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


                                    FORM 10-Q



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


      For the quarterly period ended           September 30, 1998
                                       -----------------------------------------

                                       OR

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

     For the transition period from ______________to_____________
     Commission file number  0-10743
                           ----------


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



         California                             94-2717957
--------------------------------------------------------------------------------
 (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
                                                   -----------------------------



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
                                      ---  ---

<PAGE>
                          PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
----------------------------

                        MCNEIL REAL ESTATE FUND XII, LTD.

                                 BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                          September 30,       December 31,
                                                                              1998                 1997
                                                                          ------------         ------------
ASSETS
------

Real estate investments:
<S>                                                                       <C>                  <C>         
   Land ..........................................................        $  4,534,618         $  4,534,618
   Buildings and improvements ....................................          59,252,670           58,352,857
                                                                          ------------         ------------
                                                                            63,787,288           62,887,475
   Less:  Accumulated depreciation and amortization ..............         (39,067,304)         (36,754,194)
                                                                          ------------         ------------
                                                                            24,719,984           26,133,281

Asset held for sale ..............................................                  --            9,303,533

Cash and cash equivalents ........................................           6,485,230            1,423,658
Cash segregated for security deposits ............................             317,549              456,356
Accounts receivable ..............................................             225,298              165,311
Prepaid expenses and other assets ................................             103,590              139,468
Escrow deposits ..................................................           1,343,025            1,350,788
Deferred borrowing costs, net of accumulated amorti-
   zation of $542,917 and $767,891 at September 30,
   1998 and December 31, 1997, respectively ......................           1,441,403            1,544,702
                                                                          ------------         ------------
                                                                          $ 34,636,079         $ 40,517,097
                                                                          ============         ============

LIABILITIES AND PARTNERS' DEFICIT
---------------------------------

Mortgage notes payable ...........................................        $ 41,260,737         $ 54,200,372
Accounts payable .................................................                  --                9,996
Accrued expenses .................................................             137,415              277,958
Accrued interest .................................................             285,390              378,010
Accrued property taxes ...........................................             689,851              932,545
Deferred gain - land condemnation ................................             297,754              297,754
Advance from Southmark ...........................................              41,615               39,839
Advances from affiliates - General Partner .......................              34,119               32,136
Payable to affiliates - General Partner ..........................           4,879,438            4,573,052
Security deposits and deferred rental revenue ....................             343,381              519,042
                                                                          ------------         ------------
                                                                            47,969,700           61,260,704
                                                                          ------------         ------------
Partners' deficit:
   Limited partners - 240,000 limited partnership units
     authorized;  229,666 and 229,690 limited  partnership
     units issued and outstanding at September 30, 1998
     and December 31, 1997, respectively .........................          (2,999,151)         (10,579,935)
   General Partner ...............................................         (10,334,470)         (10,163,672)
                                                                          ------------         ------------
                                                                           (13,333,621)         (20,743,607)
                                                                          ------------         ------------
                                                                          $ 34,636,079         $ 40,517,097
                                                                          ============         ============
</TABLE>
The  financial  information  included  herein has been  prepared  by  management
without audit by independent public accountants.

                 See accompanying notes to financial statements.
<PAGE>
                        MCNEIL REAL ESTATE FUND XII, LTD.

                            STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
 
                                                      Three Months Ended                      Nine Months Ended
                                                         September 30,                          September 30,
                                              ---------------------------------         --------------------------------
                                                  1998                 1997                 1998                1997
                                              ------------         ------------         ------------        ------------
Revenue:
<S>                                           <C>                  <C>                  <C>                 <C>         
   Rental revenue ....................        $  3,147,850         $  3,924,806         $ 10,493,265        $ 11,568,267
   Interest ..........................             106,627               19,659              199,814              69,467
   Gain on sale of real estate........                  --                   --            9,568,850                  --
                                              ------------         ------------         ------------        ------------
     Total revenue ...................           3,254,477            3,944,465           20,261,929          11,637,734
                                              ------------         ------------         ------------        ------------

Expenses:
   Interest ..........................             915,917            1,201,099            3,053,653           3,616,416
   Interest - affiliates .............                 669                  669                1,983               1,974
   Depreciation and
     amortization ....................             791,549              893,123            2,313,110           2,828,041
   Property taxes ....................             229,674              303,171              768,023             909,513
   Personnel expenses ................             336,864              508,319            1,163,605           1,369,512
   Utilities .........................             213,388              274,895              821,746             962,545
   Repair and maintenance ............             452,238              636,937            1,373,665           1,669,184
   Property management
     fees - affiliates ...............             155,257              194,795              512,659             578,327
   Other property operating
     expenses ........................             178,567              240,491              550,517             657,487
   General and administrative ........              91,013               69,645              458,991             170,405
   General and administrative -
     affiliates ......................              66,752               54,110              210,159             165,713
                                              ------------         ------------         ------------        ------------
     Total expenses ..................           3,431,888            4,377,254           11,228,111          12,929,117
                                              ------------         ------------         ------------        ------------

Net income (loss) ....................        $   (177,411)        $   (432,789)        $  9,033,818        $ (1,291,383)
                                              ============         ============         ============        ============

Net income (loss) allocable
   to limited partners ...............        $   (537,834)        $   (411,150)        $  8,582,128        $ (1,226,814)
Net income (loss) allocable
   to General Partner ................             360,423              (21,639)             451,690             (64,569)
                                              ------------         ------------         ------------        ------------
Net income (loss) ....................        $   (177,411)        $   (432,789)        $  9,033,818        $ (1,291,383)
                                              ============         ============         ============        ============

Net income (loss) per limited
   partnership unit ..................        $      (2.34)        $      (1.79)        $      37.37        $      (5.34)
                                              ============         ============         ============        ============

Distributions per limited
   partnership unit ..................        $       4.36         $         --         $       4.36        $         --
                                              ============         ============         ============        ============
</TABLE>




The  financial  information  included  herein has been  prepared  by  management
without audit by independent public accountants.

                 See accompanying notes to financial statements.
<PAGE>
                        MCNEIL REAL ESTATE FUND XII, LTD.

                         STATEMENTS OF PARTNERS' DEFICIT
                                   (Unaudited)

              For the Nine Months Ended September 30, 1998 and 1997

<TABLE>
<CAPTION>
                                                                                               Total
                                                    General              Limited              Partners'
                                                    Partner              Partners             Deficit
                                                 -------------        -------------        -------------
<S>                                              <C>                  <C>                  <C>          
Balance at December 31, 1996 ............        $ (9,232,451)        $ (9,148,979)        $(18,381,430)

Net loss ................................             (64,569)          (1,226,814)          (1,291,383)

Management Incentive Distribution........            (631,697)                  --             (631,697)
                                                 ------------         ------------         ------------

Balance at September 30, 1997 ...........        $ (9,928,717)        $(10,375,793)        $(20,304,510)
                                                 ============         ============         ============


Balance at December 31, 1997 ............        $(10,163,672)        $(10,579,935)        $(20,743,607)

Net income ..............................             451,690            8,582,128            9,033,818

Management Incentive Distribution .......            (622,488)                  --             (622,488)

Distribution to limited partners ........                  --           (1,001,344)          (1,001,344)
                                                 ------------         ------------         ------------

Balance at September 30, 1998 ...........        $(10,334,470)        $ (2,999,151)        $(13,333,621)
                                                 ============         ============         ============
</TABLE>







The  financial  information  included  herein has been  prepared  by  management
without audit by independent public accountants.

                 See accompanying notes to financial statements.
<PAGE>
                        MCNEIL REAL ESTATE FUND XII, LTD.

                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                Increase (Decrease) in Cash and Cash Equivalents

<TABLE>
<CAPTION>

                                                                 Nine Months Ended
                                                                    September 30,
                                                         ----------------------------------
                                                              1998                 1997
                                                         --------------       -------------
Cash flows from operating activities:
<S>                                                      <C>                  <C>         
   Cash received from tenants ...................        $ 10,387,896         $ 11,646,198
   Cash paid to suppliers .......................          (4,518,315)          (4,785,620)
   Cash paid to affiliates ......................            (638,920)          (1,025,834)
   Interest received ............................             199,814               69,467
   Interest paid ................................          (3,041,198)          (3,515,888)
   Property taxes paid ..........................            (959,296)            (996,509)
                                                         ------------         ------------
Net cash provided by operating activities........           1,429,981            1,391,814
                                                         ------------         ------------

Cash flows from investing activities:
   Additions to real estate investments .........            (899,813)          (1,244,560)
   Additions to assets held for sale ............              (9,438)                  --
   Proceeds from sale of real estate ............          18,881,821                   --
                                                         ------------         ------------
Net cash provided by (used in)
   investing activities .........................          17,972,570           (1,244,560)
                                                         ------------         ------------

Cash used in financing activities:
   Principal payments on mortgage notes
     payable ....................................            (416,574)            (487,936)
   Retirement of mortgage note payable ..........         (12,523,061)                  --
   Management Incentive Distribution paid .......            (400,000)                  --
   Distributions to limited partners ............          (1,001,344)                  --
                                                         ------------         ------------
Net cash used in financing activities ...........         (14,340,979)            (487,936)
                                                         ------------         ------------

Net increase (decrease) in cash and cash
   equivalents ..................................           5,061,572             (340,682)

Cash and cash equivalents at beginning of
   period .......................................           1,423,658            1,768,249
                                                         ------------         ------------

Cash and cash equivalents at end of period ......        $  6,485,230         $  1,427,567
                                                         ============         ============
</TABLE>




The  financial  information  included  herein has been  prepared  by  management
without audit by independent public accountants.
 
                 See accompanying notes to financialstatements.
<PAGE>
                        MCNEIL REAL ESTATE FUND XII, LTD.

                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)

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


<TABLE>
<CAPTION>

                                                                          Nine Months Ended
                                                                            September 30,
                                                                  -------------------------------
                                                                      1998                1997
                                                                  -----------         -----------
<S>                                                               <C>                 <C>         
Net income (loss) ........................................        $ 9,033,818         $(1,291,383)
                                                                  -----------         -----------

Adjustments to reconcile  net income (loss) to net
   cash  provided by operating activities:
   Depreciation and amortization .........................          2,313,110           2,828,041
   Amortization of deferred borrowing costs ..............            103,299             104,537
   Net interest added on advances from
     affiliates - General Partner ........................              1,983               1,974
   Net interest added on advances from
     Southmark ...........................................              1,776               1,768
   Gain on sale of real estate ...........................         (9,568,850)                 --
Changes in assets and liabilities:
     Cash segregated for security deposits ...............            138,807             (11,684)
     Accounts receivable .................................            (59,987)             88,630
     Prepaid expenses and other assets ...................             35,878              29,748
     Escrow deposits .....................................              7,763            (277,172)
     Accounts payable ....................................             (9,996)             (7,412)
     Accrued expenses ....................................           (140,543)            (23,752)
     Accrued interest ....................................            (92,620)             (5,777)
     Accrued property taxes ..............................           (242,694)            198,862
     Payable to affiliates - General Partner .............             83,898            (281,794)
     Security deposits and deferred rental
       revenue ...........................................           (175,661)             37,228
                                                                  -----------         -----------

       Total adjustments .................................         (7,603,837)          2,683,197
                                                                  -----------         -----------

Net cash provided by operating activities ................        $ 1,429,981         $ 1,391,814
                                                                  ===========         ===========
</TABLE>






The  financial  information  included  herein has been  prepared  by  management
without audit by independent public accountants.

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

                          Notes to Financial Statements
                                   (Unaudited)

                               September 30, 1998

NOTE 1.
-------

McNeil Real Estate Fund XII, Ltd. (the  "Partnership") was organized February 2,
1981 as a limited  partnership  organized under the provisions of the California
Uniform  Limited  Partnership  Act. The general  partner of the  Partnership  is
McNeil Partners,  L.P. (the "General Partner"),  a Delaware limited partnership,
an affiliate of Robert A. McNeil.  The Partnership is governed by an amended and
restated limited  partnership  agreement,  dated September 6, 1991 (the "Amended
Partnership Agreement"). The principal place of business for the Partnership and
the General Partner is 13760 Noel Road, Suite 600, LB70, Dallas, Texas, 75240.

In the opinion of management,  the financial  statements reflect all adjustments
necessary for a fair  presentation of the Partnership's  financial  position and
results  of  operations.  All  adjustments  were of a normal  recurring  nature.
However,  the results of operations for the nine months ended September 30, 1998
are not necessarily indicative of the results to be expected for the year ending
December 31, 1998.

NOTE 2.
-------

The  financial  statements  should  be read in  conjunction  with the  financial
statements  contained in the  Partnership's  Annual  Report on Form 10-K for the
year  ended  December  31,  1997,  and the  notes  thereto,  as  filed  with the
Securities and Exchange  Commission,  which is available upon request by writing
to McNeil Real Estate Fund XII, Ltd., c/o McNeil Real Estate  Management,  Inc.,
Investor Services, 13760 Noel Road, Suite 600, LB70, Dallas, Texas 75240.

NOTE 3.
-------

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

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

Affiliates of the General Partner have advanced funds to the Partnership to meet
working capital requirements.  These advances accrue interest at a rate equal to
the prime lending rate plus 1%.



<PAGE>
Under terms of the Amended  Partnership  Agreement,  the Partnership is paying a
Management  Incentive  Distribution  ("MID") to the General Partner. The maximum
MID is  calculated  as 1% of the tangible  asset value of the  Partnership.  The
maximum MID  percentage  decreases  subsequent to 1999.  Tangible asset value is
determined  by using the  greater  of (i) an amount  calculated  by  applying  a
capitalization  rate  of 9% to the  annualized  net  operating  income  of  each
property or (ii) a value of $10,000 per apartment unit for residential  property
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.

MID will be paid to the extent of the lesser of the  Partnership's  excess  cash
flow, as defined,  or net operating income,  as defined,  and may be paid (i) in
cash,  unless there is insufficient  cash to pay the distribution in which event
any unpaid portion not taken in limited  partnership  ("Units") will be deferred
and is payable,  without interest,  from the first available cash and/or (ii) in
Units.  A maximum  of 50% of the MID may be paid in Units.  The  number of Units
issued in payment of the MID is based on the  greater of $50 per Unit or the net
tangible asset value, as defined, per Unit.

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

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

<TABLE>
<CAPTION>
                                                                   Nine Months Ended
                                                                     September 30,
                                                               ------------------------
                                                                 1998            1997
                                                               --------        --------
<S>                                                            <C>             <C>     
Property management fees - affiliates .................        $512,659        $578,327
Interest - affiliates .................................           1,983           1,974
Charged to general and administrative affiliates:
   Partnership administration .........................         210,159         165,713
                                                               --------        --------
                                                               $724,801        $746,014
                                                               ========        ========

Charged to General Partner's deficit:
   MID ................................................        $622,488        $631,697
                                                               ========        ========
</TABLE>


<PAGE>
NOTE 4.
-------

The  Partnership  has become  aware of the  presence  of certain  solvent  based
contamination  in ground water under a portion of the Lodge at Aspen Grove.  The
source of the contamination is related to a documented  release of solvents from
underground  storage  tanks located at a Colorado  Department of  Transportation
("CDOT")  facility  nearby.  The Partnership has been informed that CDOT, as the
responsible party, has agreed to remediate the property to comply with state and
federal  standards.  CDOT has submitted a corrective action plan to the Colorado
Department of Public Health and  Environment and  implementation  of the plan is
ongoing.  The  Partnership  is unable to  estimate  impairment,  if any,  to the
property at this time.  However,  due to the  existence and  involvement  of the
responsible  party,  the  Partnership  does not  believe  that this  event has a
material impact on the accompanying financial statements.

NOTE 5.
-------

On April 7, 1998, the  Partnership  sold to an unaffiliated  buyer,  Channingway
Apartments,  a 770 unit apartment complex, located in Columbus, Ohio, for a cash
sales price of $19,150,000.  Cash proceeds from this transaction, as well as the
gain on sale are detailed below.

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

Cash sales price ..........................        $ 19,150,000    $ 19,150,000

Selling costs .............................            (268,179)       (268,179)
Basis of real estate sold .................          (9,312,971)
                                                   ------------    ------------

Gain on sale of real estate ...............        $  9,568,850
                                                   ============

Proceeds from sale of real estate .........                          18,881,821
Retirement of mortgage note payable........                         (12,523,061)
                                                                   ------------

Net cash proceeds .........................                        $  6,358,760
                                                                   ============

NOTE 6.
-------

On October 5, 1998, the  Partnership  made an early payoff of the Plaza Westlake
mortgage loan for approximately $3.7 million.

<PAGE>
NOTE 7.
-------

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.

Defendants  filed a demurrer to the  consolidated  and amended  complaint  and a
motion to strike on February 14, 1997,  seeking to dismiss the  consolidated and
amended complaint in all respects.  A hearing on Defendant's demurrer and motion
to strike  was held on May 5,  1997.  The Court  granted  Defendants'  demurrer,
dismissing  the  consolidated  and  amended  complaint  with leave to amend.  On
October  31,  1997,  the  Plaintiffs  filed a second  consolidated  and  amended
complaint. The case was stayed pending settlement discussions.  A Stipulation of
Settlement dated September 15, 1998 has been signed by the parties.  Preliminary
Court  approval  was  received  on  October 6,  1998.  A hearing on final  Court
approval is scheduled for December 17, 1998.

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


<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
-------  ---------------------------------------------------------------
         RESULTS OF OPERATIONS
         ---------------------

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

The Partnership is engaged in diversified real estate activities,  including the
ownership,  operation and management of residential  and commercial  real estate
and other real estate related  assets.  At September 30, 1998,  the  Partnership
owned  four  apartment   properties  and  one  shopping  center.   Four  of  the
Partnership's properties are subject to mortgage notes.

The  Partnership   recorded  a  $9,568,850  gain  on  the  sale  of  Channingway
Apartments.  Net proceeds from the sale, after repayment of the related mortgage
note,  amounted to $6,358,760.  The net proceeds from the sale were added to the
Partnership's balance of cash reserves.

On September 30, 1998, the Partnership distributed $1,001,344 ($4.36 per limited
partnership unit) to the limited partners.  The distribution was funded from the
recent sale of Channingway Apartments.

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

Revenue:

Partnership  rental revenues decreased $776,956 and $1,075,002 for the three and
nine months ended  September  30, 1998 as compared to the same period last year.
Excluding  the  effects  of the  sale  of  Channingway  Apartments,  Partnership
revenues  increased $930,347 or 8% for the nine months ended September 30, 1998.
Greater cash reserves led to an increase of $130,347 in interest  income for the
nine months ended September 30, 1998.

Rental revenues increased at all of the Partnership's five remaining properties.
The property  reporting the largest increase in rental revenue,  on a percentage
basis,  were Plaza Westlake and Brendon Way Apartments.  The increase in rent on
Plaza Westlake is due to an increase in contingent rents billed,  as compared to
the prior year, while the increase at Brendon Way Apartments is primarily due to
greater  occupancy  during 1998. The Lodge at Aspen Grove  increased base rental
rates 7%, but the increase was partially  offset by decreased  occupancy  rates.
The remainder of the Partnership's properties reported small increases in rental
revenue.

Expenses:

Partnership  expenses decreased $945,366 and $1,701,006 or 13% for the three and
nine months ended  September  30, 1998 as compared to the same period last year.
Excluding  the  effects  of the  sale  of  Channingway  Apartments,  Partnership
expenses increased $318,816 or 3% for the nine months ended September 30, 1998.

The  Partnership  incurred  slight  decreases  in utilities  and other  property
operating  expenses.  These  expenses  were offset by  increases  in general and
administrative and general and administrative - affiliates.




<PAGE>
General and administrative expenses increased $288,586 for the nine months ended
September  30, 1998 as compared to the same period last year.  The  increase was
mainly due to costs  incurred to explore  alternatives  to maximize the value of
the  Partnership  (see  Liquidity  and  Capital  Resources).  The  increase  was
partially offset by decreases  attributable to investor  services.  During 1997,
charges  for  investor  services  were  provided  by a third  party  vendor  and
beginning  with 1998,  these  services are provided by affiliates of the General
Partner.

General and  administrative-affiliate  expenses  increased  $44,446 for the nine
months  ended  September  30, 1998 as  compared to the same period of 1997.  The
increase is due to the change in investor relation charges as discussed above.

All other remaining expense  categories  remained  comparable to the same period
last year.

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

During the first nine months of 1998,  the  Partnership  provided  $1,429,981 in
cash from  operations as compared to $1,391,814 in cash from operations in 1997.
The  $38,167  increase  can be  attributed  to the  decreases  in  cash  paid to
affiliates,  cash paid to suppliers,  interest and property taxes paid offset by
the decrease in cash  received  from tenants in the first nine months of 1998 as
compared to the same period in 1997.

The Partnership expended $909,251 and $1,244,560 for capital improvements to its
properties for the nine months ended September 30, 1998 and 1997,  respectively.
The  Partnership  also  received   proceeds  of  $18,881,821  for  the  sale  of
Channingway in April 1998.

Total  principal  payments on mortgage  notes payable were $416,574 for the nine
months ended  September  30, 1998 as compared to $487,936 for the same period in
1997. The Partnership used $12,523,061 of the proceeds from the Channingway sale
to retire the mortgage  note payable on the  property.  During the third quarter
the Partnership also paid $400,000 in MID and $1,001,344 in distributions to the
limited partners.

Short-term liquidity:

At  September  30,  1998,  the  Partnership  held cash and cash  equivalents  of
$6,485,230.  The General Partner believes that anticipated operating results for
1998 will be  sufficient  to fund the  Partnership's  budgeted  $1.2  million in
capital  improvements  for  1998  and  to  repay  the  current  portion  of  the
Partnership's  mortgage notes. On October 5, 1998, the Partnership made an early
payoff of the Plaza Westlake mortgage loan for approximately $3.7 million.  This
early  retirement  will reduce annual interest costs  approximately  $86,000 and
$350,000 for 1998 and 1999, respectively, hence increasing cash flow.




<PAGE>
Long-term liquidity:

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

As previously announced, the Partnership has retained PaineWebber,  Incorporated
("PaineWebber")  as its exclusive  financial advisor to explore  alternatives to
maximize  the  value  of  the  Partnership  including,   without  limitation,  a
transaction  in which  limited  partnership  interests  in the  Partnership  are
converted  into  cash.  The  Partnership,   through  PaineWebber,  has  provided
financial  and  other  information  to  interested   parties  and  is  currently
conducting  discussions  with one such party in an attempt to reach a definitive
agreement  with respect to a sale  transaction.  It is possible that the General
Partner  and its  affiliates  will  receive  non-cash  consideration  for  their
ownership  interests in connection  with any such  transaction.  There can be no
assurance that any such agreement will be reached nor the terms thereof.

Income (loss) allocation and distributions:

Terms of the Amended  Partnership  Agreement  specify that income  (loss) before
depreciation  is allocated  to the General  Partner to the extent of MID paid in
cash. Depreciation is allocated in the ratio of 95:5 to the limited partners and
the  General  Partner,  respectively.  Therefore,  for  the  nine  months  ended
September 30, 1998 and 1997, $451,690 and $(64,569), respectively, was allocated
to the General Partner.  The limited partners received allocations of $8,582,128
and  $(1,226,814)  for the nine  months  ended  September  30,  1998  and  1997,
respectively.

On September  30, the  Partnership  paid its first  distribution  to the limited
partners since 1986 in the amount of  $1,001,344.  The  distribution  was funded
from the  recent  sale of  Channingway  Apartments.  The  General  Partner  will
continue to monitor the cash  reserves,  and working  capital needs to determine
when cash flows will support additional distributions to the limited partners.

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  September 30, 1998. All of these  statements are
forward-looking  statements  made pursuant to the safe harbor  provisions of the
Private  Securities  Litigation  Reform Act of 1995.  These  statements  are not
historical  and  involve  risks  and  uncertainties.  The  Partnership's  actual
occupancy trends, financial condition, results of operations, and cash flows for
future  periods may differ  materially  due to several  factors.  These  factors
include,  but are not limited to, the  Partnership's  ability to control  costs,
make necessary  capital  improvements,  negotiate  sales or  refinancings of its
properties, and respond to changing economic and competitive factors.







<PAGE>
Other Information:

Management has reviewed 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.

Management  is  in  the  process  of  evaluating  the  mechanical  and  embedded
technological systems at the various properties. Management intends to inventory
all such systems and query  suppliers,  vendors and  manufacturers  to determine
year 2000 compliance.  In circumstances of  non-compliance  management will work
with the vendor to remedy the problem or seek alternative  suppliers who will be
in compliance.  Management believes that the remediation of any outstanding year
2000  conversion  issues  will not have a  material  or  adverse  effect  on the
Partnership's operations.  However, no estimates can be made as to the potential
adverse impact  resulting from the failure of third party service  providers and
vendors to be year 2000  compliant.  Management is in the process of identifying
those risks as well as  developing  a  contingency  plan to  mitigate  potential
adverse effects from non-compliance.

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS
-------  -----------------

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.

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

Defendants  filed a demurrer to the  consolidated  and amended  complaint  and a
motion to strike on February 14, 1997,  seeking to dismiss the  consolidated and
amended complaint in all respects.  A hearing on Defendant's demurrer and motion
to strike  was held on May 5,  1997.  The Court  granted  Defendants'  demurrer,
dismissing  the  consolidated  and  amended  complaint  with leave to amend.  On
October  31,  1997,  the  Plaintiffs  filed a second  consolidated  and  amended
complaint. The case was stayed pending settlement discussions.  A Stipulation of
Settlement dated September 15, 1998 has been signed by the parties.  Preliminary
Court  approval  was  received  on  October 6,  1998.  A hearing on final  Court
approval is scheduled for December 17, 1998.

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

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K
-------   --------------------------------

(a)      Exhibits.

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

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

         11.                        Statement regarding  computation of net loss
                                    per limited  partnership  unit: net loss per
                                    limited  partnership  unit  is  computed  by
                                    dividing  net loss  allocated to the limited
                                    partners    by   the   number   of   limited
                                    partnership  units  outstanding.   Per  unit
                                    information   has  been  computed  based  on
                                    229,666  and  229,690  limited   partnership
                                    units outstanding in 1998 and 1997.

         27.                        Financial   Data   Schedule  for the quarter
                                    ended September 30, 1998.

(b)      Reports  on  Form  8-K.  There were no reports on Form 8-K filed during
         the quarter ended September 30, 1998.


<PAGE>

                       McNEIL REAL ESTATE FUND XII, LTD.

                                   SIGNATURES

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


                             McNEIL REAL ESTATE FUND XII, Ltd.

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

                                  By: McNeil Investors, Inc., General Partner



November 16, 1998                 By:  /s/  Ron K. Taylor
-----------------                    -------------------------------------------
Date                                   Ron K. Taylor
                                       President and Director of McNeil 
                                        Investors, Inc.
                                       (Principal Financial Officer)




November 16, 1998                 By:  /s/  Brandon K. Flaming
-----------------                    -------------------------------------------
Date                                   Brandon K. Flaming
                                       Vice President of McNeil Investors, Inc.
                                       (Principal Accounting Officer)