----------     ------------
<S>                                                             <C>             <C>
ASSETS
Real Estate Properties, at Cost:
  Correctional and Detention Facilities                           $ 781,531       $ 458,360
  Less - Accumulated Depreciation                                   (18,271)         (5,088)
                                                                  ---------       ---------
    Net Real Estate Properties                                      763,260         453,272

Cash and Cash Equivalents                                             1,020             756
Other Assets                                                         11,482             410
                                                                  ---------       ---------
    TOTAL ASSETS                                                  $ 775,762       $ 454,438
                                                                  =========       =========

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Distributions Payable                                             $  12,509       $   9,170
Line of Credit                                                      237,800          32,000
Accounts Payable and Accrued Expenses                                15,190             519
                                                                  ---------       ---------
    TOTAL LIABILITIES                                               265,499          41,689
                                                                  ---------       ---------

Commitments and Contingencies                                          --              --

SHAREHOLDERS' EQUITY
Preferred Shares, $.01 par value; 10,000,000 shares
    authorized; 4,300,000 and none outstanding, respectively             43            --
Common Shares, $.01 par value; 90,000,000 shares
    authorized; 21,581,033 and 21,576,000 shares issued                 216             216
    and outstanding, respectively
Capital in Excess of Par Value                                      518,372         414,841
Accumulated Distributions in Excess of Net Income                    (8,368)         (2,308)
                                                                  ---------       ---------
    TOTAL SHAREHOLDERS' EQUITY                                      510,263         412,749
                                                                  ---------       ---------
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                    $ 775,762       $ 454,438
                                                                  =========       =========
</TABLE>


The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.





                                       3

<PAGE>   4

                             CCA PRISON REALTY TRUST
                        CONSOLIDATED STATEMENTS OF INCOME
         (UNAUDITED AND AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



<TABLE>
<CAPTION>
                                                         For the period    For the Three    For the Nine
                                                        from July 18 to    Months ended     Months Ended
                                                         September 30,     September 30,    September 30,
                                                             1997              1998           1998 (1)
                                                        ---------------    -------------    -------------
<S>                                                     <C>                <C>              <C>
REVENUES
   Rental                                                     $ 8,293        $ 18,654         $ 48,727
   Interest                                                       555              44              660
                                                              -------        --------         --------
                                                                8,848          18,698           49,387
                                                              -------        --------         --------


EXPENSES
   Depreciation and Amortization                                2,131           4,589           13,183
   Interest                                                      --             2,821            5,750
   General and Administrative                                     390             716            1,725
                                                              -------        --------         --------
                                                                2,521           8,126           20,658
                                                              -------        --------         --------

Net Income                                                      6,327          10,572           28,729

Dividends to Preferred Shareholders                              --            (2,150)          (5,719)
                                                              -------        --------         --------

Net Income Available for Common Shares                        $ 6,327        $  8,422         $ 23,010
                                                              =======        ========         ========

Net Income Available Per Common Share:
   Basic                                                      $  0.29        $   0.39         $   1.07
                                                              =======        ========         ========
   Diluted                                                    $  0.29        $   0.39         $   1.05
                                                              =======        ========         ========


Weighted Average Number of Shares Outstanding, Basic           21,576          21,579           21,577
                                                              =======        ========         ========
Weighted Average Number of Shares Outstanding, Diluted         21,965          21,683           21,929
                                                              =======        ========         ========
</TABLE>


(1) As the company commenced operations on July 18, 1997, a nine months
    comparison for the periods ending September 30, 1997 and 1998 is not 
    meaningful.

The accompanying Notes to Consolidated Financial Statements are an integral part
                              of these statements.




                                       4
<PAGE>   5



                             CCA PRISON REALTY TRUST
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
                      (UNAUDITED AND AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
<S>                                                                                      <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income                                                                               $  28,729
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
  Depreciation of Real Estate Properties                                                    13,183
  Changes in Assets and Liabilities:
    Increase in Other Assets                                                               (11,072)
    Increase in Accounts Payable and Accrued Expenses                                       14,824
                                                                                         ---------
      Net Cash Provided by Operating Activities                                             45,664
                                                                                         ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Real Estate Properties                                                     (323,171)
                                                                                         ---------
      Net Cash Used In Investing Activities                                               (323,171)
                                                                                         ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Preferred Share Offering, net of Offering Costs                              103,423
Borrowings under Line of Credit                                                            205,800
Dividends paid on Preferred Shares                                                          (3,943)
Distributions paid on Common Shares                                                        (27,509)
                                                                                         ---------
      Net Cash Provided by Financing Activities                                            277,771
                                                                                         ---------

Net Increase in Cash and Cash Equivalents                                                      264

Cash and Cash Equivalents, Beginning of Period                                                 756

                                                                                         ---------
Cash and Cash Equivalents, End of Period                                                 $   1,020
                                                                                         =========

Supplemental Disclosure of Noncash Transactions:
Increase in Distributions Payable                                                        $  12,509
Reduction in Shareholders' Equity through Distributions to Shareholders                    (12,509)
                                                                                         =========
                                                                                         $    --
                                                                                         =========

Supplemental Disclosure of Cash Flow Information:
Cash paid for Interest                                                                   $   5,542
                                                                                         =========
</TABLE>



        The accompanying Notes to Consolidated Financial Statements are
                      an integral part of this statement.






                                       5
<PAGE>   6


                             CCA PRISON REALTY TRUST
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1998


1.  ORGANIZATION AND OPERATIONS

BACKGROUND AND FORMATION TRANSACTIONS

CCA Prison Realty Trust, a Maryland real estate investment trust (the
"Company"), was formed on April 23, 1997 to acquire, develop, and lease private
and public correctional and detention facilities. The Company has elected and
operates so as to qualify as a real estate investment trust (a "REIT") under the
Internal Revenue Code of 1986, as amended (the "Code").

On July 18, 1997, the Company commenced operations after completing an initial
public offering (the "Initial Offering") of 21,275,000 of its common shares,
$0.01 par value per share (the "Common Shares") (including 2,775,000 shares
issued as a result of the exercise of an over-allotment option by the
underwriters). The Common Shares were issued at an Initial Offering price of
$21.00 per share, generating gross proceeds to the Company of $446.8 million.
The aggregate proceeds to the Company, net of the underwriters' discount and
offering costs, were approximately $412.1 million.

The Company immediately used the Initial Offering proceeds to acquire nine
correctional and detention facilities (the "Initial Facilities") from
Corrections Corporation of America, a Tennessee corporation, and certain of its
subsidiaries (collectively, "CCA") for an aggregate purchase price of $308.1
million, payable in cash. The Company entered into agreements with CCA to lease
the Initial Facilities back to CCA pursuant to long-term, non-cancellable
"triple net" leases (the "Leases") which require CCA to pay all operating
expenses, taxes, insurance and other costs. All of the Leases have primary terms
ranging from 10-12 years which may be extended at fair market rental rates for
three additional five-year periods upon the mutual agreement of the Company and
CCA.

The Company also entered into option agreements with CCA (the "Option
Agreements") pursuant to which the Company was granted the option to acquire and
lease back to CCA any or all of five correctional and/or detention facilities
from CCA at any time during the three-year period following the acquisition of
the Initial Facilities for a purchase price generally equal to CCA's costs of
developing, constructing and equipping such facilities, plus 5% of such costs.
As of September 30, 1998, the Company has acquired two facilities pursuant to
the Option Agreements. In addition, the Company entered into an agreement (the
"Right to Purchase Agreement") with CCA whereby CCA granted the Company an
option to acquire, at fair market value, and lease back to CCA at fair market
rental rates, any correctional or detention facility acquired or developed and
owned by CCA in the future for a period of three years following the date CCA
first receives inmates at such facility. As of September 30, 1998, the Company
has purchased two facilities pursuant to the Right to Purchase Agreement.
Facilities available for purchase by the Company through the Option Agreements
and the Right to Purchase Agreement are collectively referred to herein as the
"Option Facilities."







                                       6
<PAGE>   7



2.  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT
    ACCOUNTING POLICIES

The consolidated financial statements of the Company include all the accounts of
the Company and its subsidiaries, including Prison Realty Management, Inc., a
Tennessee corporation and wholly-owned management subsidiary. All significant
intercompany balances and transactions have been eliminated.

The accompanying interim consolidated financial statements are unaudited. The
results of operations compares the period from July 18, 1997 to September 30,
1997, the three months ended September 30, 1998 and the nine months ended
September 30, 1998. As the Company commenced operations on July 18, 1997, a nine
months comparison for the periods ending September 30, 1997 and 1998 is not
meaningful. The financial statements, however, have been prepared in accordance
with generally accepted accounting principles for interim financial information
and in conjunction with the rules and regulations of the Securities and Exchange
Commission (the "Commission"). Accordingly, they do not include all of the
disclosures required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
solely of normal recurring matters) necessary for a fair presentation of the
financial statements for this interim period have been included. The results of
operations for the interim period are not necessarily indicative of the results
to be obtained for the full fiscal year. Reference is made to the audited
financial statements of the Company filed with the Company's Annual Report on
Form 10-K/A for the period from July 18, 1997 to December 31, 1997, as filed
with the Commission on March 18, 1998 and as amended on March 30, 1998, with
respect to significant accounting and financial reporting policies as well as
other pertinent information of the Company.


3.  COMPREHENSIVE INCOME

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income", effective for fiscal years beginning after
December 15, 1998. SFAS No. 130 requires that changes in the amounts of certain
items, including gains and losses on certain securities, be shown in the
Financial Statements. The Company adopted the provisions of SFAS No. 130 on
January 1, 1998. The Company's comprehensive income is equivalent to net income
for the nine months ended September 30, 1998.


4.  REAL ESTATE PROPERTIES

On January 5, 1998, the Company acquired from CCA the 960 bed Davis County
Correctional Center located in Holdenville, Oklahoma for a purchase price of
$36.1 million.

On April 17, 1998, the Company and its newly-formed, wholly-owned subsidiary
USCA Corporation ("USCA") and U.S. Corrections Corporation, a privately-held
owner and former operator of correctional and detention facilities ("USCC"),
entered into and completed an Agreement of Merger (the "USCC Merger
Agreement"), whereby USCA merged with and into USCC and the Company acquired all
of the outstanding capital stock and derivative securities of USCC (the "USCC
Merger"), in exchange for a cash payment to the shareholders of USCC of
approximately $157.0 million. As a result of the USCC Merger, the Company also
assumed certain liabilities of USCC consisting of a bank credit facility, two
subordinated loans, and obligations outstanding for convertible, redeemable
preferred stock totaling approximately $79.4 million. Immediately prior to the
USCC Merger, CCA purchased USCC's facility management contracts and the
corresponding enterprise value of operations from USCC for $10.0 million in
cash. Accordingly, as a result of the USCC Merger, the Company acquired only
real estate properties in substance.

By virtue of the USCC Merger, the Company acquired four correctional and
detention facilities in Kentucky, one in Ohio and two in North Carolina. At the
time of the USCC merger, the two North Carolina facilities were under
construction. As of September 30, 1998, the Company had completed one of the
North Carolina facilities, with the second facility scheduled for completion in
November 1998. The Company does not operate the facilities acquired in the USCC
Merger but leases the Kentucky facilities to CCA; leases the completed North
Carolina facility to the State of North 




                                       7

<PAGE>   8

Carolina, which has contracted with CCA to operate the facility; and expects to
lease the North Carolina facility currently under construction to the State of
North Carolina, which will contract with CCA to operate the facility. The
Company leases the Ohio facility to Hamilton County, Ohio.

On May 4, 1998, the Company acquired the Leo Chesney Center, a 200 bed
correctional facility located in Live Oak, California. The facility, acquired
for a purchase price of approximately $5.1 million, is leased to and operated by
Cornell Corrections Corporation under contract with the California Department of
Corrections. The Company is currently expanding the facility to increase the
rated capacity by approximately 72 beds.

In June, 1998, the Company began development of two educational facilities, one
in Houston, Texas and one in Dallas, Texas, for Community Education Partners
("CEP"), which develops and operates publicly funded, privately operated
alternative education programs for at-risk youth. The Company intends to
renovate and lease the facilities to CEP pursuant to terms and conditions
materially consistent with the Company's current relationship with private
prison operators.

As of September 30, 1998, the Company had investments in 20 leased real estate
properties and three development properties that are currently under
construction, with a total aggregate cost of $781.5 million. Thirteen of these
correctional and detention facilities have been purchased from CCA and leased
back to CCA. CCA currently leases 17 real estate properties from the Company.


5.  BANK CREDIT FACILITY

On April 17, 1998, the Company's $150.0 million revolving Bank Credit Facility
(as defined herein) was increased by $75.0 million to facilitate the acquisition
of real estate properties through the USCC Merger. On July 31, 1998, the Company
entered into an amendment and restatement of the Bank Credit Facility, maturing
July 2000, to increase the total available borrowings to $300.0 million. General
provisions of the Bank Credit Facility remained unchanged by the amendment and
restatement and are as follows: the effective interest rate is determined by
adding 1.50% to the LIBOR rate for the interest period selected by the Company.
The Company may specify LIBOR rate loans of one, two or three month maturities.
The Company may also borrow up to $5.0 million at the prime rate for working
capital purposes and repay such loans at any time. The Bank Credit Facility is
secured by all assets of the Company. The Company is subject to ongoing
compliance with a number of financial and other covenants under the Bank Credit
Facility, with which the Company is and has been in compliance. At September 30,
1998, $237.8 million was outstanding under the Bank Credit Facility.


6.  DISTRIBUTIONS TO SHAREHOLDERS

On March 2, 1998, the Board of Trustees declared a distribution of $0.425 per
common share for the quarter ended March 31, 1998 to common shareholders of
record on March 31, 1998. In addition, the Board of Trustees declared an initial
prorated quarterly dividend for the 8.0% Series A Cumulative Preferred Shares of
$0.417 per share to preferred shareholders of record on March 31, 1998, for the
period from January 30, 1998 through the dividend payment date of April 15,
1998. These distributions were paid on April 15, 1998.

On June 26, 1998, the Board of Trustees declared a distribution of $0.425 per
common share for the quarter ended June 30, 1998 to common shareholders of
record on July 1, 1998. In addition, the Board of Trustees declared a quarterly
dividend for the 8.0% Series A Cumulative Preferred Shares of $0.50 per share to
preferred shareholders of record on July 1, 1998 through the dividend payment
date of July 15, 1998. These distributions were paid on July 15, 1998.

On August 24, 1998, the Board of Trustees declared a distribution of $0.48 per
common share for the quarter ended September 30, 1998 to common shareholders of
record on September 30, 1998. In addition, the Board of Trustees declared a
quarterly dividend for the 8.0% Series A Cumulative Preferred Shares of $0.50 
per



                                       8

<PAGE>   9


share to preferred shareholders of record on September 30, 1998 through the
dividend payment date of October 15, 1998. These distributions were paid on
October 15, 1998.


7.  NET INCOME PER SHARE

SFAS 128, "Earnings per Share," has been issued effective for fiscal periods
ending after December 15, 1997. SFAS 128 establishes standards for computing and
presenting earnings per share. The Company adopted the provisions of SFAS 128 in
the fourth quarter of 1997. Under the standards established by SFAS 128,
earnings per share are measured at two levels: basic earnings per share and
diluted earnings per share. Basic earnings per share for the Company was
computed by dividing net income by the weighted average number of common shares
outstanding during the period, or 21,579,000 shares. Diluted earnings per share
was computed by dividing net income by the weighted average number of common
shares after considering the additional dilution related to the Company's
outstanding share options, after assuming a buyback of shares under the treasury
method.


8.  PROPOSED MERGER WITH CORRECTIONS CORPORATION OF AMERICA

On September 29, 1998, the Company, CCA and Prison Realty Corporation, a newly
formed Maryland corporation ("New Prison Realty"), entered into an Amended and
Restated Agreement and Plan of Merger (the "Merger Agreement"), pursuant to
which the Company and CCA will both be merged with and into New Prison Realty,
with New Prison Realty as the surviving entity. Under the terms of the Merger
Agreement: (i) holders of the Company's Common Shares and the Company's 8.0%
Series A Cumulative Preferred Shares will continue to own 1.0 share of New
Prison Realty for each share of Company capital stock they currently own; and
(ii) holders of shares of CCA's common stock, par value $1.00 per share (the
"CCA Common Stock"), will obtain the right to receive 0.875 share of New Prison
Realty for each share of CCA Common Stock they currently own. New Prison Realty
will elect to be taxed and expects to operate so as to qualify as a REIT for
federal income tax purposes. The proposed merger is subject to certain
conditions, including approval by the shareholders of both the Company and CCA
and certain other conditions. Pending approval by the respective shareholders,
the Company expects that the merger will be completed on or about January 1,
1999. The Company expects to incur approximately $9,250,000 in expenses related
to the merger.





                                       9
<PAGE>   10


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

The following discussion should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this report.

This quarterly report on Form 10-Q, including Management's Discussion and
Analysis of Financial Condition and Results of Operations, contains certain
forward-looking statements provided in reliance upon the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995 (the
"PSLRA"), as set forth in Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements reflect the Company's current views with respect to
future events and financial performance, and these statements can be identified,
without limitation, by the use of the words "anticipates", "believes",
"estimates", "expects", "intends", "plans", "projects" and similar expressions.
Forward-looking statements are subject to risks, uncertainties and other factors
that may cause actual results or outcomes to differ materially from future
outcomes expressed or implied by the forward-looking statement. Such factors
include, but are not limited to risks associated with the corrections and
detention industry, competitive market conditions, strength of the real estate
markets in which the company operates and general economic conditions. The
company discloses such risks in detail in its Annual Report on Form 10-K/A for
the year ended December 31, 1997. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. The Company undertakes no obligation to publicly revise these
forward-looking statements to reflect events or circumstances occurring after
the date hereof or to reflect the occurrence of unanticipated events.

OVERVIEW.

The Company was formed on April 23, 1997 as a Maryland real estate investment
trust to capitalize on the opportunities created by the increased demand for
private correctional and detention facilities. The Company has elected to
qualify as a REIT for federal income tax purposes commencing with its taxable
year ended December 31, 1997.

On July 18, 1997, the Company commenced operations after completing the Initial
Offering of 21,275,000 of its Common Shares (including 2,775,000 shares issued
as a result of the exercise of an over-allotment option by the underwriters).
The Common Shares were issued at an Initial Offering price of $21.00 per share,
generating gross proceeds to the Company of $446.8 million. The aggregate
proceeds to the Company, net of the underwriters' discount and offering costs,
were approximately $412.1 million.

The principal business strategy of the Company is to acquire correctional and
detention facilities that meet the Company's investment criteria from both
private prison managers and government entities, to expand its existing
facilities, and to lease all such facilities under long-term leases to qualified
third-party operators, including affiliates of the sellers. The Company's
initial investments were privately managed facilities that were owned and
operated by Corrections Corporation of America ("CCA"). However, the Company is
pursuing other opportunities, including acquisitions and leasebacks of, or
financings for, correctional facilities owned and operated by various government
entities and private operators other than CCA. Substantially all of the
Company's revenues are derived from: (i) rents received under triple net leases
of correctional and detention facilities; and (ii) interest earned from the
temporary investment of funds in short-term investments.

The Company, together with its wholly owned management subsidiary, Prison Realty
Management, Inc., a Tennessee corporation, incurs operating and administrative
expenses including, principally, compensation expenses for its executive
officers and other employees, office rental and related occupancy costs and
various expenses incurred in the process of acquiring additional properties. The
Company is self-administered and managed by its executive officers and staff,
and does not engage a separate advisor or pay an advisory fee for administrative
or investment services, although the Company does engage legal, accounting, tax
and financial advisors from time to time. The primary non-cash expense of the
Company is depreciation of its correctional and detention facilities.




                                       10

<PAGE>   11



The Company expects to leverage its portfolio of real estate equity investments
and will incur long and short-term indebtedness, and related interest expense,
from time to time.

The Company has made distributions to its shareholders in amounts not less than
the amounts required to maintain REIT status under the Code and, in general, in
amounts exceeding taxable income.

On September 29, 1998, the Company, CCA, and Prison Realty Corporation, a newly
formed Maryland corporation ("New Prison Realty"), entered into an Amended and
Restated Agreement and Plan of Merger (the "Merger Agreement"), pursuant to
which the Company and CCA will both be merged with and into New Prison Realty,
with New Prison Realty as the surviving corporation. Under the terms of the
Merger Agreement: (i) holders of the Company's Common Shares and the Company's
8.0% Series A Cumulative Preferred Shares will continue to own 1.0 share of New
Prison Realty for each share of Company Common Stock they currently own; and
(ii) holders of shares of CCA's common stock, par value $1.00 per share (the
"CCA Common Stock"), will obtain the right to receive 0.875 share of New Prison
Realty for each share of CCA Common Stock they currently own. New Prison Realty
will elect to be taxed and expects to operate so as to qualify as REIT for
federal income tax purposes. The proposed merger is subject to certain
conditions, including approval by the shareholders of both the Company and CCA
and certain other conditions. Pending approval by the respective shareholders,
the Company expects that the merger will be completed on or about January 1,
1999. The Company expects to incur approximately $9,250,000 in expenses related
to the merger.

RESULTS OF OPERATIONS.

The Company commenced operations on July 18, 1997. The following analysis of the
results of operations compares the period from July 18, 1997 through September
30, 1997 to the period from July 1, 1998 through September 30, 1998. As the
Company commenced operations on July 18, 1997, a nine month comparison for the
periods ending September 30, 1997 and 1998 is not meaningful.

RENTAL REVENUES - For the three months ended September 30, 1997 and 1998, rental
revenues of $8.3 million and $18.7 million, respectively, were generated from
the leasing of correctional and detention facilities. The increase in rental
revenues of $10.4 million resulted from an increase of facilities leased to
third parties from ten for the three months ended September 30, 1997 to 20 for
the three months ended September 30, 1998. Lease rates for all correctional and
detention facilities were 11.0% based upon original acquisition costs.

For the nine months ended September 30, 1998, rental revenues of $48.7 million
were generated from the leasing of correctional and detention facilities.

INTEREST INCOME - For the three months ended September 30, 1997 and 1998,
interest income was $0.6 million and $44,000, respectively. Interest income was
earned through the investment of cash prior to the purchase of the real estate
properties.

For the nine months ended September 30, 1998, interest income was $0.7 million.

DEPRECIATION EXPENSE - For the three months ended September 30, 1997 and 1998,
depreciation expense was $2.1 million and $4.6 million, respectively. The
increase in depreciation expense of $2.5 million is a result of the increase in
the number of facilities leased to third-parties from ten for the three months
ended September 30, 1997 to 20 for the three months ended September 30, 1998.

For the nine months ended September 30, 1998, depreciation expense was $13.2
million.

INTEREST EXPENSE - For the three months ended September 30, 1997 and 1998,
interest expense was $0.0 million and $2.8 million, respectively. Interest
expense is based on borrowings under the Company's bank credit facility and
includes amortization of loan costs, net of capitalized interest on construction
in progress. The Company did not have outstanding borrowings under the bank
credit facility for the three months ended September 30, 1997.




                                       11

<PAGE>   12


For the nine months ended September 30, 1998, interest expense was $5.8 million.

GENERAL AND ADMINISTRATIVE EXPENSES - For the three months ended September 30,
1997 and 1998, general and administrative expenses were $0.4 million and $0.7
million, respectively. General and administrative expenses were 4.7% and 3.8% of
rental revenues for the three months ended September 30, 1997 and 1998,
respectively. General and administrative expenses consist primarily of
management salaries and benefits, legal and other administrative costs.

LIQUIDITY AND CAPITAL RESOURCES.

By virtue of the USCC Merger, the Company acquired two correctional facilities
in North Carolina, which at the time of the USCC Merger were under construction.
As of September 30, 1998, the Company had completed one of the North Carolina
facilities, with the second facility scheduled for completion in November, 1998.
The Company expects to incur additional construction costs of approximately $6.0
million in the fourth quarter of 1998 related to the facility under construction
in North Carolina. In June, 1998, the Company began development of two
educational facilities, one in Houston, Texas and one in Dallas, Texas, for CEP,
which develops and operates publicly funded, privately operated alternative
education programs for at-risk youth. Amounts expended for CEP projects prior to
September 30, 1998 total $9.4 million, and total costs at completion are
expected to be $13.0 million. In addition, the Company has options with varying
terms to purchase any or all of 11 Option Facilities from CCA for CCA's costs
of developing, constructing and equipping the facilities, plus 5% of such costs,
aggregating approximately $487.6 million. The Company also has an option to
acquire, at fair market value, and lease back to CCA, any correctional or
detention facility acquired or developed and owned by CCA in the future for a
period of three years following the date CCA first receives inmates at such
facility.

In July 1998, the Company entered into an Agreement with CCA, whereby it agreed
to purchase from CCA, for approximately $80 million, all issued and outstanding
capital stock of Agecroft Properties, Inc. ("API"). API has entered into a
contract to design, develop, construct and finance an 800 bed medium-security
prison in Salford, England (the "Agecroft Prison"). Upon completion of
construction, API will lease the Agecroft Prison to Agecroft Prison Management
Limited ("APM"), an affiliate of CCA. APM has contracted with Her Majesty's
Principal Secretary of State for the Home Department for the design,
construction, management and financing of the Agecroft Prison under a
twenty-five year agreement. APM has also contracted with UK Detention Services
Limited, an affiliate of CCA, to manage the facility. The Agecroft Prison is
anticipated to open in January 2000.

Upon completion of the Initial Offering, the Company received approximately
$412.1 million in net proceeds. The Company used these funds, borrowings under
the Bank Credit Facility (as herein defined), and cash provided from operations
to purchase 13 correctional and detention facilities at an aggregate cost of
$491.5 million. Initially, cash on hand was invested by the Company in
interest-bearing accounts and other short-term, interest-bearing securities that
are consistent with the Company's election to seek qualification for taxation as
a REIT. After the Company began utilizing the Bank Credit Facility (as defined
herein), cash available was utilized to reduce outstanding borrowings.

The Company closed on a $150.0 million bank credit facility (the "Bank Credit
Facility"), maturing July 2000, contemporaneously with the closing of the
Initial Offering. On April 17, 1998, the Company increased the Bank Credit
Facility from $150.0 million to $225.0 million in connection with the USCC
Merger. On July 31, 1998, the Company entered into an amendment and restatement
of the Bank Credit Facility to increase the total available borrowings to $300.0
million. General provisions of the Bank Credit Facility remained unchanged by
the amendment and restatement and are as follows: the effective interest rate is
determined by adding 1.50% to the LIBOR rate for the interest period selected by
the Company. The Company may specify LIBOR rate loans of one, two or three month
maturities. The Company may also borrow up to $5.0 million at the prime rate for
working capital purposes and repay such loans at any time. The Bank Credit
Facility is secured by all assets of the Company. The Company is subject to
ongoing compliance with a number of financial and other covenants under the Bank
Credit Facility, with which the Company is and has been in compliance. At
September 30, 1998, $237.8 million was outstanding under the Bank Credit
Facility.




                                       12

<PAGE>   13


On January 30, 1998, the Company received net proceeds of approximately $103.4
million through its offering of 4,300,000 8.0% Series A Cumulative Preferred
Shares, 0.01 par value per share (including 300,000 8% Series A Cumulative
Preferred Shares issued as a result of the exercise of an over-allotment option
by the underwriters), at a price of $25 per share. The Company used
approximately $72.7 million of the preferred share offering proceeds to repay
outstanding indebtedness under the Bank Credit Facility.

On September 16, 1998, the Company filed a Registration Statement on Form S-3 to
register an aggregate of $500.0 million in value of its common shares, preferred
shares, and common share rights and warrants for sale to the public. Proceeds
from sales under the Company's Registration Statement on Form S-3 will be used
for general corporate purposes. These general corporate purposes may include,
without limitation, repayment of maturing obligations, redemption of outstanding
indebtedness, financing (in whole or part) of future acquisitions (including
acquisitions of companies and/or other real estate properties in accordance with
the Company's business objectives and strategy), capital expenditures and
working capital. Subsequent to September 30, 1998 and as of November 12, 1998,
the Company had issued and sold 1,197,769 common shares under the Company's
Registration Statement on Form S-3. Of those shares, 314,100 shares were sold to
certain trustees and officers of the Company and a like number repurchased on
the open market. Net proceeds to the Company from this share issuance total
$19.0 million.

The Company expects to meet its short-term liquidity requirements generally
through cash provided by operations and borrowings under the Bank Credit
Facility. The Company believes that its net cash provided by operations will be
sufficient to allow the Company to make distributions necessary to enable the
Company to maintain qualification as a REIT. All facilities owned by the Company
will be leased to third parties under triple net leases, which require the
lessee to pay substantially all expenses associated with the operation of such
facilities. As a result of these arrangements, the Company does not believe it
will be responsible for any significant expenses in connection with the
facilities during the terms of the Leases. The Company anticipates entering into
similar leases with respect to all properties acquired in the future.

The Company expects to meet its long-term liquidity requirements for the funding
of real estate property development and acquisitions by borrowing under the Bank
Credit Facility and by issuing equity or debt securities in public or private
transactions. The Company anticipates that as a result of its initially low debt
to total capitalization ratio and its intention to maintain a debt to total
capitalization ratio of 50% or less, it will be able to obtain financing for its
long-term capital needs. However, there can be no assurance that such additional
financing or capital will be available on terms acceptable to the Company. The
Company may, under certain circumstances, borrow additional amounts in
connection with the renovation or expansion of facilities, the acquisition of
additional properties, or, as necessary, to meet certain distribution
requirements imposed on REITs under the Code.

YEAR 2000 COMPLIANCE.

The Company has completed an assessment of its information technology hardware
and software and believes that both are Year 2000 compliant, and the Company 
intends to test its Year 2000 compliance during calendar year 1999, although
there can be no assurance that coding errors or other defects will not be
discovered in the future. Because CCA manages 18 of the Company's 20 completed
facilities, the Company may be vulnerable to CCA's failure to remedy its Year
2000 issues. Management of the Company has initiated discussions with CCA
management concerning CCA's Year 2000 issues. CCA management has advised
management of the Company that Year 2000 problems could arise in connection with
CCA's information technology hardware and software. CCA's management has advised
management of the Company that CCA is undertaking attempts to remediate its Year
2000 problems. CCA's management has also advised the Company of the risk that
the computer and non-information technology systems of third parties, such as
government agencies for which CCA provides services, commercial banks and other
lenders, could have Year 2000 problems that are not remedied. The failure of CCA
or of these third parties to remedy their Year 2000 problems could result in the
delayed collection of accounts receivable by the Company from CCA or by CCA from
government agencies for which CCA provides services, as the case may be, and the
disruption of capital flows from third party lenders, potentially resulting in
liquidity stress. Such liquidity stress could adversely affect CCA's ability to
make timely lease payments to the Company. Although CCA cannot control its Year
2000 risks arising in connection with third parties, CCA has initiated
conversations with those third parties with whom it has important relationships
to determine the extent of their Year 2000 compliance problems.





                                       13
<PAGE>   14


FUNDS  FROM OPERATIONS.

Management believes Funds from Operations is helpful to investors as a measure
of the performance of an equity REIT because, along with cash flows from
operating activities, financing activities and investing activities, it provides
investors with an understanding of the ability of the Company to incur and
service debt and make capital expenditures. The Company computes Funds from
Operations in accordance with standards established by the White Paper on Funds
from Operations approved by the Board of Governors of NAREIT in 1995, which may
differ from the methodology for calculating Funds from Operations utilized by
other equity REITs, and, accordingly, may not be comparable to such other REITs.
The White Paper defines Funds from Operations as net income (loss), computed in
accordance with generally accepted accounting principles ("GAAP"), excluding
gains (or losses) from debt restructuring and sales of property, plus real
estate related depreciation and amortization and after adjustments for
unconsolidated partnerships and joint ventures. Further, Funds from Operations
does not represent amounts available for management's discretionary use because
of needed capital replacement or expansion, debt service obligations, or other
commitments and uncertainties. Funds from Operations should not be considered as
an alternative to net income (determined in accordance with GAAP) as an
indication of the Company's financial performance or to cash flows from
operating activities (determined in accordance with GAAP) as a measure of the
Company's liquidity, nor is it indicative of funds available to fund the
Company's cash needs, including its ability to make distributions. The Company
believes that in order to facilitate a clear understanding of the consolidated
operating results of the Company, Funds from Operations should be examined in
conjunction with net income as presented in the consolidated financial
statements.

The following table presents the Company's Funds from Operations for the three
months and nine months ended September 30, 1998:


<TABLE>
<CAPTION>
       Funds from Operations:                      For the Three Months       For the Nine Months
                                                    Ended September 30,       Ended September 30, 
                                                           1998                      1998
                                                   --------------------       -------------------
       <S>                                         <C>                        <C>
       Net Income Available to Common              $      8,422               $      23,010
       Shareholders

       Add back real estate depreciation                  4,589                      13,183
                                                   --------------------       -------------------

                                                   $     13,011               $      36,193
                                                   ====================       ===================
</TABLE>

CASH FLOWS FROM OPERATING, INVESTING AND FINANCING ACTIVITIES.

The Company's cash flow provided from operating activities was $45.7 million for
the nine months ended September 30, 1998 and represents net income plus
depreciation and amortization and changes in the various components of working
capital. The Company's cash flow used in investing activities was $323.2 million
for the nine months ended September 30, 1998 and represents acquisitions of real
estate properties. The Company's cash flow provided by financing activities was
$277.8 million for the nine months ended September 30, 1998 and represents
proceeds from the preferred share offering, borrowings under the line of credit,
and payments of dividends on the preferred and common shares.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

    Not Applicable.





                                       14
<PAGE>   15


PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

    None.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

    None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

    None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

    None.

ITEM 5.  OTHER INFORMATION.

    None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a).    Exhibits

                  10.1       Amended and Restated Credit Agreement, dated as of 
                             July 31, 1998 by and among CCA Prison Realty Trust
                             and various Lenders.

                  10.2       Amended and Restated Agreement and Plan of Merger,
                             dated as of September 29, 1998, by and among
                             Corrections Corporation of America, CCA Prison
                             Realty Trust and Prison Realty Corporation
                             (previously filed as Exhibit 2.1 to Prison Realty
                             Corporation's Registration Statement on Form S-4
                             filed with the Securities and Exchange Commission
                             on September 30, 1998).

                  27.1       Financial Data Schedule (for SEC use only).

                  27.2       Restated Financial Data Schedule (for SEC use 
                             only).

 (b).   Reports on Form 8-K

                             Current Report on Form 8-K, dated September 30,
                             1998, relating to the execution of an Amended and
                             Restated Agreement and Plan of Merger by and among
                             CCA Prison Realty Trust, a Maryland real estate
                             investment trust (the "Company"), Corrections
                             Corporation of America, a Tennessee corporation
                             ("CCA"), and Prison Realty Corporation, a newly
                             formed Maryland corporation ("New Prison Realty"),
                             relating to the merger of both CCA and the Company
                             with and into New Prison Realty (the "Merger") and
                             the filing of New Prison Realty's Registration
                             Statement on Form S-4 with respect to the Merger,
                             which contains the Joint Proxy Statement of the
                             Company and CCA (the "Registration Statement on
                             Form S-4"). In the Current Report on Form 8-K, the
                             Company included the following historical financial
                             statements of CCA:

                             (i) unaudited condensed consolidated financial
                                 statements for the six month periods ended June
                                 30, 1998 and June 30, 1997 (incorporated
                                 therein by 




                                       15

<PAGE>   16


                                 reference to CCA's Quarterly Report on Form 
                                 10-Q, as amended, for the quarter ended
                                 June 30, 1998); and

                            (ii) audited consolidated financial statements for
                                 the five years ended December 31, 1997
                                 (incorporated therein by reference to CCA's
                                 Annual Report on Form 10-K, as amended, for the
                                 year ended December 31, 1997).

                             The Company also included the following pro forma
                             financial statements of Prison Realty Corporation:

                             (i) pro forma combined balance sheet as of June 30,
                                 1998 (incorporated therein by reference to the 
                                 Registration Statement on Form S-4);

                            (ii) pro forma combined statement of operations for
                                 the year ended December 31, 1997 (incorporated
                                 therein by reference to the Registration
                                 Statement on Form S-4); and

                           (iii) pro forma combined statement of operations
                                 for the six months ended June 30, 1998
                                 (incorporated therein by reference to the
                                 Registration Statement on Form S-4).




                                       16

<PAGE>   17



                                    SIGNATURE


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

CCA PRISON REALTY TRUST


/s/ Vida H. Carroll                   
-----------------------
Vida H. Carroll
Chief Financial Officer


Date:  November 16, 1998









                                       17
<PAGE>   18
                                 Exhibit Index
                                 -------------


EX-10.1   Amended and Restated Credit Agreement dated as of July 31, 1998

EX-27.1   Financial Data Schedule (for SEC use only)

EX-27.2   Restated Financial Data Schedule (for SEC use only)