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 September 30, 1997


                           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 November 13, 1997:

                           7,289,653 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 September 30, 1997 
         (unaudited) and December 31, 1996                                   1

         Consolidated Statements of Operations (unaudited) 
         for the three months and
         nine months ended September 30, 1997 and 1996                       2

         Consolidated Statements of Cash Flows (unaudited) 
         for the nine months ended September 30, 1997 and 1996               3

         Notes to Unaudited Consolidated Financial Statements                4

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


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                                   13

Signatures                                                                  15




<PAGE>


               FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES

                              CONSOLIDATED BALANCE SHEETS

                        (dollars in thousands except share data)

                                        -----------
<TABLE>

                                           September 30,           December 31,
                                               1997                     1996
                                                        (unaudited)
                                                           ASSETS
<S>                                            <C>                   <C> 

Rental properties:
  Land                                         $ 83,949              $ 61,959
  Buildings and improvements                    342,984               252,276
                                               --------              --------
                                                426,933               314,235
Accumulated depreciation                        (37,686)              (30,450)
                                              ---------             ---------
Rental properties, net                          389,247               283,785

Cash and equivalents                              7,547                11,780
Tenant receivables, net                           6,821                 4,639
Deferred financing costs, net                     3,045                 4,403
Other assets                                      9,832                 9,006
                                             ----------            ----------

          Total assets                         $416,492              $313,613
                                               ========              ========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
  Mortgage notes payable                       $193,719              $167,047
  Debentures                                     25,000                25,000
  Accounts payable and accrued expenses          13,130                 6,328
                                               --------            ----------
          Total liabilities                     231,849               198,375

Minority interest                                32,346                16,661

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; 7,289,653 and 
    4,946,245 shares issued and outstanding, 
    respectively                                    72                    49
  Additional paid-in capital                   178,027               116,068
  Accumulated distributions in excess 
    of earnings                                (25,825)              (17,563)
                                             ----------          -----------
          Total stockholders' equity           152,297                98,577
                                              --------             ---------

          Total liabilities and 
          stockholders' equity                $416,492              $313,613
                                              ========              ========

</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

                   (dollars in thousands, except share data)

                                  (unaudited)
                                    -------
<TABLE>

                                  For three months ended  For nine months ended
                                      September 30,            September 30,

<S>                                 <C>           <C>      <C>          <C> 
                                      1997          1996     1997          1996
Revenues:
         Minimum rents              $11,127       $8,390   $31,793      $23,408
         Tenant reimbursements        2,499        1,742     6,730        5,015
         Percentage rents               263          107       836          501
         Other income                   365          275       946        1,189
                                   --------      -------- --------     --------
              Total revenues         14,254       10,514    40,305       30,113
                                    -------       -------   ------       ------

Expenses:
         Property operating and 
          maintenance                 3,590        2,631    10,316        7,623
         General and administrative     611          648     2,751        2,348
         Interest                     4,747        3,999    13,675       11,025
         Depreciation and 
          amortization                2,750        2,039     7,867        5,783
                                    -------      -------   -------      -------
              Total expenses         11,698        9,317    34,609       26,779
                                    -------      -------    ------       ------

Income before income from Management 
         Company, extraordinary items, 
         minority interest and 
         distributions to Preferred 
         Stockholders                 2,556        1,197     5,696        3,334

Income from Management Company           77           90       376           97
                                   --------        -----    ------     --------

Income before extraordinary item, 
         minority interest and
         distributions to Preferred 
         Stockholders                 2,633        1,287     6,072        3,431

Extraordinary item - loss on early
         extinguishment of debt        (561)          -       (695)          -
                                   --------   -----------   -------      -----

Income before minority interest and 
         distributions to
         Preferred Stockholders       2,072        1,287     5,377        3,431

Income allocated to minority interest  (339)        (188)     (838)        (486)
                                   --------     ---------    -----        -----

Income before distributions to 
         Preferred Stockholders       1,733        1,099     4,539        2,945

Distributions to Preferred 
         Stockholders                (1,410)      (1,410)   (4,231)      (4,231)
                                    -------      -------   -------      -------

Income (loss) allocated to common 
         stockholders                  $323        ($311)     $308      ($1,286)
                                  =========    =========   =======   ==========

Net income (loss) per Common Share    $0.06       ($0.09)    $0.06       ($0.40)
                                   ========   ==========   =======      =======

Weighted average shares of Common
         Stock, in thousands          5,396        3,288     5,114        3,227
                                   ========    ========= ==========    ========

Distributions per share             $0.4875      $0.4875   $1.4625      $1.4625
                                    =======      =======    =======     =======
</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>

                                                      For the nine months ended
                                                            September 30,
                                                         1997              1996
<S>                                                    <C>               <C>   


Operating Activities:
  Income before distributions to Preferred 
  Stockholders                                         $4,539            $2,945
  Adjustment to reconcile net cash provided 
  by operating activities:
    Income allocated to minority interest                 838               486
    Depreciation and amortization                       7,867             5,784
    Gain of sale of rental property                       (45)              -
    Loss on early extinguishment of debt                  695               -
    Amortization of deferred financing costs 
    and loan discounts                                  1,071             1,668
    Equity in earnings of Management Company              (16)              263
    Compensation paid or payable in company 
    stock                                               1,678             1,136
    Provision for uncollectible accounts                  902               228
    Recognition of deferred rent                         (912)             (691)
    Net changes in:
      Tenant receivables                               (2,172)           (1,015)
      Other assets                                     (1,138)           (1,359)
      Account payable and accrued expenses              2,553                21
                                                    ---------       -----------
         Net cash provided by operating 
         activities                                    15,860             9,466
                                                    ---------         ---------

Investing Activities:
  Additions to rental properties                       (5,309)           (3,298)
  Acquisition of rental properties                    (17,252)          (38,962)
  Proceeds from sale of rental property                 1,172               -
                                                    ---------        ----------
         Net cash used in investing 
         activities                                   (21,389)          (42,260)
                                                     --------          --------

Financing Activities:
  Proceeds from line of credit                         20,500             8,348
  Proceeds from mortgage notes                          1,098            30,225
  Proceeds from issuance of common
  stock                                                51,737               -
  Cost of raising capital                              (2,808)              -
  Repayment of line of credit                         (20,500)              -
  Repayment on mortgage notes                         (34,512)             (612)
  Additions to deferred financing costs                  (537)             (591)
  Prepayment penalties                                    (44)              -
  Distributions paid to Preferred 
  Stockholders                                         (4,231)           (4,231)
  Distributions paid to Common 
  Stockholders                                         (7,361)           (4,720)
  Distributions paid to minority
  interest                                             (2,046)           (1,561)
                                                     --------         ----------
         Net cash provided by financing 
         activities                                     1,296            26,858
                                                  -----------          ---------

  Net increase (decrease) in cash and 
  equivalents                                          (4,233)           (5,936)
  Cash and equivalents, beginning 
  of period                                            11,780             7,806
                                                 ------------         ----------
         Cash and equivalents, 
         end of period                                 $7,547            $1,870
                                                  ===========         ==========

</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 46 retail  properties  containing a total of approximately
         5.0  million  square  feet  of  gross  leasable  area  located  in  the
         Mid-Atlantic   region  and  the  Chicago   metropolitan  area  and  two
         multifamily properties located in Charleston, South Carolina.

                  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   80.2%  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 33 Properties  directly and 15 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".

                  In December  1996 the Company  completed a public  offering of
         1,655,000  shares of Common Stock (the "December 1996  Offering").  The
         shares of stock  were  priced at $21.75  per  share,  resulting  in net
         proceeds of $33.4 million after  deducting the  underwriter's  discount
         and offering expenses of $2.6 million.

                  In May 1997 the Company  issued 85,562 common shares of Common
         Stock in a private  placement  to a current  shareholder.  The  Company
         received  proceeds of  approximately  $2.0 million which it used to pay
         down a portion of its outstanding line of credit.





                                         4

<PAGE>




                FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES

                NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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



                  In September 1997 the Company  completed a public  offering of
         2,070,000 shares of Common Stock (the "September 1997  Offering").  The
         shares of stock  were  priced at $24.00  per  share,  resulting  in net
         proceeds of $47.0 million after  deducting the  underwriter's  discount
         and  offering  expenses of $2.7  million.  The proceeds of the offering
         were used to retire indebtedness of approximately $46.4 million.

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  statement  and the
         notes  thereto of the  Company's  1996 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.

                  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/Loss per Share

                  Income/loss  per share is calculated by dividing  income after
         minority interest, less preferred distributions by the weighted average
         number of common  shares  outstanding  during the three months and nine
         months  ended  September  30, 1997 and 1996  respectively.  Potentially
         dilutive items i.e. the exercise of  outstanding  stock options and the
         conversion of Convertible Preferred Stock,  Operating Partnership Units
         and Exchangeable Debentures would not have a material dilutive effect.

         Recent Accounting Pronouncements

                  Effective  for the Company's  fiscal year ending  December 31,
         1997,  the Company  will be required to adopt  Statements  of Financial
         Accounting Standards No. 128, "Earnings per Share".  Statements No. 130
         "Reporting Comprehensive Income", No. 131 "Disclosures about Segment of
         an Enterprise  and Related  Information"  are required for fiscal years
         beginning  January 1, 1998 and will be adopted by the  Company in 1998.
         The  potential  impact on the Company of adopting the new standards has
         not been quantified at this time.

3.       Acquisition of Rental Properties

                  In  January  1997 the  Company  acquired  City  Line  Shopping
         Center, located in Philadelphia,  Pennsylvania for an approximate price
         of $14.8  million.  The shopping  center is anchored by Acme Market and
         Thrift  Drugs.  The  acquisition  was financed  through the issuance of
         approximately 143,000 Common Units to the seller of the property with a
         value of approximately $3.4 million,  assumed mortgage  indebtedness of
         approximately  $10.0  million,  the  issuance  of $1.0  million  of new
         indebtedness  and the  payment  of $0.4  million in cash.  The  assumed
         mortgage loan bears interest at 8.00% per annum and is payable  monthly
         based on a 24 year amortization  schedule.  The loan matures in October
         2005.

                                          5

<PAGE>




           FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES

           NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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




                  In January 1997 the Company  acquired  Four Mile Fork Shopping
         Center located in Fredericksburg,  Virginia for an approximate price of
         $5.7  million,  paid in cash.  The center is  anchored  by Safeway  and
         CVS/Pharmacy.

                  In  January  1997 the  Company  acquired  Shoppes  of  Graylyn
         located in  Wilmington,  Delaware.  The price of the  property was $7.2
         million.  The  center is  anchored  by Rite Aid.  The  acquisition  was
         financed by a $3.8 million draw on the  Company's  line of credit,  $.4
         million from the proceeds of the sale of Thieves Market and the payment
         of $3.0 million in cash.

                  In March  1997 the  Company  acquired  Ashburn  Farms  Village
         Center located in Ashburn,  Virginia for an  approximate  price of $9.2
         million.  The  center  is  anchored  by  Superfresh  Supermarket.   The
         acquisition  was financed  with assumed  mortgage debt of $6.8 million,
         the issuance of approximately  55,000 Common Units to the seller of the
         property with a value of  approximately  $1.2 million,  the issuance of
         approximately  9,500 Preferred Units to the seller of the property with
         a value of approximately  $0.2 million and the payment of approximately
         $1.0 million in cash.  The mortgage loan bears interest at LIBOR + 1.5%
         per annum, has an annual amortization of approximately $.1 million, and
         matures in January 2001.

                  In September  1997 the Company  acquired six shopping  centers
         located in the Chicago,  Illinois  metropolitan area for an approximate
         price of $67.9 million.  The acquired centers and anchor tenants are as
         follows:
<TABLE>
         <S>                           <C>     <C>              <C>  

         Center                        GLA     Anchor Tenant    Location

         Mallard Creek                 143,759 Omni Supermarket Round Lake 
                                                                Beach, IL
         McHenry Commons               100,526 Omni Supermarket McHenry, IL
         Pheasant Hill Plaza           111,190 Dominick's       Bolingbrook, IL
         Riverside Square/River's Edge 169,434 Dominick's       Chicago, IL
         Stonebrook Plaza               95,825 Dominick's       Merrionette 
                                                                Park, IL
         The Oaks                      138,274 Dominick's       Des Plaines, IL
</TABLE>


                  The   acquisition   was  financed   through  the  issuance  of
         approximately 858,000 Common Units to the seller of the properties with
         a value of  approximately  $20.4  million,  the  assumption of mortgage
         indebtedness with a value of $46.0 million and $1.5 million in cash.

                  The assumed  mortgage  indebtedness  consists of six  separate
         mortgage  loans with  effective  interest  rates  ranging from 7.16% to
         7.42% and a weighted average interest rate of 7.26%. The mortgage notes
         mature as follows:

                                    1999             $20,200
                                    2000              13,500
                                    2003               9,500
                                                   ---------
                                    Total            $43,200




                                        6

<PAGE>



               FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES

               NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

                  The following  unaudited pro forma condensed  combined results
         of  operations  are  presented  as if the  acquisitions  of the  rental
         properties (including Mitchellville Plaza which was acquired on October
         1, 1997)  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 and December 1996 Offering  occurred on January
         1 of the periods  presented.  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>

                                        For the nine months ended  For the year
                                              September 30,           ended
                                             1997       1996      Dec. 31, 1996
                                             ----       ----      -------------
            <S>                              <C>        <C>             <C>  


            Total revenues                   $49,854    $46,711         $62,676
            Expenses:
             Property operating 
             and maintenance                  13,430     11,637          17,220
             General and administrative        2,751      3,411           3,137
             Interest                         14,225     14,119          18,891
             Depreciation and 
             amortization                      9,376      8,760          11,906
                                               -----      -----         -------
              Total Expenses                  39,782     37,927          51,154
                                              ------     ------          ------

             Income before income 
              from Management
              Company, extraordinary 
              item, minority interest
              and distributions to 
              Preferred Stockholders          10,072     8,784           11,522
             Income from Management 
              Company                            376        97              221
                                                 ---        --           ------
             Income before extraordinary
              item, minority interest and
              distributions to Preferred 
              Stockholders                    10,448     8,881           11,743
              Extraordinary item - loss 
              on early extinguishment 
              of debt                           (695)        0                0           
                                             --------  -------        ---------
               Income before minority  
               interest and distributions 
               to Preferred Stockholders       9,753     8,881           11,743
               Income allocated to minority 
               interest                       (1,947)   (1,550)          (2,046)
                                             -------   -------        ---------
                Income before distributions 
                to Preferred Stockholders      7,806     7,331            9,697
                Distributions to Preferred 
                Stockholders                  (4,231)   (4,231)          (5,641)
                                             -------   -------          -------
                Income (loss) allocated to 
                Common Stockholders           $3,575    $3,100           $4,056
                                           =========   =======          =======
                Net Income (loss) per common 
                share                          $0.49     $0.45            $0.58
                                          ==========  ========          =======

</TABLE>


4.       Mortgage Debt

                  To minimize the Company's  exposure to interest  rates on debt
         that is maturing in 1999,  the Company has  recently  entered  into two
         interest rate swap contracts.  On June 13, 1997, the Company  purchased
         an option to enter into a five year interest rate swap  effective  June
         1, 1999.  The  underlying  swap  would be for a notional  amount of $15
         million.  If exercised,  the Company would pay a fixed rate of 7.5% per
         annum and would receive variable  payments from the counter party based
         on the 30 day Libor  rate.  The cost of the option was  $159,000  which
         will be amortized over the life of the underlying  swap commencing June
         1,  1999.  On August 1,  1997,  the  Company  entered  into a five year
         interest rate swap contract with a notional amount of $20 million.  The
         contract is effective  March 1, 1999. The Company will pay a fixed rate
         of 6.438% and will receive  variable  payments  from the counter  party
         based on the 30 day Libor rate.  The contracts are accounted for on the
         accrual basis with net  payments/receipts due on the swap recognized as
         an adjustment to interest expense.

                                                         7

<PAGE>



               FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES

               NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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



5.       Summary of Noncash Investing and Financing Activities

         Significant  noncash  transactions  for the nine months ended September
30, 1997 and 1996 were as follows:

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

                                                         1997              1996
                                                         ----              ----

         Liabilities assumed in acquisition 
         of rental properties                         $60,057            $8,097

         Common units in the Operating Partnership
         issued in connection with the acquisition 
         of rental properties                         $25,013            $5,646

         Preferred units in the Operating 
         Partnership issued in connection with the 
         acquisition of rental properties                $277            $1,679

         Increase in minority interest's ownership 
         of the Operating Partnership                 $14,847            $1,485

         Compensation paid through the issuance of 
         Common Stock                                  $3,233               -

         The above information supplements the 
         disclosures required by Statement of 
         Financial Accounting Standards
         No. 95 - "Statement of Cash Flows."

</TABLE>


6.       Stock Option Plans

                  On May 16, 1997, 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 351,540
         to 801,540 shares.

                  On June 1, 1997, as part of the overall incentive compensation
         plan, the Company issued 129,500 options to certain officers, directors
         and employees.

7.       Subsequent Events

                  On October 1, 1997, the Company acquired  Mitchellville  Plaza
         located in  Mitchellville,  Maryland for an approximate  price of $21.3
         million.  The center is  anchored  by Food Lion.  The  acquisition  was
         financed through the issuance of approximately  185,000 Common Units to
         the seller of the property with a value of approximately  $4.6 million,
         the  assumption  of  mortgage  indebtedness  with a valve of $15.9 
         million  and the payment  of $0.8  million in cash.  The  assumed  
         mortgage  loan has an effective rate of 7.11% per annum,  payable  
         monthly based on a 17 year amortization period, and matures on 
         January 1, 2005.

                  On  October  18,  1997,  the  Board of  Directors  declared  a
         distribution  of  $0.4875  and  $.6094  per share of  Common  Stock and
         Preferred Stock,  respectively to shareholders of record as of November
         1, 1997, payable on November 15, 1997.


                                          8

<PAGE>




                 FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES

                 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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



                  On October 31,  1997,  the Company sold .357 acres of land and
         5,500 square feet of building at the Laburnum Park  Shopping  Center to
         Ukrop's Supermarket, Inc. for approximately $0.9 million. The resulting
         gain on sale amounted to approximately $0.5 million and $0.4 million of
         the proceeds were used to retire outstanding debt collateralized by the
         property.

                  In November  1997,  the Company  entered  into an agreement to
         sell the two  multi-family  properties  located  in  Charleston,  South
         Carolina for a combined price of approximately  $8.1 million.  The sale
         is contingent  upon the purchaser  obtaining  financing and the Company
         identifying an exchange  property (for federal tax purposes) within one
         year of the signing of the agreement. The resulting gain on the sale of
         the two properties is estimated to be approximately $1.6 million.
































                                        9

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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.


Comparison  of the three  months  ended  September  30, 1997 to the three months
ended September 30, 1996

         For the three months ended September 30, 1997, the net income allocated
to common  stockholders  increased by $634,000  from a net loss of $311,000 to a
net income $323,000, when compared to the three months ended September 30, 1996,
primarily due to an increase in revenues  offset by an increase in expenses,  an
item of extraordinary  loss and an increase in the amount of income allocated to
minority interests.

         Total revenues  increased by $3,740,000 or 35.6%,  from  $10,514,000 to
$14,254,000,  due primarily to an increase in minimum  rents of  $2,737,000  and
tenant  reimbursements  of $757,000.  The  increases  were  primarily due to the
purchase of Kings Park Shopping Center in December 1996, Newtown Square Shopping
Center in December  1996 and  Northway  Shopping  Center in  December  1996 (the
"Three Month 1996  Acquisitions"),  City Line  Shopping  Center in January 1997,
Four Mile Fork Shopping  Center in January  1997,  Shoppes of Graylyn in January
1997,  Ashburn  Farm Village  Shopping  Center in March 1997 and the six Chicago
properties purchased in September 1997 (the "1997 Acquisitions").

         Property  operating and maintenance  expense increased by $959,000,  or
36.5%,  from  $2,631,000  to  $3,590,000,  due primarily to the Three Month 1996
Acquisitions  and the 1997  Acquisitions.  General and  administrative  expenses
decreased  by  $37,000 or 5.7%,  due  primarily  to a decrease  in the amount of
compensation paid or payable in Company stock of $271,000,  offset by other cash
expenses of $109,000 and accrued cash bonuses of $125,000.

         Interest expense  increased by $748,000,  or 18.7%,  from $3,999,000 to
$4,747,000,  due primarily to the increase mortgage indebtedness associated with
the Three Month 1996  Acquisitions and the 1997  Acquisitions.  The average debt
outstanding  increased  from $186.4 million for 1996 to $218.1 million for 1997.
The weighted average interest rate was 8.6% in 1996 and 8.7% in 1997.

         Depreciation and amortization expenses increased by $711,000, or 34.9%,
from   $2,039,000  to  $2,750,000,   primarily  due  to  the  Three  Month  1996
Acquisitions and the 1997 Acquisitions.

         During 1997 there was a $695,000 extraordinary loss due to the 
early extinguishment of debt.  There was no such item in 1996.

         Income  allocated  to minority  interests  increased  by $151,000  from
$188,000  to  $339,000  due to an  increase in net income and an increase in the
minority interests' ownership of the Operating Partnership.

Comparison of the nine months ended  September 30, 1997 to the nine months ended
September 30, 1996

         For the nine months ended September 30, 1997, the net income  allocated
to common stockholders  increased by $1,594,000 from a net loss of $1,286,000 to
a net income of $308,000,  when compared to the nine months ended  September 30,
1996,  primarily  due to an  increase  in  revenues  offset  by an  increase  in
expenses,  an item of extraordinary loss and an increase in the amount of income
allocated to minority interests.



                                   10

<PAGE>



         Total revenues  increased by $10,192,000 or 33.8%,  from $30,113,000 to
$40,305,000,  due primarily to an increase in minimum  rents of  $8,385,000  and
tenant  reimbursements  of  $1,715,000.  The increases were primarily due to the
purchase of Centre Ridge  Marketplace in March 1996, Takoma Park Shopping Center
in April 1996, Southside Marketplace in June 1996, Kings Park Shopping Center in
December  1996,  Newtown  Square  Shopping  Center in December 1996 and Northway
Shopping Center in December 1996 (the "Nine Month 1996 Acquisitions"), City Line
Shopping Center in January 1997, Four Mile Fork Shopping Center in January 1997,
Shoppes of Graylyn in January  1997,  Ashburn  Farm Village  Shopping  Center in
March  1997  and the  six  Chicago  properties  in  September  1997  (the  "1997
Acquisitions").

         Property operating and maintenance expense increased by $2,693,000,  or
35.3%,  from  $7,623,000  to  $10,316,000,  due primarily to the Nine Month 1996
Acquisitions  and the 1997  Acquisitions.  General and  administrative  expenses
increased by $403,000 or 17.2%, from $2,348,000 to $2,751,000,  due primarily to
an increase in the amount of  compensation  paid or payable in Company  stock of
$543,000 offset by a decrease in other cash expenses of $140,000.

         Interest expense increased by $2,650,000, or 24.0%, from $11,025,000 to
$13,675,000, due primarily to the increase mortgage indebtedness associated with
the Nine Month 1996  Acquisitions  and the 1997  Acquisitions.  The average debt
outstanding  increased  from $172.0 million for 1996 to $217.1 million for 1997.
The weighted average interest rate was 8.6% in 1996 and 8.4% 1997.

         Depreciation  and  amortization  expenses  increased by $2,084,000,  or
36.0%,  from  $5,783,000  to  $7,867,000,  primarily  due to the Nine Month 1996
Acquisitions and the 1997 Acquisitions.

         During 1997, there was a $695,000 extraordinary loss due to the early 
extinguishment of debt.  There was no such item in 1996.

         Income  allocated  to minority  interests  increased  by $352,000  from
$486,000  to  $838,000  due to an  increase in net income and an increase in the
minority interests ownership of the Operating Partnership.


Liquidity and Capital Resources

Indebtedness

         As of  September  30,  1997,  the  Company  had total  indebtedness  of
approximately   $218.7  million  (including  $25.0  million  of  debentures  and
approximately   $193.7   million  of  mortgage   indebtedness).   The   mortgage
indebtedness   consists  of   approximately   $186.6  million  in   indebtedness
collateralized by 33 of the Properties and tax-exempt bond financing obligations
issued by the  Philadelphia  Authority  for  Industrial  Development  (the "Bond
Obligations")  of  approximately  $7.1  million  collateralized  by  one  of the
properties. Of the Company's indebtedness, $13.8 million (6.3%) is variable rate
indebtedness,  and $204.9  million  (93.7%) is at a fixed  rate.  The  effective
interest rates range from 6.6% to 9.9%,  with a weighted  average  interest rate
(excluding the Bond Obligations) of 8.3% on the mortgage indebtedness,  and will
mature between 1999 and 2014. A large portion of the Company's indebtedness will
become due by 2000,  requiring  balloon  payments of $92.8 million in 1999,  and
$24.2  million  in 2000.  From  1999  through  2014,  the  Company  will have to
refinance  an  aggregate  of  approximately  $191.3  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 three  collateralized  revolving  lines of
credit (the "Lines of Credit") totaling  approximately $39 million.  The Company
has a collateralized revolving line of credit of up to $5.8 million from First

                                    11

<PAGE>



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. The Company has an additional collateralized revolving line of credit of
approximately  $8.25 million with Mellon Bank.  This line is  collateralized  by
Kenhorst  Plaza and expires March 29, 1998.  Loans under this line bear interest
at LIBOR plus 1.5%. On January 31, 1997,  the Company  closed a $25 million line
of credit  with  Corestates  Bank.  The line is  collateralized  by  Shoppes  of
Graylyn,  Newtown  Square,  Four Mile Fork and Centre Ridge  Marketplace,  bears
interest at LIBOR plus 1.50% and expires  January 31, 2000.  As of September 30,
1997, there were no outstanding draws under the lines of credit.


         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 1998.

         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, $92.8 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.

         In order to minimize the Company's  exposure to interest  rates on debt
that is maturing in 1999,  the Company has  recently  entered  into two interest
rate swap contracts.  On June 13, 1997, the Company purchased an option to enter
into a five year interest rate swap effective June 1, 1999. The underlying  swap
would be for a notional amount of $15 million.  If exercised,  the Company would
pay a fixed rate of 7.5% per annum and would receive variable  payments from the
counter  party  based  on the 30 day  Libor  rate.  The cost of the  option  was
$159,000 which will be amortized over the life of the underlying swap commencing
June 1, 1999. On August 1, 1997,  the Company  entered into a five year interest
rate swap  contract  with a notional  amount of $20  million.  The  contract  is
effective  March 1, 1999.  The Company  will pay a fixed rate of 6.438% and will
receive variable payments from the counter party based on the 30 day Libor rate.
The contracts are accounted for on the accrual basis with net  payments/receipts
due on the swap recognized as an adjustment to interest expense.

         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.











                                       12

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                                     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, 1996:

                  Date of Sale               Title                       Amount

                  01/24/97                   Common Units         143,385 units
                  03/19/97                   Common Units          55,335 units
                  03/19/97                   Preferred Units        9,538 units
                  09/01/97                   Common Units         858,224 units
                  10/01/97                   Common Units         184,865 units

               (b)        Underwriters and other purchasers

                  i.      January 24, 1997 Sales. Underwriters were not retained
                          in connection with the sale of these securities. These
                          units  were sold to the  seller of City Line  Shopping
                          Center, an "accredited investor".

                  ii.     March 19, 1997 Sales.  Underwriters  were not retained
                          in connection with the sale of these securities. These
                          units were sold to the seller of Ashburn  Farm Village
                          Shopping Center, an "accredited investor".

                  iii.    September 1, 197 Sales. Underwriters were not retained
                          in connection with the sale of these securities. These
                          units  were  sold  to  the   sellers  of  the  Chicago
                          properties, "accredited" investors.

                  iv.     October 1, 1997 Sales.  Underwriters were not retained
                          in connection with the sale of these securities. These
                          units were sold to the seller of Mitchellville  Plaza,
                          an "accredited: investor.

               (c)        Consideration

                  i.      January  24,  1997  Sales.  These units were issued in
                          exchange for property having a value of  approximately
                          $4.8 million, net of assumed indebtedness.  There were
                          no underwriting  discounts or commissions with respect
                          to such securities.

                  ii.     March 19,  1997  Sales.  These  units  were  issued in
                          exchange for property having a value of  approximately
                          $3.8 million, net of assumed indebtedness.  There were
                          no underwriting  discounts or commissions with respect
                          to such securities.

                  iii.    September  1, 1997  Sales.  These units were issued in
                          exchange for property having a value of  approximately
                          $24.7 million net of assumed indebtedness.  There were
                          no underwriting

                                                        13

<PAGE>



                       discounts or commissions with respect to such securities.


                  iv.     October 1, 1997  Sales.  These  units  were  issued in
                          exchange for property having a value of  approximately
                          $5.4 million net of assumed  indebtedness.  There were
                          no underwriting  discounts or commissions with respect
                          to such securities.


Item 6.        Exhibits and Reports on Form 8-K

(a)            Exhibits

 3.1           Articles of Incorporation of the Company (1)

 3.2           Bylaws of the Company (3)

21.1           List of Subsidiaries (1)

27             Financial Data Schedule (2)

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


(1)            Incorporated herein by reference from the Company's Form 10-K 
               for the year ended December 31, 1996.

(2)            Filed herewith.

(3)            Incorporated herein by reference from the Company's Registration 
               Statement on Form S-11 (No. 33-
               83960).

(b)            Reports on Form 8-K.

               An  interim  report  on Form 8-K was  filed on  August  1,  1997,
               reporting the acquisition of six retail properties.

               An  interim  report on Form 8-K was filed on  September  9, 1997,
               setting forth certain risk factors.

               An interim  report on Form 8-K was filed on  September  10, 1997,
               including   financial   information   with  respect  to  probable
               acquisitions.

               An interim  report on Form 8-K was filed on  September  17, 1997,
               including certain exhibits thereto.

               An interim  report on Form 8-K was filed on  September  19, 1997,
               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:          November 13, 1997          /s/ William J. Wolfe
                                                ------------------------------
                                                By: William J. Wolfe
                                                    President and
                                                    Chief Executive Officer


     Date:          November 13, 1997           /s/ James G. Blumenthal
                                                ------------------------------
                                                By: James G. Blumenthal
                                                    Executive Vice President and
                                                    Chief Financial Officer

                                      15

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