<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549


                                   FORM 10-Q

                  QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934


       For Quarter Ended March 31, 1999  Commission File Number 0-17810



                       COPLEY REALTY INCOME PARTNERS 2;
                             A LIMITED PARTNERSHIP
            (Exact name of registrant as specified in its charter)


     Massachusetts                                   04-2961376
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)

     225 Franklin Street, 25th Fl.
     Boston, Massachusetts                             02110
(Address of principal executive offices)             (Zip Code)

              Registrant's telephone number, including area code:
                                (617) 261-9000


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


     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (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  ___
<PAGE>
 
                       COPLEY REALTY INCOME PARTNERS 2;
                             A LIMITED PARTNERSHIP

                                   FORM 10-Q


                       FOR QUARTER ENDED MARCH 31, 1999


                                    PART I


                             FINANCIAL INFORMATION
                                        
<PAGE>
 
COPLEY REALTY INCOME PARTNERS 2;
A LIMITED PARTNERSHIP

BALANCE SHEETS

<TABLE>
<CAPTION>
                                   March 31, 1999     December 31, 1998
                                     (Unaudited)           (Audited)
                                   ---------------    -----------------
<S>                                <C>                <C>
Assets
 
Real estate investments:
 Property held for disposition,     $           -        $  6,225,018
 net
 
Cash and cash equivalents               7,390,972             518,094
Other assets                               18,270                   -
                                   --------------       -------------          
                                    $   7,409,242        $  6,743,112   
                                   ==============       =============

Liabilities and Partners' Capital                         
                                                
Lease commission payable            $     103,547        $          -
Accounts payable                           44,500              41,594
Accrued management fee                     25,991              12,799
                                   --------------       -------------
Total liabilities                         174,038              54,393
                                   --------------       -------------
                                                
Partners' capital (deficit):                    
 Limited partners ($781 per unit;               
 100,000 units authorized, 32,767               
 units issued and outstanding)          7,381,057           6,840,037
General partners                         (145,853)           (151,318)
                                   --------------       -------------
Total partners' capital (deficit)       7,235,204           6,688,719
                                   --------------       -------------
                                                  
                                    $   7,409,242        $  6,743,112
                                   ==============       =============
</TABLE>

          (See accompanying notes to unaudited financial statements)
<PAGE>
 
COPLEY REALTY INCOME PARTNERS 2;
A LIMITED PARTNERSHIP

STATEMENTS OF OPERATIONS (Unaudited)

<TABLE>
<CAPTION>
                                                                     Quarter Ended March 31,
                                                                   1999                   1998
                                                            -----------------     ------------------
Investment Activity
<S>                                                         <C>                   <C> 
Property rentals                                            $      126,439          $       202,600
Depreciation and amortization                                            -                  (98,999)
Property operating expenses                                        (30,500)                 (28,978)
                                                            --------------          ---------------
 Total real estate operations                                       95,939                   74,623
 
 
Gain on sale of investment                                         599,655                        -
                                                            --------------          ---------------
 Total real estate activity                                        695,594                   74,623
 
Interest on cash equivalents
 and short-term investments                                         30,865                   20,313
                                                            --------------          ---------------
 
 Total investment activity                                         726,459                   94,936
                                                            --------------          ---------------
Portfolio Expenses
 
General and administrative                                          24,570                   26,009
Management fee                                                      25,991                   12,799
                                                            --------------          ---------------
                                                                    50,561                   38,808
                                                            --------------          ---------------
 
Net Income                                                  $      675,898          $        56,128
                                                            ==============          ===============
 
 
Net income per limited partnership unit                     $        20.42          $          1.70
                                                            ==============          ===============
Cash distributions per                                                                            
 limited partnership unit                                   $         3.91          $          8.80
                                                            ==============          =============== 
 
Number of limited partnership
 units outstanding during
 the period                                                         32,767                   32,767
                                                            ==============          ===============
</TABLE> 

               (See accompanying notes to financial statements)
<PAGE>
 
COPLEY REALTY INCOME PARTNERS 2;
A LIMITED PARTNERSHIP
 
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
(Unaudited)

<TABLE> 
<CAPTION> 
                                                                   Quarter Ended March 31,
                                                             1999                               1998            
                                                    -----------------                  ----------------------
                                                     General     Limited                General     Limited     
                                                    Partners     Partners              Partners     Partners    
                                                    ---------   ----------             ---------   ----------   
<S>                                                 <C>         <C>                    <C>         <C>          
Balance at beginning                                                                                            
  of period                                         $(151,318)  $6,840,037             $(139,263)  $8,033,516   
                                                                                                                
Cash distributions                                     (1,294)    (128,119)               (2,913)    (288,376)  
                                                                                                                
Net income                                              6,759      669,139                   561       55,567   
                                                    ---------   ----------             ---------   ----------   
                                                                                                                
Balance at end of                                                                                               
  period                                            $(145,853)   7,381,057             $(141,615)  $7,800,707   
                                                    =========   ==========             =========   ==========    
</TABLE>

           (See accompanying notes to unaudited financial statements)
<PAGE>
 
COPLEY REALTY INCOME PARTNERS 2;
A LIMITED PARTNERSHIP


SUMMARIZED STATEMENTS OF CASH FLOWS
(Unaudited)

<TABLE> 
<CAPTION> 
                                             Three Months Ended March 31,
                                            -----------------------------
                                                  1999           1998
                                            -----------------------------
<S>                                         <C>                <C>   
Net cash provided by operating activities   $   46,776         $  158,405   
                                            ----------         ----------   
                                                                            
Cash flows from investing activities:                                       
  Net proceeds from sale of property         6,955,515                  -   
    Decrease in short-term                                                  
    investments, net                                 -            586,822   
                                            ----------         ----------   
                                                                            
  Net cash provided by investing activities  6,955,515            586,822   
                                            ----------         ----------   
                                                                            
Cash flows from financing activities:                                       
  Distributions to partners                   (129,413)          (291,289)   
                                            ----------         ----------   
                                                                            
Net increase in cash and cash                                               
  equivalents                                6,872,878            453,938   
                                                                            
Cash and cash equivalents:                                                  
  Beginning of period                          518,094          1,083,887   
                                            ----------         ----------   
                                                                            
  End of period                             $7,390,972         $1,537,825   
                                            ==========         ==========    
</TABLE>

           (See accompanying notes to unaudited financial statements)
<PAGE>
 
COPLEY REALTY INCOME PARTNERS 2;
A LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

   In the opinion of management, the accompanying unaudited financial statements
contain all adjustments necessary to present fairly the Partnership's financial
position as of March 31, 1999 and December 31, 1998 and the results of its
operations, its cash flows and partners' capital (deficit) for the three months
ended March 31, 1999 and 1998. These adjustments are of a normal recurring
nature.

   See notes to financial statements included in the Partnership's 1998 Annual
Report on Form 10-K for additional information relating to the Partnership's
financial statements.


NOTE 1 - ORGANIZATION AND BUSINESS
----------------------------------

   Copley Realty Income Partners 2; A Limited Partnership (the "Partnership") is
a Massachusetts limited partnership organized for the purpose of investing
primarily in newly-constructed and existing income-producing real properties.
The Partnership commenced operations in October 1987, and acquired its remaining
real estate investment prior to the end of 1987.  The Partnership intended to
dispose of its investments within six to nine years of their acquisition, and
then liquidate; however, the managing general partner has extended the holding
period, having determined it to be in the best interest of the limited partners.
The Partnership has engaged AEW Real Estate Advisors, Inc. (the "Advisor") to
provide asset management advisory services.

NOTE 2 - PROPERTY
-----------------

   On February 26, 1999, the La Mirada buildings were sold for a gross sale
price of $7,150,000. The partnership received net proceeds of $6,955,515 after
closing costs, and recognized a gain of $599,655 ($18.12 per limited partnership
unit) on the sale. On April 29, 1999 the Partnership made a capital distribution
of $6,519,322 ($198.96 per limited partnership unit) from the proceeds of the
sale.

<TABLE>
<CAPTION>
 
                                  March 31, 1999  December 31, 1998
                                  --------------  ------------------
<S>                               <C>             <C>
 
Land                                 $         -        $ 4,711,859
Buildings and improvements                     -          7,855,152
Accumulated depreciation                       -         (2,757,345)
Investment valuation allowance                 -         (4,200,000)
                                    ------------       ------------
                                               -          5,609,666
 
Other net assets                          18,270            615,352
                                    ------------       ------------
                                     $    18,270        $ 6,225,018
                                    ============       ============
</TABLE>
<PAGE>
 
COPLEY REALTY INCOME PARTNERS 2;
A LIMITED PARTNERSHIP


NOTE 3 - SUBSEQUENT EVENT
-------------------------

  Distributions of cash from operations relating to the quarter ended March 31,
1999 were made on April 29, 1999 in the aggregate amount of $113,195 ($3.42 per
limited partnership unit).  In addition, a special operating distribution was
made on April 29, 1999 from reserve operating cash flow in the amount of
$149,603 ($4.52 per limited partnership).

  As discussed above, the Partnership made a capital distribution of $6,519,322
($198.96 per limited partnership unit) from the proceeds of the La Mirada sale.
<PAGE>
 
COPLEY REALTY INCOME PARTNERS 2;
A LIMITED PARTNERSHIP

Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------


Liquidity and Capital Resources
-------------------------------

  The Partnership completed its offering of units of limited partnership
interest in April 1988, and a total of 32,997 units were sold. The Partnership
received proceeds of $29,379,522, net of selling commissions and other offering
costs, which have been invested in real estate, used to pay related acquisition
costs or retained as working capital reserves.

  In connection with the two sales during May and December of 1997, capital of
$7,182,093 ($219 per limited partnership unit) has been returned to the limited
partners, reducing the adjusted capital contribution to $781 per unit.

  At March 31, 1999, the Partnership had $7,390,972 in cash and cash
equivalents, of which $262,798 was used for operating cash distributions to
partners on April 29, 1999. In addition, $6,519,322 was used for a capital
distribution to limited partners due to the sale of La Mirada. The remainder is
being retained primarily as a reserve in the event of any claims for breach of a
representations or warranties in connection with the sale of the La Mirada
property on February 26, 1999, and as an additional reserve in connection with
the liquidation of the Partnership. Distributions of cash from operations
related to the first quarter of 1999 were made at the annualized rate of 1.75%
on the adjusted capital contribution of $781 per unit; cash distributions from
operations related to the first quarter of 1998 were made at the annualized rate
of 2.0% on the adjusted capital contribution of $781 per unit. The distribution
rate was lower in 1999 primarily due to the sale of the remaining investment in
1999 and the consequent reduction in cash flow.

  The Partnership maintains a fund for the purpose of repurchasing limited
partnership units. Two percent of cash flow, as defined, is designated for this
fund which had a balance of $209,371 and $73,208 at March 31, 1999 and December
31, 1998, respectively. Through March 31, 1999, the Partnership had repurchased
and retired 230 limited partnership units for an aggregate cost of $177,945.

 
<PAGE>
 
COPLEY REALTY INCOME PARTNERS 2;
A LIMITED PARTNERSHIP


Year 2000 Readiness Disclosure
------------------------------

  The Year 2000 Issue is a result of computer programs being written using two
digits rather than four to define the applicable year. Computer programs that
have date-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions or engage in normal
business operations.

  The Partnership relies on AEW Capital Management L.P. ("AEW Capital
Management"), the parent of AEW Real Estate Advisors, Inc., to generate
financial information and to provide other services which are dependent on the
use of computers. The Partnership has obtained assurances from AEW Capital
Management that:

  .  AEW Capital Management has developed a Year 2000 Plan (the "Plan")
     consisting of five phases: inventory, assessment, testing,
     remediation/repair and certification.

  .  As of September 30, 1998, AEW Capital Management had completed the
     inventory and assessment phases of this Plan and had commenced the testing
     and remediation/repair of internal systems.

  .  AEW Capital Management expects to conclude the internal testing,
     remediation/repair and certifications of its Plan no later than June 30,
     1999.

The Partnership also relies on joint venture partners and/or property managers
to supply financial and other data with respect to its real properties.  The
Partnership is in the process of surveying these third party providers and
assessing their compliance with Year 2000 requirements.  To date, the
Partnership is not aware of any problems that would materially impact its
results of operations, liquidity or capital resources.  However, the Partnership
has not yet obtained written assurances that these providers would be Year 2000
compliant.

The Partnership currently does not have a contingency plan in the event of a
particular provider or system not being Year 2000 compliant.  Such a plan will
be developed if it becomes clear that a provider (including AEW Capital
Management) is not going to achieve its scheduled compliance objectives by June
30, 1999.  The inability of one of these providers to complete its Year 2000
resolution process could materially impact the Partnership.  In addition, the
Partnership is also subject to external forces that might generally affect
industry and commerce, such as utility or transportation company Year 2000
compliance failures and related service interruptions.  Given the nature of its
operations, the Partnership will not incur any costs associated with Year 2000
compliance.  All such costs are borne by AEW Capital Management and the property
managers.
<PAGE>
 
COPLEY REALTY INCOME PARTNERS 2;
A LIMITED PARTNERSHIP

Results of Operations
---------------------
  Investment Results

  The La Mirada investment had been vacant from August 1990 through January
1994. Since January 1, 1995, the property has been 100% occupied under a long-
term lease. Real estate operating results for the first quarter of 1999 and 1998
were $95,939 and $74,623, respectively. The increase of $21,316 between the
comparable periods is primarily due to the omission of depreciation and
amortization as the property was held for disposition, somewhat offset by the
prorated property rentals.

  Interest on cash equivalents and short-term investments increased by
approximately $11,000 between the respective three month periods. The increase
is primarily due to an increase in average investment balances stemming from the
sale proceeds of La Mirada.

  Cash flow from operations decreased by approximately $111,000 between the
respective three month periods. The decrease is primarily due to the sale of the
remaining property discussed above and a decrease in property working capital.

  The Partnership management fee is 9% of distributable cash flow from
operations after any increase or decrease in working capital reserves as
determined by the managing general partner. The Partnership management fee
increased approximately $13,000 between the first quarter of 1999 and 1998 due
to a special operating distribution.
<PAGE>
 
                       COPLEY REALTY INCOME PARTNERS 2;
                             A LIMITED PARTNERSHIP


                                   FORM 10-Q


                       FOR QUARTER ENDED MARCH 31, 1999


                                    PART II


                               OTHER INFORMATION



Item 6.  Exhibits and Reports on Form 8-K

         a.  Exhibits: (27)  Financial Data Schedule

         b.  Reports on Form 8-K: During the quarter ended March 31, 1999, a
             current report on Form 8-K was filed on March 9, 1999 reporting on
             Item No. 2 (Acquisition or Disposition of Assets) and Item No. 7
             (Financial Statements and Exhibits), relating in both cases to the
             February 26, 1999 sale of La Mirada.
<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.



                             COPLEY REALTY INCOME PARTNERS 2; A LIMITED
                             PARTNERSHIP
                             (Registrant)



May 13, 1999
                              /s/ J. Christopher Meyer, III
                              -------------------------------
                                J. Christopher Meyer, III
                                President, Chief Executive Officer and Director
                                of Managing General Partner,
                                Second Income Corp.



May 13, 1999
                              /s/ Karin J. Lagerlund
                              --------------------------------
                               Karin J. Lagerlund
                               Treasurer and Principal Financial and Accounting
                               Officer of Managing General Partner, Second
                               Income Corp.