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

                                  FORM 10-K405

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

      For the fiscal year ended                   December 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  0-9783
                           ---------


                        McNEIL REAL ESTATE FUND XI, LTD.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


         California                             94-2669577
--------------------------------------------------------------------------------
(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
                                                   -----------------------------

Securities registered pursuant to Section 12(b) of the Act: None
----------------------------------------------------------

Securities registered pursuant to Section 12(g) of the Act: Limited partnership
                                                             units
----------------------------------------------------------

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___

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

159,500  of the  registrant's  159,813  limited  partnership  units  are held by
non-affiliates  of this registrant.  The aggregate market value of units held by
non-affiliates  is not determinable  since there is no public trading market for
limited  partnership  units  and  transfers  of units  are  subject  to  certain
restrictions.

Documents Incorporated by Reference:        See Item 14, Page 40

                                TOTAL OF 43 PAGES
<PAGE>
                                     PART I
ITEM 1.  BUSINESS
-------  --------

ORGANIZATION
------------

McNeil Real Estate Fund XI, Ltd. (the  "Partnership") was organized June 2, 1980
as a limited  partnership under the provisions of the California Uniform Limited
Partnership Act. 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  Partnership  is governed by an amended and restated
partnership  agreement of limited  partnership  dated August 6, 1991, as amended
(the  "Amended  Partnership  Agreement").  Prior  to  August  6,  1991,  Pacific
Investors  Corporation (the prior "Corporate General  Partner"),  a wholly-owned
subsidiary of Southmark Corporation  ("Southmark"),  and McNeil were the general
partners  of the  Partnership,  which was  governed by an  agreement  of limited
partnership dated June 2, 1980 (the "Original Partnership Agreement") as amended
August 29, 1980. The principal place of business for the Partnership and for the
General Partner is 13760 Noel Road, Suite 600, LB70, Dallas, Texas, 75240.

On  September  18,  1980,  a  Registration  Statement  on Form S-11 was declared
effective by the  Securities  and Exchange  Commission  whereby the  Partnership
offered for sale $80,000,000 of limited  partnership units ("Units").  The Units
represent equity interests in the Partnership and entitle the holders thereof to
participate in certain  allocations and  distributions of the  Partnership.  The
sale of Units closed on June 1, 1981,  with 160,000  Units sold at $500 each, or
gross  proceeds of  $80,000,000 to the  Partnership.  In addition,  the original
general  partners  purchased a total of 140 Units for $70,000.  During the years
1993 through 1998, 327 Units were rescinded leaving 159,813 Units outstanding as
of December 31, 1998.

SOUTHMARK BANKRUPTCY AND CHANGE IN GENERAL PARTNER
--------------------------------------------------

On July 14, 1989,  Southmark filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code. Neither the Partnership,  McNeil nor the
Corporate   General   Partner   were   included  in  the   filing.   Southmark's
reorganization  plan became  effective  August 10, 1990. Under the plan, most of
Southmark's  assets,  which  included  Southmark's  interests  in the  Corporate
General Partner, were sold or liquidated for the benefit of creditors.

In  accordance  with  Southmark's  reorganization  plan,  Southmark,  McNeil and
various of their affiliates  entered into an asset purchase agreement on October
12, 1990,  providing for, among other things,  the transfer of control to McNeil
or his affiliates of 34 limited partnerships  (including the Partnership) in the
Southmark portfolio.

On February 14,  1991,  pursuant to the asset  purchase  agreement as amended on
that date: (a) an affiliate of McNeil purchased the Corporate  General Partner's
economic  interest in the  Partnership;  (b) McNeil became the managing  general
partner of the Partnership  pursuant to an agreement with the Corporate  General
Partner that delegated  management  authority to McNeil;  (c) McNeil Real Estate
Management,  Inc.  ("McREMI"),  an  affiliate  of  McNeil,  acquired  the assets





<PAGE>
relating to the property management and partnership  administrative  business of
Southmark  and its  affiliates  and commenced  management  of the  Partnership's
properties  pursuant  to an  assignment  of  the  existing  property  management
agreements from the Southmark affiliates;  and (d) the General Partner purchased
the  short-term,  unsecured  loan  owing  from the  Partnership  to a  Southmark
affiliate in the amount of $2,645,950. The unsecured loan has now been settled.

On August 6,  1991,  the  limited  partners  approved a  restructuring  proposal
providing for (i) the  replacement of the Corporate  General  Partner and McNeil
with  the  General  Partner;  (ii)  the  adoption  of  the  Amended  Partnership
Agreement, which substantially alters the provisions of the Original Partnership
Agreement  relating  to,  among other  things,  compensation,  reimbursement  of
expenses, and voting rights; and (iii) the approval of a new property management
agreement with McREMI, the Partnership's property manager.

The  Amended   Partnership   Agreement  provides  for  a  Management   Incentive
Distribution ("MID") to replace all other forms of general partner compensation,
other  than  property  management  fees and  reimbursements  of  certain  costs.
Additional  Units  may be  issued  in  connection  with the  payment  of the MID
pursuant  to  the  Amended  Partnership  Agreement.  See  Item  8  -  Note  2  -
"Transactions  with  Affiliates."  For  a  discussion  of  the  methodology  for
calculating and  distributing the MID, see Item 13 - Certain  Relationships  and
Related Transactions.

Settlement of Claims:

During 1990,  the  Partnership  filed claims in the Southmark  bankruptcy in the
amount of $1,180,040.  McNeil also filed claims on behalf of the  Partnership in
an  indeterminate  amount,  some of which  overlapped  in whole or in part  with
claims  filed  by the  Partnership.  No  claims  were  filed  by  McNeil  or the
Partnership on behalf of individual limited partners.

In July 1991, the United States  Bankruptcy  Court for the Northern  District of
Texas,  Dallas Division,  approved an agreement whereby the Partnership  settled
its claims against Southmark.  Under the settlement  agreement,  an affiliate of
McNeil  agreed  to waive on a  dollar-for-dollar  basis an  amount  equal to the
settled claims against affiliate advances owed by the Partnership, which at June
30, 1991, were in excess of the amount of the claim.  The reduction of affiliate
advances  resulted  in an  extraordinary  gain  on  extinguishment  of  debt  of
$1,180,040 in 1991.

CURRENT OPERATIONS
------------------

General:

The Partnership is engaged in real estate  activities,  including the ownership,
operation  and  management  of  residential  real  estate and other real  estate
related   assets.   At  December  31,   1998,   the   Partnership   owned  seven
income-producing properties as described in Item 2 - Properties.

The  Partnership  does not directly  employ any  personnel.  The  Partnership is
managed by the General Partner,  and, in accordance with the Amended Partnership
Agreement,  the  Partnership  reimburses  affiliates of the General  Partner for
certain cost incurred by affiliates  of the General  Partner in connection  with
the  management  of  the  Partnership's   business.  See  Item  8  -  Note  2  -
"Transactions with Affiliates."


<PAGE>
The business of the Partnership to date has involved only one industry  segment.
See Item 8 - Financial Statements and Supplementary Data. The Partnership has no
foreign operations. The business of the Partnership is not seasonal.

Business Plan:

As previously announced, the Partnership has retained PaineWebber,  Incorporated
("PaineWebber")  as its exclusive  financial advisor to explore  alternatives to
maximize  the  value  of  the  Partnership,  including,  without  limitation,  a
transaction  in which  limited  partnership  interests  in the  Partnership  are
converted into cash. The Partnership,  through  PaineWebber,  provided financial
and other  information to interested  parties as part of an auction  process and
until early March 1999 was conducting  discussions with one bidder in an attempt
to reach a definitive  agreement  with respect to a sale  transaction.  In early
March 1999, because the Partnership had been unable to conclude negotiations for
a transaction with such bidder, the Partnership  terminated such discussions and
commenced   discussions   with  respect  to  a  sale  transaction  with  another
well-financed  bidder who had been  involved in the  original  auction  process.
During  the last full  week of  March,  the  Partnership  entered  into a 45 day
exclusivity  agreement with such party.  It is possible that the General Partner
and its  affiliates  will receive  non-cash  consideration  for their  ownership
interests in  connection  with any such  transaction.  There can be no assurance
regarding whether any such agreement will be reached nor the terms thereof.

The  Partnership  has  placed  Rock  Creek  Apartments  on the  market  for sale
effective October 1, 1996.

Competitive Conditions:

Since the  principal  business of the  Partnership  is to own and  operate  real
estate,  the Partnership is subject to all of the risks incident to ownership of
real estate and interests  therein,  many of which relate to the  illiquidity of
this type of  investment.  These  risks  include  changes  in  general  or local
economic conditions,  changes in supply or demand for competing properties in an
area,  changes in interest rates and  availability  of permanent  mortgage funds
which  may  render  the  sale  or  refinancing   of  a  property   difficult  or
unattractive, changes in real estate and zoning laws, increases in real property
tax rates and Federal or local  economic or rent  controls.  The  illiquidity of
real estate  investments  generally  impairs the ability of the  Partnership  to
respond  promptly  to  changed  circumstances.  The  Partnership  competes  with
numerous established companies, private investors (including foreign investors),
real estate investment trusts,  limited partnerships and other entities (many of
which have greater  resources than the Partnership) in connection with the sale,
financing  and  leasing  of  properties.  The  impact  of  these  risks  on  the
Partnership,   including   losses  from  operations  and   foreclosures  of  the
Partnership's  properties,  is described in Item 7 - Management's Discussion and
Analysis  of  Financial  Condition  and  Results  of  Operations.  See  Item 2 -
Properties  for  discussion  of  competitive  conditions  at  the  Partnership's
properties.










<PAGE>
Forward-Looking Information:

Within this document,  certain  statements are made as to the expected occupancy
trends,  financial  condition,  results  of  operations,  and cash  flows of the
Partnership  for periods after  December 31, 1998.  All of these  statements are
forward-looking  statements  made pursuant to the safe harbor  provisions of the
Private  Securities  Litigation  Reform Act of 1995.  These  statements  are not
historical  and  involve  risks  and  uncertainties.  The  Partnership's  actual
occupancy trends, financial condition, results of operations, and cash flows for
future  periods may differ  materially  due to several  factors.  These  factors
include,  but are not limited to, the  Partnership's  ability to control  costs,
make necessary  capital  improvements,  negotiate  sales or  refinancings of its
properties and respond to changing economic and competitive factors.

Environmental Matters:

Environmental laws create potential liabilities that may affect property owners.
The environmental  laws of Federal and certain state  governments,  for example,
impose liability on current and certain past owners of property from which there
is a release  or threat of  release  of  hazardous  substances.  This  liability
includes costs of investigation and remediation of the hazardous  substances and
natural resource  damages.  Liability for costs of investigation and remediation
is strict and may be imposed  irrespective  of whether the property owner was at
fault,  although  there are a number of  defenses.  Both  governments  and third
parties may seek recoveries under these laws.

Third parties also may seek  recovery  under the common law for damages to their
property  or person,  against  owners of  property  from which  there has been a
release of hazardous and other substances.

The presence of  contamination  or the failure to remediate  contaminations  may
adversely  affect the owner's  ability to sell or lease real estate or to borrow
using the real estate as collateral.

Various  buildings at properties do or may contain  building  materials that are
the subject of various  regulatory  programs  intended to protect  human health.
Such building materials include,  for example,  asbestos,  lead-based paint, and
lead plumbing components.  The Company has implemented programs to deal with the
presence  of those  materials,  which  include,  as  appropriate,  reduction  of
potential  exposure  situations.  The Company does not believe that the costs of
such programs are likely to have a material adverse effect. Failure to implement
such programs can result in regulatory  violations or liability claims resulting
from alleged exposure to such materials.

In connection with the proposed sale  transaction as more fully described above,
Phase I  environmental  site  assessments  have been completed for each property
owned  by the  Partnership.  Such  environmental  assessments  performed  on the
properties  have not revealed any  environmental  liability that the Partnership
believes  would have a material  adverse effect on the  Partnership's  business,
assets,  or results of operations.  The Partnership has not been notified by any
governmental  authority  of any  non-compliance,  liability  or  other  claim in
connection with any of its properties. There can be no assurances, however, that
environmental   liabilities   have  not  developed   since  such   environmental
assessments were prepared, or that future uses or conditions (including, without
limitation,  changes in applicable  environmental laws and regulations) will not
result in imposition of environmental liability.



<PAGE>
Other Information:

In August 1995, High River Limited  Partnership,  a Delaware limited partnership
controlled by Carl C. Icahn ("High River") made an  unsolicited  tender offer to
purchase from holders of Units up to approximately  45% of the outstanding Units
of the Partnership for a purchase price of $63 per Unit. In September 1996, High
River made  another  unsolicited  tender  offer to  purchase  any and all of the
outstanding  Units of the  Partnership for a purchase price of $104.50 per Unit.
In  addition  High River  made  unsolicited  tender  offers  for  certain  other
partnerships controlled by the General Partner. The Partnership recommended that
the  limited  partners  reject  the  tender  offers  made  with  respect  to the
Partnership and not tender their Units.  The General Partner believes that as of
February  1, 1999,  High River has  purchased  11.65% of the  outstanding  Units
pursuant to the tender offers. In addition,  all litigation filed by High River,
Mr. Icahn and his  affiliates  in  connection  with the tender  offers have been
dismissed without prejudice.

ITEM 2.  PROPERTIES
-------  ----------

The  following  table sets forth the real  estate  investment  portfolio  of the
Partnership  at December 31, 1998.  The buildings and the land on which they are
located  are owned by the  Partnership  in fee,  subject in each case to a first
lien deed of trust as set forth more fully in Item 8 - Note 5 - "Mortgage  Notes
Payable"  and Item 8 - Note 6 - "Mortgage  Note Payable -  Affiliate."  See also
Item 8 - Note 4 - "Real  Estate  Investments"  and  Schedule  III - "Real Estate
Investments and  Accumulated  Depreciation."  In the opinion of management,  the
properties are adequately covered by insurance.

<TABLE>
<CAPTION>
                                            Net Basis                                 1998          Date
Property              Description           of Property          Debt             Property Tax    Acquired
--------              -----------           -----------          ----             ------------    -------- 
Real Estate Investments:

Acacia Lakes (1)      Apartments
<S>                   <C>                 <C>                <C>                <C>                 <C> 
Mesa, AZ              576 units           $    5,614,216     $   8,680,219      $    142,014        5/81

Gentle Gale (2)       Apartments
Galveston, TX         133 units                1,586,638         2,489,136            75,379        5/81

Knollwood (3)         Apartments
Kansas City, MO       315 units                2,814,547         4,326,728            76,410        5/81

Sun Valley (4)        Apartments
Charlotte, NC         311 units                4,120,235         6,376,663           118,309        8/81

Villa Del Rio (5)     Apartments
Jacksonville, FL      444 units                4,047,045         5,331,844           182,673        5/81

The Village (6)       Apartments
Gresham, OR           152 units                1,488,086         2,635,000            81,221        5/81
                                           -------------     -------------       -----------
                                          $   19,670,767    $   29,839,590      $    676,006
                                           =============     =============       ===========


Asset held for sale:

Rock Creek (7)        Apartments
Portland, OR          388 units           $    4,765,942    $    6,225,000      $    143,295      2/81
                                           =============     =============       ===========
</TABLE>

-----------------------------------------
Total:    Apartments  -  2,319 units

<PAGE>

(1)  Acacia  Lakes   Apartments  is  owned  by  Acacia  Lakes  Fund  XI  Limited
     Partnership  which  is  wholly-owned  by the  Partnership  and the  General
     Partner.

(2)  Gentle Gale Apartments is owned by Gentle Gale Fund XI Limited  Partnership
     which is wholly-owned by the Partnership.

(3)  Knollwood  Apartments is owned by Knollwood Fund XI  Associates,  a general
     partnership,  which is  wholly-owned  by the  Partnership  and the  General
     Partner.

(4)  Sun Valley Apartments is owned by Sun Valley Fund XI Associates,  a general
     partnership,  which is  wholly-owned  by the  Partnership  and the  General
     Partner.

(5)  Villa Del Rio Apartments is owned by   Villa   Del   Rio   Fund  XI Limited
     Partnership  which is wholly-owned by the Partnership.

(6)  The  Village  Apartments  is owned by Village  Fund XI  Associates  Limited
     Partnership  which  is  wholly-owned  by the  Partnership  and the  General
     Partner.

(7)  Rock Creek Apartments is owned by Rock Creek Fund XI, Ltd., which is wholly
     -owned by the Partnership.

The  following  table sets  forth the  properties'  occupancy  rate and rent per
square foot for each of the last five years:

<TABLE>
<CAPTION>
                                        1998           1997            1996           1995          1994
                                    -------------  -------------  --------------  -------------  ----------

Acacia Lakes
<S>                                       <C>             <C>            <C>            <C>             <C>
   Occupancy Rate............             96%             95%            94%            96%             97%
   Rent Per Square Foot......           $8.07           $7.92          $7.73          $7.44           $6.64

Gentle Gale
   Occupancy Rate............             90%             93%            90%            88%             93%
   Rent Per Square Foot......           $8.10           $7.90          $7.78          $7.86           $7.83

Knollwood
   Occupancy Rate............             97%             97%            96%            96%             93%
   Rent Per Square Foot......           $6.20           $6.06          $5.72          $5.53           $5.17

Sun Valley
   Occupancy Rate............             96%             96%            96%            97%             97%
   Rent Per Square Foot......           $8.01           $7.81          $7.40          $7.12           $6.51

Villa Del Rio
   Occupancy Rate............             96%             92%            96%           100%             98%
   Rent Per Square Foot......           $5.83           $5.76          $5.67          $5.46           $4.98

The Village
   Occupancy Rate............             96%             98%            96%           100%            100%
   Rent Per Square Foot......           $8.69           $8.31          $8.27          $7.96           $7.76

Asset held for sale:

Rock Creek
   Occupancy Rate............             95%             94%            95%            99%             94%
   Rent Per Square Foot......           $8.58           $8.35          $8.27          $7.91           $7.54

</TABLE>

<PAGE>
Occupancy rate  represents all units leased divided by the total number of units
of the  property  as of  December  31 of the given  year.  Rent per square  foot
represents all revenue, except interest,  derived from the property's operations
divided by the leasable square footage of the property.

Competitive Conditions at Properties
------------------------------------

Acacia Lakes
------------

Due to a  substantial  investment  of  capital  since  1994,  Acacia  Lakes  has
increased  its rent per square foot by 22% over the last five years.  Currently,
the property is slightly  above the average  market  occupancy rate of 95%. Over
the last year,  approximately  8,250  multi-family  units were added to the Mesa
submarket. Strong employment growth is expected to add renters to the market and
provide  positive  absorption.  Rental  rates at Acacia Lakes are lower than the
market rate.

Gentle Gale
-----------

Gentle Gale is located in Galveston, Texas, where the local economy is dependent
upon the University of Texas Medical Branch and tourism. The University of Texas
announced a reduction of over 600 jobs effective January 1999 and additional cut
backs are  anticipated.  Over the last few years the economy has been  sluggish.
Gentle Gale  experienced  a decrease in its  occupancy  rate and is currently at
90%.  Gentle  Gale  competes  with  properties  that are newer and offer  better
amenity  packages.  Rental  rates at Gentle  Gale are just  below  many of their
competitors  in the market.  In 1998, an additional  177 units were added to the
already soft market.  The  property  has been  upgrading  the units and offering
rental discounts to remain competitive in the market.

Knollwood
---------

Knollwood  finished  1998 above the average  market  occupancy  rate of 94%. The
current  rental  rates  for  Knollwood's  townhouses  and one  and  two  bedroom
apartments are comparable to the market rate. Continued capital improvements are
planned to improve the curb appeal and upgrade the  apartments to take advantage
of the strong market conditions.

Sun Valley
----------

Strong  market   conditions  have  stimulated  new   developments  in  the  area
surrounding  Sun Valley.  Currently,  3,458 units are under  construction in the
Charlotte market,  and an additional 3,419 units are proposed.  The market began
to soften in 1997 and the continued heavy development  continued to increase the
market  competitiveness  in 1999.  With  the  capital  improvements  made at the
property over the last few years, the property has been able to stay competitive
with the newer  properties.  Sun  Valley  finished  1998 at the  market  average
occupancy rate of 95%.


<PAGE>
Villa Del Rio
-------------

Villa Del Rio's  occupancy  rate finished 1998 above the market  average of 91%.
During  1998,  7,500 units were added to the market  with other  projects in the
planning  stages.  Villa Del Rio's  advantage over its competitors is design and
layout of the property.  All units are single story  apartments and the property
is spread over 25 acres.

The Village
-----------

The Village finished the year equal to the Gresham market occupancy rate of 96%.
The  expanding  economy in Portland is slowing down after  several years growth.
The new construction  over the last couple of years has softened the market with
higher  vacancies  and rental  concessions.  The market  rental rate is slightly
lower than the rental rate at The Village. The Village should continue to remain
competitive in the marketplace.

Asset held for sale:

Rock Creek
----------

Rock Creek finished the year at the market  average of 95%. The Portland  market
has become  saturated  with new  multi-family  units with the  addition of 1,500
units in 1998.  Over the past few  years the  property  has been  upgrading  the
interiors  of the  units  as well as  improving  the  outside  appearances  with
landscaping  and a renovation of the clubhouse  and office.  These  enhancements
have allowed the property to remain  competitive  in the market and compete with
the new apartments being built in the area.

ITEM 3.  LEGAL PROCEEDINGS
-------  -----------------

The Partnership is not party to, nor are any of the Partnership's properties the
subject of, any material pending legal proceedings, other than ordinary, routine
litigation incidental to the Partnership's business, except for the following:

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 XXIII,  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., Hearth Hollow  Associates,  McNeil Midwest  Properties I, L.P. and
Regency North Associates,  L.P., - Superior Court of the State of California for
the  County of Los  Angeles,  Case No.  BC133799  (Class and  Derivative  Action
Complaint).






<PAGE>
The action involves  purported  class and derivative  actions brought by limited
partners  of each  of the  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.

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.  On
October  31,  1997,  the  Plaintiffs  filed a second  consolidated  and  amended
complaint. The case was stayed pending settlement discussions.  A Stipulation of
Settlement dated September 15, 1998 has been signed by the parties.  Preliminary
Court  approval was received on October 6, 1998. A hearing for Final Approval of
Settlement, initially scheduled for December 17, 1998, has been continued to May
25, 1999.

Because McNeil Real Estate Fund XXIII,  L.P., Hearth Hollow  Associates,  McNeil
Midwest  Properties I, L.P. and Regency North Associates,  L.P. would be part of
the  transaction  contemplated  in the settlement  and Plaintiffs  claim that an
effort should be made to sell the McNeil Partnerships,  Plaintiffs have included
allegations with respect to McNeil Real Estate Fund XXIII,  L.P.,  Hearth Hollow
Associates, McNeil Midwest Properties I, L.P. and Regency North Associates, L.P.
in the third consolidated and amended complaint.

Plaintiff's  counsel  intends  to seek an  order  awarding  attorney's  fees and
reimbursements  of their  out-of-pocket  expenses.  The  amount of such award is
undeterminable  until  final  approval  is  received  from the  court.  Fees and
expenses shall be allocated amongst the Partnerships on a pro rata basis,  based
upon  tangible  asset value of each such  partnership,  less total  liabilities,
calculated in accordance with the Amended Partnership Agreements for the quarter
most recently ended.

For a discussion of the Southmark bankruptcy, see Item 1 - Business.


<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------- ---------------------------------------------------

None.
                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNERSHIP AND RELATED
-------  --------------------------------------------------------------------
         SECURITY HOLDER MATTERS
         -----------------------

 (A)     There is no established  public trading market for limited  partnership
         units, nor is one expected to develop.

(B)      Title of Class                   Number of Record Unit Holders

         Limited partnership units        6,802 as of February 1, 1999

 (C)     Cash  distributions  of $4,221,415 were made to the  limited   partners
         during 1998. No distributions were made to the partners in 1997. During
         the last week of March 1999, the Partnership distributed  approximately
         $500,000  to the  limited  partners  of  record at March 1,  1999.  The
         Partnership  accrued  distributions  of $853,756  and  $905,153 for the
         benefit of the General  Partner for the years ended  December  31, 1998
         and 1997, respectively. Total distributions of $2,597,224 remain unpaid
         at December 31, 1998. These  distributions  are the MID pursuant to the
         Amended Partnership Agreement. See Item 8 - Note 2 - "Transactions with
         Affiliates."  See Item 7 -  Management's  Discussion  and  Analysis  of
         Financial  Condition  and Results of  Operations  for a  discussion  of
         distributions and the likelihood that they will continue  distributions
         to the limited partners.

ITEM 6. SELECTED FINANCIAL DATA
------- -----------------------

The  following  table sets forth a summary  of  certain  financial  data for the
Partnership.  This summary should be read in conjunction with the  Partnership's
financial  statements  and  notes  thereto  appearing  in  Item  8  -  Financial
Statements and Supplementary Data.

<TABLE>
<CAPTION>
Statements of                                               Years Ended December 31,
Operations                              1998           1997            1996           1995           1994
------------------                  -------------  -------------  --------------  -------------  -------------
<S>                                <C>             <C>            <C>             <C>            <C>          
Rental revenue.................    $   15,012,339  $  15,187,999  $   14,855,652  $  14,304,055  $  13,313,091
Total revenue..................        18,569,006     15,536,941      15,582,063     14,451,813     13,425,413
Net income (loss)..............         4,453,260      1,744,719       1,592,611        307,243       (193,822)

Net income (loss)
  per limited
  partnership unit..............   $        26.44  $        3.61  $         5.03  $        1.83  $       (3.98)

Distributions per limited
  partnership unit..............   $        26.41  $           -  $            -  $           -  $           -

                                                            As of December 31,
Balance Sheets                          1998           1997            1996           1995           1994
--------------                      -------------  -------------  --------------  -------------  -------------

Real estate investments, net...    $   19,670,767  $  20,677,187  $   22,992,254 $   27,251,831  $  27,916,213
Assets held for sale...........         4,765,942      5,910,865       4,203,597              -              -
Total assets...................        29,746,379     32,369,919      32,592,153     32,508,764     33,355,998
Mortgage notes payable, net....        36,064,590     38,796,649      39,255,045     39,684,440     40,090,432
Partners' deficit..............       (10,415,809)    (9,793,898)    (10,633,464)   (11,323,378)   (10,759,568)
</TABLE>
<PAGE>
See Item 7 -  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-------  -----------------------------------------------------------
         AND RESULTS OF OPERATIONS
         -------------------------

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

The  Partnership  was formed to  acquire,  operate and  ultimately  dispose of a
portfolio of  income-producing  real  properties.  As of December 31, 1998,  the
Partnership  owned  seven  apartment   properties.   All  of  the  Partnership's
properties are subject to mortgage notes.

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

1998 compared to 1997

Revenue:

Total Partnership revenues for 1998 increased by $3,032,065 as compared to 1997.
Rental  revenue  decreases  were  offset  by  increased  interest  revenue.  The
Partnership  also  recognized  a gain of  $3,319,137  on the  sale  of The  Park
Apartments. No such gain was recognized in 1997.

Rental revenue for 1998 decreased $175,660 primarily due to the sale of The Park
Apartments in April of 1998. Excluding the revenue from The Park, rental revenue
increased  $367,910 or 3%.  Interest  income for 1998  increased  by $108,216 as
compared to the prior year due to higher average cash balances being invested in
interest bearing accounts.

Expenses:

Partnership  expenses  increased  by  $323,524  or 2% for the year ended 1998 as
compared  to 1997.  The  effects  from the sale of The Park in April  1998  were
declines  of $96,205  for  interest,  $5,817 for  property  taxes,  $69,876  for
personnel  expenses,  $32,376 for repairs and maintenance,  $13,699 for property
management fees,  $17,064 for utilities and $28,339 for other property operating
expenses.

In  addition  to the sale of The  Park,  other  factors  affected  the  level of
expenses  reported by the remaining  properties.  Interest  expense - affiliates
decreased by $138,241 in 1998 as compared to 1997.  This  decrease is due to the
repayment of the affiliate mortgage note in April 1998.

Personnel  expenses  increased by  $126,098  or 7% in 1998 due to an increase of
compensation and benefits at all the properties.

General  and  administrative  expenses  increased  $394,531  for the year  ended
December  31, 1998 and  compared to the same period last year.  The increase was
mainly due to the costs incurred to explore  alternatives  to maximize the value
of the Partnership.  The increase was partially offset by decreases attributable
to investor  services.  During 1997, charges for investor services were provided
by a third party vendor.  Beginning  with 1998,  these  services are provided by
affiliates  of  the  General  Partner.   As  a  result  of  this,   general  and
administrative affiliates increased by $65,155 in 1998.
<PAGE>
1997 compared to 1996

Revenue:

Total  Partnership  revenues for 1997  decreased by $45,122 as compared to 1996.
Rental revenue increased  $332,347 or 2%. In 1997, the Partnership  recognized a
gain on  involuntary  conversion of $219,628 for fires at The Park,  The Village
and Knollwood as compared to $598,859 in 1996.

Rental revenue for 1997 was  $15,187,999  as compared to  $14,855,652  for 1996.
This  increase of $332,347 is due to an increase in the rental rates at seven of
the eight Partnership's  properties,  offset by decreases in the occupancy rates
at three of the eight Partnership's properties.

Expenses:

Total Partnership expenses decreased by $197,230 for the year ended December 31,
1997 as compared to 1996. Decreases in depreciation, general and administrative,
and general and  administrative - affiliates were offset by increases in repairs
and maintenance and interest - affiliate.

Interest expense decreased by $249,546 or 7% as compared to the same period last
year. This decrease is due to the November 1996 refinancing of the mortgage note
on The Village with an affiliate mortgage note. As a result of this refinancing,
interest expense - affiliates  increased by $221,118 for the year ended December
31, 1997.

Depreciation  declined by $289,254 or 12% for the period ended December 31, 1997
as  compared  to the same  period in 1996.  This  decrease is mainly due to Rock
Creek,  which is currently  classified  as an asset held for sale,  for which no
depreciation  has been  recognized  since  October  1,  1996.  The Park was also
classified as an asset held for sale as of August 1, 1997,  and no  depreciation
has been recognized since that date.

Repairs  and  maintenance  expense  increased  by $211,296 or 11% for the period
ended December 31, 1997 compared to the same period in 1996. The increase can be
attributed to increases in service  expenses and the  replacement  of carpeting.
Carpet replacements of $162,461 for three of the Partnership  properties,  which
met the  Partnership's  criteria for  capitalization  in 1996,  were expensed in
1997.

General and administrative expenses decreased $234,637 or 54% for the year ended
December  31,  1997 as  compared  to the same  period  last year.  In 1996,  the
Partnership incurred costs to evaluate and disseminate  information regarding an
unsolicited  tender  offer.  The  decrease  was  slightly  offset by charges for
investor  services,  which  beginning  in 1997,  was  provided  by a third party
vendor.  In 1996,  these costs were paid to an affiliate of the General  Partner
and were included in general and administrative - affiliates.

General and  administrative - affiliates expense decreased by $74,448 or 22% for
1997 as compared to the same period last year due to the  reduction  of overhead
expenses allocable to the Partnership.  Allocated expenses decreased in part due
to investor  services  being  performed by an unrelated  third party in 1997, as
discussed above.


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

At  December  31,  1998,  the  Partnership  held  cash and cash  equivalents  of
$2,397,968, down $647,817 as compared to 1997.

The  Partnership   has  experienced   positive  cash  flow  from  operations  of
$10,761,719  for the three years ended  December  31,  1998.  During  1996,  the
Partnership  received  a  mortgage  loan  from  affiliates  of  $2,588,971.  The
Partnership  has also received  $1,009,178  in insurance  proceeds for the three
years ended  December 31, 1998.  Over the last three years the  Partnership  has
used cash to fund $5,325,786 in additions to real estate investments, $1,446,347
in principal  payments,  $152,564 for additions to deferred  borrowing costs and
$2,513,937 for the payment of the MID.

The  Partnership  received  $4,787,389 as proceeds from the sale of The Park, of
which $2,565,604 was used to retire the related mortgage note payable.

On April 27, 1998, the  Partnership  refinanced the mortgage note payable on The
Village.  The new mortgage note, in the amount of $2,635,000 bears interest at a
variable rate equal to 1.75% plus the London  Interbank  Offered Rate per annum.
The new mortgage  note  requires  monthly  interest  only payments and quarterly
principal  payments in the amount  necessary to reduce the principal  balance of
the note by 5% annually.  The maturity  date of the new mortgage  note is May 1,
2001. The Partnership  realized  $46,029 of cash proceeds from the  transaction;
however,  the cash proceeds  together with additional cash reserves were used to
fund various deferred borrowing costs of $57,134 related to the transaction.

On September 28, 1998, the  Partnership  refinanced the mortgage note payable on
Rock Creek. The new mortgage note, in the amount of $6,225,000 bears interest at
a variable rate equal to 1.75% plus the London Interbank Offered Rate per annum.
The new mortgage  note  requires  monthly  interest  only payments and quarterly
principal  payments in the amount  necessary to reduce the principal  balance of
the note by 5% annually.  The maturity  date of the new mortgage note is October
1,  2001.  The  Partnership   realized   $250,217  of  cash  proceeds  from  the
transaction;  however,  $82,273 of the cash  proceeds  was used to fund  various
deferred borrowing costs related to the transaction.

The Partnership  generated  $3,645,973  through operating  activities in 1998 as
compared to $3,703,741 in 1997. The decrease of $57,768 can be attributed to the
decrease in cash  received  from tenants and increases in cash paid to suppliers
and property  taxes paid.  The decrease was partially  offset with  decreases in
interest paid and interest - affiliate paid.

The Partnership  generated  $3,703,741  through operating  activities in 1997 as
compared to  $3,412,005  in 1996.  The increase of $291,736 can be attributed to
the increase in tenant receipts as a result of the increased rental rates at all
the Partnership's properties and a decrease in the cash paid to affiliates.

Short-term liquidity:

The Partnership expended  considerable  resources during the past three years to
restore its properties to good operating condition. These expenditures have been
necessary  to  maintain  the  competitive  position of the  Partnership's  aging
properties in each of their markets.  The capital  improvements  made during the
past three years have enabled the  Partnership  to increase its rental  revenues
and reduce certain of its repairs and maintenance expenses.  The Partnership has
budgeted an  additional  $1.03 million of capital  improvements  for 1999, to be
funded from property operations and cash reserves.
<PAGE>
At  December  31,  1998,  the  Partnership  held  cash and cash  equivalents  of
$2,397,968.  The General  Partner  considers  this level of cash  reserves to be
adequate  to  meet  the  Partnership's  operating  needs.  The  General  Partner
anticipates continuing MID payments if the Partnership's  properties continue to
perform as projected.  The General Partner believes that  anticipated  operating
results for 1999 will be sufficient to fund the  Partnership's  budgeted capital
improvements  for 1999 and to repay the  current  portion  of the  Partnership's
mortgage notes.

Long-term liquidity:

For the long-term,  property operations will remain the primary source of funds.
In this  regard,  the General  Partner  expects that the $5.3 million of capital
improvements  made by the  Partnership  during the past  three  years will yield
improved cash flow from property  operations in the future. If the Partnership's
cash position  deteriorates,  the General  Partner may elect to defer certain of
the  capital  improvements,  except  where such  improvements  are  expected  to
increase the competitiveness or marketability of the Partnership's properties.

As previously announced, the Partnership has retained PaineWebber,  Incorporated
("PaineWebber")  as its exclusive  financial advisor to explore  alternatives to
maximize  the  value  of  the  Partnership,  including,  without  limitation,  a
transaction  in which  limited  partnership  interests  in the  Partnership  are
converted into cash. The Partnership,  through  PaineWebber,  provided financial
and other  information to interested  parties as part of an auction  process and
until early March 1999 was conducting  discussions with one bidder in an attempt
to reach a definitive  agreement  with respect to a sale  transaction.  In early
March 1999, because the Partnership had been unable to conclude negotiations for
a transaction with such bidder, the Partnership  terminated such discussions and
commenced   discussions   with  respect  to  a  sale  transaction  with  another
well-financed  bidder who had been  involved in the  original  auction  process.
During  the last full  week of  March,  the  Partnership  entered  into a 45 day
exclusivity  agreement with such party.  It is possible that the General Partner
and its  affiliates  will receive  non-cash  consideration  for their  ownership
interests in  connection  with any such  transaction.  There can be no assurance
regarding whether any such agreement will be reached nor the terms thereof.

The  Partnership  has  placed  Rock  Creek  Apartments  on the  market  for sale
effective October 1, 1996

Income allocation and distributions:

Terms  of  the  Amended   Partnership   Agreement  specify  that  income  before
depreciation  is allocated  to the General  Partner to the extent of MID paid in
cash. Depreciation is allocated in the ratio of 95:5 to the limited partners and
the General Partner, respectively. Therefore, for each of the three years in the
period ended December 31, 1998, $228,243, $1,167,537 and $788,575, respectively,
of net income  was  allocated  to the  General  Partner.  The  limited  partners
received  allocations  of net  income  of  $4,225,017,  $577,182  and  $804,036,
respectively, for the three year period ended December 31, 1998.

During 1998, the limited  partners  received a cash  distribution of $4,221,415.
The  distributions  consisted  of funds from  operations  and cash  reserves.  A
distribution of $853,756 for the MID has been accrued by the Partnership for the
year ended  December 31, 1998 for the General  Partner.  During the last week of
March  1999,  the  General  Partner  distributed  approximately  $500,000 to the
limited  partners  of record  as of March 1,  1999.  The  General  Partner  will
continue  to  monitor  the  cash  reserves  and  working  capital  needs  of the
Partnership to determine when cash flows will support  additional  distributions
to the limited partners.
<PAGE>
YEAR 2000 DISCLOSURE
--------------------

State of readiness
------------------

The year 2000 problem is the result of computer programs being written using two
digits rather than four to define the  applicable  year.  Any programs that have
time-sensitive  software may recognize a date using "00" as the year 1900 rather
than  the  year  2000.   This  could   result  in  major   systems   failure  or
miscalculations.

Management has assessed its  information  technology  ("IT")  infrastructure  to
identify  any systems  that could be affected by the year 2000  problem.  The IT
used by the  Partnership  for  financial  reporting and  significant  accounting
functions was made year 2000 compliant  during recent systems  conversions.  The
software  utilized for these  functions  are licensed by third party vendors who
have warranted that their systems are year 2000 compliant.

Management  is  in  the  process  of  evaluating  the  mechanical  and  embedded
technological systems at the various properties.  Management has inventoried all
such systems and queried suppliers,  vendors and manufacturers to determine year
2000 compliance. Management will complete assessment of findings by May 1, 1999.
In  circumstances  of  non-compliance  management  will work with the  vendor to
remedy the  problem or seek  alternative  suppliers  who will be in  compliance.
Management believes that the remediation of any outstanding year 2000 conversion
issues  will  not  have a  material  or  adverse  effect  on  the  Partnership's
operations. However, no estimates can be made as to the potential adverse impact
resulting  from the failure of third party  service  providers and vendors to be
year 2000 compliant.

Cost
----

The cost of IT and  embedded  technology  systems  testing  and  upgrades is not
expected to be material to the Partnership. Because all the IT systems have been
upgraded  over the last three years,  all such systems were  compliant,  or made
compliant at no additional cost by third party vendors.  Management  anticipates
the costs of assessing,  testing, and if necessary replacing embedded technology
components will be less than $50,000.  Such costs will be funded from operations
of the Partnership.

Risks
-----

Ultimately,  the potential impact of the year 2000 issue will depend not only on
the corrective measures the Partnership undertakes, but also on the way in which
the year 2000 issue is  addressed  by  government  agencies  and  entities  that
provide services or supplies to the  Partnership.  Management has not determined
the most likely worst case scenario to the  Partnership.  As management  studies
the findings of its property  systems  assessment and testing,  management  will
develop  a better  understanding  of what  would  be the  worst  case  scenario.
Management  believes  that  progress  on all  areas is  proceeding  and that the
Partnership  will  experience  no  adverse  effect  as a result of the year 2000
issue. However, there is no assurance that this will be the case.




<PAGE>
Contingency plans
-----------------

Management  is  developing  contingency  plans to  address  potential  year 2000
non-compliance of IT and embedded technology  systems.  Management believes that
failure of any IT system could have an adverse  impact on  operations.  However,
management  believes  that  alternative  systems  are  available  that  could be
utilized to minimize  such impact.  Management  believes that any failure in the
embedded  technology  systems  could have an adverse  impact on that  property's
performance.  Management  will assess these risks and develop  plans to mitigate
possible failures by June, 1999.

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

Not Applicable.




<PAGE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------  --------------------------------------------

<TABLE>
<CAPTION>

                                                                                                      Page
                                                                                                      Number
                                                                                                      ------
INDEX TO FINANCIAL STATEMENTS
-----------------------------

Financial Statements:

<S>                                                                                                      <C>
   Report of Independent Public Accountants.......................................                       16

   Balance Sheets at December 31, 1998 and 1997...................................                       17

   Statements of Operations for each of the three years in the period
      ended December 31, 1998.....................................................                       18

   Statements of Partners' Deficit for each of the three years
      in the period ended December 31, 1998.......................................                       19

   Statements of Cash Flows for each of the three years in the period
      ended December 31, 1998.....................................................                       20

   Notes to Financial Statements..................................................                       22

   Financial Statement Schedule -

      Schedule III - Real Estate Investments and Accumulated
         Depreciation.............................................................                       32



</TABLE>












All other  schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.


<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Partners of
McNeil Real Estate Fund XI, Ltd.:

We have audited the  accompanying  balance sheets of McNeil Real Estate Fund XI,
Ltd. (a California  limited  partnership)  as of December 31, 1998 and 1997, and
the related statements of operations,  partners' deficit and cash flows for each
of the three  years in the period  ended  December  31,  1998.  These  financial
statements  and the  schedule  referred to below are the  responsibility  of the
Partnership's  management.  Our responsibility is to express an opinion on these
financial statements and the schedule based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 financial  statements  referred to above present fairly, in
all material  respects,  the  financial  position of McNeil Real Estate Fund XI,
Ltd. as of December 31, 1998 and 1997, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial  statements  taken as a whole.  The  schedule  listed  in the index to
financial  statements is presented for purposes of complying with the Securities
and  Exchange  Commission's  rules  and  is not  part  of  the  basic  financial
statements.  This schedule has been subjected to the auditing procedures applied
in our audits of the basic  financial  statements  and, in our  opinion,  fairly
states in all material  respects  the  financial  data  required to be set forth
therein in relation to the basic financial statements taken as a whole.


/s/  Arthur Andersen LLP


Dallas, Texas
   March 19, 1999



<PAGE>
                        McNEIL REAL ESTATE FUND XI, LTD.

                                 BALANCE SHEETS

<TABLE>
<CAPTION>


                                                                           December 31,
                                                                 ----------------------------------
                                                                     1998                 1997
                                                                 ------------         -------------
ASSETS
------

Real estate investments:
<S>                                                              <C>                  <C>         
   Land .................................................        $  4,407,325         $  4,407,325
   Buildings and improvements ...........................          48,327,237           47,211,527
                                                                 ------------         ------------
                                                                   52,734,562           51,618,852
   Less:  Accumulated depreciation ......................         (33,063,795)         (30,941,665)
                                                                 ------------         ------------
                                                                   19,670,767           20,677,187

Assets held for sale ....................................           4,765,942            5,910,865

Cash and cash equivalents ...............................           2,397,968            3,045,785
Cash segregated for security deposits ...................             459,382              413,487
Cash restricted for mortgage payments ...................             286,160                   --
Accounts receivable .....................................             149,681               40,018
Prepaid expenses and other assets .......................             233,791              242,961
Escrow deposits .........................................             617,502              683,785
Deferred borrowing costs, net of accumulated
   amortization of $682,223 and $677,649 at
   December 31, 1998 and 1997, respectively .............           1,165,186            1,355,831
                                                                 ------------         ------------
                                                                 $ 29,746,379         $ 32,369,919
                                                                 ============         ============
LIABILITIES AND PARTNERS' DEFICIT
---------------------------------

Mortgage notes payable, net .............................        $ 36,064,590         $ 36,207,678
Mortgage note payable - affiliate .......................                  --            2,588,971
Accrued interest ........................................             240,794              292,766
Accrued expenses and deferred rental income .............             414,875              382,446
Payable to affiliates - General Partner .................           2,950,388            2,231,389
Deferred gain - fire ....................................              25,037                   --
Security deposits .......................................             466,504              460,567
                                                                 ------------         ------------
                                                                   40,162,188           42,163,817
                                                                 ------------         ------------


Partners' deficit:
     Limited partners - 159,813 limited partnership
       units issued and outstanding at December 31,
       1998 and 1997 ....................................          (3,598,672)          (3,602,274)
     General Partner ....................................          (6,817,137)          (6,191,624)
                                                                 ------------         ------------
                                                                  (10,415,809)          (9,793,898)
                                                                 ------------         ------------
                                                                 $ 29,746,379         $ 32,369,919
                                                                 ============         ============

</TABLE>

                 See accompanying notes to financial statements.
<PAGE>
                        McNEIL REAL ESTATE FUND XI, LTD.

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                             For the Years Ended December 31,
                                                     -------------------------------------------------
                                                         1998               1997               1996 
                                                     -----------        -----------        -----------

Revenue:
<S>                                                  <C>                <C>                <C>        
   Rental revenue ...........................        $15,012,339        $15,187,999        $14,855,652
   Interest .................................            237,530            129,314            127,552
   Gain on involuntary conversion ...........                 --            219,628            598,859
   Gain on disposition of real estate .......          3,319,137                 --                 --
                                                     -----------        -----------        -----------
     Total revenue ..........................         18,569,006         15,536,941         15,582,063
                                                     -----------        -----------        -----------

Expenses:
   Interest .................................          3,443,644          3,535,009          3,784,555
   Interest - affiliates ....................            106,497            244,738             23,620
   Depreciation .............................          2,135,144          2,083,616          2,372,870
   Property taxes ...........................            825,119            793,994            787,865
   Personnel expenses .......................          1,934,708          1,808,610          1,716,875
   Repairs and maintenance ..................          2,028,214          2,133,196          1,921,900
   Property management fees -
     affiliates .............................            811,452            752,909            734,247
   Utilities ................................          1,159,166          1,161,104          1,093,688
   Other property operating expenses ........            742,860            809,790            775,491
   General and administrative ...............            592,301            197,770            432,407
   General and administrative -
     affiliates .............................            336,641            271,486            345,934
                                                     -----------        -----------        -----------
     Total expenses .........................         14,115,746         13,792,222         13,989,452
                                                     -----------        -----------        -----------

Net income ..................................        $ 4,453,260        $ 1,744,719        $ 1,592,611
                                                     ===========        ===========        ===========

Net income allocable to limited
   partners .................................        $ 4,225,017        $   577,182        $   804,036
Net income allocable to General
   Partner ..................................            228,243          1,167,537            788,575
                                                     -----------        -----------        -----------
Net income ..................................        $ 4,453,260        $ 1,744,719        $ 1,592,611
                                                     ===========        ===========        ===========

Net income per limited partnership unitxxxxxx        $     26.44        $      3.61        $      5.03
                                                     ===========        ===========        ===========

Distributions per limited partnership
   unit .....................................        $     26.41        $        --        $        --
                                                     ===========        ===========        ===========
</TABLE>





                 See accompanying notes to financial statements.
<PAGE>
                        McNEIL REAL ESTATE FUND XI, LTD.

                         STATEMENTS OF PARTNERS' DEFICIT

              For the Years Ended December 31, 1998, 1997 and 1996


<TABLE>
<CAPTION>

                                                                                              Total
                                                    General             Limited             Partners'
                                                    Partner            Partners              Deficit
                                                -------------        -------------        -------------
<S>                                             <C>                  <C>                  <C>          
Balance at December 31, 1995 ...........        $ (6,339,886)        $ (4,983,492)        $(11,323,378)

Net income .............................             788,575              804,036            1,592,611

Management Incentive Distribution.......            (902,697)                  --             (902,697)
                                                ------------         ------------         ------------

Balance at December 31, 1996 ...........          (6,454,008)          (4,179,456)         (10,633,464)

Net income .............................           1,167,537              577,182            1,744,719

Management Incentive Distribution ......            (905,153)                  --             (905,153)
                                                ------------         ------------         ------------

Balance at December 31, 1997 ...........          (6,191,624)          (3,602,274)          (9,793,898)

Net income .............................             228,243            4,225,017            4,453,260

Distributions to limited partners ......                  --           (4,221,415)          (4,221,415)

Management Incentive Distribution ......            (853,756)                  --             (853,756)
                                                ------------         ------------         ------------

Balance at December 31, 1998 ...........        $ (6,817,137)        $ (3,598,672)        $(10,415,809)
                                                ============         ============         ============
</TABLE>




                 See accompanying notes to financial statements.
<PAGE>
                        McNEIL REAL ESTATE FUND XI, LTD.

                            STATEMENTS OF CASH FLOWS

                Increase (Decrease) in Cash and Cash Equivalents

<TABLE>
<CAPTION>
                                                                For the Years Ended December 31,
                                                     -------------------------------------------------------
                                                           1998                1997                1996
                                                     -------------        -------------        -------------
Cash flows from operating activities:
<S>                                                  <C>                  <C>                  <C>         
   Cash received from tenants ...............        $ 14,884,390         $ 15,197,251         $ 14,877,289
   Cash paid to suppliers ...................          (6,352,045)          (6,259,909)          (5,836,491)
   Cash paid to affiliates ..................            (879,258)            (984,779)          (1,369,172)
   Interest received ........................             237,530              129,314              127,552
   Interest paid ............................          (3,271,612)          (3,352,192)          (3,645,580)
   Interest paid to affiliates ..............            (106,497)            (244,738)             (23,620)
   Property taxes paid ......................            (866,535)            (781,206)            (717,973)
                                                     ------------         ------------         ------------
Net cash provided by operating
   activities ...............................           3,645,973            3,703,741            3,412,005
                                                     ------------         ------------         ------------

Cash flows from investing activities:
   Additions to real estate investments
     and assets held for sale ...............          (1,342,388)          (1,516,353)          (2,467,045)
   Insurance proceeds from fire damage ......                  --              260,164              681,998
   Insurance proceeds from hail damage
   Proceeds from disposition of
     real estate ............................           4,787,389                   --                   --
                                                     ------------         ------------         ------------
Net cash provided by (used in)
   investing activities .....................           3,445,001           (1,256,189)          (1,718,031)
                                                     ------------         ------------         ------------

Cash flows from financing activities:
   Principal payments on mortgage
     notes payable ..........................            (487,451)            (481,928)            (476,968)
   Cash restricted for mortgage note
     payment ................................            (286,160)                  --                   --
   Deferred borrowing costs paid ............            (139,407)                  --              (13,157)
   Proceeds from mortgage notes
     payable ................................           8,860,000                   --                   --
   Repayment of mortgage note -
     affiliate ..............................          (2,588,971)                  --                   --
   Retirement of mortgage note payable ......          (5,974,783)                  --           (2,564,266)
   Retirement of mortgage note
     payable due to disposition .............          (2,565,604)                  --                   --
   Distributions to limited partners ........          (4,221,415)                  --                   --
   Mortgage loan from affiliate .............                  --                   --            2,588,971
   Management Incentive Distribution ........            (335,000)          (1,271,718)            (907,219)
                                                     ------------         ------------         ------------
Net cash used in financing activities .......          (7,738,791)          (1,753,646)          (1,372,639)
                                                     ------------         ------------         ------------

Net increase (decrease) in cash and
     cash equivalents .......................            (647,817)             693,906              321,335

Cash and cash equivalents at
     beginning of year ......................           3,045,785            2,351,879            2,030,544
                                                     ------------         ------------         ------------

Cash and cash equivalents at end
     of year ................................        $  2,397,968         $  3,045,785         $  2,351,879
                                                     ============         ============         ============
</TABLE>

See discussion of noncash investing and financing activities in Note 2, 7 and 9.

                 See accompanying notes to financial statements.
<PAGE>
                        McNEIL REAL ESTATE FUND XI, LTD.

                            STATEMENTS OF CASH FLOWS


              Reconciliation of Net Income to Net Cash Provided by
                              Operating Activities

<TABLE>
<CAPTION>

                                                                For the Years Ended December 31,
                                                      ---------------------------------------------------
                                                          1998                1997                1996
                                                      -----------         -----------         -----------
<S>                                                   <C>                 <C>                 <C>        
Net income ...................................        $ 4,453,260         $ 1,744,719         $ 1,592,611
                                                      -----------         -----------         -----------

Adjustments to reconcile net income
   to net cash provided by operating
   activities:
   Gain on involuntary conversion ............                 --            (219,628)           (598,859)
   Gain on disposition of real estate ........         (3,319,137)                 --                  --
   Depreciation ..............................          2,135,144           2,083,616           2,372,870
   Amortization of discounts on
     mortgage notes payable ..................             24,750              23,532              22,868
   Amortization of deferred borrowing
     costs ...................................            199,254             161,947             123,008
   Changes in assets and liabilities:
     Cash segregated for security
       deposits ..............................            (45,895)             (9,538)            (17,824)
     Accounts receivable .....................            (75,368)            (10,132)              1,441
     Prepaid expenses and other
       assets ................................              9,170              13,190              20,634
     Escrow deposits .........................             66,283             (21,782)            175,504
     Accounts payable ........................                 --             (52,886)             (9,170)
     Accrued interest ........................            (51,972)             (2,662)             (6,901)
     Accrued expenses and deferred
       rental income .........................             44,304             (73,411)             (1,127)
     Payable to affiliates - General
       Partner ...............................            200,243              39,616            (288,991)
     Security deposits .......................              5,937              27,160              25,941
                                                      -----------         -----------         -----------

         Total adjustments ...................            807,287           1,959,022           1,819,394
                                                      -----------         -----------         -----------

Net cash provided by operating
   activities ................................        $ 3,645,973         $ 3,703,741         $ 3,412,005
                                                      ===========         ===========         ===========
</TABLE>


                 See accompanying notes to financial statements.
<PAGE>
                        McNEIL REAL ESTATE FUND XI, LTD.

                          NOTES TO FINANCIAL STATEMENTS

                                December 31, 1998

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------

Organization
-------------

McNeil Real Estate Fund XI, Ltd. (the  "Partnership") was organized June 2, 1980
as a limited  partnership under the provisions of the California Uniform Limited
Partnership Act. The general partner of the Partnership is McNeil Partners, L.P.
(the "General Partner"), a Delaware limited partnership,  an affiliate of Robert
A. McNeil.  The  Partnership is governed by an amended and restated  partnership
agreement of limited  partnership dated August 6, 1991, as amended (the "Amended
Partnership Agreement"). The principal place of business for the Partnership and
for the General  Partner is 13760 Noel Road,  Suite 600,  LB70,  Dallas,  Texas,
75240.

The Partnership is engaged in real estate  activities,  including the ownership,
operation  and  management  of  residential  real  estate and other real  estate
related   assets.   At  December  31,   1998,   the   Partnership   owned  seven
income-producing properties as described in Note 4 - Real Estate Investments.

As previously announced, the Partnership has retained PaineWebber,  Incorporated
("PaineWebber")  as its exclusive  financial advisor to explore  alternatives to
maximize  the  value  of  the  Partnership,  including,  without  limitation,  a
transaction  in which  limited  partnership  interests  in the  Partnership  are
converted into cash. The Partnership,  through  PaineWebber,  provided financial
and other  information to interested  parties as part of an auction  process and
until early March 1999 was conducting  discussions with one bidder in an attempt
to reach a definitive  agreement  with respect to a sale  transaction.  In early
March 1999, because the Partnership had been unable to conclude negotiations for
a transaction with such bidder, the Partnership  terminated such discussions and
commenced   discussions   with  respect  to  a  sale  transaction  with  another
well-financed  bidder who had been  involved in the  original  auction  process.
During  the last full  week of  March,  the  Partnership  entered  into a 45 day
exclusivity  agreement with such party.  It is possible that the General Partner
and its  affiliates  will receive  non-cash  consideration  for their  ownership
interests in  connection  with any such  transaction.  There can be no assurance
regarding whether any such agreement will be reached nor the terms thereof.

The  Partnership  has  placed  Rock  Creek  Apartments  on the  market  for sale
effective October 1, 1996

Basis of Presentation
---------------------

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

<PAGE>
The  Partnership's  financial  statements  include the accounts of the following
listed tier  partnerships  for the years ended December 31, 1998, 1997 and 1996.
These single asset tier  partnerships were formed to accommodate the refinancing
of  the  respective  property.  The  Partnership's  and  the  General  Partner's
ownership  interest in each tier  partnership is detailed below. The Partnership
retains  effective  control  of each tier  partnership.  The  General  Partner's
minority interest is not presented as it is both negative or immaterial.

<TABLE>
<CAPTION>
                                                                % of Ownership Interest
   Tier Partnership                                        Partnership       General Partner
   ----------------                                        -----------       ---------------
   Limited Partnerships:
<S>                                                           <C>                      <C>
Acacia Lakes Fund XI Limited Partnership                      99%                      1%
Gentle Gale Fund XI Limited Partnership*                     100                       -
Rock Creek Fund XI Limited*                                  100                       -
Villa Del Rio XI Limited Partnership*                        100                       -
Village Fund XI Associates                                    99                       1

   General Partnerships:
Knollwood XI Associates                                       99                       1
The Park Fund XI Associates**                                 99                       1
Sun Valley Fund XI Associates                                 99                       1

</TABLE>

*    The general partner of these partnerships is a corporation whose stock   is
     100% owned by the Partnership.

**   The Partnership sold The Park Apartments on April 30, 1998.  See Note 7.

Adoption of Recent Accounting Pronouncements
--------------------------------------------

The Partnership has adopted Statement of Financial Accounting Standards No. 131,
"Disclosures  About  Segments of an Enterprise  and Related  Information  ("SFAS
131"). SFAS 131 requires an enterprise to report financial information about its
reportable operating segments, which are defined as components of a business for
which  separate  financial  information  is  evaluated  regularly  by the  chief
decision  maker  in  allocating   resources  and  assessing   performance.   The
Partnership  does not  prepare  such  information  for  internal  use,  since it
analyzes  the   performance  of  and  allocates   resources  for  each  property
individually.  The Partnership's  management has determined that it operates one
line of business and it would be  impracticable  to report segment  information.
Therefore, the adoption of SFAS 131 has no impact on the Partnership's financial
statements.











<PAGE>
Real Estate Investments
-----------------------

Real estate investments are generally stated at the lower of depreciated cost or
fair value. Real estate investments are reviewed for impairment  whenever events
or changes in  circumstances  indicate  that their  carrying  amounts may not be
recoverable in accordance with Statement of Financial  Accounting  Standards No.
121,  "Accounting  for the  Impairment of Long-Lived  Assets and for  Long-Lived
Assets to be Disposed Of". When the carrying value of a property exceeds the sum
of all estimated  future cash flows, an impairment  loss is recognized.  At such
time,  a  write-down  is  recorded  to reduce the basis of the  property  to its
estimated fair value.

Improvements and betterments are capitalized and expensed  through  depreciation
charges. Repairs and maintenance are charged to operations as incurred.

Assets Held for Sale
--------------------

The  assets  held for sale are stated at the lower of  depreciated  cost or fair
value less costs to sell.  Depreciation  on these assets ceased at the time they
were placed on the market for sale.

Depreciation
------------

Buildings and improvements are depreciated using the  straight-line  method over
the estimated useful lives of the assets, ranging from 3 to 40 years.

Cash and Cash Equivalents
-------------------------

Cash  and  cash  equivalents  include  cash on hand  and  cash on  deposit  with
financial  institutions  with  original  maturities  of  three  months  or less.
Carrying amounts for cash and cash equivalents approximate fair value.

Escrow Deposits
---------------

The  Partnership is required to maintain  escrow accounts in accordance with the
terms of various  mortgage  indebtedness  agreements.  These escrow accounts are
controlled by the mortgagee and are used for payment of property  taxes,  hazard
insurance,  capital improvements and/or property replacements.  Carrying amounts
for escrow deposits approximate fair value.

Deferred Borrowing Costs
------------------------

Loan fees and other related costs incurred to obtain long-term financing on real
property are  capitalized  and amortized  using a method that  approximates  the
effective  interest method over the terms of the related mortgage notes payable.
Amortization of deferred  borrowing costs is included in interest expense on the
Statements of Operations.






<PAGE>
Discounts on Mortgage Notes Payable
-----------------------------------

Discounts on mortgage notes payable are being amortized over the remaining terms
of the related mortgage notes using the effective interest method.  Amortization
of discounts on the mortgage  notes  payable is included in interest  expense on
the Statements of Operations.

Rental Revenue
--------------

The Partnership  leases its residential  properties under  short-term  operating
leases. Lease terms generally are less than one year in duration. Rental revenue
is recognized as earned.

Income Taxes
------------

No provision for Federal  income taxes is necessary in the financial  statements
of the  Partnership  because,  as a  partnership,  it is not  subject to Federal
income tax, and the tax effect of its activities accrues to the partners.

Allocation of Net Income and Net Loss
--------------------------------------

The Amended Partnership Agreement provides for net income of the Partnership for
both  financial  statement and income tax reporting  purposes to be allocated as
indicated  below.  For  allocation  purposes,  net  income  and net  loss of the
Partnership are determined prior to deductions for depreciation:

a)      first, deductions for depreciation shall be allocated 5% to the  General
        Partner and 95% to the limited partners;

b)      then,  net income in an amount equal to the  cumulative  amount  paid to
        the General Partner for the Management Incentive  Distribution  ("MID"),
        for which no  previous  income  allocations  have been  made,   shall be
        allocated to the General Partner;  provided,  however, that if  all or a
        portion  of  such  payment  consists  of  limited   partnership    units
        ("Units"),  the  amount of net income  allocated  shall be equal  to the
        amount of cash the General Partner would have otherwise received; and

c)      then, any  remaining net  income  shall   be  allocated  to achieve  the
        allocation of 5% to the General Partner and 95% to the limited partners.

The Amended  Partnership  Agreement  provides  that net losses,  other than that
arising from a sale or refinancing, shall be allocated 5% to the General Partner
and 95% to the limited partners.

Net losses arising from  a  sale  or   refinancing  shall be allocated 1% to the
General  Partner and 99% to the limited partners.

Federal  income tax law provides  that the  allocation of loss to a partner will
not be  recognized  unless the  allocation  is in  accordance  with a  partner's
interest in the partnership or the allocation has substantial  economic  effect.
Internal  Revenue  Code Section  704(b) and  accompanying  Treasury  Regulations
establish  criteria for  allocations of Partnership  deductions  attributable to
debt. The  Partnership's  tax allocations for 1998, 1997 and 1996 have been made
in accordance with these provisions.

<PAGE>
Distributions
-------------

Pursuant to the  Amended  Partnership  Agreement  and at the  discretion  of the
General  Partner,  distributions  during  each  taxable  year  shall  be made as
follows:

(a)      first, to the General Partner, in an amount equal to the MID; and

(b)      any remaining distributable cash, as defined, shall be distributed 100%
         to the limited partners.

Cash  distributions  of $4,221,415 were made to the limited partners in 1998. No
distributions were made to the limited partners in 1997 or 1996. The Partnership
paid or accrued distributions of $853,756, $905,153 and $902,697 for the benefit
of the General  Partner for the years ended  December 31,  1998,  1997 and 1996,
respectively.   These   distributions  are  the  MID  pursuant  to  the  Amended
Partnership  Agreement.  The General Partner has waived the collection  terms of
reimbursable  expenses  and MID,  and has  elected  for the  Partnership  to pay
limited  partner  distributions  before the payment of such amounts.  During the
last week of March 1999, the Partnership  distributed  approximately $500,000 to
the limited partners of record at March 1, 1999.

Net Income Per Limited Partnership Unit
---------------------------------------

Net income per Unit is computed by dividing net income  allocated to the limited
partners  by the  number of Units  outstanding.  Per Unit  information  has been
computed based on 159,813 Units outstanding in 1998, 1997 and 1996.

NOTE 2 - TRANSACTIONS WITH AFFILIATES
-------------------------------------

The  Partnership  pays property  management fees equal to 5% of the gross rental
receipts of the Partnership's properties to McNeil Real Estate Management,  Inc.
("McREMI"),  an  affiliate  of  the  General  Partner,  for  providing  property
management and leasing services.

The  Partnership  reimburses  McREMI  for  its  costs,  including  overhead,  of
administering the Partnership's affairs.

Under terms of the Amended Partnership Agreement,  the Partnership is paying the
MID to the General Partner.  The maximum MID is calculated as 1% of the tangible
asset value of the Partnership.  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 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 maximum MID  percentage
decreases to .75% in 2000, .50% in 2001 and .25% thereafter.

The MID will be paid to the  extent of the  lesser of the  Partnership's  excess
cash flow as defined,  or net  operating  income,  as defined (the  "Entitlement
Amount"),  and may be paid (i) in cash, unless there is insufficient cash to pay
the  distribution  in which event any unpaid  portion not taken in Units will be
deferred and is payable,  without interest, from the first available cash and/or
(ii) in Units.  A maximum of 50% of the MID may be paid in Units.  The number of
Units  issued in payment  of the MID is based on the  greater of $50 per Unit or
the net  tangible  asset  value per Unit,  as  defined.  No Units were issued in
payment of the MID in 1998, 1997 or 1996.
<PAGE>
During  1991,  the  Partnership  amended  its  capitalization  policy  and began
capitalizing  certain costs of improvements and betterments which under policies
of  prior  management  had been  expensed  when  incurred.  The  purpose  of the
amendment was to more properly recognize items which were capital in nature. The
effect of the amendment  standing alone was evaluated at the time the change was
made and  determined  not to be  material  to the  financial  statements  of the
Partnership  in 1991,  nor was it expected  to be  material in any future  year.
However,  the amendment  can have a material  effect on the  calculation  of the
Entitlement   Amount  which  determines  the  amount  of  MID  earned.   Capital
improvements  are  excluded  from cash flow,  as defined.  The  majority of base
period cash flow was measured under the previous  capitalization  policy,  while
incentive  period cash flow is determined  using the amended  policy.  Under the
amended  policy,  more  items  are  capitalized,  and cash flow  increases.  The
amendment of the  capitalization  policy did not  materially  affect the MID for
1998,  1997 or 1996 because the  Entitlement  Amount was  sufficient  to pay MID
notwithstanding the amendment to the capitalization policy.

Any  amount  of the MID that is paid to the  General  Partner  in Units  will be
treated as if cash is distributed to the General Partner and is then contributed
to the Partnership by the General Partner. The MID represents a return of equity
to the General Partner for increasing cash flow, as defined,  and accordingly is
treated as a distribution.

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

<TABLE>
<CAPTION>
                                                             For the Years Ended December 31,
                                                        1998               1997              1996
                                                     ----------        ----------        ----------
<S>                                                  <C>               <C>               <C>       
Property management fees - affiliates .......        $  811,452        $  752,909        $  734,247
Interest - affiliates .......................           106,497           244,738            23,620
Charged to general and
   administrative - affiliates:
   Partnership administration ...............           336,641           271,486           345,934
                                                     ----------        ----------        ----------
                                                     $1,254,590        $1,269,133        $1,103,801
                                                     ==========        ==========        ==========
Charged to General Partner's deficit:
   MID ......................................        $  853,756        $  905,153        $  902,697
                                                     ==========        ==========        ==========
</TABLE>

Payable to affiliates - General  Partner at December 31, 1998 and 1997 consisted
primarily of accrued property  management fees, MID and cost  reimbursements and
are due and payable from  operations.  In 1998 and 1997,  the  Partnership  paid
$335,000  and  $1,271,718,  respectively,  from cash  reserves  for the MID. The
General  Partner has waived the collection  terms of  reimbursable  expenses and
MID, and has elected for the  Partnership to pay limited  partner  distributions
before the payment of such amounts.







<PAGE>
NOTE 3 - TAXABLE INCOME
-----------------------

McNeil Real Estate Fund XI, Ltd. is a partnership  and is not subject to Federal
and state income taxes.  Accordingly,  no  recognition  has been given to income
taxes in the  accompanying  financial  statements of the  Partnership  since the
income or loss of the  Partnership  is to be  included in the tax returns of the
individual  partners.  The  tax  returns  of  the  Partnership  are  subject  to
examination by Federal and state taxing authorities. If such examinations result
in  adjustments  to  distributive  shares of  taxable  income  or loss,  the tax
liability of the partners could be adjusted accordingly.

The Partnership's net assets and liabilities for tax purposes were less than the
net assets and  liabilities  for financial  reporting  purposes by $2,449,717 in
1998, $261,840 in 1997and $831,834 in 1996.

NOTE 4 - REAL ESTATE INVESTMENTS
--------------------------------

The  basis  and  accumulated  depreciation  of  the  Partnership's  real  estate
investments at December 31, 1998 and 1997 are set forth in the following tables:

<TABLE>
<CAPTION>
                                                   Buildings and       Accumulated           Net Book
       1998                         Land           Improvements        Depreciation            Value
       ----                    --------------      ------------        ------------       ---------------

Acacia Lakes
<S>                            <C>                 <C>                 <C>                 <C>           
   Mesa, AZ                    $    1,953,090      $   13,505,267      $   (9,844,141)     $    5,614,216
Gentle Gale
   Galveston, TX                      450,155           3,837,200          (2,700,717)          1,586,638
Knollwood
   Kansas City, MO                    330,547           7,481,953          (4,997,953)          2,814,547
Sun Valley
   Charlotte, NC                      562,797           8,887,177          (5,329,739)          4,120,235
Villa Del Rio
   Jacksonville, FL                   636,634          10,072,157          (6,661,746)          4,047,045
The Village
   Gresham, OR                        474,102           4,543,483          (3,529,499)          1,488,086
                                -------------       -------------       -------------       -------------
                               $    4,407,325      $   48,327,237      $  (33,063,795)     $   19,670,767
                                =============       =============       =============       =============

                                                   Buildings and       Accumulated           Net Book
       1997                         Land           Improvements        Depreciation            Value
       ----                    --------------      ------------        ------------       ---------------

Acacia Lakes                   $    1,953,090      $   13,280,033      $   (9,302,116)     $    5,931,007
Gentle Gale                           450,155           3,768,457          (2,533,853)          1,684,759
Knollwood                             330,547           7,257,557          (4,638,122)          2,949,982
Sun Valley                            562,797           8,654,858          (4,963,089)          4,254,566
Villa Del Rio                         636,634           9,760,851          (6,264,146)          4,133,339
The Village                           474,102           4,489,771          (3,240,339)          1,723,534
                                -------------       -------------       -------------       -------------
                               $    4,407,325      $   47,211,527      $  (30,941,665)     $   20,677,187
                                =============       =============       =============       =============
</TABLE>
<PAGE>
On August 1, 1997, the General  Partner placed The Park  Apartments,  located in
Joplin,  Missouri,  on the market for sale.  The property was  classified  as an
asset held for sale at December 31, 1997. The net book value of the property was
$1,341,317 at December 31, 1997.  On April 30, 1998,  the  Partnership  sold The
Park Apartments. See Note 7.

On October 1, 1996, the General Partner placed Rock Creek Apartments, located in
Portland,  Oregon,  on the market for sale.  The property was  classified  as an
asset held for sale at  December  31,  1998 and 1997.  The net book value of the
property  was   $4,765,942  and  $4,569,548  at  December  31,  1998  and  1997,
respectively.

The results of operations for the assets held for sale at December 31, 1998 were
$600,215,  $671,919 and $263,104 for 1998, 1997 and 1996, respectively.  Results
of operations are operating  revenues less operating expenses including interest
expense and depreciation expense.

The Partnership's real estate properties are encumbered by mortgage indebtedness
as discussed in Notes 5 and 6.

NOTE 5 - MORTGAGE NOTES PAYABLE
-------------------------------

The following  table sets forth the mortgage notes payable of the Partnership at
December  31,  1998 and 1997.  All  mortgage  notes are  secured by real  estate
investments or the assets held for sale.

<TABLE>
<CAPTION>

                         Mortgage         Annual       Monthly
                         Lien             Interest     Payments/                       December 31,
Property                 Position    (a)  Rates %      Maturity Date (g)           1998                1997
--------                 ---------------  -------      -----------------      ---------------     --------------

<S>                      <C>                  <C>      <C>           <C>       <C>               <C>            
Acacia Lakes             First                8.700    $   71,069    01/01     $    8,680,219    $     8,773,421
                                                                                -------------     --------------

Gentle Gale (f)          First                8.150        22,327    07/03          2,530,638          2,589,676
                         Discount (b)                                                 (41,502)           (50,020)
                                                                                -------------     --------------
                                                                                    2,489,136          2,539,656
                                                                                -------------     --------------

Knollwood                First                7.750        32,506    05/24          4,326,728          4,379,253
                                                                                -------------     --------------

Rock Creek               First (c)          Variable      Variable   10/01          6,225,000                  -
                         First               11.875        67,860    02/01                  -          6,049,641
                                                                                -------------     --------------
                                                                                    6,225,000          6,049,641
                                                                                -------------     --------------

Sun Valley               First                7.875        48,384    06/24          6,376,663          6,451,832
                                                                                -------------     --------------
</TABLE>


<PAGE>
<TABLE>
<CAPTION>

                         Mortgage         Annual       Monthly
                         Lien             Interest     Payments/                       December 31,
Property                 Position    (a)  Rates %      Maturity Date (g)           1998                1997
--------                 ---------------  -------      -----------------      ---------------     --------------
<S>                      <C>                  <C>      <C>           <C>       <C>               <C>            

The Park                 First (d)           10.500        24,021    05/24                  -          2,571,755
                                                                                -------------     --------------

The Village              First (e)          Variable      Variable   05/01          2,635,000                  -
                                                                                -------------     --------------

Villa Del Rio (f)        First                8.150        47,843    07/03          5,422,798          5,549,306
                         Discount (b)                                                 (90,954)          (107,186)
                                                                                -------------     ---------------
                                                                                    5,331,844          5,442,120
                                                                                -------------     --------------

                                                                               $   36,064,590    $    36,207,678
                                                                                =============     ==============
</TABLE>

(a)   The debt is non-recourse to the Partnership.

(b)   Discounts are based on an effective interest rate of 8.62%.

(c)  On September 28, 1998, the Partnership refinanced the mortgage note payable
     on Rock Creek.  The new  mortgage  note bears  interest at a variable  rate
     equal to 1.75%  plus the  London  Interbank  Offered  Rate  ("LIBOR").  The
     interest  rate is adjusted  every three  months.  Terms of the note require
     monthly interest-only debt service payments, plus annual principal payments
     equal to 5% of the outstanding principal balance. At December 31, 1998, the
     interest rate of the mortgage note was 7.06%. See Note 8.

(d)  On April 30, 1998, The Park was sold.  See Note 7.

(e)  On April 27, 1998, the Partnership  refinanced the mortgage note payable on
     The Village.  The new mortgage note bears interest at a variable rate equal
     to 1.75% plus the London  Interbank  Offered Rate  ("LIBOR").  The interest
     rate is adjusted  every three  months.  Terms of the note  require  monthly
     interest-only  debt service payments,  plus annual principal payments equal
     to 5% of the  outstanding  principal  balance.  At December 31,  1998,  the
     interest rate of the mortgage note was 7.37%. See Note 6 and 8.

(f)  Financing was obtained under the terms of a Real Estate Mortgage Investment
     Conduit  financing.  The mortgage  notes payable are  cross-collateralized.
     Principal  prepayments  made  before  July  2000  are  subject  to a  Yield
     Maintenance premium, as defined.  Additionally,  the Partnership must pay a
     release  payment equal to 25% of the prepaid  balance which will be applied
     to the remaining mortgage notes in the collateral pool.






<PAGE>
(g)  Balloon payments on the mortgage notes are due as follows:

           Property                         Balloon Payment          Date
           --------                         ---------------          ----

        Acacia Lakes                         $  8,468,000            01/01
        Rock Creek                              5,766,000            10/01
        The Village                             2,380,000            05/01
        Gentle Gale                             2,197,000            07/03
        Villa Del Rio                           4,707,000            07/03

Scheduled principal  maturities of the mortgage notes,  before  consideration of
discounts of $132,456, are as follows:

                                                      Real Estate    Asset Held
                                                      Investments     For Sale
                                                     ------------   ------------

        1999....................................     $    570,214   $    155,000
        2000....................................          603,912        303,500
        2001....................................       11,246,139      5,766,500
        2002....................................          431,266              -
        2003....................................        5,032,325              -
        Thereafter..............................       12,088,190              -
                                                      -----------    -----------
          Total.................................     $ 29,972,046   $  6,225,000
                                                      ===========    ===========

Based on borrowing  rates  currently  available to the  Partnership for mortgage
loans with similar terms and average maturities, the fair value of notes payable
was  approximately  $36,137,000  as of December 31, 1998 and  $38,601,000  as of
December 31, 1997.

NOTE 6 - MORTGAGE NOTE PAYABLE - AFFILIATE
------------------------------------------

The  following  sets  forth  the  mortgage  note  payable  -  affiliate  of  the
Partnership  at December 31, 1998 and 1997. The mortgage note was secured by the
real estate investment.

<TABLE>
<CAPTION>
                         Mortgage         Annual       Monthly
                         Lien             Interest     Payments/                       December 31,
Property                 Position    (a)  Rates %      Maturity Date               1998             1997
--------                 ---------------  -------      -------------------    ---------------    -----------

<S>                      <C>                  <C>     <C>            <C>     <C>                 <C>      
The Village (b)          First                (c)      Variable      11/99   $              -    $ 2,588,971
                                                                              ===============     ==========
</TABLE>

(a)   The debt is non-recourse to the Partnership.






<PAGE>
(b)  In October 1996, the  Partnership  obtained a mortgage note commitment from
     an  affiliate  of the General  Partner for an amount up to  $2,588,971.  On
     November 25, 1996,  $2,588,971 was funded to the Partnership to pay off the
     mortgage note on The Village.  The Partnership  incurred deferred borrowing
     costs of  $13,157  for the new  mortgage  note  payable,  and the  deferred
     borrowing  costs for the old  mortgage  note  payable  were written off. On
     April 27, 1998, the mortgage note was paid in full.

(c)  The note  required  monthly  payments of  interest  only equal to the prime
     lending rate plus 1%. At December 31, 1997, the prime rate was 8.50%.

Under the terms of the Amended Partnership Agreement, borrowings from affiliates
approximate fair market value.

NOTE 7 - DISPOSITION OF PROPERTY
---------------------------------

On April 30,1998, the Partnership sold to an unaffiliated buyer, The Park, a 192
unit  apartment  complex  in  Joplin,  Missouri,  for a cash  purchase  price of
$4,900,000.  Cash  proceeds  from  this  transaction,  as  well  as the  gain on
disposition are detailed below.

<TABLE>
<CAPTION>
                                                                       Gain on
                                                                     Disposition          Cash Proceeds
                                                                   ----------------       -------------

<S>                                                                <C>                    <C>         
       Cash sales price.....................................       $     4,900,000        $  4,900,000

       Selling costs........................................              (112,611)           (112,611)
       Basis of real estate sold............................            (1,349,329)
       Deferred revenue written-off.........................                11,875
       Deferred borrowing costs written off...............                (130,798)
                                                                   ---------------         -----------

       Gain on sale of real estate..........................       $     3,319,137
                                                                    ==============

       Proceeds from sale of real estate....................                                 4,787,389
       Retirement of mortgage note payable..................                                (2,565,604)
                                                                                           -----------

       Net cash proceeds....................................                              $  2,221,785
                                                                                           ===========
</TABLE>

NOTE 8 - REFINANCING OF MORTGAGE NOTES PAYABLE
----------------------------------------------

On September 28, 1998, the Partnership  refinanced the Rock Creek mortgage note.
The new mortgage note, in the amount of $6,225,000  bears interest at a variable
rate equal to 1.75% plus the London  Interbank  Offered Rate per annum (7.06% at
December  31,  1998).  The new  mortgage  note  requires  monthly  interest-only
payments and annual principal payments equal to 5% of the outstanding  principal
balance of the mortgage note.  Terms of the new note require the  Partnership to


<PAGE>
deposit  funds  into  a  restricted  cash  account  on a  quarterly  basis.  The
restricted  funds  will  be used to pay the  annual  principal  payment  and are
included in cash  restricted  for mortgage  payments on the Balance  Sheet.  The
maturity  date of the new mortgage  note is October 1, 2001.  Cash proceeds from
the refinancing transaction are as follows:

       New mortgage note proceeds...........................     $ 6,225,000
       Amount required to payoff existing debt..............       5,974,783
                                                                  ----------

       Cash proceeds from refinancing.......................     $   250,217
                                                                  ==========

The  Partnership  incurred  $82,273 of deferred  borrowing  costs related to the
refinancing of the Rock Creek mortgage note.

On April 27, 1998, the Partnership refinanced The Village mortgage note. The new
mortgage  note,  in the amount of $2,635,000  bears  interest at a variable rate
equal to 1.75%  plus the  London  Interbank  Offered  Rate per  annum  (7.37% at
December  31,  1998).  The new  mortgage  note  requires  monthly  interest-only
payments and annual principal payments equal to 5% of the outstanding  principal
balance of the mortgage note.  Terms of the new note require the  Partnership to
deposit  funds  into  a  restricted  cash  account  on a  quarterly  basis.  The
restricted  funds  will  be used to pay the  annual  principal  payment  and are
included in cash  restricted  for mortgage  payments on the Balance  Sheet.  The
maturity  date of the new mortgage  note is May 1, 2001.  Cash proceeds from the
refinancing transaction are as follows:

       New mortgage note proceeds...........................     $  2,635,000
       Amount required to payoff existing debt..............        2,588,971
                                                                  -----------

       Cash proceeds from refinancing.......................     $     46,029
                                                                  ===========

The  Partnership  incurred  $57,134 of deferred  borrowing  costs related to the
refinancing of The Village mortgage note.

NOTE 9 - GAIN ON INVOLUNTARY CONVERSION
---------------------------------------

On November 5, 1998, a fire destroyed two units and damaged four units at Gentle
Gale  Apartments.  The  Partnership  expects  to receive  $34,295  in  insurance
reimbursements  to cover  the cost of  repairs  which is  included  in  accounts
receivable  as of December 31, 1998. A deferred  gain of $25,037 was recorded by
the Partnership as of December 31, 1998. The deferred gain represents the amount
of  insurance  reimbursements  to be  received  in  excess  of the  basis of the
property  destroyed.  The deferred  gain will be  recognized  when the insurance
proceeds are received.

On January 25, 1997, a fire  destroyed  two units at The Park.  The  Partnership
received  $37,624  in  insurance  reimbursements  to cover the cost of  repairs.
Insurance  reimbursements received in excess of the basis of the property damage
were recorded as a $22,630 gain on involuntary conversion.





<PAGE>
On  January  20,  1997,  a  fire  destroyed  three  units  at The  Village.  The
Partnership  received $49,552 in insurance  reimbursements  to cover the cost of
repairs.  Insurance  reimbursements  received  in  excess  of the  basis  of the
property damage were recorded as a $24,010 gain on involuntary conversion.

On January 8, 1996, 23,347 square feet of Knollwood Apartments were destroyed by
fire  causing  approximately  $857,000  in  damages.  The  Partnership  received
$681,998 in insurance  reimbursements as of December 31, 1996, to cover the cost
to repair Knollwood. Insurance reimbursements received in excess of the basis of
the property damaged were recorded as a $531,843 gain on involuntary  conversion
during  1996.  In 1997,  the  Partnership  received  an  additional  $172,988 in
insurance  reimbursements,  all of which was  recorded as a gain on  involuntary
conversion.

In 1994, the  Partnership  received  $67,016 in insurance  proceeds to cover the
cost of repairs  caused by a hail storm in August 1994 at Knollwood  Apartments.
The insurance proceeds were placed in escrow until completion of repairs. During
1996, the Partnership completed the repairs, received the proceeds that had been
held in escrow, and recorded a $67,016 gain on the involuntary conversion.

NOTE 10 - LEGAL PROCEEDINGS
---------------------------

The Partnership is not party to, nor are any of the Partnership's properties the
subject of, any material pending legal proceedings, other than ordinary, routine
litigation incidental to the Partnership's business, except for the following:

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 XXIII,  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., Hearth Hollow  Associates,  McNeil Midwest  Properties I, L.P. and
Regency North Associates,  L.P., - 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  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.  On
October  31,  1997,  the  Plaintiffs  filed a second  consolidated  and  amended
complaint. The case was stayed pending settlement discussions.  A Stipulation of
Settlement dated September 15, 1998 has been signed by the parties.  Preliminary
Court  approval was received on October 6, 1998. A hearing for Final Approval of
Settlement, initially scheduled for December 17, 1998, has been continued to May
25, 1999.

Because McNeil Real Estate Fund XXIII,  L.P., Hearth Hollow  Associates,  McNeil
Midwest  Properties I, L.P. and Regency North Associates,  L.P. would be part of
the  transaction  contemplated  in the settlement  and Plaintiffs  claim that an
effort should be made to sell the McNeil Partnerships,  Plaintiffs have included
allegations with respect to McNeil Real Estate Fund XXIII,  L.P.,  Hearth Hollow
Associates, McNeil Midwest Properties I, L.P. and Regency North Associates, L.P.
in the third consolidated and amended complaint.

Plaintiff's  counsel  intends  to seek an  order  awarding  attorney's  fees and
reimbursements  of their  out-of-pocket  expenses.  The  amount of such award is
undeterminable  until  final  approval  is  received  from the  court.  Fees and
expenses shall be allocated amongst the Partnerships on a pro rata basis,  based
upon  tangible  asset value of each such  partnership,  less total  liabilities,
calculated in accordance with the Amended Partnership Agreements for the quarter
most recently ended.

NOTE 11 - COMMITMENTS AND CONTINGENCIES
---------------------------------------

Environmental laws create potential liabilities that may affect property owners.
The environmental  laws of Federal and certain state  governments,  for example,
impose liability on current and certain past owners of property from which there
is a release  or threat of  release  of  hazardous  substances.  This  liability
includes costs of investigation and remediation of the hazardous  substances and
natural resource  damages.  Liability for costs of investigation and remediation
is strict and may be imposed  irrespective  of whether the property owner was at
fault,  although  there are a number of  defenses.  Both  governments  and third
parties may seek recoveries under these laws.

Third parties also may seek  recovery  under the common law for damages to their
property  or person,  against  owners of  property  from which  there has been a
release of hazardous and other substances.

The presence of  contamination  or the failure to remediate  contaminations  may
adversely  affect the owner's  ability to sell or lease real estate or to borrow
using the real estate as collateral.




<PAGE>
Various  buildings at properties do or may contain  building  materials that are
the subject of various  regulatory  programs  intended to protect  human health.
Such building materials include,  for example,  asbestos,  lead-based paint, and
lead plumbing components.  The Company has implemented programs to deal with the
presence  of those  materials,  which  include,  as  appropriate,  reduction  of
potential  exposure  situations.  The Company does not believe that the costs of
such programs are likely to have a material adverse effect. Failure to implement
such programs can result in regulatory  violations or liability claims resulting
from alleged exposure to such materials.

In connection with the proposed sale transaction as more fully described in Note
1 -  "Organization  and Summary of  Significant  Accounting  Policies",  Phase I
environmental  site  assessments  have been completed for each property owned by
the Partnership. Such environmental assessments performed on the properties have
not revealed any  environmental  liability that the  Partnership  believes would
have a material adverse effect on the Partnership's business, assets, or results
of  operations.  The  Partnership  has not  been  notified  by any  governmental
authority of any non-compliance, liability or other claim in connection with any
of its  properties.  There can be no  assurances,  however,  that  environmental
liabilities  have  not  developed  since  such  environmental  assessments  were
prepared,  or that future uses or  conditions  (including,  without  limitation,
changes in applicable  environmental  laws and  regulations)  will not result in
imposition of environmental liability.



<PAGE>
                        McNEIL REAL ESTATE FUND XI, LTD.
                                  SCHEDULE III
              REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
                                December 31, 1998

<TABLE>
<CAPTION>
                                                                                                       Costs
                                                       Initial Cost (b)           Cumulative        Capitalized
                          Related (b)                         Buildings and      Write-down for      Subsequent
Description               Encumbrances         Land           Improvements       Impairment (d)     To Acquisition
-----------               -------------        -----          --------------     --------------     --------------

APARTMENTS:

Acacia Lakes
<S>                        <C>               <C>               <C>                <C>              <C>          
   Mesa, AZ                $    8,680,219    $    1,953,090    $   10,784,729     $          -     $   2,720,538

Gentle Gale
   Galveston, TX                2,489,136           450,155         2,925,081          (21,141)          933,260

Knollwood
   Kansas City, MO              4,326,728           330,547         5,122,225                -         2,359,728

Sun Valley
   Charlotte, NC                6,376,663           562,797         7,056,988                -         1,830,189

Villa Del Rio
   Jacksonville, FL             5,331,844           636,634         7,685,383                -         2,386,774

The Village
   Gresham, OR                  2,635,000           474,102         3,372,567                -         1,170,916
                           --------------    --------------    --------------     ------------     -------------

                          $    29,839,590   $     4,407,325   $    36,946,973    $     (21,141)    $  11,401,405
                           ==============    ==============    ==============     ============      ============

Asset Held for Sale:

Rock Creek (c)
   Portland, OR           $     6,225,000
                           ==============
</TABLE>

(b)  The initial cost and encumbrances  reflect the present value of future loan
     payments  discounted,  if  appropriate,  at a  rate  estimated  to  be  the
     prevailing interest rate at the date of acquisition or refinancing.

(c)  Asset  held for sale is  stated at the  lower of  depreciated  cost or fair
     value less costs to sell.  Historical cost net of accumulated  depreciation
     and write-downs  becomes the new cost basis when the asset is classified as
     "Held for  sale."  Depreciation  ceases at the time they are  placed on the
     market for sale.

(d)  The   carrying   value  of Gentle Gale Apartments was reduced by $21,141 in
     1990.

                     See accompanying notes to Schedule III.
<PAGE>
                        McNEIL REAL ESTATE FUND XI, LTD.
                                  SCHEDULE III
              REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
                                December 31, 1998

<TABLE>
<CAPTION>
                                            Gross Amount at
                                     Which Carried at Close of Period
                                                 Buildings and                        Accumulated
Description                      Land            Improvements          Total (a)      Depreciation
-----------                      ----            --------------        ---------      ------------
APARTMENTS:

Acacia Lakes
<S>                           <C>                <C>              <C>                 <C>            
   Mesa, AZ                   $    1,953,090     $   13,505,267   $     15,458,357    $   (9,844,141)

Gentle Gale
   Galveston, TX                     450,155          3,837,200          4,287,355        (2,700,717)

Knollwood
   Kansas City, MO                   330,547          7,481,953          7,812,500        (4,997,953)

Sun Valley
   Charlotte, NC                     562,797          8,887,177          9,449,974        (5,329,739)

Villa Del Rio
   Jacksonville, FL                  636,634         10,072,157         10,708,791        (6,661,746)

The Village
   Gresham, OR                       474,102          4,543,483          5,017,585        (3,529,499)
                              --------------      -------------     --------------      ------------
                             $     4,407,325     $   48,327,327    $    52,734,562     $ (33,063,795)
                              ==============      =============     ==============      ============

Asset Held for Sale:

Rock Creek (c)
   Portland, OR                                                    $     4,765,942
                                                                    ==============
</TABLE>


(a)  For Federal income tax purposes,  the properties are depreciated over lives
     ranging from 5-27.5 years using ACRS or MACRS  methods.  The aggregate cost
     of real estate  investments for Federal income tax purposes was $71,002,898
     and accumulated depreciation was $56,512,227 at December 31, 1998.

(c)  Asset  held for sale is  stated at the  lower of  depreciated  cost or fair
     value less costs to sell.  Historical cost net of accumulated  depreciation
     and write-downs  becomes the new cost basis when the asset is classified as
     "Held for  sale."  Depreciation  ceases at the time they are  placed on the
     market for sale.

                     See accompanying notes to Schedule III.
<PAGE>
                        McNEIL REAL ESTATE FUND XI, LTD.
                                  SCHEDULE III
              REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
                                December 31, 1998

<TABLE>
<CAPTION>


                                 Date of                    Date                Depreciable
Description                   Construction                Acquired              lives (years)
-----------                   ------------                --------              -------------

APARTMENTS:

Acacia Lakes
<S>                             <C>                         <C>                     <C> 
   Mesa, AZ                     1980                        05/81                   3-33

Gentle Gale
   Galveston, TX                1980                        05/81                   3-21

Knollwood
   Kansas City, MO              1970                        05/81                   3-29

Sun Valley
   Charlotte, NC                1980                        08/81                   3-40

Villa Del Rio
   Jacksonville, FL             1976                        05/81                   3-40

The Village
   Gresham, OR                  1974                        05/81                   3-30

Asset Held for Sale:

Rock Creek (c)
   Portland, OR                 1975                        02/81

</TABLE>

(c)  Asset  held for sale is  stated at the  lower of  depreciated  cost or fair
     value less costs to sell.  Historical cost net of accumulated  depreciation
     and write-downs  becomes the new cost basis when the asset is classified as
     "Held for  sale."  Depreciation  ceases at the time they are  placed on the
     market for sale.



                     See accompanying notes to Schedule III.

<PAGE>
                        McNEIL REAL ESTATE FUND XI, LTD.

                              Notes to Schedule III

                           Real Estate Investments and
                            Accumulated Depreciation


A  summary  of  activity  for  the  real  estate   investments  and  accumulated
depreciation is as follows:

<TABLE>
<CAPTION>
                                                                   For the Years Ended December 31,
                                                       ------------------------------------------------------
                                                            1998                1997                  1996
                                                       -------------       -------------         ------------

Real estate investments:

<S>                                                    <C>                  <C>                  <C>         
Balance at beginning of year ..................        $ 51,618,852         $ 55,173,438         $ 64,347,015

Improvements ..................................           1,137,982            1,150,402            2,391,036

Reclassification to assets held for sale.......                  --           (4,561,586)         (11,110,783)

Replacement of assets .........................             (22,272)            (143,402)            (453,830)
                                                       ------------         ------------         ------------

Balance at end of year ........................        $ 52,734,562         $ 51,618,852         $ 55,173,438
                                                       ============         ============         ============


Accumulated depreciation:

Balance at beginning of year ..................        $ 30,941,665         $ 32,181,184         $ 37,095,184

Depreciation ..................................           2,135,144            2,083,616            2,372,870

Reclassification to assets held for sale ......                  --           (3,220,269)          (6,983,195)

Replacement of assets .........................             (13,014)            (102,866)            (303,675)
                                                       ------------         ------------         ------------

Balance at end of year ........................        $ 33,063,795         $ 30,941,665         $ 32,181,184
                                                       ============         ============         ============


Assets Held for Sale:

Balance at beginning of year ..................        $  5,910,865         $  4,203,597         $         --

Reclassification to assets held for sale ......                  --            1,341,317            4,127,588

Sale of asset .................................          (1,349,329)                  --                   --

Improvements ..................................             204,406              365,951               76,009
                                                       ------------         ------------         ------------

Balance at end of year ........................        $  4,765,942         $  5,910,865         $  4,203,597
                                                       ============         ============         ============
</TABLE>



<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
------- -----------------------------------------------------------
        AND FINANCIAL DISCLOSURE
        ------------------------

None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------  --------------------------------------------------

Neither the  Partnership  nor the General Partner has any directors or executive
officers.  The names and ages of, as well as the positions held by, the officers
and  directors of McNeil  Investors,  Inc.,  the general  partner of the General
Partner, are as follows:

                                       Other Principal Occupations and Other
Name and Position             Age      Directorships During the Past 5 Years
-----------------             ---      -------------------------------------

Robert A. McNeil,              78       Mr.  McNeil  is also  Chairman  of   the
Chairman of the                         Board and Director of McNeil Real Estate
Board and Director                      Management,  Inc. ("McREMI") which is an
                                        affiliate of the General Partner. He has
                                        held the foregoing  positions  since the
                                        formation of such an entity in 1990. Mr.
                                        McNeil  received  his B.A.  degree  from
                                        Stanford  University  in  1942  and  his
                                        L.L.B.  degree from  Stanford Law School
                                        in 1948. He is a member of the State Bar
                                        of  California  and has been involved in
                                        real  estate  financing  since  the late
                                        1940's and in real estate  acquisitions,
                                        syndications  and   dispositions   since
                                        1960. From 1986 until active  operations
                                        of  McREMI  and  McNeil  Partners,  L.P.
                                        began in February 1991, Mr. McNeil was a
                                        private investor. Mr. McNeil is a member
                                        of the International  Board of Directors
                                        of the Salk  Institute,  which  promotes
                                        research in improvements in health care.


<PAGE>
Carole J. McNeil               55       Mrs. McNeil is Co-Chairman, with husband
Co-Chairman of the                      Robert A. McNeil,  of McNeil  Investors,
Board                                   Inc.  Mrs.  McNeil has  twenty  years of
                                        real estate experience, most recently as
                                        a private investor from 1986 to 1993. In
                                        1982, she founded Ivory & Associates,  a
                                        commercial real estate brokerage firm in
                                        San  Francisco,  CA. Prior to that,  she
                                        was a commercial  real estate  associate
                                        with the Madison Company and, earlier, a
                                        commercial  sales  associate and analyst
                                        with   Marcus  and   Millichap   in  San
                                        Francisco.    In   1978,   Mrs.   McNeil
                                        established   Escrow  Training  Centers,
                                        California's first accredited commercial
                                        training   program  for  title   company
                                        escrow  officers and real estate  agents
                                        needing  college  credits to qualify for
                                        brokerage  licenses.  She  began in real
                                        estate as Manager and Marketing Director
                                        of Title  Insurance  and  Trust in Marin
                                        County,  CA. Mrs.  McNeil  serves on the
                                        International  Board of Directors of the
                                        Salk Institute.

Ron K. Taylor                  41       Mr.  Taylor is the  President  and Chief
President and Chief                     Executive  Officer of McNeil Real Estate
Executive Officer                       Management  which is an affiliate of the
                                        General Partner.  Mr. Taylor has been in
                                        this capacity  since the  resignation of
                                        Donald K. Reed on March 4,  1997.  Prior
                                        to       assuming       his      current
                                        responsibilities, Mr. Taylor served as a
                                        Senior  Vice  President  of McREMI.  Mr.
                                        Taylor has been in this  capacity  since
                                        McREMI  commenced  operations  in  1991.
                                        Prior  to  joining  McREMI,  Mr.  Taylor
                                        served as an  Executive  Vice  President
                                        for  a   national   syndication/property
                                        management  firm. In this capacity,  Mr.
                                        Taylor  had the  responsibility  for the
                                        management  and leasing of a  21,000,000
                                        square  foot   portfolio  of  commercial
                                        properties. Mr. Taylor has been actively
                                        involved  in the  real  estate  industry
                                        since 1983.

Each director  shall serve until his successor  shall have been duly elected and
qualified.


<PAGE>
ITEM 11.  EXECUTIVE COMPENSATION
--------  ----------------------

No direct  compensation  was paid or payable by the  Partnership to directors or
officers  (since it does not have any  directors or officers) for the year ended
December  31,  1998,  nor was any  direct  compensation  paid or  payable by the
Partnership  to  directors  or officers  of the  general  partner of the General
Partner for the year ended  December 31, 1998. The  Partnership  has no plans to
pay any such remuneration to any directors or officers of the general partner of
the General Partner in the future.

See Item 13 - Certain  Relationships  and  Related  Transactions  for amounts of
compensation and  reimbursements  paid by the Partnership to the General Partner
and its affiliates.

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

(A)      Security ownership of certain beneficial owners.

         No  individual  or  group,  as  defined  by  Section  13(d)(3)  of  the
         Securities  Exchange  Act of  1934,  known  to the  Partnership  is the
         beneficial  owner of more than 5 percent  of the  Partnership's  Units,
         other than High River  Limited  Partnership,  which owns  18,622  Units
         (11.65% of the outstanding  Units) as of February 1, 1999. The business
         address for High River Limited  Partnership  is 100 South Bedford Road,
         Mount Kisco, New York 10549.

(B)      Security ownership of management.

         The  General  Partner and the  officers  and  directors  of its general
         partner,  collectively,  own 313 Units which  represent less than 1% of
         the outstanding Units.

(C)      Change in control.

         None.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------  ----------------------------------------------

Under the terms of the Amended Partnership Agreement,  the Partnership is paying
the MID to the  General  Partner.  The maximum  MID is  calculated  as 1% of the
tangible asset value of the  Partnership.  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 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  maximum MID
percentage decreases to .75% in 2000, .50% in 2001 and .25% thereafter.

The MID will be paid to the  extent of the  lesser of the  Partnership's  excess
cash flow as defined,  or net  operating  income,  as defined (the  "Entitlement
Amount"),  and may be paid (i) in cash, unless there is insufficient cash to pay
the  distribution  in which event any unpaid  portion not taken in Units will be
deferred and is payable,  without interest, from the first available cash and/or
(ii) in Units.  A maximum of 50% of the MID may be paid in Units.  The number of
Units  issued in payment  of the MID is based on the  greater of $50 per Unit or
the net tangible asset value, as defined.  For the year ended December 31, 1998,
the  Partnership  paid or accrued for the  General  Partner MID in the amount of
$853,756.
<PAGE>
Any  amount of the MID which is paid to the  General  Partner  in Units  will be
treated as if cash is distributed to the General Partner and is then contributed
to the Partnership by the General Partner. The MID represents a return of equity
to the General Partner for increasing cash flow, as defined,  and accordingly is
treated as a distribution.

The  Partnership  pays property  management fees equal to 5% of the gross rental
receipts  of the  Partnership's  properties  to McREMI  for  providing  property
management and leasing  services.  Effective  February 14, 1991, the Partnership
began reimbursing McREMI for its costs, including overhead, of administering the
Partnership's  affairs.  For the year ended December 31, 1998,  the  Partnership
paid  or  accrued  for  McREMI  $1,148,093  in  property   management  fees  and
reimbursements.

See  Item 1 -  Business,  Item  7 -  Management's  Discussion  and  Analysis  of
Financial  Condition  and  Results  of  Operations,  and  Item  8  -  Note  2  -
"Transactions with Affiliates."

In November 1996, the  Partnership  obtained a loan from McNeil Real Estate Fund
XXVII, L.P., an affiliate of the General Partner, totaling $2,588,971.  The note
is secured by The Village and requires monthly  interest-only  payments equal to
the prime  lending rate of Bank of America plus 1%. Total  interest  expense for
this loan was $106,497 for the year ended  December 31, 1998.  The mortgage note
was repaid on April 27, 1998.


<PAGE>
                                     PART IV

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

See accompanying index to financial  statements at Item 8 - Financial Statements
and Supplementary Data.

(A)        Exhibits

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

           3.                               Limited     Partnership    Agreement
                                            (Incorporated  by  reference  to the
                                            Annual  Report  on Form 10-K for the
                                            fiscal  year  ended   September  30,
                                            1987).

           3.1                              Amended    and     Restated  Limited
                                            Partnership Agreement,  dated August
                                            6, 1991  (Incorporated  by reference
                                            to the Quarterly Report on Form 10-Q
                                            for  the  quarter   ended  June  30,
                                            1991).

           3.2                              Amendment  No. 1 to the Amended  and
                                            Restated  Partnership  Agreement  of
                                            McNeil Real  Estate  Fund XI,  Ltd.,
                                            dated March 28, 1994. (2)

           3.3                              Amendment  No. 2 to the Amended  and
                                            Restated  Partnership  Agreement  of
                                            McNeil Real  Estate  Fund XI,  Ltd.,
                                            dated March 28, 1994. (2)

           10.1                             Deed of Trust Note,  dated  April 5,
                                            1989,   between  Knollwood  Fund  XI
                                            Associates  and American  Mortgages,
                                            Inc. (1)

           10.2                             Deed of Trust  Note,  dated   May 5,
                                            1989,  between  Sun  Valley  Fund XI
                                            Associates  and American  Mortgages,
                                            Inc. (1)

           10.4                             Termination  Agreement,  dated as of
                                            August 6, 1991  between  Sun  Valley
                                            Fund XI  Associates  and McNeil Real
                                            Estate Management, Inc. (1)

           10.5                             Termination  Agreement,  dated as of
                                            August 6,  1991,  between  Knollwood
                                            Fund XI  Associates  and McNeil Real
                                            Estate Management, Inc. (1)


<PAGE>
           Exhibit
           Number                           Description
           --------                         -----------

           10.6                             Termination  Agreement,  dated as of
                                            August  6,  1991   among   Southmark
                                            Management  Corporation,   Southmark
                                            Commercial    Management    Company,
                                            McNeil Real Estate Fund XI, Ltd. and
                                            McNeil Real Estate Fund XI, Ltd. and
                                            McNeil Real Estate Management,  Inc.
                                            (1)

           10.7                             Property    Management    Agreement,
                                            dated as of August 6, 1991,  between
                                            McNeil Real Estate Fund XI, Ltd. and
                                            McNeil Real Estate Management,  Inc.
                                            (1)

           10.8                             Property     Management   Agreement,
                                            dated as of August 6, 1991,  between
                                            Knollwood  Fund  XI  Associates  and
                                            McNeil Real Estate Management,  Inc.
                                            (1)

           10.9                             Property Management Agreement, dated
                                            as of August 6,  1991,  between  Sun
                                            Valley Fund XI Associates and McNeil
                                            Real Estate Management, Inc.
                                            (1)

           10.12                            Amendment  of  Property   Management
                                            Agreement,   dated  March  5,  1993,
                                            between  McNeil Real Estate Fund XI,
                                            Ltd.    and   McNeil   Real   Estate
                                            Management,  Inc.  (Incorporated  by
                                            reference,  to the Annual  Report of
                                            McNeil  Real  Estate  Fund XI,  Ltd.
                                            (File No. 0-9783),  on Form 10-K for
                                            the period ended December 31, 1992)

           10.13                            Loan  Agreement  dated   June    24,
                                            1993,   between  Lexington  Mortgage
                                            Company  and McNeil Real Estate Fund
                                            XI, Ltd. (2)

           10.14                            Master     Property       Management
                                            Agreement,  dated  as  of  June  24,
                                            1993,  between  McNeil  Real  Estate
                                            Management,  Inc.  and  McNeil  Real
                                            Estate Fund XI, Ltd. (2)

           10.15                            Multifamily  Note,  dated   November
                                            1, 1993 between  Value Line Mortgage
                                            Corporation and Acacia Lakes Fund XI
                                            Limited Partnership. (2)


<PAGE>
           Exhibit
           Number                           Description
           --------                         -----------

           10.16                            Modification  of Deed of Trust Note,
                                            dated  December  15,  1993,  between
                                            American    Mortgages,    Inc.   and
                                            Knollwood Fund XI Associates. (2)

           10.17                            Modification of Deed of  Trust Note,
                                            dated  December  20,  1993,  between
                                            American  Mortgages,  Inc.  and  Sun
                                            Valley Fund XI Associates. (2)

           10.18                            Promissory  Note,  dated  April  27,
                                            1998,   between   Village   Fund  XI
                                            Associates  Limited and  NationsBank
                                            of Texas, N.A.

           10.19                            Promissory  Note,  dated   September
                                            28, 1998, between Rock Creek Fund XI
                                            Limited and NationsBank, N.A.

           11.                              Statement  regarding  computation of
                                            Net Income per  limited  partnership
                                            unit   (see   Item  8  -  Note  1  -
                                            "Organization    and    Summary   of
                                            Significant Accounting Policies).

           22.                              List    of   subsidiaries   of   the
                                             Partnership.
<TABLE>
<CAPTION>
                                                                                                Names Under
                                                                         Jurisdiction of        Which It Is
                                            Name of Subsidiary            Incorporation        Doing Business
                                            ------------------           ---------------       --------------
                                            <S>                              <C>                    <C>
                                            Acacia Lakes Fund XI             Arizona                None
                                               Limited Partnership

                                            Gentle Gale Fund XI              Delaware               None
                                               Limited Partnership

                                            Knollwood Fund XI                Missouri               None
                                               Associates

                                            Rock Creek Fund XI Ltd.          Texas                  None

                                            Sun Valley Fund XI               North Carolina         None
                                               Associates

                                            Villa Del Rio Fund XI            Delaware               None
                                               Limited Partnership

                                            Village Fund XI Associates       Oregon                 None
                                               Limited Partnership

</TABLE>

<PAGE>

                           (1)              Incorporated  by reference  to   the
                                            Annual  Report of McNeil Real Estate
                                            Fund XI, Ltd. (File No. 0-9783),  on
                                            Form  10-K  for  the  period   ended
                                            December 31, 1991, as filed with the
                                            Securities  and Exchange  Commission
                                            on March 29, 1992.

                           (2)              Incorporated  by reference  to   the
                                            Annual  Report of McNeil Real Estate
                                            Fund XI, Ltd. (File No. 0-9783),  on
                                            Form  10-K  for  the  period   ended
                                            December 31, 1993, as filed with the
                                            Securities  and Exchange  Commission
                                            on March 30, 1995.

           27.                              Financial Data Schedule for the year
                                            ended December 31, 1998.

(B)  Reports on Form 8-K.  There  were no  reports on Form 8-K filed  during the
quarter ended December 31, 1998.


<PAGE>
                        McNEIL REAL ESTATE FUND XI, LTD.
                              A Limited Partnership

                                 SIGNATURE PAGE


Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                           McNEIL REAL ESTATE FUND XI, LTD.


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

                                By: McNeil Investors, Inc., General Partner



March 31, 1999                  By:  /s/  Robert A. McNeil
--------------                     ---------------------------------------------
Date                                 Robert A. McNeil
                                     Chairman of the Board and Director
                                     (Principal Executive Officer)


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.




March 31, 1999                  By:  /s/  Ron K. Taylor
--------------                     ---------------------------------------------
Date                                 Ron K. Taylor
                                     President and Director of McNeil 
                                       Investors, Inc.
                                     (Principal Financial Officer)




March 31, 1999                  By:  /s/  Brandon K. Flaming
--------------                     ---------------------------------------------
Date                                 Brandon K. Flaming
                                     Vice President of McNeil Investors, Inc.
                                     (Principal Accounting Officer)