UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q



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


      For the quarterly period ended            March 31, 1998
                                     -------------------------------------------


                                       OR

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

     For the transition period from ______________ to_____________
     Commission file number  0-13356
                           ---------
     


                        MCNEIL REAL ESTATE FUND XXI, L.P.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)




         California                             33-0030615
--------------------------------------------------------------------------------
(State or other jurisdiction of                (I.R.S. Employer
incorporation or organization)                  Identification No.)




             13760 Noel Road, Suite 600, LB70, Dallas, Texas, 75240
--------------------------------------------------------------------------------
               (Address of principal executive offices) (Zip code)



Registrant's telephone number, including area code       (972) 448-5800
                                                  ------------------------------


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 and (2) has been  subject to such  filing
requirements for the past 90 days. Yes X No___

<PAGE>
                          PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                        MCNEIL REAL ESTATE FUND XXI, L.P.

                                 BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                           March 31,         December 31,
                                                                             1998                1997
                                                                       --------------      ---------------

ASSETS
------

Real estate investments:
<S>                                                                    <C>                  <C>           
   Land.....................................................           $     3,192,923      $    3,192,923
   Buildings and improvements...............................                30,089,877          30,048,514
                                                                        --------------       -------------
                                                                            33,282,800          33,241,437
   Less:  Accumulated depreciation and amortization.........               (16,565,029)        (16,177,771)
                                                                        --------------       -------------
                                                                            16,717,771          17,063,666

Asset held for sale.........................................                 2,795,988           2,795,988

Cash and cash equivalents...................................                 1,856,155           1,817,585
Cash segregated for security deposits.......................                   191,911             176,258
Accounts receivable.........................................                   229,888             229,435
Escrow deposits.............................................                   466,862             558,752
Deferred borrowing costs, net of accumulated amortiz-
   ation of $233,696 and $218,067 at March 31, 1998
   and December 31, 1997, respectively......................                   352,705             368,334
Prepaid expenses and other assets...........................                    59,585              53,944
                                                                        --------------       -------------
                                                                       $    22,670,865      $   23,063,962
                                                                        ==============       =============

LIABILITIES AND PARTNERS' DEFICIT
---------------------------------

Mortgage notes payable, net.................................           $    18,472,746      $   18,534,503
Mortgage notes payable - affiliate..........................                 3,725,986           3,730,076
Accounts payable and accrued expenses.......................                   354,720             398,815
Accrued property taxes......................................                   317,773             447,269
Payable to affiliates.......................................                 5,036,561           4,862,973
Advances from affiliates....................................                   809,758             794,981
Security deposits and deferred rental revenue...............                   190,556             194,927
                                                                        --------------       -------------
                                                                            28,908,100          28,963,544
                                                                        --------------       -------------
Partners' deficit:
   Limited partners - 50,000 Units authorized; 46,948 and
     47,086  Units outstanding at March 31, 1998 and 
     December 31, 1997,  respectively  (24,863 Current
     Income Units and 22,085  Growth/Shelter Units out-
     standing at March 31, 1998 and 24,906 Current Income
     Units and 22,180 Growth/Shelter Units outstanding
     at December 31,1997)...................................                (5,857,251)         (5,522,974)
   General Partner..........................................                  (379,984)           (376,608)
                                                                        --------------       -------------
                                                                            (6,237,235)         (5,899,582)
                                                                        --------------       -------------
                                                                       $    22,670,865      $   23,063,962
                                                                        ==============       =============
</TABLE>

The  financial  information  included  herein has been  prepared  by  management
without audit by independent public accountants.

                 See accompanying notes to financial statements.
<PAGE>
                        McNEIL REAL ESTATE FUND XXI, L.P.

                            STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                 Three Months Ended
                                                                                      March 31,
                                                                           ---------------------------------
                                                                                1998                1997
                                                                           --------------     --------------
Revenue:
<S>                                                                        <C>                <C>           
   Rental revenue ............................................             $    1,654,081     $    1,607,301
   Interest ...................................................                    16,801             18,501
                                                                            -------------       ------------
     Total revenue.............................................                 1,670,882          1,625,802
                                                                            -------------       ------------

Expenses:
   Interest....................................................                   420,825            513,851
   Interest - affiliates.......................................                   125,780             29,547
   Depreciation and amortization...............................                   387,258            366,223
   Property taxes..............................................                   137,585            135,339
   Personnel costs.............................................                   202,934            209,193
   Utilities...................................................                   116,969            115,312
   Repairs and maintenance.....................................                   163,906            178,765
   Property management fees -affiliates........................                    86,281             83,527
   Other property operating expenses...........................                   103,910             94,650
   General and administrative..................................                    92,496             33,435
   General and administrative - affiliates.....................                   170,591            157,599
                                                                            -------------      -------------
     Total expenses............................................                 2,008,535          1,917,441
                                                                            -------------      -------------

Net loss.......................................................            $     (337,653)    $     (291,639)
                                                                            =============      =============

Net loss allocable to limited partners -
   Current Income Unit.........................................            $      (30,389)    $      (26,248)
Net loss allocable to limited partners -
   Growth/Shelter Unit.........................................                  (303,888)          (262,475)
Net loss allocable to General Partner..........................                    (3,376)            (2,916)
                                                                            -------------     --------------
Net loss.......................................................            $     (337,653)    $     (291,639)
                                                                            =============      =============

Net loss per limited partnership unit:
Current Income Units...........................................            $        (1.22)    $        (1.05)
                                                                            =============      =============

Growth/Shelter Units...........................................            $       (13.76)    $       (11.83)
                                                                            =============      =============

</TABLE>


The  financial  information  included  herein has been  prepared  by  management
without audit by independent public accountants.

                 See accompanying notes to financial statements.
<PAGE>

                        McNEIL REAL ESTATE FUND XXI, L.P.

                         STATEMENTS OF PARTNERS' DEFICIT
                                   (Unaudited)

               For the Three Months Ended March 31, 1998 and 1997


<TABLE>
<CAPTION>
                                                                                                  Total
                                                    General                 Limited               Partners'
                                                    Partner                 Partners              Deficit
                                                 ---------------         ---------------       ---------------
<S>                                              <C>                     <C>                   <C>            
Balance at December 31, 1996..............       $     (361,822)         $   (4,059,156)       $   (4,420,978)

Net loss
   General Partner........................               (2,916)                      -                (2,916)
   Current Income Units...................                    -                 (26,248)              (26,248)
   Growth/Shelter Units...................                    -                (262,475)             (262,475)
                                                  -------------           -------------         -------------
Total net loss............................               (2,916)               (288,723)             (291,639)
                                                  -------------           -------------         -------------

Balance at March 31, 1997.................       $     (364,738)         $   (4,347,879)       $   (4,712,617)
                                                  =============           =============         =============


Balance at December 31, 1997..............       $     (376,608)         $   (5,522,974)       $   (5,899,582)

Net loss
   General Partner........................               (3,376)                      -                (3,376)
   Current Income Units...................                    -                 (30,389)              (30,389)
   Growth/Shelter Units...................                    -                (303,888)             (303,888)
                                                  -------------           -------------         -------------
Total net loss............................               (3,376)               (334,277)             (337,653)
                                                  -------------           -------------         -------------

Balance at March 31, 1998.................       $     (379,984)         $   (5,857,251)       $   (6,237,235)
                                                  =============           =============         =============

</TABLE>




The  financial  information  included  herein has been  prepared  by  management
without audit by independent public accountants.

                 See accompanying notes to financial statements.
<PAGE>

                        McNEIL REAL ESTATE FUND XXI, L.P.

                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                Increase (Decrease) in Cash and Cash Equivalents

<TABLE>
<CAPTION>
                                                                             Three Months Ended
                                                                                  March 31,
                                                                -------------------------------------------
                                                                        1998                     1997
                                                                -------------------        ----------------
Cash flows from operating activities:
<S>                                                             <C>                        <C>            
   Cash received from tenants........................           $        1,631,609         $     1,586,353
   Cash paid to suppliers............................                     (787,618)               (676,100)
   Cash paid to affiliates...........................                      (83,284)                (83,764)
   Interest received.................................                       16,801                  18,501
   Interest paid.....................................                     (365,004)               (492,145)
   Interest paid to affiliates.......................                     (108,131)                (12,221)
   Property taxes paid...............................                     (153,371)               (164,733)
                                                                 -----------------          --------------
Net cash provided by operating activities............                      151,002                 175,891
                                                                 -----------------          --------------

Cash flows from investing activities:
   Additions to real estate investments..............                      (41,363)                (72,444)
                                                                 -----------------          --------------

Cash flows from financing activities:
   Principal payments on mortgage notes
     payable.........................................                      (66,979)                (65,193)
   Principal payments on mortgage notes
     payable - affiliate.............................                       (4,090)                      -
                                                                 -----------------          --------------
Net cash used in financing activities................                      (71,069)                (65,193)
                                                                 -----------------          --------------

Net increase in cash and cash equivalents............                       38,570                  38,254

Cash and cash equivalents at beginning of
   period............................................                    1,817,585               1,670,843
                                                                 -----------------          --------------

Cash and cash equivalents at end of period...........           $        1,856,155         $      1,709,097
                                                                 =================          ===============
</TABLE>




The  financial  information  included  herein has been  prepared  by  management
without audit by independent public accountants.

                 See accompanying notes to financial statements.
<PAGE>

                        McNEIL REAL ESTATE FUND XXI, L.P.

                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)

               Reconciliation of Net Loss to Net Cash Provided by
                              Operating Activities

<TABLE>
<CAPTION>
                                                                            Three Months Ended
                                                                                  March 31,
                                                                -------------------------------------------
                                                                       1998                     1997
                                                                ------------------       ------------------
<S>                                                             <C>                      <C>               
Net loss.............................................           $        (337,653)       $        (291,639)
                                                                 ----------------         ----------------

Adjustments to reconcile net loss to net cash 
   provided by operating activities:
   Depreciation and amortization.....................                      387,258                 366,223
   Amortization of deferred borrowing costs..........                       15,629                  17,218
   Amortization of discounts on mortgage
     notes payable...................................                        5,222                   4,958
   Accrued interest on advances from affiliates......                       14,777                  14,410
   Changes in assets and liabilities:
     Cash segregated for security deposits...........                      (15,653)                (11,412)
     Accounts receivable.............................                         (453)                (10,805)
     Escrow deposits.................................                       91,890                 (19,584)
     Prepaid expenses and other assets...............                       (5,641)                (23,074)
     Accounts payable and accrued expenses...........                      (44,095)                (15,908)
     Accrued property taxes..........................                     (129,496)                (20,918)
     Payable to affiliates...........................                      173,588                 157,362
     Security deposits and deferred rental
       revenue.......................................                       (4,371)                  9,060
                                                                   ----------------         --------------

       Total adjustments.............................                      488,655                 467,530
                                                                   ---------------          --------------

Net cash provided by operating activities............             $        151,002         $       175,891
                                                                   ===============          ==============
</TABLE>



The  financial  information  included  herein has been  prepared  by  management
without audit by independent public accountants.

                 See accompanying notes to financial statements.
<PAGE>

                        McNEIL REAL ESTATE FUND XXI, L.P.

                          Notes to Financial Statements
                                   (Unaudited)

                                 March 31, 1998

NOTE 1.
-------

McNeil  Real  Estate  Fund XXI,  L.P.  (the  "Partnership"),  formerly  known as
Southmark Realty Partners, Ltd., was organized on November 23, 1983 as a limited
partnership under the provisions of the California  Revised Limited  Partnership
Act to acquire and operate  commercial and residential  properties.  The general
partner of the Partnership is McNeil Partners,  L.P. (the "General Partner"),  a
Delaware limited partnership,  an affiliate of Robert A. McNeil ("McNeil").  The
principal place of business for the Partnership and the General Partner is 13760
Noel Road, Suite 600, LB70, Dallas, Texas, 75240.

In the opinion of management,  the financial  statements reflect all adjustments
necessary for a fair  presentation of the Partnership's  financial  position and
results  of  operations.  All  adjustments  were of a normal  recurring  nature.
However, the results of operations for the three months ended March 31, 1998 are
not  necessarily  indicative  of the results to be expected  for the year ending
December 31, 1998.

NOTE 2.
-------

The  financial  statements  should  be read in  conjunction  with the  financial
statements  contained in the  Partnership's  Annual  Report on Form 10-K for the
year  ended  December  31,  1997,  and the  notes  thereto,  as  filed  with the
Securities and Exchange  Commission,  which is available upon request by writing
to McNeil Real Estate Fund XXI, L.P., c/o McNeil Real Estate  Management,  Inc.,
Investor Services, 13760 Noel Road, Suite 600, LB70, Dallas, Texas 75240.

NOTE 3.
-------

Certain reclassifications have been made to prior period amounts to conform with
the current period presentation.

NOTE 4.
-------

The  accompanying  financial  statements  have been  prepared  assuming that the
Partnership  will continue as a going concern.  The Partnership has had to defer
payment of payables to  affiliates in order to meet its working  capital  needs.
Additionally,  the  Partnership  is currently  in default on the mortgage  notes
payable  secured by Wise County Plaza and the lender intends to foreclose on the
property.  Foreclosure  by the lender is not  anticipated  to have a significant
effect of the Partnership  since all excess cash flow of the property is payable
to the lender as additional interest on the loans.

On April 20, 1998, the Partnership sold Fort Meigs Plaza to a non-affiliate  for
$3.8 million.  There were no net cash proceeds arising from the sale as all cash
proceeds were used to pay off the first and second lien  mortgage  notes secured
by the property.
<PAGE>
The Partnership has no established  lines of credit from outside sources.  Other
possible actions to resolve cash deficiencies include refinancings,  deferral of
capital  expenditures on Partnership  properties  except where  improvements are
expected to increase the  competitiveness  and  marketability of the properties,
deferral of payables to or arranging financing from affiliates,  or the ultimate
sale of Partnership properties.

NOTE 5.
-------

The  Partnership  pays  property  management  fees  equal to 5% of gross  rental
receipts for its residential  properties and 6% of gross rental receipts for its
commercial  properties to McNeil Real Estate  Management,  Inc.  ("McREMI"),  an
affiliate of the General Partner, for providing property management services for
the Partnership's residential and commercial properties and leasing services for
its residential  properties.  McREMI may also choose to provide leasing services
for the Partnership's  commercial properties,  in which case McREMI will receive
property  management  fees from such  commercial  properties  equal to 3% of the
property's  gross  rental  receipts  plus  leasing   commissions  based  on  the
prevailing market rate for such services where the property is located.

The  Partnership  reimburses  McREMI  for  its  costs,  including  overhead,  of
administering the Partnership's  affairs.  Total accrued but unpaid  Partnership
general and administration fees of $1,240,780 and $1,171,406 were outstanding at
March 31, 1998 and December 31, 1997, respectively.

The  Partnership  is paying an asset  management  fee  which is  payable  to the
General  Partner.  Through 1999, the Asset Management Fee is calculated as 1% of
the  Partnership's  tangible asset value.  Tangible asset value is determined by
using the greater of (i) an amount calculated by applying a capitalization  rate
of 9% to the annualized net operating income of each property or (ii) a value of
$10,000 per  apartment  unit for  residential  property and $50 per gross square
foot for commercial property to arrive at the property tangible asset value. The
property  tangible  asset  value is then  added to the book  value of all  other
assets excluding  intangible items. The fee percentage  decreases  subsequent to
1999.  Total  accrued  but  unpaid  asset  management  fees  of  $3,419,623  and
$3,318,406   were   outstanding  at  March  31,  1998  and  December  31,  1997,
respectively.

The  Partnership  pays a disposition  fee to an affiliate of the General Partner
equal to 3% of the  gross  sales  price  for  brokerage  services  performed  in
connection  with the sale of the  Partnership's  properties.  The fee is due and
payable at the time the sale closes.  In  connection  with the sales of Suburban
Plaza and Wyoming Mall,  total accrued but unpaid  disposition  fees of $346,050
were outstanding at March 31, 1998 and December 31, 1997.

Prior  to the  restructuring  of the  Partnership,  affiliates  of the  Original
General  Partner  advanced  funds to enable the  Partnership to meet its working
capital requirements.  These advances were purchased by, and are now payable to,
the General Partner. These advances and accrued interest, which totaled $809,758
at March 31, 1998, were repaid in full in April 1998.








<PAGE>
Compensation  and  reimbursements  paid to or  accrued  for the  benefit  of the
General Partner and its affiliates are as follows:

<TABLE>
<CAPTION>
                                                                            Three Months Ended
                                                                                  March 31,
                                                                  ----------------------------------------
                                                                        1998                     1997
                                                                  ----------------         ---------------
<S>                                                               <C>                      <C>            
Property management fees.............................             $         86,281         $        83,527
Charged to interest - affiliates:
   Interest on advances from affiliates..............                       14,777                  14,410
   Interest on mortgage note payable - affiliate.....                      111,003                  15,137
Charged to general and administrative -affiliates:
   Partnership administration........................                       69,374                  60,595
   Asset management fee..............................                      101,217                  97,004
                                                                   ---------------          --------------
                                                                  $        382,652         $       270,673
                                                                   ===============          ==============
</TABLE>

Payable  to  affiliates  at March  31,  1998 and  December  31,  1997  consisted
primarily of unpaid asset management fees, property management fees, disposition
fees and partnership general and administrative  expenses and is due and payable
from current operations.

NOTE 6.
-------

The mortgage  notes  payable  secured by Wise County Plaza  matured on August 1,
1997. The  Partnership  was unable to negotiate a modification  and extension of
the loans.  The Partnership  continued to make regularly  scheduled debt service
payments  on the  loans  throughout  the first  quarter  of 1998;  however,  the
Partnership did not make any excess cash flow payments on the loans in 1998. All
payments  on the loans  were  ceased in April  1998 and the  lender  intends  to
foreclose on the property.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
-------  ---------------------------------------------------------------
         RESULTS OF OPERATIONS
         ---------------------

FINANCIAL CONDITION
-------------------

There has been no  significant  change in the  operations  of the  Partnership's
properties since December 31, 1997. The Partnership  reported a net loss for the
first three  months of 1998 of $337,653 as compared to a net loss  $291,639  for
the first three months of 1997.  Revenues  increased to  $1,670,882 in 1998 from
$1,625,802 in 1997.  Expenses were  $2,008,535 in 1998 as compared to $1,917,441
in 1997.

Net cash  provided by  operating  activities  was  $151,002  for the first three
months of 1998. The Partnership  expended  $41,363 for capital  improvements and
$71,069 for principal  payments on its mortgage notes payable and mortgage notes
payable -  affiliate.  Cash and cash  equivalents  increased  by $38,570 for the
first three months of 1998, leaving a balance of $1,856,155 at March 31, 1998.
<PAGE>

The Partnership  has had little ready cash reserves since its inception.  It has
been largely  dependent on  affiliates  to support its  operations.  Although no
additional  advances from affiliates were required during the first three months
of 1998,  at March 31, 1998 the  Partnership  owed  payables to  affiliates  for
property management fees, Partnership general and administrative expenses, asset
management fees and disposition fees totaling $5,036,561.  Affiliate advances of
$809,758 at March 31, 1998 were repaid in full in April 1998.

RESULTS OF OPERATIONS
---------------------

Revenue:

Total revenue  increased by $45,080 for the three months ended March 31, 1998 as
compared  to the same  period  in 1997,  mainly  due to an  increase  in  rental
revenue, as discussed below.

Rental  revenue  for the first  three  months of 1998  increased  by  $46,780 as
compared to the same period in 1997.  Rental revenue  increased by approximately
$19,000 at  Governour's  Square  Apartments  due to an increase in rental rates.
Rental revenue at Evergreen Square Apartments increased by approximately $13,000
due to an increase in  occupancy  from 83% at March 31, 1997 to 96% at March 31,
1998.

Expenses:

Total expenses increased by $91,094 for the three months ended March 31, 1998 as
compared to the same period in 1997. The increase was mainly due to increases in
interest - affiliates and general and administrative expenses,  partially offset
by a decrease in interest expense, as discussed below.

Interest  expense for the first  three  months of 1998  decreased  by $93,026 as
compared to the first three  months of 1997.  The decrease was mainly due to the
first lien loan on Fort Meigs Plaza being  purchased by an affiliate in December
1997.  Interest  on this loan was  recorded  as  interest  expense for the first
eleven months of 1997; it was recorded as interest - affiliates in 1998.

Interest -  affiliates  increased  by $96,233  for the first  quarter of 1998 as
compared  to the  first  quarter  of the prior  year.  The  increase  was due to
interest on the first lien loan secured by Fort Meigs Plaza being  payable to an
affiliate in 1998, as discussed above.

General and  administrative  expenses  for the three months ended March 31, 1998
increased  by $59,061 as compared to the same period in 1997.  The  increase was
primarily due to costs incurred in 1998 to explore  alternatives to maximize the
value of the Partnership (see Liquidity and Capital Resources).












<PAGE>

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

At March 31, 1998, the Partnership held cash and cash equivalents of $1,856,155.

Cash of $151,002  was provided by  operating  activities  during the first three
months of 1998 as compared to $175,891  provided during the same period in 1997.
The decrease in cash  provided by  operations  in the first three months of 1998
was mainly the result of an increase in cash paid to suppliers due to the timing
of the payment of invoices as well as an increase in general and  administrative
expenses in 1998.  This  increase  was  partially  offset by an increase in cash
received  from tenants in 1998 (see  discussion  of increase in rental  revenue,
above).  There was a decrease in interest  paid and an increase in interest paid
to  affiliates in 1998 due to the first lien loan on Fort Meigs Plaza being held
by an affiliate in 1998,  as previously  discussed.  The overall net decrease in
interest  paid was the  result  of the  Partnership  ceasing  excess  cash  flow
payments on the Wise County Plaza loans in 1998, which is recorded as additional
interest on the loans.

Cash used for additions to real estate investments totaled $41,363 for the first
three  months of 1998 as  compared  to $72,444  for the same  period in 1997.  A
greater  amount was spent in 1997 for replacing  appliances at Evergreen  Square
and  Woodcreek  Apartments  and for  tenant  improvements  at Fort  Meigs  Plaza
Shopping Center.

Short-term liquidity

For  the  remainder  of  1998,  present  cash  balances  and  operations  of the
properties  are  expected  to  provide  sufficient  cash  for  normal  operating
expenses, debt service payments and budgeted capital improvements.  The mortgage
notes  payable  secured by Wise County  Plaza  matured on August 1, 1997 and the
lender  plans to  foreclose  on the  property.  Fort  Meigs  Plaza was sold to a
non-affiliate  for $3.8 million in April 1998.  There were no net cash  proceeds
arising  from the sale as all cash  proceeds  were used to pay off the first and
second lien mortgage notes secured by the property.

The  Partnership  has no  established  lines of  credit  from  outside  sources.
Although  affiliates of the Partnership  have  previously  funded cash deficits,
there can be no assurance the Partnership will receive  additional funds.  Other
possible actions to resolve cash  deficiencies  include  refinancing,  deferring
major capital or repair  expenditures  on  Partnership  properties  except where
improvements are expected to enhance the  competitiveness  and  marketability of
the properties,  deferring payables to or arranging financing from affiliates or
the ultimate sale of Partnership properties.



<PAGE>

Long-term liquidity

Pursuant  to the  Partnership's  previously  announced  liquidation  plans,  the
Partnership  has recently  retained  PaineWebber,  Incorporated as its exclusive
financial  advisor  to  explore  alternatives  to  maximize  the  value  of  the
Partnership.  The  alternatives  being  considered by the  Partnership  include,
without limitation,  a transaction in which limited partnership interests in the
Partnership  are converted into cash. The General  Partner of the Partnership or
entities or persons  affiliated with the General Partner will not be involved as
a purchaser in any of the transactions  contemplated above. Any transaction will
be subject to certain conditions  including (i) approval by the limited partners
of the Partnership, and (ii) receipt of an opinion from an independent financial
advisory  firm  as  to  the  fairness  of  the  consideration  received  by  the
Partnership  pursuant to such  transaction.  Finally,  there can be no assurance
that any transaction will be consummated, or as to the terms thereof.

Operations of the  Partnership's  properties are expected to provide  sufficient
cash flow for operating expenses, debt service payments and capital improvements
in the foreseeable future.

The  Partnership  has  reported  net losses for the three months ended March 31,
1998 and 1997. In addition, the Partnership has had to defer payment of payables
to affiliates in order to meet its working capital needs. These conditions raise
substantial  doubt  about  the  Partnership's  ability  to  continue  as a going
concern.  The  financial  statements do not include any  adjustments  that might
result from the outcome of these uncertainties.

Distributions

To maintain adequate cash balances of the Partnership,  distributions to Current
Income Unit holders were suspended in 1989.  There have been no distributions to
Growth/Shelter  Units  holders.   Distributions  to  Unit  holders  will  remain
suspended  for the  foreseeable  future.  The General  Partner will  continue to
monitor  the cash  reserves  and working  capital  needs of the  Partnership  to
determine when cash flows will support distributions to the Unit holders.



<PAGE>


                           PART II. OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
-------  ---------------------------------

(a)      Exhibits.

         Exhibit
         Number                     Description
         -------                    -----------

         4.                         Amended  and  Restated  Limited  Partnership
                                    Agreement     dated    March    26,    1992.
                                    (Incorporated  by  reference  to the Current
                                    Report of the  Registrant  on Form 8-K dated
                                    March 26, 1992, as filed on April 9, 1992).

         11.                        Statement  regarding  computation   of   Net
                                    Loss per Limited  Partnership Unit: Net loss
                                    per limited  partnership unit is computed by
                                    dividing  net loss  allocated to the limited
                                    partners by the weighted  average  number of
                                    limited  partnership units outstanding.  Per
                                    unit  information has been computed based on
                                    24,863  and  24,906   Current  Income  Units
                                    outstanding in 1998 and 1997,  respectively,
                                    and 22,085 and 22,180  Growth/Shelter  Units
                                    outstanding in 1998 and 1997, respectively.

         27.                        Financial   Data   Schedule  for the quarter
                                    ended March 31, 1998.


(b)      Reports on Form 8-K. A Form 8-K with  respect to Item 2 dated April 20,
         1998 was filed on April 29, 1998 regarding the sale of Fort Meigs Plaza
         Shopping Center.



<PAGE>



                        MCNEIL REAL ESTATE FUND XXI, L.P.

                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized:



                               McNEIL REAL ESTATE FUND XXI, L.P.

                               By:  McNeil Partners, L.P., General Partner

                                    By: McNeil Investors, Inc., General Partner






May 14, 1998                        By:  /s/  Ron K. Taylor
------------                           -----------------------------------------
Date                                    Ron K. Taylor
                                        President and Director of McNeil 
                                         Investors, Inc.
                                        (Principal Financial Officer)




May 14, 1998                        By:  /s/  Carol A. Fahs
------------                           -----------------------------------------
Date                                    Carol A. Fahs
                                        Vice President of McNeil Investors, Inc.
                                        (Principal Accounting Officer)