U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

    FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                                   (Mark One)

       (x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1997

                                       or

     ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                        For the transition period from to

                         Commission file number 1-10641


                           MILESTONE PROPERTIES, INC.
             (Exact Name of Registrant as Specified in its Charter)

          Delaware                                         65-0158204
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
   Incorporation or Organization)

150 E. Palmetto Park Rd. 4th Floor Boca Raton, FL                       33432
  (Address of Principal Executive Offices)                            (Zip Code)

Registrant's telephone number, including area code              (561) 394-9533
                                                              ------------------

Securities registered under Section 12(b) of the Exchange Act:   None

Securities registered under Section 12(g) of the Exchange Act:

                                                   Name of Each Exchange
    Title of Each Class                            on Which Registered
----------------------------------                 ------------------------
Common Stock, $.01 par value                       New York Stock Exchange

$.78 Convertible Series A
 Preferred Stock, $.01 par value                   New York Stock Exchange

Indicate by check mark whether the Registrant (1) 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. x
                                  Yes      No
Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-K contained in this form, and no disclosure  will be contained,  to
the best of the  Registrant's  knowledge,  in  definitive  proxy or  information
statements  incorporated  by  reference  in Part III of this Form 10-K or by any
amendment to this Form 10-K. [x]


<PAGE>




The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant,  computed by reference to the last sale price on March 20, 1998, was
approximately $ 1 9/16 for the Common Stock and $1 7/16 for the $.78 Convertible
Series A Preferred Stock.

The  Registrant's  revenues  for the fiscal  year ended  December  31, 1997 were
$30,091,911.

As of March 20,  1998,  4,213,368  shares of the  Registrant's  Common Stock and
3,033,995 shares of the Registrant's  $.78 Convertible  Series A Preferred Stock
were outstanding.

              DOCUMENTS INCORPORATED BY REFERENCE:

The Registrant's  Proxy Statement for its 1998 Annual Meeting of Stockholders is
hereby incorporated by reference into Part III of this Form 10-K.





<PAGE>




                                TABLE OF CONTENTS


PART I


Item 1. Business..............................................................1
Item 2. Description of Property..............................................10
Item 3. Legal Proceedings....................................................13
Item 4. Submission of Matters to a Vote of Security Holders..................15

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.16
Item 6. Selected Financial Data. . . . . . . . . . . . . . .  . . . . . . . . 18
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.....................................................18
Item 8. Financial Statements and Supplementary Data...........................24
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure......................................................24

PART III


Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . 25
Item 11. Executive Compensation...............................................25
Item 12. Security Ownership of Certain Beneficial Owners and Management.......25
Item 13. Certain Relationships and Related Transactions.......................25
Item 14. Exhibits, Financial Statement Schedule  and Reports on Form 8-K......26

SIGNATURES....................................................................31

Financial Statements.........................................................F-1



<PAGE>



                                                          PART I

Item 1.        Business.

Introduction

               Milestone Properties,  Inc.  ("Milestone"),  directly and through
its wholly owned subsidiaries,  is engaged in the business of owning, acquiring,
managing,  developing  and investing in  commercial  real estate and real estate
related  assets.  Milestone,  together  with its  subsidiaries,  is  hereinafter
referred  to as the  "Company."  The  Company is  primarily  engaged in a single
business  industry,   commercial  real  estate,  which  currently  involves  the
ownership,  operation and  management of 32 interests in commercial  real estate
properties  consisting of (i) 4 fee interests  (the "Fee  Properties")  and (ii)
wraparound  notes  (the  "Wraparound  Notes")  and  wraparound   mortgages  (the
"Wraparound Mortgages" and, together with the Wraparound Notes, the "Wrap Debt")
which are secured by 28 commercial real properties (the "Underlying  Properties"
and,  together  with the Fee  Properties,  the  "Properties").  The Company also
serves as the master lessee under  individual  leases on each of the  Underlying
Properties.  The Properties are broken out by type in the following  table which
should be read in conjunction with Table 1. Summary of Properties and Underlying
Debt located at Item 2. Description of Property:

 Property Type                    No. of Properties                 GLA (Sq.Ft.)
 Fee Properties                              4                         537,189
 Underlying Properties                      28                       2,104,859
                                       -------                       ---------
 Totals                                     32                       2,642,048
                                       =======                       =========


               The  Company's  objectives  are to  realize  upon,  maintain  and
improve the value of the  Company's  real estate  holdings and to generate  cash
flow. To accomplish  these  objectives,  the Company may (i) continue to operate
the  Properties,  (ii)  sell  some  or  all  of the  Properties,  (iii)  acquire
additional  commercial  properties to develop and/or hold for  investment,  (iv)
expand, improve or redevelop the Properties or properties owned by affiliates of
the Company or third parties through the acquisition and development of adjacent
parcels,  (v) engage in management services for affiliates of the Company and/or
others, (vi) invest in real-estate backed or related  securities,  (vii) acquire
related  businesses  and/or (viii) engage in such other activities or businesses
as are consistent with the Company's overall objectives.  In connection with its
activities,  the  Company  may  also  consider  selling  one or  more of its Fee
Properties  and/or  financing or  refinancing  one or more of the  Properties or
additional  properties  acquired  by the  Company in order to fund its  business
activities.  In addition,  the Company may enter into joint  ventures or similar
arrangements  with developers or owners of shopping  centers or other commercial
properties.  These ventures may take the form of joint ownership,  participation
in  general or  limited  partnerships,  or other  forms of  investment,  and may
provide for the payment of preferential distributions, guaranteed returns and/or
fees for services. The Company may also make secured real estate mortgage loans,
including mortgages junior to institutional or other indebtedness, in connection
with the acquisition,  development,  redevelopment or improvement of properties,
either to affiliated or unaffiliated parties.

               The  Company's  business  is  operated  as a single  segment  for
financial reporting purposes.  For financial  information  regarding the Company
for  the  fiscal  years  ended  December  31,  1997,  1996  and  1995,  see  the
consolidated financial statements and the notes thereto contained herein.




                                                            1

<PAGE>



Background

               Milestone was incorporated on November 30, 1989 under the laws of
the State of Delaware. On December 18, 1990, Concord Milestone Income Fund, L.P.
("CMIF") and Concord  Milestone Income Fund II, L.P. ("CMIF II")  (collectively,
the  "Predecessor  Partnerships")  were  merged  with  and into  Milestone  (the
"Merger"). In the Merger,  Milestone succeeded to the business and operations of
the Predecessor  Partnerships  and the partnership  interests in the Predecessor
Partnerships  were converted into shares of Milestone's  common stock, par value
$.01 per share (the "Common Stock") and Milestone's  $.78  Convertible  Series A
preferred  stock,  par value $.01 per share,  $10  liquidation  preference  (the
"Series A Preferred Stock").

               In October 1995, the Company entered into various agreements with
affiliates  of Concord  Assets  Group,  Inc.  ("Concord")  pursuant to which the
Company acquired (the  "Acquisition"),  for  approximately  $700,000 in cash and
2,545,000  shares of Common Stock,  certain of the Fee Properties and certain of
the Wrap Debt and  certain  other  wraparound  notes and  wraparound  mortgages.
Certain  positions in the wraparound notes and wraparound  mortgages  (together,
the "Realized  Wrap Debt") and interests in real property which were acquired in
the Acquisition have been realized since the Acquisition.  Certain directors and
executive  officers  of Concord are also  directors  and  executive  officers of
Milestone and, at December 31, 1997, Concord  beneficially  owned  approximately
69% of the Common Stock of the Company.

               In October  1995,  the Company also  completed  the transfer (the
"Transfer") of 16 of its retail  properties  (the "UPI  Properties") to its then
wholly-owned  subsidiary,  Union  Property  Investors,  Inc.  ("UPI").  UPI  was
recapitalized  and spun-off in November 1995 when Milestone  distributed  all of
the outstanding shares of common stock of UPI to Milestone's Common Stockholders
(the  "Distribution").  On February 27, 1997,  UPI was merged (the "UPI Merger")
into a  wholly-owned  subsidiary of Kranzco Realty Trust, a Maryland real estate
investment trust ("Kranzco").  In connection with the UPI Merger, UPI terminated
its property management and management services agreements with the Company.

               During 1997, the Company sold its remaining  ownership of certain
issues of mortgage loan  securitizations  which were backed by mortgage loans on
commercial and multi-family  dwellings.  See Acquisition and Disposition of Real
Estate Related Assets.

               Effective as of November  12, 1997 and  December  17,  1997,  the
Company  entered into  contracts in connection  with  contemplated  purchases of
certain strip malls in the Jacksonville,  Florida area. See Item 7. Management's
Discussion and Analysis of Financial  Condition and Results of Operation  Recent
Developments.

               Effective as of December 24,  1997,  the Company  entered into an
agreement with Societe  Generale  Securities  Corporation  ("SGSC")  pursuant to
which the Company retained SGSC to act as a financial advisor to the Company and
two of its affiliates  (the  "Affiliates")  in connection  with any  transaction
involving (i) a proposed sale of certain shopping center properties owned by the
Affiliates  on which the Company owns  wraparound  mortgages and (ii) certain of
the Company's  Fee  Properties,  which  together  could  represent a substantial
portion of the Company's real estate interests.

               Effective  as of March  6,  1998,  the  Company  entered  into an
agreement, subject to certain conditions, in connection with a contemplated sale
of its  Mountain  View  Mall  property  located  in  Bend,  Oregon.  See Item 7.
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations - Recent Developments.


                                                            2

<PAGE>



The Wrap Debt

               Certain  material terms generally  appearing in the Wrap Debt are
described below. Since the provisions of the Wrap Debt are complex and extensive
and provisions  vary among the Wraparound  Notes and  Wraparound  Mortgages,  no
attempt has been made to describe in detail or to summarize  all  provisions  of
the Wrap Debt.

               Certain of the Wrap Debt and the  Realized  Wrap Debt were issued
by certain limited  partnerships  sponsored by Concord (the  "Partnerships")  to
affiliates  of Concord  which were formed for the purpose of (i)  acquiring  the
Underlying  Properties and other  commercial real  properties  which secured the
Realized Wrap Debt,  (ii) selling such properties to the  Partnerships  for cash
and  issuing  certain  of the Wrap  Debt and the  Realized  Wrap  Debt and (iii)
leasing the Underlying  Properties and other  commercial real  properties  which
secured the  Realized  Wrap Debt back from the  Partnerships  pursuant to Master
Leases (the "Master Leases").  Certain directors and officers of the Company are
also directors,  officers and controlling stockholders of the General Partner of
each of the  Partnerships.  In October 1995, the Company acquired certain of the
Wrap Debt and became the lessee under the Master Leases in  connection  with the
Acquisition.

               As the  holder of the Wrap  Debt,  the  Company  is  required  to
satisfy the  obligations  under notes and mortgages  held by lenders  (typically
banks or other commercial  lenders) on each Underlying  Property with a priority
senior to that of the Company,  including,  without limitation,  debt owed under
any purchase  money notes issued by the  Partnerships  which own the  Underlying
Property to the prior owner of such property in connection  with the acquisition
of such  Underlying  Property (all such senior  indebtedness  being  referred to
herein  collectively  as  the  "Underlying  Debt").  See  Table  1  in  Item  2.
Description of Property.  The  Partnerships are obligated to the Company for the
Wrap Debt which wraps around and includes the  obligation to pay the  Underlying
Debt, and is secured by a mortgage on the Underlying Property.  The Wrap Debt is
in a second priority position behind the Underlying Debt and, in some instances,
may be in a third priority position overall,  behind a bank or commercial lender
and a seller or other second priority lender.

               The Wraparound Notes

               The Company is the holder of 40 Wraparound  Notes relating to the
Underlying  Properties.  The maturity dates of the  Wraparound  Notes range from
1998 to 2017 . Each of the Wraparound Notes is a non-recourse  obligation of the
issuing  Partnership  and includes the obligation to satisfy the Underlying Debt
for the corresponding  Underlying Property.  The Underlying Debt associated with
an  Underlying  Property  in some  instances  consists  of  multiple  notes  and
mortgages which may have different priorities in relation to one another but all
of  which  are  superior  in  right to the  Wraparound  Note and the  Wraparound
Mortgage relating to an Underlying Property. A Wraparound Note may be prepaid by
the  Partnership  issuing  such note by (i) the payment of the excess of (a) the
outstanding  balance of a Wraparound  Note,  including  accrued interest and any
discount  element over (b) the then  aggregate  outstanding  balance,  including
accrued  interest,  of  the  Underlying  Debt  associated  with  the  particular
Underlying  Property,  and (ii) the  assumption  of the  borrower's  obligations
pursuant  to the  Underlying  Debt  associated  with the  particular  Underlying
Property.   The  wraparound   mortgagor's  (i.e.,  the  Partnership  owning  the
Underlying  Property)  source of debt service payments on the Wraparound Note is
the rent it  receives  as lessor  under the  Master  Leases.  Additionally,  any
percentage rent payable to the Partnership pursuant to the Master Leases will be
paid to the Company as the holder of the Wraparound Note as prepayment under the
Wraparound Note.


                                                            3

<PAGE>



               A description of the current  balances,  interest  rates,  annual
debt service, maturity dates and amounts of any balloon payments with respect to
the Wraparound Notes is set forth in Table 2 in Item 2.Description of Property.

               The Wraparound Mortgages

               The Company is the holder of 40 Wraparound  Mortgages relating to
the  Underlying  Properties.   The  Wraparound  Mortgages  provide  that,  on  a
non-recourse basis, the Company, as the wraparound mortgagee, will pay, or cause
to be  paid,  all  payments  required  by the  Underlying  Debt  so  long as the
wraparound  mortgagor (i.e.,  the Partnership  that owns the related  Underlying
Property) makes all payments under the Wraparound Notes. If the Company fails to
make any payment  required to be made by it within 30 days after the due date of
such  payment,  the  wraparound  mortgagor  may make such payment and deduct the
amount of such payment  from the next  succeeding  payments  required to be made
under the  Wraparound  Note. The  Partnerships,  as wraparound  mortgagors,  are
obligated  under the terms of the  Wraparound  Mortgages  not to perform any act
which would  constitute  a breach of the  mortgage(s)  securing  the  applicable
Underlying Debt.

               The Wraparound  Mortgages  provide that the wraparound  mortgagor
(i.e.,  the  Partnership  that owns the  Underlying  Property) will maintain all
buildings,  equipment and other improvements on the related Underlying Property.
In the event  that the  buildings  and any other  improvements  are  damaged  or
destroyed,  in whole or in part, or in the event of a taking of a portion of the
premises under the power of eminent domain, the wraparound mortgagor is required
to  restore  the same as  nearly  as  possible  to the  condition  they  were in
immediately prior to the casualty or taking. Insurance proceeds and condemnation
awards will be made available,  subject to the wraparound  mortgagee's  control,
and subject to the rights of the  holders of the  underlying  mortgages,  to the
extent  necessary  to comply with the  foregoing.  The  wraparound  mortgagee is
required to maintain  property,  casualty and public liability  insurance on the
Underlying  Property and cannot remove  improvements or fixtures or structurally
alter any building.

               Pursuant  to  the  terms  of  the   Wraparound   Mortgages,   the
outstanding  balance  of each  corresponding  Wraparound  Note  becomes  due and
payable  upon the  occurrence  of  certain  specified  events,  subject to grace
periods and cure rights, including,  without limitation,  (i) the failure of the
wraparound  mortgagor to make any payment or perform any covenant required under
the  related  Wraparound  Mortgage,  (ii)  the  commencement  of any  action  or
proceeding to foreclose  any lien senior to the lien created by such  Wraparound
Mortgage  and (iii) the  Partnerships,  as  wraparound  mortgagor,  becoming the
debtor in a bankruptcy or insolvency proceeding.  In addition, after any default
by the wraparound  mortgagor under a Wraparound  Mortgage,  the Company,  as the
wraparound  mortgagee,  may exercise certain rights of the wraparound  mortgagor
with respect to the management of the related Underlying Property.

               The  Company,  as the  wraparound  mortgagee,  has the  right  to
refinance,  restructure, alter, increase, renew or rearrange the Underlying Debt
subject to certain terms and conditions, including, without limitation, that (i)
the refinanced portion of the Underlying Debt cannot increase the obligations of
the wraparound  mortgagor,  except in certain  limited  circumstances,  (ii) the
rents payable on the Underlying Properties pursuant to the operating leases (the
"Operating  Leases") on the related  Underlying  Properties should reasonably be
expected to satisfy the debt service  obligations on the  refinanced  portion of
the Underlying  Debt and (iii) the  wraparound  mortgagor is to cooperate in the
execution of documents necessary to effectuate the refinancing, so long as it is
not required to become obligated thereon.

               See Item 3.  Legal  Proceedings,  for a  description  of a motion
which  has  been  filed  to  enforce  a  settlement  agreement  relating  to the
Underlying Properties and the Wrap Debt.

                                                            4

<PAGE>



The Master Leases

               Certain  material terms generally  appearing in the Master Leases
are described  below.  Since the provisions of the Master Leases are complex and
extensive, and provisions vary among the Master Leases, no attempt has been made
to describe in detail or to summarize all provisions of the Master Leases.

               The Company is the Master Lessee under individual  leases of each
of the Underlying  Properties.  As master  lessee,  the Company leases an entire
Underlying  Property  (i.e.,  a  shopping  center  or single  tenant  commercial
property)  from the  owner  and  re-leases  it  under  operating  leases  to the
tenant(s) who occupy such property.

               The Master  Leases were  initially  entered into by affiliates of
Concord,  as  tenants,  and  limited  partnerships   sponsored  by  Concord,  as
landlords,  and  are  coterminous  with  the  Wraparound  Notes  and  Wraparound
Mortgages.  The rent  payable  by the  lessee  under  each  Master  Lease for an
Underlying  Property is  approximately  the same amount as the debt  service due
under each Wraparound Note for such Underlying Property. The Company is both the
holder of each Wrap Debt and the lessee under the Master Leases  relating to the
Underlying Properties. Prior to the Acquisition, certain of Concord's affiliates
and the lessor under the Master  Leases  (i.e.,  the  Partnership  that owns the
related Underlying  Property) amended the Master Leases pursuant to which, among
other things, the rent payable under the Master Leases was reduced by the amount
of the fees, if any, payable by the lessor to the general partner of the lessor.
The Partnerships consented to and ratified such lease amendments.  As the Master
Lessee and the wraparound  mortgagee,  the Company  collects the rents under the
Operating  Leases and  applies  such  amounts to the  operating  expenses of the
Underlying Property and the Underlying Debt. The obligations of the lessee under
the Master Leases are  guaranteed by Concord.  Such guaranty was not affected by
the transfer and  assignment of the lessee  interest in the Master Leases to the
Company  pursuant  to the  Acquisition  and  the  Company  is not  obligated  to
indemnify  Concord with respect to such guaranty.  The Master Leases are subject
and subordinate to the Underlying Debt.

               As between the Company,  as lessor, and the operating tenants, as
lessees,  the  tenants  are  generally  responsible  for payment of rents to the
Company and for all or a portion of their pro rata share of  operating  expenses
and, in some instances, for the maintenance and repair of the property.

               Pursuant to the Master Leases, the Company, as lessee, (i) pays a
fixed base rent to the applicable  Partnership,  as lessor,  (ii) is entitled to
receive the revenues payable under the Operating Leases and (iii) is responsible
for  operating the  Underlying  Property.  The Company is also  obligated to pay
percentage  rent to the lessor  equal to certain  percentages  of net  operating
income in excess of certain threshold amounts which are subject to adjustment.

               The Partnership, as lessor under the Master Lease, is responsible
for the  maintenance,  repair and  replacement  of the  physical  property  when
necessary.  The  Company,  as lessee,  can cause the lessor,  subject to certain
limitations,  to borrow  additional  Wrap Debt to  finance  improvements  to the
related property.

               Pursuant to each of the Master Leases, the Company, as lessee, is
responsible  for compliance  with all  applicable  laws and  regulations  and is
required  to keep the  property  insured at certain  minimum  levels for certain
specified  losses.  The Company's  management  believes that the  Properties are
adequately  insured.  The Master  Leases also have  termination  and  assignment
provisions.


                                                            5

<PAGE>



               As of April 30, 1996, the Company terminated,  by written notice,
the Master Lease ( the "Chili Lease") on the Property located in Chili, New York
(the "Chili  Property").  As a result of the termination of the Chili Lease, the
Company,  the tenant  under such lease,  assigned  all of its rights,  title and
interest in the Chili Property to Valley Plaza Associates ("VPA"),  the landlord
under the Chili Lease, and VPA assumed all of the Company's related  obligations
under the Chili Lease.  Neither VPA nor the Company have made the full  required
payment on the  underlying  mortgage  loan for the Chili  Property  since May 1,
1996,  however VPA has made certain  partial  payments  thereon  which have been
credited  against the Wraparound Note  associated  with the Chili  Property.  On
February 9, 1998 the  Wraparound  Note was assigned,  resulting in the relief of
the non-recourse underlying mortgage.

               The amount of annual rents due with respect to each of the Master
Leases and the  termination  dates  thereof  are set forth in Table 2 in Item 2.
Description of Property.

Acquisition and Disposition of Real Estate Related Assets

               In July 1996, the Underlying  Debt of $2,325,000  associated with
the Property  located in Prattville,  Alabama (the  "Prattville  Property") came
due, and the mortgagor  extended the balance due to December 1996.  Although the
Underlying Debt  associated with the Prattville  Property had not been paid off,
regular  monthly  debt  payments had been made by the Company  through  February
1997.  On  March 3,  1997,  the  mortgagor  stated  its  intention  to  commence
foreclosure proceedings. During 1997, as a result of the foreclosure sale by the
bank, the Company realized its position in its wraparound note on the Prattville
Property.  Such  sale  resulted  in the  relief of the  non-recourse  underlying
mortgage,  which  resulted  in a book  gain  of  approximately  $120,000  to the
Company. In conjunction with the foreclosure sale, the Company, as the lessor on
the Master Lease on the Prattville Property, canceled such Master Lease.

               On September 24, 1997, the Company completed the purchase of Pine
Oak Plaza,  a 16,994 square foot  shopping  center  located in Sunrise,  Florida
(Broward County),  from REC I Corporation for approximately  $1,100,000 in cash.
The shopping  center is occupied by local  tenants  subject to operating  leases
ranging from 4 to 13 years with various  renewal  options and is currently 93.5%
occupied.  This  property  can be  classified  as a  neighborhood  or  community
unanchored strip center and is located in a secondary type market.

               On October 30,  1997,  the Company  realized  its position in its
wraparound note on a property located in Marion, Ohio (the "Marion Property") as
a result of the sale of the property by the owners. The sale price of the Marion
Property  was  approximately  $2,750,000,  which  resulted  in a  book  gain  of
approximately  $200,000  to the  Company.  In  conjunction  with the sale of the
Marion  Property,  the Company,  as the lessor on the Master Lease on the Marion
Property, canceled such Master Lease.

               From  August  1994 to  November  1997,  the  Company  bought  and
subsequently  sold various  issues of mortgage loan  securitizations  which were
backed by mortgage loans on commercial and multi-family dwellings ("CMBSs").  To
facilitate the purchase of such CMBSs, short term borrowing arrangements ("Loans
Payable")  were entered  into with the brokers from which CMBSs were  purchased.
The Company engaged in a variety of interest rate management techniques in order
to  attempt  to  manage  the  effective  maturity  and/or  interest  rate  risks
associated with the CMBSs. Such techniques  included selling short U.S. Treasury
Notes which were collateralized by reverse repurchase agreements.

               The  Company  had  $32,314,853  and  $37,594,939  of  CMBSs as of
December 31, 1996 and 1995,  respectively;  and  $23,829,335  and $27,450,954 of
associated  Loans  Payable  as of  December  31,  1996 and  1995,  respectively.
Additionally, the Company had $33,952,346 and $32,823,439 of U.S.

                                                            6

<PAGE>



Treasury  Notes sold short as of December 31, 1996 and 1995,  respectively;  and
$34,718,749 and $33,119,375 of associated  reverse  repurchase  agreements as of
December 31, 1996 and 1995.

               On January 23, 1997,  the Company sold its  ownership of the CMBS
consisting of the Nomura Series 1994-MD1 B3A (the "MD1  Certificate") and repaid
the associated Loan Payable. At the time of the sale of the MD1 Certificate, the
Company had outstanding U.S. Treasury Note short positions totaling  $10,000,000
associated  with the MD1  Certificate.  In  connection  with the sale of the MD1
Certificate,   the  Company  closed  $9,500,000  of  U.S.  Treasury  Note  short
positions.  As a  result  of the  sale,  the  Company  realized  a book  loss of
approximately  $1,100,000.  See Item 7. Management's  Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources.

               On November 10, 1997, the Company sold its remaining ownership of
the CMBSs  consisting  of a Nomura  Series  1996-MDV  B2  certificate  (the "MDV
Certificate"), a DLJ 1994-MF11 B2 certificate (the "B2 Certificate"),  and a DLJ
1994-MF11 B3 certificate (the "B3  Certificate") ( the MDV  Certificate,  the B2
Certificate and the B3 Certificate may be referred to collectively herein as the
"Certificates") and repaid the associated Loans Payable. At the time of the sale
of the  Certificates,  the  Company had  outstanding  U.S.  Treasury  Note short
positions totaling $25,500,000  associated with the Certificates.  In connection
with the sale of the  Certificates,  the Company  closed all such remaining U.S.
Treasury Note short  positions.  As a result of the sale, the Company realized a
book gain of approximately  $3,500,000.  See Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations  Liquidity and Capital
Resources.

               From time to time the Company sells, or may take actions to sell,
certain  real  estate  assets  which it does not  believe to be  material to the
overall business or financial position of the Company.

Investment Policy

               There are no limitations on the percentage of assets which may be
invested in any one  investment  or on the type of  investments  the Company may
make.  The Company has no present  intention of  investing  in or acquiring  the
securities of other  companies for the purpose of exercising  control over other
companies.  The Company does not  currently  intend to expand its  operations to
include non-real estate related activities, but may do so if the Company's Board
of  Directors  determines  it to be in the best  interest  of the  Company.  The
Company's  policies  towards its  investments are not subject to the vote of the
Company's stockholders.

               Currently,  the  Company  is  not  required  to  register  as  an
investment  company under the  Investment  Company Act of 1940 (the  "Investment
Company Act"). The Company intends to operate its businesses so that it will not
be deemed to be an investment  company under Section  3(a)(3) of the  Investment
Company  Act or would  qualify  for an  exemption  from  registration  under the
Investment  Company Act (e.g.  Rule 3a-1 or the real estate  interest  exemption
under Section 3(c)(5)(C)).

Real Estate Revenues

     For the years ended December 31, 1997,  1996 and 1995, no tenant  accounted
for more than 10% of the Company's total revenues.  However,  K-Mart Corporation
accounted for approximately 32%, 30% and 40 %, respectively, of rent revenue.





                                                            7

<PAGE>



Potential Environmental Risks

               Under  various  federal,  state  and  local  environmental  laws,
ordinances  and  regulations,  a current or  previous  owner or operator of real
property may be held liable for the costs of removal or  remediation  of certain
hazardous    or    toxic    substances,    including,    without    limitations,
asbestos-containing  materials,  that  could be  located  on,  in or under  such
property.  Such laws and regulations  often impose liability  whether or not the
owner or operator know of, or was responsible for, the presence of the hazardous
or toxic substances.  The costs of any required  remediation or removal of these
substances  could be substantial and the liability of an owner or operator as to
any property is generally not limited under such laws and regulations, and could
exceed the property's  value and the aggregate  assets of the owner or operator.
The  presence  of these  substances  or failure  to  remediate  such  substances
properly  may also  adversely  affect  the  owner's  ability to sell or rent the
property,  or to borrow using the property as  collateral.  Under these laws and
regulations,  an owner,  operator or any entity who arranges for the disposal of
hazardous  or toxic  substances,  such as  asbestos-containing  materials,  at a
disposal  site may also be liable  for these  costs,  as well as  certain  other
costs,  including  governmental fines and injuries to persons or properties.  To
date,  the Company has not incurred any costs of removal or  remediation of such
hazardous  or toxic  substances.  However,  the  presence,  with or without  the
Company's  knowledge,  of hazardous or toxic  substances at any property held or
operated by the Company could have an adverse effect on the Company's  business,
operating  results  and  financial  condition.  The  Company is not aware of any
environmental  conditions.

Competition

               Any rental  property  owned or hereafter  acquired by the Company
(whether  retail,  office,  industrial  or  residential)  will have  substantial
competition  from similar  properties  in the vicinity in which such property is
located. Such competition is generally for the retention of existing tenants and
for new  tenants  upon space  becoming  vacant.  The Company  believes  that the
profitability  of each of the Properties is based,  in part, upon its geographic
location, the operations and identity of the property's tenants, the performance
of the property and leasing  managers,  the  maintenance  and  appearance of the
property,  the ease of access  to the  property  and the  adequacy  of  property
related   facilities.   The  Company  also   believes   that  general   economic
circumstances  and  trends  as  well as the  character  and  quality  of new and
existing  properties  which may be located in the vicinity of the Properties are
factors that may affect the operation and competitiveness of the property.

               The  Company   competes  with  other   investors,   managers  and
developers to acquire desirable properties and engages in a continuing effort to
identify  desirable  properties for  acquisition.  Management  believes that the
Company  can  continue  to  compete  effectively  in  the  current  real  estate
environment  because  of its  experience  in  real  estate  investments,  tenant
selection and lease negotiation.  However, many other investors in real property
who compete with the Company have far greater resources than the Company.

Employees

               The Company employs 38 people,  5 of whom are officers.  Pursuant
to a management and service agreement, the Company has made available to Concord
certain of its employees to perform a variety of management  and  administrative
services for Concord. Except for services provided by certain employees pursuant
to such agreements, all of the employees are employed full-time by the Company.




                                                            8

<PAGE>




Forward-Looking Statements

               Certain   statements   made  in  this   report   may   constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934,  as amended (the  "Exchange  Act").  Such  forward-looking
statements   include  statements   regarding  the  intent,   belief  or  current
expectations  of the Company and its  management  and involve  known and unknown
risks,  uncertainties  and other  factors  which may cause the  actual  results,
performance or achievements  of the Company to be materially  different from any
future  results,  performance  or  achievements  expressed  or  implied  by such
forward-looking  statements.  Such  factors  include,  among other  things,  the
following:  general  economic and business  conditions,  which will, among other
things,  affect the demand for retail space or retail  goods,  availability  and
creditworthiness  of  prospective  tenants,   lease  rents  and  the  terms  and
availability of financing; adverse changes in the real estate markets including,
among  other  things,  competition  with other  companies;  risks of real estate
development  and  acquisition;   governmental   actions  and  initiatives;   and
environment/safety requirements.




                                                            9

<PAGE>



Item 2.        Description of Property.

               The  Company's  executive  offices are located at 150 E. Palmetto
Park Road, 4th Floor, Boca Raton,  Florida,  33432 where it leases approximately
8,000 square feet of office space.

               The  company is  engaged in the  ownership  and  operation  of 32
commercial real estate properties  consisting of shopping  centers,  strip malls
and free standing department stores. The following tables describe and summarize
certain  data  for each of the  properties.  See also  Item 1.  Business,  for a
description  of additional  terms  relating to the  Properties and the Company's
investment policies.

               Table 1. Summary of Properties and Underlying Debt.
               Table 2. Summary of Wraparound Notes.



                                                            10

<PAGE>




Table 1. Summary of Properties and Underlying Debt
<TABLE>
<CAPTION>
                                                                      Amortization
                                                                      Provisions -                                       Balance at
                                                  Underlying          Monthly Payments                                   Maturity
                                 GLA    Occupancy  Debt at   Interest of Principal &    Prepayment           Maturity   (Assuming no
Location        Property         (Sq.Ft) Rate(%)   12/31/97  Rate(%)   Interest          Provisions           Date       Prepayment)
===================================================================================================================================

<S>          <C>                <C>      <C>    <C>         <C>     <C>               <C>                  <C>         <C>
(1)Bend,OR    Mountain View Mall 346,923   95    $17,179,016  9.00    148,925 - 67% of  Yield maintenance    6/1/98      $17,077,113
                                                                       cash flow as     plus participation
                                                                       defined in the   per formula
                                                                       note

(2)Deland, FL  Deland Plaza       68,337  100   932,726      8.875    14,016          1% premium            4/1/03           343,437

(2)Rochester,NY Ridgemont Plaza   84,181  100 1,156,461       9.25    15,992          1% premium            1/1/02           747,266

   Pascagoula,MS Gulf Coast Plaza 125,803  79         0       -           -                  -                  -                -

   Janesville,WI Blackhawk Village 88,500  86   990,092       9.00    14,060                 -             7/31/02           540,492
                                                118,196       9.00     1,529                 -              8/1/07                 0

(2)Marietta,OH Kmart Corporation   87,543 100 2,040,000  5.75-6.70    Variable semi   None until 2002; then 3/15/07                0
                                                                      annual payments 3%declining 1%annually
                                                                                      to par

(2)Mt.Pleasant,PA Kmart Corporation 83,552  100 1,365,000 6.50-6.80  Variable semi    None until 2001; then  5/1/07          76,197
                                                                     annual payments  3%declining 1%annually
                                                                                      to par

(2)North Canton,OH Kmart Corporation 84,180 100 2,116,132     9.00   21,669          Prepayable at a discount 9/30/12              0

(2) Owensboro,KY  Kmart Corporation  68,337 100 1,600,000 6.50-6.80  Variable semi   None until 2001; then    12/1/07              0
                                                                     annual payments 3%declining 1% annually
                                                                                      to par

   Quincy, IL Harrison Street Plaza 149,954  99 3,042,405     7.75    27,912          Prepayable at par        7/1/98      2,992,016

   Natchez, MS Morgantown Plaza      92,646 100 1,833,519    12.50    Available cash  6% declining 1% annually 4/1/07      1,076,197
                                                                      flow            to par

(2)Streetsboro,OH Kmart Corporation  84,800 100 1,385,000 6.35-6.70   Variable semi   None until 2001; then   12/1/06              0
                                                                      annual payments 3% declining 1% annually
                                                                                      to par

(2)Dubois, PA  Sandy Plaza           34,019 100 1,490,000     7.00    Variable semi   None until 2004; then   12/1/06              0
                                                                      annual payments 3% declining 1% annually

(2)Franklin
   Township,PA Franklin Plaza        31,170 100 1,465,000     6.00    Variable semi   None until 2004; then   12/15/07             0
                                                                      annaul payments 3%declining 1% annually

(2)Clarksville,TN Kmart Corporation  88,100 100 1,565,000 6.00-6.80   Variable semi   None until 2002; then    10/1/06             0
                                                                      annaul payments 3% declining 0.5% annually
                                                                                       to par

  Montgomery,AL Chisolm Shopping     39,075 100 1,277,608      8.75    14,500          None until 1998; then    4/1/07       396,073
                Center                                                                 5% declining 1% annually
                                                                                       to a 2% minimum

  Paris, TN   Paris Plaza           102,453  98   590,753     13.50    8,859           None until 1998; then 4%  4/1/08            0
                                                                                       declining 1% annually to par

                                                  355,949      9.25    8,467           7% declining 1% annually  7/1/03            0
                                                                                       until par

(3)Chili, NY  Chili Plaza                -   -  1,477,009      9.63    21,688          1% premium                8/1/04            0

  South
  Williamson KY, Southside Mall    285,655  97 15,088,951      9.00    144,833             -                    10/1/98   14,463,542


     Savannah,TN Savannah Plaza     46,400 100    323,794      9.50    6,612               -                    1/31/03           0

     Danville,IL Holiday Square     50,978 100    475,636     9.625    9,663           1% premium                9/1/02       64,250

(2)Warsaw, VA  Richmond Plaza       43,200 100    817,913    13.125   11,373           5% declining 1% annually 10/1/09            0
                                                                                       to a 2% minimum

(2)Southwick,MA Greenwood Plaza     45,000 100    793,343     11.50    9,857 in advance 1% premium               9/1/09            0

(2)Walpole, NH Kendiana Plaza       32,400 100    793,343     11.50    9,857 in advance 1% premium                9/1/09           0

   Baton Rouge,LA Capitol Heights   52,700 100  2,066,293     12.00    33,583          5% declining 1% annua1ly 12/1/05            0
                                                                                       to a 2% minimum

(1)Sunrise, FL Pine Oak Plaza       16,994  94          0      -          -                   -                     -              0

(2)Palatka, FL Walmart Corporation  91,840 100  1,196,901     12.00    17,247          5% declining 1% annua1y  11/1/07            0
                                                                                       to a 2% minimum

(2)Vestiva
   Hills,AL Columbiana Crossing     35,946 100    745,292     13.00    13,759          5% declining 1% annually 11/1/04            0
                                                                                       to a 2% minimum

(2)Columbus, NE Cottonwood Plaza    64,890 100  1,360,287      12.00    17,201                    -              9/1/10        9,274
                                                   63,918       9.50    697                       -              7/1/11            0

(2)Hamilton, NY Alexander Plaza     43,200 100    822,687     13.125    11,373          5% declining 1% annually 12/1/09           0
                                                                                        to a 2% minimum

(1)Zanesville,OH
          Sunrise Shopping Center  130,072  55  1,199,650       9.50    14,295                  -                5/31/98   1,170,645

(1)Blackstone,VA Family Dollar      43,200  21         0           -         -                  -                  -               -

</TABLE>

(1) Fee Property
(2) Annual real estate taxes are the responsibility of the tenant.
(3) Property was under  receivership  at December 31, 1997.  On February 9, 1998
the  Wraparound  Note was assigned  resulting in the relief of the  non-recourse
underlying mortgage.

                                                                 11
<PAGE>

Table 2. Summary of Wraparound Notes at December 31, 1997

<TABLE>
<CAPTION>

                                Carrying      Face            Annual                 Balance at    Annual
                                Amount of     Amountof        Payments     Final     Maturity      Master       Master
                      Interest  Wraparound    Wraparound      of Principal Maturity  (Assuming No  lease        lease
      Location         Rate(%)  Notes         Notes           &Interest    Date      Prepayment)   Payment      Termination
====================  ========= ============  =============  ============= ========= ============= ============ ============
<S>                   <C>        <C>          <C>           <C>            <C>        <C>           <C>         <C>
Baton Rouge, LA         9.75    $ 4,006,610   $4,469,548    $ 630,350       12/31/99    $3,890,656  $630,350     12/31/99

Chili, NY               10.00     1,477,009    4,883,737      674,340       12/31/99     3,152,116   674,340     12/31/99

Clarksville, TN         9.75      1,754,804    3,759,873      554,822       12/31/99     2,969,232   554,822     12/31/99

Columbus, NE            9.75      2,172,024    2,436,955      309,207       12/31/99     2,235,677   309,207     12/31/99

Danville, IL            9.75        886,939    1,851,308     275,730        12/31/99     1,564,040   275,730     12/31/99

Deland, FL              9.70      1,411,835    1,929,531     207,550        12/31/99     1,890,294   207,550     12/31/99

Dubois, PA              10.00     1,484,336    3,057,647     475,498        12/31/99     1,995,528   475,498     12/31/99

Ellwood City (Franklin
Township), PA           10.00     1,484,336    3,057,647     475,498        12/31/99     1,995,528   475,498     12/31/99

Hamilton, NY            9.75      1,089,447    1,493,689     210,745        12/31/99     1,229,940   210,745     12/31/99

Janesville, WI          10.25     1,434,849    2,173,824     268,502        12/31/15             0   268,502     12/31/15

Marietta, OH            8.32      2,958,338    3,165,088     371,533        12/31/14             0   371,533     12/31/14

                        11.00        20,000       25,148                    12/31/14       160,313         -      -

Montgomery, AL          9.75        940,941    2,251,243     295,516        12/31/99     2,032,563   295,516     12/31/99

Mt. Pleasant, PA        9.18      2,334,042    2,545,423     290,345        12/31/15             0   290,345     12/31/15

                        11.00        12,626       12,976                    12/31/14        83,481         -      -

Natchez, MS             10.00     1,574,516    3,825,382    516,210         12/31/98     3,097,131   516,210     12/31/98

No. Canton, OH          9.11      2,207,236    2,873,770    333,272         12/31/14             0   333,272     12/31/14

                        11.00        26,575       33,958          0         12/31/14       216,478         -      -

                        11.00        25,650       29,026          0         12/01/14       186,725         -      -

Owensboro, KY           10.00     2,784,791    2,787,357    337,955         12/31/15             0   337,955     12/31/15

Palatka, FL             9.75      1,765,532    2,446,691    407,745         12/31/99     1,921,922   407,745     12/31/99

                        11.00        24,650       24,816          0         12/31/99        30,891         -      -

Paris, TN               10.00     1,551,337    3,364,006    555,860         12/31/99     2,687,003   555,860     12/31/99

                        11.00        51,016       65,515          0         12/31/99        80,814         -      -

Southwick, MA           9.75        868,168    1,420,480     196,750        12/31/99     1,248,385   196,750    12/31/99

So. Williamson, KY      9.88     13,674,922   24,521,288   4,181,000        12/31/99    19,052,522 4,181,000     12/31/99

Streetsboro, OH         9.68      1,793,315    2,298,679     276,986        12/31/14             0   276,986     12/31/14

                        11.00        21,447       27,640           0        12/31/14       176,200         -      -

                        11.00        19,600       22,180           0        12/01/14       142,686         -      -

                        11.00        10,000       10,169           0        12/31/14        65,418         -      -

Vestivia Hills, AL      9.75      1,360,003    1,800,257     257,306        12/31/99     1,555,772   257,306     12/31/99

Walpole, NH             9.75      1,006,457    1,420,480     196,750        12/31/99     1,248,385   196,750     12/31/99

Pascagoula, MS          9.75      1,225,566    2,070,634     246,507        12/31/17             0   270,266     12/31/17

                        12.00       175,125      187,335      23,759        12/31/17       187,335         -      -

                        11.00        34,658       35,620           0        12/31/16       285,255         -      -

Quincy, IL              10.00     2,545,600    6,293,133     920,890        12/31/98     4,904,390   920,890     12/31/98

Rochester (Greece), NY  9.70      1,507,843    1,788,998     220,906        12/31/14             0   220,906     12/31/14

                        10.00       130,625      166,167           0        12/31/14       910,735         -      -

Savannah, TN            9.88        500,590    1,228,035     197,500        12/31/99       993,633   197,500     12/31/99

Warsaw, VA              9.75      1,049,573    1,406,491     175,974        12/31/99     1,547,507   175,974     12/31/99

</TABLE>
                                                                12
<PAGE>

Item 3.              Legal Proceedings.

     A lawsuit (the "Rabin Litigation") purporting to be a class action against,
among  others,  Concord,  Leonard  S.  Mandor,  Robert  A.  Mandor  and  certain
partnerships (the "Concord  Partnerships") and affiliates of Concord,  was filed
in September 1989 in the United States District Court for the Southern  District
of New York alleging various federal and common law claims relating to the sales
of  interests  in  such  Concord  Partnerships.  In  November  1991,  the  Rabin
Litigation was settled  pursuant to the terms of the  court-approved  settlement
agreement (the "Rabin Settlement Agreement"). A motion brought by the plaintiffs
in the Rabin Litigation  seeking to enforce the Rabin  Settlement  Agreement and
for  declaratory  and other relief was settled by a  Stipulation  and Order (the
"Rabin  Stipulation  and  Order")  entered  and  approved  by the United  States
District Court on October 24, 1997. The plaintiffs  asserted,  inter alia,  that
the defendants breached the Rabin Settlement Agreement by improperly  allocating
transaction  expenses  against  the  payment to be made to the  selling  Concord
Partnerships in certain circumstances pursuant to the Rabin Settlement Agreement
and breached their  fiduciary  duties to the  plaintiffs by prematurely  selling
properties without valid business justification.

     Under the Rabin Stipulation and Order, the plaintiffs withdrew their breach
of fiduciary duty claims and withdrew with prejudice their claim that defendants
breached the Rabin  Settlement  Agreement  by their  allocation  of  transaction
expenses  from the sale of  certain  properties  in  exchange  for a payment  of
$600,000 from the defendants. The settlement payment has been made. In addition,
the  Rabin  Stipulation  and  Order  provides  for a  formula  relating  to  the
allocation of transaction expenses in connection with the future sale of certain
properties  owned  by  the  Concord   Partnerships,   including  the  Underlying
Properties  subject  to the Wrap  Debt.  Generally,  under  such  formula,  if a
Property (as defined in the Rabin Settlement Agreement) is sold for a price less
than the sum of (a) the outstanding Wrap Debt, (b) the Permitted Additional Wrap
Debt (as  defined in the Rabin  Settlement  Agreement)  and (c) the amount to be
paid to the holder of the Wrap Debt pursuant to the Rabin Settlement  Agreement,
then 82.25% of the  transaction  expenses shall be the obligation of the selling
Concord  Partnership,  and shall be deducted  from the 11% of net  proceeds  (as
defined in the Rabin  Settlement  Agreement)  to be  distributed  to the selling
Concord  Partnership,  and the Company,  as the holder of the Wrap Debt, will be
responsible for paying the remaining 17.75% of the transaction expenses incurred
in such sale.  In the event a Property  is sold for a price in excess of the sum
of (a) the outstanding Wrap Debt, (b) the Permitted Additional Wrap Debt and (c)
the  amount  to be paid to the  holder of the Wrap  Debt  pursuant  to the Rabin
Settlement  Agreement,  then the transaction expenses shall be deducted from the
proceeds in excess of such existing debt,  and, if such excess  proceeds are not
sufficient to pay all such transaction  expenses,  82.25% of the balance of such
transaction  expenses  shall  be  paid  out of  the  11%  of  the  net  proceeds
distributed  to the  selling  Concord  Partnership,  and  the  Company  will  be
responsible for paying the remaining 17.75% of the transaction expenses incurred
in such sale.  Concord and one of its subsidiaries  have agreed to indemnify the
Company for any losses, up to $200,000 in the aggregate, resulting from any such
additional  transaction  fees,  costs or  expenses  incurred by the Company as a
result of such events.  The Company does not believe that the Rabin  Stipulation
and Order materially  adversely affects the Company.  There can be no assurance,
however, that the plaintiffs will not pursue the breach of fiduciary duty claims
against Concord and the General Partners of the Concord  Partnerships  which own
the  Underlying  Properties  which were  withdrawn  under the terms of the Rabin
Stipulation and Order.

     On January 30, 1996,  Milestone,  its Board of  Directors  and Concord were
named as defendants in an action (the "Winston  Action")  commenced in the Court
of Chancery of the State of Delaware (the "Delaware Court").  In the action, the
plaintiff,  a Series A Preferred  Stockholder  purporting to bring the action on
behalf of himself and other  Series A Preferred  Stockholders,  alleged  that in
connection  with  the  Acquisition,  the  Transfer  and  the  Distribution  (the
Acquisition,  the Transfer and the  Distribution  are  collectively  referred to
herein  as  the   "Transactions"),   Milestone  and  its  directors  engaged  in
self-dealing  and breached their fiduciary  duties and faith and fair dealing to
the Series A Preferred Stockholders.  The plaintiff claimed, among other things,
that, as a result of the Transactions, Milestone would not have sufficient funds
to pay dividends on the Series A Preferred  Stock and that the  Properties  were
grossly  inferior to the UPI  Properties.  The  defendants  moved to dismiss the
plaintiff's

                                                                13

<PAGE>



original  complaint,  and  thereafter,  the  plaintiff  amended his complaint to
allege further causes of action, including a claim of rescission. The defendants
moved to dismiss the amended complaint and, after hearing arguments thereon, the
Delaware  Court  dismissed  the  plaintiff's  claim for  rescission  of both the
Transfer and the Distribution and reserved decision on the defendants' motion to
dismiss the plaintiff's claim for damages and other relief. On December 9, 1996,
the plaintiff  requested that the Delaware Court dismiss the amended  complaint,
and filed a purported  new class  action.  On January 14, 1997,  the  defendants
filed a motion to dismiss or stay the  purported  new class  action.  On May 12,
1997,  the  Delaware  Court issued a decision on such motion and  dismissed  the
plaintiff's breach of fiduciary duty and statutory claims (although the Delaware
Court had  allowed  the  plaintiff  to  replead  the  fiduciary  duty claim as a
derivative  claim  brought  on behalf of  Milestone),  but did not  dismiss  the
plaintiff's claim that the Transfer and the Distribution did not comply with the
Certificate of Designations  for the Series A Preferred  Stock. On June 4, 1997,
the plaintiff  appealed the Delaware  Court's  dismissal of the  fiduciary  duty
claim and, on June 11, 1997, the defendants filed a cross-appeal.  The plaintiff
thereafter filed an amended complaint.

     On October 30, 1997,  Milestone  entered into a  Stipulation  of Settlement
(the "Winston Settlement  Agreement") providing for the settlement (the "Winston
Settlement") of the purported class action  lawsuit.  The Winston  Settlement is
subject to approval by the Delaware  Court after a hearing,  and is also subject
to a number of  conditions  which may be waived at the option of the Company and
the other defendants, including the condition that stockholders owning more than
10% of the Series A Preferred Stock do not opt out of the Winston Settlement.

     If the Winston  Settlement is approved and consummated,  the Winston Action
will be dismissed,  Milestone's  stockholders will release all derivative claims
arising in  connection  with the  Transactions  and the  holders of the Series A
Preferred  Stock  between  October  23,  1995 and the date on which the  Winston
Settlement  is  consummated  will  release  any  claims  they may  have  against
Milestone and the other named defendants  arising out of the Transactions.  Each
Series A Preferred  Stockholder  who does not opt out of the Winston  Settlement
and who owns  shares of the  Series A  Preferred  Stock on the date the  Winston
Settlement is consummated will received $0.75 per share in cash from the Company
and one  share of  preferred  stock of  Concord  Milestone  Preferred,  Inc.,  a
Delaware  corporation  affiliated  with  Concord  ("CMP") ( the "CMP"  Preferred
Stock), in exchange for each share of Series A Preferred Stock surrendered.  The
CMP Preferred Stock will have a liquidation  preference of $2.25 per share, will
be required to be redeemed by CMP at $2.25 per share after five years,  and will
have no voting or dividend rights; in addition,  the CMP Preferred Stock will be
subject to optional  redemption  in accordance  with a schedule  during the five
year period prior to mandatory redemption.  CMP's redemption obligations will be
secured by a letter of credit.

     The ultimate  consummation  of the Winston  Settlement  as set forth in the
Winston Settlement  Agreement is subject to numerous  conditions,  some of which
are not in the control of the Company,  such as approval by the Delaware  Court,
and therefore is inherently  uncertain.  Accordingly,  no dollar amount has been
included  in the  Company's  accompanying  financial  statements  to reflect the
potential  Winston  Settlement.  If the Winston  Settlement is consummated,  the
Company does not anticipate that the Company's  portion of such settlement costs
will  exceed  $3,000,000.  There can be no  assurance,  however,  that any fees,
expenses or other costs  associated with the ultimate  resolution of the Winston
Action will not differ from such estimate.

     The  foregoing  description  of the  Winston  Settlement  and  the  Winston
Settlement  Agreement  is  qualified in its entirety by reference to the Winston
Settlement Agreement, a copy of which was filed with the Securities and Exchange
Commission on November 12, 1997 as Exhibit 2 to Milestone's Form 8-K.

     On  January  29,  1998,  Milestone,  along with  certain of its  directors,
commenced  a lawsuit  in the  United  States  District  Court  for the  Southern
District  of  New  York  against  National  Union  Fire  Insurance   Company  of
Pittsburgh, Pa. ("National Union") and Stonewall Surplus Lines Insurance Company
("Stonewall").  National Union had issued a directors and officers insurance and
company  reimbursement  policy (the  "National  Policy") for  Milestone  and its
directors with a limit of $2,000,000.  Stonewall had issued an excess  directors
and officers liability and company reimbursement policy (the "Stonewall Policy")
for Milestone and its directors with a limit of

                                                                14

<PAGE>



$2,000,000.  Pursuant  to the  Winston  Settlement  Agreement,  if  the  Winston
Settlement is consummated, Milestone will be required to pay, in cash, $0.75 per
share for each of the outstanding  3,033,995 shares of Series A Preferred Stock,
to each  Series A  Preferred  Stockholder  who  does not opt out of the  Winston
Setllement,  plus the plaintiff's legal fees in an amount not to exceed $650,000
and will incur other legal expenses.  Milestone  believes that the amount it and
certain  of its  directors  will be  required  to pay, pursuant  to the  Winston
Settlement  Agreement  and  as a  result  of  the  litigation,  if  the  Winston
Settlement  is  consummated,  are covered  losses under both the National  Union
Policy  and  the  Stonewall  Policy.  In  addition,  the  Company  has  incurred
approximately $250,000 in legal fees in defending Milestone and its directors in
connection  with the Winston  Action,  which it believes is a covered loss under
the  National  Union and  Stonewall  policies.  National  Union has  refused  to
contribute  to the Winston  Settlement,  as set forth in the Winston  Settlement
Agreement,  asserting that the Winston Settlement does not encompass any covered
loss  (as  defined  in the  National  Policy).  Stonewall  has also  refused  to
contribute to the Winston  Settlement.  In the complaint,  the plaintiffs allege
that National  Union and Stonewall have  wrongfully  failed to contribute to the
Winston  Settlement and seek  reimbursement from National Union and Stonewall up
to the limits of their  respective  policies.  National  Union has  answered the
complaint and has denied liability.  Stonewall has until April 6, 1998 to answer
the  complaint.  At this time,  the  Company  is not in a position  to render an
opinion as to the outcome of this action.

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

     No matters  were  submitted  to a vote of  security  holders,  through  the
solicitation  of proxies or otherwise,  during the fourth  quarter of the fiscal
year ended December 31, 1997.



                                                                15

<PAGE>



                                                              PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters.

     The Common  Stock and the Series A  Preferred  Stock have traded on the New
York  Stock   Exchange   ("NYSE")   under  the  symbols  "MPI"  and  "MPI  PRA",
respectively, since January 29, 1991.

     The  quarterly  high and low sales  prices in 1997 and 1996 for the  Common
Stock and the Series A  Preferred  Stock,  as  reported  by  Bloomberg,  were as
follows:

   Common Stock                                 High                 Low

   1997
   First Quarter                            $   7/8           $    9/16
   Second Quarter                               9/16               7/16
   Third Quarter                                9/16               7/16
   Fourth Quarter                              11/16                1/2

   1996
   First Quarter                              $ 2 1/8          $   1 1/2
   Second Quarter                               1 7/8              1 1/8
   Third Quarter                                1 1/8              11/16
   Fourth Quarter                               1 1/8                5/8


   Series A Preferred Stock                     High                 Low

   1997
   First Quarter                          $      7/8          $   5/8
   Second Quarter                               11/16              1/2
   Third Quarter                              1 5/16              7/16
   Fourth Quarter                             1 5/16            1 3/16

   1996
   First Quarter                           $    3 1/4         $   2
   Second Quarter                               2 5/8             1 1/8
   Third Quarter                                1 1/4             26/32
   Fourth Quarter                               1 1/8               5/8



On March 20, 1998,  the last reported sale price of the Common Stock was $1 9/16
and the last reported sale price of the Series A Preferred Stock was $1 7/16. On
March 20, 1998,  there were  approximately  1,899  record  holders of the Common
Stock and 1,651 record holders of the Series A Preferred Stock.



                                                             16

<PAGE>




Dividend Policy

                     Common Stock

     Milestone has never paid any cash  dividends on its Common Stock and has no
present  intention  to declare or pay cash  dividends on the Common Stock in the
foreseeable  future.  While there are no restrictions on Milestone's  ability to
pay  dividends,  except  for the  preference  of the  Series A  Preferred  Stock
(discussed below),  the Company  anticipates that in the future earnings will be
retained  to finance the  Company's  operations.  Any  decision as to the future
payment  of  dividends  on the  Common  Stock  will  depend  on the  results  of
operations and the financial  condition of the Company and such other factors as
Milestone's Board of Directors,  in its discretion,  deems relevant. See Item 7.
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operation - Liquidity and Capital Resources.

                     Series A Preferred Stock

     Milestone's  Board of Directors  determined not to pay any dividends on the
Series A Preferred  Stock during the years ended  December 31, 1996 and 1997 and
for the quarter ended March 31, 1998.  The last  dividend  declared by Milestone
was for the quarter ended December 31, 1995 and was paid on February 15, 1996 at
$0.195 per share of Series A Preferred Stock.

     After September 30, 1995,  holders of the Series A Preferred Stock having a
liquidation  preference of $10.00 per share,  were no longer entitled to receive
dividends on a cumulative basis.  Pursuant to the Certificate of Designations of
the Series A Preferred  Stock,  after such date, no cash dividend may be paid on
the Common Stock unless full  dividends of $0.195 on all  outstanding  shares of
Series A Preferred  Stock for the then  current  quarterly  dividend  period are
declared  and either paid or  sufficient  sums for the  payment  thereof are set
apart. As a result of Milestone's Board of Directors' determination not to pay a
dividend for the quarter  ended June 30, 1997,  which was the sixth  consecutive
quarter for which no dividend was paid, the number of persons  entitled to serve
as directors on  Milestone's  Board of Directors has been  increased by one, and
the holders of the Series A Preferred  Stock,  who currently elect one member of
the Board of  Directors,  are entitled to elect a second  member of the Board of
Directors to fill such newly created directorship. Any decision as to the future
payment of dividends on the Series A Preferred  Stock will depend on the results
of operations and the financial  condition of the Company and such other factors
as Milestone's Board of Directors,  in its discretion,  deems relevant. See Item
7.  Management's  Discussion and Analysis of Financial  Condition and Results of
Operation - Liquidity and Capital Resources.






                                                             17

<PAGE>




Item 6.  Selected Financial Data
       (Amounts in thousands, except per share information)
<TABLE>
<CAPTION>

                                                      Years Ended December 31,
                                                      1997              1996              1995             1994             1993
------------------------------------------------------------------------------------------------------------------------------------

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

Total revenues                                        $ 30,092       $   33,722       $    25,768       $    19,404        $  14,494

Total expenses                                         34,244            35,843            26,261            16,951           14,278

(Loss)income before income taxes                       (4,152)           (2,121)             (493)            2,453              216
Benefit (provision) for income taxes                      721             (366)             (317)           (1,161)           ( 377)

Net (loss)income                                       (3,431)           (2,487)             (810)            1,292            (161)
Distributions on preferred stock                            0                  0            (2,732)         (2,772)          (2,807)
                                               --------------    ---------------         -----------     -----------     -----------

Loss attributable to common stockholders              ($3,431)          ($2,487)           ($3,542)        ($1,480)         ($2,968)
                                               ===============   ===============        ===========      ==========      ===========

Loss per common share                                  ($0.82)           ($0.65)            ($2.13)         ($1.28)          ($2.06)
                                              ================   ===============        ===========      ===========     ===========

Weighted average common shares
    outstanding                                         4,207              3,846             1,665            1,160            1,441
                                              ===============    ===============        ============    ============     ===========

Total assets                                          $112,223         $182,095           $198,413          $137,785         $87,390

Mortgages and notes payable                            67,739            71,563             79,278            47,105          43,253
</TABLE>



Milestone  has never  paid any cash  dividends  on its  Common  Stock and has no
present intention to declare or pay cash dividends on the Common Stock or on the
Series A Preferred Stock in the  foreseeable  future.  See Item 7.  Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operation -
Liquidity and Capital Resources.

For a discussion  regarding new accounting  standards,  see Item 7. Management's
Discussion  and Analysis of Financial  Condition and Results of Operations - New
Accounting Standards.

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

 The following  discussion and analysis  should be read in conjunction  with
the  Consolidated  Financial  Statements  of the Company  and the notes  thereto
appearing in Item 14 of this report.

General

     Certain  statements  made in this  report may  constitute  "forward-looking
statements"  within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. See Item 1. Business - Forward Looking Statements.

     The  Company is engaged in the  business  of owning,  acquiring,  managing,
developing  and  investing  in  commercial  real estate and real estate  related
assets.








                                                                 18

<PAGE>




Year 2000 Compliance

     The  Company  has and will  continue  to make  certain  investments  in its
software  systems  and  applications  to ensure  that the  Company  is year 2000
compliant.  It is  anticipated  that the project  will be  completed by internal
staff without  significant  contributions from outside  contractors.  Management
believes  that the  financial  impact to the Company of  ensuring  its year 2000
compliance  has not been and will not be  material  to the  Company's  financial
position or results of operations.

Recent Developments

     On March 6, 1998,  the Company  entered into a contract in connection  with
the contemplated sale of its Mountain View Mall property located in Bend, Oregon
(the  "Bend  Property").  Under  the  terms  of the  contract,  which  is in the
feasibility stage, the potential  purchaser is not yet obligated to purchase the
Bend  Property and the Company is not yet  obligated to sell the Bend  Property,
and any such obligation for the purchase or sale of such property is conditional
upon the occurrence or non-occurrence  of certain events and/or  determinations,
some or all of which  may not be in the  control  of the  Company.  Accordingly,
there can be no assurance that the contemplated transaction will occur.

     On February 9, 1998,  the Company  realized its position in its  wraparound
note on the property  located in Chili,  New York, as a result of the assignment
of  the  wraparound  note.  Such  assignment  resulted  in  the  relief  of  the
non-recourse  underlying  mortgage,  which  resulted  in  a  net  book  gain  of
approximately $75,000 to the Company.

     The Company  entered into an agreement with SGSC (the "SGSC  Agreement") on
January 9, 1998,  effective  as of  December  24,  1997,  pursuant  to which the
Company  retained  SGSC to act as a financial  advisor to the Company and two of
its affiliates (the "Affiliates"),  in connection with any transaction involving
a proposed sale (a "Proposed Sale") by the Affiliates of certain shopping center
properties  and  any  proposed  sale  by the  Company  of  certain  of  its  Fee
Properties.  The shopping  center  properties to be sold by the  Affiliates  are
subject to Wrap Debt held by the Company  which would need to be released  prior
to the consummation of any  transaction.  The Properties to be sold and the Wrap
Debt  to be  repaid  in  connection  with a  Proposed  Sale  could  represent  a
substantial portion of the Company's real estate related assets.

     Neither the Company nor the  Affiliates  have entered into any  commitment,
agreement or  understanding  with any  prospective  purchaser  with respect to a
Proposed  Sale, and there can be no assurance that SGSC will be able to identify
suitable  candidates to undertake a Proposed  Sale, or that if  identified,  the
Company and the  Affiliates  will be willing and able to  consummate  a Proposed
Sale on terms acceptable to them.

     On November  21, 1997 and  December  17,  1997,  the Company  entered  into
contracts  (the  "Purchase  Contracts")  in  connection  with  the  contemplated
purchase of two strip mall shopping centers in the  Jacksonville,  Florida area.
Pursuant to the Purchase  Contracts any  obligations to purchase such properties
are  subject  to the  occurrence  or  non-occurrence  of certain  events  and/or
determinations,  some or all of which may not be in the control of the  Company.
Accordingly,  there can be no assurance that the contemplated  transactions will
occur.



                                                                 19

<PAGE>



Results of Operations

                     Calendar Year 1997 Compared to Calendar Year 1996

     The Company recognized a net loss of $3,430,731 for the year ended December
31, 1997 as compared to a net loss of $2,486,974 for the same period in 1996 due
to the following factors:

     Revenues for 1997 were  $30,091,911,  a decrease of $3,630,531 or 11%, from
$33,722,442  for 1996.  Such  decrease  was  primarily  due to the net of: (1) a
decrease  in  interest  income  of  $4,299,059  resulting  primarily  from (a) a
decrease in interest income of  approximately  $994,000 due to a decrease in the
number of wraparound notes held by the Company to 28 for the year ended December
31,  1997 from 30 for the same  period in 1996 and (b) a  decrease  in  interest
income of approximately $3,196,900 due to the sale by the Company of all four of
its mortgage  backed  securities,  (2) a decrease in rental income of $1,102,272
resulting  from a decrease in the number of properties  leased by the Company to
28 for the year ended December 31, 1997 from 30 for the same period in 1996, (3)
an  unrealized  holding loss on U.S.  Treasury  Notes sold short of $316,887 for
1997  compared to an unrealized  holding gain of  $1,217,186  for 1996 and (4) a
gain  on the  sale of  available-for-sale  securities  of  $3,511,560  for  1997
compared to a loss on the sale of available-for-sale  securities of $350,699 for
1996.

     Operating expenses for the year ended December 31, 1997 were $21,686,805, a
decrease of $1,221,139,  or 5%, from $22,907,944 for the year ended December 31,
1996. Such decrease was primarily due to the net of: (1) a decrease in net lease
expenses of $1,221,258  due to a decrease in the number or properties  leased by
the  Company to 28 for the year  ended  December  31,  1997 from 30 for the same
period in 1996,  (2) a decrease  in property  expenses  of  $299,903  due to the
decrease in the number of  properties  leased by the Company,  (3) a decrease in
professional fees of $139,627 due to non-recurring  transaction costs associated
with the  disposition  of real estate related assets in 1996 and (4) an increase
in salaries,  general and administration expenses of $416,800 due to an increase
in bonuses for several executive officers of the Company.

     Interest  expense for the year ended  December 31, 1997 was  $9,119,554,  a
decrease of $2,842,226, or 24%, from $11,961,780 for the year ended December 31,
1996.  Such decrease was  primarily due to a decrease in financing  arrangements
related  to the  disposition  during  1997  by the  Company  of all  four of the
mortgage backed  securities then held by the Company  resulting in a decrease in
interest expense of approximately $2,560,800.

     Valuation  allowance,  which is a reduction  in the  carrying  value of the
Wraparound  Notes,  for the year ended  December  31,  1997 was  $2,590,132,  an
increase of $2,400,279  from $189,853 for the year ended  December 31, 1996. The
value of the  underlying  collateral  was  determined  by internal  analysis and
independent appraisals.

     Depreciation  and  amortization  for the year ended  December  31, 1997 was
$847,385,  an  increase  of $63,984,  or 8%,  from  $783,401  for the year ended
December 31, 1996. Such increase was primarily due to  approximately  $1,253,000
of property improvements purchases made during 1997.

                     Calendar Year 1996 Compared to Calendar Year 1995

     Revenues for 1996 were $33,722,442, an increase of $7,954,932, or 31%, from
$25,767,510  in 1995.  Such  increase  was  primarily  due to the net of: (1) an
increase in rental income of $1,506,092  attributable to the Properties acquired
in the Acquisition,  (2) an increase in interest income of $8,637,435  resulting
primarily  from  (a)  Wraparound  Note  receivable   interest  of  approximately
$7,875,000,  and (b) interest income relating to the mortgage backed  securities
purchased  in March  1995  and  March  1996 of  approximately  $398,000,  (3) an
unrealized  holding gain on U.S. Treasury Notes sold short of $1,217,186 in 1996
compared to an unrealized holding loss of

                                                                 20

<PAGE>



$4,137,225  for  such  securities  in  1995,  (4) a gain on sale of real  estate
related  assets of $260,239 for 1996 as compared to a gain of $6,326,231 on sale
of property in 1995 and (5) a loss on the sale of available-for-sale  securities
of $350,699 in 1996  compared to a gain of  $1,561,721  for such  securities  in
1995.

     Operating expenses for 1996 were $23,097,797, an increase of $9,140,312, or
65%, from  $13,957,485  in 1995.  Such increase was primarily due to the net of:
(1) an  increase  in lease  expense of  $11,953,480  attributable  to the Master
Leases  acquired in the  Acquisition,  (2) an  increase in property  expenses of
$782,070 due to the Underlying  Properties relating to the Master Leases, (3) an
increase  in expenses  for  management  company  operations  of $653,300  due to
additional  properties  managed by the  Company  in 1996 and (5) a  decrease  in
professional  fees of  $3,979,434  for 1996  compared to 1995,  when the Company
consumated the Acquisition, the Transfer and the Distribution.

     Interest  expense for 1996 was $11,961,780,  an increase of $3,046,016,  or
34%,  from  $8,915,764  in 1995.  Such  increase was  primarily due to: (1) debt
service  on the  Underlying  Properties  and  (2)  additional  interest  charges
relating to the  mortgage  backed  securities  purchased in March 1995 and March
1996.

     Depreciation and amortization  expense for 1996 was $783,401, a decrease of
$2,604,001, or 77%, from $3,387,402 in 1995. Such decrease was primarily due to:
(1) a decrease in  depreciable  real estate  assets to three  properties in 1996
from 18 properties in 1995, amounting to a decrease in property  depreciation of
approximately  $583,270  in  1996  and (2) a net  decrease  in  amortization  of
management contract rights of approximately $191,798 in 1996.

Liquidity and Capital Resources

     During  1997,  the Company sold its  $16,700,000  par MDV  Certificate  for
$14,680,344,  using  $10,251,093  to  pay  off  the  balance  of  the  financing
associated  with the MDV  Certificate  and keeping net  proceeds of  $4,429,251.
During 1997,  the Company sold its  $5,000,000  par B2 and its $8,560,000 par B3
Certificates  for  $12,556,138,  using  $9,373,175 to pay off the balance of the
financing associated with the B2 and B3 Certificates and keeping net proceeds of
$3,182,963. In connection with the sale of the Certificates and the close of the
U.S. Treasury Note short positions and the proceeds  therefrom,  the Company has
paid  bonuses of  approximately  $669,460 to several  executive  officers of the
Company pursuant to a long term incentive plan for management.  The Company does
not currently anticipate investing in additional certificates.

     The Company, as the holder of 222,860 shares of Kranzco Series C Cumulative
Redeemable  Preferred  Shares is entitled to receive from the redemption of such
shares, in 5 equal  installments over the next 13 months, an aggregate amount of
cash equal to  approximately  $2,228,600,  plus  interest  at the rate of 8% per
annum on the applicable  outstanding  balance of such shares. Such funds will be
available to fund the Company's  obligations and its real estate  investment and
development activities.

     Milestone has no present  intention to declare or pay cash dividends on the
Series  A  Preferred  Stock  or  Common  Stock in the  foreseeable  future.  The
cumulative period relating to the payment of dividends on the Series A Preferred
Stock expired on September 30, 1995. The Company  anticipates that approximately
$3,000,000 of cash will be required in connection with the implementation of the
Winston  Settlement  and  that  additional  sums of cash  will  be  required  in
connection  with  potential  purchases of community  shopping  centers and strip
malls that are  currently  being  contemplated.  If Milestone  declares  further
dividends  on the Series A Preferred  Stock or the Common  Stock and the payment
thereof  utilizes all, or  substantially  all, of its available  cash flow after
taxes and  expenses,  the Company will require other sources of funding to allow
it to implement the Winston  Settlement,  effect the contemplated  purchases and
accomplish its other  long-term  goals.  Accordingly,  no assurance can be given
that Milestone will declare or pay dividends on the Series A Preferred Stock or,
subject to the preference on the Series A Preferred  Stock, the Common Stock, in
the future,  and  currently  has no  intention  to do so. Any decision as to the
future payment of dividends on the Series A Preferred Stock or Common Stock will
depend on the results of

                                                                 21

<PAGE>



operations,   investment   opportunities  for  available  funds,  the  financial
condition  of the  Company  and  such  other  factors  as  Milestone's  Board of
Directors deems relevant.  See Item 5.Market for Registrant's  Common Equity and
Related Stockholder Matters

     Cash  generated  by the sale of the  Certificates,  the  redemption  of the
Kranzco Series C Cumulative  Redeemable  Preferred Stock and the cash on hand at
December  31,  1997 may be used to fund (i) the cash  payments to be made by the
Company  pursuant  to the  Winston  Settlement,  (ii)  expenses  relating to the
Winston  Settlement,  (iii)  bonus  payments  to be  made to  several  executive
officers of the Company  under a long term  incentive  plan,  (iv) the Company's
real estate  investment,  acquisition and  development  activities and (v) other
general  corporate  purposes.  See Item 3. Legal Proceeding for a description of
the terms of the Winston Settlement.

     The Company's  existing  borrowings and the  encumbrances on the Properties
securing  those  borrowings  may  inhibit  or result in  increased  costs to the
Company in connection with its ability to incur future indebtedness and/or raise
substantial equity capital in the marketplace.

     The Company has invested  available funds in secure,  short-term,  interest
bearing  investments.  The Company  believes that its levels of working capital,
liquidity  and  funds  from  operations,   are  sufficient  to  support  present
operations and to continue to fund future growth and business  opportunities  as
the Company seeks to maximize shareholder value. Other than as described herein,
management  is  not  aware  of  any  other  trends,   events,   commitments   or
uncertainties  that  will,  or are likely to,  materially  impact the  Company's
liquidity.

Cash Flows

     Net cash used in  operating  activities  of  $6,073,949  for the year ended
December 31, 1997 included (1) a net loss of  $3,430,731,  (2)  adjustments  for
non-cash  items of  $1,172,247  and (3) a net  change in  operating  assets  and
liabilities of $1,470,971,  compared to net cash used in operating activities of
$2,783,859 for the year ended December 31, 1996,  which included (1) net loss of
$2,486,974,  (2) adjustments of $728,499 for non-cash items and (3) a net change
in operating asset and liabilities of $431,614, compared to net cash provided by
operating  activities  of $637,203 for the year ended  December 31, 1995,  which
included  (1) a net loss of $809,649,  (2)  adjustments  for  non-cash  items of
$4,530,845  and  (3) a  net  change  in  operating  assets  and  liabilities  of
$5,977,697.

     Net cash  provided by  investing  activities  of  $47,421,221  for the year
ending  December 31, 1997  included (1) proceeds  from  principal  repayments on
loans  receivable  and  Wraparound  Notes of  $4,750,010,  (2) the  issuance  of
Wraparound  Notes of $81,934,  (3)  purchase  of  building,  land and  leasehold
improvements  of  $1,363,153;  (4) proceeds from the sale of real estate related
assets  of  $5,258,708,   (5)  proceeds  from  the  sale  of  available-for-sale
securities of  $36,360,354,  (6) proceeds from the  redemption of investments in
preferred  stock  of  $1,730,833,   (7)  proceeds  from  redemption  of  reverse
repurchase  agreements of $35,035,636 and (8) purchase of U.S. Treasury Notes of
$34,269,233,   compared  to  net  cash  provided  by  investing   activities  of
$14,021,098  for the year ended  December 31, 1996,  which included (1) proceeds
from  principal  repayments  of $4,817,864 on loans  receivable  and  Wraparound
Notes,  (2) issuance of Wraparound  Notes of $45,550,  (3) purchase of leasehold
improvements  of  $213,186,  (4) proceeds  from the sale of real estate  related
assets  of  $4,325,177,   (5)  proceeds  from  the  sale  of  available-for-sale
securities of  $23,201,402,  (6) proceeds from the  redemption of investments of
$2,541,667,  (7) purchase of $20,142,060 of available-for-sale  securities,  (8)
proceeds from U.S.  Treasury Notes sold short of $13,989,844,  (9) proceeds from
the redemption of reverse repurchase agreements of $9,203,125,  (10) purchase of
U.S.  Treasury  Notes of  $9,143,750  and (11)  purchase  of reverse  repurchase
agreements  of  $14,513,435.  Net  cash  provided  by  investing  activities  of
$21,712,986  for the year ended  December  31,  1995  included  (1)  purchase of
building,  land and leasehold  improvements  of $796,561,  (2) proceeds from the
principal  repayments on loans receivable of $49,771, (3) proceeds from the sale
of real estate  related  assets of  $25,079,214,  (4) proceeds  from the sale of
available-for-sale  securities of $25,285,441,  (5) proceeds from U.S.  Treasury
Notes payable of $2,590,951,  (6) purchase of reverse  repurchase  agreements of
$2,240,011 and (7) purchase of $28,255,819 of available-for-sale securities.


                                                                 22

<PAGE>



     Net cash used in financing  activities  of  $31,053,874  for the year ended
December 31, 1997 included (1) principal payments on mortgages and notes payable
of  $6,685,652,  (2)  principal  payments on loans payable of  $23,829,335,  (3)
amounts  paid on U.S.  Treasury  Notes  payable of  $316,887  and (4) amounts in
restricted cash of $222,000,  compared to net cash used in financing  activities
of  $10,657,906  for the year  ended  December  31,  1996,  which  included  (1)
distributions  of  $666,622 to Series A preferred  stockholders,  (2)  principal
repayments  of  $7,586,850  on  mortgages  and notes  payable,  (3)  proceeds of
$14,522,045 from loans payable,  (4) principal  payments of $18,143,665 on loans
payable and (5) proceeds of $1,217,186  received on U.S. Treasury Notes payable.
Net cash used in financing activities of $21,606,887 for the year ended December
31, 1995 included (1) distributions  paid to Series A Preferred  Stockholders of
$2,732,243,  (2) principal  payments on mortgages  payable of  $19,733,850,  (3)
proceeds from loans payable of  $22,630,146,  (4) principal  repayments on loans
payable of  $17,344,127,  (5) amounts  paid on U.S.  Treasury  Notes  payable of
$4,137,225 and (6) payments to common and preferred claimants of $289,588.

New Accounting Standards

     In June 1997, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standards  ("SFAS")  No.  130,  "Reporting  Comprehensive
Income".  SFAS No. 130  establishes  standards for  reporting and  displaying of
comprehensive  income  and  its  components  in a full  set of  general  purpose
financial statements.

     SFAS No. 130  mandates  that all items that are  required to be  recognized
under accounting  standards as components of comprehensive income be reported in
a financial  statement  that is  displayed  in equal  prominence  with all other
financial  statements.  It does not require a specific format for such financial
statements but requires that an enterprise display an amount  representing total
comprehensive income for the period in such a financial statement.

     SFAS No.  130 is  applicable  to all  entities  that  provide a full set of
financial statements. Enterprises that have no comprehensive income items in any
period presented are excluded from the scope of SFAS No. 130.

     SFAS No. 130 is  effective  for both interim and annual  periods  beginning
after December 15, 1997.  Comparative  financial statements provided for earlier
periods are required to be  reclassified  to reflect the  provisions of SFAS No.
130.  SFAS No.  130 will not have a material  effect on current or prior  period
financial statement displays presented by the Company.

     In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information".  SFAS No.
131 establishes  standards for the way public business enterprises are to report
information about operating segments in annual financial statements and requires
those  enterprises to report selected  information  about operation  segments in
interim financial reports issued to shareholders.  It also establishes standards
for related disclosures  concerning products and services,  geographic areas and
major customers.

     SFAS No. 131 is  effective  for both interim and annual  periods  beginning
after  December  15,  1997.  In the  initial  year of  application,  comparative
information for earlier years is to be restated,  unless it is  impracticable to
do so. SFAS No. 131 need not be applied to interim  financial  statements in the
initial year of its application, but comparative information for interim periods
in the initial year of application shall be reported in financial statements for
interim  periods in the second year of  application.  SFAS No. 131 will not have
any material  effect on  disclosures  presented  by the Company,  as the Company
operates as a single segment.

     In February 1998, the Financial  Accounting Standards Board issued SFAS No.
132, "Employers' Disclosures about Pensions and Other Postretirement  Benefits".
SFAS No. 132 revises employers' disclosure  requirements  concerning pension and
other postretirement benefit plans by standardizing such disclosure requirements

                                                                 23

<PAGE>



to the extent  practicable,  requires  additional  information on changes in the
benefit  obligations  and  fair  values  of plan  assets  that  will  facilitate
financial  analysis,  and eliminate  certain  disclosures  that are no longer as
useful as they were when FASB  Statements  No. 87,  "Employers'  Accounting  for
Pensions",  No. 88,  "Employers'  Accounting for Settlements and Curtailments of
Defined  Benefit  Pension  Plans and for  Termination  Benefits",  and No.  106,
"Employers'  Accounting for Postretirement  Benefits Other Than Pensions",  were
issued.  SFAS No. 132 suggests  combined formats for presentation of pension and
other  postretirement  benefit  disclosures and permits reduced  disclosures for
nonpublic entities.

     SFAS No. 132 is effective  for fiscal years  beginning  after  December 15,
1997. SFAS No. 132 will not have any material effect on disclosures presented by
the Company.


Item 8.  Financial Statements and Supplementary Data

          The Company's  Consolidated Financial Statements and the notes thereto
appear in Item 14 of this report.

Item  9.  Changes  in and  Disagreements  With  Accountants  on  Accounting  and
Financial Disclosure.

          None.

                                                                 24

<PAGE>



                                                              PART III

          Certain  information  required by Part III is omitted from this report
since the Company plans to file with the  Securities  and Exchange  Commission a
definitive  proxy  statement for its 1998 Annual  Meeting of  Stockholders  (the
"Proxy  Statement")  no later  than 120 days  after the end of the  fiscal  year
covered by this report, and certain information included therein is incorporated
herein by reference.

Item 10.  Directors and Executive Officers of the Registrant.

          The  information  regarding the Company's  directors  required by this
Item is incorporated by reference to the section in the Proxy Statement entitled
"Election of Directors."

          The information regarding the Company's executive officers required by
this Item is  incorporated  by reference  to the section in the Proxy  Statement
entitled "Executive Officers."

          The  information  regarding  compliance  with  Section  16(a)  of  the
Securities  Exchange  Act of  1934  by the  directors,  executive  officers  and
beneficial owners of more than 10% of the Common Stock or the Series A Preferred
Stock required by this Item is  incorporated  by reference to the section in the
Proxy  Statement   entitled  "Section  16(a)  Beneficial   Ownership   Reporting
Compliance."

Item 11.  Executive Compensation.

          The  information  regarding  compensation  of directors  and executive
officers of the Company  required by this Item is  incorporated  by reference to
the  sections  in the Proxy  Statement  entitled  "Executive  Compensation"  and
"Compensation of Directors."

Item 12.   Security Ownership of Certain Beneficial Owners and Management.

          The information  regarding  security  ownership of certain  beneficial
owners and management  required by this Item is incorporated herein by reference
to the section in the Proxy Statement  entitled  "Security  Ownership of Certain
Beneficial Owners and Management."

Item 13.  Certain Relationships and Related Transactions.

          The   information   regarding   certain   relationships   and  related
transactions  required by this Item is  incorporated by reference to the section
in  the  Proxy   Statement   entitled   "Certain   Relationships   and   Related
Transactions."



                                                                 25

<PAGE>



Item 14.         Exhibits, Financial Statement Schedule and Reports on Form 8-K.

 (a)(1)              Financial Statements and Financial Statement Schedule.

The following consolidated financial statements of the Company are filed as part
of this report:

                                                                      Page
           Independent Auditors' Report                                F-1

           Consolidated Balance Sheets - December 31, 1997 and 1996    F-2

           Consolidated Statements of Revenues and Expenses -
           Years Ended December 31, 1997, 1996 and 1995                F-3

           Consolidated Statements of Stockholders' Equity -
           Years Ended December 31, 1997, 1996 and 1995                F-4

           Consolidated Statements of Cash Flows -
           Years Ended December 31, 1997, 1996 and 1995                F-5

           Notes to Consolidated Financial Statements                  F-6

                     Consolidated Schedule.

                     III.    Real Estate and Accumulated Depreciation at    F-24
                              December 31, 1997

                     Note. All schedules,  other than those indicated above, are
                     omitted  because  of the  absence of the  conditions  under
                     which they are required or because the required information
                     is included in the consolidated financial statements or the
                     notes to the consolidated financial statements.

 (a)(2)              Exhibits.

                     The exhibits to this report are listed below.

Exhibit              Description

2.1  Master  Purchase  and Sale  Agreement  dated as of February  17,  1995,  as
     amended,  between the  Company  and Castle  Plaza,  Inc.  (incorporated  by
     reference  to  Exhibit  2.1  to the  Company's  Form  8-K  filed  with  the
     Securities and Exchange Commission (the "Commission") on November 7, 1995).

2.2  Short-Form  Contracts,  dated as of February 17, 1995,  between the Company
     and Castle  Plaza,  Inc.  (incorporated  by reference to Exhibit 2.2 to the
     Company's Form 8-K filed with the Commission on November 7, 1995).

2.3  Purchase and Sale  Agreement,  dated as of February  17,  1995,  as amended
     between the Company and Mountain View Mall, Inc. (incorporated by reference
     to  Exhibit  2.3 to the  Company's  Form 8-K filed with the  Commission  on
     November 7, 1995).


                                                                 26

<PAGE>


Exhibit             Description

2.4  Purchase and Sale  Agreement,  dated as of February  17,  1995,  as amended
     between  the  Company  and  Concord   Income   Realty   Partners  VI,  L.P.
     (incorporated  by reference to Exhibit 2.4 to the Company's  Form 8-K filed
     with the Commission on November 7, 1995).

2.5  Purchase and Sale  Agreement,  dated as of February  17,  1995,  as amended
     between  the  Company  and  Concord   Income   Realty   Partners  IX,  L.P.
     (incorporated  by reference to Exhibit 2.5 to the Company's  Form 8-K filed
     with the Commission on November 7, 1995).

3.1  Certificate of Amendment to Certificate  of  Incorporation  of the Company,
     filed on December 18, 1990 (incorporated by reference to Exhibit 3.1 to the
     Company's Form 10-K filed with the Commission on March 29, 1991).

4.1  Certificate of Designations of $.78 Convertible Series A Preferred Stock of
     the  Company,  filed on December  18, 1990  (incorporated  by  reference to
     Exhibit 4.1 to the Company's  Form 10-K filed with the  Commission on March
     29, 1991).

4.1A Certificate of Amendment to Certificate of Designations of $.78 Convertible
     Series A Preferred Stock of the Company filed on June 9, 1994 (incorporated
     by  reference  to Exhibit 4.5 to the  Company's  Form 10-QSB filed with the
     Commission on August 15, 1994).

4.2  Specimen  form of Common Stock  Certificate  (incorporated  by reference to
     Exhibit 4.2 to the Company's  Form 10-K filed with the  Commission on March
     29, 1991).

4.3  Specimen  form of Series A Preferred  Stock  Certificate  (incorporated  by
     reference  to  Exhibit  4.3 to the  Company's  Form  10-K  filed  with  the
     Commission on March 29, 1991).

4.4  Rights  Agreement,  dated as of March 31, 1993  between the Company and The
     Bank of New York, as Rights Agent  (incorporated  by reference to Exhibit 1
     to the Company's Form 8-A filed with the Commission on March 31, 1993).

10.1 Asset purchase agreement among the Company,  Milestone Property Management,
     Inc.,  Concord  Assets  Group,  Inc. and Concord  Assets  Management,  Inc.
     (incorporated  by  reference to Item 7(c) to the  Company's  Form 8-K filed
     with the Commission on January 3, 1993).

10.2 Settlement  agreement  dated  as  of  January  31,  1993  relating  to  the
     settlement  of a class  action  litigation  (incorporated  by  reference to
     Exhibit  10.22 to the  Company's  Form 10-KSB filed with the  Commission on
     March 30, 1993).

10.3 Letter  agreement  related to  employment  dated March 31, 1993 between the
     Company and Leonard S. Mandor  (incorporated  by reference to Exhibit 10.23
     to the Company's Form 10-QSB filed with the Commission on May 14, 1993).

10.3AAmendment to letter  agreement  related to employment  dated March 31, 1993
     between the Company and Leonard S. Mandor,  dated May 2, 1996 (incorporated
     by reference to Exhibit 10.1 to the  Company's  Report on Form 10-QSB filed
     with the Commission on May 16,1996).

10.4 Letter  agreement  related to  employment  dated March 31, 1993 between the
     Company and Robert A. Mandor (incorporated by reference to Exhibit 10.24 to
     the Company's Form 10-QSB filed with the Commission on May 14, 1993).


                                                                 27

<PAGE>


Exhibit             Description

10.4AAmendment to letter  agreement  related to employment  dated March 31, 1993
     between the Company and Robert A. Mandor,  dated May 2, 1996  (incorporated
     by reference to Exhibit 10.2 to the  Company's  Report on Form 10-QSB filed
     with the Commission on May 16, 1996).

10.5 Letter  agreement  related to  employment  dated March 31, 1993 between the
     Company and Harvey Shore (incorporated by reference to Exhibit 10.25 to the
     Company's Form 10-QSB filed with the Commission on May 14, 1993).

10.5AAmendment to letter  agreement  related to employment  dated March 31, 1993
     between the Company and Harvey Shore,  dated May 2, 1996  (incorporated  by
     reference to Exhibit 10.4 to the Company's Report on Form 10-QSB filed with
     the Commission on May 16, 1996).

10.6 Letter  agreement  related to  employment  dated March 31, 1993 between the
     Company and Joan LeVine  (incorporated by reference to Exhibit 10.26 to the
     Company's Form 10-QSB filed with the Commission on May 14, 1993).

10.6AAmendment to letter  agreement  related to employment  dated March 31, 1993
     between the Company and Joan  LeVine,  dated May 2, 1996  (incorporated  by
     reference to Exhibit 10.3 to the Company's Report on Form 10-QSB filed with
     the Commission on May 16, 1996).

10.7 Letter  agreement  related to  employment  dated March 31, 1993 between the
     Company and Joseph P. Otto  (incorporated  by reference to Exhibit 10.27 to
     the Company's Form 10-QSB filed with the Commission on May 14, 1993).

10.7AAmendment to letter  agreement  related to employment  dated March 31, 1993
     between the Company and Joseph P. Otto, dated May 2, 1996  (incorporated by
     reference to Exhibit 10.5 to the Company's Report on Form 10-QSB filed with
     the Commission on May 16, 1996).

10.8 Key Executive  Employment and Severance Agreements entered into between the
     Company and:
                     a.  Leonard S. Mandor
                     b.  Robert A. Mandor
                     c.  Harvey Shore
                     d.  Joan LeVine
                     e.  Joe Otto
(incorporated by reference to Exhibit 10.29 to the  Company's  Form 10-QSB filed
     with the Commission on May 14, 1993).

10.9 Purchase  money  promissory  note  purchase  money  mortgage  and  security
     agreement  with The  Benderson  85-1  Trust  for the  Tonawanda,  New York,
     property  (incorporated by reference to Exhibit 10.33 to the Company's Form
     10-QSB filed with the Commission on August 14, 1993).

10.10Amended  indemnification  agreement between the Company and related parties
     (incorporated by reference to Exhibit 19.2 to the Company's Form 10-Q filed
     with the Commission on May 14, 1992).

10.11Second amended and restated management and reimbursement  agreement between
     the Company and Concord  (incorporated  by reference to Exhibit 19.3 to the
     Company's Form 10-Q filed with the Commission on March 30, 1993).


                                                                 28

<PAGE>


Exhibit             Description

10.121993  Employee  Stock  Option Plan  (incorporated  by  reference to Exhibit
     10.20 to the Company's  Form 10-KSB filed with the  Commission on March 31,
     1994).

10.131993 Non-Employee  Director Stock Option Plan (incorporated by reference to
     Exhibit  10.21 to the  Company's  Form 10-KSB filed with the  Commission on
     March 31, 1994).

10.14Pre-sale Wet Ink Funding  Facility between ("MMC") and Nomura Asset Capital
     Corporation  (incorporated  by reference to Exhibit  10.32 to the Company's
     Form 10-QSB filed with the Commission on August 15, 1994).

10.15Guaranty   between  the  Company  and  Nomura  Asset  Capital   Corporation
     (incorporated  by reference to Exhibit 10.33 to the  Company's  Form 10-QSB
     filed with the Commission on August 15, 1994).

10.16Global master Repurchase  Agreement  between Nomura Grand Cayman,  Ltd. and
     MMC  (incorporated  by reference  to Exhibit  10.34 to the  Company's  Form
     10-QSB filed with the Commission on August 15, 1994).

10.17Master  Repurchase  Agreement between DLJ Mortgage  Acceptance  Corporation
     and MMC  (incorporated  by reference to Exhibit 10.35 to the Company's Form
     10-QSB filed with the Commission on August 15, 1996).

10.18Management  Services Agreement dated November 20, 1995, between the Company
     and Union Property  Investors,  Inc.  (incorporated by reference to Exhibit
     10.30 to the Company's  Form 10- KSB filed with the Commission on March 30,
     1996).

10.19Property  Management  Agreement,  dated  November  20,  1995,  between  the
     Company and Milestone Property Management,  Inc. (incorporated by reference
     to Exhibit 10.31 to the Company's Form 10- KSB filed with the Commission on
     April 1, 1996).

10.20Stipulation  and  Agreement  of  Settlement  dated  October 30, 1997 by and
     among John Winston, the plaintiff, and Leonard S. Mandor, Robert M. Mandor,
     Joan  LeVine,  Harvey  Jacobson,  Gregory  McMahon,  Geoffrey S.  Aaronson,
     Milestone  and  Concord  (incorporated  by  reference  to  Exhibit 2 to the
     Company's 8-K filed with the Commission on November 12, 1997.

21   Subsidiaries of the Company.

27   Financial Data Schedule  Article 5 included for Electronic  Data Gathering,
     Analysis,  and Retrieval  (EDGAR)  purposes  only.  This Schedule  contains
     summary  financial  information  extracted  from the  consolidated  balance
     sheets  and  consolidated  statements  of  revenues  and  expenses  and  is
     qualified in its entirety by reference to such financial statements.




                                                                 29

<PAGE>



(b)                  Reports on Form 8-K.

                                On November  12, 1997, a Form 8-K was filed with
                     the Commission reporting the Winston Settlement and Winston
                     Settlement Agreement entered into on October 30, 1997.

                            On November  21, 1997, a Form 8-K was filed with the
                     Commission  reporting the sale of the remaining holdings of
                     available-for-sale  securities  and  containing  (i)  a pro
                     forma balance sheet as of September 31, 1997 and (ii) a pro
                     forma  consolidated  statements of revenue and expenses for
                     the nine months ended September 30, 1997 and the year ended
                     December 31, 1996.

                     On January  15,  1998,  a  Form  8-K  was  filed  with  the
                        Commission  reporting  that the Company  entered into an
                        agreement with Societe Generale  Securities  Corporation
                        pursuant to which the
                     Company retained SGSC to act as financial advisor involving
a proposed sale of certain properties.


                                                                 30

<PAGE>



                                                             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.

                                  MILESTONE PROPERTIES, INC.

                                  By:    /s/ Leonard S. Mandor
                                         Leonard S. Mandor
                                         Chairman of the Board and
                                         Chief Executive Officer

                                  DATE:   March 20, 1998

                    Pursuant to the requirements of the Securities  Exchange Act
of 1934, this report has been signed below by the following persons on behalf of
the Registrant in the capacities and on the dates indicated.

Signature and Title                                        Date

/s/ Leonard S. Mandor                                      March 20, 1998
------------------------------------
Leonard S. Mandor
Chairman of the Board and
Chief Executive Officer

/s/ Robert A. Mandor                                       March 20, 1998
------------------------------------
Robert A. Mandor
President, Chief Financial
Officer and Director

/s/ Joseph P. Otto                                         March 20, 1998
------------------------------------
Joseph P. Otto
Vice President and Director

/s/ Patrick S. Kirse                                         March 20, 1998
-----------------------------------
Patrick S. Kirse
Vice President of Accounting
(Principal Accounting Officer)

/s/ Geoffrey S. Aaronson                                   March 20, 1998
------------------------------------
Geoffrey S. Aaronson
Director

/s/ Harvey Jacobson                                        March 20, 1998
----------------------------------
Harvey Jacobson
Director

/s/ Gregory McMahon                                        March 20, 1998
---------------------------------
Gregory McMahon
Director



                                        31

<PAGE>



INDEPENDENT AUDITORS' REPORT




Milestone Properties, Inc.:

We have  audited  the  accompanying  consolidated  balance  sheets of  Milestone
Properties,  Inc. and  subsidiaries  (the "Company") as of December 31, 1997 and
1996  and  the  related  consolidated   statements  of  revenues  and  expenses,
stockholders'  equity and cash  flows for each of the three  years in the period
ended  December  31, 1997.  Our audits also  included  the  financial  statement
schedule  of  real  estate  and  accumulated  depreciation.  These  consolidated
financial  statements and financial statement schedule are the responsibility of
the Company's  management.  Our  responsibility  is to express an opinion on the
consolidated  financial statements and financial statement schedule based on our
audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
consolidated  financial  statement  presentation.  We  believe  that our  audits
provide a reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material respects,  the consolidated financial position of Milestone Properties,
Inc.  and  subsidiaries  at December  31, 1997 and 1996 and the results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted  accounting  principles.
Also, in our opinion,  such financial  statement  schedule,  when  considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.


/s/ Deloitte & Touche, LLP
New York, New York

March 20, 1998



                                                        F-1

<PAGE>
<TABLE>
<CAPTION>
                                    MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
                                            CONSOLIDATED BALANCE SHEETS


ASSETS                                                                          December 31, 1997  December 31, 1996
                                                                                   -------------     -------------
<S>                                                                                 <C>               <C>
Current Assets:
     Cash and cash equivalents .................................................$     13,435,237    $   3,141,839
     Restricted cash ...........................................................         222,000                0
     Loans receivable ..........................................................       1,512,744        1,684,585
     Accounts receivable .......................................................       1,265,625        1,360,621
     Accrued interest receivable ...............................................       8,465,528        9,646,886
     Due from related party ....................................................         391,851          599,093
     Prepaid expenses and other ................................................       1,034,613          430,603
     Reverse repurchase agreements .............................................               0       34,718,749
     Available-for-sale securities ............................................                0       32,314,853
                                                                                   -------------      -----------

         Total current assets ..................................................      26,327,598       83,897,229

     Property, improvements and equipment, net .................................      19,610,060       18,884,467
     Wraparound notes, net .....................................................      59,402,931       71,431,945
     Deferred income tax asset, net ............................................       4,058,358        3,272,873
     Investments in preferred stock ............................................       2,228,600        3,959,433
     Management contract rights, net ...........................................         290,926          426,467
     Goodwill and other, net ...................................................         304,639          222,863
                                                                                   -------------    -------------

         Total assets ..........................................................   $ 112,223,112    $ 182,095,277
                                                                                   =============    =============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
     Accounts payable and accrued expenses .....................................   $   2,015,942    $   2,031,513
     Accrued interest payable ..................................................         259,116        1,139,941
     Master lease payable ......................................................      13,637,564       14,445,351
     Due to related party ......................................................               0           61,688
     Current portion of mortgages and notes payable ............................       5,997,687        2,862,274
     Income taxes payable ......................................................       2,822,119        3,250,744
     Loans payable .............................................................               0       23,829,335
     Treasury notes sold short .................................................               0       33,952,346
                                                                                   -------------    -------------

     Total current liabilit ....................................................      24,732,428       81,573,192

     Mortgages and notes payable ...............................................      61,741,877       71,562,942
                                                                                   -------------    -------------

         Total liabilities .....................................................      86,474,305      153,136,134
                                                                                   -------------    -------------

Commitments and Contingencies

Stockholders' equity:
     Common stock ($.01 par value,  10,000,000 shares authorized,  4,905,959 and
        4,743,155 issued and outstanding in 1997 and 1996,
       respectively: 692,591 shares in treasury) ...............................          49,060           47,433
     Preferred stock (Series A $0.01 par value,
        $10 liquidation preference, 10,000,000 shares
         authorized, 3,033,995 and 3,182,184 shares issued
        and outstanding in 1997 and 1996, respectively) ........................          30,341           31,822
     Additional paid-in surplus ................................................      48,105,428       48,105,575
     Unrealized holding loss - available-for-sale securities
        (Net of tax benefit of $151,552 in 1996) ...............................               0         (220,396)
     Accumulated deficit .......................................................     (18,995,604)     (15,564,873)
     Shares held in treasury - at cost .........................................      (3,440,418)      (3,440,418)
                                                                                    -------------    -------------

         Total stockholders' equity ............................................      25,748,807       28,959,143
                                                                                    -------------    -------------

Total liabilities and stockholders' equity .....................................   $ 112,223,112    $ 182,095,277
                                                                                   =============     ============

</TABLE>
           See Accompanying Notes to Consolidated Financial Statements


                                                        F-2
<PAGE>

                   MILESTONE PROPERTIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF REVENUES AND EXPENSES
               For the Years Ended December 31, 1997,1996 and 1995

<TABLE>
<CAPTION>
                                                       December 31,1997 December 31, 1996 December 31, 1995
                                                       ---------------- ----------------- -----------------
<S>                                                         <C>            <C>              <C>
REVENUES:
     Rent ..............................................   $ 10,280,548     $11,382,820     $ 9,876,728
     Interest income ...................................     13,355,849      17,654,908       9,017,473
     Revenue from management company operations ........        512,303         976,983       1,034,321
     Tenant reimbursements .............................      1,261,217       1,184,462         926,791
     Management and reimbursement income ...............        407,286         835,811         499,806
     Percentage rent ...................................        450,423         266,653         428,739
     Amortization of discount - available-for-sale
     securities ........................................        313,551         294,079         232,925
     Unrealized (loss)gain on treasury notes
     sold short ........................................       (316,887)      1,217,186      (4,137,225)
     Gain on sale of real estate related assets ........        316,061         260,239       6,326,231
     Gain (loss)on sale of available-for-sale securities      3,511,560        (350,699)      1,561,721
                                                           ------------    ------------    ------------

     Total revenues ....................................     30,091,911      33,722,442      25,767,510
                                                           ------------    ------------    ------------

EXPENSES:
     Master lease expense ..............................     13,787,465      15,008,723       3,055,243
     Interest expense ..................................      9,119,554      11,961,780       8,915,764
     Depreciation and amortization .....................        847,385         783,401       3,387,402
     Valuation allowance on wraparound notes ...........      2,590,132         189,853               0
     Salaries, general and administration ..............      3,955,434       3,538,634       3,997,591
     Property expenses .................................      1,718,346       2,018,249       1,236,179
     Expenses for management company operations ........      1,304,166       1,281,317         628,017
     Professional fees .................................        921,394       1,061,021       5,040,455
                                                           ------------    ------------    ------------

         Total expenses ................................     34,243,876      35,842,978      26,260,651
                                                           ------------    ------------    ------------


Loss before income taxes ...............................     (4,151,965)     (2,120,536)       (493,141)

(Benefit) Provision for income taxes ...................       (721,234)        366,438         316,508
                                                           ------------    ------------    ------------

Net loss ...............................................     (3,430,731)     (2,486,974)       (809,649)

Distributions on preferred stock .......................              0               0      (2,732,242)
                                                           ------------    ------------    ------------


Loss attributable to common stockholders ...............   $ (3,430,731)   $ (2,486,974)   $ (3,541,891)
                                                           ============    ============    ============


Loss per common share ..................................   $      (0.82)   $      (0.65)   $      (2.13)
                                                           ============    ============    ============


Weighted average common shares outstanding .............      4,206,550       3,845,546       1,664,956
                                                           ============    ============    ============
</TABLE>

           See Accompanying Notes to Consolidated Financial Statements

                                                        F-3
<PAGE>

                   MILESTONE PROPERTIES, INC AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

              For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>


                                                          Common Stock          Preferred Stock            Treasury Stock
                                                       ------------------     -------------------     ----------------------
                                                       Shares      Amount      Shares       Amount      Shares        Cost
                                                       -------   ---------   ---------  ----------    ---------    ----------
<S>                                                   <C>          <C>       <C>           <C>         <C>         <C>

Balance December 31, 1994                              1,852,921 $  18,529   3,549,578  $    35,496   (692,591) $  (3,440,418)

Conversion of preferred stock into common stock           85,852       859    (131,023)      (1,310)

Cash distributions declared -
$0.78 per preferred claimant share

Cash distributions declared -
$0.78 per preferred share

Purchase of Acquisition Assets                         2,544,654   25,447

Spin-off of UPI

Net loss for the year ended December 31, 1995

Unrealized holding gain - available-for-sale securities
                                                       ----------------------------------------------------------------------

Balance December 31, 1995                              4,483,427  44,835      3,418,555    34,186      (692,591)   (3,440,418)
                                                      -----------------------------------------------------------------------

Conversion of preferred stock into common stock          259,728   2,598       (236,371)   (2,364)

Net loss for the year ended December 31, 1996

Unrealized holding loss - available-for-sale securities
                                                      --------------------------------------------------------------------------

Balance December 31, 1996                              4,743,155  47,433      3,182,184    31,822      (692,591)   (3,440,418)
                                                      --------------------------------------------------------------------------

Conversion of preferred stock into common stock          162,804   1,627       (148,189)   (1,481)

Net loss for the year ended December 31, 1997

Realization of unrealized holding loss -
                 available-for-sale securities
                                                      -------------------------------------------------------------------------

Balance December 31, 1997                              4,905,959  $49,060     3,033,995   $ 30,341     (692,591)  $(3,440,418)
                                                       =========================================================================



                                                                       Unrealized
                                                                       Holding (Loss)/
                                                          Additional   Gain on
                                                            Paid-in    Available-for-  Accumulated   Stockholders'
                                                            Surplus   Sale Securities  Deficit        Equity
                                                          ----------  ---------------  -----------   -------------

<S>                                                      <C>         <C>               <C>           <C>
Balance December 31, 1994                                $51,326,392 $      (900,111)  $(9,536,007)  $37,503,881

Conversion of preferred stock into common stock               451                                              0

Cash distributions declared -
$0.78 per preferred claimant share                         (289,588)                                    (289,588)

Cash distributions declared -
$0.78 per preferred share                                                               (2,732,243)   (2,732,243)

Purchase of Acquisition Assets                            12,285,779                                  12,311,226

Spin-off of UPI                                          (15,217,225)                                (15,217,225)

Net loss for the year ended December 31, 1995                                             (809,649)     (809,649)

Unrealized holding gain - available-for-sale securities                     1,749,093                  1,749,093
                                                          -------------------------------------------------------

Balance December 31, 1995                                 48,105,809          848,982  (13,077,899)   32,515,495
                                                          -------------------------------------------------------

Conversion of preferred stock into common stock                (234)                                           0

Net loss for the year ended December 31, 1996                                           (2,486,974)   (2,486,974)

Unrealized holding loss - available-for-sale securities                   (1,069,378)                 (1,069,378)
                                                          -------------------------------------------------------

Balance December 31, 1996                                 48,105,575        (220,396)  (15,564,873)   28,959,143
                                                          -------------------------------------------------------

Conversion of preferred stock into common stock                (146)                                           0

Net loss for the year ended December 31, 1997                                           (3,430,731)   (3,430,731)

Realization of unrealized holding loss -
                 available-for-sale securities                                220,396                    220,396
                                                          ------------------------------------------------------

Balance December 31, 1997                                 $48,105,428        $       0 $(18,995,604) $25,748,807
                                                          ======================================================


</TABLE>

           See Accompanying Notes to Consolidated Financial Statements

                                                                    F-4

<PAGE>
                   MILESTONE PROPERTIES, INC AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
                                                                December 31, 1997 December 31, 1996 December 31, 1995
                                                                 ---------------- ----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                <C>            <C>               <C>
    Net Loss ....................................................  $  (3,430,731) $   (2,486,974)   $   (809,649)
    Adjustments to reconcile net loss to
    net cash (used in )provided by operating activities:
    Depreciation and amortization ...............................        847,385         783,401       3,387,402
    Deferred benefit taxes ......................................       (785,479)       (280,948)     (3,934,595)
    Valuation allowance on wraparound notes .....................      2,590,132         189,853               0
    Unrealized loss (gain) on treasury notes sold short .........        316,887      (1,217,186)      4,137,225
    Amortization of discount - available-for-sale securities ....       (313,551)       (294,079)       (232,925)
    Realized loss (gain) on sale of available-for-sale securities     (3,511,560)        350,699      (1,561,721)
    Gain on sale of real estate related assets ..................       (316,061)       (260,239)     (6,326,231)
    Change in operating assets and liabilities net:
        Decrease (increase)  in accounts receivable .............         94,996          26,743        (528,548)
         Decrease(increase) in due from related party ...........        207,242        (442,959)        795,267
         Decrease (increase) in accrued interest receivable .....      1,181,358       1,751,144      (2,201,377)
         (Increase) decrease in prepaid expenses and other ......       (760,071)         59,044         561,559
         (Decrease) increase in accrued expenses ................        (15,571)        196,295         657,952
         (Decrease) increase in accrued interest payable ........       (880,825)        194,390         514,656
         (Decrease) increase  in master lease payable ...........       (807,787)     (1,347,380)      3,042,770
         (Decrease) increase in income taxes payable ............       (428,625)         75,913       2,992,154
         (Decrease) increase in due to related party ............        (61,688)        (81,576)        143,264
                                                                     ------------    ------------    ------------

         Net cash (used in) provided by operating activities ....     (6,073,949)     (2,783,859)        637,203
                                                                     ------------    ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Principal repayments on loans receivable ....................        171,841          53,460          49,771
    Principal repayments on wraparound notes ....................      4,578,169       4,764,404               0
    Issuance of wraparound notes ................................        (81,934)        (45,550)              0
    Purchase of building and land ...............................     (1,100,000)              0        (745,092)
    Purchase of leasehold improvements ..........................       (263,153)       (213,186)        (51,469)
    Proceeds from realization of real estate related assets .....      5,258,708       4,325,177      25,079,214
    Proceeds from the sale of available-for-sale securities .....     36,360,354      23,201,402      25,285,441
    Proceeds from redemption of investments in preferred stock ..      1,730,833       2,541,667               0
    Purchase of available-for-sale securities ...................              0     (20,142,060)    (28,255,819)
    Proceeds from treasury notes sold short .....................              0      13,989,844       2,590,951
    Proceeds from redemption of reverse repurchase
         agreements .............................................     35,035,636       9,203,125               0
    Purchase of treasury notes ..................................    (34,269,233)     (9,143,750)              0
    Purchase of reverse repurchase agreements ...................              0     (14,513,435)     (2,240,011)
                                                                     ------------    ------------    ------------

         Net cash provided by investing activities ..............     47,421,221      14,021,098      21,712,986
                                                                     ------------    ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Distributions paid to preferred stockholders ................              0        (666,622)     (2,732,243)
    Principal payments on mortgages and notes payable ...........     (6,685,652)     (7,586,850)    (19,733,850)
    Proceeds from loans payable .................................              0      14,522,045      22,630,146
    Principal payments on loans payable .........................    (23,829,335)    (18,143,665)    (17,344,127)
    Amounts (paid) received on treasury notes payable ...........       (316,887)      1,217,186      (4,137,225)
    Payments to common and preferred stock claimants ............              0               0        (289,588)
    Amounts in restricted cash ..................................       (222,000)              0               0
                                                                     ------------    ------------    ------------

         Net cash used in financing activities ..................    (31,053,874)    (10,657,906)    (21,606,887)
                                                                     ------------    ------------    ------------

NET INCREASE IN CASH AND CASH EQUIVALENTS .......................     10,293,398         579,333         743,302

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ..................      3,141,839       2,562,506       1,819,204
                                                                     ------------    ------------    ------------


CASH AND CASH EQUIVALENTS, END OF PERIOD ........................   $ 13,435,237    $  3,141,839    $  2,562,506
                                                                     ============    ============    ============

SUPPLEMENTAL DISCLOSURES OF CASH
     FLOW INFORMATION

    Cash paid during the period for interest ....................   $ 10,000,379    $ 11,767,390    $  8,518,507
                                                                     ============    ============    ============


    Cash paid during the period for income taxes ................   $    854,429    $    451,986    $    754,501
                                                                     ============    ============    ============
</TABLE>
           See Accompanying Notes to Consolidated Financial Statements
                                                                   F-5
<PAGE>
                           MILESTONE PROPERTIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     1.   Organization and Basis of Presentation

Milestone Properties, Inc. ("Milestone"),  directly and through its wholly owned
subsidiaries,  is  engaged  in the  business  of  owning,  acquiring,  managing,
developing  and  investing  in  commercial  real estate and real estate  related
assets. Milestone,  together with its subsidiaries, is herein referred to as the
"Company". Milestone was incorporated on November 30, 1989 under the laws of the
State of Delaware. On December 18, 1990, the Concord Milestone Income Fund, L.P.
("CMIF") and Concord  Milestone Income Fund II, L.P. ("CMIF II")  (collectively,
the  "Predecessor  Partnerships")  were merged  with and into the  Company  (the
"Merger").  In the Merger,  the Company succeeded to the business and operations
of the Predecessor Partnerships and the partnership interests in the Predecessor
Partnerships  were converted into shares of Milestone's  common stock, par value
$.01 per share (the "Common Stock"),  and Milestone's $.78 Convertible  Series A
preferred  stock,  par value $.01 per share,  $10  liquidation  preference  (the
"Series A Preferred Stock").

In October 1995, the Company entered into various  agreements with affiliates of
Concord Assets Group,  Inc.  ("Concord")  pursuant to which the company acquired
certain  real  estate  related  assets for  approximately  $700,000  in cash and
approximately  2,545,000  shares  of  Common  Stock  (the  "Acquisition").   The
Acquisition  was  treated in a manner  similar to a pooling  of  interests,  and
therefore the assets and  liabilities  have been  transferred  at the historical
cost basis of Concord.

In October 1995, the Company also completed the transfer (the  "Transfer") of 16
of its  retail  properties  (the  "UPI  Properties")  to its  then  wholly-owned
subsidiary Union Property  Investors,  Inc. ("UPI").  UPI was then recapitalized
and  spun-off  in  November  1995,  when  the  Company  distributed  all  of the
outstanding  shares of common stock of UPI to the Company's Common  Stockholders
(the  "Distribution").  On February 27, 1997,  UPI was merged (the "UPI Merger")
into a  wholly-owned  subsidiary of Kranzco Realty Trust, a Maryland real estate
investment trust ("Kranzco").  In connection with the UPI Merger, UPI terminated
its property management and management services agreements with the Company.

2.   Summary of Significant Accounting Policies

Business

The Company primarily is the owner of Wraparound Notes,  secured by mortgages on
commercial  retail  properties,  as well as the master lessee of such properties
which are located in 16 states  throughout the United  States.  The Company also
invests directly in real estate and real estate related assets.

Principles of Consolidation

The  consolidated   financial  statements  include  the  accounts  of  Milestone
Properties,  Inc. and its subsidiaries.  Intercompany  accounts and transactions
have been eliminated in the consolidated financial statements.

Basis of Accounting, Fiscal Year

The Company  records are  maintained on the accrual basis of accounting for both
financial and tax reporting purposes. Its fiscal year is the calendar year.

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.


                                                                    F-6

<PAGE>



Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with a maturity of
three  months  or less to be cash  equivalents.  The  carrying  value  of  these
investments  approximates  fair market value. The Company has restricted cash of
$222,000 at December 31, 1997, as a compensating  balance for a Letter of Credit
related to a guarantee of performance  associated with the lease of office space
for the  Company's  corporate  offices.  Restricted  cash is held in an interest
bearing  account and becomes  available  for general  operating  purposes of the
Company on December  31,  2000.  Currently,  no amounts are  outstanding  on the
Letter of Credit.

Available-for-Sale Securities

Gains and losses  relating to  available-for-sale  securities  are excluded from
earnings and reported as a separate  component of stockholders'  equity,  net of
tax  effect,  until such  amounts  are  generally  realized  through the sale or
redemption of the securities.  Realized gains and losses are determined based on
the specific identification method.

Property, Improvements and Equipment and Related Depreciation and Amortization

Properties are stated at cost,  less  depreciation  computed on a  straight-line
basis over their estimated useful lives of 26.5- 50 years. Building improvements
and equipment are stated at cost, and depreciated on a straight-line basis using
an  estimated  useful life of five  years.  Leasehold  improvements  and leasing
commissions  are  amortized  on a  straight-line  basis  over the  lesser of the
estimated useful life or the remaining term of the applicable lease.

Investment in Wraparound Notes

Investment in Wraparound  Notes is stated at the lower of the  unamortized  note
balance or the estimated  value of the underlying  collateral.  The Company does
not  recognize  income  from the  discount  portion  of certain  original  issue
discount notes due to the uncertainty regarding realization of such amounts.

Impairment

The  Company  assesses  at least  annually  the  probability  that  the  amounts
collectible  under the  contractual  terms of each Wraparound Note will equal or
exceed the carrying  amount of such Wraparound  Note.  When management  believes
that a Wraparound Note has been impaired,  the Company measures impairment based
on the estimated value of the underlying collateral, using internal analysis and
independent appraisals when necessary. For the years ended December 31, 1997 and
1996,  the Company  provided  valuation  allowances of $2,590,132  and $189,853,
respectively; no allowance was required in 1995.

The Company reviews each of its property  investments for possible impairment at
least annually,  and more  frequently if  circumstances  warrant.  Impairment is
determined to exist when estimated amounts recoverable through future cash flows
from  operations on an undiscounted  basis is less than the property's  carrying
value.  If a property is  determined  to be impaired,  it is written down to its
estimated  fair value to the extent that the  carrying  amount  exceeds the fair
value of the property.  No write downs for  impairment  of property  investments
were recorded in 1997, 1996 or 1995.

The determination of impairment is based, not only upon future cash flows, which
rely upon estimates and  assumptions  including  expense  growth,  occupancy and
rental rates, but also upon market  capitalization and discount rates as well as
other market indicators. The Company believes that the estimates and assumptions
used  are  appropriate  in  evaluating  the  carrying  amount  of the  Company's
Wraparound  Notes and  properties.  However,  changes in market  conditions  and
circumstances  may occur in the near term which would cause these  estimates and
assumptions  to change,  which,  in turn,  could  cause the  amounts  ultimately
realized  upon  the  sale or  other  disposition  of the  Wraparound  Notes  and
properties to differ materially from their carrying value. Such changes may also
require write-downs in future years.


                                                                    F-7

<PAGE>



Management Contract Rights and Goodwill

Management  contract  rights and goodwill are being  amortized  over a period of
approximately  seven years. The amortization for the management  contract rights
has been  accelerated  for those  agreements  that are  terminated  prior to the
expiration of the initial lease term.

Income Taxes

Deferred taxes are provided for the temporary  differences between the tax bases
of the  assets  and  liabilities  and  the  amounts  reported  in the  financial
statements.

Loss Per Common Share

In February  1997, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"),  "Earnings
per Share" which establishes standards for computing and presenting earnings per
share. The new standard  replaces the presentation of primary earnings per share
prescribed by Accounting  Principles Board Opinion No. 15 ("APB 15"),  "Earnings
per Share" with a  presentation  of basic  earnings per share and also  requires
dual  presentation  of basic and diluted  earnings  per share on the face of the
statement of operations for all entities with complex capital structures.  Basic
earnings  per  share  excludes  dilution  and is  computed  by  dividing  income
available to common stockholders by the weighted-average number of common shares
outstanding for the period.  Diluted earnings per share is computed similarly to
fully-diluted  earnings per share  pursuant to APB 15. The Company  adopted SFAS
No. 128 in the fourth  quarter of fiscal 1997 and has restated all prior periods
in its financial statements.

Basis and  diluted  earnings  per  share are based on the same  weighted-average
number of shares of common stock and common  stock  equivalents  outstanding  of
4,206,550,  3,845,546 and 1,664,956 for the years ending December 31, 1997, 1996
and 1995,  respectively.  Convertible Series A Preferred Stock amounts have been
excluded from weighted-average shares for 1997, 1996 and 1995 as inclusion would
be anti-dilutive.  Options to purchase 313,700,  176,000,  and 168,500 shares of
common stock in 1997, 1996 and 1995, respectively, were outstanding at each year
end but were not  included  in the  computation  of diluted  earnings  per share
because the  weighted-average  exercise  prices of the options were greater than
the  average  market  price of the common  stock for the  respective  period and
inclusion would therefore be anti-dilutive.

Reclassifications

Certain  prior year  amounts  have been  reclassified  to conform  with the 1997
financial presentation.

3. Acquisition and Dispositions of Real Estate and Real Estate Related Assets

On October 30, 1997, the Company realized its position in its wraparound note on
a property  located in Marion,  Ohio as a result of the sale of such property by
the owners. The sale price of the property was approximately  $2,750,000,  which
resulted in a book gain of approximately $200,000 to the Company. In conjunction
with the sale of such property,  the Company,  as the lessor on the Master Lease
on such property, canceled such Master Lease.

On September 24, 1997,  the Company  completed the purchase of Pine Oak Plaza, a
16,944 square foot shopping center located in Sunrise (Broward County), Florida,
from REC I Corporation for approximately $1,100,000 in cash. The shopping center
is occupied by local tenants  subject to operating  leases  ranging from four to
thirteen years with various  renewal  options and is currently  93.5%  occupied.
This property can be classified as a neighborhood or community  unanchored strip
center and is located in a secondary type market.

                                                                    F-8

<PAGE>



Also,  during 1997, the Company  realized its position in its wraparound note on
the property located in Prattville,  Alabama as a result of the foreclosure sale
of the associated  property by the bank. Such sale resulted in the relief of the
non-recourse  underlying  mortgage,  which  also  resulted  in a  book  gain  of
approximately  $120,000 to the Company. In conjunction with the foreclosure sale
of such  property,  the  Company,  as the  lessor  on the  Master  Lease on such
property, canceled such Master Lease.

On November 1, 1996, the Company  realized its position in the wraparound  notes
on the property  located in Southington,  Connecticut as a result of the sale of
such  property  by its  owners.  The sale  price was  approximately  $2,745,000,
resulting in a book loss of $127,020 to the  Company.  In  conjunction  with the
sale of such  property,  the Company,  as the lessor on the Master Lease on such
property, canceled such Master Lease.

On May 24, 1996, the Company realized its position in the wraparound note on the
property  located in Roanoke,  Virginia as a result of the sale of such property
by its owners. The sale price was approximately $2,150,000,  resulting in a book
gain of $393,768 to the Company.  In conjunction with the sale of such property,
the Company,  as the lessor on the Master Lease on such property,  canceled such
Master Lease.

From  August  1994 to  November  1997 one of the  focuses of the  Company was on
investment  opportunities and purchasing issues of mortgage loan securitizations
which were backed by mortgage  loans on commercial  and  multi-family  dwellings
("CMBSs").   To  facilitate   the  purchase  of  CMBSs,   short  term  borrowing
arrangements  ("Loans  Payable")  were  entered into with the brokers from which
such  securitizations  were  purchased.  The  Company  engaged  in a variety  of
interest rate management  techniques in order to attempt to manage the effective
maturity and/or interest rate risks  associated with the CMBSs.  Such techniques
included selling short U.S. Treasury Notes which were  collateralized by reverse
repurchase agreements.

The Company had  $32,314,853 and $37,594,939 of CMBS as of December 31, 1996 and
1995, respectively;  and $23,829,335 and $27,450,954 of associated Loans Payable
as of December 31, 1996 and 1995,  respectively.  Additionally,  the Company had
$33,952,346 and $32,823,439 of U.S. Treasury Notes sold short as of December 31,
1996 and 1995,  respectively;  and  $34,718,749  and  $33,119,375  of associated
reverse repurchase  agreements as of December 31, 1996 and 1995. On November 10,
1997,  the  Company  sold its  remaining  ownership  of the CMBS and  repaid the
associated Loans Payable (the "Sale"). At the time of the Sale, the Company also
closed its remaining U.S. Treasury Note short positions.

The $12,089,000 MD1  Certificate was sold for $9,520,088.  The Company  received
net proceeds of  $2,852,060,  and used the  remaining  $6,668,028 to pay off the
balance of the financing  associated  with the MD1  Certificate.  As a result of
such sale, the Company realized a book loss of approximately $1,100,000.

The  $16,700,000  par MDV  Certificate  was sold for  $14,680,344.  The  Company
received net proceeds of $4,429,251,  and used the remaining  $10,251,093 to pay
off the  balance of the  associated  financing.  The  $5,000,000  par B2 and the
$8,560,000 par B3 Certificates  were sold for $12,556,138.  The Company received
net proceeds of  $3,182,963  and used the  remaining  $9,373,175  to pay off the
balance  of the  associated  financing.  As a result of such sale,  the  Company
realized  a  book  gain  of   $3,511,560.   The  Company  has  paid  bonuses  of
approximately  $669,000 to several executive officers of the Company pursuant to
a long term incentive plan for management.

On March 6, 1998,  the Company  entered into a contract in  connection  with the
contemplated  sale of its Mountain  View Mall property  located in Bend,  Oregon
(the  "Bend  Property").  Under  the  terms  of the  contract,  which  is in the
feasibility stage, the potential  purchaser is not yet obligated to purchase the
Bend  Property and the Company is not yet  obligated to sell the Bend  Property,
and any such obligation for the purchase or sale of such property is conditional
upon the occurrence or non-occurrence  of certain events and/or  determinations,
some or all of which  may not be in the  control  of the  Company.  Accordingly,
there can be no assurance that the contemplated transaction will occur.

On November 21, 1997 and December 17, 1997,  the Company  entered into contracts
(the "Purchase  Contracts") in connection with the contemplated  purchase of two
strip mall shopping centers in the Jacksonville,  Florida area.  Pursuant to the
Purchase  Contracts any  obligations to purchase such  properties are subject to
the occurrence or non-occurrence of certain events and/or  determinations,  some
or all of which may not be in the control of the Company. Accordingly, there can
be no assurance that the contemplated transactions will occur.

                                                                    F-9

<PAGE>



4.  Property and Improvements

Property  and  improvements  at  December  31,  1997 and 1996  consisted  of the
following:

                                   December 31, 1997      December 31, 1996
                                   -----------------      -----------------

  Land                               $   1,140,000          $    1,030,000
  Building                              24,181,311              23,191,311
  Leasehold Improvements
        and Equipment                      692,609                 429,458
                                     -------------           -------------
                                        26,013,920              24,650,769
  Less:  Accumulated Depreciation
        and Amortization                (6,403,860)             (5,766,302)
                                      -------------          -------------
  Total                              $  19,610,060          $   18,884,467
                                      =============          =============

                         5.  Investment in Wraparound Notes

Investment in Wraparound Notes  represents  notes due from limited  partnerships
(the "Partnerships") which had previously been syndicated by Concord and certain
of its  affiliates.  Certain  directors  and  officers  of the  Company are also
directors,  officers and controlling stockholders of the general partner of each
of the  Partnerships.  The  syndication  of a Partnership  by Concord  typically
involved the sale of a property (the "Concord Property") owned by Concord to the
Partnership for cash and certain non-recourse  promissory notes (the "Wraparound
Notes"),  payment of which was secured by the Underlying  Property.  The related
Wraparound Notes were subordinate to the Underlying Property Mortgage Debt ("the
Underlying  Debt") of the Concord  Property.  Concord  then  master  leased (the
"Master  Lease")  the Concord  Property  back from the  Partnership  for a fixed
annual rental fee which entitled Concord to all rents under the tenant operating
leases. Concord was required to satisfy all other landlord obligations. Pursuant
to the  Acquisition,  the Company  acquired  35  Wraparound  Notes,  assumed the
Underlying  Debt  and was  assigned  the  interest  in the  Master  Leases.  The
Partnerships  are obligated to make fixed  payments of principal and interest on
certain   Wraparound   Notes.   Such  payments   approximate  the  Master  Lease
obligations.  The  payments  received by the Company are used to make the Master
Lease payments to the Partnerships.

Upon sale of the Underlying Property,  proceeds are initially applied to satisfy
the Underlying Debt, and the balance,  to the extent proceeds are available,  is
divided between a preferred  return to the  Partnership's  limited  partners and
then repayment of the Wraparound Note.

The Wraparound  Notes have  maturities  ranging from 1998 to 2017. The scheduled
principal  receipts of the Wraparound  Notes are as follows  (dollar  amounts in
thousands):

                        Year Ending
                        December 31
                        1998                          $    3,717
                        1999                               5,562
                        2000                              36,452
                        2001                                 360
                        2002                                 395
                        Thereafter (excluding
                        $11,202 of the
                        original issue discount)          12,917
                                                          ------

                        Total                           $ 59,403
                                                          ======



                                                                   F-10

<PAGE>



The following  schedule  depicts  Wraparound  Notes which are subordinate to the
underlying mortgages on such properties.
<TABLE>
<CAPTION>

                                                     Final          Face Amount        Carrying Amount
                    Closing        Interest         Maturity        of Mortgage            of Mortgage      Interest Due
   Location           Date          Rate (%)          Date             Loans                   Loans        and Accrued
   --------          -----         --------          ----              -----                  ------        -----------

<S>                  <C>             <C>           <C>              <C>                   <C>              <C>
Baton Rouge, LA      10/23/95         9.75          12/31/99        $ 4,469,548           $ 4,006,610      $ 455,792
Clarksville, TN      10/23/95         9.75          12/31/99          3,759,873     a       1,754,804        226,186
Columbus, NE         10/23/95         9.75          12/31/99          2,436,955             2,172,024        248,514
Danville, IL         10/23/95         9.75          12/31/99          1,851,308               886,939        188,792
Deland, FL           10/23/95         9.70          12/31/99          1,929,531             1,411,835        195,715
Dubois, PA           10/23/95        10.00          12/31/99          3,057,647     a       1,484,336        155,782
Ellwood City, PA     10/23/95        10.00          12/31/99          3,057,647     a       1,484,336        155,782
Hamilton, NY         10/23/95         9.75          12/31/99          1,493,689             1,089,447        152,322
Janesville, WI       10/23/95        10.25          12/31/15          2,173,824              1,434849        233,654
Marietta, OH         10/23/95         8.32          12/31/14          3,165,088             2,958,338        307,837
Marietta, OH         10/23/95        11.00          12/31/14             25,148                20,000         -
Montgomery, AL       10/23/95         9.75          12/31/99          2,251,243               940,941        229,575
Mt. Pleasant, PA     10/23/95         9.18          12/31/15          2,545,423             2,334,042        243,708
Mt. Pleasant, PA     10/01/97        11.00          12/31/14             12,976                12,626         -
Natchez, MS          10/23/95        10.00          12/31/98          3,825,382     a       1,574,516        170,199
No. Canton, OH       10/23/95         9.11          12/31/14          2,873,770             2,207,236        272,969
No. Canton, OH       10/23/95        11.00          12/31/14             33,958                26,575         -
No. Canton, OH       10/15/96        11.00          12/01/14             29,026                25,650         -
Owensboro, KY        10/23/95        10.00          12/31/15          2,787,357             2,784,791        291,915
Palatka, FL          10/23/95         9.75          12/31/99          2,446,691             1,765,532        249,503
Palatka, FL          12/09/97        11.00          12/31/99             24,816                24,650         -
Paris, TN            10/23/95        10.00          12/31/99          3,364,006             1,551,337        352,256
Paris, TN            10/23/95        11.00          12/31/99             65,515                51,016         -
Southwick, MA        10/23/95         9.75          12/31/99          1,420,480               868,168        144,857
So. Williamson, KY   10/23/95         9.88          12/31/99         24,521,288            13,674,922      2,534,138
Streetsboro, OH      10/23/95         9.68          12/31/14          2,298,679             1,793,315        232,625
Streetsboro, OH      10/23/95        11.00          12/31/14             27,640                21,447         -
Streetsboro, OH      10/15/96        11.00          12/01/14             22,180                19,600         -
Streetsboro, OH      11/07/97        11.00          12/31/14             10,169                10,000         -
Vestivia Hills, AL   10/23/95         9.75          12/31/99          1,800,257             1,360,003        183,586
Walpole, NH          10/23/95         9.75          12/31/99          1,420,480             1,006,457        144,857
Pascagoula, MS       10/23/95         9.75          12/31/17          2,070,634             1,225,566        211,158
Pascagoula, MS       10/23/95        12.00          12/31/17            187,335               175,125         -
Pascagoula, MS       10/01/97        11.00          12/31/16             35,620                34,658         -
Quincy, IL           10/23/95        10.00          12/31/98          6,293,133     a       2,545,600        261,064
Rochester, NY        10/23/95         9.70          12/31/14          1,788,998             1,507,843        182,438
Rochester, NY        10/23/95        10.00          12/31/14            166,167               130,625         -
Savannah, TN         10/23/95         9.88          12/31/99          1,228,035               500,590        126,911
Warsaw, VA           10/23/95         9.75          12/31/99          1,406,491             1,049,573        143,431
                                                                    -----------           -----------     ----------

Totals                                                               92,378,007            57,925,922      8,295,566

Temporary receiver - Chili Plaza, New York                            4,883,737             1,477,009        169,962
                                                                    -----------           -----------    -----------

Total                                                              $ 97,261,744          $ 59,402,931    $ 8,465,528
                                                                     ==========          ============      =========
</TABLE>


a - Includes discount elements totaling in aggregate $11,202,305.





                                                                   F-11

<PAGE>



The following  schedule  represents the roll forward of Wraparound Notes for the
years ended December 31, 1997 and 1996:

Balance at January 1, 1996                                      $80,941,328

        Add:
        Issuance of wraparound notes                                 45,250
        Less:
        Principal repayments                 (4,506,963)
        Notes satisfied - property sales     (4,857,817)
        Valuation allowance                    (189,853)         (9,554,633)
                                           -------------         -----------

Balance at December 31, 1996                                     71,431,945
                                                                 ----------

        Add:
        Issuance of wraparound notes                                 81,934
        Less:
        Principal repayments                 (4,578,169)
        Notes satisfied - property sales     (4,942,647)
        Valuation allowance                  (2,590,132)        (12,110,948)
                                             ----------        -------------

Balance at December 31, 1997                                    $59,402,931
                                                                 ==========

At December 31, 1997 and 1996 the Wraparound Notes had a valuation  allowance of
$2,590,132  and  $189,853,  respectively.  The aggregate  carrying  value of the
Wraparound  Notes  adjusted  by  the  valuation  allowance  is  $12,160,890  and
$26,042,452, respectively.

Included in the Wraparound Notes carrying amount is $8,795,921, which represents
the  non-discount  portion,  and  $11,202,305,  which  represents  the  discount
portion,  of certain  original  issue  discount  mortgage  notes (the  "Discount
Notes").  The carrying  value of the  Wraparound  Notes  exclude  such  discount
portion of the Discount  Notes.  The  Partnerships  are  obligated to make fixed
payments on the non-discount portion of the Discount Notes and are not obligated
to make any principal  payments on the discount  portion of the Discount  Notes.
The Company does not recognize  income from the discount portion of the Discount
Notes due to uncertainty regarding the realization of such amounts.

Each of the Wraparound Notes gives the Company a lien on the Underlying Property
as well as the Partnership's  interest in the Master Lease. The Wraparound Notes
are subordinate to the Underlying Debt.

6.  Investments

On February  27, 1997,  UPI was merged (the "UPI  Merger")  into a  wholly-owned
subsidiary of Kranzco  Realty Trust,  a Maryland  real estate  investment  trust
("Kranzco").  In  connection  with the UPI  Merger,  the  356,400  shares of UPI
Preferred  Stock which the  Company  owned as of the date of the UPI Merger were
converted  into  356,400  shares of  Kranzco's  Series C  Cumulative  Redeemable
Preferred Shares (the "Kranzco Series C Shares").  The Company believes that the
terms of the  Kranzco  Series  C  Shares  are  similar  to the  terms of the UPI
Preferred  Stock,  because  the  Kranzco  Series  C  Shares  (i)  have  the same
redemption price and liquidation preference and price ($10 per share) as the UPI
Preferred  Stock,  (ii) pay  cumulative  dividends  at the rate  paid on the UPI
Preferred Stock as of the date of the UPI Merger (8%), and (iii) are required to
be redeemed ratably on a quarterly basis over a two-year period from the date of
the UPI Merger,  as compared to the UPI Preferred Stock,  which was not required
to be redeemed  until the year 2002 (although UPI could,  at its option,  redeem
shares of UPI Preferred Stock at any time).



                                                                   F-12

<PAGE>



The  Company,  as the holder of 222,860  shares of Kranzco  Series C  Cumulative
Redeemable  Preferred  Shares is entitled to receive from the redemption of such
shares, in 5 equal  installments over the next 13 months, an aggregate amount of
cash equal to  approximately  $2,228,600,  plus  interest  at the rate of 8% per
annum on the applicable outstanding balance of such shares.

7. Leases

As Lessor

The Properties have gross leasable area of approximately 2,642,048 and 2,935,493
square feet of which  approximately  94% and 95% was leased as of  December  31,
1997 and 1996, respectively.

Minimum  base  rental  income  under  tenant  lease  agreements  relating to the
Properties  having  remaining  lease terms  ranging  from one to twenty years at
December 31, 1997 is as follows (dollar amounts in thousands):

           Year Ending
           December 31
               1998                    $ 10,614
               1999                       9,738
               2000                       8,727
               2001                       7,899
               2002                       6,427
        Thereafter                       26,945

For the years ended  December 31, 1997,  1996 and 1995, no tenant  accounted for
more  than  10% of the  Company's  total  revenue.  However,  Kmart  Corporation
accounted for approximately 32%, 30% and 40%, respectively, of rent revenue.

As Lessee

Minimum  rental  expense under the Master  Leases,  having  original lease terms
ranging  from 1998 to 2017  years,  at December  31, 1997 is as follows  (dollar
amounts in thousands):

           Year Ending
           December 31

               1998                     $13,411
               1999                      11,974
               2000                       2,370
               2001                       2,370
               2002                       2,370
            Thereafter                   30,646

Although the Company's  lease  payments are not  contingent  upon receiving rent
from the  Properties,  such  payments are expected to be made from such receipts
and the receipt of interest and principal payments from the Wraparound Notes.



                                                                   F-13

<PAGE>



8.  Mortgages and Notes Payable

The  mortgages  and  notes  payable  are  non-recourse  to the  Company  and are
collateralized  by the  Properties.  The  scheduled  principal  payments  of the
mortgages and notes payable at December 31, 1997 are as follows  (dollar amounts
in thousands):

        Year Ending
           December 31
        1998                             $5,998
        1999                              2,924
        2000                              3,235
        2001                              3,465
        2002                                881
            Thereafter                   51,236
                                         ------
               Total                   $ 67,739
                                        =======

The interest rates on the mortgages and notes payable range from 5.75% to 13.5%.

The  mortgages  and notes payable and related terms at December 31, 1997 for the
Properties are summarized as follows (amounts in thousands, except as noted):
<TABLE>
<CAPTION>
                                                                       Monthly
                                                                       Payment
                                 Principal                          Provisions
                                  Balance                               Stated
                              December 31            Interest       in Actual
       Property/Location              1997           Rate (%)        Dollars        Maturity Date (4)
    -----------------------    ------------------    --------     ------------     -------------------

<S>                                     <C>              <C>    <C>                   <C>
    Dubois, PA                          $1,490           7.00   $          (1)        12/01/2006
    Franklin Township, PA                 1,465          6.00              (1)        12/15/2007
    Clarksville, TN                       1,565     6.00-6.80              (1)        10/01/2006
    Montgomery, AL                        1,278          8.75           14,500        04/01/2007
    Paris, TN                               591         13.50            8,859        04/01/2008
    Paris, TN                               356          9.25            8,467        07/01/2003
    Chili, NY                             1,477          9.63           21,687        08/01/2004
    South Williamson, KY                 15,089          9.00          144,833        10/01/1998
    Savannah, TN                            324          9.50            6,612        01/31/2003
    Danville, IL                            476         9.625            9,663        09/01/2002
    Warsaw, VA                              818        13.125           11,373        10/01/2009
    Southwick, MA                           793         11.50            9,857        09/01/2009
    Walpole, NH                             793         11.50            9,857        09/01/2009
    Baton Rouge, LA                       2,066         12.00           33,583        12/01/2005
    Palatka, FL                           1,197         12.00           17,247        11/01/2007
    Vestivia Hills, AL                      745         13.00           13,759        11/01/2004
    Columbus, NE                          1,360         12.00           17,201        09/01/2010
    Columbus, NE                             64          9.50              697        07/01/2011
    Hamilton, NY                            823        13.125           11,373        12/01/2009
    Bend, OR               (3)           17,179          9.00          148,925(5)     06/01/1998
    Bend, OR                                 11         10.75              242        11/17/2002
    Zanesville, OH                        1,200          9.50           14,295        05/31/1998
    Deland, FL                              933         8.875           14,016        04/01/2003
    Rochester, NY                         1,156          9.25           15,992        01/01/2002
    Janesville, WI                          990          9.00           14,060        07/31/2002
    Janesville, WI                          118          9.00            1,529(6)     08/01/2007
    Marietta, OH                          2,040     5.75-6.70              (1)        03/15/2007
    Mt. Pleasant, PA                      1,365          6.50              (1)        05/01/2007
    North Canton, OH                      2,116          9.00           21,669        09/30/2012
    Owensboro, KY                         1,600   6.50 - 6.80              (1)        12/01/2007
    Quincy, IL                            3,042          7.75           27,912        07/01/1998
    Natchez, MS                           1,834         12.50              (2)        04/01/2007
    Streetsboro, OH                       1,385     6.35-6.70              (1)        12/01/2006
                                          -----
    Total Balance                       $67,739
                                        =======
</TABLE>

(1)Principal and interest serviced through a bond fund with variable semi-annual
payments.
(2) Monthly payments of principal and interest equal to available cash flow.
(3) At maturity,  the mortgagee is entitled to 50% of (i) the  property's  value
(as determined by sale or appraisal)  less (ii) the  outstanding  balance,  plus
$1,500,000.
(4) Certain  mortgages and notes  contain  various  terms  regarding  prepayment
penalties.
(5) Plus 67% of annual cash flow.
(6) Monthly payments subject to available cash flow.




                                                                   F-14

<PAGE>



The following  schedule  represents  the roll forward of the mortgages and notes
payable activity:

Balance at January 1, 1996                $82,012,066
    Principal payments                     (7,586,850)

Balance at December 31, 1996               74,425,216
    Principal payments                     (6,685,652)
                                        --------------

Balance at December 31, 1997              $ 67,739,564
                                       ===============


9.  Capital Stock

The  authorized  capital stock of the Company  consists of 10,000,000  shares of
Common Stock and 10,000,000 shares of Series A Preferred Stock.

The shares of Common  Stock are  entitled  to one vote per  share.  The Series A
Preferred  Stock has limited voting rights.  The Series A Preferred  Stock has a
$10.00  liquidation  preference  and  has a  preferential  right  to  receive  a
quarterly  dividend  of $0.195  per share  before  dividends  can be paid on the
Common Stock.

On December 21, 1995 the conversion  ratio for the Series A Preferred  Stock was
adjusted  to  provide  for the  receipt  of one share of Common  Stock  upon the
conversion of .91 shares of Series A Preferred Stock. Previously, the conversion
ratio was 1.6 shares of Series A Preferred  Stock for one share of Common Stock.
The new  conversion  ratio,  which was  effective  as of November  1, 1995,  was
determined  pursuant  to the  Certificate  of  Designations  for  the  Series  A
Preferred Stock, which required the adjustment to be made in connection with the
Distribution.

After  September  30, 1995,  holders of the MPI  Preferred  Stock were no longer
entitled  to  receive  dividends  on a  cumulative  basis.  As a  result  of the
Company's  Board  of  Director's  determination  not to pay a  dividend  for the
quarter ended June 30, 1997, which was the sixth  consecutive  quarter for which
no dividend  was paid,  the number of persons  entitled to serve as directors on
the Company's  Board of Directors has been  increased by one, and the holders of
the Series A Preferred  Stock,  who  currently  elect one member of the Board of
Directors,  are  entitled to elect a second  member of the Board of Directors to
fill such newly created directorship.

Milestone's  Board of Directors  determined  not to pay any dividends on the MPI
Preferred  Stock for the  years  ended  December  31,  1997 and  1996.  The last
dividend declared by the Company was for the quarter ended December 31, 1995 and
was paid on February 15, 1996 at $0.195 per share of Series A Preferred Stock.

In May 1994, the Common Stockholders  approved the adoption of the 1993 Employee
Stock Option Plan (the "Employee Stock Option Plan"). The total number of shares
of Common Stock of the Company  which may be issued  pursuant to the exercise of
options   granted  under  the  Employee  Stock  Option  Plan  is  300,000.   The
Compensation Committee of the Board of Directors (the "Compensation  Committee")
made initial  grants in December 1993 under such plan totaling  153,000  options
(the "Initial  Grant") which are  exercisable for 153,000 shares of Common Stock
at a per  option  exercise  price  of  $4.75.  In June  1997,  the  Compensation
Committee  canceled the Original  Issue and reissued  153,000  options which are
exercisable for 153,000 shares of Common Stock at a per option exercise price of
$0.50.  At the same time, the  Compensation  Committee  granted  154,000 options
which  are  exercisable  for  154,000  shares of  Common  Stock at a per  option
exercise  price of $0.50.  Options  granted under the Employee Stock Option Plan
expire on the tenth  anniversary of the date of their grant, or upon termination
of the grantee's employment with the Company. During the year ended December 31,
1997,  1996 and 1995,  23,800,  0 and 7,000  such  options  were  canceled  upon
resignation of an employee, respectively.



                                                                    F-15

<PAGE>



In May 1994,  the Common  Stockholders  also  approved  the adoption of the 1993
Non-Employee  Director  Stock  Option Plan ("the  "Non-Employee  Director  Stock
Option Plan").  Options granted under such plan expire on the tenth  anniversary
of the date of their grant,  or upon the grantee's  removal or resignation  from
the Board of  Directors.  The exercise  price for each option  granted under the
Non-employee  Director Stock Option Plan is determined by averaging the high and
low  trading  prices  of the  Common  Stock as  reported  on the New York  Stock
Exchange on the date of such  options.  Under the  Non-Employee  Director  Stock
Option Plan, the Company granted 2,500 options to each non-employee  director in
each of 1993 (upon the adoption of the plan),  1994,1995,1996 and 1997, at a per
option exercise price of $4.75, $4.375, $1.375, $1.6875 and $0.50, respectively.
As of December 31, 1997, all of the  non-employee  director  options  granted in
1993 thru 1995 are  exercisable,  one half of the  options  granted  in 1996 are
exercisable,  and none of the non-employee  director options granted in 1997 are
exercisable. Pursuant to such plan, each non-employee director was granted 2,500
options upon  adoption of such plan in 1994 and is granted 2,500 options at each
annual meeting of the stockholders of the Company.

In October 1995, the Financial  Accounting  Standards Board issued  Statement of
Financial   Accounting   Standards   No.  123,   "Accounting   for   Stock-Based
Compensation"  ("SFAS No. 123").  SFAS No. 123 requires  expanded  disclosure of
stock-based compensation  arrangements with employees, and encourages,  but does
not require  compensation cost be measured based on the fair value of the equity
instrument  awarded.  Companies  are  permitted,  however,  to continue to apply
Accounting  Principles  Board  Opinion  No.  25  ("APB  25"),  which  recognizes
compensation cost based on the intrinsic value of the equity instrument awarded.
The  Company  will  continue  to apply  APB 25 to its  stock-based  compensation
awards.   Accordingly,   no  compensation   cost  has  been  recognized  in  the
consolidated financial statements of the Company.

No  options  were  exercised  and,  other  than the  options  granted  under the
Non-Employee Director Stock Option Plan, no employee options were granted during
the years ended  December 31, 1996 and 1995.  The Company has  evaluated the pro
forma effects of the options granted under the Employee Stock Option Plan during
the year ended December 31, 1997 and determined  such effects not to be material
to the Company's consolidated  financial position or results of operations.  The
pro forma disclosure provisions of SFAS No. 123 for the years ended December 31,
1997, 1996 and 1995 are as follows:

                                       1997           1996             1995
                                       ----           ----              ----
Net loss                 As reported $(3,430,731)  $(2,486,974)     $(809,649)
                         Pro-forma    (3,443,748)   (2,486,974)      (809,649)

Loss per common share    As reported      $(0.82)       $(0.65)        $(2.13)
                         Pro-forma         (0.79)        (0.65)         (2.13)

For the  purposes  of  providing  the pro forma  disclosures,  the fair value of
options  granted were estimated  using the Black Scholes  options  pricing model
with the following  weighted average  assumptions;  a risk free interest rate of
5.06%, an expected life of one year, volatility of 42.20% and no dividends.  The
estimated fair value  compensation  cost of the related options was amortized to
expense over the options' vesting period.




                                                                    F-16

<PAGE>



Certain  information  relating to the options granted and outstanding  under the
Employee  Stock  Option Plan and the Non-  Employee  Director  Stock Option Plan
during the years ended December 31, 1997, 1996 and 1995 is presented below:
<TABLE>
<CAPTION>


                             Year Ended                        Year Ended                 Year Ended
                         December 31, 1995                  December 31, 1996          December 31, 1997
                   ---------------------------------   --------------------------- -------------------------------------
                     Number         Weighted           Number        Weighted       Number        Weighted
                       of            Average             of           Average         of          Average
                    Options      Exercise Price        Options     Exercise Price   Options     Exercise Price
<S>                  <C>          <C>                   <C>        <C>                <C>         <C>
Outstanding at       168,000      $ 4.73                168,500    $ 4.58             176,000     $   4.46
January  1
    Granted            7,500        1.375                 7,500      1.6875           307,500         0.50
    Exercised              0                                  0                             0
    Forfeited         (7,000)        4.75                     0                      (169,800)        4.15
                     --------                         ---------                  ------------
Outstanding at        168,500      $ 4.58               176,000     $4.46             313,700      $ 0 .74
December 31
                     ========                          =========                 ============
Options exercised
at December 31              0                                 0                             0
                     ========                          =========                 ============

</TABLE>

10. Income Taxes

The Company recognizes deferred taxes for the temporary  differences between the
tax  bases  of its  assets  and  liabilities  and the  amounts  reported  in the
financial statements at enacted statutory rates.

The provision for income taxes for the years ended  December 31, 1997,  1996 and
1995 consists of the following:

Current Tax:                         1997           1996               1995
                                     ----           ----               ----
  Federal                    $          0        $   524,317        $3,293,167
  State and other                   64,245           123,069           957,936
                                 ---------      ------------       -----------
    Total current                   64,245           647,386         4,251,103
                                  --------      ------------        ----------

Deferred Tax:
  Federal                        (667,657)          (11,894)        (3,049,311)
  State and other                (117,822)         (269,054)          (885,284)
                               -----------     -------------       -----------
       Total deferred            (785,479)         (280,948)        (3,934,595)
                                ----------      ------------        -----------

Total (benefit) provision
 for income taxes             $   (721,234)   $      366,438       $    316,508
                               ============    =============        ===========

Temporary differences between the amount reported in the consolidated  financial
statements and the tax bases of assets and liabilities result in deferred taxes.
There was a (decrease)  increase in the valuation  allowance of  ($340,576)  and
$1,355,576  for the  year  ended  December  31,  1997  and  1996,  respectively.
Realization  of  remaining  deferred  tax  assets  is  dependent,  in  part,  on
generating sufficient taxable income in the future.  Although realization is not
assured, the Company believes that it is more likely than not that such deferred
tax assets will be realized.  The amount of the  deferred  tax asset  considered
realizable,  however,  could be reduced in the near term if  estimates of future
taxable income are reduced. The Company has a net operating loss carryforward of
$1,520,664 at December 31, 1997. Deferred tax assets and liabilities at December
31, 1997, 1996 and 1995 were as follows:



                                                                    F-17

<PAGE>

<TABLE>
<CAPTION>


Deferred Tax Assets:                                             1997             1996        1995
                                                              -----------    -----------    -----------
<S>                                                           <C>            <C>            <C>
  Acquisition costs .......................................   $ 1,025,222    $ 1,078,538    $ 1,128,897
  Unrealized holding loss on U.S. Treasury Notes sold short             0        517,553      1,116,073
  Principal amortization on Wraparound Notes...............     2,000,385      2,210,868        341,546
  Unrealized holding loss on Available-for-Sale Securities              0        146,531              0
  Valuation allowance on Wraparound Notes .................     1,380,811        344,758              0
  Other ...................................................       880,897        421,409        350,086
                                                              -----------    -----------    -----------

  Gross deferred tax assets ...............................     5,287,315      4,719,657      2,936,602

  Less:  Valuation allowance ..............................    (1,015,000)    (1,355,576)             0
                                                              -----------    -----------    -----------
  Deferred tax asset net of valuation allowance ...........     4,272,315      3,364,081      2,936,602
                                                              -----------    -----------    -----------
Deferred Tax Liabilities:
  Accelerated depreciation ................................       213,957         91,208         91,208
  Unrealized holding gain on Available-for-Sale Securities              0              0        565,988
                                                              -----------    -----------    -----------

  Gross deferred tax liabilities ..........................       213,957         91,208        657,196
                                                              -----------    -----------    -----------

  Net deferred tax asset ..................................   $ 4,058,358    $ 3,272,873    $ 2,279,406
                                                              ===========    ===========    ===========
</TABLE>

The provision for total income tax differs from the amount  obtained by applying
the  statutory  federal  income  tax rate to pre-tax  income  for the  following
reasons:

                                          1997            1996           1995
                                          ----            ----           ----
Amount computed on pre-tax income         (35.0)%        (35.0)%         (35.0)%

Increase (Decrease) in taxes:
Increase in taxes from State and other
  taxes net of Federal tax benefit         2.1            (5.2)             9.7

Valuation Allowance                       15.5            55.9                0
Non-deductible Acquisition Costs             0              0             90.2
Other                                        0            1.6             (0.6)
                                      --------        ----------       --------
                                        (17.4)%          17.3%            64.3%
                                       ========        =======         ========

11.       Fair Values of Financial Instruments

The  following  estimated  fair values  were  determined  by the  Company  using
available market information and valuation methodologies  considered appropriate
by  management.  However,  considerable  judgement is necessary to interpret and
apply market data to develop  specific fair value  estimates for given financial
instruments,  and the use of  different  market  assumptions  and/or  estimation
methodologies  could  have a material  effect on  reported  fair value  amounts.
Accordingly,  the estimates  presented herein are not necessarily  indicative of
the amounts that could be realized upon  disposition of the Company's  financial
instruments.

Cash and cash equivalents, account and loan receivables and accounts payable and
accrued  expenses are reflected in the  consolidated  balance  sheets at amounts
considered  by  management  to  reasonably  approximate  fair value due to their
short-term  nature.  The Company estimates the fair value of its long-term fixed
rate mortgage loans generally  using  discounted cash flow analysis based on the
Company's  current  borrowing  rates for similar  types of debt. At December 31,
1997 and 1996,  the carrying  value of the notes and  mortgages  payable and the
fair value of such instruments was not considered to be significantly different.


                                                                    F-18

<PAGE>



The fair value of the Wraparound Notes has been estimated by management based on
the estimated fair value of the Underlying Properties.  At December 31, 1997 and
1996, the fair value of the Wraparound Notes was estimated to be $65,997,009 and
$80,643,928  compared  to a  carrying  amount of  $59,402,931  and  $71,431,945,
respectively.

For the investment in Kranzco Series C Cumulative  Redeemable  Preferred  Shares
the estimated fair value,  which  approximates the carrying amount,  is based on
the applicable mandatory redemption price and the dividend interest rates and is
evaluated using interest rates currently offered on like securities with similar
remaining maturities.

The fair value estimates presented herein are based on information  available as
of December 31, 1997 and 1996.  Although  management is not aware of any factors
that  would   significantly   affect  the  estimated  fair  value   amounts,   a
comprehensive  reevaluation  has  not  been  performed  for  purposes  of  these
financial  statement  disclosures and current estimates of fair value may differ
significantly from the amounts presented herein.

12.       Related Party Transactions

The Company is a party to a management  agreement (the  "Management  Agreement")
with Concord pursuant to which the Company provides management services, assists
in the management of Concord  Properties,  provides certain personnel and office
space  and  general  office  service  to  Concord  which  the  Company  receives
reimbursements from Concord. The Management Agreement is renewable annually. For
the years ended  December 31,  1997,  1996 and 1995  reimbursed  expenses to the
Company were $338,394, $420,743 and $981,302, respectively.

As of December  31, 1997 and 1996,  the Company has  recorded  receivables  from
Concord of $391,851  and  $599,093,  respectively.  Such  receivable  consist of
management  fees due to the Company and expenses for general office  services as
well as salary reimbursements.

Concord is wholly owned by Leonard S. Mandor and Robert A. Mandor,  both of whom
are  executive  officers and  directors of Concord and the Company,  and both of
whom may be deemed to beneficially  own more than a majority of the voting stock
of the Company.

Concord  beneficially owns 2,901,098 shares of Common Stock at December 31, 1997
and 1996. The wholly-owned  subsidiaries of Concord own 2,698,765 shares and the
two  limited  partnerships,  which are the sole  general  partners of the wholly
owned subsidiaries of Concord, own 202,333 shares at December 31, 1997 and 1996.

In addition, the Company received property management fees of $107,725, $107,007
and $116,359 during 1997, 1996 and 1995, respectively,  from a partnership whose
general partner is an affiliate of the Company.

In connection  with the UPI Merger,  UPI terminated its property  management and
management services agreements with the Company. The Company does not expect the
termination  of these  agreements  to have a  materially  adverse  effect on the
operations or financial  condition of the Company.  The aggregate  annual fee by
UPI to the Company under these agreements for the years ended December 31, 1997,
1996 and 1995 was $108,588, $1,235,831 and $155,018, respectively.



                                                                    F-19

<PAGE>

13.       Commitments and Contingent Liabilities

The Company's office facility in Boca Raton is subject to a noncancellable  five
year operating lease agreement  commencing January 1, 1998 and expiring December
31, 2002.  Aggregate  annual  rental  payments for the years ended  December 31,
1997,  1996 and 1995 for the  Company  were  $758,193,  $752,344  and  $720,751,
respectively.  Future minimum annual payments under the noncancellable operating
lease agreement, as of December 31, 1997, are as follows:

                      1998                    $176,374
                      1999                      183,479
                      2000                      190,805
                      2001                      198,421
                      2002                      206,358
                                                -------

                      Total                   $955,437


Under a long term  incentive  bonus plan,  the Company has accrued  $669,460 and
$818,964 for bonuses to be paid to certain officers  relating to the years ended
December 31, 1997 and 1996, respectively.

The  Company  has  accrued  performance  related  bonuses to  certain  executive
officers in the amount of $426,870 and $55,566 for the years ended  December 31,
1997 and 1996, respectively.

Under  various  federal,  state and local  environmental  laws,  ordinances  and
regulations,  a current or previous  owner or operator of real  property  may be
held  liable for the costs of removal or  remediation  of certain  hazardous  or
toxic substances, including, without limitations, asbestos-containing materials,
that could be located on, in or under such property.  Such laws and  regulations
often  impose  liability  whether or not the owner or  operator  know of, or was
responsible for, the presence of the hazardous or toxic substances. The costs of
any required remediation or removal of these substances could be substantial and
the  liability  of an owner or operator  as to any  property  is  generally  not
limited under such laws and  regulations,  and could exceed the property's value
and the  aggregate  assets  of the  owner or  operator.  The  presence  of these
substances or failure to remediate such  substances  properly may also adversely
affect the owner's ability to sell or rent the property,  or to borrow using the
property as collateral.  Under these laws and regulations, an owner, operator or
any entity who arranges for the disposal of hazardous or toxic substances,  such
as  asbestos-containing  materials,  at a  disposal  site may also be liable for
these costs, as well as certain other costs,  including  governmental  fines and
injuries to persons or  properties.  To date,  the Company has not  incurred any
costs of removal or remediation of such hazardous or toxic substances.  However,
the  presence,  with or without the Company's  knowledge,  of hazardous or toxic
substances at any property held or operated by the Company could have an adverse
effect on the Company's business, operating results and financial condition.

14.       Legal Proceedings.

A lawsuit (the "Rabin  Litigation")  purporting  to be a class  action  against,
among  others,  Concord,  Leonard  S.  Mandor,  Robert  A.  Mandor  and  certain
partnerships (the "Concord  Partnerships") and affiliates of Concord,  was filed
in September 1989 in the United States District Court for the Southern  District
of New York alleging various federal and common law claims relating to the sales
of  interests  in  such  Concord  Partnerships.  In  November  1991,  the  Rabin
Litigation was settled  pursuant to the terms of the  court-approved  settlement
agreement (the "Rabin Settlement Agreement"). A motion brought by the plaintiffs
in the Rabin Litigation  seeking to enforce the Rabin  Settlement  Agreement and
for  declaratory  and other relief was settled by a  Stipulation  and Order (the
"Rabin  Stipulation  and  Order")  entered  and  approved  by the United  States
District Court on October 24, 1997. The plaintiffs  asserted,  inter alia,  that
the defendants breached the Rabin Settlement Agreement by improperly  allocating
transaction  expenses  against  the  payment to be made to the  selling  Concord
Partnerships in certain circumstances pursuant to the Rabin Settlement Agreement
and breached their  fiduciary  duties to the  plaintiffs by prematurely  selling
properties without valid business justification.

Under the Rabin  Stipulation and Order, the plaintiffs  withdrew their breach of
fiduciary  duty claims and withdrew with prejudice  their claim that  defendants
breached the Rabin  Settlement  Agreement  by their  allocation  of  transaction
expenses

                                                                    F-20

<PAGE>



from the sale of certain  properties  in exchange for a payment of $600,000 from
the  defendants.  The settlement  payment has been made. In addition,  the Rabin
Stipulation  and Order  provides  for a formula  relating to the  allocation  of
transaction  expenses in connection  with the future sale of certain  properties
owned by the Concord  Partnerships,  including the Underlying Properties subject
to the Wrap Debt.  Generally,  under such formula,  if a Property (as defined in
the Rabin Settlement Agreement) is sold for a price less than the sum of (a) the
outstanding Wrap Debt, (b) the Permitted Additional Wrap Debt (as defined in the
Rabin  Settlement  Agreement) and (c) the amount to be paid to the holder of the
Wrap  Debt  pursuant  to the  Rabin  Settlement  Agreement,  then  82.25% of the
transaction expenses shall be the obligation of the selling Concord Partnership,
and shall be  deducted  from the 11% of net  proceeds  (as  defined in the Rabin
Settlement Agreement) to be distributed to the selling Concord Partnership,  and
the Company,  as the holder of the Wrap Debt, will be responsible for paying the
remaining 17.75% of the transaction expenses incurred in such sale. In the event
a Property is sold for a price in excess of the sum of (a) the outstanding  Wrap
Debt,  (b) the Permitted  Additional  Wrap Debt and (c) the amount to be paid to
the holder of the Wrap Debt pursuant to the Rabin Settlement Agreement, then the
transaction  expenses  shall be  deducted  from the  proceeds  in excess of such
existing debt,  and, if such excess  proceeds are not sufficient to pay all such
transaction  expenses,  82.25% of the balance of such transaction expenses shall
be paid out of the 11% of the net proceeds  distributed  to the selling  Concord
Partnership, and the Company will be responsible for paying the remaining 17.75%
of the  transaction  expenses  incurred  in such  sale.  Concord  and one of its
subsidiaries have agreed to indemnify the Company for any losses, up to $200,000
in the aggregate,  resulting from any such additional transaction fees, costs or
expenses  incurred by the Company as a result of such  events.  The Company does
not believe that the Rabin  Stipulation and Order materially  adversely  affects
the Company.  There can be no assurance,  however,  that the plaintiffs will not
pursue the breach of  fiduciary  duty  claims  against  Concord  and the General
Partners of the Concord  Partnerships which own the Underlying  Properties which
were withdrawn under the terms of the Rabin Stipulation and Order.

On January 30, 1996, Milestone, its Board of Directors and Concord were named as
defendants  in an  action  (the  "Winston  Action")  commenced  in the  Court of
Chancery of the State of Delaware (the  "Delaware  Court").  In the action,  the
plaintiff,  a Series A Preferred  Stockholder  purporting to bring the action on
behalf of himself and other  Series A Preferred  Stockholders,  alleged  that in
connection  with  the  Acquisition,  the  Transfer  and  the  Distribution  (the
Acquisition,  the Transfer and the  Distribution  are  collectively  referred to
herein  as  the   "Transactions"),   Milestone  and  its  directors  engaged  in
self-dealing  and breached their fiduciary  duties and faith and fair dealing to
the Series A Preferred Stockholders.  The plaintiff claimed, among other things,
that, as a result of the Transactions, Milestone would not have sufficient funds
to pay dividends on the Series A Preferred  Stock and that the  Properties  were
grossly  inferior to the UPI  Properties.  The  defendants  moved to dismiss the
plaintiff's  original  complaint,  and  thereafter,  the  plaintiff  amended his
complaint to allege further  causes of action,  including a claim of rescission.
The  defendants  moved to dismiss  the  amended  complaint  and,  after  hearing
arguments  thereon,  the Delaware  Court  dismissed  the  plaintiff's  claim for
rescission of both the Transfer and the  Distribution  and reserved  decision on
the defendants'  motion to dismiss the  plaintiff's  claim for damages and other
relief.  On December 9, 1996,  the plaintiff  requested  that the Delaware Court
dismiss  the  amended  complaint,  and filed a purported  new class  action.  On
January 14, 1997, the defendants filed a motion to dismiss or stay the purported
new class action.  On May 12, 1997, the Delaware Court issued a decision on such
motion and  dismissed  the  plaintiff's  breach of fiduciary  duty and statutory
claims  (although  the Delaware  Court had allowed the  plaintiff to replead the
fiduciary duty claim as a derivative claim brought on behalf of Milestone),  but
did not dismiss the plaintiff's claim that the Transfer and the Distribution did
not comply  with the  Certificate  of  Designations  for the Series A  Preferred
Stock. On June 4, 1997, the plaintiff appealed the Delaware Court's dismissal of
the  fiduciary  duty  claim  and,  on June  11,  1997,  the  defendants  filed a
cross-appeal. The plaintiff thereafter, filed an amended complaint.

On October 30, 1997,  Milestone  entered into a Stipulation  of Settlement  (the
"Winston  Settlement  Agreement")  providing  for the  settlement  (the "Winston
Settlement") of the purported class action  lawsuit.  The Winston  Settlement is
subject to approval by the Delaware  Court after a hearing,  and is also subject
to a number of  conditions  which may be waived at the option of the Company and
the other defendants, including the condition that stockholders owning more than
10% of the Series A Preferred Stock do not opt out of the Winston Settlement.

If the Winston  Settlement is approved and consummated,  the Winston Action will
be  dismissed,  Milestone's  stockholders  will  release all  derivative  claims
arising in  connection  with the  Transactions  and the  holders of the Series A
Preferred Stock

                                                                    F-21

<PAGE>



between  October  23,  1995 and the  date on which  the  Winston  Settlement  is
consummated  will  release any claims they may have  against  Milestone  and the
other named defendants arising out of the Transactions.  Each Series A Preferred
Stockholder  who does not opt out of the Winston  Settlement and who owns shares
of the  Series  A  Preferred  Stock  on  the  date  the  Winston  Settlement  is
consummated will received $0.75 per share in cash from the Company and one share
of preferred stock of Concord Milestone Preferred,  Inc., a Delaware corporation
affiliated with Concord ("CMP") ( the "CMP"  Preferred  Stock),  in exchange for
each share of Series A Preferred Stock surrendered. The CMP Preferred Stock will
have a  liquidation  preference  of $2.25  per  share,  will be  required  to be
redeemed by CMP at $2.25 per share after five years,  and will have no voting or
dividend  rights;  in  addition,  the CMP  Preferred  Stock  will be  subject to
optional  redemption in accordance  with a schedule  during the five year period
prior to mandatory redemption. CMP's redemption obligations will be secured by a
letter of credit.

The ultimate  consummation of the Winston Settlement as set forth in the Winston
Settlement Agreement is subject to numerous conditions, some of which are not in
the  control  of the  Company,  such as  approval  by the  Delaware  Court,  and
therefore  is  inherently  uncertain.  Accordingly,  no dollar  amount  has been
included  in the  Company's  accompanying  financial  statements  to reflect the
potential  Winston  Settlement.  If the Winston  Settlement is consummated,  the
Company does not anticipate that the Company's  portion of such settlement costs
will  exceed  $3,000,000.  There can be no  assurance,  however,  that any fees,
expenses or other costs  associated with the ultimate  resolution of the Winston
Action will not differ from such estimate.

The foregoing  description of the Winston  Settlement and the Winston Settlement
Agreement is  qualified  in its entirety by reference to the Winston  Settlement
Agreement, a copy of which was filed with the Securities and Exchange Commission
on November 12, 1997 as Exhibit 2 to Milestone's Form 8-K.

On January 29, 1998, Milestone, along with certain of its directors, commenced a
lawsuit in the United  States  District  Court for the Southern  District of New
York against National Union Fire Insurance Company of Pittsburgh, Pa. ("National
Union") and Stonewall  Surplus Lines Insurance Company  ("Stonewall").  National
Union had issued a directors and officers  insurance  and company  reimbursement
policy (the  "National  Policy") for Milestone and its directors with a limit of
$2,000,000.  Stonewall had issued an excess directors and officers liability and
company  reimbursement  policy (the  "Stonewall  Policy") for  Milestone and its
directors  with a  limit  of  $2,000,000.  Pursuant  to the  Winston  Settlement
Agreement, if the Winston Settlement is consummated,  Milestone will be required
to pay, in cash,$0.75 per share for each of the ouustanding  3,033,995 shares of
Series A Preferred  Stock,  to each Series A Preferred  Stockholder who does not
opt out of the Winston  Settlment , plus the plaintiff's legal fees in an amount
not to exceed $650,000 and will incur other legal expenses.  Milestone  believes
that the  amount  it and  certain  of its  directors  will be  required  to pay,
pursuant to the Winston Settlement  Agreement and as a result of the litigation,
if the Winston  Settlement  is  consummated,  are covered  losses under both the
National  Union Policy and the Stonewall  Policy.  In addition,  the Company has
incurred  approximately  $250,000 in legal fees in defending  Milestone  and its
directors in connection with the Winston Action,  which it believes is a covered
loss under the National Union and Stonewall policies. National Union has refused
to contribute to the Winston Settlement,  as set forth in the Winston Settlement
Agreement,  asserting that the Winston Settlement does not encompass any covered
loss  (as  defined  in the  National  Policy).  Stonewall  has also  refused  to
contribute to the Winston  Settlement.  In the complaint,  the plaintiffs allege
that National  Union and Stonewall have  wrongfully  failed to contribute to the
Winston  Settlement and seek  reimbursement from National Union and Stonewall up
to the limits of their  respective  policies.  National  Union has  answered the
complaint and has denied liability.  Stonewall has until April 6, 1998 to answer
the  complaint.  At this time,  the  Company  is not in a position  to render an
opinion as to the outcome of this action.



                                                                    F-22

<PAGE>



15.  Subsequent Events

The Company entered into an agreement (the "SGSC Agreement") on January 9, 1998,
effective as of December 24, 1997, with Societe Generale Securities  Corporation
("SGSC")  pursuant  to which the  Company  retained  SGSC to act as a  financial
advisor  to the  Company  and  two  of its  affiliates  (the  "Affiliates"),  in
connection with any transaction (a  "Transaction")  involving a proposed sale by
the Affiliates of certain shopping center  properties and a proposed sale by the
Company of certain of its Fee Properties.  The shopping center  properties to be
sold by the  Affiliates are subject to Wrap Debt held by the Company which would
need to be released prior to the  consummation of a Transaction.  The Properties
to be sold and the Wrap  Debt to be repaid in  connection  with any  Transaction
could  represent a  substantial  portion of the  Company's  real estate  related
assets.

Neither  the  Company  nor the  Affiliates  have  entered  into any  commitment,
agreement or  understanding  with any prospective  purchaser with respect to any
Transaction,  and there can be no  assurance  that SGSC will be able to identify
suitable  candidates to undertake any  Transaction,  or that if identified,  the
Company and the Affiliates  will be able to consummate any  Transaction on terms
acceptable to them.

On February 9, 1998, the Company realized its position in its Wraparound Note on
the property  located in Chili,  New York as a result of the  assignment  of the
Wraparound  Note.  Such  assignment  resulted in the relief of the  non-recourse
underlying mortgage,  which resulted in a net book gain of approximately $75,000
to the Company.

16.  Consolidated Quarterly Summary of Operations

The  following is summary  financial  information  with respect to the Company's
operations for the four fiscal quarters during fiscal year 1997.
<TABLE>
<CAPTION>
                                                     Fourth                   Third            Second           First
                                                     Quarter                  Quarter          Quarter          Quarter

<S>                                               <C>           <C>       <C>              <C>              <C>
Total revenues                                    $10,968,487   (1)       $6,308,950       $5,966,201       $6,848,273

Total expenses                                    11,738,497               7,328,116        7,657,032        7,520,231
                                                ------------            ------------       ----------       ----------

Loss before income taxes                           (770,010)              (1,019,166)      (1,690,831)        (671,958)

(Benefit) provision for income taxes               (980,919)                 166,297          416,309         (322,921)
                                                ------------           -------------      -----------       -----------

Net income (loss)                                     210,909             (1,185,463)      (2,107,140)        (349,037)
                                                  ===========           =============     ============      ===========

Net income(loss) per common  share                     $0.05                  ($0.28)          ($0.50)          ($0.08)
                                                ============          ===============   ==============     ============

Weighted average common  shares outstanding        4,213,368               4,211,275        4,192,211        4,188,451
                                                ============           =============     ============        =========

</TABLE>

Note:
(1)  Includes  approximately  $3,511,560  of gain on sale of  available-for-sale
securities (see Note 2. "Summary of Significant Accounting Policies").





                                                                    F-23

<PAGE>




                           MILESTONE PROPERTIES, INC.

                                  Schedule III

                    Real Estate and Accumulated Depreciation
                                December 31, 1997
<TABLE>
<CAPTION>


                                          Initial Cost         Cost of                  Accumulated     Date            Depreciation
     Location       Encumbrances        Land       Building  Improvements      Total    Depreciation   Acquired         Life

<S>                  <C>           <C>          <C>            <C>          <C>         <C>            <C>               <C>
Mountain View Mall   $17,179,016   $1,030,000   $19,866,183    $79,338      $20,975,521 ($4,472,989)   10/23/95          50
Bend, Oregon

Pine Oak Plaza        -               110,000       990,000     45,145        1,145,145      (7,207)   09/24/97          50
Sunrise, Florida

Sunrise Shopping Center1,199,650       -          2,530,219     91,904        2,622,123  (1,022,012)   10/23/95          50
Zanesville, Ohio

Family Dollar Stores   -               -            794,909      8,607          803,516    (563,743)   10/23/95       26.65
Blackstone, Virginia

                     -----------   ----------   -----------   --------      ----------- -----------
     Totals          $18,378,666   $1,140,000   $24,181,311   $224,994      $25,546,305 ($6,065,951)
                     ===========   ==========   ===========   ========      =========== ===========

</TABLE>

Reconciliation of Property and Improvements

Balance at January 1, 1995                      $84,160,584

         Pooling-
           Acquisitions          $24,221,311
         Dispositions            (84,160,584)

Balance at December 31, 1995                     24,221,311

         Improvements                 46,999

Balance at December 31, 1996                     24,268,310

         Acquisitions              1,100,000
         Improvements                177,995

Balance  at December 31, 1997                   $25,546,305


Reconciliation of Accumulated Depreciation

Balance at January 1, 1995                    ($13,848,604)

         Dispositions             $13,848,604
         Pooling-Accumulated
              Depreciation         (4,965,798)
         Depreciation Expense         (97,380)

Balance at December 31, 1995                    (5,063,178)

         Depreciation expense       (481,840)

Balance at December 31, 1996                    (5,545,018)

         Depreciation expense       (520,933)

Balance at December 31, 1997                   ($6,065,951)


At  December  31,  1997 the tax basis of the  Company's  owned  real  estate was
approximately $25,406,248.

                                                                    F-24