SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                 ---------------
                                    FORM 10-K

(Mark One)    |X| Annual Report pursuant to Section 13 or 15(d) of
                     the Securities and Exchange Act of 1934
                     for fiscal year ended December 31, 1998

                                       or

              |_| Transition Report pursuant to Section 13 or 15(d)
                       of the Securities Exchange Act 1934
            for the transaction period from __________to ___________

                      Commission File Number: 333-45467-01
                                              ------------

                          MORGAN STANLEY CAPITAL I INC.
                       (IN RESPECT OF COMMERCIAL MORTGAGE
                   PASS-THROUGH CERTIFICATES, SERIES 1998-XL1)
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                Delaware                                       13-3291626
------------------------------------------                ---------------------
      (State or other jurisdiction                          (I.R.S. Employer
    of incorporation or organization)                      Identification No.)

              1585 Broadway
              New York, NY                                        10036
------------------------------------------                ---------------------
(Address of Principal Executive Offices)                         Zip Code

                                 (212) 761-4000
               --------------------------------------------------
               Registrant's telephone number, including area code

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

Securities registered pursuant to Section 12(g) of the Act:  None.

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.

                               Yes  |_|      No |X|

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 the 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. |_|
 
                                 Not Applicable.

Aggregate market value of voting stock held by non-affiliates of the registrant
as of December 31, 1998.

                                 Not Applicable.

Number of shares of common stock outstanding as of December 31, 1998.


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                                 Not Applicable.

Registrant has not been involved in bankruptcy proceedings during the proceeding
five years, and is not reporting as a corporate issuer.

The following documents are incorporated by reference into this Form 10-K.

                                      None.


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                    MORGAN STANLEY CAPITAL I INC. COMMERCIAL
               MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-XL1
               ---------------------------------------------------
                                    FORM 10-K

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                        Page
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<S>        <C>                                                                                             <C>
PART I.

           Item 1.        Business.......................................................................  4
           Item 2.        Properties...................................................................... 4
           Item 3.        Legal Proceedings..............................................................  4
           Item 4.        Submission of Matters to a Vote of Security Holders............................  4

PART II.

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

PART III.

           Item 10.       Directors and Executive Officers of the Registrant............................   5
           Item 11.       Executive Compensation........................................................   5
           Item 12.       Security Ownership of Certain Beneficial Owners and Management................   5
           Item 13.       Certain Relationships and Related Transactions................................   5

PART IV.

           Item 14.       Exhibits, Financial Statement Schedules and Reports on Form 8-K...............   5

           Supplemental Information to be Furnished with Reports Filed Pursuant
             to Section 15(d) of the Securities Exchange Act of 1934 of Registrants
             Which Have Not Registered Securities Pursuant to Section 12 of such Act.....................  6

SIGNATURES...............................................................................................  7

INDEX OF EXHIBITS........................................................................................  8
</TABLE>


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                                     PART I

Item 1. Business

This Annual Report on Form 10-K relates to the Trust Fund formed and the
Commercial Mortgage Pass- Through Certificates, Series 1998-XL1 (the
"Certificates") issued pursuant to a Pooling and Servicing Agreement dated as of
June 1, 1998 (the "Pooling Agreement"), by and among Morgan Stanley Capital I
Inc. as depositor (the "Registrant"), Midland Loan Services, Inc., as master
servicer (the "Master Servicer"), Clarion Partners, LLC, as special servicer
(the "Special Servicer"), and State Street Bank and Trust Company, as trustee
(in such capacity, the "Trustee"). Capitalized terms used herein and not defined
have the same meanings ascribed to such terms in the Pooling Agreement.

This Annual Report is being filed by the Trustee, in its capacity as such under
the Pooling Agreement, on behalf of Registrant. The information contained herein
has been supplied to the Trustee by third parties without independent review or
investigation by the Trustee. Pursuant to the Pooling Agreement, the Trustee is
not responsible for the accuracy or completeness of such information.

The information called for by this item is "not applicable" to the Trust Fund.
As used in this Annual Report filed on Form 10-K, "not applicable" or "Not
Applicable" means that the response to the referenced item is omitted in
reliance on the procedures outlined in numerous no-action letters issued by the
Commission's Staff with respect to substantially similar certificates.

Item 2. Properties

Information regarding the mortgaged properties securing the Mortgage Loans has
been set forth in the Prospectus Supplement relating to the Certificates. The
Trust Fund created under the Pooling Agreement has or will acquire title to real
estate only upon default of the related borrowers under the Mortgage Loans held
by the Trust Fund.

The Annual Statement as to Compliance of Midland Loan Services, Inc., as Master
Servicer required to be delivered under the Pooling Agreement is annexed hereto
as Exhibit 14(a)(1)(i). The Annual Independent Public Accountant's Servicing
Report of Ernst & Young LLP with respect to certain matters affecting the Master
Servicer as set forth therein is annexed hereto as Exhibit 14(a)(1)(ii). The
Annual Statement as to Compliance of Clarion Partners, LLC, as the Special
Servicer, is annexed hereto as Exhibit 14(a)(1)(iii). The Annual Independent
Public Accountant's Servicing Report of Ernst & Young LLP with respect to
certain matters affecting Clarion Partners, LLC is annexed hereto as Exhibit
14(a)(1)(iv).

The Registrant has been informed that, as of the end of the Reporting Year, the
Trust Fund did not acquire any mortgage property in connection with the
foreclosure of a defaulted Mortgage Asset or otherwise and that there were no
Specially Serviced Mortgage Loans.

Item 3. Legal Proceedings

The Registrant knows of no material pending legal proceedings involving either
of (i) the Trust Fund or (ii) with respect to the Certificates or the Trust
Fund, the Registrant, the Master Servicer, the Special Servicer, or the Trustee
with respect to the Trust Fund other than ordinary routine litigation, if any,
incidental to the Trustee's, the Master Servicer's, the Special Servicer's, or
the Registrant's duties under the Pooling Agreement and not material when taken
as a whole.

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


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No matters were submitted to a vote or consent of the holders of the
Certificates during the period covered by this report.

                                     PART II

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

Presently, there is no established trading market for the Certificates known to
the Registrant. As of December 31, 1998, there is an aggregate of two (2)
holders of all Classes of the Certificates.

Item 6. Selected Financial Data

Not Applicable.

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

Not Applicable.

Item 8. Financial Statements and Supplementary Data

Not Applicable.

Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure

The Registrant knows of no changes or disagreements with accountants on
accounting and financial disclosure with respect to the Trust Fund or the
Certificates.

Item 10. Directors and Executive Officers of the Registrant

Not Applicable.

Item 11. Executive Compensation

Not Applicable.

                                    PART III

Item 12. Security Ownership of Certain Beneficial Owners and Management

Information required by this item with respect to the security ownership of
certain owners of the Certificates is annexed hereto as Exhibit 99.1.

Item 13. Certain Relationships and Related Transactions

Not Applicable.

                                     PART IV

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

             (a)(1) Financial Statements


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<PAGE>

             (i) The Master's Servicer's Annual Statement as to Compliance of
Midland Loan Services, Inc. for the period ended December 31, 1998 required to
be delivered by the Pooling Agreement on or before April 15, 1999 is annexed
hereto as Exhibit 14(a)(1)(i).

             (ii) The Independent Accountant's Report of Ernst & Young LLP, an
independent public accountant, with respect to master servicing by Midland Loan
Services, Inc. is annexed hereto as Exhibit 14(a)(1)(ii).

             (iii) The Special Servicer's Statement as to Compliance for the
period ended December 31, 1998 required to be delivered to the Trustee by
Clarion Partners, LLC is annexed hereto as Exhibit 14(a)(1)(iii).

             (iv) The Independent Accountant's Report of Ernst & Young LLP, an
independent public accountant, with respect to special servicing by Clarion
Partners LLC is annexed hereto as Exhibit 14(a)(1)(iv).

             (v) The Summary Status Report of the Master Servicer required by
the Pooling Agreement to be delivered by the Master Servicer to the Trustee is
annexed hereto as Exhibit 99.2.

             (a)(2) Financial Statement Schedules

             Not Applicable.

             (a)(3) Exhibits

             Unless otherwise indicated, the following exhibits required by Item
             601 of Regulation S-K and previously furnished to the Commission as
             exhibits to a Report on Form 8-K, are incorporated into this Form
             10-K by reference:

                     4.        Pooling Agreement dated as of June 1, 1998, by
                               and among Morgan Stanley Capital I Inc., as
                               depositor, Midland Loan Services, Inc., as Master
                               Servicer, Clarion Partners, LLC, as Special
                               Servicer, and State Street Bank and Trust
                               Company, as Trustee.

                     99.1*     Security Ownership of certain Beneficial Owners.

             (b)     The following Reports on Form 8-K were filed with the
                     Commission by or on behalf of the Registrant with respect
                     to the Certificates during the last quarter of the period
                     covered by this report:

                     Report on Form 8-K dated October 20, 1998, reporting items
                     5 and 7.

                     Report on Form 8-K dated November 19, 1998, reporting items
                     5 and 7.

                     Report on Form 8-K dated December 9, 1998, reporting items
                     5 and 7.

------------------
*  Filed herewith

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 OF REGISTRANTS WHICH HAVE NOT
REGISTERED SECURITIES PURSUANT TO SECTION 12 OF SUCH ACT.


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The Registrant has not sent an annual report or proxy material to the holders of
its Certificates. The Registrant will not be sending an annual report or proxy
materials to the holders of its Certificates subsequent to the filing of this
Form 10-K.

                                   SIGNATURES

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


                            MORGAN STANLEY CAPITAL I INC.
                            (IN RESPECT OF ITS COMMERCIAL MORTGAGE
                            PASS-THROUGH CERTIFICATES, SERIES 1998-XL1)

Dated:  April 15, 1999      By: State Street Bank and Trust Company,
                                  solely in its capacity as Trustee of the
                                  Trust Fund for the Registrant's Mortgage Pass-
                                  Through Certificates, Series 1998-XL1 and not
                                  individually


                            By:  /s/ Julie Kirby
                                ------------------------------------------------
                                 Julie Kirby, Assistant Vice President


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<PAGE>

                                INDEX OF EXHIBITS

                                   DESCRIPTION

Exhibit No.*

14(a)(1)(i)      Statement as to Compliance by Midland Loan Services, Inc. as
                 Master Servicer

14(a)(1)(ii)     Independent Accountant's Report of Ernst & Young LLP,
                 independent public accountants, with respect to master
                 servicing by Midland Loan Services, Inc.

14(a)(1)(iii)    Statement as to Compliance by Clarion Partners, LLC

14(a)(1)(iv)     Independent Accountant's Report of Ernst & Young LLP,
                 independent public accountants, with respect to servicing by
                 Clarion Partners,LLC

99.1             Security Ownership of Certain Owners (with original principal
                 balances)

99.2             Summary Status Report of the Master Servicer setting forth
                 certain information with respect to the Borrowers and Mortgaged
                 Properties

*Item 601(a) of Regulation S-K Exhibit No.


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