FORT MEIGS PLAZA



                    BALANCE SHEET AS OF DECEMBER 31, 1997 AND
            STATEMENTS OF OPERATIONS, OWNER'S DEFICIT AND CASH FLOWS
                             FOR THE YEAR THEN ENDED

             TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




                    BALANCE SHEET AS OF DECEMBER 31, 1996 AND
            STATEMENTS OF OPERATIONS, OWNER'S DEFICIT AND CASH FLOWS
         FOR EACH OF THE TWO YEARS IN THE PERIOD ENDED DECEMBER 31, 1996

                                    UNAUDITED



<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Owner of
  Fort Meigs Plaza:

We have audited the  accompanying  balance sheet of Fort Meigs Plaza (a property
wholly-owned  by McNeil Real Estate Fund XXI,  L.P., the "Owner") as of December
31, 1997, and the related  statements of operations,  changes in owner's deficit
and cash  flows for the year then  ended.  These  financial  statements  are the
responsibility of the Property's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit 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 audit provides 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 Fort Meigs Plaza as of December
31, 1997, and the results of its operations and its cash flows for the year then
ended, in conformity with generally accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Property  will  continue  as a  going  concern.  As  discussed  in Note 2 to the
financial  statements,  the Property's Owner is in default on approximately $3.7
million in mortgage note debt that is secured by the Property,  and for which no
extensions, modifications, or refinancings have yet been negotiated. There is no
guarantee that such  negotiations can be completed.  The Owner's plans in regard
to these matters are also described in Note 2. This condition raises substantial
doubt about the Property's ability to continue as a going concern. The financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.


/s/  Arthur Andersen LLP



Dallas, Texas
  March 20, 1998


<PAGE>
                                FORT MEIGS PLAZA

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                       -----------------------------------------
                                                                              1997                    1996
                                                                       -----------------        ----------------
                                                                                                    (Unaudited)
                                     ASSETS
                                     ------
<S>                                                                    <C>                      <C>
Asset held for sale:
   Land                                                                $         367,193        $        367,193
   Buildings and tenant improvements                                           4,594,690               4,530,376
                                                                        ----------------         ---------------
                                                                               4,961,883               4,897,569
   Less:  Accumulated depreciation
     and amortization                                                         (2,165,895)             (2,165,895)
                                                                        -----------------        ----------------
                                                                               2,795,988               2,731,674

Cash                                                                              18,953                  10,291
Cash segregated for tenant security deposits                                      10,358                   8,383
Accounts receivable                                                              100,314                 104,137
Prepaid expenses and other assets                                                 11,654                   6,478
                                                                        ----------------         ---------------
                                                                       $       2,937,267        $      2,860,963
                                                                        ================         ===============


                         LIABILITIES AND OWNER'S DEFICIT
                         -------------------------------

Mortgage note payable                                                  $               -        $      3,011,293
Mortgage notes payable - affiliate                                             3,730,076                 733,900
Accrued interest payable                                                         105,655                  93,146
Accrued property taxes                                                            75,992                  74,880
Accounts payable and other accrued expenses                                          536                       -
Accounts payable - affiliate                                                       3,200                   3,004
Tenant security deposits and deferred rental revenue                               8,850                   7,980
                                                                         ---------------         ---------------
                                                                               3,924,309               3,924,203

Commitments and contingencies

Owner's deficit                                                                 (987,042)             (1,063,240)
                                                                         ---------------         ---------------
                                                                       $       2,937,267        $      2,860,963
                                                                        ================         ===============
</TABLE>

                 See accompanying notes to financial statements.

<PAGE>
                                FORT MEIGS PLAZA

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                             For the Years Ended December 31,
                                                   ----------------------------------------------------
                                                       1997               1996               1995
                                                                       (Unaudited)       (Unaudited)
                                                   --------------    ---------------   ----------------
<S>                                                <C>               <C>               <C>
REVENUE:
   Rental revenue                                  $      682,906    $       684,195   $        669,565
                                                    -------------     --------------    ---------------

EXPENSES:
   Interest                                               368,996            386,939            388,851
   Interest - affiliates                                   77,380             61,556             61,388
   Depreciation and amortization                                -            149,474            193,711
   Property taxes                                          74,894             72,539             69,682
   Personnel expenses                                      11,848              8,580              9,855
   Repairs and maintenance                                 41,473             38,454             45,329
   Property management fees                                41,403             39,308             40,575
   Utilities                                               20,159             20,639             20,717
   Other property operating expenses                       54,004             22,401             23,640
                                                    -------------      -------------     --------------

     Total expenses                                       690,157            799,890            853,748
                                                    -------------      -------------     --------------

Net loss                                           $       (7,251)    $     (115,695)   $      (184,183)
                                                    =============      =============     ==============
</TABLE>

                 See accompanying notes to financial statements.
<PAGE>
                                FORT MEIGS PLAZA

                    STATEMENTS OF CHANGES IN OWNER'S DEFICIT

              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<TABLE>
<CAPTION>

                                                               For the Years Ended December 31,
                                                   -------------------------------------------------------------
                                                       1997                    1996                 1995
                                                                           (Unaudited)           (Unaudited)
                                                   ---------------        ----------------     -----------------
<S>                                               <C>                    <C>                  <C>
Balance at beginning of year (unaudited)          $   (1,063,240)        $      (979,098)     $       (815,657)

Capital contributed                                      816,419                 693,522               693,133

Capital distributed                                     (732,970)               (661,969)             (672,391)

Net loss                                                  (7,251)               (115,695)             (184,183)
                                                  --------------           -------------        --------------

Balance at end of year                           $      (987,042)         $   (1,063,240)      $      (979,098)
                                                  ==============           =============        ==============
</TABLE>



                 See accompanying notes to financial Statements.

<PAGE>
                                FORT MEIGS PLAZA

                            STATEMENTS OF CASH FLOWS

                           Increase (Decrease) in Cash

<TABLE>
<CAPTION>

                                                            For the Years Ended December 31,
                                                   ----------------------------------------------------
                                                       1997               1996               1995
                                                                       (Unaudited)       (Unaudited)
                                                   ---------------    ---------------   ---------------
<S>                                                <C>                <C>               <C>
Cash flows from operating activities:
   Cash received from tenants..............        $      685,624     $      652,870    $       673,073
   Cash paid to suppliers..................              (132,226)           (94,652)           (95,555)
   Cash paid to affiliates.................               (41,207)           (39,772)           (40,352)
   Interest paid...........................              (384,879)          (386,688)          (388,280)
   Interest paid to affiliate..............               (48,886)           (48,886)           (48,886)
   Property taxes paid.....................               (73,782)           (72,546)           (70,697)
                                                    --------------     --------------    ---------------
Net cash provided by operating
   activities..............................                 4,644             10,326             29,303
                                                    -------------      -------------     --------------

Cash flows from investing activities:
   Additions to buildings and tenant
     Improvements..........................               (64,314)           (30,956)           (28,685)
                                                    -------------      -------------     --------------

Cash flows from financing activities:
   Principal payments on mortgage
     note payable..........................               (15,117)           (13,308)           (11,716)
   Capital contributed.....................               816,419            693,522            693,133
   Capital distributed.....................              (732,970)          (661,969)          (672,391)
                                                    --------------     -------------     --------------
Net cash provided by financing activities..                68,332             18,245              9,026
                                                    -------------      -------------     --------------

Net increase (decrease) in cash............                 8,662             (2,385)             9,644

Cash at beginning of year..................                10,291             12,676              3,032
                                                    -------------      -------------     --------------

Cash at end of year........................        $       18,953     $       10,291    $        12,676
                                                    =============      =============     ==============

</TABLE>
                 See accompanying notes to financial statements.
<PAGE>
                                FORT MEIGS PLAZA

                            STATEMENTS OF CASH FLOWS

               Reconciliation of Net Loss to Net Cash Provided by
                              Operating Activities

<TABLE>
<CAPTION>

                                                            For the Years Ended December 31,
                                                   -----------------------------------------------------
                                                          1997             1996               1995
                                                                       (Unaudited)       (Unaudited)
                                                   ---------------    ---------------  -----------------
<S>                                                <C>                <C>              <C>
Net loss...................................        $       (7,251)    $     (115,695)  $       (184,183)
                                                    -------------      -------------    ---------------

Adjustments to reconcile net loss to
   net cash provided by operating
   activities:
   Depreciation and amortization...........                     -            149,474            193,711
   Amortization of deferred borrowing
     costs.................................                   102                393                360
   Changes in assets and liabilities:
     Cash segregated for tenant
       security deposits...................                (1,975)            (3,447)             3,551
     Accounts receivable...................                 3,823            (30,123)             2,267
     Prepaid expenses and other
       assets..............................                (5,278)            (2,022)             1,430
     Accrued interest payable..............                12,509             12,528             12,713
     Accrued property taxes................                 1,112                 (7)            (1,015)
     Accounts payable and other
       accrued expenses....................                   536             (2,556)             2,556
     Accounts payable - affiliates.........                   196               (464)               223
     Tenant security deposits and
       deferred rental revenue.............                   870              2,245             (2,310)
                                                    -------------      -------------     ---------------

     Total adjustments.....................                11,895            126,021            213,486
                                                    -------------      -------------     --------------

Net cash provided by operating
   activities..............................        $        4,644     $       10,326    $        29,303
                                                    =============      =============     ==============
</TABLE>

                 See accompanying notes to financial statements.

<PAGE>
                                FORT MEIGS PLAZA

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 1997

Note 1 - Organization and Summary of Significant Accounting Policies
--------------------------------------------------------------------

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

Fort Meigs Plaza (the  "Property")  is  wholly-owned  by McNeil Real Estate XXI,
L.P. (the "Owner").  The Property is a 104,990 square foot strip shopping center
located in Perrysburg, Ohio, a city lying just outside of Toledo, Ohio.

   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.

The accompanying financial statements have been prepared from the records of the
Property  and  include its  assets,  liabilities,  revenues  and  expenses.  The
accompanying financial statements do not include assets,  liabilities,  revenues
or expenses  pertaining to the operation of the Owner or of other  properties in
which the Owner has an ownership interest.

   Buildings and Tenant Improvements
   ---------------------------------

The  Property's  buildings  and  tenant  improvements  are  stated  at cost less
accumulated  depreciation and amortization through October 1, 1996. Depreciation
and  amortization  were computed  principally on a straight-line  basis over the
estimated  useful lives of the related assets,  which ranged from 5 to 25 years.
Tenant  improvements were amortized over the life of the respective lease or the
estimated useful lives of the improvements, whichever was shorter.

The Owner  placed  the  Property  on the market  for sale  October  1, 1996.  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," depreciation and amortization ceased on that date.

   Revenue Recognition
   -------------------

The Property leases its units 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
leases.  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 Sheet.


<PAGE>
Future minimum rents to be received as of December 31, 1997 are as follows:

      1998..............................               $       573,846
      1999..............................                       498,124
      2000..............................                       375,223
      2001..............................                       337,222
      2002..............................                        60,201
      Thereafter........................                       362,875
                                                        --------------
        Total...........................               $     2,207,491
                                                        ==============

Future minimum rents do not include  contingent rentals based on sales volume of
tenants.  Contingent  rents  amounted to $50,026 for the year ended December 31,
1997. Future minimum rents also do not include expense reimbursements for common
area   maintenance,   property  taxes,   and  other   expenses.   These  expense
reimbursements  amounted to $65,786 for the year ended December 31, 1997.  These
contingent  rents and expense  reimbursements  are included in rental revenue on
the Statements of Operations.

Note 2 - Mortgage Notes Payable - Affiliate
-------------------------------------------

The following  sets forth the mortgage notes payable - affiliate of the Owner of
the Property at December 31,  1997.  The mortgage  notes are in the Owner's name
and are secured by the Property.

<TABLE>
<CAPTION>
Mortgage                 Annual           Monthly
Lien                     Interest         Payments/
Position(a)              Rates %          Maturity
-----------              --------         ----------
<S>                      <C>              <C>          <C>      <C>
First                    12.81            $33,333      03/98    $     2,996,176
Second                    8.25            $4,073(b)    09/97            733,900
                                                                 --------------
                                                                $     3,730,076
                                                                 ==============
</TABLE>

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

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

In December 1997,  McNeil Real Estate Fund XX, L.P.  ("Fund XX"), the affiliated
partnership  of the Owner  that holds the second  lien  mortgage  secured by the
Property,  purchased the first lien mortgage note from the unaffiliated  lender.
The Owner is in default  on  payment  of both the first and second  liens on the
Property  as the  notes  matured  on  March  1,  1998  and  September  1,  1997,
respectively. The Property is currently on the market for sale and the Owner has
received  an offer  from a  non-affiliate  to  purchase  the  property  for $3.8
million.  The Owner will  continue  to make  regularly  scheduled  debt  service
payments on the first and second lien  mortgage  notes until the Property can be
sold.



<PAGE>
If the pending sales  transaction  is not  completed,  the Owner will attempt to
renegotiate the terms of the affiliate debt. However, such refinancing may be at
an interest rate which is higher, or otherwise on terms which are less favorable
than  those  provided  by the  current  mortgage.  Furthermore,  if  alternative
financing  cannot be  obtained,  the  affiliate  lender  could  foreclose on the
Property which secures the mortgage. Management believes the possibility of this
outcome is unlikely.

Note 3 - Transactions with Affiliates
-------------------------------------

   Property Management Fees
   ------------------------

The Owner pays property  management fees of 6% of gross receipts of the Property
to McNeil Real Estate Management, Inc., an affiliate of the Owner, for providing
property management and leasing services to the Property.

   Accounts Payable - Affiliate
   ----------------------------

Accounts  payable  -  affiliate  at  December  31,  1997  consists  of  property
management fees which are due and payable from current operations.

Note 4 - Commitments and Contingencies
--------------------------------------

The  Property  is engaged in legal  actions  arising  from the normal  course of
business. In management's opinion, the Property has adequate legal defenses with
respect to these  actions,  and the  resolution of these matters  should have no
material  adverse effects upon the results of operations or financial  condition
of the Property.