UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC  20549

                                   FORM 10-Q

[X]  Quarterly  Report  Pursuant  to  Section  13 or 15 (d) of the  Securities
Exchange Act of 1934
For the quarter ended    September 30, 1998                        
                      ---------------------------------------------
                  or
[ ]  Transition  Report  Pursuant  to  Section  13 or 15(d) of the  Securities
Exchange Act of 1934

For the transition period from              to              

Commission File Number 33-24129                             

Historic Preservation Properties 1989 Limited Partnership
(Exact name of registrant as specified in its charter)

      Delaware                                           04-3021042   
(State or other jurisdiction                    (I.R.S. Employer
    of incorporation or                         Identification No.)
      organization)

45 Broad Street, 3rd Floor, Boston, Massachusetts         02109      
(Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code (617) 338-6900 

Previous Address:  Batterymarch Park II, Quincy, MA 02169

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     


Voting stock held by non-affiliates of the registrant:  Not Applicable.

<PAGE>



           HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP

                                   FORM 10-Q

                              September 30, 1998

                               TABLE OF CONTENTS


PART  I  -  FINANCIAL INFORMATION

      Financial Statements

         Balance Sheets                                                  3

         Statements of Operations                                        4

         Statements of Partners' Equity (Deficit)                        5

         Statements of Cash Flows                                        6

         Notes to Financial Statements                                   7-13

       Management's Discussion and Analysis of Financial
               Condition and Results of Operations                      14-18

PART II -  Other Information                                            19

         Signatures                                                     20


                                      2

<PAGE>


          HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
                                BALANCE SHEETS
                   SEPTEMBER 30, 1998 AND DECEMBER 31, 1997

                                    ASSETS

                                                        1998           1997
                                                 -----------    -----------
(Unaudited)

INVESTMENT IN REAL ESTATE                        $ 4,108,780              $
                                                                  4,000,210
Less reserve for realization of investments in    (3,469,267)    (3,469,267)
Investee entity
                                                 -----------    -----------
                                                     639,513        530,943

CASH AND CASH EQUIVALENTS                            107,329        175,288
OTHER ASSETS                                          76,850         77,505
                                                 -----------    -----------
                                                              
                                                 $   823,692    $   783,736
                                                 ===========    ===========


LIABILITIES AND PARTNERS' EQUITY


LIABILITIES:
Accounts payable and accrued expenses            $    35,373    $    33,562
                                                 -----------    -----------
                           
Total liabilities                                     35,373         33,562
                                                 -----------    -----------
                                              
COMMITMENTS AND CONTINGENCIES (Notes 3 and 4)

PARTNERS' EQUITY
Limited Partners' Equity- Units of Investor
Partnership Interest, $1,000 stated value
per Unit-issued and outstanding 26,588 units       1,011,772        974,008
General Partner's Deficit                           (223,453)      (223,834)
                                                 -----------    -----------
                                          
Total partners' equity                               788,319        750,174
                                                 -----------    -----------
                                         
                                                 $   823,692    $   783,736
                                                 ===========    ===========


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

                                      3

<PAGE>


          HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
                           STATEMENTS OF OPERATIONS
            FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
          AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                 (UNAUDITED)



                                   Three Months              Nine Months
                                  Ended September 30,     Ended September 30,
                                   1998        1997        1998        1997
                                 ----------  ----------   ---------   ---------
REVENUES:
   Interest and other income     $    1,903  $    2,026   $   5,113   $   6,507
                                ----------  ----------   ---------   ---------
                                      1,903       2,026       5,113       6,507
                                 ----------  ----------   ---------   ---------
EXPENSES:
   Operating and administrative      55,233      54,163     157,250     130,713
                                 ----------  ----------   ---------   ---------
    
LOSS FROM OPERATIONS                (53,330)    (52,137)   (152,137)   (124,206)

EQUITY IN INCOME OF
   INVESTEE ENTITIES                 54,416      39,746     190,282      17,782
                                 ----------  ----------   ---------   ---------
                         
NET INCOME (LOSS)                $    1,086  $  (12,391)   $  38,145  $(106,424)
                                 ==========  ==========   =========   =========
                             
NET INCOME (LOSS) ALLOCATED
   TO GENERAL PARTNERS           $       11  $     (124)  $     381   $  (1,064)
                                 ==========  ==========   =========   =========

NET INCOME (LOSS) ALLOCATED
   TO LIMITED PARTNERS           $    1,075  $  (12,267)  $  37,764   $(105,360)
                                 ==========  ==========   =========   =========

NET INCOME (LOSS) PER UNIT OF
   INVESTOR LIMITED PARTNERSHIP
   INTEREST, BASED ON 26,588
   UNITS ISSUED AND OUTSTANDING  $      .04  $     (.46)  $    1.42   $   (3.96)
                                 ==========  ==========   =========   =========


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

                                      4

<PAGE>


          HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
                   STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
               FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
                       THE YEAR ENDED DECEMBER 31, 1997




                             Units of
                             Investor      Investor
                             Limited        Limited      General
                            Partnership    Partners'    Partner's
                             Interest       Equity       Deficit         Total
                            -----------   ------------  -----------   ----------

BALANCE, December 31, 1996     26,588     $ 1,069,565    $(222,869)   $ 846,696
                                                     
   Net loss                         -         (95,557)        (965)     (96,522)
                             --------      ----------    ---------    ---------
                       
BALANCE, December 31, 1997     26,588         974,008     (223,834)     750,174

   Net income (Unaudited)           -          37,764          381       38,145
                             --------     -----------    ---------    ---------
                          
BALANCE, September 30, 1998
  (Unaudited)                  26,588     $ 1,011,772    $ 223,453)   $ 788,319
                             ========     ===========    =========    =========

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

                                      5
<PAGE>

          HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
                           STATEMENTS OF CASH FLOWS
            FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                 (UNAUDITED)



                                                        1998            1997
                                                    --------------  ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                  $    38,145     $ (106,424)
                                                                       
  Adjustments to reconcile net income (loss) to
net cash
      use in operating activities:
      Equity in income in investee entities             (190,282)       (17,782)
      Decrease in other assets                               655         20,150
      Increase (decrease) in accounts payable and          1,811         (2,521)
accrued expenses
                                                    --------------  ------------
         Net cash used in operating activities          (149,671)      (106,577)
                                                    --------------  ------------
                                    
CASH FLOWS FROM INVESTING ACTIVITIES:
      Cash contributions to investee entity              (35,288)             -
      Distributions from investee entity                 117,000        117,000
                                                    --------------  ------------
         Net cash provided by investing activities        81,712        117,000
                                                    --------------  ------------
         
NET INCREASE (DECREASE) IN CASH                          (67,959)        10,423

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD           175,288        163,316
                                                    --------------  ------------
                       
CASH AND CASH EQUIVALENTS, END OF PERIOD             $   107,329    $   173,739
                                                    ==============  ============


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

                                      6

<PAGE>

             HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
                          NOTES TO FINANCIAL STATEMENTS
                                 SEPTEMBER 30, 1998
                                    (UNAUDITED)


(1)   Organization and General Partner - BHP

      Historic  Preservation  Properties 1989 Limited  Partnership  ("HPP'89" or
      "the  Partnership")  was formed on  September  1, 1988 under the  Delaware
      Revised  Uniform  Limited  Partnership  Act.  The  purpose of HPP'89 is to
      invest in a diversified  portfolio of real  properties,  for which certain
      costs of  rehabilitation  have  qualified for  rehabilitation  tax credits
      (Rehabilitation Tax Credits).

      The  general  partner  of  HPP'89  is  Boston  Historic  Partners  Limited
      Partnership (BHP), a Massachusetts limited partnership.  BHP was formed in
      November  1986 for the purpose of  organizing,  syndicating  and  managing
      publicly offered real estate limited partnerships  (Public  Rehabilitation
      Partnerships).  As of September 30, 1998, BHP had  established  three such
      partnerships, including HPP'89.

(2)   Basis of Presentation

      The  accompanying  unaudited  financial  statements  of  HPP'89  have been
      prepared in accordance with generally accepted  accounting  principles for
      interim financial information and generally with instructions to Form 10-Q
      and Article 10 of Regulation S-X. Accordingly,  they do not include all of
      the information and footnotes  required by generally  accepted  accounting
      principles  for  complete   financial   statements.   In  the  opinion  of
      management,  all  adjustments  (consisting of normal  recurring  accruals)
      considered necessary for a fair presentation have been included. Operating
      results for the nine months ended  September 30, 1998 are not  necessarily
      indicative  of the  results  that  may be  expected  for the  year  ending
      December  31,  1998.  For  further  information,  refer  to the  financial
      statements  and  footnotes  thereto  included in the Annual Report on Form
      10-K for the year ended  December  31, 1997 for HPP'89,  as filed with the
      Securities and Exchange Commission.

      Certain amounts in the 1997 Financial Statements have been reclassified to
      conform to the 1998 presentation.

(3)   Investments  in Investee  Entities  and Real  Estate;  Commitments  and 
      Contingencies

      During  1989,  HPP'89  acquired  general  partnership  interests  in three
      Investee  Entities,  as well as a direct interest in a property located in
      St.  Paul,  Minnesota.  Each such  Investee  Entity  placed a property  in
      service in December 1989 and commenced initial leasing activity.

      As discussed below, in March 1996, HPP'89  contributed land,  building and
      improvements  and furniture and equipment  related to its property located
      in St. Paul,  Minnesota  (the  Cosmopolitan  Building),  and certain other
      assets and liabilities, to a limited liability company for a 50% ownership
      interest in the Investee Entity.

      HPP'89's current allocable percentage of operating income and/or losses in
      the  Investee  Entities  ranges  from  50% to 99%.  Each  of the  Investee
      Entities' agreements is different but, in general,  provides for a sharing
      of management  duties and decisions among HPP'89 and the respective  local
      general  partners or other  managing  members,  and certain  priorities to
      HPP'89  with  respect  to  return  on  and  return  of  invested  capital.
      Significant  Investee Entity decisions require the approval of both HPP'89
      and the local general  partners or other  managing  members.  In addition,
      each Investee  Entity has entered into various  agreements  with its local
      general partners or members, or their affiliates,  to provide development,
      management  and other  services,  for which the local general  partners or
      other  members  (or their  affiliates),  are paid  fees by the  respective
      Investee Entity.

      Following is summary of  information  regarding the Investee  Entities and
      HPP'89's investments therein:

      Jenkins Court Associates Limited Partnership (Jenkins Court) is a Delaware
      limited  partnership  which was formed on  December  20,  1988 to acquire,
      construct,  rehabilitate, operate and manage a 144,000 net rentable square
      foot five-story building and 30,000 net rentable square feet of new retail
      space, including storage areas and parking facilities, located at Old York
      Road and Rydal Road, Jenkintown Borough, Pennsylvania.

                                      7
<PAGE>

          HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
                  NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                              SEPTEMBER 30, 1998
                                 (UNAUDITED)


(3)   Investments  in Investee  Entities  and Real  Estate;  Commitments  and 
      Contingencies (continued)

      HPP'89 contributed  $6,563,064 through the date of Jenkins Court's Chapter
      11 filing (see  below) to the  capital of Jenkins  Court and had a general
      partnership  interest  therein.   HPP'89's  investment  in  Jenkins  Court
      represented  approximately  36%  of  the  aggregate  amount  which  HPP'89
      originally  contributed  to the  capital  of its three  Investee  Entities
      acquired   during  1989  and  to  purchase  its  direct  interest  in  the
      Cosmopolitan Building.

      On November  23,  1994,  Jenkins  Court filed a petition  for relief under
      Chapter 11 of the  federal  bankruptcy  laws in United  States  Bankruptcy
      Court for the  jurisdiction of the Eastern  District of  Pennsylvania.  On
      August 31, 1995, after maximum vesting of the remaining Rehabilitation Tax
      Credits had been achieved for 1995 and considering  the  unlikelihood of a
      successful plan of  reorganization,  Jenkins Court and the mortgage holder
      entered into a settlement  agreement under which Jenkins Court transferred
      the deed and title of the  property to the mortgage  holder.  The mortgage
      holder   released   Jenkins  Court  and  its  guarantors  for  the  entire
      indebtedness,   and  Jenkins  Court   received   $25,000  to  pay  certain
      professional fees incurred during the bankruptcy proceedings. The transfer
      of deed and title of the  property to the  mortgage  holder  resulted in a
      recapture of  Rehabilitation  Tax Credits in 1995 of $44,451 to HPP'89, of
      which $44,007 was allocated to the Limited Partners of HPP'89. Tax credits
      allocated  to the Limited  Partners  of HPP'89  totaling  $2,758,113  were
      vested  on or  before  June 15,  1995.  Therefore,  98.4%  of the  Limited
      Partners' tax credits were vested prior to the loss of the property.

      Although Jenkins Court no longer owns investment  property or has property
      operations  after  August 31, 1995,  the Jenkins  Court  partnership  will
      remain in existence until the resolution of certain partnership assets and
      liabilities.   Partnership  assets  include   approximately   $312,000  of
      unsecured  receivables  from the developer and its  affiliates  which have
      been  fully  reserved  for at  December  31,  1997 and  1996;  partnership
      liabilities  include  approximately  $94,000 of trade  payables which have
      been fully  reserved  for at December  31, 1997 and 1996 since HPP'89 does
      not believe such amount will be recourse to HPP'89,  as well as a $250,000
      default  loan and  accrued  interest  thereon  which had been  provided by
      HPP'89 and secured by the developer's  interest in an unaffiliated limited
      partnership.

      402 Julia Street Associates Limited  Partnership (402 Julia) is a Delaware
      limited  partnership  formed  on  July  25,  1989 to  acquire,  construct,
      rehabilitate,  operate  and  manage  a  19,000  square  foot  site and the
      building  situated  thereon  and to  rehabilitate  the  building  into  24
      residential  units and  approximately  3,500 net  rentable  square feet of
      commercial  space  located  thereon  at 402  Julia  Street,  New  Orleans,
      Louisiana.  At  September  30,  1998,  402  Julia  had  leased  94% of its
      residential  units and 100% commercial  space for a combined  occupancy of
      96% .

      HPP'89  originally  contributed  $775,000  to the capital of 402 Julia and
      owns a general partnership interest therein.  HPP'89's original investment
      in 402 Julia  represented  approximately  4% of the aggregate amount which
      HPP'89  has  contributed  to the  capital of its three  Investee  Entities
      acquired in 1989 and to purchase its direct  interest in the  Cosmopolitan
      Building.

      On September 16, 1993,  HPP'89 sold  one-third of its general  partnership
      interest  in 402 Julia to the  developer  general  partner  for  $185,000.
      HPP'89's  percentage of interest in 402 Julia was thereby reduced from 98%
      to 65%.  The terms of the sale  required an initial  payment of  $100,000,
      which was received in September  1993,  and  requires  annual  payments of
      $3,500  through 2016 and a final  payment of $4,500 in 2017.  At September
      30,  1998 the  remaining  uncollected  payments  total  $71,000  which are
      secured by the interest sold to the developer  general  partner.  The sale
      transaction did not generate any Investment Tax Credit recapture.

      On July 17, 1998,  402 Julia  refinanced  its  mortgage  debt by issuing a
      promissory  note to a new  lender  in the  amount  of  $1,100,000  bearing
      interest at 6.69%,  amortizing  over 30 years and maturing in August 2008,
      at which time all unpaid interest and principal is due.


                                      8
<PAGE>

          HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
                  NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                              SEPTEMBER 30, 1998
                                 (UNAUDITED)


(3)   Investments  in Investee  Entities  and Real  Estate;  Commitments  and 
      Contingencies (continued)

      Rehabilitation Tax Credits generated by 402 Julia and previously allocated
      to HPP'89 Limited Partners  totaled $248,796 since inception.  As of March
      31, 1995, 100% of these credits were fully vested.

      HPP'89  recorded  net loss of $21,753 and $4,400 for the nine months ended
      September  30,  1998 and 1997  respectively,  as well as  amortization  of
      $2,439 for each of the nine months ended September 30, 1998 and 1997, from
      the 402 Julia Investment.

      Portland  Lofts  Associates  Limited  Partnership  (Portland  Lofts)  is a
      Delaware  limited  partnership  formed  on  August  8,  1989  to  acquire,
      construct,  rehabilitate, operate and manage three buildings containing 89
      residential  units and 29,250 square feet of ground floor space useable as
      either  commercial space or as home/studio  space for artists,  located at
      555  Northwest  Park Avenue in Portland,  Oregon.  At September  30, 1998,
      Portland Lofts had leased  approximately 95% of its residential  apartment
      units and 95% of the commercial space for a combined occupancy of 95%.

      HPP'89 contributed $3,820,000 through September 30, 1998 to the capital of
      Portland Lofts and owns a general partnership  interest therein.  HPP'89's
      investment in Portland Lofts represents approximately 21% of the aggregate
      amount which  HPP'89  originally  contributed  to the capital of its three
      Investee  Entities acquired in 1989 and to purchase its direct interest in
      the Cosmopolitan Building.

      Rehabilitation  Tax Credits  generated by Portland  Lofts and allocated to
      HPP'89's Limited Partners totaled $1,775,571 since inception.  As of April
      1, 1996, 100% of these tax credits were fully vested.

      On May 21, 1996,  Portland Lofts and the holder of its mortgage note and a
      $550,000   unsecured  note  entered  into  a  Settlement   Agreement  (the
      Agreement)  to  resolve  claims  concerning  the  mortgage  note  and  the
      unsecured note (the Notes). According to the Agreement, Portland Lofts was
      allowed  until  July 31,  1996 to pay  $5,400,000  to the  holder  in full
      satisfaction of the Notes.

      On June 20, 1996,  Portland  Lofts issued a promissory  mortgage note to a
      bank in the  amount  of  $5,625,000  and a  promissory  note to one of its
      general partners in the amount of $340,000 to provide  sufficient funds to
      pay in full the $5,400,000  settlement  amount with the holder, a separate
      $400,000  note  payable and all related  closing  costs.  The  transaction
      resulted in an extraordinary gain on extinguishment of debt of $1,656,579.

      In 1990,  HPP'89 had reserved  against its  investment  in Portland  Lofts
      reducing  such  investment  to  zero  due to the  substantial  doubt  that
      Portland Lofts may not be able to continue as a going concern.  Due to the
      debt settlement and refinancing  completed in June 1996, Portland Lofts is
      expected  to  continue  as a going  concern.  Generally,  under the equity
      method  of  accounting,  an  investment  may not be  carried  below  zero.
      Accordingly,  since the Portland Lofts  Investment was fully reserved for,
      HPP'89 had  cumulative  unrecorded  losses of  $1,325,926  at December 31,
      1995.  Principally as a result of the extraordinary gain on extinguishment
      of debt, Portland Lofts generated net income of $1,547,514 during the year
      ended  December  31, 1996 of which HPP'89 has been  allocated  $1,532,039.
      Consequently,  HPP'89 was able to recover all of its cumulative unrecorded
      losses  from  Portland  Lofts and  recognize  income  in  equity  from its
      investment in Portland  Lofts of $206,113 for the year ended  December 31,
      1996. At December 31, 1996,  HPP'89's net  investment  balance in Portland
      Lofts totaled approximately $180,000.

                                      9
<PAGE>

          HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
                  NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                              SEPTEMBER 30, 1998
                                 (UNAUDITED)


(3)   Investments  in Investee  Entities  and Real  Estate;  Commitments  and 
      Contingencies (continued)

      For the year ended December 31, 1997,  Portland Lofts allocated a net loss
      of  $173,710  and paid  cash  distributions  of  $156,000  to  HPP'89.  As
      mentioned  above,  generally,  under the equity method of  accounting,  an
      investment may not be carried below zero. During 1997, HPP'89's investment
      in  Portland  Lofts  was  reduced  to zero  due to  allocated  losses  and
      distributions received. Although HPP'89's investment in Portland Lofts has
      been  reduced to zero,  Portland  Lofts is expected to continue as a going
      concern and to continue to provide  distributions  to HPP'89.  At December
      31,  1997,  HPP'89  had  cumulative  unrecorded  losses  totaling  $95,392
      relating to the Portland Lofts investment.

      For the nine  months  ended  September  30,  1998,  HPP'89  recognized  an
      unrecorded  loss of $2,185 from Portland  Lofts,  thereby  increasing  the
      cumulative  unrecorded losses relating to the Portland Lofts investment as
      of September 30, 1998 to $97,577.  For the nine months ended September 30,
      1997,  HPP'89 recorded a net loss of $78,319 and had unrecorded  losses of
      $14,330 from the Portland Lofts investment.

      For each of the nine months  ended  September  30,  1998 and 1997,  HPP'89
      received  distributions  of $117,000 from the Portland  Lofts  investment.
      Distributions  of $117,000 and $15,206 for the nine months ended September
      30,  1998 and 1997,  respectively,  were  recorded  as equity in income of
      investee entities.

      The  Cosmopolitan at Mears Park, LLC (TCAMP) On December 18, 1989,  HPP'89
      acquired the Cosmopolitan  Building  containing 255 residential  units and
      approximately  2,200  square feet of  commercial  space.  The building was
      renovated,  and certain  renovation costs qualified for Rehabilitation Tax
      Credits.  HPP'89  purchased the  Cosmopolitan  Building for one dollar and
      assumed  mortgage  indebtedness  with  a face  value  of  $22,500,000.  In
      accordance with the terms of the Purchase and Sale Agreement,  HPP'89 paid
      $5,000,000  at the  closing  which  was  used to  repay a  portion  of the
      outstanding  mortgage  loan  principal.   The  Cosmopolitan  Building  was
      originally  recorded  at the net  purchase  price of the net  indebtedness
      assumed  by  HPP'89  plus  the  amount  paid  at the  closing.  Subsequent
      improvements were recorded at cost.

      HPP'89's investment in the Cosmopolitan Building represented approximately
      39% of the aggregate  amount which HPP'89  originally  contributed  to the
      capital of its three  Investee  Entities  acquired in 1989 and to purchase
      its direct interest in the Cosmopolitan  Building.  At September 30, 1998,
      the economic occupancy of TCAMP was 97%.

      Rehabilitation  Tax Credits  generated by the purchase of the Cosmopolitan
      Building and previously  allocated to HPP'89's  Limited  Partners  totaled
      $4,307,491  since  inception.  As of December 31, 1994,  100% of these tax
      credits were fully vested.

      The mortgage HPP'89 assumed  relating to its purchase of the  Cosmopolitan
      Building had an original maturity date of December 18, 1999. On January 5,
      1995,  HPP'89  consummated  the  Second  Amendment  to the Loan  Agreement
      (Second  Amendment)  with the holder to resolve a dispute  over funds in a
      restricted  escrow  account.  The terms of the  Second  Amendment  allowed
      HPP'89 to be paid the interest  earned on and  overfunded  deposits to the
      escrow account.  Also,  HPP'89 received an option to buy the mortgage note
      for the fair market value of the property.  In exchange,  HPP'89  released
      the principal funds of the escrow account  (approximately  $1,311,000) for
      payment on the outstanding mortgage and agreed to reduce the maturity date
      of the note from December 18, 1999 to December 18, 1996.

                                      10
<PAGE>

          HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
                  NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                              SEPTEMBER 30, 1998
                                 (UNAUDITED)


(3)   Investments  in Investee  Entities  and Real  Estate;  Commitments  and 
      Contingencies (continued)

      Effective March 15, 1996,  HPP'89  contributed the Cosmopolitan  Building,
      and certain other assets and  liabilities,  to TCAMP (a Limited  Liability
      Company)  for a  50%  ownership  interest.  Concurrently,  another  member
      contributed   $650,000  cash  to  TCAMP  for  a  50%  ownership  interest.
      Simultaneously,  TCAMP issued a mortgage note in the amount of $7,000,000,
      the proceeds of which along with the $650,000  contributed  cash were used
      to  settle  in  full  HPP'89's   mortgage  note  payable  related  to  the
      Cosmopolitan  Building.  The fair value of the  Cosmopolitan  Building and
      other  assets  contributed  by  HPP'89  approximated  the  fair  value  of
      liabilities transferred to TCAMP by HPP'89 and the amount paid by TCAMP to
      settle in full HPP'89's  mortgage note payable related to the Cosmopolitan
      Building.  This transaction resulted in a provision for impairment of real
      estate of $8,437,963 to recognize a reduction to fair value at the date of
      contribution to TCAMP and an extraordinary gain on debt  extinguishment of
      $9,182,017  to recognize  the  difference  between the amount  outstanding
      under the  mortgage  payable  and the amount  accepted  by the lender from
      TCAMP in full settlement.

      Distributions  from TCAMP to HPP'89 and the other  members  are subject to
      the order of  distributions  as  specified in the  Operating  Agreement of
      TCAMP. Until the other member's original $650,000 capital contribution had
      been repaid in full, to the extent that the Partnership  accumulated  from
      whatever  sources  operating  reserve amounts greater than $140,000 at the
      end of any fiscal year, the  Partnership  was required to contribute  such
      excess  within  thirty  days of the end of such  fiscal  year to  TCAMP as
      additional  capital  contributions to be distributed by TCAMP to its other
      member as a return of its original capital contribution.

      On February 27, 1998,  HPP'89  contributed to TCAMP $35,288,  representing
      operating  reserves in excess of $140,000 at December 31, 1997.  The funds
      were then  distributed  from TCAMP to its other  member as a return of its
      original  capital  contribution.  As of December 31, 1997, the outstanding
      balance  of  the  other  member's  unreturned  original  $650,000  capital
      contribution  was $223,773.  On May 18, 1998, the other member's  original
      $650,000 capital  contribution was repaid in full, thereby eliminating any
      future requirements for HPP'89 to make additional capital contributions to
      TCAMP.

      As a result of the  contribution  of the  Cosmopolitan  to TCAMP for a 50%
      ownership  interest  in TCAMP,  HPP'89 no longer has  operations  directly
      related  to real  estate  activity.  As of March  15,  1996  (the  date of
      contribution),  the Partnership accounts for its investment in TCAMP under
      the equity method of accounting. HPP'89 recorded net income from the TCAMP
      investment of $97,474 and $87,735 for the nine months ended  September 30,
      1998 and 1997, respectively.

      HPP'89's  investments  in the Investee  Entities at September 30, 1998 and
      December 31, 1997 are  summarized as follows  (excluding the investment in
      Jenkins Court):
                                                    1998               1997
                                              ----------------   ---------------
                                                                   (Audited)
      Cumulative:
      Investments  and  advances  made in cash $   4,880,288      $   4,845,000
      Evaluation and acquisition costs               835,709            835,709
      Interest capitalization and other costs         39,615             39,615
      Net equity in loss of Investee Entities       (959,097)        (1,151,818)
      Reserves for realization of investments     (3,469,267)        (3,469,267)
      Amortization of certain costs                  (48,915)           (46,476)
      Distributions  received  from  Investee       (397,200)          (280,200)
        Entities
      Sale of one third  interest of Investee       (241,620)          (241,620)
        Entity
                                              ---------------   ----------------

                                               $     639,513       $    530,943
                                              ================   ===============


                                      11
<PAGE>

          HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
                  NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                              SEPTEMBER 30, 1998
                                 (UNAUDITED)

(3)   Investments  in Investee  Entities  and Real  Estate;  Commitments  and 
      Contingencies (continued)

      The equity in income of Investee  Entities  reflected in the  accompanying
      statements of operations for the nine months ended  September 30, 1998 and
      1997 includes allocated income of $192,721 and $20,221,  respectively, and
      amortization  of certain costs of $2,439 for each of the nine months ended
      September 30, 1998 and 1997.

      Summary combined  balance sheets of the Investee  Entities as of September
      30, 1998 and  December  31,  1997,  and  summary  combined  statements  of
      operations  for the nine months ended  September  30, 1998 and 1997 are as
      follows:

                           COMBINED BALANCE SHEETS
                                    ASSETS
                                             1998           1997
                                          -----------    -----------
Buildings and Improvements,(net of                        (Audited)
  accumulated depreciation;
  1998, $3,305,696; 1997, $2,896,633)     $15,465,117    $15,855,989
Land                                        2,041,326      2,041,326
Other assets(net of accumulated
  amortization;1998, $85,652;
  1997,$105,861)                              623,694        561,218
Cash and cash equivalents                     173,001        393,832
                                          -----------    -----------
           Total assets                   $18,523,969    $18,631,534
                                          ===========    ===========

                       LIABILITIES AND PARTNERS' EQUITY
                                             1998           1997
                                          -----------    -----------
                                                          (Audited)
Liabilities:
  Mortgage and notes payable              $13,393,443    $13,412,706
  Other liabilities                           824,385        735,828
                                           ----------    -----------
        Total liabilities                  14,207,828     14,148,534
                                          -----------    -----------  
                                                                    

   Partners' (or Members') equity:
     HPP'89                                 3,377,418      3,385,594
     Other partners                           938,723      1,097,406
                                          -----------    -----------  
       Total partners' equity               4,316,141      4,483,000
                                          -----------    -----------  
         Total liabilities and 
          partners' equity                $18,523,969    $18,631,534  
                                          ===========    =========== 

                   COMBINED STATEMENTS OF OPERATIONS
                                             1998           1997
                                          -----------    -----------
Revenue:
  Rental revenue                          $ 2,839,801    $ 2,663,808
  Interest and other income                   100,852        108,892
                                          -----------    -----------
                                            2,940,653      2,772,700
                                          -----------    -----------
  Expenses:
    Interest expense                          936,195        950,420
    Depreciation and amortization             459,093        457,730
    Operating expenses                      1,385,922      1,289,401
                                          -----------    -----------
                                            2,781,210      2,697,551
                                          -----------    -----------
                                  
   Net income                             $   159,443    $    75,149
                                          ===========    ===========
   Net income (loss) allocated
   to HPP'89                              $    73,536    $    (9,315)
                                          ===========    ===========
   Net income allocated to other partners $    85,907    $    84,464
                                          ===========    ===========


                                      12
<PAGE>

             HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
                     NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                                 SEPTEMBER 30, 1998
                                    (UNAUDITED)

(4)   Transactions With Related Parties and Commitments

      On October 1, 1995, HPP'89 engaged Claremont Management Corporation (CMC),
      a Massachusetts corporation previously unaffiliated and a related party as
      of March 15, 1996 through ownership by a member of TCAMP, to provide asset
      management,  accounting and investor services.  CMC provided such services
      for an annual  management  fee of $67,200  plus  reimbursement  of all its
      costs of providing these services.  The contract with CMC expired June 30,
      1998.  For the six  months  ended  June 30,  1998 and  nine  months  ended
      September 30, 1997, CMC was reimbursed $50,716 and $56,186,  respectively,
      for operating costs.

      Effective July 1, 1998,  HPP'89 engaged Gunn Financial,  Inc.  (GFI),  an
      unaffiliated  Massachusetts  corporation,  to  provide  accounting,  asset
      management and investor  services.  GFI will provide such services for an
      annual management fee of $63,000,  plus  reimbursement of all its costs of
      providing these services. The agreement expires on the earlier of June 30,
      2006 or the  liquidation  of the  Partnership,  as defined.  For the three
      months ended September 30, 1998, GFI was reimbursed $26,462 for operating
      costs.

      In November 1995, HPP'89 entered into a management  agreement with CMC, to
      manage the Cosmopolitan Building.  CMC's management agreement required the
      payment of management fees equal to the greater of $5,200 monthly or 4% of
      gross  receipts as defined in the  agreements.  For the period  January 1,
      1996 through March 15, 1996,  CMC was paid $21,940 in property  management
      fees.  The CMC  management  agreement  also required the  Cosmopolitan  to
      maintain  with CMC at all  times an  Operating  Account  in the  amount of
      $100,000 and a  Contingency  Reserve  Account in the amount of $50,000 for
      the  benefit  of the  Cosmopolitan.  On March 15,  1996,  the date  HPP'89
      contributed  the  property  to TCAMP,  the  property  management  contract
      between HPP'89 and CMC was terminated and TCAMP directly engaged CMC under
      similar management fee terms.

(5)   Fair Value of Financial Instruments

      The fair values of cash  equivalents,  other assets,  and accounts payable
      and  accrued  expenses  at  September  30,  1998  and  December  31,  1997
      approximate their carrying amounts due to their short maturities.


                                      13
<PAGE>

          HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                     CONDITION AND RESULTS OF OPERATIONS
                              SEPTEMBER 30, 1998

Liquidity and Capital  Resources.  The  Partnership  terminated  its offering of
Units on December 29, 1989, at which time Limited  Partners had purchased 26,588
Units, representing gross capital contributions of $26,588,000.  The Partnership
originally  invested an aggregate of $11,158,064 in three Investee  Partnerships
which owned or acquired real properties,  the  rehabilitation of which qualified
for  Rehabilitation  Tax  Credits.  The  Partnership  also  originally  invested
$5,000,000 in the Cosmopolitan, real property that the Partnership had purchased
directly,  and was required to place a total of $2,000,000 in an escrow  account
with the mortgage lender for this property for the purpose of funding  operating
deficits.

Such amounts originally contributed represent  approximately 100% of the Limited
Partners'  capital   contributions  after  deduction  of  selling   commissions,
organizational and sales costs,  acquisition fees and reserves.  The Partnership
does not expect to make any additional investments in new real estate.

The  Cosmopolitan  is a 255  unit  residential  property  located  in St.  Paul,
Minnesota.  On January  5, 1995,  the  Partnership  resolved a dispute  with the
holder of the Cosmopolitan's mortgage over certain amounts in an escrow account.
As a result,  the Partnership  received  approximately  $286,000 from the escrow
account  which was used to fund and reserve  for the general and  administrative
expenses of the  Partnership,  and  obtained  the  opportunity  to purchase  the
mortgage  note at the fair market  value of the  property,  in exchange  for the
release of the principal  funds from the escrow  account as a payment toward the
mortgage  principal  and a  reduction  of the  mortgage  term  by  three  years.
Effective March 15, 1996, HPP'89 contributed the Cosmopolitan, and certain other
assets  and  liabilities,  to  TCAMP (a  Limited  Liability  Company)  for a 50%
ownership interest.  Concurrently,  another member contributed  $650,000 cash to
TCAMP for a 50% ownership interest. Simultaneously, TCAMP issued a mortgage note
in the amount of  $7,000,000  the  proceeds  of which  along  with the  $650,000
contributed  cash,  were used to settle in full  HPP'89's  mortgage note payable
related to the Cosmopolitan Building.  TCAMP's mortgage bears interest at 9.14%;
amortizes  over a 25 year schedule and requires  monthly  payments of principal,
interest, real estate tax and replacement reserve deposits totaling $94,551; the
mortgage  matures in March 2003, at which time all unpaid  principal and accrued
interest  is due.  After  March 14,  1996,  HPP'89 no longer has any  operations
directly  related to real estate activity or generates cash from rental activity
from the  Cosmopolitan.  As of March 15, 1996, the Partnership  accounts for its
investment in TCAMP under the equity method of accounting.

Jenkins  Court  was a  174,000  square  foot  building  located  in  Jenkintown,
Pennsylvania  leased to office  and  retail  tenants.  Jenkins  Court  filed for
protection  under  Chapter 11 Federal  Bankruptcy  laws on November 23, 1994. On
August 31, 1995,  after  maximum  vesting of the  remaining  Rehabilitation  Tax
Credits  had been  achieved  for 1995,  and  considering  the  unliklihood  of a
successful plan of  reorganization,  Jenkins Court  negotiated with the mortgage
holder  to  transfer  the deed and the  title of the  property  to the  mortgage
holder, in lieu of foreclosure.

Although Jenkins Court no longer owns its investment property and will no longer
have property operations, the Jenkins Court partnership will remain in existence
until the  resolution  of  certain  partnership  assets and  liabilities.  These
liabilities include a $250,000 default loan and accrued interest thereon,  which
has been  provided  by HPP'89 and  secured  by the  developer's  interest  in an
unaffiliated limited partnership. As a result of the Chapter 11 proceedings, The
Partnership  is not expected to be liable as a general  partner of Jenkins Court
for any remaining obligations of Jenkins Court.

Due to the foreclosure proceeding related to Jenkins Court, HPP'89 no longer has
an  investment  in the  property.  As of December 31, 1995,  the  investment  in
Jenkins Court and its  corresponding  reserve,  both totaling  $5,471,055,  were
eliminated from the balance sheet.

Portland  Lofts is a  mix-use  property  located  in  Portland,  Oregon  with 89
residential  units and 29,250  square  feet of  commercial  space.  In May 1996,
Portland  Lofts reached a settlement  agreement  with the holder of its mortgage
note and an unsecured  note.  According to the  Settlement  Agreement,  Portland
Lofts was allowed until,  July 31, 1996, to pay $5,400,000 to the holder in full
satisfaction of both the mortgage note and an unsecured note.


                                      14
<PAGE>

          HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
                              SEPTEMBER 30, 1998

On June 20, 1996, Portland Lofts issued a promissory mortgage note in the amount
of  $5,625,000  and a  promissory  note to a general  partner  in the  amount of
$340,000 to provide  sufficient  funds to pay in full the $5,400,000  settlement
amount  with the holder in full  satisfaction  of both the  mortgage  note,  the
unsecured note payable and all related closing costs.  The transaction  resulted
in an extraordinary  gain on extinguishment  of debt of $1,656,579.  The current
mortgage note on the property bears  interest at 9.0%;  amortizes over a 25-year
schedule;  requires monthly  payments of principal and interest of $47,205;  and
matures on July 1, 2006, at which time all unpaid principal and interest is due.

402  Julia is a mix-use  property  located  in New  Orleans,  Louisiana  with 24
residential  units and 3,500 square feet of commercial  space.  On September 16,
1993, HPP'89 sold one-third of its general partnership  interest in 402 Julia to
the developer general partner for $185,000.  HPP'89's  percentage of interest in
402 Julia was thereby reduced from 98% to 65%. The terms of the sale required an
initial payment of $100,000,  which was received in September 1993, and requires
annual payments of $3,500 through 2016 and a final payment of $4,500 in 2017. On
July 17, 1998,  402 Julia  refinanced  its mortgage debt by issuing a promissory
note to a new  lender in the amount of  $1,100,000  bearing  interest  at 6.69%,
amortizing  over 30 years and maturing in August 2008,  at which time all unpaid
interest and principal is due.

The short-term liquidity of the Investee Entities, with the exception of Jenkins
Court,  depends on their  ability to generate  sufficient  rental income to fund
operating expenses and debt service requirements.  TCAMP, Portland Lofts and 402
Julia have stabilized  operations and, after  considering the effects of TCAMP's
and Portland  Lofts' recent  respective  refinancings,  are expected to generate
cash flow.  For each of the nine months ended  September 30, 1998 and 1997,  the
Partnership   received   distributions   from   Portland   Lofts  of   $117,000,
respectively.

HPP'89's cash is used primarily to fund general and  administrative  expenses of
managing the public fund. The Partnership's  only source of short term liquidity
is from distributions  received from Investee Entities and the proceeds from the
previous sale of a partial  interest in 402 Julia.  The  Partnership  expects to
fund its expenses with cash flow distributions from Portland Lofts and TCAMP. As
of September 30, 1998 and December 31, 1997,  the  Partnership  had $107,329 and
$175,288 of total cash.

Until the other member's original $650,000 capital  contribution had been repaid
in full, to the extent that the Partnership  accumulated  from whatever  sources
operating  reserve  amounts greater than $140,000 at the end of any fiscal year,
the Partnership was required to contribute such excess within thirty days of the
end of such  fiscal  year to TCAMP as  additional  capital  contributions  to be
distributed by TCAMP to its other member as a return of the outstanding  portion
of its original capital  contribution.  On February 27, 1998, HPP'89 contributed
to TCAMP  $35,288,  representing  operating  reserves  in excess of  $140,000 at
December  31,  1997.  The funds  were then  distributed  from TCAMP to its other
member as a return of its original capital contribution.  On May 18, 1998, TCAMP
had returned the total outstanding portion of its original capital  contribution
to its other member,  thereby  eliminating any future requirements for HPP'89 to
make additional capital contributions to TCAMP.

Cash  flow  generated  from  the  Partnership's  investment  properties  and the
Partnership's share of the proceeds from the sale of such properties is expected
to be the source of future long-term liquidity.

                                      15
<PAGE>

          HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
                              SEPTEMBER 30, 1998


Results of Operations.  As a result of the  contribution of the  Cosmopolitan to
TCAMP for a 50%  ownership  interest  in TCAMP,  subsequent  to March 14,  1996,
HPP'89 no longer had operations directly related to real estate activity.  As of
the date of contribution,  the Partnership  accounts for its investment in TCAMP
under the equity method of accounting.

Due to the foreclosure proceeding related to Jenkins Court, HPP'89 no longer has
an  investment  in the  property.  As of December 31, 1995,  the  investment  in
Jenkins Court and its  corresponding  reserve,  both totaling  $5,471,055,  were
eliminated from the balance sheet.

The Partnership  accounts for its  investments in its three  remaining  investee
entities  under the  equity  method.  In  general,  under the  equity  method of
accounting for  investments,  the investment is recorded at cost and the current
allocable  portion of earnings  (losses)  of an  Investee  Entity is recorded as
income  (loss)  with a  corresponding  increase  (decrease)  to  the  investment
account.  The allocable portion of losses of an Investee Entity are not recorded
after the  respective  investment  account  is reduced  to zero.  The  allocable
portion of earnings of an Investee  Entity are not recorded until all previously
unrecorded losses are absorbed.  The Partnership's  allocable share of operating
income and/or losses in investee entities range from 50% to 99%.

Distributions  received are recorded as  reductions to the  investment  account.
Distributions  received  from an Investee  Entity  whose  respective  investment
account has been reduced to zero are recorded as income.

As of September 30, 1998, 402 Julia leased 94% of its residential units and 100%
commercial space for a combined occupancy of 96%. 402 Julia has benefited from a
relatively strong New Orleans market and continues to record stable  operations.
402 Julia rents units to residential tenants, half of which are under short-term
operating  leases with the remaining rented under  month-to-month  arrangements.
For the nine months ended  September 30, 1998,  402 Julia recorded a net loss of
approximately  $33,300  of  which  included  depreciation  and  amortization  of
approximately $45,000.

At  September  30,  1998,  Portland  Lofts had leased  approximately  95% of its
residential  apartment  units and 95% of the  commercial  space  for a  combined
occupancy of 95%. Portland Lofts rents space to residential  tenants principally
under  month-to-month  arrangements  and to commercial  tenants under  operating
leases of varying terms  expiring  through  2004. As of September 30, 1998,  the
Partnership  had entered  into  fifteen  commercial  leases.  The  Partnership's
largest  commercial tenant  occupancies 23% of the commercial space at September
30, 1998,  representing only 5.8% of the total square feet of the property.  For
the nine months ended September 30, 1998,  Portland Lofts recorded a net loss of
approximately  $2,200  of  which  included   depreciation  and  amortization  of
approximately $213,800.

TCAMP operates its 255 unit  residential  property in the competitive  lowertown
district of St. Paul,  Minnesota with  traditional,  annual  operating leases to
individuals that expire within one year of signing.  Despite the availability of
low mortgage rates in the single family house market, the building has increased
rental  rates with the market and  maintained  occupancy  above 95% for  several
years.

At  September  30,  1998,  TCAMP had an economic  occupancy of 97%. For the nine
months ended  September  30, 1998,  TCAMP  recorded net income of  approximately
$194,900,   which  included   depreciation  and  amortization  of  approximately
$200,300.

In 1990,  the  Partnership  fully  reserved  against its  investment in Portland
Lofts,  due to the  substantial  doubt it  would  continue  as a going  concern.
Accordingly,  since the Portland  Lofts  investment  was fully reserved for, the
Partnership had cumulative  unrecorded losses of $1,325,926  associated with the
investment as of December 31, 1995.  Principally as a result of an extraordinary
gain  on  extinguishment  of  debt,  Portland  Lofts  generated  net  income  of
$1,547,514  in  1996,  of  which  HPP'89  has been  allocated  $1,532,039.  This
allocated net income allowed HPP'89 to recover all of its cumulative  unrecorded
losses from Portland Lofts.


                                      16
<PAGE>

          HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
                              SEPTEMBER 30, 1998


For the year ended  December 31, 1997,  Portland  Lofts  allocated a net loss of
$173,710 and cash  distributions  of $156,000 to HPP'89.  During 1997,  HPP'89's
investment in Portland Lofts was reduced to zero due to allocation of losses and
distributions received.  Accordingly, HPP'89 had cumulative unrecorded losses at
December  31, 1997 of $95,392.  For the nine months  ended  September  30, 1998,
HPP'89 recognized unrecorded losses of $2,185,  increasing the unrecorded losses
from the Portland  Lofts  investment  to $97,577.  Distributions  received  from
Portland Lofts for the nine months ended September 30, 1998 totaled $117,000 and
were  recorded  as  equity  income  of  investee  entities.   Although  HPP'89's
investment  in  Portland  Lofts  has been  reduced  to zero,  Portland  Lofts is
expected to continue as a going concern and to continue to provide distributions
to HPP'89.

The  Partnership  recorded  net  income,  under  generally  accepted  accounting
principles, of $1,086 for the three months ended September 30, 1998, compared to
a net loss of $12,391  for the three  months  ended  September  30,  1997.  This
increase of $13,477 in net income is primarily  attributable  to the increase in
equity in income of investee entities of approximately  $14,700. The increase in
the  Partnership's  share of equity in income is  primarily  due to the activity
from Portland Lofts,  offset by an increase in 402 Julia's net allocated losses.
As mentioned above, the Partnership's  net investment  balance in Portland Lofts
had been reduced to zero in the third  quarter of 1997, as a result of allocated
net losses and  distributions  received.  Therefore,  for the three months ended
September  30,  1997,  the  Partnership  recorded a loss of $738,  reducing  the
Portland Lofts net investment balance to zero, offset by distributions  received
in excess of the  investment  balance of $15,206  recorded  as equity  income of
investee  entities.   For  the  same  period  1998,  the  Partnership   received
distributions  of $39,000 in excess of the net  investment  balance in  Portland
Lofts  that were also  recorded  as equity  income  of  investee  entities.  The
increase in 402 Julia's net loss of $13,850 for the three months ended September
30, 1998,  compared to the same period in 1997,  is primarily  attributed to the
amortization of the deferred loan commitment fee related to 402 Julia's original
mortgage which was refinanced prior to its maturity in July of 1998.

The  Partnership  recorded  net  income,  under  generally  accepted  accounting
principles, of $38,145 for the nine months ended September 30, 1998, compared to
a net loss of $106,424 for the nine months ended June 30,  1997.  This  $144,569
increase to net income is  primarily  attributable  to the increase in equity in
income of investee entities of approximately $172,500,  offset by an increase in
operating and administrative  expenses of approximately $26,500. The increase in
HPP'89's  share of  equity  in  income is  primarily  due to the  activity  from
Portland Lofts,  offset by an increase in 402 Julia's net allocated  losses.  As
mentioned  above, the Portland Lofts investment was reduced to zero in the third
quarter of 1997.  Therefore,  for the nine months ended  September 30, 1997, the
Partnership  had  recorded  a net loss of  $78,314  offset by  distributions  of
$15,206  received in excess of the net  investment  balance from Portland  Lofts
compared  to  distributions  of $117,000  recorded as equity  income of investee
entities  for the same period in 1998.  The  increase in 402 Julia's net loss of
$17,352 for the nine  months  ended  September  30,  1998,  compared to the same
period in 1997, is primarily attributed to the amortization of the deferred loan
commitment fee related to 402 Julia's original mortgage.

Inflation and Other Economic Factors

Recent  economic  trends  have  kept  inflation  relatively  low,  although  the
Partnership  cannot  make any  predictions  as to  whether  recent  trends  will
continue.  The assets of the  Partnership,  principally  investments in Investee
Entities,  are highly leveraged in view of the fact that each Investee  property
is subject to a substantial  long-term first mortgage loan.  Operating  expenses
and rental  revenue  of each  Investee  property  are  subject  to  inflationary
factors.  Low rates of inflation  could result in slower rental rate  increases,
and to the extent that these  factors  are  outpaced  by  increases  in property
operating   expenses  (which  could  arise  as  a  result  of  general  economic
circumstances  such as an increase in the cost of energy or fuel,  or from local
economic  circumstances),  the operations of the  Partnership  and its Investees
could be adversely  affected.  Actual  deflation in prices  generally  would, in
effect,  increase  the  economic  burden of the  mortgage  debt  service  with a
corresponding adverse effect.

                                     17
<PAGE>

          HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
                              SEPTEMBER 30, 1998


Inflation and Other Economic Factors (continued)

High rates of inflation,  on the other hand,  raise the  operating  expenses for
projects,  and to the extent they cannot be passed on to tenants  through higher
rents,  such increases  could also  adversely  affect  Partnership  and Investee
operations. Although, to the extent rent increases are commensurable, the burden
imposed by the mortgage leverage is reduced with a favorable effect. High levels
of new  construction  of similar  projects and low levels of interest  rates may
reduce demand for existing retail properties.

Year 2000 Issues

The Partnership  and its Investee  Entities have analyzed the effect of the Year
2000 on their respective  financial and computer  systems and have  incorporated
and/or  expect to have  incorporated  the necessary  modifications  to avert any
negative  consequences.  The Partnership does not anticipate Year 2000 issues to
have any material  effect on its  operations  or the  operations of the Investee
Entities.  The  Partnership  also  does  not  anticipate  that  it  shall  incur
substantial costs to address Year 2000 issues.

                                     18
<PAGE>

          HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
                         PART II - OTHER INFORMATION
                              SEPTEMBER 30, 1998


Item 1.           Legal Proceedings

            The  Partnership  is not a party  to, to the best  knowledge  of the
            General Partner, any material pending legal proceedings.

            To  the  best  knowledge  of  the  General  Partner,  Jenkins  Court
            Associates L.P.,  Portland Lofts  Associates  L.P., 402 Julia 
            Street Associates L.P. nor The  Cosmopolitan  at Mears Park, LCC 
            are not currently  subject to any material pending legal
            proceedings.

Item 2.           Changes in Securities - Not applicable.

Item 3.           Defaults Upon Securities - Not applicable.

Item 4.           Submission of Matters to a Vote of Security Holders - Not
applicable.

Item 5.           Other Information - Not applicable.

Item 6.           Exhibits and Reports from Form 8-K

            (a)   Exhibits
                  None.

            (b)   Reports from Form 8-K None.


                                      19
<PAGE>

          HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP

                                  SIGNATURES


Pursuant to the  requirements of Section 13 or 15(d) 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.

                      HISTORIC PRESERVATION PROPERTIES 1989
                           LIMITED PARTNERSHIP

                           By:   Boston Historic Partners Limited Partnership
                                 General Partner

                                 By:   Portfolio Advisory Services, Inc.
                                       General Partner

Date:  November 1, 1998                By:  /s/ Terrence P. Sullivan
                                             Terrence P. Sullivan,
                                             President

                                 and


Date:  November 1, 1998          By:  /s/ Terrence P. Sullivan
                            
                                       Terrence P. Sullivan,
                                       General Partner

                                     20