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 period ended       June 30, 1997
                           -----------------------------------------------------


                                       OR

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

     For the transition period from ______________ to_____________
     Commission file number  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>
                        MCNEIL REAL ESTATE FUND XXI, L.P.

                          PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
------- --------------------
                                 BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                          June 30,           December 31,
                                                                            1997                 1996
                                                                       ---------------      --------------
ASSETS
-------

Real estate investments:
<S>                                                                    <C>                  <C>           
   Land.....................................................           $     3,240,113      $    3,240,113
   Buildings and improvements...............................                29,911,356          29,542,828
                                                                        --------------       -------------
                                                                            33,151,469          32,782,941
   Less:  Accumulated depreciation and amortization.........               (15,414,340)        (14,661,016)
                                                                        --------------       -------------
                                                                            17,737,129          18,121,925

Asset held for sale.........................................                 2,744,391           2,731,674
Cash and cash equivalents...................................                 1,657,410           1,670,843
Cash segregated for security deposits.......................                   180,578             167,645
Accounts receivable.........................................                   302,236             317,152
Escrow deposits.............................................                   565,933             425,750
Deferred borrowing costs, net of accumulated amortiz-
   ation of $188,054 and $153,724 at June 30, 1997
   and December 31, 1996, respectively......................                   398,347             432,677
Prepaid expenses and other assets...........................                    60,941              63,559
                                                                        --------------       -------------
                                                                       $    23,646,965      $   23,931,225
                                                                        ==============       =============

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

Mortgage notes payable, net.................................           $    21,658,382      $   21,780,275
Mortgage note payable - affiliate...........................                   733,900             733,900
Accounts payable and accrued expenses.......................                   263,550             282,667
Accrued property taxes......................................                   416,573             347,845
Payable to affiliates.......................................                 4,532,899           4,210,324
Advances from affiliates....................................                   764,769             735,253
Deferred gain on involuntary conversion.....................                    40,070              66,879
Security deposits and deferred rental revenue...............                   205,875             195,060
                                                                        --------------       -------------
                                                                            28,616,018          28,352,203
                                                                        --------------       -------------
Partners' deficit:
   Limited  partners  -  50,000  Units  authorized; 
     47,086  and  47,288  Units outstanding at June 30,
     1997 and December 31, 1996,  respectively,  (24,906
     Current Income Units and 22,180  Growth/Shelter  
     Units  outstanding at June 30, 1997 and 24,949 
     Current Income Units and 22,339 Growth/Shelter Units
     outstanding at December 31,1996).......................                (4,601,750)         (4,059,156)
   General Partner..........................................                  (367,303)           (361,822)
                                                                        --------------       -------------
                                                                            (4,969,053)         (4,420,978)
                                                                        --------------       -------------
                                                                       $    23,646,965      $   23,931,225
                                                                        ==============       =============
</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                     Six Months Ended
                                                  June 30,                              June 30,
                                      ---------------------------------    ---------------------------------
                                          1997               1996               1997                1996
                                      --------------    ---------------    --------------     --------------
Revenue:
<S>                                   <C>                <C>               <C>                <C>           
   Rental revenue................     $    1,614,511     $    1,605,888    $    3,221,812     $    3,199,384
   Interest......................             19,740             31,826            38,241             53,875
   Gain on involuntary
     conversion..................             26,809                  -            26,809                  -
                                       -------------      -------------     -------------      -------------
     Total revenue...............          1,661,060          1,637,714         3,286,862          3,253,259
                                       -------------      -------------     -------------      -------------

Expenses:
   Interest......................            505,794            471,064         1,019,645            984,980
   Interest - affiliates.........             30,411             29,853            59,958             59,845
   Depreciation and
     amortization................            387,101            405,871           753,324            808,585
   Property taxes................            135,339            125,445           270,678            245,136
   Personnel costs...............            172,259            168,161           381,452            375,353
   Utilities.....................             96,252             97,408           211,564            210,490
   Repairs and maintenance.......            211,357            175,433           390,122            351,538
   Property management
     fees - affiliates...........             82,757             85,525           166,284            167,347
   Other property operating
     expenses....................             97,985            100,477           198,656            200,932
   General and administrative....             34,892             23,444            62,306             45,201
   General and administrative -
     affiliates..................            163,349            187,047           320,948            368,354
                                       -------------      -------------     -------------      -------------
     Total expenses..............          1,917,496          1,869,728         3,834,937          3,817,761
                                       -------------      -------------     -------------      -------------

Net loss.........................     $     (256,436)    $     (232,014)   $     (548,075)    $     (564,502)
                                       =============      =============     =============      =============

Net loss allocable to limited
   partners - Current
   Income Unit...................     $      (23,079)    $      (20,881)   $      (49,327)    $      (50,805)
Net loss allocable to
   limited partners - Growth/
   Shelter Unit..................           (230,793)          (208,813)         (493,267)          (508,052)
Net loss allocable to
   General Partner...............             (2,564)            (2,320)           (5,481)            (5,645)
                                       -------------      -------------     -------------      -------------
Net loss.........................     $     (256,436)    $     (232,014)   $     (548,075)    $     (564,502)
                                       =============      =============     =============      =============

Net loss per limited partnership 
   unit:
   Current Income Units..........     $         (.93)    $         (.84)   $        (1.98)    $        (2.04)
                                       =============      =============     =============      =============

   Growth/Shelter Units..........     $       (10.41)    $        (9.34)   $       (22.24)    $       (22.74)
                                       =============      =============     =============      =============
</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 Six Months Ended June 30, 1997 and 1996


<TABLE>
<CAPTION>
                                                                                                  Total
                                                    General                 Limited               Partners'
                                                    Partner                 Partners              Deficit
                                                 ---------------         ---------------       ---------------
<S>                                              <C>                     <C>                   <C>            
Balance at December 31, 1995..............       $     (350,551)         $   (2,943,347)       $   (3,293,898)

Net loss
   General Partner........................               (5,645)                      -                (5,645)
   Current Income Units...................                    -                 (50,805)              (50,805)
   Growth/Shelter Units...................                    -                (508,052)             (508,052)
                                                  -------------           -------------         -------------
Total net loss............................               (5,645)               (558,857)             (564,502)
                                                  -------------           -------------         -------------

Balance at June 30, 1996..................       $     (356,196)         $   (3,502,204)       $   (3,858,400)
                                                  =============           =============         =============


Balance at December 31, 1996..............       $     (361,822)         $   (4,059,156)       $   (4,420,978)

Net loss
   General Partner........................               (5,481)                      -                (5,481)
   Current Income Units...................                    -                 (49,327)              (49,327)
   Growth/Shelter Units...................                    -                (493,267)             (493,267)
                                                  -------------           -------------         -------------
Total net loss............................               (5,481)               (542,594)             (548,075)
                                                  -------------           -------------         -------------

Balance at June 30, 1997..................       $     (367,303)         $   (4,601,750)       $   (4,969,053)
                                                  =============           =============         =============

</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>
                                                                            Six Months Ended
                                                                                  June 30,
                                                                -------------------------------------------
                                                                        1997                     1996
                                                                -------------------        ----------------
Cash flows from operating activities:
<S>                                                             <C>                        <C>            
   Cash received from tenants........................           $        3,223,375         $     3,231,345
   Cash paid to suppliers............................                   (1,302,991)             (1,170,281)
   Cash paid to affiliates...........................                     (164,657)               (166,595)
   Interest received.................................                       38,241                  53,875
   Interest paid.....................................                     (976,353)               (944,609)
   Interest paid to affiliates.......................                      (24,443)                (24,443)
   Property taxes paid...............................                     (293,553)               (238,126)
                                                                 -----------------          --------------
Net cash provided by operating activities............                      499,619                 741,166
                                                                 -----------------          --------------

Cash flows from investing activities:
   Additions to real estate investments..............                     (381,245)               (306,352)
                                                                 -----------------          --------------

Cash flows from financing activities:
   Deferred borrowing costs paid.....................                            -                    (312)
   Principal payments on mortgage notes
     payable.........................................                     (131,807)               (120,920)
                                                                 -----------------          --------------
Net cash used in financing activities................                     (131,807)               (121,232)
                                                                 -----------------          --------------

Net increase (decrease) in cash and
   cash equivalents..................................                      (13,433)                313,582

Cash and cash equivalents at beginning of
   period............................................                    1,670,843               1,998,301
                                                                 -----------------          --------------

Cash and cash equivalents at end of period...........           $        1,657,410         $     2,311,883
                                                                 =================          ==============

</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>
                                                                            Six Months Ended
                                                                                  June 30,
                                                                  -----------------------------------------
                                                                        1997                    1996
                                                                  -----------------       -----------------
<S>                                                               <C>                     <C>              
Net loss.............................................             $       (548,075)       $       (564,502)
                                                                   ---------------         ---------------

Adjustments to reconcile net loss to net cash
   provided by operating activities:
   Depreciation and amortization.....................                      753,324                 808,585
   Amortization of deferred borrowing costs..........                       34,330                  31,838
   Amortization of discounts on mortgage
     notes payable...................................                        9,914                   9,406
   Accrued interest on advances from affiliates......                       29,516                  29,235
   Gain on involuntary conversion....................                      (26,809)                      -
   Changes in assets and liabilities:
     Cash segregated for security deposits...........                      (12,933)                 (3,341)
     Accounts receivable.............................                       14,916                  23,832
     Escrow deposits.................................                     (140,183)                 60,538
     Prepaid expenses and other assets...............                        2,618                  (3,478)
     Accounts payable and accrued expenses...........                      (19,117)                 (9,914)
     Accrued property taxes..........................                       68,728                 (25,612)
     Payable to affiliates...........................                      322,575                 369,106
     Security deposits and deferred rental
       revenue.......................................                       10,815                  15,473
                                                                   ---------------          --------------

       Total adjustments.............................                    1,047,694               1,305,668
                                                                   ---------------          --------------

Net cash provided by operating activities............             $        499,619         $       741,166
                                                                   ===============          ==============

</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)

                                  June 30, 1997

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 six months ended June 30, 1997 are
not  necessarily  indicative  of the results to be expected  for the year ending
December 31, 1997.

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,  1996,  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 The Herman  Group,  2121 San Jacinto
St., 26th Floor, Dallas, Texas 75201.

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,  in 1997, the mortgage notes payable  secured by Wise County Plaza
and Fort Meigs Plaza mature.  The mortgage  note payable - affiliate  secured by
Fort Meigs Plaza also matures in 1997. In addition to regularly  scheduled  debt
service payments,  balloon payments totaling  approximately $9.7 million are due
in 1997.  Management  expects to refinance  these mortgage notes as they mature.
However, if management is unable to refinance the mortgage notes as they mature,
the  Partnership  will require  other sources of cash. No such sources have been
identified.  The financial  statements do not include any adjustments that might
result from the outcome of these uncertainties.


<PAGE>
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.

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  $3,122,480  and
$2,927,930   were   outstanding   at  June  30,  1997  and  December  31,  1996,
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 June 30, 1997 and December 31, 1996.

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.

The total  advances  from  affiliates  at June 30,  1997 and  December  31, 1996
consisted of the following:

                                                    June 30,    December 31,
                                                      1997          1996
                                                   ---------    ------------

Advances purchased by General Partner..........    $ 630,574    $  630,574
Accrued interest payable.......................      134,195       104,679
                                                    --------     ---------
                                                   $ 764,769    $  735,253
                                                    ========     =========





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

                                                       Six Months Ended
                                                           June 30,
                                                   -----------------------
                                                       1997        1996
                                                   ---------    ----------

Property management fees.......................    $ 166,284    $  167,347
Charged to interest - affiliates:
   Interest on advances from affiliates........       29,516        29,235
   Interest on mortgage note payable -
      affiliate................................       30,442        30,610
Charged to general and administrative -
   affiliates:
   Partnership administration..................      126,398       165,253
   Asset management fee........................      194,550       203,101
                                                    --------     ---------
                                                   $ 547,190    $  595,546
                                                    ========     =========

Payable to affiliates at June 30, 1997 and December 31, 1996 consisted primarily
of unpaid asset management fees, property management fees,  disposition fees and
partnership  general and  administrative  expenses  and are due and payable from
current operations.

NOTE 6.
-------

In March 1997, the lender on the Partnership's  $733,900 mortgage note payable -
affiliate  secured by Fort Meigs  Plaza  extended  the  maturity  of the note to
September 1, 1997 from April 1, 1997.

NOTE 7.
-------

On July 12 and September 5, 1996, Governour's Square Apartments suffered damages
from  two  separate  hurricanes.  Repairs  of  damages  totaling  $191,402  were
completed.  Reimbursements  for the repairs  totaling $40,937 were received from
the insurance  carrier in 1996, and $40,272 were received  during the first half
of 1997.  The  remaining  costs of  $110,193  less a  $50,000  deductible,  were
received in July 1997 and are  included in accounts  receivable  on the June 30,
1997 Balance Sheet. The Partnership  recognized a gain on involuntary conversion
of $27,252 and  recorded a deferred  gain of $66,879 in 1996.  The total gain on
involuntary  conversion of $94,131  represents the insurance claims in excess of
the  basis  of the  property  damaged  by the  hurricanes.  A  $26,809  gain  on
involuntary  conversion  was  recognized  during the first half of 1997, and the
remaining deferred gain was recognized in July 1997 when the remaining insurance
claim reimbursements were received.


<PAGE>
NOTE 8.
-------

In 1996, the  Partnership  adopted the Financial  Accounting  Standards  Board's
Statement  of  Financial  Accounting  Standards  No.  121,  "Accounting  for the
Impairment of Long-Lived  Assets and for  Long-Lived  Assets to be Disposed Of."
This statement  requires the cessation of  depreciation on assets held for sale.
Since Fort Meigs Plaza was placed on the market for sale,  no  depreciation  was
taken effective October 1, 1996.


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, 1996. The Partnership  reported a net loss for the
first six months of 1997 of $548,075  as compared to $564,502  for the first six
months of 1996.  Revenues  increased to  $3,286,862  in 1997 from  $3,253,259 in
1996. Expenses were $3,834,937 in 1997 as compared to $3,817,761 in 1996.

Net cash provided by operating  activities was $499,619 for the first six months
of 1997. The Partnership expended $381,245 for capital improvements and $131,807
for principal payments on its mortgage notes payable.  Cash and cash equivalents
decreased  by  $13,433  for the first six  months of 1997,  leaving a balance of
$1,657,410 at June 30, 1997.

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 six months of
1997, at June 30, 1997 the Partnership  owed affiliate  advances of $764,769 and
payables to affiliates for property  management  fees,  Partnership  general and
administrative  expenses,  asset  management fees and disposition  fees totaling
$4,532,899.

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

Revenue:

Total  revenue  increased  by $23,346  and  $33,603  for the first three and six
months of 1997,  respectively,  as  compared  to the same  periods of 1996.  The
increase  was due to an  increase  in  rental  revenue,  partially  offset  by a
decrease in interest income,  as discussed  below. In addition,  the Partnership
recognized a $26,809  gain on  involuntary  conversion  during the first half of
1997  relating  to  hurricane  damages  at  Governour's  Square  Apartments,  as
discussed in Item 1, Note 7.








<PAGE>
Rental  revenue  increased  by $8,623 and  $22,428  for the three and six months
ended June 30,  1997,  respectively,  as compared  to the same  periods in 1996.
Rental revenue for all properties  increased  slightly  during the first half of
1997,  except at Evergreen Square  Apartments where rental revenue decreased due
to a decline in  occupancy to 82% at the end of June 1997 from 90% at the end of
June 1996. In addition,  in 1996 the Partnership received  approximately $18,000
of rental revenue relating to a property which had previously been sold. No such
income was received during the first half of 1997.

Interest  income  decreased  by $12,086 and $15,634 for the three and six months
ended June 30, 1997,  respectively,  as compared to the same periods in 1996 due
to a lower amount of cash  available  for  short-term  investment  in 1997.  The
Partnership  held $1.7 million of cash and cash  equivalents at June 30, 1997 as
compared to $2.3 million at June 30, 1996.

Expenses:

Total  expenses  increased  by $47,768  and  $17,176 for the first three and six
months of 1997,  respectively,  as  compared  to the same  periods in 1996.  The
increase was mainly due to increases in property taxes,  repairs and maintenance
and  general  and  administrative  expenses,  partially  offset by a decrease in
general and administrative - affiliates, as discussed below.

Property  taxes  increased  by $9,894 and  $25,542  for the three and six months
ended June 30, 1997, respectively,  as compared to the same periods in 1996. The
increase  was  partially  due to  increased  property  taxes  at  Woodcreek  and
Evergreen Square Apartments.  In addition,  in 1996 the Partnership  received an
approximately  $5,700 refund of prior years'  property taxes relating to Bedford
Green Apartments. No such refund was received in the first half of 1997.

Repairs and maintenance  expense  increased by $35,924 and $38,584 for the three
and six months  ended  June 30,  1997,  respectively,  as  compared  to the same
periods in 1996.  The  increase was due to  increases  in  replacement  of floor
coverings at Woodcreek  Apartments and  replacement of appliances at Governour's
Square Apartments.  The replacements,  which met the Partnership's  criteria for
capitalization in 1996, were expensed in 1997.

General and  administrative  expenses for the first three and six months of 1997
increased by $11,448 and $17,105,  respectively, as compared to the same periods
in 1996.  Costs incurred for investor  services were paid to an unrelated  third
party in 1997.  In the first  six  months of 1996,  such  costs  were paid to an
affiliate of the General Partner and were included in general and administrative
- affiliates on the Statements of Operations.

General and administrative - affiliates decreased by $23,698 and $47,406 for the
three and six months ended June 30, 1997, respectively,  as compared to the same
periods in 1996. The decrease was mainly due to a decrease in overhead  expenses
allocated to the  Partnership  by McREMI,  which was  partially  due to investor
services  being  performed  by an  unrelated  third party in 1997,  as discussed
above.


<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

At June 30, 1997, the Partnership held cash and cash equivalents of $1,657,410.

Cash of $499,619  was  provided  by  operating  activities  during the first six
months of 1997 as compared to $741,166  provided during the same period in 1996.
The decrease in cash provided by operations in the first half of 1997 was mainly
the result of an increase in cash paid to suppliers,  interest paid and property
taxes paid due to the timing of the payment of invoices.

Cash used for  additions  to real estate  investments  totaled  $381,245 for the
first six months of 1997 as compared to $306,352  for the same period in 1996. A
greater amount was spent in the first half of 1997 for  landscaping and exterior
painting at Governour's Square Apartments.

Short-term liquidity

For  the  remainder  of  1997,  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
Partnership  is currently  attempting to negotiate an extension with the lender.
The  mortgage  note payable - affiliate  secured by Fort Meigs Plaza  matured on
April 1, 1997 and the maturity was extended to September 1, 1997. The Fort Meigs
mortgage note payable to a non-affiliate matures in October 1997.

In addition to regularly  scheduled  debt  service  payments,  balloon  payments
totaling  approximately  $9.7  million  are due in 1997.  Management  expects to
refinance these mortgage notes as they mature or sell the property  securing the
loan.  However,  if management is unable to refinance the mortgage notes as they
mature, the Partnership will require other sources of cash. No such sources have
been identified. 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.

Long-term liquidity

The Partnership  has determined to begin orderly  liquidation of all its assets.
Although  there can be no assurance as to the timing of the  liquidation  due to
real estate  market  conditions,  the general  difficulty  of  disposing of real
estate,  and  other  general  economic  factors,  it is  anticipated  that  such
liquidation  would result in the  dissolution of the  Partnership  followed by a
liquidating  distribution  to the limited  partners by  December  2001.  In this
regard,  the Partnership has placed Fort Meigs Plaza on the market for sale. The
Partnership has received an offer from a non-affiliate  to purchase the property
for $4.4 million.







<PAGE>
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 significant  mortgage maturities
during 1997,  and management  expects to refinance  these mortgage notes as they
mature or sell the  property  securing  the  loan.  If  management  is unable to
refinance the mortgage notes as they mature,  the Partnership will require other
sources of cash. No such sources have been identified.

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.

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS
-------  -----------------

James F.  Schofield,  Gerald C. Gillett,  Donna S. Gillett,  Jeffrey  Homburger,
Elizabeth Jung,  Robert Lewis, and Warren Heller et al. v. McNeil Partners L.P.,
McNeil Investors,  Inc., McNeil Real Estate Management,  Inc., Robert A. McNeil,
Carole J. McNeil,  McNeil Pacific  Investors Fund 1972, Ltd., McNeil Real Estate
Fund IX,  Ltd.,  McNeil Real  Estate  Fund X, Ltd.,  McNeil Real Estate Fund XI,
Ltd.,  McNeil  Real Estate Fund XII,  Ltd.,  McNeil Real Estate Fund XIV,  Ltd.,
McNeil Real Estate Fund XV, Ltd.,  McNeil Real Estate Fund XX, L.P., McNeil Real
Estate Fund XXI, L.P.,  McNeil Real Estate Fund XXII,  L.P.,  McNeil Real Estate
Fund XXIV,  L.P.,  McNeil Real Estate  Fund XXV,  L.P.,  McNeil Real Estate Fund
XXVI, L.P., and McNeil Real Estate Fund XXVII,  L.P., et al. - Superior Court of
the State of California for the County of Los Angeles,  Case No. BC133799 (Class
and Derivative Action Complaint).

The action involves  purported  class and derivative  actions brought by limited
partners of each of the fourteen limited partnerships that were named as nominal
defendants as listed above (the  "Partnerships").  Plaintiffs allege that McNeil
Investors, Inc., its affiliate McNeil Real Estate Management,  Inc. and three of
their senior officers and/or directors (collectively, the "Defendants") breached
their  fiduciary  duties and certain  obligations  under the respective  Amended
Partnership  Agreement.  Plaintiffs  allege that  Defendants  have rendered such
Units highly illiquid and  artificially  depressed the prices that are available
for Units on the resale market.  Plaintiffs also allege that Defendants  engaged
in a course of conduct to prevent the  acquisition  of Units by an  affiliate of
Carl  Icahn  by  disseminating  purportedly  false,  misleading  and  inadequate
information.  Plaintiffs  further allege that Defendants  acted to advance their
own personal  interests at the expense of the Partnerships'  public unit holders
by failing to sell Partnership  properties and failing to make  distributions to
unitholders.


<PAGE>
On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint.
Plaintiffs  are suing for breach of  fiduciary  duty,  breach of contract and an
accounting,  alleging,  among other things, that the management fees paid to the
McNeil affiliates over the last six years are excessive,  that these fees should
be reduced retroactively and that the respective Amended Partnership  Agreements
governing the Partnerships are invalid.

Defendants  filed a demurrer to the  consolidated  and amended  complaint  and a
motion to strike on February 14, 1997,  seeking to dismiss the  consolidated and
amended complaint in all respects.  A hearing on Defendant's demurrer and motion
to strike  was held on May 5,  1997.  The Court  granted  Defendants'  demurrer,
dismissing the consolidated and amended complaint with leave to amend.


<PAGE>



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
                                    Income (Loss) per Limited  Partnership Unit:
                                    Net income  (loss) per  limited  partnership
                                    unit is  computed  by  dividing  net  income
                                    (loss)  allocated to the limited partners by
                                    the  weighted   average  number  of  limited
                                    partnership  units  outstanding.   Per  unit
                                    information   has  been  computed  based  on
                                    24,906  and  24,949   Current  Income  Units
                                    outstanding in 1997 and 1996,  respectively,
                                    and 22,180 and 22,339  Growth/Shelter  Units
                                    outstanding in 1997 and 1996, respectively.

         27.                        Financial  Data   Schedule  for  the quarter
                                    ended June 30, 1997.


(b)      Reports on  Form  8-K.  There were no reports on Form 8-K  filed during
         the quarter ended June 30, 1997.



<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






August 13, 1997                   By:  /s/  Ron K. Taylor
---------------                       ------------------------------------------
Date                                   Ron K. Taylor
                                       President and Director of McNeil
                                         Investors, Inc.
                                       (Principal Financial Officer)




August 13, 1997                   By:  /s/  Carol A. Fahs
---------------                      -------------------------------------------
Date                                   Carol A. Fahs
                                       Vice President of McNeil Investors, Inc.
                                       (Principal Accounting Officer)