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


                                   FORM 10-K
                                        

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998        COMMISSION FILE NUMBER 1-9349


                       SIZELER PROPERTY INVESTORS, INC.
            (Exact name of registrant, as specified in its charter)
                                        

            DELAWARE                                          72-1082589
    (State or other jurisdiction                           (I.R.S. Employer
  of incorporation or organization)                       Identification No.)

       2542 WILLIAMS BLVD.                                       70062
        KENNER, LOUISIANA                                      (Zip Code)
(Address of principal executive offices)

      REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (504) 471-6200
                                        
          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

   Title of each class             Name of each exchange on which registered
   -------------------             -----------------------------------------
Common Stock, $.01 par value                New York Stock Exchange
8% Convertible Subordinated
   Debentures, due 2003                     New York Stock Exchange

       SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE.

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes   X      No 
                                              -------     -------

     Indicate by check mark if disclosure of delinquent files pursuant to
Item 405 of the Registration S-K ((S) 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statement incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K (  X  ).
                                                      -----

     The aggregate  market value of  voting  stock held  by  non-affiliates of
the registrant was $58,102,000 at March 22, 1999.

     The number of shares of common stock outstanding at March 22, 1999, was
7,930,483.

                      DOCUMENTS INCORPORATED BY REFERENCE

                                       1
<PAGE>
 
     Portions of the registrant's definitive proxy statement for the annual
meeting of its shareholders to be held in May 1999 are incorporated by reference
in Part III of this report.

                                       2
<PAGE>
 
                                    PART I

ITEM 1.  BUSINESS.

THE COMPANY

     Sizeler Property Investors, Inc. (the "Company") was organized as a
Delaware corporation with perpetual existence on October 28, 1986.

     The Company is a self-administered equity real estate investment trust
(REIT) that invests in  income- producing shopping center and apartment
properties in the southern United States.  At December 31, 1998, the Company's
investment portfolio included interests in three enclosed regional shopping
malls, two power shopping centers, eleven community shopping centers, and
fourteen apartment communities.  The properties are located in Louisiana (15),
Florida (10), Alabama (4), and Texas (1).  Leasable area of the retail
properties totalled approximately 2.7 million s.f., and the apartment
communities contained 3,341 units.  At December 31, 1998, the Company's retail
and apartment properties were each approximately 95% leased.

     The Company has elected to qualify and be treated as a REIT under the
Internal Revenue Code of 1986, as amended (the "Code"), and intends to maintain
its qualification as a REIT in the future.  As a qualified REIT, with limited
exceptions, the Company will not be taxed under federal and certain state income
tax laws at the corporate level on income that it distributes to its
shareholders.  For special tax provisions applicable to REITs, refer to
Sections 856-860 of the Code.


INVESTMENT OBJECTIVE AND STRATEGIC PLAN

     The Company's fundamental investment objective is to create long-term value
for its shareholders.  The Company expects to achieve this objective through an
overall strategy, focused on making opportunistic property acquisitions and
employing an effective value-added asset management program, which emphasizes
cash flow growth and the appreciation of property values.  The Company may also
participate with other entities in property ownership, through joint ventures or
other types of co-ownership.

     The Company's strategy for future growth is to acquire shopping center and
apartment properties in fundamentally strong markets in the southern United
States as capital and real estate market conditions permit, and to improve the
operating performance of those properties through its effective and efficient
leasing and management programs.  The Company also intends, from time to time,
to implement programs of redevelopment or expansion of certain of its properties
and, subject to market conditions, develop new properties within its
geographical region.  The Company believes that its regional concentration and
substantial knowledge of the markets in which it operates affords it a
competitive advantage in the identification of real estate trends and investment
opportunities within those markets.

     At December 31, 1998, approximately 61% of the Company's portfolio
consisted of investments in shopping centers and 39% consisted of investments in
apartments.  In order to provide a degree of portfolio risk diversification,
while maintaining a focused approach to asset management, the Company has
elected to expand its ownership of apartment properties and, to the extent
practical, intends to achieve a balanced portfolio of investments in shopping
centers and apartments.

     The Company considers numerous factors in the evaluation of potential real
estate investments, including, but not limited to, the following:

     --acquisition and/or development cost and initial cash flow in relation to
       yield objective;

     --the potential to increase cash flow through effective property
       management;

     --geographic area and demographic profile;

                                       3
<PAGE>
 
     --property size and composition of tenants;

     --availability of financing, including the possibility of assuming existing
       financing or the potential for refinancing;

     --condition, quality of design, construction, and other physical
       attributes;

     --current and expected economic environment of local and regional real
       estate markets;

     --the presence of or proximity to potential environmental problems;

     --current and historical occupancy levels;

     --current and historical sales levels of retail tenants;

     --other characteristics of existing tenants, including credit-worthiness;

     --anticipated future treatment under applicable federal, state, and local
       tax laws and regulations;  and

     --potential for appreciation in value.


     Although the Company presently makes equity investments in real estate, it
may invest in mortgages and other types of interests in real estate.  The
Company may also invest in the securities of other entities engaged in real
estate activities or securities of other issuers, subject to the limitations of
such investments necessary to maintain its REIT qualification.

     An important part of the Company's overall strategic initiative is to
increase cash flow and to enhance the value of its portfolio through:  (1)
maximizing  rental income by achieving an optimum level of rental rates and
occupancy levels; (2) operating properties in a cost-effective manner; (3)
renovating existing properties in order to maintain or improve their competitive
position and performance in the marketplace; (4) developing new properties; and
(5) accessing the most cost effective sources of capital to finance its
properties.

     The Company expects to hold its properties as long-term investments and has
no maximum period for retention of each investment.  Under ordinary
circumstances, the Company would not expect to sell property held for less than
four years.


COMPETITION

     There are numerous real estate entities which compete with the Company in
seeking properties for acquisition and/or development and tenants for occupancy
in its market area.  The Company believes that the principal competitive factors
affecting the attraction and retention of its tenants are property location,
visibility, and accessibility, as well as the quality, condition, and overall
appearance of its properties.  The Company also competes with other entities for
capital funds necessary to support its investment activities and asset growth.


ENVIRONMENTAL MATTERS

     Investments in real property have the potential for environmental liability
on the part of the owner of such property.  The Company is not aware of any
environmental liabilities relating to the Company's investment properties which
would have a material adverse effect on the Company's business, assets, or
results of operations.

     The Company's guidelines require a Phase I environmental study prior to the
acquisition or development of

                                       4
<PAGE>
 
a property that, because of its prior use or its proximity to other properties
with environmental risks, may be subject to possible environmental hazards.
Where determined appropriate by a Phase I study, a more extensive evaluation may
be undertaken to further investigate the potential for environmental liability
prior to an investment in a property. The Company does not presently maintain
insurance coverage for environmental liabilities.


EXECUTIVE OFFICERS

     The Company is self-administered and does not engage a separate advisor or
pay an advisory fee for administrative or investment services.  Management of
the Company is provided by its officers.  The executive officers of the Company
are elected annually by, and serve at the discretion of, the Board of Directors.

     The executive officers of the Company are as follows:

     Name                      Age            Position(s) with the Company
     ----                      ---            ---------------------------- 
Sidney W. Lassen ..........    64          Chairman of the Board, Chief 
                                           Executive Officer, and Director
Thomas A. Masilla, Jr......    52          Vice Chairman, President, Principal
                                           Operating and Chief Financial
                                           Officer, and Director

     Mr. Lassen has been an executive officer of the Company since its inception
in 1986, and has been involved in the acquisition, development, management, and
disposition of shopping center and apartment properties for approximately 40
years.  He has previously served as a trustee of the International Council of
Shopping Centers, the national association for the shopping center industry.
Mr. Lassen is Chairman of the Board and Chief Executive Officer of Sizeler
Realty Co., Inc., and a Director of the Hibernia Corporation.

     Mr. Masilla was elected to the position of Vice Chairman of the Company in
1994, Principal Operating Officer and President in 1995, Chief Financial Officer
in 1996, and has been a member of the Company's Board of Directors since 1986.
Mr. Masilla, a certified public accountant, was a consultant to the Company from
1992 to 1994, and was a consultant to Sizeler Realty Co., Inc. from 1992 to
1994.  Mr. Masilla has been a corporate executive and manager for more than 25
years, with extensive experience in commercial bank management.


PROPERTY MANAGEMENT

     The Company has a management agreement with Sizeler Real Estate Management
Co., Inc. (the "Management Company"), which is wholly-owned by Sizeler Realty
Co., Inc. ("Sizeler Realty").  Sizeler Realty is a diversified real estate
service company in which a beneficial minority interest is directly owned by
Sidney W. Lassen and the balance is owned by members of the family of Mr.
Lassen's wife, and residual entities of the estates of her mother and father.

     Under the terms of the management agreement with the Company, the
Management Company performs leasing and management services with respect to the
Company's properties, including, for each property, the annual preparation of
detailed operating and capital budgets, accounting, data processing, collection
of rents, repairs, cleaning, maintenance, and other operating services.  Upon
request of the Company, the Management Company also performs, or causes to be
performed, additional services, such as advertising, promotion, market research,
and other management information, and may perform for fees, services for tenants
and other third parties, which fees may not qualify under REIT income tests.

     The Management Company is paid a fee based on the Company's gross
investment in real estate, subject to adjustment for year-to-year increases or
decreases in funds from operations per share of the Company.


ECONOMIC CONDITIONS

     The Company is affected by national and local economic conditions and
changes in real estate markets.  The financial performance of shopping center
properties depends upon the strength of retail sales, which are directly
affected

                                       5
<PAGE>
 
by trends in employment and personal income. Apartment properties are, likewise,
affected by the economic conditions and employment trends of the communities in
which they are located.

     Fifteen of the Company's properties, comprising approximately 46% of its
investment portfolio, are located in Louisiana.  The Louisiana economy, since
the late 1980's, has experienced positive growth as reflected in higher levels
of employment and an increase in general economic activity.  The national and
global economies also have an impact on Louisiana, particularly as they affect
the tourism, convention, energy, and port industries, which are important
segments of the Louisiana economy.

                                       6
<PAGE>
 
     To diversify its portfolio and reduce the risks of geographic concentration
and economic dependency on a primary industry, the Company began a program in
1988 of acquiring properties in other states of the Gulf South region. Today,
the Company has properties in Louisiana, Florida, Alabama, and Texas.


ITEM 2.  PROPERTIES

     As of December 31, 1998, the Company's real estate portfolio included
interests in sixteen shopping centers and fourteen apartment communities.  The
Company holds, directly, or indirectly through partnerships, a fee interest in
all of its properties, with the exception of the Southwood Shopping Center in
Gretna, Louisiana, and the Westland Shopping Center, in Kenner, Louisiana, in
which it holds its interests under  long-term ground leases.  Thirteen of the
Company's properties were subject to mortgage loans at December 31, 1998.

     In the opinion of Management, all of the Company's properties are well-
maintained and in good repair, suitable for their intended uses, and are
adequately covered by insurance.

                                       7
<PAGE>
 
     The following table sets forth certain information concerning the Company's
real estate investments as of December 31, 1998:
<TABLE>
<CAPTION>
 
                                                                                            Percent
                                                                                           Leased (d)
                                                                     Gross Leasable Area   December 31
                                       Year           Year Last       in Square Feet or    -------------
Description                          Completed        Renovated        Rentable Units      1998    1997
-----------                          ---------        ---------      -------------------   -----   -----
<S>                                     <C>             <C>              <C>               <C>     <C>
 
REGIONAL ENCLOSED MALLS (3)
---------------------------
 Hammond Square (b)                     1978             1992              364,681          89%      91%
   (Hammond, Louisiana)                                                    435,085 (a)
 North Shore Square (b)                 1986             1995              355,865          97%      97%
   (Slidell, Louisiana)                                                    623,914 (a)
 Southland Mall (b)                  1970, 1981          1994              469,807          98%      98%
   (Houma, Louisiana)                                                      623,479 (a)
POWER SHOPPING CENTERS (2)
--------------------------
 Lantana Plaza                          1992              ---              275,928          98%      98%
   (Palm Beach County, Florida)
 Westward                            1961, 1990          1995              226,547         100%     100%
   (W. Palm Beach, Florida)
COMMUNITY SHOPPING CENTERS (11)
-------------------------------
 Airline Park(b)                        1973             1986               71,368          92%      93%
   (Metairie, Louisiana)
 Azalea Gardens (b)                     1950             1986               45,032         100%     100%
   (Jefferson, Louisiana)
 Camelot Plaza                          1981              ---               80,760          84%      89%
   (San Antonio, Texas)
 Colonial (b)                           1967             1987               43,230          22%      35%
   (Harahan, Louisiana)
 Delchamps Plaza (b)                    1989              ---               72,649         100%     100%
   (Gonzales, Louisiana)                                                   186,649 (a)
 Rainbow Square                         1986              ---               74,746         100%     100%
   (Dunnellon, Florida)                                                    116,746 (a)
 Southwood (c)                          1986              ---               40,000         100%     100%
   (Gretna, Louisiana)
 Town & Country                         1989              ---              148,782          99%      99%
   (Palatka, Florida)
 Weeki Wachee Village                   1987              ---               82,349          91%      94%
   (Weeki Wachee, Florida)
 Westgate (b)                           1964             1987              208,319          98%      98%
   (Alexandria, Louisiana)
 Westland (b)                           1966             1990              108,271          94%      98%
   (Kenner, Louisiana)                                                   ---------        ----     ----
                                                                         2,668,334          95%      96%
                                                                         =========        ====      ===
 
APARTMENTS (14)
---------------
 Bel Air                             1968, 1974           ---            202 units          98%      96%
  (Mobile, Alabama)
 Bryn Mawr                              1991              ---            240 units          99%     100%
  (Naples, Florida)
 Colonial Manor (b)                     1967             1994             48 units         100%      98%
   (Harahan, Louisiana)
 Garden Lane (b)                     1966, 1971           ---            261 units         100%      95%
  (Gretna, Louisiana)
 Georgian (b)                           1951             1993            135 units          99%      93%
  (New Orleans, Louisiana)
 Governors Gate (b) (e)                  ---              ---            184 units          66%     n/a
   (Pensacola, Florida)
 Hampton Park                           1977             1995            300 units          96%      97%
   (Mobile, Alabama)
 Jamestown Estates                      1972              ---            177 units          96%      97%
   (Pensacola, Florida)
 Lafayette Square                    1969-1972           1995            675 units          94%      93%
   (Mobile, Alabama)
 Lakeview Club                          1992              ---            443 units          96%      98%
   (Ft. Lauderdale, Florida)
 Magnolia Place (b)                     1984              ---            148 units          91%      99%
   (New Iberia, Louisiana)
 Pine Bend                              1979              ---            152 units          97%      98%
   (Mobile, Alabama)
 Steeplechase (b)                       1982              ---            192 units          98%     100%
   (Lafayette, Louisiana)
 Woodcliff                              1977              ---            184 units          95%      96%
   (Pensacola, Florida)                                                -----------        ----     ----
                                                                       3,341 units          95%      96%
                                                                       ===========        ====     ====
</TABLE>

                                       8
<PAGE>
 
(a)  The larger number is the total area of the indicated center, including
     owner-occupied stores in which the Company has no ownership interest.
     Hammond Square and Southland Mall have stores owned by Dillard Department
     Stores, Inc., comprising 70,404 s.f. and 153,672 s.f. of space,
     respectively; North Shore Square Mall has stores owned by Dillard
     Department Stores, Inc. comprising 115,776 s.f. and 76,954 s.f. of space,
     and Mervyn's comprising 75,319 s.f. of space; Delchamps Plaza and Rainbow
     Square Shopping Centers have stores owned by Wal-Mart Stores, Inc.,
     comprising 114,000 s.f. and 42,000 s.f., respectively.

(b)  The Company has a 99% partnership interest in these properties.

(c)  The Company has a 50% partnership interest in Southwood Shopping Center.

(d)  Percent leased for retail is computed as the ratio of total space leased,
     including anchor stores, to total leasable space, expressed as a
     percentage. The computation excludes owner-occupied stores in which the
     Company has no ownership interest.

(e)  This apartment community is under development. As of December 31, 1998, the
     contractor had released 184 units, of which 66% were leased. The
     development will have 240 units and completion is expected in early 1999.
     This property is in the initial lease-up stage and is expected to stabilize
     occupancy levels by the end of 1999.


ITEM 3.  LEGAL PROCEEDINGS.

     The Company is not presently involved in any material litigation nor, to
its knowledge, is any material litigation threatened against the Company or its
properties, other than routine litigation arising in the ordinary course of
business or which is expected to be covered by the Company's liability
insurance.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1998.

                                       9
<PAGE>
 
                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.

     The Company's shares of common stock ("shares") and its 8% convertible
subordinated debentures are listed for trading on the New York Stock Exchange
under the symbol "SIZ" and "SIZ 03," respectively.

     The following table sets forth the high and low sales price of the shares
for the periods indicated, as reported by the New York Stock Exchange, and the
dividends paid per share in such periods.
 
                                                           Dividends
                                High            Low          Paid  
                              ---------       -------      ---------
1998                                                              
----
1st Quarter................... $ 11 3/8       $10  5/16        $0.22
2nd Quarter...................   11 3/16        9 13/16        $0.22
3rd Quarter...................   10 5/16        8  5/8         $0.22
4th Quarter...................    9 3/16        8  1/16        $0.22

1997
----
1st Quarter................... $ 10 5/8       $ 9  5/8         $0.22
2nd Quarter...................   10 1/2         9  5/8         $0.22
3rd Quarter...................   11 3/4        10  1/4         $0.22
4th Quarter...................   11 5/8         9 11/16        $0.22

     As of March 22, 1999, there were 475 individually-listed owners of record
of the Company's shares. Approximately 82% of the Company's outstanding shares
are held by CEDE & Co., which is accounted for as a single shareholder of record
for multiple beneficial owners. CEDE & Co. is a nominee of the Depository Trust
Company (DTC), with respect to securities deposited by participants with DTC,
e.g., mutual funds, brokerage firms, banks, and other financial organizations.

     The Company has paid dividends in each quarter since its inception as a
publicly-owned company in 1987, with a cumulative total of approximately $77.7
million paid to shareholders over this time period.

     Under the REIT rules of the Internal Revenue Code, the Company must pay at
least 95% of its ordinary taxable income as dividends in order to avoid taxation
as a regular corporation.  The declaration of dividends is a discretionary
decision of the Board of Directors and depends upon the Company's distributable
funds, financial requirements, tax considerations, and other factors.  A portion
of the Company's dividends paid may be deemed capital gain income, a return of
capital, or both, to its shareholders.  The Company annually provides its
shareholders a statement as to its designation of the taxability of the
dividend.

     The federal income tax status of dividends per share paid for each of the
five years ended December 31 was as follows:
 
 
                          1998     1997    1996    1995    1994
                        --------   -----   -----   -----   -----
 Ordinary Income          $0.62    $0.54   $0.37   $0.40   $0.72
 Return of Capital         0.27(a)  0.34    0.51    0.72    0.38
 Capital Gain              ---      ---     ---     ---     ---
                          -----    -----   -----   -----   -----
   Total                  $0.89    $0.88   $0.88   $1.12   $1.10
                          =====    =====   =====   =====   =====

     (a) Includes a $0.01 per share distribution for the redemption of stock
         purchase rights in connection with the Company's adoption of a
         replacement shareholder rights plan.

     The Company has a dividend reinvestment plan pursuant to which the
Company's shareholders of record may use their dividends to purchase additional
shares.  The Company has acquired shares for the plan by open market

                                       10
<PAGE>
 
purchases. Brokerage commissions on all such purchases are paid by the Company
and are not charged to plan participants.

                                       11
<PAGE>
 
Item 6.  SELECTED FINANCIAL DATA.

     The following table sets forth selected consolidated financial data (in
thousands, except per share data) for the Company and its subsidiaries and
should be read in conjunction with the consolidated financial statements and
notes thereto included herein.
<TABLE>
<CAPTION>

 
                                                                                      Year Ended December 31,
                                               -----------------------------------------------------------------------------
OPERATING DATA (1)                                1998             1997             1996             1995             1994
                                               ---------        ---------        ---------        ---------        ---------
<S>                                            <C>              <C>              <C>              <C>              <C> 
  Operating Revenue
    Rents and other income                     $  47,648        $  46,286        $  44,255        $  43,087        $  36,621
    Equity in income of partnership                  111               94              103              106               75
                                               ---------        ---------        ---------        ---------        ---------
                                                  47,759           46,380           44,358           43,193           36,696    
  Operating Expenses                              30,481           29,280           27,630           26,044           21,382
                                               ---------        ---------        ---------        ---------        ---------
    INCOME FROM OPERATIONS                        17,278           17,100           16,728           17,149           15,314
                                               ---------        ---------        ---------        ---------        ---------

  Other Income (Expenses)
    Interest and dividend income                      32               63               98               42               82
    Interest expense                             (14,554)         (14,608)         (14,542)         (14,497)         (10,248)
                                               ---------        ---------        ---------        ---------        ---------
                                                 (14,522)         (14,545)         (14,444)         (14,455)         (10,166)
                                               ---------        ---------        ---------        ---------        ---------
    INCOME BEFORE GAIN ON SALE
      OF REAL ESTATE                               2,756            2,555            2,284            2,694            5,148
                                               ---------        ---------        ---------        ---------        ---------
Gain on Sale of Real Estate Investments             ----             ----             ----             ----                8
                                               ---------        ---------        ---------        ---------        ---------
INCOME BEFORE EXTRAORDINARY ITEM                   2,756            2,555            2,284            2,694            5,156
  Extraordinary Item--Early Extinguishment
    of Debt                                         ----             ----             (449)            ----             ----
                                               ---------        ---------        ---------        ---------        ---------
      NET INCOME                               $   2,756        $   2,555        $   1,835        $   2,694        $   5,156
                                               =========        =========        =========        =========        =========
Funds From Operations (2)                      $  12,284        $  11,509        $  10,771        $  10,492        $  11,118
Net Cash Provided by (Used in):
  Operating Activities                         $  12,510        $  13,027        $  13,583        $  10,117        $  10,615
  Investing Activities                         $ (17,020)       $  (6,836)       $  (7,555)       $ (17,857)       $ (52,748)
  Financing Activities                         $   4,532        $  (5,531)       $  (6,834)       $   7,591        $  37,257
Dividends Paid                                 $   7,330        $   7,413        $   7,425        $   9,723        $   9,806
Per Share Data:
  Net Income (Basic and Diluted)               $    0.33        $    0.30        $    0.22        $    0.31        $    0.58
  Dividends Paid                               $    0.88        $    0.88        $    0.88        $    1.12        $    1.10
Weighted Average Shares Outstanding                8,331            8,423            8,433            8,690            8,914

                                                  1998             1997             1996             1995             1994
                                               ---------        ---------        ---------        ---------        ---------
BALANCE SHEET DATA
  Gross Investment in Real Estate              $ 329,390        $ 311,216        $ 304,424        $ 296,884        $ 279,698
  Total Assets                                   285,886          276,345          278,380          281,857          269,923
  Mortgage Notes Payable                          89,869           90,615           68,080           68,317           42,139
  Notes Payable                                   49,178           32,342           52,639           51,419           52,987
  Convertible Subordinated Debentures             62,878           62,878           62,878           62,878           62,878
  Total Liabilities                              209,669          191,818          189,013          186,534          163,213
  Shareholders' Equity                            76,217           84,527           89,367           95,323          106,710
</TABLE>

________________

(1)  See "Management's Discussion and Analysis of Financial Condition and
     Results of Operations" for information regarding factors such as property
     acquisitions and dispositions and other transactions which have affected
     operating performance during the periods indicated.

(2)  Using guidelines established by the National Association of Real Estate
     Investment Trusts, funds from operations has been defined by the

                                       12
<PAGE>
 
     Company as net income, excluding gains or losses from sales of property and
     other non-operating extraordinary items, plus depreciation on real estate
     assets, and after adjustments for unconsolidated partnerships to reflect
     funds from operations on the same basis.

                                       13
<PAGE>
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

Overview

     The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto appearing elsewhere in this
Annual Report on Form 10-K.  Historical results and percentage relationships,
including trends which might appear, set forth in the consolidated statements of
income contained in the consolidated financial statements, should not be taken
as indicative of future operations.

     The Company's real estate investment portfolio is composed of sixteen
shopping center properties and fourteen apartment properties.  As of
December 31, 1998, the Company's gross investment in real estate totalled $329.4
million, and consisted of approximately 61%, or $199.9 million, in shopping
centers, and approximately 39%, or $129.5 million, in apartments. Total revenue
for 1998 was $47.8 million, and consisted of approximately 57%, or $27.4
million, generated by the shopping center properties, and approximately 43%, or
$20.4 million, generated by the apartment properties.


RESULTS OF OPERATIONS

 Comparison of the years ended December 31, 1998, and 1997.

     For the year ended December 31, 1998, operating revenue from shopping
centers and apartments increased approximately $894,000 and $485,000,
respectively, resulting in a combined total increase of approximately $1.4
million.  The increase in operating revenue is primarily attributable to
increases in rental rates coupled with sustained occupancy levels at the
properties, offset by the effect of the new accounting method for recognizing
percentage rental income for the retail properties (see Note A of Notes to
Consolidated Financial Statements).  Operating expenses, before depreciation,
increased approximately $677,000 in 1998 compared to 1997.  The increase in
operating expenses associated with the retail properties is $396,000 and with
the apartment properties is $281,000.  The increase in operating expenses is
attributable to the following: (i) an increase in management fees due to
increases in investments in real estate properties on which the management fee
is based, and an increase in leasing fees due to higher leasing activity in
1998; (ii) an increase in real estate taxes due to increased property value
assessments at certain properties; and (iii) an increase in maintenance and
administrative expenses due to higher payroll costs, professional fees and other
administrative costs associated with the Company's real estate portfolio and
capital structure.  Depreciation increased $524,000 due to capital improvements
made to the Company's properties during 1998 and 1997.  Accordingly, income from
operations totalled $17.3 million in 1998, compared to $17.1 million in 1997,
and income from operations, before depreciation, totalled $27.4 million in 1998,
compared to $26.7 million in 1997.

     Interest and dividend income decreased in 1998 compared to 1997 due to
reduced interest earnings on mortgage escrow deposits resulting from lower
escrow balances during 1998.

     Interest expense reflects a net decrease of $54,000 resulting from the
following activity completed within the past twelve months.  In December 1997,
mortgage financing was completed at one of the Company's enclosed regional malls
and has increased interest expense approximately $1.8 million.  In the second
quarter of 1998, the Company refinanced mortgage debt on ten of its apartment
properties, and repaid a mortgage note payable on one of its retail centers, all
of which resulted in a reduction in interest expense totalling $394,000.  The
mortgage proceeds derived from the mortgage financing and refinancing mentioned
above were used to pay down variable-rate bank debt and as a result, interest
expense on bank debt decreased $1.4 million.  During 1998, the Company drew on
its bank lines to fund contract payments on the Governors Gate development in
Florida, and the related interest charges of $308,000 have been capitalized to
the development.  The average bank borrowings were approximately $38.6 million
and $51.6 million for 1998 and 1997, respectively, with an average rate of 7.6%
and 7.8%, respectively.

     Net income in 1998, compared to 1997, increased in the aggregate and on a
per-share basis.

                                       14
<PAGE>
 
 Comparison of the years ended December 31, 1997, and 1996.

     For the year ended December 31, 1997, operating revenue from shopping
centers and apartments increased approximately $1.2 million and $844,000,
respectively, resulting in a combined total increase of approximately
$2.0 million. The increase in operating revenue is primarily attributable to
increases in rental rates coupled with sustained higher occupancy levels at the
properties. Operating expenses, before depreciation, in 1997 increased $1.1
million, compared to 1996. The increase in operating expenses associated with
the retail properties is $650,000 and with the apartment properties is $498,000.
The increase in operating expenses is attributable to the following: (i) an
increase in management and leasing fees due to increases in investments in real
estate properties, combined with an increase in the rate used to calculate the
management fee due to the increase in funds from operations in 1997 over 1996,
and an increase in leasing fees due to higher leasing activity in 1997; (ii) an
increase in real estate taxes due to increased property value assessments at
several properties; and (iii) an increase in maintenance and administrative
expenses due to higher payroll costs, professional fees, and other
administrative costs associated with the Company's real estate portfolio and
capital structure. Depreciation increased $502,000 due to capital improvements
made to the Company's properties during 1997 and 1996. Accordingly, income from
operations totalled $17.1 million, compared to $16.7 million reported in 1996,
and income from operations, before depreciation, totalled $26.7 million in 1997,
compared to $25.8 million in 1996.

     Interest and dividend income decreased in 1997 compared to 1996 due to
reduced interest earnings on mortgage escrow deposits resulting from lower
escrow balances during 1997.

     Interest expense increased $66,000 over 1996, attributable to the
following:  (1) an increase of $98,000 in interest on bank debt (average bank
borrowings were approximately $51.6 million and $51.9 million, with average
interest rates of 7.8% and 7.6% in 1997 and 1996, respectively) offset by (2) a
net decrease of approximately $32,000 in mortgage interest due to: (i)
refinancing of existing mortgage debt of approximately $19.8 million in the
first quarter of 1996, and $3.4 million in the third quarter of 1996, which
resulted in reductions in the interest rates of approximately 200 and 113 basis
points, respectively, offset by (ii) mortgage debt financing totalling $23
million completed in December 1997.

     Net income in 1997, compared to 1996, increased in the aggregate and on a
per-share basis.  Net income in 1996 included an extraordinary charge of
$449,000 resulting from deferred financing costs expensed in connection with the
refinancing of mortgage debt.


LIQUIDITY AND CAPITAL RESOURCES

     The primary source of working capital for the Company is net cash provided
by operating activities, from which the Company funds normal operating
requirements and distributions to shareholders.  In addition, the Company
maintains unsecured credit lines with commercial banks, which it utilizes to
temporarily finance the cost of portfolio growth, property improvements, and
other expenditures.  At December 31, 1998, the Company had $1.2 million in cash
and cash equivalents, and commitments for a total of $100.0 million of bank
lines of credit, of which approximately $49.2 million was available.
Utilization of the bank lines is subject to certain restrictive covenants that
impose maximum borrowing levels by the Company through the maintenance of
prescribed debt-to-equity or other financial ratios.

     Net cash flows provided by operating activities decreased $517,000 in 1998
from 1997, and decreased $556,000 in 1997 from 1996.  The decrease between 1998
and 1997 is primarily attributable to a net increase in operating assets over
1997, offset by an increase in income from operations before depreciation. The
decrease between 1997 and 1996 is primarily attributable to a net decrease in
operating liabilities offset by an increase in income from operations before
depreciation.

     Net cash flows used in investing activities increased $10.2 million
primarily attributable to the development of a new luxury apartment community in
Florida.  During 1997, the Company entered into a construction contract with a
third-party construction company to build the apartment community.  When
completed, this community will have

                                       15
<PAGE>
 
240 garden-style units, with a mix of one, two, and three bedroom units. As of
December 31, 1998, the Company had $14.0 million invested in this development.
The total development will cost approximately $14.3 million and is expected to
be completed in early 1999. Also during 1998, the Company acquired two parcels
of land for future development totalling approximately $611,000 located next to
two properties owned by the Company. The Company had no other material
commitments for capital improvements at December 31, 1998.

     Net cash flows used in investing activities decreased $719,000 in 1997 from
1996, attributable to a decrease in  capital expenditures on real estate
properties due to the completion of a roofing project at one of the Company's
retail centers in 1996, offset by an increase in acquisitions of real estate
reflecting the acquisition of land for future development located in Florida as
mentioned above.  The Company had no other material commitments for capital
improvements at December 31, 1997.

     Net cash flows provided by financing activities increased approximately
$10.1 million in 1998 from 1997 primarily attributable to using the Company's
available bank lines to fund contract payments in connection with the
development of the apartment community in Florida.  Also in the second quarter
of 1998, the Company completed mortgage debt refinancing involving ten of the
Company's apartment properties.  Mortgage debt totalling $59.1 million was
refinanced resulting in new mortgage debt totalling $61.5 million, of which the
net proceeds totalling $2.4 million were used to pay down short-term variable-
rate bank debt.  The Company was able to achieve a reduction of 100 basis points
in the average interest rate on the mortgages refinanced, from an average rate
of approximately 7.8% down to an average rate of approximately 6.8%.  Offsetting
the increase in cash flows from financing activities, in the second quarter of
1998, the Company repaid mortgage debt totalling $1.7 million having an interest
rate of 9.0% on one of its retail centers, and the Company has additional debt
amortization resulting from mortgage debt financing completed in 1997.
Additionally during 1998, pursuant to the Company's stock repurchase program
initiated in 1995, the Company repurchased 449,000 shares at a total cost of
$3.8 million compared to 17,100 shares repurchased at a total cost of $176,000
in 1997.

     Net cash flows used in financing activities decreased $1.3 million in 1997
from 1996 primarily attributable to mortgage debt financing totalling $23
million completed in December 1997 combined with a decrease in treasury shares
purchased in 1997 compared to 1996.  Proceeds derived from the mortgage debt
financing were used to pay down short-term variable-rate bank debt.  During
1997, pursuant to the Company's stock repurchase program initiated in 1995,
17,100 shares were repurchased at a total cost of $176,000, compared to 62,800
shares repurchased at a total cost of $516,000 in 1996.

     As of December 31, 1998, thirteen of the Company's properties, comprising
approximately 47% of its gross investment in real estate, were subject to a
total of $89.9 million in mortgage debt, all of which bear a fixed rate of
interest for a fixed term.  The remaining seventeen properties in the portfolio
are currently unencumbered by  mortgage debt.  The Company anticipates that its
current cash balance, operating cash flows, and borrowings (including borrowings
under its lines of credit) will be adequate to fund the Company's future (i)
operating and administrative expenses, (ii) debt service obligations, (iii)
distributions to shareholders, (iv) capital improvements on existing properties,
(v) development of new properties, and (vi) normal repair and maintenance
expenses at its properties.

     The Company's current dividend policy is to pay quarterly dividends to
shareholders, based upon, among other factors, funds from operations, as opposed
to net income.  Because funds from operations excludes the deduction of non-cash
charges, principally depreciation of real estate assets, and certain non-
operating items, quarterly dividends will typically be greater than net income
and may include a tax-deferred return of capital component.  The Board of
Directors, on February 5, 1999, declared a cash  dividend with respect to the
period October 1, 1998, through December 31, 1998, of $.22 per share, to
shareholders of record as of February 25, 1999.


FUNDS FROM OPERATIONS

     Real estate industry analysts utilize the concept of funds from operations
as an important analytical measure of a REIT's financial performance.  The
Company considers funds from operations in evaluating its operating results, and
its dividend policy is also based, in part, on the concept of funds from
operations.

                                       16
<PAGE>
 
     Funds from operations is defined by the Company as net income, excluding
gains or losses from sales of property and other non-operating extraordinary
items, plus depreciation on real estate assets, and after adjustments for
unconsolidated partnerships to reflect funds from operations on the same basis.
Funds from operations do not represent cash flows from operations as defined by
generally accepted accounting principles, nor is it indicative that cash flows

                                       17
<PAGE>
 
are adequate to fund all cash needs, including distributions to shareholders.
Funds from operations should not be considered as an alternative to net income
as defined by generally accepted accounting principles or to cash flows as a
measure of liquidity.

     For the year ended December 31, 1998, funds from operations totalled $12.3
million, compared to $11.5 million in 1997, an increase of approximately
$800,000.  This increase in funds from operations results from internal growth
and improved operating performance by the Company's real estate properties,
which experienced overall income growth, primarily from higher rental rates
coupled with sustained occupancy.

     For the year ended December 31, 1997, funds from operations totalled $11.5
million, compared to $10.8 million in 1996, an increase of approximately
$700,000.  This increase in funds from operations results from internal growth
and improved operating performance by the Company's real estate properties,
which experienced overall income growth, primarily from higher rental rates
coupled with sustained occupancy, offset by a slight increase in interest
expense due to a higher level of average borrowings.


FUTURE RESULTS

     This Form 10-K and other documents prepared, and statements made by the
Company, may contain certain forward-looking statements that are subject to risk
and uncertainty.  Investors and potential investors in the Company's securities
are cautioned that a number of factors could adversely affect the Company and
cause actual results to differ materially from those in the forward-looking
statements, including, but not limited to (a) the inability to lease currently
vacant space in the Company's properties; (b) decisions by tenants and anchor
tenants who own their space to close stores at the Company's properties; (c) the
inability of tenants to pay rent and other expenses; (d) tenant bankruptcies;
(e) decreases in rental rates available from tenants; (f) increases in operating
costs at the Company's properties; (g) lack of availability of financing for
acquisition, development and rehabilitation of properties by the Company; (h)
increases in interest rates; (i) Year 2000 issues; (j) a general economic
downturn resulting in lower retail sales and causing downward pressure on
occupancies and rents at retail properties; as well as (k) the adverse tax
consequences if the Company were to fail to qualify as a REIT in any taxable
year; and (l) the competitive factors described in "Item 1 - Competition" of
this report.


YEAR 2000 ISSUE

     The Company has been addressing the potential computer program problems
resulting from the arrival of Year 2000 (Y2K).  The Company has established a
Y2K compliance review process to assess the impact on the Company's internal
financial information systems and property mechanical operations systems, as
well as the potential impact from Y2K problems of significant tenants, vendors
and suppliers of financial and other services (collectively "independent third
parties").  The Company has identified required modifications to its internal
corporate computer operating systems and certain software modifications at its
apartment properties.  The Company has completed these identified modifications
and continues to test and monitor its systems.  The Company has been working
with external consultants to have every computer system evaluated to determine
their Y2K compliance.  This evaluation has shown that approximately 65% of the
Company's computer systems are Y2K compliant.  The remaining 35% will either be
fixed to become compliant, or they will be replaced with new systems during
1999.  The estimated cost to fix and/or completely replace these remaining
computer systems range from $5,000 to $25,000.  The Company's compliance plan is
to continue the process of conducting inquiries of its independent third parties
in order to determine if these third parties have Y2K problems, and what
contingency plans they have developed to deal with identified exposures.  Based
on the results of these inquiries, the Company will formulate appropriate
contingency back-up plans to take necessary and feasible precautions against
problems not within its control.  The Company is also continuing the process of
reviewing, testing, and monitoring its own internal systems to ensure that they
are Y2K compliant and to make necessary and timely corrections of identified Y2K
problems under its direct control.  This overall process will be on-going
throughout 1999 due to the dependence upon the timeliness of activities of the
Company's third parties, whom it does not control.

     Pursuant to the disclosure requirements of the Securities and Exchange
Commission, the Company is

                                       18
<PAGE>
 
attempting to identify possible worst case scenarios concerning Y2K issues and
the related risks to the Company should one or more of these scenarios occur. It
should be noted, however, that the Company cannot predict the probability of
these scenarios actually materializing.

     In the Company's opinion, risks which could have a material effect on the
Company's business, results of operations, or financial statements would likely
be due to the Company's dependence on the services of independent third parties
over which the Company has no control.  Such potentially material risks would
include, but are not limited to, the following: (i) failure of tenants to make
rental payments because either their internal systems or their banking
institutions will be unable to process such payments; (ii) the Company will be
unable to pay vendors and/or creditors due to the failure of tenants to pay
rents and/or the Company's banking institutions' failure to process such
payments; and (iii) the complete failure or extended interruption of utility
services to the Company's properties, which are served by various utilities, due
to the utilities' inability to provide such services.

     As of the time of this report, the Company is continuing to evaluate
contingency plans for the above described scenarios.  However, the Company's
plans will depend upon the assessments and contingency plans of the independent
third parties.  The Company has requested such information from several thousand
independent third parties, and it is awaiting receipt of their responses.
Responses received to date indicate that independent third parties are working
on their own assessments at this time.  The Company will continue to assess this
matter so as to develop appropriate plans to reasonably mitigate such risks, if
and when identified.  A widespread failure of tenants (or their banks) to
deliver collectible rent payments, or a failure of the Company's principal banks
of account to credit deposits to the Company's account or process the Company's
checks, or a sustained interruption of utility services to any of the Company's
properties is likely to have a material adverse effect on the Company's revenues
(which will be extremely adverse if multiple tenants or properties are so
affected) and may subject the Company to claims by tenants and contractual
counterparties and may result in Company claims against non-performing suppliers
and service providers.  If such  a worse case scenario occurs, it will likely be
of catastrophic proportions impacting multiple companies and industries of all
kinds.  Accordingly, the Company's ability to mitigate its exposures to such
risks will be limited to what it can control, and corrective measures will be
subject to the Company's resources as well as the efforts which industry and
government make to alleviate the problems.


EFFECTS OF INFLATION

     Substantially all of the Company's retail leases contain provisions
designed to provide the Company with a hedge against inflation.  Most of the
Company's retail leases contain provisions which enable the Company to receive
percentage rentals based on tenant sales in excess of a stated breakpoint and/or
provide for periodic increases in minimum rent during the lease term.  The
majority of the Company's retail leases are for terms of less than ten years,
which allows the Company to adjust rentals to changing market conditions.  In
addition, most retail leases require tenants to pay a contribution towards
property operating expenses, thereby reducing the Company's exposure to higher
costs caused by inflation.  The Company's apartment leases are written for short
terms, generally six to twelve months, and are adjusted according to changing
market conditions.


ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     The Company is exposed to interest rate changes primarily as a result of
its bank lines of credit and long-term debt used to maintain liquidity, and fund
capital expenditures and expansion of the Company's real estate investment
portfolio and operations.  The Company's interest rate risk management objective
is to limit the impact of interest rate changes on earnings and cash flows, and
to optimize its overall borrowing costs.  To achieve its objective, the Company
utilizes its variable LIBOR-based, short-term (one to six month maturities) bank
credit lines to fund new investments until such investments can be financed with
long-term fixed-rate mortgage debt.

                                       19
<PAGE>
 
     The Company's interest rate risk is monitored on an on-going basis, using a
variety of techniques.  The table below presents the principal amounts, weighted
average interest rates, fair values and other terms required by year of expected
maturity based on contractual terms to evaluate the expected cash flows and
sensitivity to interest changes.
<TABLE>
<CAPTION>
 
                                         Fixed              Average         Variable           Average   
                                          Rate             Interest           Rate            Interest   
                                          Debt               Rate             Debt              Rate     
                                      ------------         --------        -----------        ---------  
<S>                                   <C>                    <C>           <C>                  <C>      
   1999                               $  5,148,000           7.62%         $49,178,000          7.10%    
   2000                                  1,831,000           7.55%                ----          ----     
   2001                                  4,662,000           7.54%                ----          ----     
   2002                                  1,949,000           7.53%                ----          ----     
   2003                                 64,980,000           7.43%                ----          ----     
   Thereafter                           74,177,000           7.13%                ----          ----     
                                      ------------                         -----------                   
                                                                                                         
   Total at December 31, 1998         $152,747,000           7.62%         $49,178,000          7.10%     
                                      ============                         ===========              
                                                                                                    
   Fair Value at December 31, 1998    $150,391,000                         $47,999,000              
                                      ============                         ===========               
</TABLE>

     As the table incorporates only those exposures that exist as of
December 31, 1998, it does not consider those exposures or positions which could
arise after that date. Moreover, because firm commitments are not presented in
the table above, the information presented therein has limited predictive value.
As a result, the Company's ultimate realized gain or loss with respect to
interest rate fluctuations will depend on the exposures that arise during the
period and the level of interest rates.


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The Company's Consolidated Balance Sheets as of December 31, 1998 and 1997,
and its Consolidated Statements of Income, Shareholders' Equity, Cash Flows, and
Notes to Consolidated Financial Statements for the years ended December 1998,
1997, and 1996, together with the Reports of Independent Auditors thereon, are
included under Item 14 of this report and are incorporated herein by reference.
Unaudited quarterly results of operations included in Notes to Consolidated
Financial Statements are also incorporated herein by reference.


ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE.

     There have be no disagreements with Accountants on accounting and financial
disclosures.

                                       20
<PAGE>
 
                                   PART  III


ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     For information regarding the executive officers of the Company, see
"Executive Officers" in Part I, Item 1 of this report.  The other information
required by this Item 10 is incorporated herein by reference to the Company's
definitive proxy statement, which will be filed with the Securities and Exchange
Commission, pursuant to Regulation 14A within 120 days of the end of the
Company's fiscal year.


ITEM 11.   EXECUTIVE COMPENSATION.

     The information required by this Item 11 is incorporated herein by
reference to the Company's definitive proxy statement, which will be filed with
the Securities and Exchange Commission pursuant to Regulation 14A within 120
days of the end of the Company's fiscal year.


ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The information required by this Item 12 is incorporated herein by
reference to the Company's definitive proxy statement, which will be filed with
the Securities and Exchange Commission pursuant to Regulation 14A within 120
days of the end of the Company's fiscal year.


ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information required by this Item 13 is incorporated herein by
reference to the Company's definitive proxy statement, which will be filed with
the Securities and Exchange Commission pursuant to Regulation 14A within 120
days of the end of the Company's fiscal year.

                                       21
<PAGE>
 
                                    PART IV


ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a) (1) and (2) Financial Statements and Financial Statement Schedules


                         INDEX TO FINANCIAL STATEMENTS
                       AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
 
                                                                                                   Page
                                                                                                   ----
<S>                                                                                              <C>
Report of Independent Auditors                                                                       18
 
Consolidated Balance Sheets as of December 31, 1998, and 1997                                        19
 
Consolidated Statements of Income for the years ended December 31, 1998, 1997,
  and 1996                                                                                           20
 
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1998,
  1997, and 1996                                                                                     21
 
Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997, and 1996          22
 
Notes to Consolidated Financial Statements                                                        23-34
 
Financial Statement Schedules
 
     Schedule II.  Valuation and Qualifying Accounts                                                 35
 
     Schedule III.  Real Estate and Accumulated Depreciation                                      36-37
</TABLE>


     All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
submitted because they are not required or the required information appears in
the financial statements or notes thereto.

                                       22
<PAGE>
 
                        REPORT OF INDEPENDENT AUDITORS



Shareholders and Board of Directors
Sizeler Property Investors, Inc.


     We have audited the consolidated balance sheets of Sizeler Property
Investors, Inc. and subsidiaries as of December 31, 1998, and 1997, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1998.  In
connection with our audits of the consolidated financial statements, we have
also audited the financial statement schedules listed in the Index at Item
14(a).  These consolidated financial statements and financial statement
schedules are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated financial
statements and the financial statement schedules 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 financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Sizeler
Property Investors, Inc. and subsidiaries as of December 31, 1998, and 1997, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1998, in conformity with generally
accepted accounting principles.  Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material respects,
the information set forth therein.


                                                 KPMG LLP

New Orleans, Louisiana
February 4, 1999,
except for Note H, as to
which the date is March 4, 1999

                                       23
<PAGE>
 
               SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                           December 31
                                                                                 --------------------------------
                                                                                      1998               1997
                                                                                 -------------      -------------
<S>                                                                              <C>                <C>
                        ASSETS
Real estate investments (Notes B and D)
  Land                                                                           $  49,814,000      $  49,203,000
  Buildings and improvements, net of accumulated depreciation
    of $55,964,000 in 1998 and $46,454,000 in 1997                                 222,699,000        214,655,000
  Investments in real estate partnership (Notes A and F)                               913,000            904,000
                                                                                 -------------      -------------
                                                                                   273,426,000        264,762,000
 
Cash and cash equivalents                                                            1,150,000          1,128,000
Accounts receivable and accrued revenue, net of allowance for
  doubtful accounts of $423,000 in 1998 and $281,000 in 1997                         2,829,000          2,696,000
Prepaid expenses and other assets, net                                               8,481,000          7,759,000
                                                                                 -------------      -------------
 
     Total Assets                                                                $ 285,886,000      $ 276,345,000
                                                                                 =============      =============
 
           LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Mortgage notes payable (Notes D and M)                                           $  89,869,000      $  90,615,000
Notes payable (Note D)                                                              49,178,000         32,342,000
Accounts payable and accrued expenses                                                6,657,000          4,903,000
Tenant deposits and advance rents                                                      878,000            871,000
Minority interest in real estate partnerships (Note K)                                 209,000            209,000
                                                                                 -------------      -------------
                                                                                   146,791,000        128,940,000
Convertible subordinated debentures (Notes D and M)                                 62,878,000         62,878,000
                                                                                 -------------      -------------
     Total Liabilities                                                             209,669,000        191,818,000
                                                                                 -------------      -------------
 
SHAREHOLDERS' EQUITY (Notes E and L)
Preferred stock, 6,000,000 shares authorized in 1998 and
  3,000,000 shares authorized in 1997, none issued                                        ----               ----
Common stock, par value $.01 per share, 30,000,000 shares authorized
  in 1998 and 15,000,000 shares authorized in 1997, shares issued
  and outstanding--8,979,806 in 1998 and 8,966,119 in 1997                              90,000             90,000
Additional paid-in capital                                                         127,750,000        127,602,000
Accumulated distributions in excess of net income (Note G)                         (42,688,000)       (38,028,000)
                                                                                 -------------      -------------
                                                                                    85,152,000         89,664,000
Treasury shares, at cost, 989,800 shares in 1998 and 540,800 shares in 1997         (8,926,000)        (5,146,000)
Accumulated other comprehensive income (Note A)                                         (9,000)             9,000
                                                                                 -------------      -------------
     Total Shareholders' Equity                                                     76,217,000         84,527,000
                                                                                 -------------      -------------
Commitments and contingencies (Note J)                                                    ----               ----
                                                                                 -------------      -------------
 
     Total Liabilities and Shareholders' Equity                                  $ 285,886,000      $ 276,345,000
                                                                                 =============      =============
 
</TABLE>

                                 See notes to consolidated financial statements.

                                       24
<PAGE>
 
               SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
 
 
                                                                                  Year Ended December 31
                                                               --------------------------------------------------------
                                                                    1998                 1997                  1996
                                                               -------------         ------------         -------------
OPERATING REVENUE (Notes C & F)
<S>                                                            <C>                   <C>                  <C>
  Rents and other income                                       $  47,648,000         $ 46,286,000         $  44,255,000
  Equity in income of partnership                                    111,000               94,000               103,000
                                                               -------------         ------------         -------------
                                                                  47,759,000           46,380,000            44,358,000
                                                               -------------         ------------         -------------

OPERATING EXPENSES
  Management and leasing (Note F)                                  2,468,000            2,429,000             2,228,000
  Utilities                                                        1,999,000            2,004,000             1,977,000
  Real estate taxes                                                3,692,000            3,446,000             3,363,000
  Administrative expenses                                          2,431,000            2,520,000             2,194,000
  Operations and maintenance (Note F)                              7,201,000            6,828,000             6,391,000
  Other operating expenses                                         2,545,000            2,432,000             2,358,000    
  Depreciation and amortization (Note A)                          10,145,000            9,621,000             9,119,000
                                                               -------------         ------------         -------------
                                                                  30,481,000           29,280,000            27,630,000
                                                               -------------         ------------         -------------

    INCOME FROM OPERATIONS                                        17,278,000           17,100,000            16,728,000
                                                               -------------         ------------         -------------

OTHER INCOME (EXPENSES)
  Interest, dividends, and other income                               32,000               63,000                98,000
  Interest expense (Note D)                                      (14,554,000)         (14,608,000)          (14,542,000)
                                                               -------------         ------------         -------------
                                                                 (14,522,000)         (14,545,000)          (14,444,000)
                                                               -------------         ------------         -------------

    INCOME BEFORE EXTRAORDINARY ITEM                               2,756,000            2,555,000             2,284,000
                                                               -------------         ------------         -------------

 Extraordinary item--early extinguishment of debt (Note A)              ----                 ----              (449,000)
                                                               -------------         ------------         -------------

    NET INCOME                                                 $   2,756,000         $  2,555,000         $   1,835,000
                                                               =============         ============         =============

BASIC AND DILUTED EARNINGS PER
  SHARE DATA (Note A):
    Income before extraordinary item                           $        0.33         $       0.30         $        0.27
                                                               =============         ============         =============

    Extraordinary item                                         $        ----         $       ----         $       (0.05)
                                                               =============         ============         =============

    Net income                                                 $        0.33         $       0.30         $        0.22
                                                               =============         ============         ============= 
</TABLE>


                See notes to consolidated financial statements.

                                       25
<PAGE>
 
               SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                                        Accumulated
                                     Common Stock        Additional    Distributions                    Unrealized  
                                 -------------------      Paid-in      in Excess of      Treasury     Gain/(Loss) on
                                   Shares     Amount     Capital       Net Income        Stock          Securities        Total
                                 ---------   -------   ------------   -------------   ------------   ---------------   -----------
<S>                              <C>         <C>       <C>            <C>             <C>               <C>            <C>
Balance at January 1, 1996       8,930,069   $89,000   $127,273,000   $(27,580,000)   $(4,454,000)      $ (5,000)      $95,323,000
Net income for 1996                                                      1,835,000                                       1,835,000
Cash dividends declared and
  paid ($.88 per share)
  (Note G)                                                              (7,425,000)                                     (7,425,000)
Exercise of stock options
  (Note E)                          10,000                   88,000                                                         88,000
Shares issued pursuant to
  Directors' Stock Ownership
  Plan (Note E)                      6,000                   56,000                                                         56,000
Shares issued pursuant to
  Incentive Award Plan                 300                    3,000                                                          3,000
Unrealized gain on securities
  (Note A)                                                                                                 3,000             3,000
Purchase of treasury shares,
  62,800 shares                                                                          (516,000)                        (516,000)
                                 ---------   -------   ------------   -------------   ------------   ---------------   -----------
Balance at December 31, 1996     8,946,369   $89,000   $127,420,000   $(33,170,000)   $(4,970,000)      $ (2,000)      $89,367,000
Net income for 1997                                                      2,555,000                                       2,555,000
Cash dividends declared and
  paid ($.88 per share)
  (Note G)                                                              (7,413,000)                                     (7,413,000)
Exercise of stock options
  (Note E)                           8,750                   75,000                                                         75,000
Shares issued pursuant to
  Directors' Stock Ownership
  Plan (Note E)                      9,000     1,000         90,000                                                         91,000
Shares issued pursuant to
  Incentive Award Plan               2,000                   17,000                                                         17,000
Unrealized gain on securities
  (Note A)                                                                                                11,000            11,000
Purchase of treasury shares,
  17,100 share                                                                           (176,000)                        (176,000)
                                 ---------   -------   ------------   -------------   ------------   ---------------   -----------
Balance at December 31, 1997     8,966,119   $90,000   $127,602,000   $(38,028,000)   $(5,146,000)      $  9,000       $84,527,000
Net income for 1998                                                      2,756,000                                       2,756,000
Cash dividends declared and
  paid ($.88 per share)
  (Note G and H)                                                        (7,330,000)                                     (7,330,000)
Stock Rights Redemption (Note L)                                           (86,000)                                        (86,000)
Shares issued pursuant to
  Directors' Stock Ownership
  Plan (Note E)                      9,000                   98,000                                                         98,000
Shares issued pursuant to
  Incentive Award Plan               4,687                   50,000                                                         50,000
Unrealized gain on securities
  (Note A)                                                                                               (18,000)          (18,000)
Purchase of treasury shares,
  449,000 shares                                                                       (3,780,000)                      (3,780,000)
                                 ---------   -------   ------------   -------------   ------------   ---------------   -----------
Balance at December 31, 1998     8,979,806   $90,000   $127,750,000   $(42,688,000)   $(8,926,000)      $ (9,000)      $76,217,000
                                 =========   =======   ============   =============   ============   ===============   =========== 
</TABLE>


                See notes to consolidated financial statements.

                                       26
<PAGE>
 
               SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
 
 
                                                                             Year Ended December 31
                                                                 ----------------------------------------------
                                                                     1998              1997            1996
                                                                 ------------     ------------     ------------
<S>                                                              <C>              <C>              <C>
OPERATING ACTIVITIES:
  Net income                                                     $  2,756,000     $  2,555,000     $  1,835,000    
  Adjustments to reconcile net income to net cash provided
    by operating activities:
      Depreciation and amortization                                10,145,000        9,621,000        9,119,000
      Extraordinary item--early extinguishment of debt                   ----             ----          449,000
  Changes in operating assets and liabilities:
      (Increase) decrease in accounts receivable and
        accrued revenue                                              (133,000)         332,000           60,000
      (Increase) decrease in prepaid expenses and
        other assets                                                 (962,000)        (196,000)         538,000
      Increase (decrease) in accounts payable and accrued
        expenses                                                      609,000          531,000        1,610,000
      Other, net                                                       95,000          184,000          (28,000)
                                                                 ------------     ------------     ------------
        Net Cash Provided by Operating Activities                  12,510,000       13,027,000       13,583,000
                                                                 ------------     ------------     ------------

INVESTING ACTIVITIES:
  Acquisitions of land                                               (611,000)        (550,000)            ----
  Improvements to real estate investments, net of
    related retainage payable                                     (16,409,000)      (6,286,000)      (7,555,000)
                                                                 ------------     ------------     ------------
        Net Cash Used in Investing Activities                     (17,020,000)      (6,836,000)      (7,555,000)
                                                                 ------------     ------------     ------------

FINANCING ACTIVITIES:
  Proceeds from mortgage notes payable and notes
    payable to banks (Note I)                                      78,345,000       23,000,000       24,649,000
  Principal payments on mortgage notes payable and
    notes payable to banks (Note I)                               (62,255,000)     (20,764,000)     (23,664,000)
  Debt issuance costs and mortgage escrow deposits                   (414,000)        (267,000)          82,000
  Cash dividends and other distributions to
    Shareholders (Note G)                                          (7,414,000)      (7,413,000)      (7,425,000)
  Issuance of shares pursuant to stock option and award plans          50,000           92,000           90,000
  Minority interest in real estate partnerships (Note K)                 ----           (3,000)         (50,000)
  Purchases of treasury shares                                     (3,780,000)        (176,000)        (516,000)
                                                                 ------------     ------------     ------------
        Net Cash Provided by (Used in) Financing Activities         4,532,000       (5,531,000)      (6,834,000)
                                                                 ------------     ------------     ------------

  Net increase (decrease) in cash and cash equivalents                 22,000          660,000         (806,000)
  Cash and cash equivalents at beginning of year                    1,128,000          468,000        1,274,000
                                                                 ------------     ------------     ------------
        CASH AND CASH EQUIVALENTS AT END
          OF YEAR                                                $  1,150,000     $  1,128,000     $    468,000
                                                                 ============     ============     ============ 
</TABLE>

                See notes to consolidated financial statements.

                                       27
<PAGE>
 
               SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       December 31, 1998, 1997, and 1996


NOTE A:  SIGNIFICANT ACCOUNTING POLICIES

     Principles of Consolidation.  The consolidated financial statements include
the accounts of Sizeler Property Investors, Inc., and its majority-owned and
controlled subsidiaries and partnerships (the "Company").  All significant
intercompany transactions and balances have been eliminated in consolidation.
The Company's investment in a real estate partnership at December 31, 1998 and
1997, represents a 50% interest in a partnership which owns a community shopping
center and is accounted for by the equity method.

     Cash and Cash Equivalents.  Cash equivalents represent investments that are
highly liquid and have a maturity of three months or less at the time the
investment is made.

     Real Estate Investments.  Real estate investments are recorded at cost.
Depreciation of buildings and improvements is provided by the straight-line
method over the estimated useful lives of the assets, ranging from ten to forty
years.  Betterments and major replacements are capitalized, and the replaced
asset and accumulated depreciation are removed from the accounts.  Tenant
improvement costs are depreciated using the straight-line method over the term
of the related leases.  Maintenance and repairs are expensed in the period
incurred.

     In accordance with Statement of Financial Accounting Standards (SFAS)
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of, the Company reviews real estate (and other long-lived
assets) and certain identifiable intangibles to be held and used, whenever
events or changes in circumstances indicate that the carrying amounts of an
asset may not be recoverable. If it is indicated that the carrying amount may
not be recoverable from future cash flows generated by the asset, an impairment
loss will be recognized. No real estate is held for sale at December 31, 1998.

     Securities.  In accordance with SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, investment securities have been
classified as available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of taxes, reported as a separate component of
shareholders' equity.

     Deferred Charges.  Debt issuance costs in connection with issuance of the
Company's 8% Convertible Subordinated Debentures (the "Debentures") and other
financings are included in prepaid expense and other assets and are being
amortized over the term of the related obligations.  Unamortized costs are
charged to expense upon prepayment of the obligation.  Unamortized costs related
to the Debentures are offset against shareholders' equity upon conversion by
debenture-holders.  Costs incurred in connection with the execution of leases
are included in prepaid expenses and other assets, and are amortized over the
term of the respective leases.  Unamortized costs are charged to expense upon
cancellation of leases prior to the  expiration of lease terms.

     Rental Income.  Rental income includes rents from shopping center and
apartment properties.  Minimum

                                       28
<PAGE>
 
rents from shopping center leases are accounted for ratably over the term of the
lease. Percentage rents are recognized based upon tenant sales that exceed
specific levels. Tenant reimbursements are recognized as the applicable services
are rendered or expenses are incurred.

     On May 21, 1998, the Emerging Issues Task Force (EITF) of the Financial
Accounting Standards Board reached a consensus decision on Issue No. 98-9,
Accounting for Contingent Rent in Interim Financial Periods, which provides that
recognition of contingent (percentage) rental income in interim periods must be
deferred until the specified target (breakpoint) that triggers the percentage
rental income is achieved.  Consistent with industry practice, the Company has
historically recognized percentage rental income based on a percentage of
tenants' sales ratably over the course of the year.  The Company has adopted
Issue No. 98-9 and has deferred the recognition of percentage rental income
until the date that the tenants' sales exceed the breakpoint set forth in the
lease agreements.  However, on November 19, 1998, the EITF withdrew its May 21,
1998, consensus on Issue No. 98-9.  This change in thinking by the EITF was met
with strong objections from the Securities and Exchange Commission (SEC) on the
basis that income should not be accrued if it can be reversed.  The SEC is
expected to pursue this matter further in 1999 and state its position through a
release of the SEC's Staff Accounting Bulletin (SAB) on revenue recognition.
Based on the strong objection taken by the SEC to the withdrawal of Issue
No. 98-9 by the EITF, the Company has elected to continue accounting for
percentage rental income as prescribed by Issue No. 98-9 until the SEC renders
its final position on the recognition of percentage rents.

     Federal Income Taxes.  The Company has elected to be taxed as a real estate
investment trust (REIT) under the Internal Revenue Code and intends to maintain
its qualification as a REIT in the future.  As a REIT, the Company is allowed to
reduce taxable income by all or a portion of its distribution to shareholders.
As distributions have exceeded taxable income, no provision for federal or state
income taxes has been recorded.

     A real estate investment trust is required to distribute to shareholders at
least 95% of its ordinary taxable income and meet certain income source and
investment restriction requirements.  Taxable income differs from net income for
financial reporting purposes principally because of differences in the amount
and timing of depreciation of the properties.  At December 31, 1998, the income
tax basis, net of accumulated tax depreciation, of the Company's real estate
properties was approximately $260 million.

     Comprehensive Income.  Effective January 1, 1998, the Company adopted SFAS
No. 130, Reporting Comprehensive Income.  This Statement requires the reporting
of comprehensive income and its components, the purpose of which is to report a
measure of all changes in equity of an enterprise that result from recognized
transactions and other economic events of the period other than transactions
with owners in their capacity as owners.  The term comprehensive income is used
to describe the total of all components of comprehensive income, including net
income.  Other comprehensive income refers to revenues, expenses, gains, and
losses that under generally accepted accounting principles (GAAP) are included
in comprehensive income, but excluded from net income.  Comprehensive income for
the years ended December 31, 1998 and 1997, was $2,738,000 and $2,566,000,
respectively.  Other comprehensive income was composed of unrealized holding
gains or losses on marketable securities.

     Earnings Per Share.   The Company adopted SFAS No. 128, Earnings Per Share,
which superseded Accounting Principles Board (APB) Opinion No. 15, Earnings Per
Share, and replaced the presentation of "primary EPS", which the Company has
historically presented, with a presentation of "basic EPS", and replaced the
presentation of "fully diluted EPS", which the Company has not been required to
present due to the immaterial difference from primary EPS, with "diluted EPS."
Basic EPS, unlike primary EPS, 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 EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the Company.  As required by SFAS
No. 128, the Company adopted the provisions of the new standard in 1997, and
accordingly, restated 1996.

     A reconciliation of the basic EPS computation to the diluted EPS
computation considers the effect of dilution on both net income and shares of
common stock.  There is no effect on net income in the calculation of diluted
EPS for the years ended December 31, 1998, 1997, and 1996.  The effect of
dilution on shares of common stock for each

                                       29
<PAGE>
 
of those years is as follows:


<TABLE>
<CAPTION>
                                             1998                        1997                        1996
                                    -----------------------     -----------------------     -----------------------
                                      Shares      Per Share       Shares      Per Share       Shares      Per Share
                                    ---------     ---------     ---------     ---------     ---------     ---------
<S>                                 <C>             <C>         <C>             <C>         <C>             <C>
Basic EPS                           8,330,835       $0.33       8,423,277       $0.30       8,432,676       $0.22
Effect of dilutive securities:
    Stock options                      17,634                      25,508                       1,381
                                    ---------       -----       ---------       -----       ---------       -----
Diluted EPS                         8,348,469       $0.33       8,448,785       $0.30       8,434,057       $0.22
                                    =========       =====       =========       =====       =========       =====
</TABLE>

     For the years ended December 31, 1998, 1997, and 1996, options to purchase
316,940, 147,000, and 209,500 shares of common stock, respectively, were
outstanding but excluded in the computation of diluted EPS because the options'
exercise prices were greater than the average market prices of common shares.
The Company's outstanding Debentures are also excluded from the computation for
1998, 1997, and 1996 due to their antidilutive effect.

     Common Stock and Preferred Stock.  In March 1998, the Board of Directors
approved an increase in the Company's authorized Preferred Stock, from 3 million
shares to 6 million shares, and its authorized Common Stock, from 15 million to
30 million shares, pursuant to shareholder approval given at the Company's 1994
Annual Meeting of Shareholders, which gave the Board of Directors authority to
effect the said increases in the Company's authorized shares for a period of
five years.  The Company has one class of Common Stock, and the additional
authorized shares have the same voting rights and other attributes as the
existing outstanding shares of Common Stock.  The Board of Directors is
authorized to provide for the issuance of the Preferred Stock, and to fix the
designations, powers, preferences and rights of the shares of each series, and
the qualifications, limitations, or restrictions thereof.  The Company does not
have any outstanding shares of Preferred Stock.

     Stock Option Plans.  Prior to January 1, 1996, the Company accounted for
its stock option plan in accordance with the provisions of APB Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations.  As such,
compensation expense was recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise price.  On January 1,
1996, the Company adopted SFAS No. 123, Accounting for Stock-Based Compensation,
which permits entities to recognize, as expense over the vesting period, the
fair value of all stock-based awards on the date of grant.  Alternatively, SFAS
No. 123 also allows entities to continue to apply the provisions of APB Opinion
No. 25 and provide pro forma net income and pro forma earnings per share
disclosures for employee stock option grants made in 1995 and future years as if
the fair-value-based method defined in SFAS No. 123 had been applied.  The
Company has elected to continue to apply the provisions of APB Opinion No. 25
and provide the pro forma disclosure provisions of SFAS No. 123.

     Extraordinary Item.  Net income for 1996 includes an extraordinary non-cash
charge of $449,000 resulting from deferred financing costs expensed in
connection with the refinancing of approximately $20 million of mortgage debt.

     Use of Estimates.  The preparation of the 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 at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period.  Actual amounts could differ
from these estimates.

     Reclassifications.  Certain reclassifications have been made in the 1997
and 1996 Consolidated Financial Statements to conform to the 1998 financial
statement presentation.


NOTE B:  REAL ESTATE INVESTMENTS

     Certain real estate with a book value of approximately $131,220,000 at
December 31, 1998, is pledged as collateral for notes payable described in
Note D. In addition, certain notes are secured by assignments of rents and
leases on such real estate. Certain real estate is located on land subject to
long-term ground leases expiring at dates through 2046.

                                       30
<PAGE>
 
     In 1998, the Company incurred total development costs of $12.2 million on
the development of an apartment property and expects the development to be
completed in early 1999.  At December 31, 1998, the Company had a total
investment in the development of $14.0 million, of which construction in
progress totalled $7.9 million.  Also in 1998, the Company acquired two parcels
of developable land, one parcel adjacent to a retail center and the other parcel
adjacent to an apartment property, totalling approximately $611,000.

     In 1997, the Company acquired land for approximately $550,000 for the
purpose of developing new apartment units.  At December 31, 1997, the Company
had total investment and total construction in progress in the apartment
development of $1.8 million.

     There were no acquisitions of real estate properties made by the Company in
1996.


NOTE C:  REAL ESTATE OPERATIONS

     The Company's principal business is investing in shopping centers and
apartment communities, located in the southern United States.  Tenants in the
Company's shopping centers include national, regional, and local retailers. Most
of the Company's shopping center leases provide for the payment of fixed monthly
rentals (minimum rents), reimbursement of common area maintenance, utilities,
taxes and insurance expenses, and payment of additional rents based upon a
percentage of retail sales in excess of stated minimums.  The non-cancellable
portions of such lease terms range from one to forty years.

     Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash equivalents
with high credit-quality financial institutions.  With respect to accounts
receivable and accrued revenue, the Company believes that such items do not
represent significant concentrations of credit risk due to diversity in the
Company's tenant base and its geographical dispersion throughout the southern
United States.

     Rents and other income in the Company's Consolidated Statements of Income
include reimbursed expenses, comprised of the following items:


                                               Year Ended December 31
                                        ------------------------------------
                                           1998         1997         1996
                                        ----------   ----------   ----------
     Common area maintenance            $3,124,000   $2,873,000   $2,802,000
     Real estate tax and insurance       2,083,000    1,956,000    1,796,000
     Utility charges                     1,115,000    1,058,000      949,000
     Other tenant income                 1,072,000      923,000      877,000
     Other income                          470,000      443,000      460,000
                                        ----------   ----------   ----------
                                        $7,864,000   $7,253,000   $6,884,000
                                        ==========   ==========   ==========
 

     The Company's shopping centers are leased to tenants under operating
leases.  The future minimum rents on non-cancellable operating leases at
December 31, 1998, are as follows:

 
              Year                             Amount     
              ----                         -------------  
              1999                         $  17,846,000  
              2000                            15,886,000  
              2001                            14,660,000  
              2002                            13,252,000  
              2003                            11,799,000  
              Thereafter                      49,122,000  
                                           -------------   
                                           $ 122,565,000                   
                                           ============= 

     The above amounts do not include rental income that is based on tenants'
sales or reimbursed expenses.

                                       31
<PAGE>
 
     Reportable Operating Segments.  Effective January 1, 1998, the Company
adopted SFAS No. 131, Disclosure About Segments of an Enterprise and Related
Information.  This Statement establishes standards for the way that public
business enterprises report information about operating segments in financial
statements.  It also establishes standards for related disclosures about
products and services, geographic areas, and major customers.

     The Company is engaged in two operating segments, the ownership and rental
of retail shopping center properties and apartment properties.  These reportable
segments offer different products or services and are managed separately because
each requires different operating strategies and management expertise.  There
are no intersegment sales or transfers.  The accounting policies of the segments
are the same as those described in Note A, Significant Accounting Policies.

     The Company assesses and measures segment operating results based on a
performance measure referred to as Income from Rental Operations, and is based
on the revenues and expenses associated with the operations of the real estate
properties.  Income from Rental Operations is not a measure of operating results
or cash flows from operating activities as measured by generally accepted
accounting principles, and is not necessarily indicative of cash available to
fund cash needs and should not be considered an alternative to cash flows as a
measure of liquidity.

                                       32
<PAGE>
 
     The operating revenues, operating expenses, income from rental operations,
and real estate investments for each of the reportable segments are summarized
below for the years ended December 31, 1998, 1997, and 1996.

 
 
                                       1998            1997            1996
Operating revenues:               ------------    ------------    ------------
  Retail                          $ 27,416,000    $ 26,522,000    $ 25,344,000
  Apartments                        20,343,000      19,858,000      19,014,000
                                  ------------    ------------    ------------
                                  $ 47,759,000    $ 46,380,000    $ 44,358,000
                                  ============    ============    ============

Operating expenses:
  Retail                          $ 10,921,000    $ 10,525,000    $  9,875,000
  Apartments                         9,415,000       9,134,000       8,636,000
                                  ------------    ------------    ------------
                                    20,336,000      19,659,000      18,511,000
  Depreciation                      10,145,000       9,621,000       9,119,000
                                  ------------    ------------    ------------
                                  $ 30,481,000    $ 29,280,000    $ 27,630,000
                                  ============    ============    ============
 
Income from Rental Operations:
  Retail                          $ 16,495,000    $ 15,997,000    $ 15,469,000
  Apartments                        10,928,000      10,724,000      10,378,000
                                  ------------    ------------    ------------
                                    27,423,000      26,721,000      25,847,000
  Depreciation                     (10,145,000)     (9,621,000)     (9,119,000)
                                  ------------    ------------    ------------
Income from operations              17,278,000      17,100,000      16,728,000
Other Income/(Expenses) (1)        (14,522,000)    (14,545,000)    (14,893,000)
                                  ------------    ------------    ------------

Net Income                        $  2,756,000    $  2,555,000    $  1,835,000
                                  ============    ============    ============ 

Real Estate Investments: (2)
  Retail                          $199,880,000    $197,770,000    $195,188,000
  Apartments                       129,510,000     113,446,000     109,236,000
                                  ------------    ------------    ------------
                                  $329,390,000    $311,216,000    $304,424,000
                                  ============    ============    ============ 


     (1)  Includes interest and dividend income, interest expense, and for the
          year 1996, extraordinary item for early extinguishment of debt.

     (2)  Includes investments in land which the Company can use for future
          development, and an investment in a real estate partnership, which is
          accounted for by the equity method.

                                       33
<PAGE>
 
NOTE D:   NOTES PAYABLE

     The Company's mortgage notes payable at December 31, 1998 and 1997, are as
follows:


<TABLE>
<CAPTION>
                 
                                        Secured by Land,                  Balance           
                                         Buildings, and                 Outstanding at        
                                         Improvements,                   December 31,  
                        Interest       with Book Value on       -----------------------------
Principal Maturity      Rate (c)       December 31, 1998           1998             1997         
------------------      --------       ------------------       ----------       ------------  
<S>                     <C>              <C>                    <C>               <C>          
March 1, 1999 (a)        9.00%           $        (a)           $      ----       $ 1,749,000    
December 1, 1999        10.88%              4,188,000             3,450,000         3,491,000    
May 1, 2008 (b)          6.85%             25,981,000            16,048,000        16,000,000    
June 1, 2008 (b)         6.87%             10,011,000             8,548,000         6,709,000    
May 1, 2008 (b)          6.85%              3,718,000             3,009,000         3,000,000    
May 1, 2008 (b)          6.85%              4,431,000             3,611,000         3,600,000    
May 1, 2008 (b)          6.85%              4,421,000             3,260,000         3,250,000    
May 1, 2008 (b)          6.85%              5,034,000             3,230,000         3,220,000    
May 1, 2008 (b)          6.85%              4,751,000             3,325,000         3,315,000    
May 1, 2008 (b)          6.85%             19,082,000            12,237,000        12,200,000    
May 1, 2008 (b)          6.85%             12,724,000             7,824,000         7,800,000    
September 30, 2001       8.63%              4,206,000             3,151,000         3,281,000    
January 1, 2013          8.05%             32,673,000            22,176,000        23,000,000    
                                         ------------           -----------       -----------    
                                         $131,220,000           $89,869,000       $90,615,000    
                                         ============           ===========       ===========     
</TABLE>
___________________________

(a)  In June 1998, the Company repaid this mortgage debt totalling $1.7 million.

(b)  In April and May 1998, the Company refinanced these mortgage notes payable,
     thereby reducing the fixed rates of interest from an average of 7.85% to an
     average of 6.85%.

(c)  The weighted average interest rate on mortgage debt at December 31, 1998,
     was 7.36%.


     Future principal payments on the Company's mortgage notes payable at
December 31, 1998, are as follows:
 
                    Year                         Amount
                    ----                       -----------
                    1999                       $ 5,148,000
                    2000                         1,831,000
                    2001                         4,662,000
                    2002                         1,949,000
                    2003                         2,102,000
                                               -----------
                                               $15,692,000
                                               =========== 
 

     In May 1993, the Company completed an offering of $65 million of 8%
Convertible Subordinated Debentures, due 2003 (less $2.6 million of underwriting
costs).  The debentures are convertible into common stock of the Company, based
on $13.00 per share, at any time prior to maturity, unless previously redeemed.
No debentures were converted in 1998, 1997, or 1996.

     The Company has commitments for lines of credit from commercial banks
totalling $100 million, of which $49.2 million was available at December 31,
1998.  The weighted average interest rate was 7.6% and 7.8% for the years ended
December 31, 1998 and 1997, respectively.  The terms of the agreements for the
bank lines of credit are renewable on an annualized basis, and generally provide
for the right of the banks to terminate such commitments and to accelerate all
outstanding advances upon the occurrence of any material adverse change in the
financial

                                       34
<PAGE>
 
condition or operation of the Company. In addition, the bank credit agreements
also contain restrictive covenants that impose maximum borrowing levels by the
Company through the maintenance of prescribed debt-to-equity or other financial
ratios. The Company was in compliance with the bank debt covenant agreements at
December 31, 1998.


NOTE E:  STOCK OPTION AND OWNERSHIP PLANS

     On February 1, 1996, the Company adopted the 1996 Stock Option Plan (the
"1996 Plan").  Under the 1996 Plan, 10-year options may be granted to key
employees, and are annually granted to directors at the fair market value of the
Company's common stock on the date of grant.  A total of 350,000 shares of
common stock of the Company are available for grant, of which a maximum of
125,000 shares may be issued to non-employee directors upon the exercise of non-
qualified stock options granted.  Options granted under the 1996 Plan vest, for
key employees, 50% after one year, and the remaining 50% after two years, from
the grant date; for directors, 100% vests six months from the grant date.  No
options will be granted under the 1996 Plan after February 1, 2006.  A total of
58,500 options were exercisable under the 1996 Plan at December 31, 1998.

     The Company had a 1986 Stock Option Plan (the "1986 Plan"), which
terminated in October 1996.  Under the 1986 Plan, 10-year options were granted
to key employees and were annually granted to directors at the fair market value
of the Company's common stock at the date of grant.   At December 31, 1998,
there were a total of 267,250 shares of common stock reserved for issuance upon
exercise of options granted under the 1986 Plan.  Options granted under the 1986
Plan vest, for key employees, 50% after one year, and the remaining 50% after
two years, from the grant date; for directors, 100% vests six months from the
grant date.

     The Company applies APB Opinion No. 25 in accounting for its Plans, and
accordingly, no compensation cost has been recognized for its stock options in
the financial statements.  Had the Company determined compensation

cost based on the fair value at the grant date for its stock options under SFAS
No. 123, the Company's net income would have been reduced to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
 
                                       As Reported                             Pro Forma Results            
                          ------------------------------------        ------------------------------------ 
                             1998         1997         1996              1998         1997         1996    
                          ----------   ----------   ----------        ----------   ----------   ---------- 
<S>                       <C>          <C>          <C>               <C>          <C>           <C>       
                                                                                                           
Net income                $2,756,000   $2,555,000   $1,835,000        $2,671,000   $2,501,000    $1,821,000
                          ==========   ==========   ==========        ==========   ==========    ==========
                                                                                                           
Net income per share      $     0.33   $     0.30   $     0.22        $     0.32   $     0.30    $     0.22
                          ==========   ==========   ==========        ==========   ==========    ========== 
</TABLE>

     Pro forma net income reflects only options granted in 1998, 1997 and 1996.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net income amounts
presented above because compensation cost is reflected over the options' vesting
period and compensation cost for options granted prior to January 1, 1995 is not
considered.

     For grants in 1998, 1997 and 1996, the fair value of each option grant is
estimated on the date of grant using an option pricing model based on the
following assumptions:
<TABLE>
<CAPTION>
 
                                      1998        1997        1996
                                    ---------   ---------   ---------
       <S>                          <C>         <C>         <C>
       Risk free interest rate           5.8%        6.8%        6.6%
       Expected life                10 years    10 years    10 years
       Expected volatility              23.7%       26.6%       29.5%
       Expected dividend                 8.0%        8.3%       10.5%
 
</TABLE>

                                       35
<PAGE>
 
     The following summary is on the Company's 1996 and 1986 Plans combined for
the years ended December 31, 1998, 1997, and 1996:
<TABLE>
<CAPTION>
 
                                             1998                 1997               1996
                                      ------------------    -----------------   ----------------
                                                Weighted             Weighted            Weighted
                                                 Average              Average             Average
                                                Exercise             Exercise            Exercise
                                       Shares     Price     Shares     Price     Shares    Price
                                      ---------   ------   ---------   ------   --------   ------
<S>                                   <C>         <C>      <C>         <C>      <C>        <C>
Outstanding at beginning of year       368,750    $11.18    327,500    $11.44   309,500    $12.83
Granted                                107,000     11.00     60,000     10.25   115,500      8.67
Exercised                                    0      0.00     (8,750)     8.63   (10,000)     8.75
Expired                                (25,000)    16.75    (10,000)    16.38   (87,500)    13.02
                                       -------    ------    -------    ------   -------    ------
Outstanding at end of year             450,750    $10.83    368,750    $11.18   327,500    $11.44
                                       =======    ======    =======    ======   =======    ======
 
Options exercisable                    325,750    $10.83    260,000    $11.86   205,500    $13.00
                                       =======    ======    =======    ======   =======    ======
 
</TABLE>

     The weighted-average grant date fair value of options granted in 1998,
1997, and 1996, was $11.00, $10.25, and $8.67, respectively.

     The following table summarizes information about the Company's stock option
plans outstanding at December 31, 1998:
<TABLE>
<CAPTION>
 
                                     Options Outstanding                                                Options Exercisable
-------------------------------------------------------------------------------------------   -------------------------------------
                                   Number          Weighted-Average                                Number
Range of                       Outstanding at          Remaining         Weighted-Average      Exercisable at     Weighted  Average
Exercise Prices               December 31, 1998    Contractual Life       Exercise Price      December 31, 1998    Exercise Price
---------------------------   -----------------   -------------------   -------------------   -----------------   -----------------
<S>                           <C>                 <C>                   <C>                   <C>                 <C>
 
$   8.50-$10.19                         161,750              6.5 yrs.              $   9.00             161,750            $   9.00
$  10.20-$11.94                         178,000              7.8 yrs.                 10.79              53,000               10.73
$  11.95-$14.94                         111,000              3.7 yrs.                 13.54             111,000               13.54
                                        -------              --------              --------            --------              ------
                                        450,750              6.3 yrs.              $  10.83             325,750            $  10.83
                                        =======              ========              ========            ========            ========
</TABLE>

     The 1994 Directors' Stock Ownership Plan, effective in January 1994,
provides that directors of the Company, who are not salaried officers of the
Company, are entitled to receive an annual director's fee of 750 shares. The
number of shares entitled was amended to 1,000 shares, effective January 1,
1996, and amended to 1,500 shares, effective January 1, 1997. Alternatively, a
director may elect to be paid a cash substitute, equal to 90% of the value of
the shares for which the director elects the cash substitute, in lieu of all or
part of the annual stock award. Under this Plan, there were 9,000 shares issued
in each year 1998 and 1997, and there were 6,000 shares issued in 1996.

     The Company adopted an Incentive Award Plan, effective January 1, 1994. The
purpose of the Plan is to reward eligible officers of the Company on the basis
of their contribution to the Company, and in particular on the basis of their
contribution to the Company's achievement of planned growth in funds from
operations per share. The Plan is administered by a committee of the Board of
Directors of the Company, composed of those members of the Compensation
Committee. An award under this Plan is payable by the Company one-half in cash
and one-half in shares of common stock of the Company. The Company recognized
compensation costs totalling $101,000 in 1998, $100,000 in 1997, and $39,000 in
1996, which includes the issuance of 5,677, 4,687, and 2,000 shares,
respectively.


NOTE F:  RELATED PARTY TRANSACTIONS

    The Company has a contract with Sizeler Real Estate Management Co., Inc.
(the "Management Company") to manage the Company's real estate properties. A
beneficial minority interest is directly owned in Sizeler Realty Co., Inc.
("Sizeler Realty"), the parent of the Management Company, by an officer of the
Company, and the balance is owned by members of the family of the officer's wife
and residual entities of the estates of her mother and father. The agreement is
renewable annually, subject to the approval of a majority of the unaffiliated
directors of the Company, and subject to the termination rights of the parties.
The management agreement may be terminated for any reason by either party upon
180 days' written notice.

                                       36
<PAGE>
 
   The management fee is based on the Company's gross investment in real estate,
adjusted for year-to-year increases (or decreases) in funds from operations per
share.  The annual management fee, which is calculated based upon .65% of the
Company's gross investment in real estate at the beginning of each year, is paid
ratably on a monthly basis, adjusted for acquisitions or dispositions of
property during a year.  At the end of each year, the management fee for that
year will be adjusted (either upward or downward) by the percentage increase or
decrease in the Company's funds from operations per share, compared to the
previous year.  Accordingly, the management fee paid to the Management Company
for 1998 and 1997 was based upon .697% each year, and for 1996, was based upon
 .688% of the Company's gross investment in real estate due to an increase in
funds from operations per share year over year.  The Management Company also
receives a leasing fee equal to 3% of the total fixed minimum rent payable for
retail properties during the term of a new lease (2.5% on renewal leases).   In
addition to management and leasing fees, the Management Company is reimbursed
for certain administrative expenses of the Company.

   Under the management contract, the Company made cash payments to the
Management Company of $2,752,000, $2,478,000, and $2,448,000 in 1998, 1997, and
1996, respectively.  At December 31, 1998, there were no amounts accrued or
payable, and for 1997, $141,000 was accrued and payable.

   The Company leases approximately 14,000 s.f. at the Westland Shopping Center
to Sizeler Realty.  Under this lease, Sizeler Realty paid annual rent, including
expense reimbursements, of $101,000 in 1998, $99,000 in 1997, and $100,000 in
1996.  The lease provides for two five-year renewal options.

   The Company holds its interest in the Westland Shopping Center pursuant to a
long-term ground lease, expiring on December 31, 2046, with two trusts that own
the land, the respective beneficiaries of which are an officer and director's
wife and her brother.  The two trusts were extinguished upon the last to die of
the parents of the officer and director's wife and her brother, and a residual
entity succeeded to ownership.  The Company was charged $45,000 in 1998, $51,000
in 1997, and $52,000 in 1996.

   In March 1991, the Company purchased a 50% interest in the Southwood Shopping
Center ("Southwood") from Sizeler Realty (LaPalco), Inc. ("LaPalco"), a wholly-
owned subsidiary of Sizeler Realty, for $900,000. Southwood is subject to a
long-term ground lease from an entity in which an officer and director and his
wife and her brother and her brother's wife own interests, expiring on March 31,
2031.  The rent under the ground lease is 50% of cash flow (after debt service
and certain other adjustments) up to a maximum of $225,000, and in the event the
rental payment shall reach $225,000 in any year, it shall remain fixed at
$225,000 for each year thereafter.  No ground rent was payable under the lease
agreement in 1998, 1997, or 1996.  LaPalco is the primary obligor on a mortgage
note payable, guaranteed by Sizeler Realty, which LaPalco is solely obligated to
pay out of its partnership distributions or other sources.  At December 31,
1998, the balance of the mortgage note payable was $1,199,000.  Although the
Company is not an obligor on the mortgage note payable, the partnership's
interest in Southwood is subordinated to the mortgage encumbering the property.

   The Company incurred $37,000 in each year 1998 and 1997, and $41,000 in 1996
for maintenance services provided by an affiliate of the Management Company.

   A director and officer of the Company is a director of Hibernia National Bank
("Hibernia").  At December 31, 1998, $20,000,000 of the Company's $100,000,000
bank lines of credit was provided by Hibernia.  The Company had borrowings under
this line totalling $14,092,000 at December 31, 1998, and $2,948,000 at December
31, 1997.

                                       37
<PAGE>
 
NOTE G:  DIVIDEND DISTRIBUTION

   The dividends paid in 1998, 1997, and 1996 for federal income tax purposes
were as follows:
<TABLE>
<CAPTION>
 
                                                   1998                      1997                     1996 
                                         ------------------------   ------------------------   ------------------
                                                          Per                        Per                     Per
                                           Total         Share        Total         Share        Total      Share
                                         ----------   -----------   ----------   -----------   ----------   -----
<S>                                      <C>          <C>           <C>          <C>           <C>          <C>
Ordinary income                          $5,165,000   $     0.62    $4,549,000    $     0.54   $3,122,000   $0.37
Return of capital                         2,249,000         0.27(a)  2,864,000          0.34    4,303,000    0.51
                                         ----------   ----------    ----------    ----------   ----------   -----
                                         $7,414,000   $     0.89    $7,413,000    $     0.88   $7,425,000   $0.88
                                         ==========   ==========    ==========    ==========   ==========   =====
</TABLE>
     (a) Includes a $0.01 per share distribution for the redemption of stock
         purchase rights in connection with the Company's adoption of a
         replacement shareholder rights plan.

                                       38
<PAGE>
 
NOTE H:  SUBSEQUENT EVENTS

   On March 4, 1999, the Company paid a $.22 per share quarterly dividend, to
shareholders of record as of February 25, 1999.

   In March 1999, the Company increased its committed bank lines of credit by $5
million, bringing its total committed bank lines of credit to $105 million.


NOTE I:  CASH FLOWS

   During 1998, the Company completed mortgage refinancing involving ten of the
Company's apartment properties.  Mortgage debt totalling $59.1 million was
refinanced resulting in new mortgage debt totalling $61.5 million, of which net
proceeds totalling $2.4 million were used to pay-down short-term variable-rate
debt.  The Company was able to achieve a reduction in the average interest rate
paid on the mortgages refinanced by approximately 100 basis points, from an
average rate of approximately 7.8% down to an average rate of approximately
6.8%.  During 1998, the Company also repaid mortgage debt totalling $1.7 million
bearing a fixed rate of interest of 9.0% on a retail community center.

   During 1997, the Company completed mortgage financing on a regional enclosed
mall incurring a mortgage note payable totalling $23,000,000.

   During 1996, the Company refinanced three mortgage notes payable, which
resulted in reductions of the fixed rates of interest from a high of 9.8% and
9.5% to a low of 8.6% and 7.4%, respectively, and extended the maturity dates
ranging from one to five years.

   Cash interest payments made in 1998, 1997, and 1996 totalled $14,562,000,
$14,591,000, and $14,659,000, respectively.


NOTE J:  COMMITMENTS AND CONTINGENCIES

   The Company's officers defer a portion of their current compensation. Total
charges to earnings associated with such deferred compensation were $111,000,
$115,000, and $114,000, in 1998, 1997, and 1996, respectively.

   The Company, from time to time, may be subject to litigation arising from the
conduct of its business.  Management does not believe that any existing
litigation involving the Company will materially affect its financial condition
or future results of operations.


NOTE K:  MINORITY INTEREST IN REAL ESTATE PARTNERSHIP

   The Company, directly or through wholly-owned subsidiaries, owns its
interests in its Louisiana-based properties (with the exception of the Southwood
Shopping Center) through separate partnerships, in which the Company has a 99%
interest and its partner has a 1% interest.  In each case, its partner is a
wholly-owned subsidiary of Sizeler Realty (see Note F).  The Company's
consolidated financial statements include 100% of the assets, liabilities, and
operations of its Louisiana-based properties.  Sizeler Realty's ownership
portion is reflected in the Company's consolidated financial statements as
minority interest.


NOTE L:  SHAREHOLDER RIGHTS PLAN

   On August 6, 1998, the Company's Board of Directors adopted a replacement
shareholder rights plan ("Plan") to supersede a shareholder rights plan which
had been in effect since 1989.  Simultaneously, the board declared a dividend
distribution of one purchase right ("Right") for each share of the Company's
Common Stock

                                       39
<PAGE>
 
outstanding at the close of business August 27, 1998, or subsequently issued.
Each Right entitles the holder to purchase 1/1,000 of a share of a new Series A
Preferred Stock of the Company ("Preferred Stock").

     The Rights become exercisable upon the earlier of (i) the date of the
Company's public announcement that a person or affiliated group has acquired, or
obtained the right to, beneficial ownership of 15% or more of the Company's
Common Stock; (ii) ten business days following the commencement of a tender
offer that would result in a person or affiliated group owning 30% or more of
the Company's Common Stock; or (iii) ten business days after the Company's Board
of Directors determines that a person or affiliated group has become the
beneficial owner of at least 10% of the Company's Common Stock and that
ownership (a) is intended to cause pressure on the Company to take action or
enter into a transaction or transactions intended to provide such persons with
short-term financial gain under circumstances where the best long-term interests
of the Company and its shareholders would not be served, or (b) is causing or is
reasonably likely to cause a material adverse impact on the business or
prospects of the Company (including but not limited to jeopardizing the
Company's status as a real estate investment trust, impairing relationships with
the Company's tenants, customers, lenders, providers of financial and other
services, or regulators or impairing the Company's ability to maintain its
competitive position).

     The exercise price of a Right has been established at $40, subject to
adjustment as provided in the Plan.  Once exercisable, each Right would entitle
the holder to purchase Preferred Stock having a value equal to two times the
value of the Right.  The Rights expire on August 27, 2008.


NOTE M:  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
Disclosure about Fair Value of Financial Instruments.  The estimated fair value
amounts have been determined by the Company using available market information
and appropriate valuation methodologies and are described in the following
paragraphs.

     Fair value estimates are subject to certain inherent limitations.
Estimates of fair value are made at a specific point in time, based on relevant
market information and information about the financial instrument.  The
estimated fair values of financial instruments presented below are not
necessarily indicative of amounts the Company might realize in actual market
transactions.  Estimates of fair value are subjective in nature and involve
uncertainties and matters of significant judgement and, therefore, cannot be
determined with precision.  Changes in assumptions could significantly affect
the estimates.

     The carrying amounts of cash and cash equivalents, accounts receivable and
accrued revenue, accounts payable, accrued expenses and deposits approximate
fair value because of the short maturity of these items.  The carrying amounts
of notes payable outstanding under the Company's lines of credit with commercial
banks approximate fair value because the interest rates on these instruments
change with market interest rates.

     The carrying value of mortgage notes payable is $89.9 million and $90.6
million at December 31, 1998, and 1997, respectively, while the estimated fair
value is $90.3 million and $90.0 million, respectively.   The estimated fair
value is based upon interest rates available to the Company for issuance of
similar debt with similar terms and remaining maturities.  The estimated fair
value of the Company's 8% convertible subordinated debentures, with a carrying
value of $62.9 million at December 31, 1998, and 1997, was $59.1 million and
$60.4 million, respectively, based upon the quoted market prices of the
securities as of the end of the respective years.

                                       40
<PAGE>
 
NOTE N:  QUARTERLY FINANCIAL DATA (UNAUDITED)

     Summarized (unaudited) quarterly financial data for the years ended 1998
and 1997 are as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
 
                                          Three months ended in 1998
                                -----------------------------------------------
                                March 31   June 30   September 30   December 31
                                --------   -------   ------------   -----------
<S>                             <C>        <C>       <C>            <C>
Revenues                         $11,777   $11,834        $11,720       $12,428
Net income                       $   664   $   711        $   680       $   701
Net income per share             $  0.08   $  0.08        $  0.08       $  0.09

                                          Three months ended in 1997
                                ----------------------------------------------- 
                                March 31   June 30   September 30   December 31
                                --------   -------   ------------   -----------
Revenues                         $11,332   $11,486        $11,565       $11,997
Net income                       $   606   $   630        $   620       $   699
Net income per share             $  0.07   $  0.08        $  0.07       $  0.08
</TABLE>

                                       41
<PAGE>
 
                                                                     SCHEDULE II


               SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
                       VALUATION AND QUALIFYING ACCOUNTS
                 Years Ended December 31, 1998, 1997, and 1996


<TABLE>
<CAPTION>
 
 
COLUMN A                                        COLUMN B    COLUMN C     COLUMN D     COLUMN E
--------                                       ----------   ----------   ----------  ----------
                                               Balance at   Additions                  Balance
                                               Beginning    Charged to                 at End 
                                               of Period    Operations   Deductions   of Period
                                               ----------   ----------   ----------  ----------
<S>                                           <C>          <C>         <C>         <C>          
Year ended December 31, 1998
   Allowance for doubtful accounts              $281,000    $248,000     $106,000     $423,000
                                                ========    ========     ========     ======== 
 

Year ended December 31, 1997
   Allowance for doubtful accounts              $204,000    $149,000     $ 72,000     $281,000
                                                ========    ========     ========     ======== 

Year ended December 31, 1996
   Allowance for doubtful accounts              $166,000    $191,000     $153,000     $204,000
                                                ========    ========     ========     ======== 
</TABLE> 

                                       42
<PAGE>
 
                                                                    SCHEDULE III

               SIZELER PROPERTY INVESTORS, INC. AND SUBSIDIARIES
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                               DECEMBER 31, 1998
<TABLE>
<CAPTION>
 
        COLUMN A                  COLUMN B             COLUMN C              COLUMN D                  COLUMN E                 
-----------------------------   -----------   --------------------------   ------------  ----------------------------------------
                                                                              Costs     
                                                                            Capitalized     
                                                                           Subsequent to          Gross Amount at Which
                                                Initial Cost to Company     Acquisition         Carried at Close of Period
                                              --------------------------   -------------  ----------------------------------------
                                                             Buildings &       Net                      Buildings & 
Description                     Encumbrance      Land       Improvements   Improvements      Land      Improvements 
-----------------------------   -----------   -----------   ------------   ------------   ----------   ------------ 
<S>                             <C>           <C>           <C>            <C>            <C>          <C>          
Regional enclosed malls:
 Hammond Square                 $       ---   $ 2,574,000   $ 23,664,000    $ 2,661,000   $2,559,000    $26,340,000
 North Shore Square              22,176,000     4,000,000     30,150,000      4,103,000    4,366,000     33,887,000 
 Southland                              ---     2,408,000     28,289,000     12,064,000    2,945,000     39,816,000 
                                -----------   -----------   ------------    -----------   ----------    ----------- 
                                 22,176,000     8,982,000     82,103,000     18,828,000    9,870,000    100,043,000
                                -----------   -----------   ------------    -----------   ----------    ----------- 
 
Power shopping centers:
 Lantana Plaza                          ---     6,000,000     14,107,000      3,849,000    7,808,000     16,148,000 
 Westward Plaza                         ---     5,676,000     13,506,000      3,406,000    5,677,000     16,911,000 
                                              -----------   ------------    -----------   ----------    ----------- 
                                               11,676,000     27,613,000      7,255,000   13,485,000     33,059,000 
                                              -----------   ------------    -----------   -----------    ----------
 
Community shopping centers:
 Airline Park                           ---       977,000      1,037,000        205,000      977,000      1,242,000 
 Azalea Gardens                         ---       574,000        806,000        509,000      574,000      1,315,000 
 Camelot Plaza                          ---       993,000      2,281,000        568,000    1,126,000      2,716,000 
 Colonial                               ---       554,000        555,000        347,000      559,000        897,000 
 Delchamps Plaza                  3,450,000       713,000      4,381,000        116,000      713,000      4,497,000 
 Rainbow Square                   3,151,000       970,000      4,443,000        142,000      984,000      4,571,000 
 Town & Country                         ---       860,000      3,194,000      1,025,000    1,491,000      3,588,000 
 Weeki Wachee                           ---     2,185,000      4,179,000        667,000    2,819,000      4,212,000 
 Westgate                               ---     1,809,000      2,162,000      1,103,000    1,774,000      3,300,000 
 Westland (e)                           ---           ---      3,068,000      2,087,000          ---      5,155,000 
                                -----------   -----------   ------------    -----------   ----------    ----------- 
                                  6,601,000     9,635,000     26,106,000      6,769,000   11,017,000     31,493,000 
                                -----------   -----------   ------------    -----------   ----------    ----------- 
 
Apartments:
 Bel Air                          3,260,000       500,000      3,674,000      1,148,000      500,000      4,822,000 
 Bryn Mawr                        8,548,000     1,575,000      9,020,000        894,000    1,575,000      9,914,000 
 Colonial Manor                         ---       212,000        771,000        383,000      212,000      1,154,000 
 Garden Lane                      3,611,000       500,000      3,117,000      1,709,000      500,000      4,826,000 
 Georgian                               ---       839,000      2,420,000      1,359,000      839,000      3,779,000 
 Governors Gate (f)                     ---       550,000            ---     13,402,000      550,000     13,402,000 
 Hampton Park                     5,477,000     1,305,000      6,616,000      3,220,000    1,305,000      9,836,000 
 Jamestown                        3,230,000       712,000      4,035,000        919,000      712,000      4,954,000 
 Lafayette Square                12,237,000     2,632,000     14,282,000      6,393,000    2,632,000     20,675,000 
 Lakeview Club                   16,048,000     4,400,000     23,200,000      1,687,000    4,400,000     24,887,000 
 Magnolia Place                         ---       175,000      2,050,000        634,000      175,000      2,684,000 
 Pine Bend                        2,347,000       450,000      3,029,000      1,151,000      753,000      3,877,000 
 Steeplechase                     3,009,000       458,000      3,068,000      1,378,000      594,000      4,310,000 
 Woodcliff                        3,325,000       695,000      4,047,000        901,000      695,000      4,948,000 
                                -----------   -----------   ------------    -----------   ----------    ----------- 
                                 61,092,000    15,003,000     79,329,000     35,178,000   15,442,000    114,068,000
                                -----------   -----------   ------------    -----------   ----------    ----------- 
         TOTAL                  $89,869,000   $45,296,000   $215,151,000    $68,030,000  $49,814,000   $278,663,000
                                ===========   ===========   ============    ===========  ===========   ============ 
 
</TABLE>


<TABLE>
<CAPTION>
 
       COLUMN A                                    COLUMN F           COLUMN G       COLUMN H    COLUMN I
                                -----------      -----------      ----------------   --------   ----------
                                                                                                 Life on 
                                                                                                   which
                                                                                                Depreciation
                                                                                                 in Latest
                                                                                                   Income 
                                                   Accumulated         Date of          Date     Statement is
Description                         Total          Depreciation      Construction     Acquired     Computed
-----------                     --------------    -------------   -----------------   --------   ------------
<S>                              <C>              <C>             <C>                     <C>    <C>    
 Regional enclosed malls:
  Hammond Square                  $ 28,899,000      $8,017,000                 1978       1987   10-40 yrs
  North Shore Square                38,253,000       5,272,000                 1986       1994   10-40 yrs
  Southland                         42,761,000      11,541,000     1970, 1981, 1994       1986   10-40 yrs
                                  ------------      ----------    
                                   109,913,000      24,830,000
                                  ------------      ----------
 
 Power shopping centers:
  Lantana Plaza                     23,956,000       2,152,000                 1992       1993   10-40 yrs
  Westward Plaza                    22,588,000       3,142,000     1961, 1990, 1995       1992   10-40 yrs
                                  ------------      ----------    
                                    46,544,000       5,294,000
                                  ------------      ----------    
 
 Community shopping centers:
  Airline Park                       2,219,000         377,000                 1973       1987   10-40 yrs
  Azalea Gardens                     1,889,000         434,000                 1950       1987   10-40 yrs
  Camelot Plaza                      3,842,000         466,000                 1981       1992   10-40 yrs
  Colonial                           1,456,000         305,000                 1967       1987   10-40 yrs
  Delchamps Plaza                    5,210,000       1,022,000                 1989       1991   10-40 yrs
  Rainbow Square                     5,555,000       1,349,000                 1986       1988   10-40 yrs
  Town & Country                     5,079,000         431,000                 1989       1993   10-40 yrs
  Weeki Wachee                       7,031,000       1,299,000                 1987       1988   10-40 yrs
  Westgate                           5,074,000       1,066,000                 1964       1987   10-40 yrs
  Westland (e)                       5,155,000       1,609,000                 1966       1987   10-40 yrs
                                  ------------      ----------    
                                    42,510,000       8,358,000
                                  ------------      ----------    
 
 Apartments:
  Bel Air                            5,322,000         901,000           1968, 1974       1992   10-40 yrs
  Bryn Mawr                         11,489,000       1,478,000                 1991       1993   10-40 yrs
  Colonial Manor                     1,366,000         381,000                 1967       1987   10-40 yrs
  Garden Lane                        5,326,000         895,000           1966, 1971       1992   10-40 yrs
  Georgian                           4,618,000         821,000           1951, 1980       1992   10-40 yrs
  Governors Gate (f)                13,952,000          64,000                  ---        ---   10-40 yrs
  Hampton Park                      11,141,000       1,911,000                 1977       1993   10-40 yrs
  Jamestown                          5,666,000         631,000                 1972       1995   10-40 yrs
  Lafayette Square                  23,307,000       4,051,000          1969 - 1972       1993   10-40 yrs
  Lakeview Club                     29,287,000       3,305,000                 1992       1994   10-40 yrs
  Magnolia Place                     2,859,000         633,000                 1984       1991   10-40 yrs
  Pine Bend                          4,630,000         675,000                 1979       1992   10-40 yrs
  Steeplechase                       4,904,000         844,000                 1982       1992   10-40 yrs
  Woodcliff                          5,643,000         892,000                 1977       1993   10-40 yrs
                                  ------------     -----------    
                                   129,510,000      17,482,000
                                  ------------     -----------    
         TOTAL                    $328,477,000     $55,964,000
                                  ============     ===========    


Note:          This schedule does not include the Company's 50% interest in a
real estate partnership.
</TABLE> 

                                       43
<PAGE>
 
     SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)


Note (a)  Changes in real estate owned were as follows:
<TABLE>
<CAPTION>
 
                                                1998            1997            1996            
                                            -------------   -------------   -------------       
          <S>                               <C>             <C>             <C>                 
          Balance at beginning of year       $310,312,000    $303,476,000    $295,921,000       
          Additions during period:                                                              
              Investments in land                 611,000         550,000            ----       
              Improvements                     17,554,000       6,286,000       7,555,000       
                                             ------------    ------------    ------------       
          Balance at end of year             $328,477,000    $310,312,000    $303,476,000       
                                             ============    ============    ============       
 
</TABLE>
Note (b)  Changes in accumulated depreciation of real estate assets owned were
          as follows:
<TABLE>
<CAPTION>
 
                                                         1998          1997          1996    
                                                      -----------   -----------   ----------- 
          <S>                                         <C>           <C>           <C>        
          Balance at beginning of year                $46,454,000   $37,518,000   $29,041,000
          Additions during period:                                                           
              Depreciation on real estate assets        9,510,000     8,936,000     8,477,000
                                                      -----------   -----------   -----------
          Balance at end of year                      $55,964,000   $46,454,000   $37,518,000
                                                      ===========   ===========   =========== 
 
</TABLE>
Note (c)  The income tax basis of real estate, net of accumulated tax
          depreciation, is approximately $259,908,000 at December 31, 1998.


Note (d)  Depreciation is provided by the straight-line method over the
          estimated useful lives, which are as follows:

          Buildings and improvements             10 - 40 years
          Parking lots                           20 years
          Tenant improvements                    Lease term


Note (e)  The Company holds its interest in the Westland Shopping Center under a
          long-term ground lease.


Note (f)  The Company acquired land in 1997 for the development of a 240-unit
          luxury apartment community. Construction commenced in early 1998, and
          the Company expects the development to be completed in early 1999.

                                       44
<PAGE>
 
                                 FORM 10-K EXHIBITS
<TABLE>
<CAPTION>
 
<S>                        <C>                                              <C> 
3.1A      Restated Certificate of Incorporation, as amended                 Incorporated by Reference (1)
3.1B      Amendment No. 1 to Restated Certificate of Incorporation,         Incorporated by Reference (6)
            as amended
3.1C      Amendment No. 2 to Restated Certificate of Incorporation,         Incorporated by Reference (11)
            as amended
3.2       Restated By-Laws as amended through March 1, 1999                 Filed herewith
4.0A      Form of Certificate for Common Stock, $.01 par value              Incorporated by Reference (3)   
4.1A      Indenture for the Registrant's 8% Convertible                     Incorporated by Reference (12)
            Subordinated Debentures, due 2003                                                                
4.2A      Debenture for the Registrant's 8% Convertible                     Incorporated by Reference (12)  
            Subordinated Debentures, due 2003                                                                
10.1A     Management Agreement                                              Incorporated by Reference (1)   
10.1B     Amendment No. 1 to Management Agreement                           Incorporated by Reference (3)   
10.1C     Amendment No. 2 to Management Agreement                           Incorporated by Reference (4)   
10.1D     Amendment No. 3 to Management Agreement                           Incorporated by Reference (9)   
10.1E     Amendment No. 5 to Management Agreement                           Incorporated by Reference (11)  
10.1F     Amendment No. 4 to Management Agreement                           Incorporated by Reference (15)  
10.1G     Amendment No. 6 to Management Agreement                           Incorporated by Reference (15)  
10.1H     Amendment No. 7 to Management Agreement                           Incorporated by Reference (15)  
10.2      Form of Indemnification Agreement (which the Company              Incorporated by Reference (1)   
            has entered into with each officer and director)                                                 
10.3      Form of Right of First Refusal which has been entered             Incorporated by Reference (2)   
            into by the Company and each of Sidney W. Lassen                                                 
            and Sizeler Realty Co., Inc.                                                                     
10.4      The Company's 1986 Stock Option Plan, as amended                  Incorporated by Reference (9)   
            through January 25, 1991*                                                                        
10.5      Form of Deferred Compensation Agreement (the                      Incorporated by Reference (10)  
            Company has such an agreement with Sidney W.                                                     
            Lassen)*                                                                                         
10.6      The Company's 1989 Directors Stock Option Plan                    Incorporated by Reference (5)   
10.7      Sizeler Property Investors, Inc. Incentive Award Plan*            Incorporated by Reference (13)  
10.8      First Amendment to the Sizeler Property Investors, Inc.           Incorporated by Reference (13)  
            Incentive Award Plan*                                                                            
10.9      Sizeler Property Investors, Inc. 1994 Directors' Stock            Incorporated by Reference (16)  
            Ownership Plan, as amended*                                                                      
10.10     Agreement between the Company and Sidney W. Lassen*               Incorporated by Reference (13)  
10.11     Agreement between the Company and Thomas A.                                                        
            Masilla, Jr.*                                                   Incorporated by Reference (14)  
10.12     Non-Elective Deferred Compensation Agreement                      Incorporated by Reference (14)  
            between Company and Thomas A. Masilla, Jr.                                                       
            (The Company also has a Non-Elective Deferred                                                    
            Compensation Agreement with Sidney W. Lassen,                                                    
            which is identical to Mr. Masilla's Agreement).*                                                 
10.13     The Company's 1996 Stock Option Plan, as amended                  Incorporated by Reference (16)  
19.1      Shareholder Rights Agreement dated as of                          Incorporated by Reference (7)   
            August 6, 1998                                                                                   
19.2      Amendment No. 1 to Shareholder Rights Agreement                   Filed herewith                  
21        List of Subsidiaries                                              Filed herewith                  
23.1      Consent of KPMG LLP                                               Filed herewith                   
27        Financial Data Schedule                                           Filed herewith    
</TABLE>
______________________

                                       45
<PAGE>
 
(1)  Incorporated by reference to the exhibits filed on November 5, 1986, with
     the Company's original registration statement on Form S-11 (No. 33-9973).
(2)  Incorporated by reference to the exhibits filed on November 24, 1986, with
     Amendment No. 1 to the Company's registration statement on Form S-11.
(3)  Incorporated by reference to the exhibits filed on January 14, 1987, with
     Amendment No. 3 to the Company's registration statement on Form S-11.
(4)  Incorporated by reference to the exhibits filed on February 6, 1987, with
     Post-Effective Amendment No. 1 to the Company's registration statement on
     Form S-11.
(5)  Incorporated by reference to the Exhibit A to the Company's Proxy
     Statement, dated March 23, 1989.
(6)  Incorporated  by reference  to the exhibits to the  Company's  Form 10-K
     for the year ended December 31, 1988.
(7)  Incorporated by reference to the exhibit to the Company's Form 8-A, filed
     on August 26, 1998.
(8)  Incorporated by reference to the Exhibit A to the Company's Proxy
     Statement, dated April 5, 1991.
(9)  Incorporated by reference to the exhibits filed with the Company's
     Form 10-K for the year ended December 31, 1990.
(10) Incorporated by reference to the exhibits filed with the Company's
     Form 10-K for the year ended December 31, 1991.
(11) Incorporated by reference to the exhibits filed with the Company's
     Form 10-K for the year ended December 31, 1992.
(12) Incorporated by reference to the exhibits filed with the Company's
     Form 8-K, dated May 26, 1993.
(13) Incorporated by reference to the exhibits filed on March 7, 1994, with the
     Company's registration statement on Form S-3 (No. 33-76134).
(14) Incorporated by reference to the exhibits filed with the Company's
     Quarterly Report on Form 10-Q for the quarter ended June 30, 1995.
(15) Incorporated by reference to the Exhibits filed with the Company's Annual
     Report on Form 10-K for the year ended December 31, 1995.
(16) Incorporated by reference to the exhibits to the Company's definitive proxy
     material for its 1997 Annual Meeting of Stockholders.

*    Management compensation plan agreements.

                                       46
<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 of the undersigned, thereunto duly authorized.

                                  SIZELER PROPERTY INVESTORS, INC.


                                  By:         /s/   Sidney W. Lassen
                                      -----------------------------------
                                               Sidney W. Lassen
                                            Chairman of the Board
                                         (Chief Executive Officer)

Date:  March 24, 1999


     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 and in the capacities and on the dates indicated.


       Signature                         Title                        Date
-------------------------------  ------------------------       ----------------
 
By: /s/ SIDNEY W. LASSEN         Chairman of the Board           March 24, 1999
    --------------------------   (Chief Executive Officer)
        Sidney W. Lassen        
 
By: /s/ THOMAS A. MASILLA, JR.   Vice Chairman, President and    March 24, 1999
    --------------------------   Director (Principal Operating
        Thomas A. Masilla, Jr.   and Chief Financial Officer)
 
By: /s/ DAVID A. O'FLYNN, JR.    Controller/Secretary            March 24, 1999
    --------------------------   (Principal Accounting Officer)
        David A. O'Flynn, Jr.        
 
By: /s/ J. TERRELL BROWN         Director                        March 24, 1999
    --------------------------
        J. Terrell Brown
 
By: /s/ FRANCIS L. FRAENKEL      Director                        March 24, 1999
    --------------------------
        Francis L. Fraenkel
 
By: /s/ HAROLD B. JUDELL         Director                        March 24, 1999
    --------------------------
        Harold B. Judell
 
By: /s/ JAMES W. McFARLAND       Director                        March 24, 1999
    --------------------------
        James W. McFarland
 
By: /s/ RICHARD L. PEARLSTONE    Director                        March 24, 1999
    --------------------------
        Richard L. Pearlstone
 
By: /s/ THEODORE H. STRAUSS      Director                        March 24, 1999
    --------------------------
        Theodore H. Strauss


                                       47