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, 1996
                               -------------------------------------------------

                                       OR

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

     For the transition period from ______________ to_____________

     Commission file number  0-13356
                            --------


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


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


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

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

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

Securities registered pursuant to Section 12(g) of the Act:
     Current Income Limited Partnership Units
     Growth/Shelter 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 ]

All of the Registrant's 47,288 outstanding limited partnership units are held by
non-affiliates.  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 42

                                TOTAL OF 44 PAGES
<PAGE>
                                     PART I

ITEM 1.  BUSINESS
-------  --------

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

McNeil  Real Estate  Fund XXI,  L.P.,  (the  "Partnership"),  formerly  known as
Southmark Realty Partners, Ltd., was organized on November 23, 1983 as a limited
partnership under the provisions of the California  Revised Limited  Partnership
Act to acquire and operate  commercial and residential  properties.  The general
partner of the Partnership is McNeil  Partners,  L.P. (the "General  Partner") a
Delaware limited partnership,  an affiliate of Robert A. McNeil ("McNeil").  The
General Partner was elected at a meeting of limited  partners on March 26, 1992,
at which  time an amended  and  restated  partnership  agreement  (the  "Amended
Partnership  Agreement")  was  adopted.  Prior to March 26,  1992,  the  general
partner of the Partnership was Southmark  Partners,  Ltd. (the "Original General
Partner"), a Texas limited partnership of which the general partner is Southmark
Investment  Group,  Inc., a  wholly-owned  subsidiary  of Southmark  Corporation
("Southmark").  The  principal  place of business  for the  Partnership  and the
General Partner is 13760 Noel Road, Suite 600, LB70, Dallas, Texas, 75240.

On February 3, 1984, the Partnership registered with the Securities and Exchange
Commission  ("SEC")  under the  Securities  Act of 1933 (File No.  2-88171)  and
commenced  a public  offering  for sale of  $50,000,000  of limited  partnership
units. There were two classes of limited  partnership units offered,  designated
as Current Income Units and Growth/Shelter  Units,  (referred to collectively as
"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 February 2, 1985 with 47,382 Units
(24,982  Current  Income Units and 22,400  Growth/Shelter  Units) sold at $1,000
each, or gross  proceeds of  $47,382,000  to the  Partnership.  The  Partnership
subsequently filed a Form 8-A Registration Statement with the SEC and registered
its Units under the Securities Exchange Act of 1934 (File No. 0-13356). In 1994,
22 Current Income Units and 34 Growth/Shelter  Units were  relinquished,  and in
1995,  11 Current  Income Units and 7  Growth/Shelter  Units were  relinquished.
During 1996, 20  Growth/Shelter  Units were  relinquished  leaving  47,288 Units
(24,949  Current Income Units and 22,339  Growth/Shelter  Units)  outstanding at
December 31, 1996.

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,  the General
Partner  nor  the  Original   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
Original 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 (the "Selected Partnerships").



<PAGE>
On February 14,  1991,  pursuant to the asset  purchase  agreement as amended on
that date,  McNeil Real Estate  Management,  Inc.  ("McREMI"),  an  affiliate of
McNeil,  acquired the assets 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.

On March 26, 1992, the limited partners  approved a restructuring  proposal that
provided  for (i) the  replacement  of the Original  General  Partner with a new
general  partner,  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;  (iii) the approval of an amended
property management  agreement with McREMI, the Partnership's  property manager;
and (iv) the  approval  to change the  Partnership's  name to McNeil Real Estate
Fund XXI, L.P. Under the Amended  Partnership  Agreement,  the Partnership began
accruing an asset  management  fee,  retroactive to February 14, 1991,  which is
payable  to  the  General  Partner.  For a  discussion  of the  methodology  for
calculating  the asset  management  fee, see Item 13 Certain  Relationships  and
Related Transactions.  The proposals approved at the March 26, 1992 meeting were
implemented as of that date.

Concurrent with the approval of the restructuring,  the General Partner acquired
from Southmark and its affiliates,  for aggregate  consideration of $389,023 (i)
the right to receive  payment on the  advances  owing  from the  Partnership  to
Southmark and its affiliates in the amount of  $1,131,143,  and (ii) the general
partner interest of the Original General Partner. None of the Units are owned by
the General Partner or its affiliates.

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

General:

The Partnership is engaged in diversified real estate activities,  including the
ownership,  operation and  management of  residential,  commercial  office,  and
retail real estate.  As described in Item 2 - Properties,  at December 31, 1996,
the Partnership owned seven revenue-producing properties.

The  Partnership  does not directly  employ any personnel.  The General  Partner
conducts the business of the  Partnership  directly and through its  affiliates.
The Partnership  reimburses  affiliates of the General Partner for such services
rendered in accordance with the Amended Partnership Agreement. See Item 8 - Note
2 "Transactions With Affiliates."

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.


<PAGE>
Business Plan:

The Partnership  determined to evaluate market and other economic  conditions to
establish  the  optimum  time  to  commence  an  orderly   liquidation   of  the
Partnership's  assets in  accordance  with the terms of the Amended  Partnership
Agreement.  Taking such conditions as well as other pertinent  information  into
account,  the Partnership has determined to begin orderly liquidation of all its
assets.  Although there can be no assurance as to the timing of the  liquidation
due to real estate  market  conditions,  the general  difficulty of disposing of
real estate,  and other general  economic  factors,  it is anticipated that such
liquidation  would result in the  dissolution of the  Partnership  followed by a
liquidating  distribution  to the limited  partners by  December  2001.  In this
regard,  the  Partnership  has placed  Fort Meigs  Plaza on the market for sale.
Until such time as the  Partnership's  assets are liquidated,  the Partnership's
plan of operations  is to preserve or increase the net  operating  income of its
assets  whenever  possible,  while  at the same  time  making  whatever  capital
expenditures  are reasonable  under the  circumstances  in order to preserve and
enhance the value of the Partnership's assets.

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.  For a detailed
discussion of the competitive  conditions for the  Partnership's  properties see
Item 2 - Properties.

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, 1996.  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.




<PAGE>
Other Information:

The environmental  laws of the Federal government and of certain state and local
governments  impose  liability  on current  property  owners for the clean-up of
hazardous and toxic substances discharged on the property. This liability may be
imposed  without  regard  to the  timing,  cause or person  responsible  for the
release of such substances onto the property.  The Partnership  could be subject
to such liability in the event that it owns properties having such environmental
problems.  The Partnership has no knowledge of any pending claims or proceedings
regarding such environmental problems.

ITEM 2.      PROPERTIES
-------      ----------
The following  table sets forth the investment  portfolio of the  Partnership at
December 31, 1996.  All of the  buildings and the land on which they are located
are owned by the  Partnership  in fee and are  subject  to a first  lien deed of
trust.  Certain  of the  properties  are  also  subject  to one or  more  junior
mortgages as described more fully in Item 8 - Note 5 - "Mortgage  Notes Payable"
and Note 6 - "Mortgage  Note Payable -  Affiliates."  See also Item 8 - Note 4 -
"Real  Estate  Investments"  and Schedule  III - "Real  Estate  Investments  and
Accumulated  Depreciation and  Amortization." In the opinion of management,  the
properties are adequately covered by insurance.

<TABLE>
<CAPTION>
                                              Net Basis of                          1996             Date
Property              Description              Property            Debt        Property Tax        Acquired
--------              -----------            -------------         ----        -------------       --------
<S>                   <C>                  <C>               <C>                <C>                    <C> 
Real Estate Investments:

Bedford Green (1)     Apartments
Bedford, OH           156 units            $     2,146,107   $    3,266,122     $   84,107            6/84

Breckenridge (2)      Apartments
Davenport, IA         120 units                  1,504,268        1,691,669         79,650           10/84

Evergreen
  Square (3)          Apartments
Tupelo, MS            257 units                  2,679,223        1,943,630         76,863           11/84

Governour's
  Square (4)          Apartments
Wilmington, NC        219 units                  3,865,285        3,048,469         66,925           11/84

Wise County Plaza     Retail Center
Wise, VA              147,848 sq. ft.            5,206,044        6,035,465         47,493            2/84

Woodcreek (5)         Apartments
Ft. Wayne, IN         204 units                  2,720,998        2,783,627         92,674           11/84

Asset Held for Sale:

Fort Meigs Plaza      Retail Center
Perrysburg, OH        104,990 sq. ft.            2,731,674        3,745,193         72,539           10/84
                                           ---------------   --------------   ------------
                                          $     20,853,599  $    22,514,175   $    520,251
                                           ===============   ==============    ===========
</TABLE>
------------------------------------------
Total:    Apartments  - 956 Units
          Retail Centers - 252,838 sq. ft.


<PAGE>

(1)    Bedford  Green  Apartments  is owned by Bedford  Green  Fund XXI  Limited
       Partnership, which is wholly-owned by the Partnership.

(2)    Breckenridge  Apartments  is  owned  by  Breckenridge  Fund  XXI  Limited
       Partnership, which is wholly-owned by the Partnership.

(3)    Evergreen  Apartments is owned by Evergreen Fund XXI Limited Partnership,
       which is wholly-owned by the Partnership.

(4)    Governour's  Square  Apartments is owned by  Governour's  Square Fund XXI
       Limited Partnership, which is wholly-owned by the Partnership.

(5)    Woodcreek  Apartments is owned by Woodcreek Fund XXI Limited Partnership,
       which is wholly-owned by the Partnership.


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

<TABLE>
<CAPTION>
                                        1996           1995            1994           1993          1992
                                    -------------  -------------  --------------  -------------  ----------
<S>                                       <C>             <C>            <C>            <C>             <C>
Bedford Green
   Occupancy Rate............             97%             99%            87%            95%             94%
   Rent Per Square Foot......       $    9.11      $     8.31     $     7.99      $    7.83      $     7.36

Breckenridge
   Occupancy Rate............             93%             97%            89%            88%             88%
   Rent Per Square Foot......       $    8.26      $     7.79     $     7.07      $    7.09      $     7.00

Evergreen Square
   Occupancy Rate............             88%             90%            91%            90%             92%
   Rent Per Square Foot......       $    4.62      $     4.52     $     4.24      $    3.88      $     3.70

Fort Meigs Plaza
   Occupancy Rate............             97%             96%            98%           100%             99%
   Rent Per Square Foot......       $    6.52      $     6.38     $     6.40      $    6.45      $     6.25

Governour's Square
   Occupancy Rate............            100%             99%            97%            97%             96%
   Rent Per Square Foot......       $    7.33      $     6.85     $     6.44      $    6.01      $     5.70

Wise County Plaza
   Occupancy Rate............             88%             94%            83%            91%             93%
   Rent Per Square Foot......       $    6.02      $     5.56     $     5.90      $    6.33      $     6.54

Woodcreek
   Occupancy Rate............             93%             87%            92%            98%             88%
   Rent Per Square Foot......       $    6.33      $     6.09     $     6.22      $    5.42      $     5.43
</TABLE>

Occupancy rate  represents all units leased divided by the total number of units
for  residential  properties  and square  footage leased divided by total square
footage for commercial  properties 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.
<PAGE>
Competitive Conditions

Bedford Green  Apartments is located in Bedford,  Ohio,  southeast of Cleveland,
Ohio.  Bedford Green continues to be one of the nicest apartment  communities in
the market and charges higher rents than its competitors. The property ended the
year at a 97% occupancy rate,  giving the property a 98% average  occupancy rate
for 1996.  Management expects to maintain occupancy in the mid to high 90% range
in  1997  by  improving  the   appearance  of  the  property   through   capital
expenditures.

Breckenridge Apartments is located in a northwest residential area of Davenport,
Iowa. The Partnership completed previously deferred capital improvements in 1994
through  1996 which  allowed  the  property  to compete  more  effectively.  The
property  currently has no deferred  maintenance and its curb appeal is equal to
that of its  competition.  Due to the  availability  of  affordable  housing and
discounts  offered by competitors,  rental rates will be increased only slightly
in 1997. Management expects to maintain occupancy in the mid 90% range in 1997.

Evergreen  Square  Apartments,  built  in 1970 in  Tupelo,  Mississippi,  offers
attractive  floor  plans,  a  renovated  exterior  and various  amenities  which
position it as a strong  competitor  in its market area.  Exterior  improvements
have helped Evergreen  Square maintain a stabilized  occupancy in spite of being
located in a  declining  neighborhood.  An increase in crime in the area in 1996
resulted in a decrease in  occupancy.  Competing  apartment  communities  accept
assisted/subsidized  housing renters whereas Evergreen Square does not. Although
there has been no recent multifamily development in the immediate area, the area
offers a very  reasonably  priced home buying  market and an abundance of rental
homes and  duplexes.  Based upon a  continued  capital  improvement  program and
focused  management,  Evergreen  Square  should  be  able  to  maintain  current
occupancy rates.  However,  its location in a declining  neighborhood will limit
long-range growth.

Fort Meigs Plaza is a strip shopping center located in Perrysburg,  Ohio, a city
lying just outside of Toledo,  Ohio.  The center is surrounded  by  upper-middle
income  residential  neighborhoods  which  are very well  established.  With the
exception of one property,  all of the competitors are newer, yet Fort Meigs has
earned a reputation in the marketplace as a well maintained center. The property
is expected to operate at current  occupancy levels in 1997. The Partnership has
determined to begin an orderly  liquidation of all the Partnership's  assets. In
this  regard,  the  Partnership  placed  Fort Meigs Plaza on the market for sale
effective October 1, 1996.

Governour's Square Apartments,  located in Wilmington,  North Carolina was built
in 1974.  Extensive  exterior  renovations  from 1992  through  early  1996 have
allowed the asset to reposition  itself as a strong competitor in the Wilmington
market.  These exterior  improvements as well as interior  upgrades  enabled the
property to achieve an occupancy rate slightly above the market,  even with some
new  construction  and  renovations by  competitors  in the immediate  area. The
apartments  are marketed  primarily to middle  income  residents and many of the
families  who select  the  property  do so for its  favorable  school  location.
Occupancy increased in 1996 due to homeowners displaced by two hurricanes.  Many
of these renters are now returning to their homes,  however,  management expects
to maintain occupancy rates in the mid 90% range in 1997.






<PAGE>
Wise County Plaza, located in Wise, Virginia, was built in 1971 and its colonial
design is unique to the area. Although the shopping center is located in an area
besieged  by  high  unemployment  rates  and a  lackluster  economy  due  to the
declining  coal industry,  it has remained a consistent  competitor in the local
retail  market.  In  conjunction  with a  major  new  lease  in  1995,  exterior
renovations  were  updated  significantly.  Another  large  tenant is  currently
undergoing a major renovation  which should add value to the center.  Management
plans to maintain occupancy while holding down costs in 1997.

Woodcreek  Apartments,  located in Fort  Wayne,  Indiana,  was built in 1978 and
offers  attractive floor plans which were renovated in 1991 to make the property
more  marketable.  The property has a high  turnover rate due to a contract with
Collegiate Housing which induces short term contracts. Management added a weight
room in 1996 which  appealed to the large number of young  professionals  in the
complex.  The stable  economy in the area should  allow the property to maintain
occupancy in the low 90% range during 1997.

The following  schedule shows lease  expirations  for each of the  Partnership's
commercial properties for 1997 through 2006:

<TABLE>
<CAPTION>
                           Number of                                   Annual           % of Gross
                           Expirations           Square Feet            Rent            Annual Rent
                           -----------           -----------       -------------        -----------
<C>                             <C>                   <C>          <C>                        <C>
Fort Meigs Plaza
1997                            2                     4,974        $      27,972              5%
1998                            4                     5,299               47,880              8%
1999                            4                    42,256              126,408             21%
2000                            3                     7,206               62,520             11%
2001                            3                    35,772              245,880             42%
2002                            1                     5,079               35,400              6%
2003                            1                     2,250               25,188              4%
2004-2006                       -                         -                    -              -

                           Number of                                   Annual           % of Gross
                           Expirations           Square Feet            Rent            Annual Rent
                           -----------           -----------       -------------        -----------
Wise County Plaza
1997                            3                     7,746        $      47,220              6%
1998                            7                    10,677               85,056             11%
1999                            4                     9,472               59,220              8%
2000                            1                     1,119                7,272              1%
2001                            4                    37,904              282,060             36%
2002-2003                       -                         -                    -              -
2004                            1                    36,893               55,344              7%
2005-2006                       -                         -                    -              -

</TABLE>


<PAGE>
No  residential  tenant  leases 10% or more of the available  rental space.  The
following  schedule reflects  information on commercial tenants occupying 10% or
more of the leasable square feet for each property.

Nature of
Business                   Square Footage                           Lease
   Use                       Leased           Annual Rent         Expiration

Fort Meigs Plaza
   Variety Store             30,000            $ 64,500              1999
   Grocery Store             32,470             222,420              2001

Wise County Plaza
   General Office            21,062            $217,356              2001
   Department Store          36,893              55,344              2004
   Grocery Store             28,173             146,676              2008


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 XXIV,  L.P.,  McNeil Real Estate  Fund XXV,  L.P.,  McNeil Real Estate Fund
XXVI, L.P., and McNeil Real Estate Fund XXVII,  L.P., et al. - Superior Court of
the State of California for the County of Los Angeles,  Case No. BC133799 (Class
and Derivative Action Complaint).


The action involves  purported  class and derivative  actions brought by limited
partners of each of the fourteen limited partnerships that were named as nominal
defendants  as listed above (as defined in this  Section,  the  "Partnerships").
Plaintiffs allege that McNeil Investors,  Inc., its affiliate McNeil Real Estate
Management, Inc. and three of their senior officers and/or directors (as defined
in this Section, collectively, the "Defendants") breached their fiduciary duties
and certain  obligations under the respective  amended  partnership  agreements.
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.  On January 7, 1997, the Court ordered
consolidation with three other similar actions.

The  Partnerships  filed a demurrer to the  complaint  and a motion to strike on
February  14,  1997,  seeking to dismiss  the  complaint  in all  respects.  The
demurrer  is  pending.  The  Partnerships  deny  that  there is any merit to the
plaintiff's allegations and intend to vigorously defend this action.


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          3,987 as of January 31, 1997

(C)      No distributions were paid to the partners in 1996 or 1995 and none are
         anticipated in 1997.  The General  Partner will continue to monitor the
         cash reserves and working capital needs of the Partnership to determine
         when cash flows will support  distributions  to the Unit  holders.  See
         Item 7 - Management's  Discussion  and Analysis of Financial  Condition
         and  Results  of  Operations,  and  Item 8 - Note 1  "Organization  and
         Summary of Significant Accounting Policies - Distributions."



<PAGE>
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                              1996           1995            1994           1993           1992
------------------                  -------------  -------------  --------------  -------------  -------------
<S>                                 <C>            <C>            <C>             <C>            <C>          
Rental revenue...............       $   6,434,691  $   6,642,725  $    8,054,097  $   9,985,424  $   9,905,279
Write-down for impairment
 of real estate..............                   -              -               -       (976,800)             -
Gain on disposition of
 real estate.................                   -      1,615,811          29,440        678,830              -
Loss before extraordinary
 items.......................          (1,127,080)      (170,804)     (1,891,596)    (3,106,420)    (2,719,318)
Extraordinary items..........                   -              -               -     (1,182,974)       283,273
Net loss.....................          (1,127,080)      (170,804)     (1,891,596)    (4,289,394)    (2,436,045)


Net income (loss) per limited
 partnership Unit:
Income (loss) before 
 extraordinary items:
  Current Income Units.......       $       (4.07) $       31.62  $        (6.82) $      (11.19) $       (9.80)
  Growth/Shelter Units.......              (45.41)        (42.85)         (76.12)       (124.81)       (109.26)

Extraordinary items:
  Current Income Units.......                   -              -               -          (4.26)          1.02
  Growth/Shelter Units.......                   -              -               -         (47.53)         11.38

Net income (loss):
  Current Income Units.......               (4.07)         31.62           (6.82)        (15.45)         (8.78)
  Growth/Shelter Units.......              (45.41)        (42.85)         (76.12)       (172.34)        (97.88)

                                                              As of December 31,
Balance Sheets                          1996           1995            1994           1993           1992
--------------                      -------------  -------------  --------------  -------------  -------------

Real estate investments, net...     $  18,121,925  $  21,671,191  $   22,557,552  $  27,856,319 $   39,497,843
Assets held for sale...........         2,731,674              -       8,153,520      5,935,338      2,257,185
Total assets...................        23,931,225     25,178,649      33,985,057     38,017,866     44,449,501
Mortgage notes payable, net....        22,514,175     22,742,528      30,979,473     33,040,885     36,420,172
Partners' equity (deficit).....        (4,420,978)    (3,293,898)     (3,123,094)    (1,231,498)     3,057,896
</TABLE>

See Item 7 -  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations.  Georgetown Apartments was foreclosed on by its lender in
September 1992.  Hickory Lake Apartments was sold in December 1993 and Homestead
Manor  Apartments  was sold in February  1994.  Wyoming Mall and Suburban  Plaza
shopping centers were sold in March 1995.



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

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

The Partnership  generated $699,883 of cash through operating activities in 1996
as compared to $410,990 in 1995 and  $546,157 in 1994.  The  increase in 1996 as
compared to 1995 was  primarily  due to the sales of Suburban  Plaza and Wyoming
Mall in 1995.  With the proceeds  from the sales,  the  Partnership  was able to
repay  $973,000 of  advances  and  $1,331,000  of mortgage  notes  payable  from
affiliates  in the first half of 1995,  thereby  reducing the  interest  paid to
affiliates  in 1996.  In addition,  cash paid to  suppliers,  interest  paid and
property  taxes paid were lower in 1996 due to the sales of the two  properties.
These  decreases  in cash  paid were  partially  offset  by a  decrease  in cash
received from tenants as a result of the property sales in 1995. In addition, no
interest was  received  from  affiliates  in 1996 as compared to $71,614 in 1995
since the  previous  advances of $300,000 to McNeil Real Estate Fund XXII,  L.P.
("Fund  XXII") for Wyoming Mall were paid off in 1995.  Cash paid to  affiliates
increased  in  1996  due  to  the  payment  of   previously   accrued   overhead
reimbursements to McREMI.

Cash  received  from  tenants and cash paid to  suppliers  decreased  in 1995 as
compared to 1994 primarily due to the sales Homestead Manor in February 1994 and
Suburban  Plaza and Wyoming  Mall in March 1995.  There was a greater  amount of
cash  paid to  affiliates  in 1994,  mainly  due to the  payment  of a  $201,000
disposition fee related to the sale of Hickory Lake Apartments which was sold in
December 1993.  Interest received increased in 1995 compared to 1994,  primarily
as a result of higher  average cash  balances due to proceeds  received from the
sales of Suburban  Plaza and Wyoming Mall.  Interest  paid  decreased in 1995 as
compared to 1994 primarily due to the sales of properties  discussed  above.  In
addition, the Partnership refinanced two of its properties in 1995, resulting in
a reduction in interest paid on these loans.  In 1995,  the  Partnership  paid a
greater amount of previously  deferred interest on advances from affiliates from
the proceeds  received  from  property  sales.  Property  taxes paid include the
funding of escrow  accounts which were  established as a part of the refinancing
of Bedford Green and Woodcreek Apartments in 1995.

In 1996, the Partnership received $40,937 of proceeds from the insurance carrier
for damages suffered at Governour's Square Apartments.

During  1995  and  1994,  the   Partnership   received   $300,000  and  $20,874,
respectively,  for  repayment  of the  advance to Fund XXII,  the joint owner of
Wyoming Mall.

In 1995, the sale of Suburban Plaza and Wyoming Mall shopping  centers  provided
cash proceeds of $10,946,743.  The  Partnership  used the proceeds to retire the
related  mortgage notes on the properties sold totaling  $7,415,826,  to repay a
mortgage  note  from an  affiliate  in the  amount  of  $1,331,000  and to repay
affiliate advances of $973,000.
In 1994, the sale of Homestead Apartments provided cash proceeds of $39,850.

In 1995, the Partnership paid $194,952 for deferred  borrowing costs relating to
the refinancing of Bedford Green and Woodcreek Apartments.



<PAGE>
Mortgage  principal  payments  totaled  $247,160 in 1996 and $253,698 in 1995 as
compared to $345,980 in 1994.  Principal  payments in 1996 and 1995 decreased as
compared to 1994 due to the sales of Wyoming  Mall and  Suburban  Plaza in March
1995.  In addition,  the interest  rate on the Fort Meigs  mortgage note payable
increased  in late  1994,  resulting  in  lower  amounts  being  applied  to the
principal balance in 1996 and 1995.

In 1995,  the  Partnership  received  $60,103 of proceeds from  refinancing  two
mortgage notes payable. See Item 8 - Note 10 - "Mortgage Refinancings."

Short-term liquidity:

In 1997,  present cash balances and operations of the properties are expected to
provide sufficient cash for normal operating expenses, debt service payments and
budgeted  capital  improvements.  In 1997, the mortgage notes payable secured by
Wise County  Plaza and Fort Meigs Plaza  mature.  The  mortgage  note  payable -
affiliate  secured by Fort Meigs  Plaza also  matures in 1997.  In  addition  to
regularly   scheduled  debt  service   payments,   balloon   payments   totaling
approximately  $9.7  million are due in 1997.  Management  expects to  refinance
these  mortgage  notes as they  mature.  However,  if  management  is  unable to
refinance the mortgage notes as they mature,  the Partnership will require other
sources of cash. No such sources have been identified.

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

The General Partner has, at its discretion, advanced funds to the Partnership to
fund working capital  requirements.  During 1995, the  Partnership  repaid these
advances  from the proceeds  from the sales of Wyoming Mall and Suburban  Plaza.
The General  Partner is not obligated to advance funds to the  Partnership,  and
there is no assurance that the Partnership will receive additional funds.

Prior  to the  restructuring  of the  Partnership,  affiliates  of the  Original
General  Partner  advanced  funds to enable the  Partnership to meet its working
capital requirements.  These advances were purchased by, and are now payable to,
the  General  Partner.  During  1995 the  Partnership  repaid a  portion  of the
purchased  advances and the related accrued  interest from the proceeds from the
sales of Wyoming Mall and Suburban Plaza.

The total  advances from  affiliates at December 31, 1996 and 1995  consisted of
the following:

                                                   1996             1995
                                                -----------     ------------

   Advances purchased by General Partner        $   630,574     $    630,574
   Accrued interest payable                         104,679           46,027
                                                 ----------      -----------
                                                $   735,253     $    676,601
                                                 ==========      ===========



<PAGE>
The  advances  are  unsecured,  due on demand and accrue  interest  at the prime
lending  rate of Bank of America  plus 1%. The prime  lending rate was 8.25% and
8.5% at December 31, 1996 and 1995, respectively.

Long-term liquidity:

The Partnership  determined to evaluate market and other economic  conditions to
establish  the  optimum  time  to  commence  an  orderly   liquidation   of  the
Partnership's  assets in  accordance  with the terms of the Amended  Partnership
Agreement.  Taking such conditions as well as other pertinent  information  into
account,  the Partnership has determined to begin orderly liquidation of all its
assets.  Although there can be no assurance as to the timing of the  liquidation
due to real estate  market  conditions,  the general  difficulty of disposing of
real estate,  and other general  economic  factors,  it is anticipated that such
liquidation  would result in the  dissolution of the  Partnership  followed by a
liquidating  distribution  to the limited  partners by  December  2001.  In this
regard, the Partnership has placed Fort Meigs Plaza on the market for sale.

Operations of the  Partnership's  properties are expected to provide  sufficient
cash flow for operating expenses, debt service payments and capital improvements
in the foreseeable  future. The Partnership has significant  mortgage maturities
during 1997,  and management  expects to refinance  these mortgage notes as they
mature. However, if management is unable to refinance the mortgage notes as they
mature, the Partnership will require other sources of cash. No such sources have
been identified.

These  conditions raise  substantial  doubt about the  Partnership's  ability to
continue  as a going  concern.  The  financial  statements  do not  include  any
adjustments that might result from the outcome of these uncertainties.

Distributions

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

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

The  Partnership was formed to engage in the business of acquiring and operating
income-producing  real  properties,  and holding the properties for  investment.
Since  completion of its capital  formation and property  acquisition  phases in
1985, when it completed the purchase of thirteen properties, the Partnership has
operated its properties for production of income.  The Partnership's  properties
were  adversely  affected by  competitive  and overbuilt  markets,  resulting in
continuing cash flow problems.  In 1990, Commerce Tower in Amarillo,  Texas, was
foreclosed on by the lender in full  settlement of the mortgage  indebtedness on
the  property.   Georgetown  Apartments,   located  in  Lakeland,  Florida,  was
foreclosed  on by the lender in full  settlement  of  mortgage  indebtedness  in
September,  1992.  Hickory  Lake  Apartments  was  sold in  December  1993,  and
Homestead  Manor  Apartments  was sold in  February  1994.  In March  1995,  the
Partnership  sold the Suburban  Plaza and Wyoming  Mall  shopping  centers.  The
Partnership continues to operate the seven remaining properties.



<PAGE>
During  1994,  management  determined  that Wyoming Mall had reached its optimum
value and therefore began actively marketing the property for sale. The property
was sold on March 31, 1995 with net cash proceeds of $877,664.

Suburban  Plaza  was  sold to an  unrelated  third  party  for a cash  price  of
$6,910,000  on March  31,1995.  The  Partnership  received net cash  proceeds of
$1,322,253.

In November 1993,  the  Partnership  ceased making debt service  payments on the
first and second  mortgages of Homestead  Manor  Apartments,  and a receiver was
subsequently appointed on January 24, 1994. This property had been on the market
since 1992,  and  management  was in  negotiations  with a buyer at the time the
receiver was appointed. The sale was successfully completed on February 22, 1994
for a cash  purchase  price of $60,810  and  assumption  of the first and second
liens by the purchaser.

The Partnership's working capital needs have been supported by net proceeds from
the December  1993 sale of Hickory Lake  Apartments  and the March 1995 sales of
Suburban Plaza and Wyoming Mall and by deferring certain affiliate payables.

The Partnership  has had little ready cash reserves since its inception.  It has
been largely  dependent on  affiliates  to support its  operations.  Although no
additional  advances from  affiliates were required during 1996, the Partnership
owed  affiliate  advances of $735,253  and payables to  affiliates  for property
management  fees,  Partnership  general  and  administrative   expenses,   asset
management fees and disposition fees totaling $4,210,324.

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

1996 compared to 1995

Revenue:

Total revenues decreased by $1,815,931 in 1996 as compared to 1995. The decrease
was  mainly  due to the  Partnership  recording  a gain in  1995 on the  sale of
Suburban Plaza Shopping  Center,  net of the loss on the sale of Wyoming Mall in
1995, as discussed below.

Rental  revenue  decreased  by $208,034  in 1996 as compared to prior year.  The
overall  decrease was primarily  due to the sales of Suburban  Plaza and Wyoming
Mall, which contributed  rental revenue of approximately  $326,000 and $262,000,
respectively,  in 1995. This loss of rental revenue from the sold properties was
partially  offset by an  increase  in rental  revenue  at the  remainder  of the
properties.  The majority of the  increase was due to increased  rental rates at
each of the  properties.  In  addition,  although  occupancy  at  Bedford  Green
Apartments and Wise County Plaza was lower at the end of 1996 than at the end of
1995,  there  was an  increase  in the  average  occupancy  rates at  these  two
properties  in 1996.  See Item 2 - Properties  for a more  detailed  analysis of
occupancy and rents per square foot.

Interest  income  decreased by $19,338 in 1996 as compared to 1995. In 1995, the
Partnership  recorded  approximately  $9,400 of  interest on a loan made to Fund
XXII,  the joint owner of Wyoming Mall. No such interest was recorded in 1996 as
the loan was repaid by Fund XXII in 1995.  In addition,  there was a decrease in
interest  earned  on funds  held in escrow  accounts  by the  mortgagee.  Escrow
deposits  declined  in 1996 as funds were  released  by the  lenders for capital
improvements.

<PAGE>
The Partnership  recognized a gain on involuntary conversion of $27,252 relating
to hurricane damage suffered at Governour's  Square Apartments in 1996 (see Item
8 - Note 11 - "Gain on Involuntary Conversion").

During 1995, the Partnership  recognized a gain on disposition of real estate on
Suburban Plaza of $1,861,448 and a loss on the sale of Wyoming Mall of $245,637.
No such gain was recorded in 1996.

Expenses:

Total  expenses  decreased by $859,655 in 1996 as compared to 1995. The decrease
was mainly due to decreases in interest expense,  depreciation and amortization,
other property  operating  expenses and general and administrative - affiliates,
as discussed below.

Interest   expense  in  1996   decreased   by  $311,462  in  relation  to  1995.
Approximately $214,000 of the decrease was due to the repayment of the mortgages
on Suburban Plaza and Wyoming Mall when the properties  were sold in March 1995.
The decrease was also due to lower  interest  rates on the mortgages  secured by
Bedford Green and Woodcreek Apartments which were refinanced in July 1995.

Interest expense - affiliates  decreased by $76,032 in 1996 as compared to 1995.
The decrease  was due to the  repayment of $973,000 of advances and a $1,331,000
mortgage  note from an  affiliate in 1995.  See Item 8 - Note 2 -  "Transactions
with Affiliates."

Other property  operating  expenses decreased by $150,058 in 1996 as compared to
the prior year.  The decrease was partially  due to the sales of Suburban  Plaza
and Wyoming Mall, which incurred expenses of approximately  $33,000 and $19,000,
respectively, in 1995. In addition, a greater amount of legal fees were incurred
at Wise  County  Plaza in 1995  relating  to the  bankruptcy  filing  by a major
tenant.  All of the properties  experienced a decrease in property insurance and
marketing costs in 1996.

General and administrative  expenses increased by $14,219 in 1996 as compared to
1995 mainly due to increased tax preparation fees in 1996.

General  and  administrative  -  affiliates  decreased  by  $107,274  in 1996 as
compared  to 1995.  The  decrease  was mainly due to a lower  amount of overhead
expenses being allocated to the Partnership by McREMI.

1995 compared to 1994

Revenue:

Total  revenues  increased by $67,128 in 1995 as compared to 1994.  The increase
was mainly due to a gain on the sale of Suburban Plaza Shopping  Center,  net of
the loss on the sale of  Wyoming  Mall.  The change  was  partially  offset by a
decrease in rental revenue, as discussed below.

Rental revenue decreased by $1,411,372 in 1995 as compared to 1994. The decrease
was primarily  due to the sales of Suburban  Plaza and Wyoming Mall in the first
quarter  of  1995.  Increased  occupancy  and  rental  rates at  Bedford  Green,
Breckenridge, Evergreen Square and Governour's Square apartments slightly offset
the loss in rental revenues from the sold properties.




<PAGE>
Interest income  increased by $46,263 in 1995, as compared to 1994. The increase
was  primarily  the  result of higher  average  cash  balances  due to  proceeds
received from the sales of Suburban Plaza and Wyoming Mall. The Partnership held
approximately  $2 million of cash and cash  equivalents  at December 31, 1995 as
compared to $1.2 million at December 31, 1994.

During 1995, the Partnership  recognized a gain on disposition of real estate on
Suburban Plaza of $1,861,448 and a loss on the sale of Wyoming Mall of $245,637.
During 1994, the Partnership  recognized a gain on disposition of real estate on
Homestead  Manor  Apartments  of $29,440.  Also related to the sale of Homestead
Manor Apartments,  the Partnership  reduced previously accrued property taxes of
$154,134,  which was  recorded as other income  during 1994.  No such income was
recorded in 1995.

Expenses:

Total  expenses  decreased by $1,653,664 in 1995 as compared to 1994,  primarily
due to the sales of Suburban  Plaza and  Wyoming  Mall  shopping  centers in the
first  quarter  of 1995.  Suburban  Plaza and  Wyoming  Mall  incurred  expenses
totaling approximately $272,000 and $334,000, respectively, in 1995, as compared
to $1,000,000 and $1,188,000, respectively, in 1994.

Interest expense decreased by $611,478 in 1995 as compared to 1994. The decrease
was primarily  due to the sales of Suburban  Plaza and Wyoming Mall in the first
quarter of 1995.

Interest expense - affiliates decreased by $117,364 in 1995 as compared to 1994.
The  decrease  was mainly due to the  repayment  of $973,000  in advances  and a
$1,331,000 mortgage note payable from an affiliate in 1995.

Depreciation and amortization decreased by $322,666 in 1995 as compared to 1994.
The decrease  was mainly due to the sales of Suburban  Plaza and Wyoming Mall in
the first quarter of 1995.  This decrease was slightly  offset by an increase at
the  remaining  properties,  the result of the addition of  depreciable  capital
improvements.

Property taxes and property  management fees - affiliates  decreased by $146,667
and  $84,886,  respectively,  in 1995 as compared to 1994.  The  decreases  were
primarily  due to the  sales of  Suburban  Plaza and  Wyoming  Mall in the first
quarter of 1995.

Repairs and  maintenance  decreased by $153,064 in 1995 as compared to 1994. The
decrease was  primarily  due to the sales of Suburban  Plaza and Wyoming Mall in
the first quarter of 1995. In addition, Governour's Square experienced a decline
in painting expense due to decreased turnover of tenants in 1995.

General and  administrative  expense decreased by $23,683 in 1995 as compared to
1994. In 1994 the Partnership  paid  approximately  $7,000 of state  withholding
taxes on behalf of the limited partners.  No such withholding taxes were paid in
1995. In addition,  the Partnership  incurred a greater amount of legal expenses
in 1994 relating to the sale of Homestead Manor Apartments and Suburban Plaza.

General  and  administrative  -  affiliates  decreased  by  $136,218  in 1995 as
compared to 1994.  The decrease was due mainly to a decline in asset  management
fees, the result of a decreased tangible asset value of the Partnership on which
the fee is based,  primarily  because of the sale of Suburban  Plaza and Wyoming
Mall.


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

<TABLE>
<CAPTION>

                                                                                                      Page
                                                                                                      Number
                                                                                                      ------
<S>                                                                                                      <C>
INDEX TO FINANCIAL STATEMENTS

Financial Statements:

   Report of Independent Public Accountants.......................................                       18

   Balance Sheets at December 31, 1996 and 1995...................................                       19

   Statements of Operations for each of the three years in the period
      ended December 31, 1996.....................................................                       20

   Statements of Partners' Deficit for each of the three years
      in the period ended December 31, 1996.......................................                       21

   Statements of Cash Flows for each of the three years in the period
      ended December 31, 1996.....................................................                       22

   Notes to Financial Statements..................................................                       24

   Financial Statement Schedule -

      Schedule III - Real Estate Investments and Accumulated
         Depreciation and Amortization............................................                       37


</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 XXI, L.P.:

We have audited the accompanying  balance sheets of McNeil Real Estate Fund XXI,
L.P. (a California  limited  partnership)  as of December 31, 1996 and 1995, and
the related statements of operations,  partners' deficit and cash flows for each
of the three  years in the period  ended  December  31,  1996.  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 XXI,
L.P. as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Partnership  will  continue as a going  concern.  As  discussed in Note 8 to the
financial  statements,  the Partnership  has previously  relied on advances from
affiliates  to meet  its  debt  obligations  and to fund  capital  improvements.
Additionally, the Partnership has had to defer payment of payables to affiliates
in order to meet its working  capital needs.  Additionally,  the  Partnership is
faced with mortgage note  maturities of  approximately  $9.7 million in 1997 for
which no extensions,  modifications  or refinancings  have yet been  negotiated.
There is no guarantee  that such  negotiations  can be  completed.  Management's
plans in regard to these matters are also described in Note 8. These  conditions
raise substantial  doubt about the Partnership's  ability to continue as a going
concern.  The  financial  statements do not include any  adjustments  that might
result from the outcome of these uncertainties.

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 17, 1997

<PAGE>
                        McNEIL REAL ESTATE FUND XXI, L.P.

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                 December 31,
                                                                        ----------------------------------
                                                                            1996                 1995
                                                                       ---------------      -------------
<S>                                                                    <C>                  <C>           
ASSETS
------

Real estate investments:

   Land.....................................................           $     3,240,113      $    3,607,306
   Buildings and improvements...............................                29,542,828          33,341,911
                                                                        --------------       -------------
                                                                            32,782,941          36,949,217
   Less:  Accumulated depreciation and
     amortization...........................................               (14,661,016)        (15,278,026)
                                                                        --------------       -------------
                                                                            18,121,925          21,671,191

Asset held for sale.........................................                 2,731,674                   -

Cash and cash equivalents...................................                 1,670,843           1,998,301
Cash segregated for security deposits.......................                   167,645             167,007
Accounts receivable.........................................                   317,152             176,462
Escrow deposits.............................................                   425,750             611,639
Deferred borrowing costs, net of accumulated
   amortization of $153,724 and $90,135 at
   December 31, 1996 and 1995, respectively.................                   432,677             495,631
Prepaid expenses and other assets...........................                    63,559              58,418
                                                                        --------------       -------------
                                                                       $    23,931,225      $   25,178,649
                                                                        ==============       =============

LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
------------------------------------------

Mortgage notes payable, net.................................           $    21,780,275     $    22,008,628
Mortgage note payable - affiliate...........................                   733,900             733,900
Accounts payable and accrued expenses.......................                   282,667             300,985
Accrued property taxes......................................                   347,845             338,135
Payable to affiliates - General Partner.....................                 4,210,324           4,217,978
Advances from affiliates - General Partner..................                   735,253             676,601
Deferred gain on involuntary conversion.....................                    66,879                   -
Security deposits and deferred rental revenue...............                   195,060             196,320
                                                                        --------------       -------------
                                                                            28,352,203          28,472,547
                                                                        --------------       -------------

Partners' deficit:
   Limited  partners - 50,000 Units  authorized;  47,288 
   and 47,308 Units issued and outstanding at December
   31, 1996 and 1995, respectively (24,949 Current Income
   Units and 22,339 Growth/  Shelter Units  outstanding 
   at December 31, 1996 and  24,949  Current  Income Units
   and  22,359  Growth/Shelter  Units outstanding at
   December 31, 1995).....................................                  (4,059,156)         (2,943,347)
   General Partner..........................................                  (361,822)           (350,551)
                                                                        --------------       -------------
                                                                            (4,420,978)         (3,293,898)
                                                                        --------------       -------------
                                                                       $    23,931,225      $   25,178,649
                                                                        ==============       =============
</TABLE>
                 See accompanying notes to financial statements.

<PAGE>
                        McNEIL REAL ESTATE FUND XXI, L.P.

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                            For the Years Ended December 31,
                                                   ----------------------------------------------------
                                                        1996               1995               1994
                                                   --------------     --------------    ---------------
Revenue:
<S>                                                <C>                <C>               <C>            
   Rental revenue..........................        $    6,434,691     $    6,642,725    $     8,054,097
   Interest................................               105,374            124,712             78,449
   Other income............................                     -                  -            154,134
   Gain on involuntary conversion..........                27,252                  -                  -
   Net gain on disposition of real estate..                     -          1,615,811             29,440
                                                    -------------      -------------     --------------
     Total revenue.........................             6,567,317          8,383,248          8,316,120
                                                    -------------      -------------     --------------

Expenses:
   Interest................................             2,028,191          2,339,653          2,951,131
   Interest - affiliates...................               120,208            196,240            313,604
   Depreciation and amortization...........             1,590,804          1,724,781          2,047,447
   Property taxes..........................               520,251            552,075            698,742
   Personnel costs.........................               729,371            789,067            829,324
   Repairs and maintenance.................               787,086            758,653            911,717
   Property management fees -
     affiliates............................               331,145            351,663            436,549
   Utilities...............................               421,204            432,670            472,466
   Other property operating expenses.......               405,927            555,985            533,570
   General and administrative..............                67,710             53,491             77,174
   General and administrative -
     affiliates............................               692,500            799,774            935,992
                                                    -------------      -------------     --------------
     Total expenses........................             7,694,397          8,554,052         10,207,716
                                                    -------------      -------------     --------------

Net loss...................................        $   (1,127,080)    $     (170,804)   $    (1,891,596)
                                                    =============      =============     ==============

Net income (loss) allocable to limited
   partners - Current Income Unit..........        $     (101,437)    $      788,960    $      (170,244)
Net loss allocable to limited
   partners - Growth/Shelter Unit..........            (1,014,372)          (958,056)        (1,702,436)
Net loss allocable to General
   Partner.................................               (11,271)            (1,708)           (18,916)
                                                    -------------      -------------     --------------
Net loss...................................        $   (1,127,080)    $     (170,804)   $    (1,891,596)
                                                    =============      =============     ==============

Net income (loss) per limited partnership
   unit:

Current Income Unit Holders................        $        (4.07)    $        31.62    $         (6.82)
                                                    =============      =============     ==============

Growth/Shelter Unit Holders................        $       (45.41)    $       (42.85)   $        (76.12)
                                                    =============      =============     ==============
</TABLE>


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

                         STATEMENTS OF PARTNERS' DEFICIT

              For the Years Ended December 31, 1996, 1995 and 1994



<TABLE>
<CAPTION>

                                                                                                   Total
                                                    General                 Limited                Partners'
                                                    Partner                 Partners               Deficit
                                                 -----------------       -----------------     -----------------
<S>                                              <C>                     <C>                   <C>              
Balance at December 31, 1993..............       $       (329,927)       $       (901,571)     $     (1,231,498)

Net loss
   General Partner........................                (18,916)                      -               (18,916)
   Current Income Units...................                      -                (170,244)             (170,244)
   Growth/Shelter Units...................                      -              (1,702,436)           (1,702,436)
                                                  ---------------         ---------------       ---------------
Total net loss............................                (18,916)             (1,872,680)           (1,891,596)
                                                  ---------------         ---------------       ---------------

Balance at December 31, 1994..............               (348,843)             (2,774,251)           (3,123,094)

Net income (loss)
   General Partner........................                 (1,708)                      -                (1,708)
   Current Income Units...................                      -                 788,960               788,960
   Growth/Shelter Units...................                      -                (958,056)             (958,056)
                                                  ---------------         ---------------       ---------------
Total net loss............................                 (1,708)               (169,096)             (170,804)
                                                  ---------------         ---------------       ---------------

Balance at December 31, 1995..............               (350,551)             (2,943,347)           (3,293,898)

Net loss
   General Partner........................                (11,271)                      -               (11,271)
   Current Income Units...................                      -                (101,437)             (101,437)
   Growth/Shelter Units...................                      -              (1,014,372)           (1,014,372)
                                                  ---------------         ---------------       ---------------
Total net loss............................                (11,271)             (1,115,809)           (1,127,080)
                                                  ---------------         ---------------       ---------------

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

</TABLE>

                 See accompanying notes to financial statements.


<PAGE>
                        McNEIL REAL ESTATE FUND XXI, L.P.

                            STATEMENTS OF CASH FLOWS

                Increase (Decrease) in Cash and Cash Equivalents

<TABLE>
<CAPTION>
                                                            For the Years Ended December 31,
                                                   -----------------------------------------------------
                                                        1996                1995               1994
                                                   ---------------    ---------------   ----------------
<S>                                                <C>                <C>               <C>            
Cash flows from operating activities:
   Cash received from tenants..............        $    6,377,872     $    6,778,734    $     8,077,101
   Cash paid to suppliers..................            (2,295,191)        (2,600,394)        (3,322,165)
   Cash paid to affiliates.................            (1,031,299)          (358,687)          (939,041)
   Interest received.......................               105,374            115,284             46,481
   Interest received - affiliates..........                     -             71,614                  -
   Interest paid...........................            (1,947,970)        (2,320,337)        (2,715,704)
   Interest paid to affiliates.............               (48,493)          (543,878)          (153,671)
   Property taxes paid.....................              (460,410)          (731,346)          (446,844)
                                                    -------------      -------------     --------------
Net cash provided by operating
     activities............................               699,883            410,990            546,157
                                                    -------------      -------------     --------------

Cash flows from investing activities:
   Net proceeds received from
     insurance company.....................                40,937                  -                  -
   Additions to real estate investments....              (820,483)          (702,157)          (882,381)
   Repayment of advances to affiliates.....                     -            300,000             20,874
   Proceeds from disposition of real
     estate................................                     -         10,946,743             39,850
                                                    -------------      -------------     --------------
Net cash provided by (used in)
   investing activities....................              (779,546)        10,544,583           (821,657)
                                                    -------------      -------------     --------------

Cash flows from financing activities:
   Deferred borrowing costs paid...........                  (635)          (194,952)            (1,142)
   Principal payments on mortgage
     notes payable.........................              (247,160)          (253,698)          (345,980)
   Retirement of mortgage notes due to
     disposition of real estate............                     -         (7,415,826)                 -
   Retirement of mortgage note - affiliate.
     due to disposition of real estate.....                     -         (1,331,000)                 -
   Net proceeds from refinancing on
     mortgage notes payable................                     -             60,103                  -
   Repayment of advances from affiliates -
     General Partner.......................                     -           (973,000)                 -
                                                    -------------      -------------     --------------
Net cash used in financing activities......              (247,795)       (10,108,373)          (347,122)
                                                    -------------      -------------     --------------

Net increase (decrease) in cash and
     cash equivalents......................              (327,458)           847,203           (622,622)

Cash and cash equivalents at
     beginning of year.....................             1,998,301          1,151,098          1,773,720
                                                    -------------      -------------     --------------

Cash and cash equivalents at end
     of year...............................        $    1,670,843     $    1,998,301    $     1,151,098
                                                    =============      =============     ==============
</TABLE>

  See  discussion  of noncash  investing  and  financing  activities in Note 7 -
  "Property Dispositions" and Note 11 - "Gain on Involuntary Conversion."

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

                            STATEMENTS OF CASH FLOWS


               Reconciliation of Net Loss to Net Cash Provided by
                              Operating Activities

<TABLE>
<CAPTION>
                                                          For the Years Ended December 31,
                                                   -----------------------------------------------------
                                                        1996               1995               1994
                                                   ---------------    ---------------   ----------------
<S>                                                <C>                <C>               <C>             
Net loss...................................        $   (1,127,080)    $     (170,804)   $    (1,891,596)
                                                    -------------      -------------     --------------

Adjustments to reconcile net loss
   to net cash provided by operating
   activities:
   Depreciation and amortization...........             1,590,804          1,724,781          2,047,447
   Amortization of discounts on
     mortgage notes payable................                18,807             20,278            168,832
   Amortization of deferred borrowing
     costs.................................                63,589             62,026             67,240
   Accrued interest on advances from
     affiliates - General Partner..........                58,652           (261,381)           130,711
   Interest added to advances to
     affiliates - General Partner..........                     -             (9,428)           (31,968)
   Gain on disposition of real estate......                     -         (1,615,811)           (29,440)
   Gain on involuntary conversion..........               (27,252)                 -                  -
   Changes in assets and liabilities:
     Cash segregated for security deposits.                  (638)            38,574             22,600
     Accounts receivable...................               (40,225)            89,358             21,307
     Advances to affiliates................                     -             71,614                  -
     Escrow deposits.......................               185,889           (358,841)           229,655
     Prepaid expenses and other assets.....                (5,141)            63,678              1,071
     Accounts payable and accrued
       expenses............................               (18,318)            16,756           (472,560)
     Accrued property taxes................                 9,710            (65,774)          (171,613)
     Payable to affiliates - General
       Partner.............................                (7,654)           792,750            433,500
     Security deposits and deferred
        rental revenue.....................                (1,260)            13,214             20,971
                                                    -------------      -------------     --------------

         Total adjustments.................             1,826,963            581,794          2,437,753
                                                    -------------      -------------     --------------

Net cash provided by operating
     activities............................        $      699,883     $      410,990    $       546,157
                                                    =============      =============     ==============
</TABLE>



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

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 1996


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

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

McNeil  Real Estate  Fund XXI,  L.P.,  (the  "Partnership"),  formerly  known as
Southmark Realty Partners, Ltd., was organized on November 23, 1983 as a limited
partnership under the provisions of the California  Revised Limited  Partnership
Act to acquire and operate  commercial and residential  properties.  The general
partner of the Partnership is McNeil Partners,  L.P. (the "General Partner"),  a
Delaware  limited  partnership,  an affiliate  of Robert A. McNeil.  The General
Partner was elected at a meeting of limited partners on March 26, 1992, at which
time an amended and restated  partnership  agreement  (the "Amended  Partnership
Agreement")  was adopted.  Prior to March 26, 1992,  the general  partner of the
Partnership was Southmark  Partners,  Ltd. (the "Original General  Partner"),  a
Texas limited  partnership of which the general partner is Southmark  Investment
Group, Inc., a wholly-owned  subsidiary of Southmark Corporation.  The principal
place of business  for the  Partnership  and the  General  Partner is 13760 Noel
Road, Suite 600, LB70, Dallas, Texas, 75240.

The Partnership is engaged in diversified real estate activities,  including the
ownership,  operation and  management of  residential,  commercial  office,  and
retail real estate.  The  Partnership  determined  to evaluate  market and other
economic  conditions  to  establish  the  optimum  time to  commence  an orderly
liquidation  of the  Partnership's  assets in  accordance  with the terms of the
Amended Partnership Agreement. As described in Note 4 "Real Estate Investments,"
at December 31, 1996, the Partnership owned seven revenue-producing properties.

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.  These single asset tier  partnerships were formed to
accommodate  the refinancing of the respective  property.  The Partnership has a
100% ownership interest in each of the following tier partnerships:

    Tier Partnership
    ----------------

    Bedford Green Fund XXI Limited Partnership (a)
    Breckenridge Fund XXI Limited Partnership (b)
    Evergreen Fund  XXI Limited Partnership (b)
    Governour's Square Fund XXI Limited Partnership (b)
    Woodcreek Fund XXI Limited Partnership (a)

    (a) Included  in   financial  statements  for  years ended December 31, 1996
        and 1995.
    (b) Included  in  financial  statements  for  years ended December 31, 1996,
        1995, and 1994.

The financial  statements also include the accounts  (through March 31, 1995) of
the  Partnership and its 50% undivided  interest in the assets,  liabilities and
operations of Wyoming Mall owned jointly with McNeil Real Estate Fund XXII, L.P.

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.  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
recoverable amount.

The  Partnership's  method  of  accounting  for real  estate  investments  is 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" ("SFAS 121"),  which the Partnership  adopted effective January 1, 1996. The
adoption  of  SFAS  121 did  not  have a  material  impact  on the  accompanying
financial statements.

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

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

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

Depreciation and Amortization
-----------------------------

Buildings and improvements are depreciated using the  straight-line  method over
the  estimated  useful lives of the assets,  ranging from 5 to 25 years.  Tenant
improvements  are capitalized and amortized over the terms of the related tenant
lease using the straight-line method.

<PAGE>
Cash and Cash Equivalents
-------------------------

Cash and cash equivalents  include cash on hand and cash on deposit in 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.

Prepaid Commissions
-------------------

Leasing  commissions  incurred to obtain  leases on  commercial  properties  are
capitalized  and amortized using the  straight-line  method over the term of the
related  lease and are  included  in prepaid  expenses  and other  assets on the
Balance Sheets.

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.

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 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.

The Partnership leases its commercial properties under non-cancelable  operating
leases.  Certain leases provide concessions and/or periods of escalating or free
rent. Rental revenue is recognized on a straight-line basis over the term of the
related lease. The excess of the rental revenue  recognized over the contractual
rental  payments  is  recorded  as accrued  rent  receivable  and is included in
accounts receivable on the Balance Sheets.





<PAGE>
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 generally provides that net income (other than
net income  arising from sales or  refinancing)  shall be allocated  one percent
(1%) to the  General  Partner  and  ninety-nine  percent  (99%)  to the  limited
partners equally as a group, and net loss shall be allocated one percent (1%) to
the General  Partner,  nine percent (9%) to the limited  partners owning Current
Income  Units  and  ninety  percent  (90%)  to  the  limited   partners   owning
Growth/Shelter Units.

For financial statement  purposes,  net income arising from sales or refinancing
shall be  allocated  one  percent  (1%) to the General  Partner and  ninety-nine
percent (99%) to the limited  partners equally as a group, and net loss shall be
allocated  one percent  (1%) to the General  Partner,  nine  percent (9%) to the
limited  partners  owning  Current  Income Units and ninety percent (90%) to the
limited partners owning Growth/Shelter Units.

For tax reporting  purposes,  net income arising from sales or refinancing shall
be  allocated  as  follows:  (a)  first,  amounts  of such net  income  shall be
allocated among the General  Partner and limited  partners in proportion to, and
to the extent of, the  portion of such  partner's  share of the net  decrease in
Partnership Minimum Gain determined under Treasury  Regulations,  (b) second, to
the General Partner and limited partners in proportion to, and to the extent of,
the amount by which their  respective  capital account  balances are negative by
more than their respective  remaining shares of the  Partnership's  Minimum Gain
attributable  to properties  still owned by the Partnership and (c) third, 1% of
such net income shall be  allocated  to the General  Partner and 99% of such net
income shall be allocated 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 allocation of  Partnership  deductions  attributable  to
debt. The  Partnership's  tax allocations for 1996, 1995 and 1994 have been made
in accordance with these provisions.

Distributions
-------------

At the discretion of the General  Partner,  distributable  cash (other than cash
from sales or refinancing)  shall be distributed  100% to the limited  partners,
with such distributions first paying the Current Income Priority Return and then
the  Growth/Shelter  Priority  Return.  Also at the  discretion  of the  General
Partner, the limited partners will receive 100% of distributable cash from sales
or refinancing with such distributions  first paying the Current Income Priority
Return,  then the  Growth/Shelter  Priority  Return,  then repayment of Original




<PAGE>
Invested  Capital,  and of the  remainder,  16.66% to  limited  partners  owning
Current Income Units and 83.34% to limited partners owning Growth/Shelter Units.
The  limited  partners'  Current  Income  and  Growth/Shelter  Priority  Returns
represent  a 10% and 8%,  respectively,  cumulative  return  on  their  Adjusted
Invested  Capital  balance,  as  defined.  No  distributions  of Current  Income
Priority   Return  have  been  made  since  1988,   and  no   distributions   of
Growth/Shelter Priority Return have been made since the Partnership began.

In connection  with a Terminating  Disposition,  as defined,  cash from sales or
refinancing and any remaining reserves shall be allocated among, and distributed
to, the General Partner and limited partners in proportion to, and to the extent
of,  their  positive  capital  account  balances  after the net  income has been
allocated pursuant to the above.

Net Income (Loss) Per Limited Partnership Units
-----------------------------------------------

Net income (loss) per limited  partnership unit ("Unit") is computed by dividing
net income  (loss)  allocated to the limited  partners by the  weighted  average
number of Units  outstanding.  Per Unit  information  has been computed based on
24,949,  24,949 and 24,960  Current Income Units  outstanding in 1996,  1995 and
1994,   respectively  and  22,339,   22,359  and  22,366   Growth/Shelter  Units
outstanding in 1996, 1995 and 1994, respectively.

Reclassifications
-----------------

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

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

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

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

Under the terms of the Amended  Partnership  Agreement,  the Partnership  pays a
disposition  fee to an affiliate of the General Partner equal to 3% of the gross
sales price for brokerage  services performed in connection with the sale of the
Partnership's  properties.  The fee is due and  payable  at the  time  the  sale
closes. The Partnership incurred $346,050 of such fees during 1995 in connection
with the sales of Suburban Plaza and Wyoming Mall.  These fees have not yet been
paid by the  Partnership  and are  included in payable to  affiliates  - General
Partner on the Balance Sheets at December 31, 1996 and 1995.




<PAGE>
Under the terms of the Amended Partnership Agreement,  the Partnership is paying
an asset  management fee,  retroactive to February 14, 1991, which is payable to
the General Partner.  Through 1999, the asset management fee is calculated as 1%
of the Partnership's tangible asset value. Tangible asset value is determined by
using the greater of (i) an amount calculated by applying a capitalization  rate
of 9 percent to the annualized  net operating  income of each property or (ii) a
value of $10,000 per apartment unit for  residential  property and $50 per gross
square foot for  commercial  property to arrive at the property  tangible  asset
value. The property  tangible asset value is then added to the book value of all
other assets excluding intangible items. The fee percentage decreases subsequent
to 1999.

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,
                                                       ------------------------------------------------
                                                          1996              1995               1994
                                                       ----------      -------------       ------------
<S>                                                    <C>             <C>                 <C>         
Property management fees - affiliates........      $      331,145     $      351,663     $      436,549
Charged to gain on disposition of
   real estate:
    Disposition fee .........................                   -            346,050                  -
Charged to interest - affiliates:
   Interest on advances from
     affiliates - General Partner............              58,652             86,364            130,711
   Interest on mortgage note
     payable - affiliates....................              61,556            109,876            182,893
Charged to general and
   administrative - affiliates:
   Partnership administration................             295,106            394,802            418,177
   Asset management fee......................             397,394            404,972            517,815
                                                    -------------      -------------     --------------
                                                   $    1,143,853     $     1,693,727   $     1,686,145
                                                    =============      ==============    ==============
</TABLE>

During 1992,  the  Partnership  made  advances of $320,874 to McNeil Real Estate
Fund XXII,  L.P., the joint owner of Wyoming Mall, for tenant  improvements  and
operations at Wyoming Mall.  During 1994,  $20,874 of these  advances was repaid
and during  1995 the  balance of the  advances  and the  related  interest  were
repaid. The advances,  which were unsecured and due on demand,  accrued interest
at prime plus 3.5%.

The General Partner has, at its discretion,  advanced funds to the  Partnership.
The  Partnership  received  $472,431 in advances  that were used to fund working
capital  requirements.  These  advances and the related  accrued  interest  were
repaid in 1995 from the  proceeds  from the sales of Wyoming  Mall and  Suburban
Plaza. The General Partner is not obligated to advance funds to the Partnership,
and there is no assurance that the Partnership will receive additional funds.






<PAGE>
Prior  to the  restructuring  of the  Partnership,  affiliates  of the  Original
General  Partner  advanced  funds to enable the  Partnership to meet its working
capital requirements.  These advances were purchased by, and are now payable to,
the General  Partner.  During 1995,  $500,569 of these  advances and the related
accrued interest were repaid.

The total  advances from  affiliates at December 31, 1996 and 1995  consisted of
the following:

                                                  1996             1995
                                              -----------     ------------

  Advances purchased by General Partner       $   630,574     $    630,574
  Accrued interest payable                        104,679           46,027
                                               ----------      -----------
                                              $   735,253     $    676,601
                                               ==========      ===========


The  advances  are  unsecured,  due on demand and accrue  interest  at the prime
lending  rate of Bank of America  plus 1%. The prime  lending rate was 8.25% and
8.5% at December 31, 1996 and 1995, respectively.

In May 1992, the Partnership obtained a loan from McNeil Real Estate Fund XXVII,
L.P.,  an  affiliate of the General  Partner,  totaling  $972,000.  The loan was
secured by a third loan on  Suburban  Plaza  which was sold in March  1995.  The
Partnership utilized a portion of the proceeds from 1995 property sales to repay
the affiliate mortgage in April 1995.

Payable to affiliates - General  Partner at December 31, 1996 and 1995 consisted
primarily  of  unpaid  property   management  fees,   Partnership   general  and
administrative expenses,  disposition fees and asset management fees and are due
and payable from current operations.

See Note 6 -  "Mortgage  Note  Payable  -  Affiliate"  for a  discussion  of the
mortgage note payable to an affiliated entity.

NOTE 3 - TAXABLE LOSS
---------------------

McNeil Real Estate Fund XXI, L.P. 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 reporting purposes exceeded
the net assets and liabilities for financial  reporting  purposes by $3,103,486,
$3,563,407 and $3,192,202 in 1996, 1995 and 1994, respectively.


<PAGE>
NOTE 4 - REAL ESTATE INVESTMENTS
--------------------------------

The  basis  and  accumulated  depreciation  of  the  Partnership's  real  estate
investments at December 31, 1996 and 1995 are set forth in the following tables:

<TABLE>
<CAPTION>
                                                                        Accumulated
                                                   Buildings and        Depreciation         Net Book
       1996                         Land           Improvements        & Amortization          Value
       ----                    --------------      ------------        --------------     ---------------
<S>                            <C>                <C>                  <C>                 <C>           
Bedford Green
   Bedford, OH                 $      252,310     $     3,632,040      $   (1,738,243)     $    2,146,107
Breckenridge
   Davenport, IA                      232,016           2,460,769          (1,188,517)          1,504,268
Evergreen Square
   Tupelo, MS                         396,856           4,608,920          (2,326,553)          2,679,223
Governour's Square
   Wilmington, NC                     577,657           6,095,250          (2,807,622)          3,865,285
Wise County Plaza
   Wise, VA                         1,397,569           8,284,347          (4,475,872)          5,206,044
Woodcreek
   Fort Wayne, IN                     383,705           4,461,502          (2,124,209)          2,720,998
                                -------------       -------------       -------------       -------------
                               $    3,240,113      $   29,542,828      $  (14,661,016)     $   18,121,925
                                =============       =============       =============       =============


                                                                        Accumulated
                                                   Buildings and        Depreciation         Net Book
       1995                         Land           Improvements        & Amortization          Value
       ----                    --------------      ------------        --------------     ---------------

Bedford Green                  $      252,310      $    3,502,644      $   (1,568,085)     $    2,186,869
Breckenridge                          232,016           2,429,345          (1,059,282)          1,602,079
Evergreen Square                      396,856           4,511,320          (2,107,120)          2,801,056
Fort Meigs Plaza                      367,193           4,499,421          (2,016,421)          2,850,193
Governour's Square                    577,657           5,881,314          (2,500,547)          3,958,424
Wise County Plaza                   1,397,569           8,236,756          (4,136,550)          5,497,775
Woodcreek                             383,705           4,281,111          (1,890,021)          2,774,795
                                -------------       -------------       -------------       -------------
                               $    3,607,306      $   33,341,911     $   (15,278,026)     $   21,671,191
                                =============       =============      ==============       =============
</TABLE>

Fort Meigs Plaza is a strip shopping center located in Perrysburg,  Ohio, a city
lying just outside of Toledo,  Ohio.  The center is surrounded  by  upper-middle
income  residential  neighborhoods  which  are very well  established.  With the
exception of one property,  all of the competitors are newer, yet Fort Meigs has
earned a reputation in the marketplace as a well maintained center. The property
is  expected to operate at current  occupancy  levels in 1997.  The  Partnership
placed  Fort  Meigs  Plaza on the  market  for sale  effective  October 1, 1996.
Accordingly,  the shopping  center was  classified  as an asset held for sale at
December  31,  1996.  The net book value of Fort Meigs Plaza was  $2,731,674  at
December 31, 1996.


<PAGE>
The results of operations  for the asset held for sale at December 31, 1996 were
$(115,695),  $(184,183) and $(177,281)  for 1996,  1995 and 1994,  respectively.
Results of operations are operating  revenues less operating  expenses including
depreciation and interest expense.

The Partnership leases its commercial properties under non-cancelable  operating
leases.  Future  minimum  rents to be received  as of  December  31, 1996 are as
follows:


      1997.........................       $   1,242,000
      1998.........................           1,189,000
      1999.........................           1,055,000
      2000.........................             910,000
      2001.........................             676,000
      Thereafter...................           1,599,000
                                           ------------
        Total......................       $   6,671,000
                                           ============

Future minimum rents do not include  contingent rentals based on sales volume of
tenants. Contingent rents amounted to $54,912, $63,777 and $89,293 for the years
ended December 31, 1996, 1995, and 1994, respectively. Future minimum rents also
do not include  expense  reimbursements  for common area  maintenance,  property
taxes, and other expenses.  These expense  reimbursements  amounted to $174,370,
$233,290  and $537,948  for the years ended  December  31, 1996,  1995 and 1994,
respectively.  These contingent rents and expense reimbursements,  which include
amounts  related to the asset held for sale,  are included in rental  revenue on
the Statements of Operations.


<PAGE>

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

The following  sets forth  mortgage  notes  payable,  net of  discounts,  of the
Partnership  at  December  31, 1996 and 1995.  All  mortgage  notes  payable are
secured by the related real estate investment.

<TABLE>
<CAPTION>
                           Mortgage       Annual          Monthly
                           Lien           Interest        Payments/                   December 31,
Property                   Position(a)    Rates %         Maturity (d)             1996          1995
--------                   -----------    -------      -------------------    -----------   ---------------

<S>                        <C>                <C>      <C>           <C>      <C>           <C>            
Bedford Green (b)          First              8.48     $   25,327    07/02    $     3,266,122    $     3,291,885
                                                                                -------------     --------------

Breckenridge (c)           First              8.15     $   14,602    07/03          1,729,293          1,762,115
                           Discount                                                   (37,624)           (42,384)
                                                                                -------------     --------------
                                                                                    1,691,669          1,719,731
                                                                                -------------     --------------

Evergreen Square (c)       First              8.15     $   16,777    07/03          1,986,858          2,024,568
                           Discount                                                   (43,228)           (48,697)
                                                                                -------------     --------------
                                                                                    1,943,630          1,975,871
                                                                                -------------     --------------

Fort Meigs Plaza           First             12.81     $   27,370    10/97          3,011,293          3,024,601
                                                                                -------------     --------------

Governour's Square (c)     First              8.15     $   26,314    07/03          3,116,269          3,175,416
                           Discount                                                   (67,800)           (76,378)
                                                                                -------------     --------------
                                                                                    3,048,469          3,099,038
                                                                                -------------     --------------

Wise County Plaza          First              8.97     $   31,296    08/97          3,526,419          3,582,872
                           Second             3.87          8,092    08/97          2,509,046          2,509,046
                                                                                -------------     --------------
                                                                                    6,035,465          6,091,918
                                                                                -------------     --------------

Woodcreek (b)              First              8.48     $   21,586    07/02          2,783,627          2,805,584
                                                                                -------------     --------------

                                                       Total                  $    21,780,275    $    22,008,628
                                                                                =============     ==============
</TABLE>

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

(b)    On July 14, 1995, the Partnership refinanced Bedford Green Apartments and
       Woodcreek Apartments (see Note 10 - "Mortgage Refinancings").


<PAGE>
(c)    Financing  was  obtained  under  the  terms  of a  Real  Estate  Mortgage
       Investment   Conduit   financing.   The   mortgage   notes   payable  are
       cross-collateralized  and may not be prepaid in whole or part before July
       1998.  Any  prepayments  made during the sixth or seventh  loan years 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.

(d)    Balloon payments on the mortgage notes are due as follows:

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


       Wise County Plaza                 $   6,000,127            08/97
       Fort Meigs Plaza                      3,000,138            10/97
       Bedford Green                         3,074,442            07/02
       Woodcreek                             2,620,263            07/02
       Breckenridge                          1,436,695            07/03
       Evergreen Square                      1,650,679            07/03
       Governour's Square                    2,588,992            07/03

Scheduled  principal  maturities of the mortgage  notes  payable under  existing
agreements, excluding discounts of $148,652, are as follows:


        1997....................................       $   9,239,336
        1998....................................             209,059
        1999....................................             226,950
        2000....................................             246,372
        2001....................................             267,456
        Thereafter..............................          11,739,754
                                                        ------------
                                                       $  21,928,927
                                                        ============

Based on borrowing  rates  currently  available to the  Partnership for mortgage
loans with  similar  terms and  average  maturities,  the fair value of mortgage
notes payable was approximately $21,458,000 at December 31, 1996 and $21,975,000
at December 31, 1995.

NOTE 6 - MORTGAGE NOTE PAYABLE - AFFILIATES
-------------------------------------------

The following sets forth  mortgage note payable - affiliates of the  Partnership
at December 31, 1996 and 1995.  The mortgage note is secured by the related real
estate investments.

<TABLE>
<CAPTION>
                         Mortgage         Annual          Monthly
                         Lien             Interest        Payments/                    December 31,
Property                 Position(a)      Rates %         Maturity                 1996                1995
--------                 ------------     -------      -------------------    ---------------     ------------
<S>                                           <C>      <C>            <C>     <C>                <C>          
Fort Meigs               Second               8.25     $    4,073(b)  04/97   $       733,900    $     733,900
                                                                               ==============     ============
</TABLE>
<PAGE>
(a)    The debt is non-recourse to the Partnership.

(b)    Payments are  interest-only  equal  to   an   effective  interest rate of
       6.66%.  All accrued  interest is due at maturity in April 1997.

Based on borrowing rates  currently  available to the Partnership for a mortgage
loan with similar terms and average  maturities,  the fair value of the mortgage
note  payable was  approximately  $690,000 at December  31, 1996 and $694,000 at
December 31, 1995.

NOTE 7 - PROPERTY DISPOSITIONS
------------------------------

On March 31, 1995, Suburban Plaza Shopping Center was sold to an unrelated third
party  for a cash  price  of  $6,910,000.  Cash  proceeds  and  the  gain on the
disposition is detailed below:

                                                 Gain on Sale    Cash Proceeds
                                                 -------------   -------------

Sales price...............................       $  6,910,000     $ 6,910,000

Selling costs.............................           (293,754)        (86,454)
Retirement of mortgage discount...........            (683,198)
Carrying value............................          (3,691,594)
Accounts receivable.......................            (315,979)
Deferred borrowing costs..................                (479)
Prepaid expenses..........................             (63,548)
                                                   -----------

Gain on disposition of real estate........        $  1,861,448
                                                   ===========


Retirement of mortgage note...............                         (3,963,489)
Retirement of mortgage notes - affiliates.                         (1,331,000)
Accrued interest paid on retired notes....                           (146,111)
Real estate tax proration.................                            (38,368)
Credit for security deposit liability.....                            (22,325)
                                                                   ----------
Net cash proceeds.........................                        $ 1,322,253
                                                                   ==========



<PAGE>
On March 31, 1995,  Wyoming Mall Shopping  Center was sold to an unrelated third
party  for a cash  price of  $9,250,000.  The  Partnership  had a 50%  undivided
interest  in the assets,  liabilities  and  operations  of Wyoming  Mall,  owned
jointly with McNeil Real Estate Fund XXII,  L.P.  Cash  proceeds and the gain on
the disposition is detailed below:

                                                  Gain on Sale   Cash Proceeds
                                                  ------------   -------------
Sales price..............................         $  4,625,000    $ 4,625,000

Selling costs............................             (234,838)       (96,088)
Mortgage note prepayment penalty.........             (138,441)      (138,441)
Carrying value...........................           (4,325,663)
Accounts receivable......................              (81,749)
Deferred borrowing costs.................              (49,910)
Prepaid expenses.........................              (40,036)
                                                   -----------

Loss on disposition of real estate.......         $   (245,637)
                                                   ===========


Retirement of mortgage note..............                          (3,452,337)
Payment of 1994 taxes at closing.........                             (23,735)
Real estate tax proration................                             (14,154)
Credit for security deposit liability....                             (22,581)
                                                                   ----------
Net cash proceeds........................                         $   877,664
                                                                   ==========

The  Partnership  pays a disposition  fee to an affiliate of the General Partner
equal to 3% of the  gross  sales  price  for  brokerage  services  performed  in
connection  with the sale of the  Partnership's  properties.  The fee is due and
payable at the time the sale closes.  The Partnership  incurred $346,050 of such
fees  for the  year  ended  December  31,  1995 in  connection  with the sale of
properties.

On February 22, 1994,  Homestead Manor Apartments was sold to an unrelated third
party for a cash price of $60,810 and  assumption  of the first and second liens
by the  purchaser.  Cash proceeds and the gain on the  disposition  are detailed
below:

                                                  Gain on Sale   Cash Proceeds
                                                  ------------   -------------

Sales price..............................         $     60,810    $    60,810
Credit for onsite petty cash.............                 (150)          (150)
Mortgages assumed by purchaser...........            1,884,299
Carrying value...........................           (1,915,519)
                                                   -----------

Gain on disposition of real estate.......         $     29,440
                                                   ===========

Credit for security deposit liability....                             (20,810)
                                                                   ----------
Net cash proceeds........................                         $    39,850
                                                                   ==========

<PAGE>
Also related to the sale of Homestead Manor Apartments,  the Partnership reduced
previously  accrued  property  taxes of  $154,134,  which was  recorded as other
income.

NOTE 8 - FINANCIAL CONDITION AND GOING CONCERN CONSIDERATIONS
-------------------------------------------------------------

The  accompanying   financial   statements  have  been  prepared   assuming  the
Partnership will continue as a going concern. The Partnership incurred losses of
$1,127,080, $170,804 and $1,891,596 in 1996, 1995 and 1994, respectively.

The Partnership  generated $699,883 of cash through operating activities in 1996
and received $40,937 in proceeds from an insurance carrier.  However,  cash used
for additions to real estate  investments  totaled $820,483,  deferred borrowing
costs  totaled $635 and  mortgage  principal  payments  totaled  $247,160.  Cash
expenditures exceeded cash generated by $327,458.

In 1997,  present cash balances and operations of the properties are expected to
provide sufficient cash for normal operating expenses, debt service payments and
budgeted capital  improvements.  However, any unanticipated capital improvements
will require other sources of cash. In 1997, the mortgage notes payable  secured
by Wise County Plaza and Fort Meigs Plaza  mature.  The mortgage  note payable -
affiliate  secured by Fort Meigs  Plaza also  matures in 1997.  In  addition  to
regularly   scheduled  debt  service   payments,   balloon   payments   totaling
approximately  $9.7  million are due in 1997.  Management  expects to  refinance
these  mortgage  notes as they  mature.  However,  if  management  is  unable to
refinance the mortgage notes as they mature,  the Partnership will require other
sources of cash. No such sources have been  identified.  The  Partnership has no
established  lines of credit from outside  sources.  Other  possible  actions to
resolve cash deficiencies include refinancings, deferral of capital expenditures
on Partnership properties except where improvements are expected to increase the
competitiveness and marketability of the properties,  deferral of payables to or
arranging  financing  from  affiliates,  or the  ultimate  sale  of  Partnership
properties.

These  conditions raise  substantial  doubt about the  Partnership's  ability to
continue  as a going  concern.  The  financial  statements  do not  include  any
adjustments that might result from the outcome of these uncertainties.

NOTE 9 - 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 XXIV,  L.P.,  McNeil Real Estate  Fund XXV,  L.P.,  McNeil Real Estate Fund
XXVI, L.P., and McNeil Real Estate Fund XXVII,  L.P., et al. - Superior Court of
the State of California for the County of Los Angeles,  Case No. BC133799 (Class
and Derivative Action Complaint).

<PAGE>
The action involves  purported  class and derivative  actions brought by limited
partners of each of the fourteen limited partnerships that were named as nominal
defendants  as listed above (as defined in this  Section,  the  "Partnerships").
Plaintiffs allege that McNeil Investors,  Inc., its affiliate McNeil Real Estate
Management, Inc. and three of their senior officers and/or directors (as defined
in this Section, collectively, the "Defendants") breached their fiduciary duties
and certain  obligations under the respective  amended  partnership  agreements.
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.  On January 7, 1997, the Court ordered
consolidation with three other similar actions.

The  Partnerships  filed a demurrer to the  complaint  and a motion to strike on
February  14,  1997,  seeking to dismiss  the  complaint  in all  respects.  The
demurrer  is  pending.  The  Partnerships  deny  that  there is any merit to the
plaintiff's allegations and intend to vigorously defend this action.

NOTE 10 - MORTGAGE REFINANCINGS
-------------------------------

The  mortgage  notes  payable on Bedford  Green and  Woodcreek  Apartments  that
matured in June 1995 were refinanced in July 1995 for $3,300,000 and $2,812,500,
respectively.  The new mortgage  loans bear an interest  rate of 8.48%,  require
monthly  principal and interest  payments of $25,327 and $21,586,  respectively,
and mature in July 2002.
The following is a summary of the cash proceeds relating to the refinancings:

                                         Bedford
                                          Green        Woodcreek      Total
                                       ------------  ------------  ------------
     New loan proceeds.............    $ 3,300,000   $ 2,812,500   $ 6,112,500
     Existing debt retired.........     (3,118,570)   (2,933,827)   (6,052,397)
                                        ----------    ----------    ----------
     Loan proceeds.................    $   181,430   $  (121,327)  $    60,103
                                        ==========    ==========    ==========

The Partnership  incurred loan costs of $194,952 related to the refinancing.  An
additional  $404,074 of tax,  insurance  and property  replacement  escrows were
established at the closing of the refinancing.








<PAGE>
NOTE 11 - GAIN ON INVOLUNTARY CONVERSION
----------------------------------------

On July 12 and September 5, 1996,  Governour's Square Apartments suffered damage
from  two  separate  hurricanes.  Repairs  of  damages  totaling  $191,402  were
completed.  Reimbursements  for the repairs  totaling $40,937 were received from
the  insurance  carrier.  The  remaining  costs  of  $150,465,  less  a  $50,000
deductible, will be submitted to the insurance carrier for reimbursement and are
included in accounts  receivable  on the December 31, 1996  Balance  Sheet.  The
Partnership  recognized a gain on involuntary conversion of $27,252 and recorded
a deferred gain of $66,879 in 1996. The total gain on involuntary  conversion of
$94,131  represents the insurance  claims in excess of the basis of the property
damaged by the hurricanes.  The deferred gain on involuntary  conversion will be
recognized as the remaining insurance claim reimbursements are received.

NOTE 12 - PRO FORMA INFORMATION (UNAUDITED)
-------------------------------------------

The following  unaudited pro forma  information for the years ended December 31,
1995 and 1994 reflects the results of operations  of the  Partnership  as if the
sales of Wyoming Mall and  Suburban  Plaza  shopping  centers had occurred as of
January  1,  1994.  The  unaudited  pro  forma  information  is not  necessarily
indicative of the results of operations  which  actually  would have occurred or
those which might be expected to occur in the future.

                                                  1995           1994
                                               ------------  -------------
     Total revenue                             $ 6,182,132   $  6,139,088
     Loss before extraordinary items            (1,756,693)    (1,815,611)
     Net loss                                   (1,756,693)    (1,815,611)

     Net loss per thousand limited 
       partnership units:
       Current Income Units                          (6.34)         (6.55)
       Growth/Shelter Units                         (70.71)        (73.06)




<PAGE>

                        McNEIL REAL ESTATE FUND XXI, L.P.
                                  SCHEDULE III
              REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
                                December 31, 1996

<TABLE>
<CAPTION>
                                                                                  Cumulative           Costs
                                                     Initial Cost                Write-down       Capitalized
                          Related                             Buildings and     and Permanent       Subsequent
Description               Encumbrances (b)       Land         Improvements        Impairment (c)  To Acquisition
-----------               ----------------       ----         -------------     ----------------  --------------
<S>                        <C>               <C>               <C>                <C>              <C>          
APARTMENTS:

Bedford Green
   Bedford, OH             $    3,266,122    $      252,310    $    3,203,996     $          -     $     428,044

Breckenridge
   Davenport, IA                1,691,669           232,016         2,184,818                -           275,951

Evergreen
   Tupelo, MS                   1,943,630           396,856         4,217,746         (491,000)          882,174

Governour's Square
   Wilmington, NC               3,048,469           577,657         4,829,242                -         1,266,008

Woodcreek
   Fort Wayne, IN               2,783,627           383,705         3,613,217                -           848,285

RETAIL CENTERS:

Wise County Plaza
   Wise, VA                     6,035,465         1,397,569         8,375,648         (500,000)          408,699
                           --------------    --------------    --------------     ------------     -------------

                          $    18,768,982   $     3,240,113   $    26,424,667    $    (991,000)   $    4,109,161
                           ==============    ==============    ==============     ============     =============

Asset Held for sale (d):

Fort Meigs Plaza
   Perrysburg, OH         $    3,745,193
                           =============
</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)  The carrying  values of Evergreen  Square  Apartments and Wise County Plaza
     Shopping  Center were reduced by $176,568 and  $500,000,  respectively,  in
     1989. The carrying value of Evergreen Square Apartments was further reduced
     by $314,432 in 1991.

(d)  The  asset  held for sale is stated  at lower of  depreciated  cost or fair
     value less cost 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 the asset is placed on
     the market for sale.


                     See accompanying notes to Schedule III.
<PAGE>
                        McNEIL REAL ESTATE FUND XXI, L.P.
                                  SCHEDULE III
              REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
                                December 31, 1996

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

Bedford Green
   Bedford, OH                $      252,310     $    3,632,040   $      3,884,350    $   (1,738,243)

Breckenridge
   Davenport, IA                     232,016          2,460,769          2,692,785        (1,188,517)

Evergreen
   Tupelo, MS                        396,856          4,608,920          5,005,776        (2,326,553)

Governour's Square
   Wilmington, NC                    577,657          6,095,250          6,672,907        (2,807,622)

Woodcreek
   Fort Wayne, IN                    383,705          4,461,502          4,845,207        (2,124,209)

RETAIL CENTERS:

Wise County Plaza
   Wise, VA                        1,397,569          8,284,347          9,681,916        (4,475,872)
                               -------------      -------------    ---------------     -------------

                              $    3,240,113     $   29,542,828   $     32,782,941    $  (14,661,016)
                               =============      =============    ===============     =============

Asset Held for Sale:

Fort Meigs Plaza
   Perrysburg, OH                                                 $      2,731,674
                                                                   ===============

</TABLE>

(a)  For Federal income tax purposes,  the properties are depreciated over lives
     ranging from 5-39  years using ACRS or MACRS methods. The aggregate cost of
     real estate investments for Federal income tax purposes was $43,744,664 and
     accumulated depreciation was $30,779,860 at December 31, 1996.





                     See accompanying notes to Schedule III.

<PAGE>
                        McNEIL REAL ESTATE FUND XXI, L.P.
                                  SCHEDULE III
              REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
                                December 31, 1996


<TABLE>
<CAPTION>

                                 Date of                    Date                Depreciable
Description                   Construction                Acquired              lives (years)
-----------                   ------------                --------              -------------
<S>                             <C>                         <C>                     <C> 
APARTMENTS:

Bedford Green
   Bedford, OH                  1970                        06/84                   5-25

Breckenridge
   Davenport, IA                1974                        10/84                   5-25

Evergreen
   Tupelo, MS                   1970                        11/84                   5-25

Governour's Square
   Wilmington, NC               1974                        11/84                   5-25

Woodcreek
   Fort Wayne, IN               1978                        11/84                   5-25

RETAIL CENTERS:


Wise County Plaza
   Wise, VA                     1971                        02/84                   5-25


Asset Held for Sale:

Fort Meigs Plaza
   Perrysburg, OH               1974                        10/84                   


</TABLE>



                     See accompanying notes to Schedule III.

<PAGE>
                        McNEIL REAL ESTATE FUND XXI, L.P.

                              Notes to Schedule III
      Real Estate Investments and Accumulated Depreciation and Amortization

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

<TABLE>
<CAPTION>
                                                             For the Years Ended December 31,
                                                   ----------------------------------------------------
                                                       1996                1995               1994
                                                   --------------     --------------     --------------
<S>                                                <C>                <C>                <C>           
Real estate investments:

Balance at beginning of year...............        $   36,949,217     $   36,253,677     $   42,477,794

Improvements...............................               798,291            695,540            870,671

Reclassification to asset held for
   sale....................................            (4,875,377)                 -         (7,094,788)

Write-off of damaged basis.................               (89,190)                 -                  -
                                                    -------------      -------------      -------------

Balance at end of year.....................        $   32,782,941     $   36,949,217     $   36,253,677
                                                    =============      =============      =============


Accumulated depreciation and amortization:

Balance at beginning of year...............        $   15,278,026     $   13,696,125     $   14,621,475

Depreciation...............................             1,590,804          1,724,781          1,775,298

Reclassification to asset held for
   sale....................................            (2,165,895)          (142,880)        (2,700,648)

Write-off of damaged basis.................               (41,919)                 -                  -
                                                    -------------      -------------     --------------

Balance at end of year.....................        $   14,661,016     $   15,278,026    $    13,696,125
                                                    =============      =============     ==============


Assets held for sale:

Balance at beginning of year...............        $            -     $    8,153,520    $     5,935,338

Reclassification to asset held for
   sale....................................             2,709,482                  -          4,394,140

Improvements...............................                22,192              6,617             11,710

Depreciation...............................                     -           (142,880)          (272,149)

Sale of real estate........................                     -         (8,017,257)        (1,915,519)
                                                   --------------      -------------     --------------

Balance at end of year.....................        $    2,731,674     $            -    $     8,153,520
                                                    =============      =============     ==============

</TABLE>

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

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,              76       Mr.  McNeil  is also  Chairman  of   the
Chairman of the Board                   Board and Director of McNeil Real Estate
and Director                            Management,  Inc. ("McREMI") which is an
                                        affiliate of the General Partner. He has
                                        held the foregoing  positions  since the
                                        formation  of such  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 has been a
                                        member  of the  International  Board  of
                                        Directors of the Salk  Institute,  which
                                        promotes  research  in  improvements  in
                                        health care.

Carole J. McNeil               53       Mrs.   McNeil   is  Co-Chairman,    with
Co-Chairman of the                      husband  Robert  A.  McNeil,  of  McNeil
Board                                   Investors,  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.


<PAGE>

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

Ron K. Taylor                  39       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.

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,  1996,  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, 1996. 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.



<PAGE>

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 securities.

(B)   Security ownership of management.

      Neither the General  Partner nor any of its  officers or  directors of its
      general partner own any limited partnership units.

 (C)  Change in control.

      None.


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

The amendments to the Partnership compensation structure included in the Amended
Partnership  Agreement  provide for an asset management fee to replace all other
forms of General Partner  compensation  other than property  management fees and
reimbursements  of certain  costs.  Through 1999,  the asset  management  fee is
calculated as 1% of the Partnership's tangible asset value. Tangible asset value
is  determined  by using the greater of (i) an amount  calculated  by applying a
capitalization  rate of 9 percent to the annualized net operating income of each
property or (ii) a value of $10,000 per apartment unit for residential  property
and $50 per gross square foot for commercial  property to arrive at the property
tangible  asset value.  The property  tangible  asset value is then added to the
book value of all other assets  excluding  intangible  items. The fee percentage
decreases  subsequent  to 1999.  For the  year  ended  December  31,  1996,  the
Partnership  paid or accrued  $397,394  of such  asset  management  fees.  Total
accrued but unpaid asset  management  fees of  $2,927,930  were  outstanding  at
December 31, 1996.

The  Partnership  pays property  management fees equal to 5% of the gross rental
receipts for its  residential  properties  and 6% of gross  rental  receipts for
commercial  properties  to McREMI,  an  affiliate  of the General  Partner,  for
providing property management services. Additionally, the Partnership reimburses
McREMI for its costs,  including  overhead of  administering  the  Partnership's
affairs.  For the year ended December 31, 1996, the Partnership  paid or accrued
$626,251  of such  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."

Prior  to the  restructuring  of the  Partnership,  affiliates  of the  Original
General  Partner  advanced  funds to enable the  Partnership to meet its working
capital requirements.  These advances were purchased by, and are now payable to,
the General  Partner.  Accrued  interest  totaling $58,652 was added to advances
from affiliates for the year ended December 31, 1996.

A second  lien on Fort Meigs  Plaza  totaling  $733,900 is secured by a mortgage
note payable to an affiliate of the General Partner. For the year ended December
31, 1996, interest expense relating to this loan totaled $61,556.



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

See accompanying Index to Financial Statements at Item 8.

(A)     Exhibits

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

              3.1 and 4.1          Amended  and  Restated  Limited   Partnership
                                   Agreement dated March 26, 1992  (Incorporated
                                   by  reference  to the  Current  Report of the
                                   registrant  on Form 8-K dated March 26, 1992,
                                   as filed on April 9, 1992).

              10.2                 Portfolio Services Agreement,  dated February
                                   14, 1991,  between Southmark Realty Partners,
                                   Ltd. and McNeil Real Estate Management,  Inc.
                                   (Incorporated  by reference to the  Quarterly
                                   Report of the registrant on Form 10-Q for the
                                   period ended March 31, 1991,  as filed on May
                                   14, 1991).

              10.3                 Amended and  Restated  Notes, dated  March 1,
                                   1991, between Southmark Realty Partners, Ltd.
                                   and The  Manhattan  Savings Bank  relating to
                                   Wise County Plaza. (Incorporated by reference
                                   to the  Annual  Report of the  registrant  on
                                   Form 10-K for the period  ended  December 31,
                                   1991, as filed on March 24, 1992).

              10.6                 First Amendment and Modification  of Mortgage
                                   Note,  dated June 10,  1992,  between  McNeil
                                   Real Estate Fund XXI,L.P. and Household Bank,
                                   F.S.B. relating to Woodcreek Apartments. (1)

              10.7                 First Amendment and Modification  of Mortgage
                                   Note,  dated June 10,  1992,  between  McNeil
                                   Real  Estate  Fund XXI,  L.P.  and  Household
                                   Bank,   F.S.B.   relating  to  Bedford  Green
                                   Apartments. (1)

              10.9                 Promissory  Note,  dated May 1, 1992, between
                                   McNeil Real Estate Fund XXI,  L.P. and McNeil
                                   Real Estate Fund XXVII, L.P. (1)

              10.10                Property  Management  Agreement dated   March
                                   26,  1992,  between  McNeil  Real Estate Fund
                                   XXI, L.P. and McNeil Real Estate  Management,
                                   Inc. (1)

              10.11                Amendment of  Property  Management  Agreement
                                   dated  March 5,  1993 by McNeil  Real  Estate
                                   Fund  XXI,   L.P.   and  McNeil  Real  Estate
                                   Management, Inc. (1)


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

              10.12                Revolving Credit  Agreement  dated  August 6,
                                   1991,  between  McNeil  Partners,   L.P.  and
                                   various selected partnerships,  including the
                                   Registrant.(2)

              10.13                Loan  Agreement  dated June 23, 1993  between
                                   Lexington  Mortgage  Company  and McNeil Real
                                   Estate Fund XXI,  L.P., et al.  (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 on March 30, 1994).

              10.14                Master Property  Management  Agreement, dated
                                   June 24,  1993  between  McNeil  Real  Estate
                                   Management,  Inc. and McNeil Real Estate Fund
                                   XXI, L.P. (filed without schedules).(2)

              10.15                Loan  Agreement  dated  July 14, 1995 between
                                   Fleet Real Estate  Capital,  Inc. and Bedford
                                   Green Fund XXI Limited Partnership. (3)

              10.16                Loan Agreement  dated  July  14, 1995 between
                                   Fleet Real Estate Capital, Inc. and Woodcreek
                                   Fund XXI Limited Partnership. (3)

              10.17                Sale   Agreement   dated  February  16,  1994
                                   between McNeil Real Estate Fund XXI, L.P. and
                                   HM Investment Corp. for the sale of Homestead
                                   Apartments  (Incorporated by reference to the
                                   Current  Report of the registrant on Form 8-K
                                   dated February 22, 1994, as filed on March 4,
                                   1994).

              11.                  Statement   regarding  computation   of   Net
                                   Income  (Loss) per Limited  Partnership  Unit
                                   (see Item 8 -  "Organization  and  Summary of
                                   Significant Accounting Policies").


<PAGE>

              22.                  Following is a list of subsidiaries of the
                                   Partnership:

<TABLE>
<CAPTION>
                                                                                 Names Under
                                                              Jurisdiction       Which It Is
                                   Name of Subsidiary          Incorporation     Doing Business
                                   ------------------         --------------     --------------

<S>                               <C>                              <C>               <C> 
                                   Bedford Green Fund XXI
                                   Limited Partnership             Texas             None

                                   Breckenridge Fund XXI
                                   Limited Partnership             Delaware          None

                                   Evergreen Fund XXI
                                   Limited Partnership             Delaware          None

                                   Governour's Square Fund
                                   XXI Limited Partnership         Delaware          None

                                   Woodcreek Fund XXI
                                   Limited Partnership             Texas             None
</TABLE>

              The Partnership has omitted  instruments with respect to long-term
              debt  where  the  total  amount  of  the   securities   authorized
              thereunder  does  not  exceed  10%  of  the  total  assets  of the
              Partnership. The Partnership agrees to furnish a copy of each such
              instrument to the Commission upon request.


                     (1)           Incorporated  by   reference  to  the  Annual
                                   Report of the registrant on Form 10-K for the
                                   period ended  December 31, 1992,  as filed on
                                   March 30, 1993.

                     (2)           Incorporated   by  reference  to  the  Annual
                                   Report of the registrant on Form 10-K for the
                                   period ended  December 31, 1993,  as filed on
                                   March 30, 1994.

                     (3)           Incorporated  by reference  to the  Quarterly
                                   Report of the registrant on Form 10-Q for the
                                   period ended  September 30, 1995, as filed on
                                   November 13, 1995.

(B)       There were no reports on Form 8-K filed by the Partnership  during the
          quarter ended December 31, 1996.



<PAGE>

                        McNEIL REAL ESTATE FUND XXI, L.P.
                              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 XXI, L.P.


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

                                   By: McNeil Investors, Inc., General Partner



March 28, 1997                     By:  /s/  Robert 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 28, 1997                     By:  /s/  Ron K. Taylor
--------------                          ----------------------------------------
Date                                    Ron K. Taylor
                                        President and Director of McNeil 
                                         Investors, Inc.
                                        (Principal Financial Officer)




March 28, 1997                     By:  /s/  Carol A. Fahs
--------------                          ----------------------------------------
Date                                    Carol A. Fahs
                                        Vice President of McNeil Investors, Inc.
                                        (Principal Accounting Officer)