FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549


                    [X] Quarterly Report Pursuant to Section
                     13 or 15(d) of the Securities Exchange
                                   Act of 1934

                       For the period ended June 30, 1998


                         Commission File Number 0-25230



                       FIRST WASHINGTON REALTY TRUST, INC.
             (Exact name of registrant as specified in its charter)



Maryland                                                        52-1879972
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                              identification no.)



4350 East-West Highway, Suite 400, Bethesda, MD                     20814
   (Address of principal executive offices)                       (Zip code)



Registrant's telephone number, including area code (301) 907-7800

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

        Common Stock, $.01 par value, outstanding as of August 13, 1998:

                        8,556,985 Shares of Common Stock


<PAGE>








                       FIRST WASHINGTON REALTY TRUST, INC.
                                    FORM 10-Q

                                      INDEX









Part I:  Financial Information                                             Page

Item 1.  Consolidated Balance Sheets as of June 30, 1998 (unaudited) and
              December 31, 1997                                              1

         Consolidated Statements of Operations (unaudited) for the three 
              months and six months ended June 30, 1998 and 1997             2

         Consolidated Statements of Cash Flows (unaudited) for the six 
              months ended June 30, 1998 and 1997                            3

         Notes to Unaudited Consolidated Financial Statements                4

Item 2.  Management's Discussion and Analysis of Financial Condition 
              and Results of Operations                                      9


Part II:  Other Information


Item 2.  Market for the Registrant's Common Equity and Related 
              Shareholders Matters                                          13

Item 6.  Exhibits and Reports on Form 8-K                                   14

Signatures                                                                  15




<PAGE>




              FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                    (dollars in thousands except share data)

                                   -----------
<TABLE>
<S>                                               <C>             <C> 

                                                     June 30,      December 31,
                                                       1998           1997
                                                    ---------      ------------
                                                   (unaudited)
                                     ASSETS

Rental properties:
  Land                                              $ 99,719           $ 89,042
  Buildings and improvements                         407,635            367,756
                                                    --------           --------
                                                     507,354            456,798
Accumulated depreciation                             (44,626)           (40,839)
                                                   ---------          ---------
Rental properties, net                               462,728            415,959

Cash and equivalents                                   5,187              3,142
Tenant receivables, net                                7,576              7,274
Deferred financing costs, net                          2,519              2,734
Other assets                                          10,081             10,032
                                                 -----------        -----------

          Total assets                              $488,091           $439,141
                                                    ========           ========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
  Mortgage notes payable                            $243,426           $212,030
  Debentures                                          25,000             25,000
  Accounts payable and accrued expenses                9,014             10,914
                                                 -----------        -----------
          Total liabilities                          277,440            247,944

Minority interest                                     50,478             38,255

Stockholders' equity:
  Convertible preferred stock $.01 par value,
     3,800,000 shares designated; 2,314,189 issued 
     and outstanding (aggregate liquidation 
     preference of $57,855)                               23                 23
  Common stock $.01 par value, 90,000,000 shares 
     authorized; 7,405,179 and 7,291,732 shares 
     issued and outstanding, respectively                 74                 72
  Additional paid-in capital                         189,472            179,356
  Accumulated distributions in excess of earnings    (29,396)           (26,509)
                                                  ----------        -----------
          Total stockholders' equity                 160,173            152,942
                                                    --------         ----------

          Total liabilities and stockholders' 
               equity                               $488,091           $439,141
                                                    ========           ========
</TABLE>

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

                                        1

<PAGE>



              FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                      (in thousands, except per share data)

                                   (unaudited)
                                     -------
<TABLE>
<S>                                        <C>       <C>      <C>      <C> 

                                                For three           For six
                                               months ended       months ended
                                                 June 30,          June 30,
                                             ----------------  ----------------
                                               1998      1997     1998     1997
                                             -------  -------  -------  -------
Revenues:
 Minimum rents                               $14,054  $10,275  $26,982  $19,907
 Tenant reimbursements                         3,399    2,108    6,487    4,231
 Percentage rents                                359      245      755      573
 Other income                                    300      260      528      536
                                             -------  -------   ------   ------
  Total revenues                              18,112   12,888   34,752   25,247
                                             -------  -------   ------    -----

Expenses:
 Property operating and maintenance            4,441    2,913    8,584    5,967
 General and administrative                    1,015    1,282    1,852    2,140
 Interest                                      5,120    4,556    9,971    8,928
 Depreciation and amortization                 3,656    2,656    6,921    5,117
                                             -------  -------   ------   ------
  Total expenses                              14,232   11,407   27,328   22,152
                                             -------  -------   ------   ------

 Income before gain on sale of properties,  
  income from  Management Company, 
  extraordinary item, minority interest
  and distributions to Preferred Stockholders  3,880    1,481    7,424    3,095

 Gain on sale of properties                        0        0    1,683       45

 Income from Management Company                   60      136      340      299
                                             -------    -----   ------    -----

 Income before extraordinary item,
  minority interest and distributions
  to Preferred Stockholders                    3,940    1,617    9,447    3,439

 Extraordinary item - loss on early
  extinguishment of debt                           0        0     (358)    (134)
                                             -------  -------   ------  -------

 Income before minority interest and
  distributions to Preferred Stockholders      3,940    1,617    9,089    3,305

 Income allocated to minority interest          (887)    (242)  (1,953)    (499)
                                             -------  -------   ------  -------
 Income before distributions to
  Preferred Stockholders                       3,053    1,375    7,136    2,806

 Distributions to Preferred Stockholders      (1,410)  (1,410)  (2,820)  (2,820)
                                             -------  -------  -------  -------
 Income (loss) allocated to Common 
  Stockholders                                $1,643     ($35)  $4,316     ($14)
                                             =======  =======  =======  =======
 Earnings (loss) per Common Share - Basic
  Income (loss) before extraordinary item      $0.22   ($0.01)   $0.63    $0.03
  Extraordinary item                            0.00     0.00    (0.05)   (0.03)
                                             -------  -------  -------  -------
  Net income (loss)                            $0.22   ($0.01)   $0.58    $0.00
                                             =======  =======  =======  =======
 Earnings per Common Share - Diluted
  Income (loss) before extraordinary item      $0.22   ($0.01)   $0.63    $0.03
  Extraordinary item                            0.00     0.00    (0.05)   (0.03)
                                             -------  -------  -------  -------
  Net income (loss)                            $0.22   ($0.01)    $0.5    $0.00
                                             =======  =======  =======  =======
 Shares of Common Stock, -   Basic             7,405    4,989    7,395    4,968
                                             =======  =======  =======  =======
 Shares of Common Stock, -  Diluted            7,488    5,058    7,486    5,028
                                             =======  =======  =======  =======
 Distributions per share                     $0.4875  $0.4875  $0.9750  $0.9750
                                             =======  =======  =======  =======


</TABLE>

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

                                        2

<PAGE>





              FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                             (Dollars in thousands)
                                   (unaudited)
                                    --------
<TABLE>
<S>                                                    <C>              <C>  

                                                        For the six months ended
                                                                 June 30,
                                                        ------------------------
                                                           1998            1997
                                                        ----------    ----------


Operating Activities:
  Income before distributions to 
   Preferred Stockholders                                $7,136          $2,806
  Adjustment to reconcile net cash provided 
    by operating activities:
    Income allocated to minority interest                 1,953             499
    Depreciation and amortization                         6,921           5,117
    Gain of sale of rental properties                    (1,683)            (45)
    Loss on early extinguishment of debt                    358             134
    Amortization of deferred financing costs
     and loan premiums                                     (273)            902
    Equity in earnings of Management Company               (100)            (59)
    Compensation paid or payable in company stock           655           1,400
    Provision for uncollectible accounts                    921             759
    Recognition of deferred rent                           (404)           (621)
    Net changes in:
      Tenant receivables                                   (818)         (1,282)
      Other assets                                         (244)            602
      Account payable and accrued expenses                 (628)            149
                                                     ----------      ----------
         Net cash provided by operating activities       13,794          10,361
                                                      ---------        --------

Investing Activities:
  Additions to rental properties                         (2,119)         (4,841)
  Acquisition of rental properties                      (21,968)        (16,751)
  Proceeds from sale of rental properties                 4,253           1,172
                                                      ---------       ---------
         Net cash used in investing activities          (19,834)        (20,420)
                                                       --------        --------

Financing Activities:
  Net proceeds from line of credit                       22,637          18,100
  Proceeds from mortgage notes                              318           2,235
  Proceeds from issuance of common stock                    -             2,000
  Proceeds from exercise of stock options                    37            -
  Repayment on mortgage notes                            (1,670)        (11,918)
  Additions to deferred financing costs                    (672)           (525)
  Distributions paid to Preferred Stockholders           (2,820)         (2,820)
  Distributions paid to Common Stockholders              (7,203)         (4,823)
  Distributions paid to minority interest                (2,542)         (1,320)
                                                       --------       ---------
         Net cash provided by financing activities        8,085             929
                                                      ---------       ---------

  Net increase (decrease) in cash and equivalents         2,045          (9,130)
  Cash and equivalents, beginning of period               3,142          11,780
                                                      ---------        --------
         Cash and equivalents, end of period             $5,187          $2,650
                                                       ========        ========

</TABLE>


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

                                        3

<PAGE>



              FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                    (dollars in thousands, except share data)
                                    ---------



1.       Business

         General
         -------

                  First Washington Realty Trust, Inc. (the "Company") is a fully
         integrated  real estate  organization  with expertise in  acquisitions,
         property management, leasing, renovation and development of principally
         supermarket- anchored neighborhood shopping centers. The Company owns a
         portfolio of 52 retail  properties  containing a total of approximately
         5.6  million  square  feet  of  gross  leasable  area  located  in  the
         Mid-Atlantic region and the Chicago metropolitan area.

                  The  Company,  incorporated  in  Maryland  in April  1994,  is
         self-managed  and  self-administered  and has  elected to be taxed as a
         real estate  investment  trust ("REIT") under the Internal Revenue Code
         of 1986, as amended (the "Code").

                  The  Company  currently  owns   approximately   77.1%  of  the
         partnership  interests in First Washington  Realty Limited  Partnership
         (the  "Operating  Partnership").  All of the Company's  operations  are
         conducted through the Operating Partnership.  The Operating Partnership
         owns 34 Properties  directly and 18 Properties  are owned by lower tier
         partnerships  or limited  liability  companies  in which the  Operating
         Partnership  owns a 99%  partnership  interest  and the  Company  (or a
         wholly-owned subsidiary of the Company) owns a 1% partnership interest.

                  Due to the  Company's  ability,  as the  general  partner,  to
         exercise  both  financial  and  operational  control over the Operating
         Partnership,  the Operating  Partnership is consolidated  for financial
         reporting purposes. Allocation of net income to the limited partners of
         the  Operating  Partnership  is based on their  respective  partnership
         interests and is reflected in the accompanying  Consolidated  Financial
         Statements  as  minority  interests.  Losses  allocable  to the limited
         partners  in  excess  of  their  basis  are  allocated  to  the  Common
         Stockholders  as the  limited  partners  have  no  requirement  to fund
         losses.

                  The  Operating  Partnership  also owns 100% of the  non-voting
         preferred stock of First  Washington  Management,  Inc.  ("FWM") and is
         entitled  to 99% of the cash flow from FWM.  FWM  provides  management,
         leasing and related  services  for the  Properties  and to  third-party
         clients,  including  individual,  institutional and corporate  property
         owners. FWM is also referred to herein as the "Management Company".

2.       Summary of Significant Accounting Policies

         Basis of Presentation
         ---------------------

                  The unaudited interim consolidated financial statements of the
         Company  are  prepared   pursuant  to  the   Securities   and  Exchange
         Commission's  rules  and  regulations  for  reporting  on Form 10-Q and
         should be read in  conjunction  with the financial  statements  and the
         notes  thereto of the  Company's  1997 Annual  Report to  Stockholders.
         Accordingly,   certain   disclosures   accompanying   annual  financial
         statements  prepared in accordance with generally  accepted  accounting
         principles are omitted. In the opinion of management,  all adjustments,
         consisting solely of normal recurring  adjustments,  necessary for fair
         presentation of the consolidated  financial  statements for the interim
         periods have been included.  The current period's results of operations
         are not  necessarily  indicative  of results  which  ultimately  may be
         achieved for the year.



                                        4

<PAGE>






              FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                    (dollars in thousands, except share data)
                                    ---------


                  The consolidated  financial statements include the accounts of
         the  Company  and  its  majority  owned  partnerships,   including  the
         Operating  Partnership.   All  significant  intercompany  balances  and
         transactions have been eliminated.

         Income per Share
         ----------------

                  Basic and diluted  income per share is  calculated by dividing
         income after minority  interest,  less preferred  distributions  by the
         weighted average number of common shares outstanding during the periods
         presented.

         Recent Accounting Pronouncements
         --------------------------------

                  On March 19, 1998, the Emerging  Issues Task Force ("EITF") of
         the Financial Accounting Standards Board reached a consensus opinion on
         issue No. 97-11, "Accounting for Internal Costs Relating to Real Estate
         Property  Acquisitions"  which  requires  that  the  internal  costs of
         preacquisition  activities  incurred in connection with the acquisition
         of an  operating  property  be expensed  as  incurred.  The Company has
         historically  capitalized  internal  preacqusition  costs of  operating
         properties  as a  component  of  the  acquisition  price.  The  Company
         capitalized  $227 for the period  January 1 through  March 19, 1998 and
         $123 for the six months ended June 30,  1997.  The Company will realize
         an increase in general and  administrative  expense due to the adoption
         of this ruling which is effective immediately.

                  On May 21, 1998,  the Emerging  Issues Task Force  ("EITF") of
         the Financial Accounting Standards Board reached a consensus opinion on
         Issue No. 98-9,  "Accounting for Contingent  Rent In Interim  Financial
         Periods"  which  provides that  recognition of rental income in interim
         periods must be deferred  until the specified  target that triggers the
         contingent  rental  income is  achieved.  The Company has  historically
         recognized  rental income based on a percentage of tenant sales ratably
         over the course of the year.  This  consensus is effective May 21, 1998
         and will require the Company to defer  recognition of this income until
         the date that the tenant's sales exceed the breakpoint set forth in the
         lease agreement. The Company believes the impact of this consensus will
         be to decrease  percentage  rentals in the fiscal year ending  December
         31, 1998 by approximately $240. Additionally,  the amount of percentage
         rentals  recognized  in each  quarter of  subsequent  fiscal years will
         differ from historical experience,  with a significant concentration of
         revenue being recognized in the fourth quarter.

                  During the second quarter,  the Financial Accounting Standards
         Board  issued  SFAS 133  "Accounting  for  Derivative  Instruments  and
         Hedging  Activities",  which will be effective for the Company's fiscal
         year  2000.  This  statement   establishes   accounting  and  reporting
         standards requiring that every derivative instrument, including certain
         derivative instruments imbedded in other contracts,  be recorded in the
         balance  sheet as either  an asset or  liability  measured  at its fair
         value.  The statement  also  requires that changes in the  derivative's
         fair value be recognized in earnings unless  specific hedge  accounting
         criteria are met. The Company is currently assessing the impact of this
         new statement on its consolidated  financial position,  liquidity,  and
         results of operations.

                  The Company adopted SFAS No. 130, "Reporting Comprehensive 
         Income" on January 1, 1998.  The Company has no items of other 
         comprehensive income.

3.       Acquisition of Rental Properties

                  During the first six months of 1998, the Company acquired five
         shopping  centers for an aggregate  acquisition  cost of  approximately
         $57,363.  All the  acquisitions  were  accounted for using the purchase
         method of accounting and the operations of each property is included in
         the Company's  Statement of Operations from their  respective  dates of
         acquisition. The following is a summary of the acquisitions:


                                        5

<PAGE>



              FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                    (dollars in thousands, except share data)
                                    ---------
<TABLE>
<S>     <C>              <C>             <C>     <C>     <C>             <C>

Date                                              Total   Anchor          Anchor
Acquired Property Name    Location        GLA     Cost    Tenant          (GLA)
--------------------------------------------------------------------------------

1/98     Bowie Plaza      Bowie, MD       104,836 $12,135 Giant Food      21,750
3/98     Watkins Park     Mitchellville,
         Plaza            MD              112,143  14,662 Safeway         43,205
4/98     Parkville 
         Shopping Center  Baltimore, MD   140,925   8,388 A&P Superfresh  39,571
5/98     Elkridge Corners Elkridge, MD     73,529   8,873 A&P Superfresh  18,750
6/98     Village                                          Ukrop's
         Shopping Center  Richmond, VA    110,885  13,305 Supermarket     39,003
                                          ------- -------                -------
                                          542,318 $57,363                162,279
                                          ======= =======                =======
</TABLE>

The acquisitions were financed as follows:
<TABLE>
<S>                  <C>          <C>      <C>        <C>      <C>     <C>

                      Number of             Assumed    Line of
Property              Partnerships Market   Mortgage   Credit
Name                  Units        Value    Debt (1)   Draw    Cash     Total
-------------------------------------------------------------------------------

Bowie Plaza             130,626    $3,592   $5,374    $3,000   $ 169     $12,135
Watkins Park Plaza          -         -        -      10,000   4,662 (2)  14,662
Parkville 
 Shopping Center        185,361     4,819    3,182       -       387       8,388
Elkridge Corners         89,109     2,228    6,645       -       -         8,873
Village Shopping Center 373,162     9,702      -       3,500     103      13,305
                        -------   -------  -------   ------- -------     -------
                        778,258   $20,341  $15,201   $16,500  $5,321     $57,363
                        =======   =======  =======   ======   ======     =======
</TABLE>

     (1)  Includes loan premiums.
     (2)  Includes  net  proceeds  from the sale of  properties  of
          approximately $4,253.

                  The following  unaudited pro forma condensed  combined results
         of  operations  are  presented  as if the  acquisitions  of the  rental
         properties occurred on January 1 of the period presented.  In preparing
         the pro forma  data,  adjustments  have  been  made to assume  that the
         September  1997  Offering  occurred  on January 1, 1997.  The  proforma
         statements are provided for  information  purposes only. They are based
         on historical  information  and do not  necessarily  reflect the actual
         results that would have occurred nor are they necessarily indicative of
         future results of operations of the Company.
<TABLE>
          <S>                                        <C>               <C>

                                                        For the six months ended
                                                                  June 30,
                                                      --------------------------
                                                         1998              1997
                                                      --------          --------

           Total Revenues                             $35,862           $35,232
                                                      =======           =======
           Pro forma net income before gain on sale
             of properties and extraordinary item      $3,706            $2,888
           Gain on sale or properties                       0             1,728
           Extraordinary item                            (121)           (1,191)
                                                        -----           -------
           Pro forma net income                        $3,585            $3,425
                                                       ======            ======
           Pro forma earnings per Common Share - Basic
              Income before gain on sale of
               properties and extraordinary item        $0.50             $0.41
              Gain on sale of properties                $0.00             $0.25
              Extraordinary item                        (0.02)            (0.17)
                                                       ------            ------
              Net income                                $0.48             $0.49
                                                        =====             =====
           Pro forma earnings per Common Share - Diluted
              Income before gain on sale of 
               properties and extraordinary item        $0.50             $0.41
              Gain on sale of properties                $0.00             $0.24
              Extraordinary item                        (0.02)            (0.17)
                                                       ------            ------
              Net income                                $0.48             $0.48
                                                        =====             =====

</TABLE>

                                        6

<PAGE>





              FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                    (dollars in thousands, except share data)
                                    ---------


4.       Sale of Properties

                  In  March  1998,   the  Company  sold  its  two   multi-family
         properties  (Branchwood and Park Place Apartments) for a combined sales
         price of approximately $8,050. The gain on sale is approximately $1,536
         and net proceeds  after the payment of the existing  mortgage  debt was
         approximately  $3,962.  In  March  1998,  the  Company  sold one of the
         Georgetown  retail shops  consisting of 5,000 square feet for $750. The
         gain on sale is  approximately  $147 and net proceeds after the payment
         of existing mortgage debt was approximately $291. The proceeds of these
         sales were used to purchase Watkins Park Plaza in a like-kind  exchange
         as defined in Internal Revenue Code Section 1031.

5.       Line of Credit

                  In   January   1998,   the   Company   closed   on  a  $35,500
         collateralized revolving Line of Credit with Union Bank of Switzerland.
         This line is collateralized by six properties  (Kenhorst Plaza, Shoppes
         of Graylyn,  Four Mile Fork,  Takoma Park, Centre Ridge Marketplace and
         Newtown  Square).  The line which  matures on January 31, 2001 replaces
         the Lines of Credit the Company  had with  Mellon  Bank and  Corestates
         Bank.  Loans  under  this  line will bear  interest  at LIBOR  plus one
         percent (1%). The line was  subsequently  increased to $45,000 on March
         20, 1998 and Watkins Park Plaza was pledged as additional collateral.

6.       Summary of Noncash Investing and Financing Activities

                  Significant noncash transactions for the six months ended 
         June 30, 1998 and 1997 were as follows:
<TABLE>
          <S>                                               <C>         <C>

                                                                1998       1997
                                                                ----       ----

          Liabilities assumed in acquisition
           of rental properties                              $15,201    $16,843
          Common units in the Operating 
           Partnership issued in connection 
           with the acquisition of rental properties         $20,341     $4,660
          Preferred units in the Operating 
           Partnership issued in connection with 
           the acquisition of rental properties                  -         $277
          Increase in minority interest's ownership of the
           Operating Partnership                             $12,813     $1,258
          Accrued compensation paid through the issuance
           of Common Stock                                      $760        -

</TABLE>


7.       Stock Option Plans

                  On May 8, 1998, the Stockholders  approved an amendment to the
         Company's 1994 Stock Option Plan. The amendment increases the number of
         shares  available for issuance under the Stock Option Plan from 796,691
         to 1,296,691 shares.

                  On May 8, 1998, the Stockholders  approved an amendment to the
         Company's  1996  Restricted  Stock Plan.  The  Amendment  increases the
         number of shares available for issuance under the Restricted Stock Plan
         from 18,508 to 368,508 shares.

                  On May 8, 1998, the Stockholders  approved an amendment to the
         Company's  1996  Contingent  Stock  Agreements.  The amendment  further
         grants  an  additional   150,000  shares  of  Common  Stock  to  senior
         management under a performance-based incentive plan.


                                        7

<PAGE>




              FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                    (dollars in thousands, except share data)
                                    ---------


8.       Subsequent Events

                  In July 1998,  the  Company  completed  a public  offering  of
         1,150,000 shares of Common Stock (the "July 1998 Offering"). The shares
         of  stock  were  priced  at  $23.75,   resulting  in  net  proceeds  of
         approximately  $25,600 after deducting the  underwriter's  discount and
         offering expenses of approximately $1,700. The proceeds of the offering
         were used to pay down the Company's Line of Credit.

                  On  July  17,  1998,   the  Board  of  Directors   declared  a
         distribution  of  $0.4875  and  $0.6094  per share of Common  Stock and
         Preferred Stock, respectively to shareholders of record as of August 1,
         1998, payable on August 15, 1998.


































                                        8

<PAGE>





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

Overview

         The  following  discussion  should  be read  in  conjunction  with  the
"Selected  Consolidated  Financial Information" and the Financial Statements and
notes thereto of the Company appearing  elsewhere in this Form 10-Q. Dollars are
in thousands except per share data.

Comparison  of the three  months  ended June 30, 1998 to the three  months ended
June 30, 1997

         For the three months ended June 30, 1998,  the net income  allocated to
common stockholders increased by $1,678 from a net loss of ($35) to a net income
of $1,643, when compared to the three months ended June 30, 1997,  primarily due
to an increase in revenues offset by an increase in expenses, and an increase in
the amount of income allocated to minority interests.

         Total revenues  increased by $5,224 or 40.5%,  from $12,888 to $18,112,
due   primarily   to  an  increase  in  minimum   rents  of  $3,779  and  tenant
reimbursements  of $1,291.  The increases  were primarily due to the purchase of
the six Chicago properties  purchased in September 1997,  Mitchellville Plaza in
October 1997,  Spring Valley Center in December 1997 (the "1997  Acquisitions"),
Bowie  Plaza in  January  1998,  Watkins  Park  Plaza in March  1998,  Parkville
Shopping Center in April 1998, Elkridge Corners Shopping Center in May 1998, and
Village Shopping Center in June 1998 (the "1998 Acquisitions").

         Property  operating and  maintenance  expense  increased by $1,528,  or
52.5%,  from $2,913 to $4,441,  due primarily to the 1997  Acquisitions  and the
1998  Acquisitions.  General and  administrative  expenses  decreased by $267 or
20.8%,  from  $1,282 to $1,015  due  primarily  to a  decrease  in the amount of
compensation  paid or payable in Company stock of $682, offset by an increase in
internal  preacquisition  costs of $176,  cash  bonuses  of $100 and other  cash
expenses of $139. Prior to March 19, 1998,  internal  preacquisition  costs were
capitalized and included in the cost of acquiring rental properties.

         Interest  expense  increased by $564, or 12.4%,  from $4,556 to $5,120,
due primarily to the increased mortgage  indebtedness  associated  with the 1997
Acquisitions  and the 1998  Acquisitions  offset by a reduction of mortgage debt
through proceeds from the September 1997 offering and a decrease in the weighted
average  interest  rate.  The average  debt  outstanding  increased  from $216.6
million for 1997 to $260.1  million for 1998 and the weighted  average  interest
rate decreased from 8.4% to 7.9%.

         Depreciation and amortization  expenses  increased by $1,000, or 37.7%,
from  $2,656 to  $3,656,  primarily  due to the 1997  Acquisitions  and the 1998
Acquisitions.

         Income allocated to minority  interests  increased by $645 from $242 to
$887 due to an increase in net income and an increase in the minority interests'
ownership of the Operating Partnership from 15.0% to 22.9%.

Comparison of the six months ended June 30, 1998 to the six months ended 
June 30, 1997

         For the six months  ended June 30,  1998,  the net income  allocated to
common  stockholders  increased by $4,330 from a net loss of $14 to a net income
of $4,316, when compared to the six months ended June 30, 1997, primarily due to
an increase in  revenues  off set by an increase in expenses  and an increase in
the amount of income allocated to minority interests.





                                        9

<PAGE>



         Total revenues  increased by $9,505 or 37.6%,  from $25,247 to $34,752,
due   primarily   to  an  increase  in  minimum   rents  of  $7,075  and  tenant
reimbursements  of $2,256.  The increases  were primarily due to the purchase of
Ashburn Farm Village  Shopping Center in March 1997, the six Chicago  properties
purchased in September 1997,  Mitchellville Plaza in October 1997, Spring Valley
Center in December 1997 (the "1997 Acquisitions"),  Bowie Plaza in January 1998,
Watkins  Park Plaza in March  1998,  Parkville  Shopping  Center in April  1998,
Elkridge  Corners  Shopping  Center in May 1998, and Village  Shopping Center in
June 1998 (the "1998 Acquisitions").

         Property  operating and  maintenance  expense  increased by $2,617,  or
43.9%, from $5,967 to $8,584,  due primarily to the 1997 and 1998  Acquisitions.
General and  administrative  expenses decreased by $288 or 13.5%, from $2,140 to
$1,852  due  primarily  to an  decrease  in the amount of  compensation  paid or
payable  in  Company   stock  of  $900   offset  by  an   increase  in  internal
preacquisition  costs of $176,  cash bonuses of $200 and other cash  expenses of
$236. Prior to March 19, 1998,  internal  preacquisition  costs were capitalized
and included in the cost of acquiring rental properties.

     Interest expense increased by $1,043, or 11.7%, from $8,928 to $9,971,  due
primarily to the increased  mortgage  indebtedness  associated with the 1997 and
1998  Acquisitions  offset by a reduction in mortgage  debt from the proceeds of
the  September  1997 offering and a reduction in the weighted  average  interest
rate.  The average debt  outstanding  increased  from $210.3 million for 1997 to
$252.3 million for 1998, and the weighted  average  interest rate decreased from
8.5% to 7.9%.

         Depreciation and amortization  expenses  increased by $1,804, or 35.3%,
from $5,117 to $6,921, primarily due to the 1997 and 1998 Acquisitions.

         During  1998, a gain on sale of  properties  of $1,683 was realized and
there was a $358 extraordinary loss due to the early extinguishment of debt. For
the same period in 1997,  a gain on sale of  properties  of $45 was realized and
there was a $134 extraordinary loss due to the early extinguishment of debt.

         In 1998, the Company sold its two multi-family  properties  (Branchwood
and Park  Place)  and one of the  Georgetown  retail  shops  retiring  $4,236 of
mortgage  debt  associated  with these  properties.  In 1997,  the Company  sold
Thieves Market in which $734 of mortgage debt  associated  with the property was
retired.

         Income allocated to minority interests increased by $1,454 from $499 to
$1,953  due  to an  increase  in net  income  and an  increase  in the  minority
interests ownership of the Operating Partnership from 15.1% to 22.9%.

Liquidity and Capital Resources

Indebtedness

         As  of  June  30,  1998,   the  Company  had  total   indebtedness   of
approximately   $268.4  million  (including  $25.0  million  of  debentures  and
approximately   $243.4   million  of  mortgage   indebtedness).   The   mortgage
indebtedness   consists  of   approximately   $236.5  million  in   indebtedness
collateralized by 35 of the Properties and tax-exempt bond financing obligations
issued by the  Philadelphia  Authority  for  Industrial  Development  (the "Bond
Obligations")  of  approximately  $6.9  million  collateralized  by  one  of the
properties.  Of the Company's  indebtedness,  $39.5 million  (14.7%) is variable
rate indebtedness,  and $228.9 million (85.3%) is at a fixed rate. The effective
interest  rates of the  indebtedness  range  from 6.3% to 9.8%,  with a weighted
average  interest rate of 7.9%,  and will mature  between 1999 and 2014. A large
portion of the Company's indebtedness will become due by 2000, requiring balloon
payments of $88.9 million in 1999, and $24.4 million in 2000.  From 1999 through
2014,  the Company will have to refinance an aggregate of  approximately  $228.5
million.  Since  the  Company  anticipates  that  only a  small  portion  of the
principal of such  indebtedness will be repaid prior to maturity and the Company
will likely not have sufficient  funds on hand to repay such  indebtedness,  the
Company  will  need to  refinance  such  indebtedness  through  modification  or
extension  of existing  indebtedness,  additional  debt  financing or through an
additional offering of equity securities.

         The Company currently has two collateralized revolving lines of 
credit (the "Lines of Credit") totaling

                                       10

<PAGE>



approximately  $51  million.  In January  1998,  the  Company  closed on $35,500
collateralized  revolving  Line of Credit with Union Bank of  Switzerland.  This
line is  collateralized by six properties  (Kenhorst Plaza,  Shoppes of Graylyn,
Four Mile Fork, Takoma Park,  Centre Ridge Marketplace and Newtown Square).  The
line which  matures on January 31, 2001 replaces the Lines of Credit the Company
had with  Mellon  Bank and  Corestates  Bank.  Loans  under  this line will bear
interest at LIBOR plus one percent (1%). The line was subsequently  increased to
$45,000  on March 20,  1998 and  Watkins  Park Plaza was  pledged as  additional
collateral.  The Company has a collateralized  revolving line of credit of up to
$5.8 million from First Union Bank. Loans under the line of credit bear interest
at LIBOR plus two percent  (2%) per annum,  and mature on June 30,  1998.  Loans
under  the  line  of  credit  are  collateralized  by a first  mortgage  lien on
Brafferton  Shopping Center. As of June 30, 1998, there was $25,937  outstanding
under the Lines of Credit  which is  reflected  as  mortgage  notes  payable and
included in the discussion of mortgage indebtedness above.

Liquidity

         The  Company  expects  to meet its  short-term  liquidity  requirements
generally through its working capital, net cash provided by operations and draws
on the Lines of Credit.  The  Company  believes  that the  foregoing  sources of
liquidity will be sufficient to fund liquidity needs through 1999.

         The Company expects to meet certain  long-term  liquidity  requirements
such  as  development,   property   acquisitions,   scheduled  debt  maturities,
renovations,  expansions and other non-recurring  capital  improvements  through
long-term secured and unsecured indebtedness,  including the Lines of Credit and
the issuance of additional  equity  securities.  The Company also expects to use
funds  available  under the Lines of  Credit to fund  acquisitions,  development
activities and capital improvements on an interim basis.

         During 1999, $88.9 million of the Company's  indebtedness  becomes due,
including the $25.0 million Exchangeable  Debentures.  The Company believes that
it will be able to retire this debt  through  either a  refinancing  of the debt
using the properties as collateral, an equity offering or a combination of both.
The Company currently  believes that the loan-to-values on the properties are at
a level  that  will  enable  the  Company  to  refinance  the loans  without  an
additional requirement for capital.

         The Company  has  elected to qualify as a REIT for  federal  income tax
purposes  commencing  with its tax year ended December 31, 1994. To qualify as a
REIT, the Company is required,  among other items, to pay  distributions  to its
shareholders of at least 95% of its taxable income.  The Company intends to make
quarterly distributions to its shareholders from operating cash flow.

New Accounting Standards

     On March 19, 1998, the Emerging Issues Task Force ("EITF") of the Financial
Accounting  Standards  Board  reached a  consensus  opinion on issue No.  97-11,
"Accounting  for Internal Costs Relating to Real Estate  Property  Acquisitions"
which requires that the internal costs of preacquisition  activities incurred in
connection  with  the  acquisition  of an  operating  property  be  expensed  as
incurred. The Company has historically  capitalized internal preacqusition costs
of operating  properties as a component of the  acquisition  price.  The Company
capitalized  $227 for the period  January 1 through  March 19, 1998 and $123 for
the six months  ended June 30,  1997.  The Company  will  realize an increase in
general and  administrative  expense due to the adoption of this ruling which is
effective immediately.

         On May 21,  1998,  the  Emerging  Issues  Task  Force  ("EITF")  of the
Financial  Accounting  Standards Board reached a consensus  opinion on Issue No.
98-9,  "Accounting  for  Contingent  Rent In Interim  Financial  Periods"  which
provides that  recognition of rental income in interim  periods must be deferred
until the  specified  target  that  triggers  the  contingent  rental  income is
achieved.  The Company has  historically  recognized  rental  income  based on a
percentage of tenant sales ratably over the course of the year.  This  consensus
is effective May 21, 1998 and will require the Company to defer  recognition  of
this income until the date that the tenant's  sales  exceed the  breakpoint  set
forth in the lease agreement.  The Company believes the impact of this consensus
will be to decrease  percentage  rentals in the fiscal year ending  December 31,
1998 by  approximately  $240. Additionally,  the  amount of  percentage  rentals
recognized  in  each  quarter  of  subsequent  fiscal  years  will  differ  from
historical experience, with a significant concentration of revenue being 
recognized in the fourth quarter.

                                       11

<PAGE>



         During the second  quarter,  the Financial  Accounting  Standards Board
issued SFAS 133 "Accounting for Derivative  Instruments and Hedging Activities",
which will be  effective  for the  Company's  fiscal year 2000.  This  statement
establishes  accounting and reporting  standards requiring that every derivative
instrument,   including  certain  derivative   instruments   imbedded  in  other
contracts,  be  recorded in the  balance  sheet as either an asset or  liability
measured at its fair value.  The  statement  also  requires  that changes in the
derivative's  fair  value  be  recognized  in  earnings  unless  specific  hedge
accounting  criteria are met. The Company is currently  assessing  the impact of
this new  statement  on its  consolidated  financial  position,  liquidity,  and
results of operations.  

          The Company has considered the effects that the year
2000 may have on its computer hardware and software application.  The Company
does not believe that there will be a material effect on the Company's
operations or future financial results.














































                                       12

<PAGE>



                                     Part II

OTHER INFORMATION

 Item 2.       Recent Sales of Unregistered Equity Securities

               (a)        Securities Sold

                  The  following  table sets  forth the date of sale,  title and
                  amount of  unregistered  securities  sold by the Company since
                  December 31, 1997:
<TABLE>
                 <S>                        <C>                       <C> 

                  Date of Sale               Title                       Amount

                  01/01/98                   Common Units               130,626
                  04/30/98                   Common Units               185,361
                  05/28/98                   Common Units                89,109
                  06/01/98                   Common Units               373,162

</TABLE>


               (b)        Underwriters and other purchasers

                  i.      January 1, 1998 Sales.  Underwriters were not retained
                          in connection with the sale of these securities. These
                          units  were  sold to the  seller  of Bowie  Plaza,  an
                          "accredited investor".

                  ii.     April 30, 1998 Sales.  Underwriters  were not retained
                          in connection with the sale of these securities. These
                          units  were sold to the seller of  Parkville  Shopping
                          Center, an "accredited investor".

                  iii.    May 28, 1998 Sales.  Underwriters were not retained in
                          connection  with the sale of these  securities.  These
                          units were sold to the seller of Elkridge Corners,  an
                          "accredited investor".

                  iv.     June 1, 1998 Sales.  Underwriters were not retained in
                          connection  with the sale of these  securities.  These
                          units  were  sold to the  seller of  Village  Shopping
                          Center, an "accredited investor".

               (c)        Consideration

                  i.      January 1, 1998  Sales.  These  units  were  issued in
                          exchange for property having a value of  approximately
                          $6.8 million, net of assumed indebtedness.  There were
                          no underwriting  discounts or commissions with respect
                          to such securities.

                  ii.     April 30,  1998  Sales.  These  units  were  issued in
                          exchange for property having a value of  approximately
                          $5.2 million, net of assumed indebtedness.  There were
                          no underwriting  discounts or commissions with respect
                          to such securities.

                  iii.    May  28,  1998  Sales.  These  units  were  issued  in
                          exchange for property having a value of  approximately
                          $2.2 million, net of assumed indebtedness.  There were
                          no underwriting  discounts or commissions with respect
                          to such securities.

                  iv.     June  1,  1998  Sales.  These  units  were  issued  in
                          exchange for property having a value of  approximately
                          $9.8 million, net of assumed indebtedness.  There were
                          no underwriting  discounts or commissions with respect
                          to such securities.


                                       13

<PAGE>



Item 6.        Exhibits and Reports on Form 8-K

(a)            Exhibits

27             Financial Data Schedule (1)
-----------------------------------------------------------------------


(1)            Filed herewith.

(b)            Reports on Form 8-K.

               An interim report on Form 8-K was filed on May 18, 1998 including
               certain exhibits thereto.

               An  interim  report  on Form  8-K was  filed  on  June  17,  1998
               reporting the acquisition of five retail properties.

               An  interim  report  on Form  8-K was  filed  on  July  28,  1998
               regarding recently enacted legislation.

               An  interim  report  on Form  8-K was  filed  on  July  31,  1998
               including certain exhibits thereto.

                                       14

<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.


                                     FIRST WASHINGTON REALTY TRUST, INC.


  Date: August 13, 1998              /s/ William J. Wolfe
                                     ------------------------------
                                     By:      William J. Wolfe
                                              President and
                                              Chief Executive Officer


 Date: August 13, 1998              /s/ James G. Blumenthal
                                    ---------------------------------
                                    By:      James G. Blumenthal
                                             Executive Vice President and
                                             Chief Financial Officer

                                       15

<PAGE>