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, 1997
                                ------------------------------------------------

                                       OR

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

     For the transition period from ______________ to_____________

     Commission file number  0-14268
                           ----------


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


         California                              33-0085680
--------------------------------------------------------------------------------
(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  32,815,117  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 32

                                TOTAL OF 34 PAGES
<PAGE>
                                     PART I

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

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

McNeil Real Estate  Fund XXII,  L.P.,  (the  "Partnership"),  formerly  known as
Southmark  Realty  Partners  II, Ltd.  was  organized  on November 30, 1984 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  Investment  Group,  Inc. (the
"Original General Partner"), 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  26,  1985,  the  Partnership  registered  with the  Securities  and
Exchange  Commission ("SEC") under the Securities Act of 1933 (File No. 2-94740)
and commenced a public  offering for sale of $55,000,000 of limited  partnership
units.  There were two  classes  of limited  partnership  units,  designated  as
Current Income Units and Growth/Shelter  Units offered (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 December 31, 1985, with 33,333,867
Units (19,922,588 Current Income Units and 13,411,279 Growth/Shelter Units) sold
at  one  dollar  each,  or  gross  proceeds  of  $33,333,867.   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. 0-14268).  During
the years 1991 through 1996,  345,750  Units were  rescinded.  In 1997,  173,000
Units were  relinquished  leaving  32,815,117 Units  (19,567,088  Current Income
Units and 13,248,029 Growth/Shelter Units) outstanding at December 31, 1997.

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 being 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.


<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  Partners 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
management  agreement with McREMI, the Partnership's  property manager; and (iv)
the approval to change the  Partnership's  name to McNeil Real Estate Fund XXII,
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
new 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 $18,861, (i)
the right to receive  payment on the  advances  owing  from the  Partnership  to
Southmark  and its  affiliates  in the amount of  $16,397,  and (ii) the general
partner interest of the Original General Partner. None of the Units are owned by
the General Partner or its affiliates.

Settlement Of Claims:

The  Partnership  filed claims with the United States  Bankruptcy  Court for the
Northern  District of Texas,  Dallas Division (the  "Bankruptcy  Court") against
Southmark for damages relating to improper  overcharges,  breach of contract and
breach of fiduciary duty. The Partnership settled these claims in 1991, and such
settlement was approved by the Bankruptcy Court.

An Order Granting  Motion to Distribute  Funds to Class 8 Claimants  dated April
14, 1995 was issued by the Bankruptcy  Court.  In accordance  with the Order, in
May 1995 the Partnership received in full satisfaction of its claims, $29,292 in
cash, and common and preferred stock in the reorganized  Southmark which amounts
represent the  Partnership's  pro-rata share of Southmark  assets  available for
Class 8 Claimants. The Partnership sold the Southmark common and preferred stock
in May 1995 for $9,457 which,  combined  with the cash proceeds from  Southmark,
resulted in a gain on legal settlement of $38,749.

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

General:

The Partnership is engaged in real estate  activities,  including the ownership,
operation and management of residential  real estate.  At December 31, 1997, the
Partnership  owned  one  income-producing  property  as  described  in  Item 2 -
Properties.




<PAGE>
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.

Business Plan:

Pursuant  to the  Partnership's  previously  announced  liquidation  plans,  the
Partnership  has recently  retained  PaineWebber,  Incorporated as its exclusive
financial  advisor  to  explore  alternatives  to  maximize  the  value  of  the
Partnership.  The  alternatives  being  considered by the  Partnership  include,
without limitation,  a transaction in which limited partnership interests in the
Partnership  are converted into cash. The General  Partner of the Partnership or
entities or persons  affiliated with the General Partner will not be involved as
a purchaser in any of the transactions  contemplated above. Any transaction will
be subject to certain conditions  including (i) approval by the limited partners
of the Partnership, and (ii) receipt of an opinion from an independent financial
advisory  firm  as  to  the  fairness  of  the  consideration  received  by  the
Partnership  pursuant to such  transaction.  Finally,  there can be no assurance
that any transaction will be consummated, or as to the terms thereof.

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   foreclosure  of  the
Partnership's  property,  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 property see Item
2 - Properties.


<PAGE>
Forward Looking Information:

Within this document,  certain  statements are made as to the expected occupancy
trends,  financial  condition,  results  of  operations,  and cash  flows of the
Partnership  for periods after  December 31, 1997.  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 the sale or refinancing of its
property and respond to changing economic and competitive factors

Environmental Matters:

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 a property having such environmental
problems.  The Partnership has no knowledge of any pending claims or proceedings
regarding such environmental problems.

Other information:

Management  has begun to review its  information  technology  infrastructure  to
identify any systems that could be affected by the year 2000  problem.  The year
2000 problem is the result of computer  programs  being written using two digits
rather  than  four to  define  the  applicable  year.  Any  programs  that  have
time-sensitive  software may recognize a date using "00" as the year 1900 rather
than  the  year  2000.   This  could   result  in  major   systems   failure  or
miscalculations.  The information  systems used by the Partnership for financial
reporting and  significant  accounting  functions  were made year 2000 compliant
during  recent  systems  conversions.  The  Partnership  is in  the  process  of
evaluating the computer systems at the various properties.  The Partnership also
intends to communicate  with  suppliers,  financial  institutions  and others to
coordinate  year 2000 issues.  Management  believes that the  remediation of any
outstanding  year 2000  conversion  issues  will not have a material  or adverse
effect on the Partnership's operations.


<PAGE>
ITEM 2.  PROPERTIES
-------  ----------

The following  table sets forth the investment  portfolio of the  Partnership at
December  31,  1997.  The  buildings  and the land on which they are located are
owned in fee,  subject  to a first lien deed of trust as set forth more fully in
Item 8 - Note 5 -  "Mortgage  Note  Payable".  See also  Item 8 - Note 4 - "Real
Estate  Investment"  and Schedule III - "Real Estate  Investment and Accumulated
Depreciation".  In the opinion of management, the property is adequately covered
by insurance.

<TABLE>
<CAPTION>
                                            Net Basis of                          1997         Date
Property              Description            Property            Debt         Property Tax   Acquired
--------              -----------          -------------     ----------       ------------   ---------
<S>                   <C>                  <C>               <C>                <C>            <C>
Harbour Club III (1)  Apartments
   Belleville, MI     331 units            $   5,389,429     $ 5,928,021        $158,102       5/86

(1)    Harbour Club III Apartments is owned by Harbour Club  Associates  Limited
       Partnership,  which is  wholly-owned  by the  Partnership and its General
       Partner.

The following table sets forth the property's occupancy rate and rent per square
foot for the last five years:
</TABLE>

<TABLE>
<CAPTION>
                                        1997           1996            1995           1994          1993
                                    -------------  -------------  --------------  -------------  ----------
<S>                                       <C>             <C>            <C>            <C>             <C>
Harbour Club III
   Occupancy Rate............             92%             94%            96%            91%             90%
   Rent Per Square Foot......           $7.69           $7.38          $7.21          $6.75           $6.74
</TABLE>

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

Competitive conditions
----------------------

Harbour Club III
----------------

Harbour Club III, located in Belleville,  Michigan,  was built in 1972 as a part
of a four-phase  apartment  complex.  The property offers a complete  package of
amenities  including a golf course,  clubhouse,  exercise  room,  tanning  beds,
tennis courts,  saunas,  boat docks and launch, and playgrounds.  The apartments
located  in this phase of the  complex  offer lake and golf  course  views.  The
Belleville market is currently  supporting an occupancy rate of 92% which is the
current rate at Harbour Club III.  Prior to 1997, the property had not increased



<PAGE>
rents  for six  years  due to  restrictions  imposed  by the  property's  former
mortgage  holder.  In 1997, a 12% rent increase was  implemented.  Over the past
three  years,  approximately  $1,024,000  has been  invested in the property and
$334,000 has been budgeted for 1998. These capital  improvements  include paving
the parking lot, exercise equipment, hall renovations and interior upgrades. The
1998 capital expenditures will enhance the curb appeal and allow the property to
compete more aggressively and increase occupancy.

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

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

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

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

     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.






<PAGE>
     Defendants filed a demurrer to the consolidated and amended complaint and a
     motion to strike on February 14, 1997,  seeking to dismiss the consolidated
     and amended  complaint in all respects.  A hearing on Defendant's  demurrer
     and motion to strike was held on May 5, 1997. The Court granted Defendants'
     demurrer,  dismissing the consolidated and amended  complaint with leave to
     amend. On October 31, 1997, the Plaintiffs filed a second  consolidated and
     amended complaint. Defendants must move, answer or otherwise respond to the
     second consolidated and amended complaint by June 30, 1998.

2)   HCW Pension  Real Estate  Fund,  Ltd. et al. v. Ernst & Young,  BDO Seidman
     et al. (Case #92-06560-A). This suit was filed on behalf of the Partnership
     and other  affiliated  partnerships  (as  defined  in this  Section  1, the
     "Affiliated  Partnerships")  on May 26, 1992, in the 14th Judicial District
     Court  of  Dallas  County.   The  petition  sought  recovery   against  the
     Partnership's  former auditors,  Ernst & Young, for negligence and fraud in
     failing to detect and/or report  overcharges of fees/expenses by Southmark,
     the  former  general  partner.   The  former  auditors  initially  asserted
     counterclaims   against  the  Affiliated   Partnerships  based  on  alleged
     fraudulent misrepresentations made to the auditors by the former management
     of  the  Affiliated   Partnerships   (Southmark)  in  the  form  of  client
     representation  letters executed and delivered to the auditors by Southmark
     management.  The counterclaims sought recovery of attorneys' fees and costs
     incurred in defending this action.  The counterclaims  were later dismissed
     on appeal, as discussed below.

     The  trial  court  granted   summary   judgment   against  the   Affiliated
     Partnerships based on the statute of limitations;  however,  on appeal, the
     Dallas Court of Appeals reversed the trial court and remanded for trial the
     Affiliated  Partnerships'  fraud claims  against  Ernst & Young.  The Texas
     Supreme  Court  denied  Ernst &  Young's  application  for writ of error on
     January 11, 1996. Shortly before trial, the district court judge once again
     granted summary judgment against the Affiliated Partnerships on December 2,
     1996. The Partnership is continuing to pursue vigorously its claims against
     Ernst & Young;  however,  the final  outcome of this  litigation  cannot be
     determined at this time.

3)   Dick   and   Aloma  Anderson v. McNeil Real Estate Fund XXII, L.P. , McNeil
     Partners,  L.P.,  Wayne T. Shipp, the Wayne Shipp Agency,  Inc.,  Southmark
     Investment Group, Inc. and Southmark Realty Partners, Ltd. This lawsuit was
     filed in November  1993, in Washington  State in the Clark County  Superior
     Court. In 1985, the plaintiffs apparently spent $22,000 to purchase limited
     partnership  interests in Southmark Realty Partners Ltd. II , (not named by
     them as a defendant ) whose name is now McNeil Real Estate Fund XXII,  L.P.
     (the  "Partnership").   Plaintiffs  allege  that  in  connection  with  the
     transactions by which McNeil  Partners,  L.P. became general partner of the
     Partnership, and by which certain changes were made in the Partnership, the
     McNeil entities engaged in the offer and/or sale of unregistered securities
     in violation of Washington law. The plaintiffs have alleged that certain of
     the other  defendants  --  specifically  Mr. Shipp and the Shipp  Insurance
     Agency  --  engaged  in  fraud  in  connection  with  the  sale of  limited

<PAGE>
     partnership interests in the Partnership to plaintiffs. The plaintiffs have
     not made fraud allegations against any of the McNeil or Southmark entities.
     The majority of  plaintiffs'  claims against the  Partnership  are based on
     allegations  that  the  securities  are  not  registered  in the  State  of
     Washington.  Counsel's  research  indicates  that  there  are two  possible
     exemptions to the  registration  of securities  which apply to this matter.
     These statutory  exceptions are under review by the  plaintiffs'  attorney.
     Counsel for the  Partnership  was contacted  recently and asked whether the
     Partnership  would be interested  in  repurchasing  Plaintiffs'  units at a
     discount. Plaintiffs will be advised of their option to abandon their units
     back to the Partnership for no consideration.  The ultimate outcome of this
     proceeding cannot be determined at this time.

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

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            2,284 as of January 31, 1998

(C)      No distributions were made to the partners in 1997 or 1996 and none are
         anticipated in 1998.  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 partners.  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                              1997           1996            1995           1994           1993
------------------                  -------------  -------------  --------------  -------------  -------------
<S>                                 <C>             <C>           <C>              <C>            <C>
Rental revenue...............       $   2,340,806   $  2,251,970  $    2,456,308   $  2,950,795   $  5,655,988
Write-down for permanent
  impairment of  real estate.                   -              -               -              -        735,288
Loss on disposition of real
  estate.....................                   -              -         245,637              -      1,443,330
Income(loss) before
  extraordinary items........              21,172       (220,762)       (308,378)      (565,993)    (3,829,270)
Extraordinary items..........                   -              -               -              -      3,583,014
Net income(loss).............              21,172       (220,762)       (308,378)      (565,993)      (246,256)

Net income(loss) per
  thousand limited
  partnership units:
Income(loss) before
  extraordinary items:
Current Income Units.........       $         .53  $       (1.01)  $       (1.40)  $      (2.56)  $     (17.32)
Growth/Shelter Units.........                 .78         (14.97)         (20.74)        (38.04)       (257.23)

Extraordinary items:
  Current Income Units.......                   -              -               -              -          16.20
  Growth/Shelter Units.......                   -              -               -              -         240.69

Net income(loss):
  Current Income Units.......                 .53          (1.01)          (1.40)         (2.56)         (1.12)
  Growth/Shelter Units.......                 .78         (14.97)         (20.74)        (38.04)        (16.54)

                                                              As of December 31,
Balance Sheets                          1997           1996            1995           1994           1993
--------------                      -------------  -------------  --------------  -------------   ------------

Real estate, net...............     $   5,389,429   $  5,318,692  $    5,504,538   $  5,632,109   $ 10,543,632
Asset held for sale............                 -              -               -      4,393,157              -
Total assets...................         6,341,340      6,164,365       6,407,931     11,314,161     11,558,910
Mortgage notes payable, net....         5,928,021      5,979,501       6,026,515      9,534,751      9,622,454
Partners' deficit..............        (1,772,901)    (1,794,073)     (1,419,024)    (1,110,646)      (544,653)

</TABLE>
Abbey Lane Apartments and Lexington Green Apartments were conveyed via a deed in
lieu of  foreclosure  on September 30, 1993.  Wyoming Mall was sold on March 31,
1995. See Item 7 - Management's  Discussion and Analysis of Financial  Condition
and Results of Operations.


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

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
1986,  when it completed the purchase of five  properties,  the  Partnership has
operated its  properties  for  production of income.  Competitive  and overbuilt
markets,  resulting in continuing  cash flow  problems,  adversely  affected the
Partnership's  properties.  In 1988, the lender foreclosed on Southmark Tower in
Houston,  Texas in full settlement of the mortgage indebtedness on the property.
In 1993, two of the  Partnership's  properties,  Abbey Lane and Lexington Green,
were  conveyed  via a deed in  lieu of  foreclosure  in full  settlement  of the
mortgage indebtedness on the properties. After the sale of Wyoming Mall in March
1995, the Partnership continues to operate its remaining property,  Harbour Club
III.

The Partnership has had little ready cash reserves since its inception,  and has
been  largely  dependent on  affiliates  to support its  operations.  Payable to
affiliates for property management fees,  Partnership general and administrative
expenses and asset management fees totaled $1,933,837 at December 31, 1997.

Until the  Partnership  is able to generate cash from  operations or sales,  the
Partnership  will be dependent on its present  cash  reserves,  operation of the
property,  or  financial  support  from  affiliates.  Distributions  will remain
suspended until cash reserves are judged adequate.

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

1997 compared to 1996

Revenue:

Total Partnership  revenues in 1997 increased $92,592 or 4% for 1997 as compared
to 1996.  Rental revenue was $2,340,806 for 1997, a 4% increase from  $2,251,970
for 1996.  Interest income  increased  $3,756 or 11% for 1997 as compared to the
prior year.

Expenses:

Total expenses decreased by $149,342 or 6% for the year ended December 31, 1997,
as compared to 1996. This decrease is primarily due to the interest  incurred as
a result of the recession of limited  partnership units in 1996. No such expense
occurred in 1997.

General  and  administrative  expenses  increased  by $18,593 or 25% for 1997 as
compared to 1996.  The increase is primarily due to costs  incurred for investor
services that were paid to an unrelated  third party in 1997.  During 1996, such
costs were paid to an  affiliate  of the General  Partner  and were  included in
general and administrative - affiliates on the Statement of Operations.



<PAGE>
1996 compared to 1995

Revenue:

Total  Partnership  revenues  in 1996  decreased  $368,709 or 14% as compared to
1995.  This decrease is due to the sale of Wyoming Mall in March 1995.  Also, in
1995, the Partnership  recorded a $38,749 gain on legal  settlement and recorded
$134,434 in other income as a result of property tax refund on Harbour Club III.
No such income was recorded in 1996.

Rental revenue decreased  $204,338 or 8% for the year ended December 31, 1996 as
compared to the same period in 1995, primarily due to the sale of Wyoming Mall.

Interest  income  increased  $8,812  or 34% in 1996 as  compared  to  1995.  The
increase is primarily due to higher average cash balances that resulted from the
sale proceeds of Wyoming Mall.

Expenses:

Total  expenses  decreased  $456,325 or 15% for the year ended  December 31,
1996 as compared to the same period of 1995.

During 1995,  Wyoming Mall was sold and the effects from the sale were  declines
of $97,610 in interest,  $74,606 in depreciation  and  amortization,  $10,516 in
property taxes,  $24,740 in personnel  expenses,  $17,518 in property management
fees -  affiliates,  $11,916 in repairs  and  maintenance  and  $33,819 in other
property  operating  expenses.  A $245,637  loss on the sale of Wyoming Mall was
recorded in 1995.

In addition to the sale of Wyoming  Mall,  other  factors  affected the level of
expenses reported by the remaining property.

Interest -  affiliates  decreased  $18,568 for 1996 as  compared  to 1995.  This
decrease is due to the sale of Wyoming Mall,  which enabled the  Partnership  to
repay all outstanding affiliate advances, thereby eliminating affiliate interest
expense.

The  Partnership  recorded  $145,713 of interest  relating to the  rescission of
Units in 1996.  The Court entered  judgment  against the  Partnership in October
1996 to rescind  188,000  Units with total  claims of $347,809.  The  Plaintiffs
agreed to accept  $300,000 in  satisfaction  of the  judgment and the claims for
attorneys' fees pending the approval of the Court.

Depreciation expense  increased  by  $36,042 in 1996 due to the capital improve-
ments  made at  Harbour  Club III Apartments.

Repairs and  maintenance  decreased by $35,528 in 1996 as compared to 1995 after
the effect of the sale of Wyoming  Mall,  noted  above.  The  decrease is due to
reductions in grounds maintenance, courtesy patrol, and other repairs.


<PAGE>

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

The  Partnership had $794,323 of cash provided by operations in 1997 as compared
to $452,443 in 1996. Cash paid to suppliers  decreased by $149,047 mainly due to
a receipt of $83,000 for property  replacements  from escrow  previously held by
HUD, the former  mortgage  holder of Harbour Club III  Apartments.  Cash paid to
affiliates increased by $52,662 due to the resumption of overhead payments to an
affiliate of the General Partner for administering the Partnership's  affairs in
1997. The  Partnership  paid $145,713 of interest  relating to the rescission of
limited partnership units in 1996.

The  Partnership  provided  $452,443  of cash  from  operations  during  1996 as
compared  to  $448,347  in  1995.  Cash  received  from  tenants,  cash  paid to
suppliers,  cash paid to  affiliates,  interest  paid,  and property  taxes paid
decreased due to the sale of Wyoming Mall in March 1995.  The  Partnership  paid
$145,713 of interest relating to the rescission of limited  partnership units in
1996.  With the proceeds from the sale of Wyoming Mall, the Partnership was able
to repay all the affiliate advances and accrued interest in 1995. Therefore,  no
interest was paid to  affiliates  in 1996.  During 1995,  the  Partnership  also
received  $38,749  for a legal  settlement  with  Southmark  and  $134,434  as a
property tax refund as a result of a successful tax appeal.

The   Partnership   expended   $511,834,   $241,207  and  $270,552  for  capital
improvements  to its  properties  in 1997,  1996  and  1995,  respectively.  The
Partnership  also received  proceeds of $738,914 for the sale of Wyoming Mall on
March 31, 1995.

Net cash used in  financing  activities  was  $90,321  for 1997 as  compared  to
$238,521  and  $876,173 in 1996 and 1995,  respectively.  The  Partnership  paid
$154,287 to the Limited  Partners to rescind  188,000  units in 1996.  Principal
payments on mortgage  notes payable were  $90,321,  $84,234 and $91,519 in 1997,
1996 and 1995,  respectively.  In 1995, the  Partnership  repaid all outstanding
advances from affiliates of the General Partner in the amount of $784,654.

The Partnership's  remaining  property,  through improved  operations as well as
curtailment of expenses,  has been able to provide  sufficient cash flow to meet
its own working  capital  requirements.  In  addition,  the sale of Wyoming Mall
enabled the Partnership to meet its general and administrative expenses.

Short-term liquidity

At  December  31,  1997,  the  Partnership  held  cash and cash  equivalents  of
$794,630.  The  General  Partner  considers  this level of cash  reserves  to be
adequate to meet the Partnership's operating needs. The General Partner believes
that  anticipated  operating  results  for 1998 will be  sufficient  to fund the
Partnership's  budgeted  capital  improvements for 1998 and to repay the current
portion of the Partnership's mortgage note.


<PAGE>
Long-term liquidity

Pursuant  to the  Partnership's  previously  announced  liquidation  plans,  the
Partnership  has recently  retained  PaineWebber,  Incorporated as its exclusive
financial  advisor  to  explore  alternatives  to  maximize  the  value  of  the
Partnership.  The  alternatives  being  considered by the  Partnership  include,
without limitation,  a transaction in which limited partnership interests in the
Partnership  are converted into cash. The General  Partner of the Partnership or
entities or persons  affiliated with the General Partner will not be involved as
a purchaser in any of the transactions  contemplated above. Any transaction will
be subject to certain conditions  including (i) approval by the limited partners
of the Partnership, and (ii) receipt of an opinion from an independent financial
advisory  firm  as  to  the  fairness  of  the  consideration  received  by  the
Partnership  pursuant to such  transaction.  Finally,  there can be no assurance
that any transaction will be consummated, or as to the terms thereof.

Distributions

To maintain adequate cash balances of the Partnership,  distributions to Current
Income Unit holders were suspended in 1988.  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.




<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------  -------------------------------------------
<TABLE>
<CAPTION>
                                                                                                      Page
                                                                                                     Number
                                                                                                     ------
INDEX TO FINANCIAL STATEMENTS

Financial Statements:

<S>                                                                                                      <C>
   Report of Independent Public Accountants.......................................                       13

   Balance Sheets at December 31, 1997 and 1996...................................                       14

   Statements of Operations for each of the three years in the period
   ended December 31, 1997........................................................                       15

   Statements of Partners' Deficit for each of the three years in
   the period ended December 31, 1997.............................................                       16

   Statements of Cash Flows for each of the three years in the period
   ended December 31, 1997........................................................                       17

   Notes to Financial Statements..................................................                       19

   Financial Statement Schedules -

      Schedule III - Real Estate Investment and Accumulated
         Depreciation.............................................................                       27


</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 XXII, L.P.:

We have audited the accompanying balance sheets of McNeil Real Estate Fund XXII,
L.P. (a California  limited  partnership)  as of December 31, 1997 and 1996, and
the related statements of operations,  partners' deficit and cash flows for each
of the three  years in the period  ended  December  31,  1997.  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 XXII,
L.P. as of December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.

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



/s/  Arthur Andersen LLP


Dallas, Texas
   March 20, 1998


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

                                 BALANCE SHEETS



<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                       -----------------------------------
                                                                            1997                 1996
                                                                       ---------------      --------------
<S>                                                                    <C>                  <C>
ASSETS
------
Real estate investment:
   Land.....................................................           $       380,414      $      380,414
   Buildings and improvements...............................                10,595,887          10,084,053
                                                                        --------------       -------------
                                                                            10,976,301          10,464,467
   Less:  Accumulated depreciation..........................                (5,586,872)         (5,145,775)
                                                                        --------------       -------------
                                                                             5,389,429           5,318,692

Cash and cash equivalents...................................                   794,630             602,462
Cash segregated for security deposits.......................                    67,510              66,510
Accounts receivable.........................................                    11,508               4,614
Escrow deposits.............................................                    68,310             160,642
Prepaid expenses and other assets...........................                     9,953              11,445
                                                                        --------------       -------------
                                                                       $     6,341,340      $    6,164,365
                                                                        ==============       =============
LIABILITIES AND PARTNERS' DEFICIT
---------------------------------

Mortgage note payable, net..................................           $     5,928,021      $    5,979,501
Accounts payable and accrued expenses.......................                   114,584              90,572
Accrued property taxes......................................                    68,129              66,427
Payable to affiliates - General Partner.....................                 1,933,837           1,756,367
Security deposits and deferred rental income................                    69,670              65,571
                                                                        --------------       -------------
                                                                             8,114,241           7,958,438
                                                                        --------------       -------------

Partners' deficit:
   Limited  partners - 55,000,000  Units  authorized;
     32,815,117 and 32,988,117 Units issued and out-
     standing at December 31, 1997 and 1996, respectively,
     (19,567,088 and 19,713,088 Current Income Units
     outstanding at December 31, 1997 and 1996,
     respectively,  and 13,248,029 and 13,275,029
     Growth/Shelter Units at December 31, 1997
     and 1996, respectively)................................                (1,520,196)         (1,541,156)
   General Partner..........................................                  (252,705)           (252,917)
                                                                        --------------       -------------
                                                                            (1,772,901)         (1,794,073)
                                                                        --------------       -------------
                                                                       $     6,341,340      $    6,164,365
                                                                        ==============       =============
</TABLE>




                 See accompanying notes to financial statements.

<PAGE>
                       McNEIL REAL ESTATE FUND XXII, L.P.
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                             For the Years Ended December 31,
                                                   ----------------------------------------------------
                                                        1997               1996               1995
                                                   --------------    ---------------    ---------------
<S>                                                <C>               <C>                <C>
Revenue:
   Rental revenue..........................        $    2,340,806    $     2,251,970    $     2,456,308
   Interest................................                38,217             34,461             25,649
   Gain on settlement of legal
     expenses..............................                     -                  -             38,749
   Other income............................                     -                  -            134,434
                                                    -------------      -------------     --------------
     Total revenue.........................             2,379,023          2,286,431          2,655,140
                                                    -------------      -------------     --------------

Expenses:
   Interest................................               543,730            581,533            683,664
   Interest - affiliates...................                     -                  -             18,568
   Interest - rescission of limited
     partnership units.....................                     -            145,713                  -
   Depreciation............................               441,097            427,053            465,617
   Property taxes..........................               158,102            153,318            169,039
   Personnel expenses......................               284,143            291,417            317,753
   Repairs and maintenance.................               269,458            266,224            313,668
   Property management fees -
     affiliates............................               116,572            112,374            126,807
   Other property operating expenses.......               226,895            227,802            279,043
   General and administrative..............                92,161             73,568             64,085
   General and administrative -
     affiliates............................               225,693            228,191            279,637
   Loss on disposition of real estate......                     -                  -            245,637
                                                    -------------      -------------     --------------
     Total expenses........................             2,357,851          2,507,193          2,963,518
                                                    -------------      -------------     --------------

Net income (loss)..........................        $       21,172     $     (220,762)   $      (308,378)
                                                    =============      =============     ==============

Net income (loss) allocable to limited
   partners - Current Income Unit..........        $       10,480     $      (19,868)   $       (27,754)
Net income (loss) allocable to limited
   partners - Growth/Shelter Unit..........                10,480           (198,686)          (277,540)
Net income (loss) allocable to General
   Partner.................................                   212             (2,208)            (3,084)
                                                    -------------      -------------     --------------
Net income (loss)..........................        $       21,172     $     (220,762)   $      (308,378)
                                                    =============      =============     ==============

Net income (loss) per thousand
   limited partnership units:
Current Income Units.......................        $          .53     $        (1.01)   $         (1.40)
                                                    =============      =============     ==============

Growth/Shelter Units.......................        $          .78     $       (14.97)   $        (20.74)
                                                    =============      =============     ==============
</TABLE>


                 See accompanying notes to financial statements.
<PAGE>

                       McNEIL REAL ESTATE FUND XXII, L.P.

                         STATEMENTS OF PARTNERS' DEFICIT

              For the Years Ended December 31, 1997, 1996 and 1995

<TABLE>
<CAPTION>

                                                                                                    Total
                                                    General                 Limited                Partners'
                                                    Partner                 Partners               Deficit
                                                 ---------------        ----------------      ----------------
<S>                                              <C>                    <C>                   <C>
Balance at December 31, 1994..............       $     (247,625)        $      (863,021)      $    (1,110,646)

Net loss
   General Partner........................               (3,084)                      -                (3,084)
   Current Income Units...................                    -                 (27,754)              (27,754)
   Growth/Shelter Units...................                    -                (277,540)             (277,540)
                                                  -------------           -------------         -------------
Total net loss............................               (3,084)               (305,294)             (308,378)
                                                  -------------           -------------         -------------

Balance at December 31, 1995..............             (250,709)             (1,168,315)           (1,419,024)

Rescission of 178,000 limited
   partnership units (net of distribution
   previously paid of $23,713)............                    -                (154,287)             (154,287)

Net loss
   General Partner........................               (2,208)                      -                (2,208)
   Current Income Units...................                    -                 (19,868)              (19,868)
   Growth/Shelter Units...................                    -                (198,686)             (198,686)
                                                  -------------           -------------         --------------
Total net loss............................               (2,208)               (218,554)             (220,762)
                                                  -------------           -------------         -------------

Balance at December 31, 1996..............             (252,917)             (1,541,156)           (1,794,073)

Net income
   General Partner........................                  212                       -                   212
   Current Income Units...................                    -                  10,480                10,480
   Growth/Shelter Units...................                                       10,480                10,480
                                                  -------------           -------------         -------------
Total net income..........................                  212                  20,960                21,172
                                                  -------------           -------------         -------------

Balance at December 31, 1997..............       $     (252,705)         $   (1,520,196)       $   (1,772,901)
                                                  =============           =============         =============
</TABLE>


                 See accompanying notes to financial statements.
<PAGE>

                       McNEIL REAL ESTATE FUND XXII, L.P.

                            STATEMENTS OF CASH FLOWS

                Increase (Decrease) in Cash and Cash Equivalents

<TABLE>
<CAPTION>


                                                             For the Years Ended December 31,
                                                   -----------------------------------------------------
                                                        1997               1996               1995
                                                   ---------------   ----------------   ----------------
<S>                                                <C>               <C>                <C>
Cash flows from operating activities:
   Cash received from tenants..............        $    2,339,524    $     2,261,315    $     2,527,267
   Cash received from legal settlement.....                     -                  -             38,749
   Cash paid to suppliers..................              (769,875)          (918,922)          (945,403)
   Cash paid to affiliates.................              (164,795)          (112,133)          (380,456)
   Interest received.......................                38,217             34,461             25,649
   Interest paid...........................              (505,417)          (544,804)          (676,971)
   Interest paid to affiliates.............                     -                  -           (149,043)
   Interest paid to limited partners for
     rescission of units...................                     -           (145,713)                 -
   Property taxes paid.....................              (143,331)          (121,761)          (125,879)
   Property taxes refunded.................                     -                  -            134,434
                                                    -------------      -------------     --------------
Net cash provided by operating
   activities..............................               794,323            452,443            448,347
                                                    -------------      -------------     --------------

Cash flows from investing activities:
   Additions to real estate
     investments...........................              (511,834)          (241,207)          (270,552)
   Proceeds from disposition
     of real estate........................                     -                  -            738,914
                                                    -------------      -------------     --------------
Net cash provided by (used in)
   investing activities                                  (511,834)          (241,207)           468,362
                                                    -------------      -------------     --------------

Cash flows from financing activities:
   Principal payments on mortgage
     notes payable.........................               (90,321)           (84,234)           (91,519)
   Repayment of advances from
     affiliates - General Partner..........                     -                  -           (784,654)
   Rescission of limited partnership
     units.................................                     -           (154,287)                 -
                                                    -------------      -------------     --------------
Net cash used in financing activities......               (90,321)          (238,521)          (876,173)
                                                    -------------      -------------     --------------

Net increase (decrease) in cash and
   cash equivalents........................               192,168            (27,285)            40,536

Cash and cash equivalents at
   beginning of year.......................               602,462            629,747            589,211
                                                    -------------      -------------     --------------

Cash and cash equivalents at end
   of year.................................        $      794,630     $      602,462    $       629,747
                                                    =============      =============     ==============
</TABLE>


See discussion of noncash investing and financing activities in Note 6.

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

                            STATEMENTS OF CASH FLOWS


           Reconciliation of Net Income (Loss) to Net Cash Provided by
                              Operating Activities

<TABLE>
<CAPTION>

                                                             For the Years Ended December 31,
                                                   ----------------------------------------------------
                                                        1997               1996               1995
                                                   -------------      ---------------   ---------------
<S>                                                <C>                <C>               <C>
Net income (loss)..........................        $      21,172      $     (220,762)   $     (308,378)
                                                    ------------       -------------     -------------

Adjustments to reconcile net income
   (loss) to net cash provided by
   operating activities:
   Depreciation............................               441,097            427,053            465,617
   Amortization of discount on
     mortgage note payable.................                38,841             37,220             35,620
   Amortization of deferred borrowing
     costs.................................                     -                  -              2,936
   Loss on disposition of real estate......                     -                  -            245,637
   Changes in assets and liabilities:
     Cash segregated for security
       deposits............................                (1,000)             9,980             11,348
     Accounts receivable...................                (6,894)                69             54,836
     Escrow deposits.......................                92,332             19,895            177,321
     Prepaid expenses and other
       assets..............................                 1,492                491              7,902
     Accounts payable and accrued
       expenses............................                24,012            (42,578)          (145,096)
     Accrued property taxes ...............                 1,702                496           (130,323)
     Payable to affiliates - General
       Partner.............................               177,470            228,432             25,988
     Security deposits and deferred
       rental income.......................                 4,099             (7,853)             4,939
                                                    -------------      -------------     --------------

         Total adjustments.................               773,151            673,205            756,725
                                                    -------------      -------------     --------------

Net cash provided by
   operating activities....................        $      794,323     $      452,443    $       448,347
                                                    =============      =============     ==============
</TABLE>

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

                          NOTES TO FINANCIAL STATEMENTS

                                December 31, 1997

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

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

McNeil Real Estate  Fund XXII,  L.P.,  (the  "Partnership"),  formerly  known as
Southmark  Realty  Partners  II, Ltd.  was  organized  on November 30, 1984 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.  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 real estate  activities,  including the ownership,
operation and  management of  residential  and retail real estate and other real
estate  related  assets.  At  December  31,  1997,  the  Partnership  owned  one
income-producing property as described in Note 4 - Real Estate Investment.

Pursuant  to the  Partnership's  previously  announced  liquidation  plans,  the
Partnership  has recently  retained  PaineWebber,  Incorporated as its exclusive
financial  advisor  to  explore  alternatives  to  maximize  the  value  of  the
Partnership.  The  alternatives  being  considered by the  Partnership  include,
without limitation,  a transaction in which limited partnership interests in the
Partnership  are converted into cash. The General  Partner of the Partnership or
entities or persons  affiliated with the General Partner will not be involved as
a purchaser in any of the transactions  contemplated above. Any transaction will
be subject to certain conditions  including (i) approval by the limited partners
of the Partnership, and (ii) receipt of an opinion from an independent financial
advisory  firm  as  to  the  fairness  of  the  consideration  received  by  the
Partnership  pursuant to such  transaction.  Finally,  there can be no assurance
that any transaction will be consummated, or as to the terms thereof.

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 Harbour Club
Associates  Limited  Partnership   ("Harbour  Club"),  a  single  asset  limited
partnership   formed  to  accommodate   the  refinancing  of  Harbour  Club  III
Apartments.  The Partnership is the general partner of Harbour Club, and holds a
99.99% interest in Harbour Club. The Partnership  exercises effective control of
Harbour Club. The minority  interest is not presented as it is both negative and
immaterial.

                                            % of Ownership Interest
Tier Partnership                           Partnership    General Partner
---------------                            -----------    ---------------

Limited Partnerships:
Harbour Club Associates                        99%              1%

Real Estate Investments
-----------------------

The real estate  investment is generally stated at the lower of depreciated cost
or fair value.  The real estate  investment is reviewed for impairment  whenever
events or changes in circumstances  indicate that its carrying amount 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 fair
value.

The  Partnership's  method of  accounting  for its real estate  investment 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.

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

Buildings and improvements are depreciated using the  straight-line  method over
the estimated useful lives of the assets, ranging from 5 to 25 years.

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

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

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

The  Partnership is required to maintain  escrow accounts in accordance with the
terms  of  its  mortgage  indebtedness  agreement.  These  escrow  accounts  are
controlled by the mortgagee and are used for payment of property taxes. Carrying
amounts for escrow deposits approximate fair value.


<PAGE>
Deferred Borrowing Costs
------------------------

Loan fees and other related costs incurred to obtain long-term financing on real
property were capitalized and are included in prepaid expenses and other assets.
Amortization  was  recorded  using a  method  that  approximated  the  effective
interest method over the term of the related mortgage note payable. Amortization
of deferred borrowing costs is included in interest expense on the Statements of
Operations.

Discount on Mortgage Note Payable
---------------------------------

Discount on mortgage note payable is being  amortized over the remaining term of
the related note using the effective  interest method.  Amortization of discount
on mortgage  note payable is included in interest  expense on the  Statements of
Operations.

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

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

The  Partnership  leased its commercial  property  (which was sold in 1995 - see
Note 6 - "Property Disposition") under non-cancelable  operating leases. Certain
leases provided  concessions  and/or periods of escalating or free rent.  Rental
income was  recognized  on a  straight-line  basis over the term of the  related
lease.

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 refinancings
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.




<PAGE>
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 property 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 1997, 1996 and 1995 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  refinancings,  with such  distributions  first  paying  the  Current  Income
Priority Return,  then the  Growth/Shelter  Priority  Return,  then repayment of
Original  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% cumulative return on their Adjusted Invested Capital balance, as
defined.  No  distributions  of Current Income  Priority  Returns have been made
since 1988, and no  distributions of  Growth/Shelter  Priority Returns have been
made since the Partnership began.

In connection  with a Terminating  Disposition,  as defined,  cash from sales or
refinancings   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 Loss Per Thousand Limited Partnership Units
------------------------------------------------

Net loss per  thousand  limited  partnership  units  ("Units")  is  computed  by
dividing  net loss  allocated to the limited  partners by the  weighted  average
number of limited  partnership  Units  outstanding  expressed in thousands.  Per
thousand unit  information has been computed based on 19,567,  19,713 and 19,826
weighted  average  Current  Income  Units  outstanding  in 1997,  1996 and 1995,
respectively,  and 13,248,  13,275 and 13,383  weighted  average  Growth/Shelter
Units outstanding in 1997, 1996, and 1995, respectively.





<PAGE>
NOTE 2 - TRANSACTIONS WITH AFFILIATES
-------------------------------------

The  Partnership  pays property  management fees equal to 5% of the gross rental
receipts for its  residential  property and paid 6% of gross rental receipts for
its commercial property 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 property.

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 is paying
an asset  management fee,  retroactive to February 14, 1991, which is payable to
the new 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 to or  accrued  for the  benefit  of the
General Partner or its affiliates are as follows:

<TABLE>
<CAPTION>
                                                              For the Years Ended December 31,
                                                         1997               1996               1995
                                                   --------------     --------------     --------------
<S>                                                <C>                <C>                <C>
Property management fees...................        $      116,572     $      112,374     $      126,807
Charged to interest - affiliates:
   Interest on advances from
     affiliates - General Partner..........                     -                  -             18,568
Charged to general and
   administrative - affiliates:
   Partnership administration..............                63,367             81,704            114,003
   Sale disposition fee - Wyoming Mall.....                     -                  -            138,750
   Asset Management Fee....................               162,326            146,487            165,634
                                                    -------------      -------------       ------------
                                                   $      342,265     $      340,565     $      563,762
                                                    =============      =============       ============
</TABLE>

Payable to affiliates - General  Partner at December 31, 1997 and 1996 consisted
primarily  of  unpaid  property   management  fees,   Partnership   general  and
administrative  expenses,  and asset management fees and is due and payable from
current operations.

Prior  to  the  restructuring  of  the  Partnership,   affiliates  of  Southmark
Investments  Group,  Inc.  advanced funds to enable the  Partnership to meet its
working capital requirements.  These advances were purchased by, and were repaid
to, the General Partner.


<PAGE>
The General Partner has, at its discretion, advanced funds to the Partnership to
fund working capital  requirements.  The advances were unsecured,  due on demand
and accrued  interest at the prime  lending rate of Bank of America plus 1%. All
advances  to the General  Partner  were paid in full  during  1995.  The General
Partner is not  obligated to advance  funds to the  Partnership  and there is no
assurance that the Partnership will receive additional funds.

In April 1995,  the  Partnership  utilized the proceeds from the sale of Wyoming
Mall to  repay  all  outstanding  affiliate  advances  and the  related  accrued
interest.

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

McNeil  Real  Estate  Fund XXII,  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 purposes exceeded the net
assets and liabilities for financial  reporting  purposes by $6,119,845 in 1997,
$6,503,402 in 1996 and $6,235,169 in 1995.

NOTE 4 - REAL ESTATE INVESTMENT
--------------------------------

The  basis  and  accumulated  depreciation  of  the  Partnership's  real  estate
investment at December 31, 1997 and 1996, is set forth in the following tables:

<TABLE>
<CAPTION>
                                              Buildings and       Accumulated           Net Book
                               Land           Improvements        Depreciation            Value
                               ---------     -----------------  ------------------  ---------------
       <S>                     <C>          <C>                 <C>                 <C>
Harbour Club III
   Belleville, MI

       1997                    $380,414     $      10,595,887   $      (5,586,872)  $     5,389,429
                                =======      ================    ================    ==============


       1996                    $380,414     $      10,084,053   $      (5,145,775)  $     5,318,692
                                =======      ================    ================    ==============
</TABLE>


<PAGE>
NOTE 5 - MORTGAGE NOTE PAYABLE
------------------------------

The  following  sets  forth the  mortgage  note  payable of the  Partnership  at
December 31, 1997 and 1996. The mortgage note is secured by the underlying  real
estate investment.

<TABLE>
<CAPTION>
                         Mortgage         Annual          Monthly
                         Lien             Interest        Payments/                    December 31,
Property                 Position    (a)  Rates %         Maturity                 1997                1996
--------                 ---------------  -------      -------------------    ---------------     --------------
<S>                      <C>                  <C>      <C>           <C>      <C>                 <C>
Harbour Club III         First                7.000    $   49,395    05/24    $     7,128,106     $    7,218,427
                         Discount (b)                                              (1,200,085)        (1,238,926)
                                                                               --------------      -------------
                                                                              $     5,928,021     $    5,979,501
                                                                               ==============      =============
</TABLE>

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

(b)     The discount is based on an effective interest rate of 9.09%.

Scheduled  principal   maturities  of  the  mortgage  note  under  the  existing
agreement, excluding the discount of $1,200,085, are as follows:

          1998....................................        $      96,851
          1999....................................              103,852
          2000....................................              111,360
          2001....................................              119,410
          2002....................................              128,042
          Thereafter..............................            6,568,591
                                                            -----------
            Total                                          $  7,128,106
                                                            ===========

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 $6,937,000 as of December 31, 1997 and $6,262,000
as of December 31, 1996.


<PAGE>
NOTE 6 - PROPERTY DISPOSITION
-----------------------------

On March 31, 1995,  Wyoming Mall 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 XXI, L.P. Cash proceeds and the loss on the  disposition is detailed
below:
<TABLE>
<CAPTION>
                                                                    Loss on Sale       Cash Proceeds
                                                                  ----------------     --------------
<S>                                                               <C>                  <C>
Sales Price..........................................             $      4,625,000     $   4,625,000

Selling costs........................................                     (234,838)         (234,838)
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....................................                                    $    738,914
                                                                                          ===========
</TABLE>

The selling costs above include a disposition fee at 3% of the gross sales price
paid the to General Partner in the amount of $138,750.

NOTE 7 - LEGAL PROCEEDINGS
--------------------------

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

1)   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





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

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

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

     Defendants filed a demurrer to the consolidated and amended complaint and a
     motion to strike on February 14, 1997,  seeking to dismiss the consolidated
     and amended  complaint in all respects.  A hearing on Defendant's  demurrer
     and motion to strike was held on May 5, 1997. The Court granted Defendants'
     demurrer,  dismissing the consolidated and amended  complaint with leave to
     amend. On October 31, 1997, the Plaintiffs filed a second  consolidated and
     amended complaint. Defendants must move, answer or otherwise respond to the
     second consolidated and amended complaint by June 30, 1998.

2)   HCW Pension  Real Estate  Fund,  Ltd. et al. v. Ernst & Young,  BDO Seidman
     et al. (Case #92-06560-A). This suit was filed on behalf of the Partnership
     and other  affiliated  partnerships  (as  defined  in this  Section  1, the
     "Affiliated  Partnerships")  on May 26, 1992, in the 14th Judicial District
     Court  of  Dallas  County.   The  petition  sought  recovery   against  the
     Partnership's  former auditors,  Ernst & Young, for negligence and fraud in
     failing to detect and/or report  overcharges of fees/expenses by Southmark,
     the  former  general  partner.   The  former  auditors  initially  asserted
     counterclaims   against  the  Affiliated   Partnerships  based  on  alleged
     fraudulent misrepresentations made to the auditors by the former management
     of  the  Affiliated   Partnerships   (Southmark)  in  the  form  of  client
     representation  letters executed and delivered to the auditors by Southmark
     management.  The counterclaims sought recovery of attorneys' fees and costs
     incurred in defending this action.  The counterclaims  were later dismissed
     on appeal, as discussed below.



<PAGE>
     The  trial  court  granted   summary   judgment   against  the   Affiliated
     Partnerships based on the statute of limitations;  however,  on appeal, the
     Dallas Court of Appeals reversed the trial court and remanded for trial the
     Affiliated  Partnerships'  fraud claims  against  Ernst & Young.  The Texas
     Supreme  Court  denied  Ernst &  Young's  application  for writ of error on
     January 11, 1996. Shortly before trial, the district court judge once again
     granted summary judgment against the Affiliated Partnerships on December 2,
     1996. The Partnership is continuing to pursue vigorously its claims against
     Ernst & Young;  however,  the final  outcome of this  litigation  cannot be
     determined at this time.

3)   Dick  and  Aloma  Anderson v.  McNeil  Real Estate Fund XXII, L.P. , McNeil
     Partners,  L.P.,  Wayne T. Shipp, the Wayne Shipp Agency,  Inc.,  Southmark
     Investment Group, Inc. and Southmark Realty Partners, Ltd. This lawsuit was
     filed in November  1993, in Washington  State in the Clark County  Superior
     Court. In 1985, the plaintiffs apparently spent $22,000 to purchase limited
     partnership  interests in Southmark Realty Partners Ltd. II , (not named by
     them as a defendant ) whose name is now McNeil Real Estate Fund XXII,  L.P.
     (the  "Partnership").   Plaintiffs  allege  that  in  connection  with  the
     transactions by which McNeil  Partners,  L.P. became general partner of the
     Partnership, and by which certain changes were made in the Partnership, the
     McNeil entities engaged in the offer and/or sale of unregistered securities
     in violation of Washington law. The plaintiffs have alleged that certain of
     the other  defendants  --  specifically  Mr. Shipp and the Shipp  Insurance
     Agency  --  engaged  in  fraud  in  connection  with  the  sale of  limited
     partnership interests in the Partnership to plaintiffs. The plaintiffs have
     not made fraud allegations against any of the McNeil or Southmark entities.
     The majority of  plaintiffs'  claims against the  Partnership  are based on
     allegations  that  the  securities  are  not  registered  in the  State  of
     Washington.  Counsel's  research  indicates  that  there  are two  possible
     exemptions to the  registration  of securities  which apply to this matter.
     These statutory  exceptions are under review by the  plaintiffs'  attorney.
     Counsel for the  Partnership  was contacted  recently and asked whether the
     Partnership  would be interested  in  repurchasing  Plaintiffs'  units at a
     discount. Plaintiffs will be advised of their option to abandon their units
     back to the Partnership for no consideration.  The ultimate outcome of this
     proceeding cannot be determined at this time.

NOTE 8 - PRO FORMA INFORMATION (UNAUDITED)
------------------------------------------

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

                                                      1995
                                                  -------------
         Total revenue                            $  2,389,866
         Net loss                                      (57,289)

         Net loss per thousand limited
           partnership units:
           Current Income Units                          (.26)
           Growth/Shelter Units                         (3.85)


<PAGE>
NOTE 9 - RESCISSION OF LIMITED PARTNERSHIP UNITS
------------------------------------------------

As discussed in Note 7, on October 22, 1996, a judgment was entered  against the
Partnership,  which effectively rescinded 188,000 Units of the Partnership as of
October 31,  1996.  The  judgment was for  $347,809.  As part of a  negotiation,
however,  the  plaintiffs  agreed  to  accept  $300,000  as  full  and  complete
settlement of all claims, including attorney fees. Accordingly,  the Partnership
made settlement  payments to an escrow agent on behalf of the plaintiff  limited
partners totaling  $300,000 on December 23, 1996. The payments  consisted of two
components.  The first component of $154,287,  which is recorded as a rescission
of limited partnership units on the Statements of Partners' Deficit,  represents
the return of the limited partners' equity  investments net of all distributions
previously paid to them. The second component of $145,713,  which is recorded as
interest   rescission  of  limited   partnership  units  on  the  Statements  of
Operations,  represents  interest  paid on the rescinded  Units  pursuant to the
court judgment.


<PAGE>


                       McNEIL REAL ESTATE FUND XXII, L.P.
                                  SCHEDULE III
              REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
                                December 31, 1997
<TABLE>
<CAPTION>
                                                                                                    Costs
                                                     Initial Cost            Cumulative        Capitalized
                            Related                         Buildings and      Write-down         Subsequent
Description                Encumbrances (b)     Land        Improvements       Impairment (c)   To Acquisition
-----------                ----------------   --------      --------------    ---------------  ---------------
<S>                        <C>                <C>           <C>               <C>              <C>
APARTMENTS:

Harbour Club III

   Belleville, MI (c)      $    5,928,021     $561,491      $   13,475,784    $    (4,526,936) $    1,465,962
                            =============      =======       =============     ===============  =============
</TABLE>


(b) The   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  value of Harbour Club III Apartments was reduced by $4,526,936
    in 1992.






                     See accompanying notes to Schedule III.


<PAGE>
                       McNEIL REAL ESTATE FUND XXII, L.P.
                                  SCHEDULE III
              REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
                                December 31, 1997

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

APARTMENTS:

Harbour Club III
   Belleville, MI (c)         $      380,414     $   10,595,887   $     10,976,301    $   (5,586,872)
                               =============      =============    ===============     =============
</TABLE>


(a)  For Federal income tax purposes,  the properties are depreciated over lives
     ranging from 5-27.5 years using ACRS or MACRS  methods.  The aggregate cost
     of real estate  investments for Federal income tax purposes was $16,988,264
     and accumulated depreciation was $10,665,201 December 31, 1997.

(c) The carrying  value of Harbour Club III Apartments was reduced by $4,526,936
    in 1992.




                     See accompanying notes to Schedule III.

<PAGE>
                       McNEIL REAL ESTATE FUND XXII, L.P.
                                  SCHEDULE III
              REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
                                December 31, 1997



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

Harbour Club III
   Belleville, MI (c)           1972                        5/86                    5-25

</TABLE>

(c) The carrying  value of Harbour Club III Apartments was reduced by $4,526,936
    in 1992.


                     See accompanying notes to Schedule III.

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

                              Notes to Schedule III

              Real Estate Investments and Accumulated Depreciation


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,
                                                   ----------------------------------------------------
                                                        1997               1996               1995
                                                   --------------     --------------    ---------------
<S>                                                <C>                <C>               <C>
Real estate investment:

Balance at beginning of year...............        $   10,464,467     $   10,223,260    $     9,959,820

Improvements...............................               511,834            241,207            263,440
                                                    -------------      -------------     --------------

Balance at end of year.....................        $   10,976,301     $   10,464,467    $    10,223,260
                                                    =============      =============     ==============


Accumulated depreciation:

Balance at beginning of year...............        $    5,145,775     $    4,718,722    $     4,327,711

Depreciation...............................               441,097            427,053            391,011
                                                    -------------      -------------     --------------

Balance at end of year.....................        $    5,586,872     $    5,145,775    $     4,718,722
                                                    =============      =============     ==============


Asset held for sale:

Balance at beginning of year...............        $            -     $            -    $     4,393,157

Improvements...............................                     -                  -              7,112

Depreciation...............................                     -                  -            (74,606)

Dispositions...............................                     -                  -         (4,325,663)
                                                    -------------      -------------     --------------

Balance at end of year.....................        $            -     $            -    $             -
                                                    =============      =============     ==============
</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:
<TABLE>
<CAPTION>
                                       Other Principal Occupations and Other
Name and Position             Age      Directorships During the Past 5 Years
-----------------             ---      -------------------------------------
<S>                            <C>      <C>
Robert A. McNeil,              77       Mr.  McNeil  is also  Chairman  of   the
Chairman of the                         Board and Director of McNeil Real Estate
Board and Director                      Management,  Inc. ("McREMI") which is an
                                        affiliate of the General Partner. He has
                                        held the foregoing  positions  since the
                                        formation of such an entity in 1990. Mr.
                                        McNeil  received  his B.A.  degree  from
                                        Stanford  University  in  1942  and  his
                                        L.L.B.  degree from  Stanford Law School
                                        in 1948. He is a member of the State Bar
                                        of  California  and has been involved in
                                        real  estate  financing  since  the late
                                        1940's and in real estate  acquisitions,
                                        syndications  and   dispositions   since
                                        1960. From 1986 until active  operations
                                        of  McREMI  and  McNeil  Partners,  L.P.
                                        began in February 1991, Mr. McNeil was a
                                        private investor. Mr. McNeil is a member
                                        of the International  Board of Directors
                                        of the Salk  Institute,  which  promotes
                                        research in improvements in health care.

Carole J. McNeil               54       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.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                       Other Principal Occupations and Other
Name and Position             Age      Directorships During the Past 5 Years
-----------------             ---      -------------------------------------
<S>                            <C>      <C>
Ron K. Taylor                  40       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.
</TABLE>

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,  1997,  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, 1997. The  Partnership  has no plans to
pay any such remuneration to any directors or officers of the General Partner in
the future.

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

ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------     --------------------------------------------------------------
(A)   Security ownership of certain beneficial owners.

      No  individual or group as defined by Section  13(d)(3) of the  Securities
      Exchange Act of 1934,  known to the Partnership is the beneficial owner of
      more than 5 percent of the Partnership's Units.


<PAGE>
(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,  1997,  the
Partnership  paid or accrued  $162,326  of such  asset  management  fees.  Total
accrued but unpaid asset  management  fees of  $1,297,604  were  outstanding  at
December 31, 1997.

The Partnership pays property  management fees equal to 5% of the gross receipts
of the residential  property and paid 6% for the commercial  property 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, 1997, the Partnership paid or accrued  $179,939 of such property  management
fees and reimbursements.



<PAGE>


                                     PART IV

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

See accompanying Index to Financial  Statements at Item 8 - Financial Statements
and Supplementary Data.

      (A)     Exhibits

              The following  exhibits are  incorporated  by reference and are an
              integral part of this Form 10-K.

<TABLE>
<CAPTION>
              Exhibit
              Number                Description
              --------              -----------
              <S>                   <C>
              4.                    Amended  and  Restated  Limited  Partnership
                                    Agreement     dated    March    26,    1992.
                                    (Incorporated  by  reference  to the Current
                                    Report of the  Registrant  on Form 8-K dated
                                    March 26, 1992, as filed on April 9, 1992).

              10.6                  Modification  of Note  and  Mortgage,  dated
                                    May 1, 1984,  between  Knoblinks  Associates
                                    III and Samuel R. Pierce,  Jr., as Secretary
                                    of Housing and Urban Development relating to
                                    Harbour Club III. (1)

              10.7                  Property Management  Agreement   dated March
                                    26,  1992,  between  McNeil Real Estate Fund
                                    XXII,    L.P.   and   McNeil   Real   Estate
                                    Management, Inc. (2)

              10.8                  Amendment of   Property Management Agreement
                                    dated March 5, 1993. (2)

              10.10                 Property  Management  Agreement  dated March
                                    26, 1992,  between  Harbour Club  Associates
                                    and  McNeil  Real  Estate   Management  Inc.
                                    (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 31, 1994.)

              11.                   Statement  regarding computation of Net Loss
                                    per Limited  Partnership  Unit (see Item 8 -
                                    Note  1  -  "Organization   and  Summary  of
                                    Significant Accounting Policies".)
</TABLE>



<PAGE>

              Exhibit
              Number               Description
              -------              -----------
              22.                  Following is a list of subsidiaries of the
                                    Partnership:

<TABLE>
<CAPTION>
                                                                                            Names Under
                                                                  Jurisdiction of           Which It Is
                                   Name of Subsidiary               Incorporation           Doing Business
                                   ------------------              ---------------         ---------------
                                   <S>                                <C>                        <C>
                                   Harbour Club Associates
                                   Limited Partnership                Michigan                   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  Quarterly
                                 Report of the Registrant,  on Form 10-Q for the
                                 period  ended March 31,  1991,  as filed on May
                                 14, 1991.

                           (2)   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.


      (B)     Reports  on Form  8-K.  There  were no  reports  on Form 8-K filed
              during the quarter ended December 31, 1997.


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


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

                                     By: McNeil Investors, Inc., General Partner



March 30, 1998                       By:  /s/  Robert A. McNeil
--------------                            --------------------------------------
Date                                      Robert A. McNeil
                                          Chairman of the Board and Director
                                          Principal Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.




March 30, 1998                       By:  /s/  Ron K. Taylor
--------------                            --------------------------------------
Date                                      Ron K. Taylor
                                          President and Director of McNeil
                                            Investors, Inc.
                                          (Principal Financial Officer)




March 30, 1998                       By:  /s/  Carol A. Fahs
--------------                            --------------------------------------
Date                                      Carol A. Fahs
                                          Vice President of McNeil
                                            Investors, Inc.
                                          (Principal Accounting Officer)