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  0-17173
                            ---------


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


         Delaware                               33-0214387
--------------------------------------------------------------------------------
(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:  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 ]

4,529,267 of the registrant's  5,199,901  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 45

                                TOTAL OF 47 PAGES
<PAGE>
                                     PART I

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

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

McNeil Real  Estate Fund XXVII,  L.P.  (the  "Partnership"),  formerly  known as
Southmark Prime Plus, L.P., was organized by affiliates of Southmark Corporation
("Southmark") on January 16, 1987 as a limited  partnership under the provisions
of the Delaware Revised Uniform Limited Partnership Act to make short-term loans
to affiliates of the general partner.  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 30,  1992,  at which time an amended and
restated  partnership  agreement  (the  "Amended  Partnership   Agreement")  was
adopted.  Prior to March 30, 1992, the general  partner of the  Partnership  was
Prime Plus Corp. (the "Original General Partner"), a wholly-owned  subsidiary of
McNeil.  The Original  General Partner was purchased from Southmark by McNeil on
March 13, 1991, as discussed  further below. The principal place of business for
the Partnership and the General Partner is 13760 Noel Road,  Suite 600,  Dallas,
Texas 75240.

The sole limited partner of the Partnership was initially  Southmark  Depositary
Corp. (the "Depositary"),  a wholly-owned subsidiary of Southmark. On August 14,
1987, the  Partnership  registered  with the Securities and Exchange  Commission
("SEC")  under the  Securities  Act of 1933 (File No.  33-11824) and commenced a
public  offering  for sale of  $100,000,000  of  Depositary  units.  The sale of
Depositary  units closed on August 14, 1988,  with  5,548,888  units sold at $10
each, or gross  proceeds of  $55,488,880  to the  Partnership.  The  Partnership
subsequently filed a Form 8-A Registration Statement with the SEC and registered
its  Depositary  units  under  the  Securities  Exchange  Act of 1934  (File No.
0-17173).  The  Depositary  assigned the  principal  attributes of its aggregate
limited partner  interest in the Partnership to the Depositary unit holders.  As
further discussed,  the Depositary units were subsequently  converted to limited
partnership  units  ("Units").  The  Units  represent  equity  interests  in the
Partnership  and  entitle  the  limited   partners  to  participate  in  certain
allocations  and  distributions  of the  Partnership.  As of December  31, 1997,
348,987 of the Units have been repurchased  pursuant to the terms of the Amended
Partnership Agreement.

SOUTHMARK BANKRUPTCY AND CHANGE IN GENERAL PARTNER
--------------------------------------------------

On July 14, 1989,  Southmark filed a voluntary petition for reorganization under
Chapter 11 of the U.S.  Bankruptcy Code.  Neither the  Partnership,  the General
Partner  nor  the  Original   General  Partner  were  included  in  the  filing.
Southmark's  reorganization  plan became  effective  August 10, 1990.  Under the
plan, most of Southmark's assets,  which included  Southmark's  interests in the
Original General Partner, were sold or liquidated for the benefit of creditors.

In  accordance  with  Southmark's  reorganization  plan,  Southmark,  McNeil and
various of their affiliates  entered into an asset purchase agreement on October
12, 1990,  providing for, among other things,  the transfer of control to McNeil
or his affiliates of 34 limited partnerships  (including the Partnership) in the
Southmark portfolio.


<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.  On March 13, 1991,
McREMI  commenced  management  of the  Partnership's  properties  pursuant to an
assignment of the existing  property  management  agreements  from the Southmark
affiliates.

On March 30,  1992,  the  unitholders  approved a  restructuring  proposal  that
provided  for (i) the  replacement  of the  Original  General  Partner  with the
General Partner;  (ii) the adoption of the Amended  Partnership  Agreement which
(a) substantially  alters the provisions of the original  Partnership  Agreement
relating to, among other things,  compensation,  reimbursements of expenses, and
voting rights and (b) makes  Depositary unit holders direct limited  partners of
the Partnership;  (iii) the approval of an amended property management agreement
with McREMI, the Partnership's property manager; and (iv) the approval to change
the Partnership's  name to McNeil Real Estate Fund XXVII, L.P. Under the Amended
Partnership  Agreement,  the Partnership began accruing an asset management fee,
retroactive to March 13, 1991,  which is payable to the General  Partner.  For a
discussion of the methodology for calculating the asset management fee, see Item
13 - Certain Relationships and Related  Transactions.  The proposals approved at
the March 30, 1992 meeting were implemented as of that date.

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,  which
totaled  approximately  $17,024,326,  for  the  full  amount  claimed  and  such
settlement was approved by the Bankruptcy Court.

Pursuant to the settlement agreement, the Partnership released Southmark and its
affiliates  and the  Original  General  Partner  from any further  liability  in
connection  with the  claims  made with the  Bankruptcy  Court.  In  return,  an
affiliate of McNeil  agreed to waive  payment on a dollar for dollar basis in an
amount equal to the settled  claims  against  Partnership  advances owed at that
time. In addition,  the Partnership received Southmark bankruptcy plan assets in
respect to its claims which were not offset  against the  Partnership  advances.
Because the Partnership's claims against Southmark were settled for $17,024,326,
the  Partnership  advances of $223,800  owed at that time were  reduced in their
entirety  and the claims had a remaining  balance of  $16,800,526.  Although the
Partnership  settled the claims against  Southmark for the full amount  claimed,
the settlement agreement provided that the Partnership receive a distribution of
Southmark  bankruptcy  plan  assets  based on a claim  amount  of  approximately
$9,157,000.

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,  $984,649
in cash, and common and preferred stock in the  reorganized  Southmark which was
subsequently  sold for  $317,675.  These  amounts  represent  the  Partnership's
pro-rata share of Southmark assets available for Class 8 Claimants.


<PAGE>
CURRENT OPERATIONS
------------------

General:

Under the original partnership agreement, the Partnership's primary business was
to make short-term  nonrecourse mortgage or deed of trust loans to affiliates of
the  Original  General  Partner and to  partnerships  or real estate  investment
trusts  sponsored by affiliates of the Original  General  Partner formed for the
purpose of acquiring revenue-producing real properties. Due to borrower defaults
and foreclosures on the properties securing all but one of these mortgages,  the
Partnership's  business  also  includes  ownership and operation of real estate.
Since  the  beginning  of  operations  and  prior  to  the  restructuring,   the
Partnership  funded twelve mortgage loans, seven in 1987 and five in 1988, which
completed the Partnership's investment of the proceeds from the sale of Units.

The borrowers on the mortgage loan  investments held by the Partnership were all
affiliates of Southmark. During the early part of the terms of the loans, to the
extent that property  operations  were  insufficient  to pay required  interest,
Southmark  supported the borrowers  with cash and the  Partnership's  loans were
kept current. On July 14, 1989, Southmark filed for bankruptcy  protection,  and
such support ceased and all loans went into default.

In 1994,  the  remaining  mortgage  loan  investment,  which  was  secured  by a
mini-storage  warehouse  in  Stone  Mountain,   Georgia  that  was  sold  to  an
unaffiliated borrower,  was modified.  Principal and interest payments under the
modified terms were received by the Partnership.  The loan was repaid in full in
1996. See Item 8 - Note 5 "Mortgage Loan Investment."

In 1992, the Partnership  received the proceeds from a $7,000,000  mortgage note
payable secured by five of the Partnership's  mini-storage warehouses located in
Florida.  A portion of the proceeds  from the loan was used to make  nonrecourse
mortgage  loans to  affiliates  of the General  Partner in  accordance  with the
Amended Partnership Agreement.  The loans were secured by revenue-producing real
estate  and were  either  junior or senior to other  indebtedness  as more fully
described in Item 8 - Note 6 - "Mortgage  Loan  Investments -  Affiliates."  The
mortgage note payable was repaid by the  Partnership  in 1995. A $5 million line
of credit was obtained during 1995 for the purpose of funding  additional  loans
to affiliates of the General  Partner.  See Item 8 - Note 7 - "Revolving  Credit
Agreement."

The  Partnership  is engaged  in the  ownership,  operation  and  management  of
commercial real estate and the servicing of mortgage loan investments secured by
real estate.  At December 31,  1997,  the  Partnership  had four  mortgage  loan
investments to affiliates of the General Partner as described in Item 8 - Note 6
- "Mortgage  Loan  Investments  -  Affiliates"  and owned ten  revenue-producing
properties as described in Item 2 - Properties.

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

The business of the Partnership to date has involved only one industry  segment.
See Item 8 - Financial Statements and Supplementary Data. The Partnership has no
foreign operations. The Partnership's business is not seasonal.


<PAGE>
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.

The  Partnership  has  placed  AAA  Century  Airport  Self-Storage  and  Burbank
Mini-Storage on the market for sale effective August 1, 1997.

Competitive Conditions:

Since the  principal  business of the  Partnership  is to own and  operate  real
estate and to service notes receivable  secured by real estate,  the Partnership
is  subject  to all of the risks  incidental  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 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  and the borrowers) in connection with the sale,  financing
and  leasing  of  properties.  The  impact  of these  risks on the  Partnership,
including  losses  from  operations  and   foreclosures  of  the   Partnership's
properties,  is  described  in Item 7  Management's  Discussion  and Analysis of
Financial  Condition and Results of  Operations.  See Item 2 - Properties  for a
discussion  of  the  competitive   conditions  at  each  of  the   Partnership's
properties.

Forward-Looking Information:

Within this document,  certain  statements are made as to the expected occupancy
trends,  financial  condition,  results  of  operations,  and cash  flows of the
Partnership  for periods after  December 31, 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  sales or  refinancings of its
properties,  collect  payments  on  mortgage  loan  investments  and  respond to
changing economic and competitive factors.


<PAGE>
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 properties having such environmental
problems.  The Partnership has no knowledge of any pending claims or proceedings
regarding such environmental problems.

Other Information:

In August 1995, High River Limited  Partnership,  a Delaware limited partnership
controlled  by Carl C. Icahn ("High  River") made  unsolicited  tender offers to
purchase from holders of limited  partnership  units up to approximately  45% of
the  outstanding   limited  partnership  units  of  certain  other  partnerships
controlled by the General Partner. High River did not offer to purchase Units of
the  Partnership at that time. In September 1996, High River made an unsolicited
tender offer to purchase any and all of the outstanding Units of the Partnership
for a purchase price of $5.62 per unit. In addition High River made  unsolicited
tender offers for certain other partnerships  controlled by the General Partner.
The Partnership  recommended  that the limited partners reject the tender offers
made with respect to the  Partnership  and not tender  their Units.  The General
Partner  believes  that  as of  January  31,  1998,  High  River  has  purchased
approximately  1.8% of the outstanding  Units pursuant to the tender offers.  In
addition,  all litigation  filed by High River,  Mr. Icahn and his affiliates in
connection with the tender offers has been dismissed without prejudice.

On  October  17,  1996,  the  Partnership  announced  that  it had  received  an
unsolicited  offer from an  unaffiliated  third party to acquire all outstanding
Units of the  Partnership  at $6.50 per Unit.  After meeting with the offeror in
Dallas and  considering the $6.50 offer,  the  Partnership  rejected it as being
inadequate.

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 real  estate  investment  portfolio  of the
Partnership  at December 31, 1997.  All of the  buildings  and the land on which
they are located are owned in fee. The two office  buildings and Kendall  Sunset
Mini-Storage  secure a $5 million line of credit as described more fully in Item
8 -  Note  7 -  "Revolving  Credit  Agreement."  The  remaining  properties  are
unencumbered by mortgage  indebtedness.  See also Item 8 - Note 4 - "Real Estate
Investments"  and  Schedule  III  -  Real  Estate  Investments  and  Accumulated
Depreciation and Amortization.  In the opinion of management, the properties are
adequately covered by insurance.

<TABLE>
<CAPTION>
                                            Net Basis                              1997            Date
Property              Description          of Property           Debt (a)     Property Taxes     Acquired
--------              -----------          -----------           --------     --------------     ---------

Real Estate Investments:
<S>                   <C>                  <C>               <C>             <C>                   <C>
AAA Sentry            Mini-Storage
N. Lauderdale, FL     798 units            $       471,764   $           -   $     54,741          10/90

Forest Hill           Mini-Storage
W. Palm Beach, FL     682 units                  1,908,111               -         40,584           8/90

Fountainbleau         Mini-Storage
Miami, FL             771 units                  1,173,349               -         62,857          11/90

Kendall Sunset        Mini-Storage
Miami, FL             940 units                  3,444,192       1,298,667         72,988          10/90

Margate               Mini-Storage
Margate, FL           640 units                  1,176,833               -         49,294          10/90

Military Trail        Mini-Storage
W. Palm Beach, FL     685 units                  1,881,506               -         42,045           8/90

One Corporate
  Center I            Office Building
Edina, MN             111,146 sq. ft.            4,337,900       1,025,838        287,740          12/89

One Corporate
  Center III          Office Building
Edina, MN             111,252 sq. ft.            4,236,921       1,113,143        292,080          12/89
                                            --------------    ------------    -----------
                                           $    18,630,576   $   3,437,648   $    902,329
                                            ==============    ============    ===========
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                            Net Basis                              1997            Date
Property              Description          of Property           Debt (a)     Property Taxes     Acquired
--------              -----------          -----------           --------     --------------     ---------

Assets Held For Sale:
<S>                   <C>                  <C>               <C>             <C>                    <C>
AAA Century
  Airport             Mini-Storage
Inglewood, CA         567 units            $     1,908,947   $           -   $     33,860           9/90

Burbank               Mini-Storage
Burbank, CA           982 units                  2,640,934               -         41,894           9/90
                                            --------------    ------------    -----------
                                           $     4,549,881   $           -   $     75,754
                                            ==============    ============    ===========
</TABLE>
-----------------------------------------
Total:    Office Buildings  -  222,398 sq. ft.
          Mini-storage and self-storage warehouses - 6,065 units

(a)       For purposes of this table,  the revolving  credit  agreement has been
          allocated  among  the  properties  securing  the  debt  based on their
          estimated relative market values.

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

<TABLE>
<CAPTION>
                                        1997           1996            1995           1994          1993
                                    -------------  -------------  --------------  -------------  -----------

Real Estate Investments:
<S>                                       <C>             <C>            <C>            <C>              <C>
AAA Sentry
   Occupancy Rate............             94%             96%            96%            95%              98%
   Rent Per Square Foot......           $8.23           $8.01          $7.70          $7.00            $6.17

Forest Hill
   Occupancy Rate............            100%             98%            97%            99%            100%
   Rent Per Square Foot......          $10.72          $10.41          $9.82          $9.22           $8.45

Fountainbleau
   Occupancy Rate............             93%             96%            97%            99%            100%
   Rent Per Square Foot......           $9.27           $8.98          $8.38          $8.08           $7.66

Kendall Sunset
   Occupancy Rate............             94%             92%            95%            96%             99%
   Rent Per Square Foot......          $12.06          $11.75         $11.72         $11.71          $11.23

Margate
   Occupancy Rate............             88%             94%            90%           100%             98%
   Rent Per Square Foot......          $10.42           $9.95          $9.90         $10.06           $9.55
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
                                        1997           1996            1995           1994          1993
                                    -------------  -------------  --------------  -------------  -----------
Military Trail
<S>                                       <C>             <C>            <C>            <C>             <C>
   Occupancy Rate............             88%             88%            91%            90%             91%
   Rent Per Square Foot......           $9.82          $10.11          $9.35          $8.46           $7.76

One Corporate Center I
   Occupancy Rate............             98%            100%            93%            95%             99%
   Rent Per Square Foot......          $13.07          $11.88         $10.92         $10.34          $11.56

One Corporate Center III
   Occupancy Rate............             94%             95%            97%            96%             78%
   Rent Per Square Foot......          $13.72          $12.31         $11.17         $11.03           $7.38

Assets Held For Sale:

AAA Century Airport
   Occupancy Rate............             95%             96%            94%            95%              82%
   Rent Per Square Foot......          $10.31          $10.12         $10.19          $8.87            $7.90

Burbank
   Occupancy Rate............             92%             87%            81%            81%             84%
   Rent Per Square Foot......          $11.25          $10.80         $10.29         $10.32           $8.74
</TABLE>

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

Competitive Conditions

Real Estate Investments:

AAA Sentry
----------

AAA Sentry  Mini-Storage  consists  of five,  two-story  self-storage  warehouse
buildings and one  apartment/leasing  office. The rentable space is divided into
798 units, with 85% of these units air conditioned.

The property is located in a  predominately  commercial  area, with a mixture of
single and multi-family residential properties.  New competition in the area has
created a surplus  in  storage  units and  limited  demand.  Specials  are being
offered by competitors  to attract new renters and many  long-term  customers of
AAA Sentry are now relocating to other new or renovated facilities. AAA Sentry's
occupancy and rental rates are  competitive  with  properties of the same age in
the area.  For 1998,  management  will  continue to provide  excellent  customer
service. Rental rates will be closely monitored and adjusted according to market
conditions  with minimal  discounts and free rent.  The  Partnership  expects to
maintain occupancy in the mid-90% range in 1998.



<PAGE>
Forest Hill
-----------

Forest Hill  Mini-Storage  consists of nine,  one-story  self-storage  warehouse
buildings and one  apartment/leasing  office. The rentable space is divided into
682 units, with 22 of these units being recreational vehicle parking spaces. 35%
of the units are air conditioned.

The property is located in a predominately residential neighborhood in West Palm
Beach,  Florida,  consisting of single family homes and small  businesses to the
east and multi-family  apartment  communities to the south and west. A competing
facility  opened in December  1996 that  allows  drive-in  accessibility  to the
units.  Another  new  facility  within one mile of Forest Hill opened in January
1998.  Currently,  Forest Hill's occupancy has remained strong with rental rates
slightly higher than the competition. However, these two facilities could have a
negative impact on the property.  The Partnership  expects to maintain occupancy
in the mid 90% range in 1998 by  offering  rental  concessions  to  tenants  and
continuing to emphasize customer service.

Fountainbleau
-------------

Fountainbleau  Mini-Storage consists of three,  two-story self-storage warehouse
buildings and one  apartment/leasing  office. The rentable space is divided into
771 units. 56% of the units are air conditioned.

The property is located in the central  western  quadrant of the Miami metroplex
and is in close proximity to the Miami International  Airport.  The property has
poor drive-by exposure with a limited view from the Florida Turnpike. The street
located in front of the property is currently a dead end street but is scheduled
to be  opened to  traffic  by the end of 1998.  The  immediate  neighborhood  is
predominately   industrial  with  single  family  residential  and  multi-family
communities  further  to the south  and  north.  The  tenant  profile  currently
consists of local businesses.

The  area  is  being  saturated  by new  mini-storage  construction  along  with
renovation of existing  facilities.  A competing  facility  located within three
miles of Fountainbleau is expected to open in March 1998. A major  international
moving  company  that  leased  more  than 90 of  Fountainbleau's  units  in 1995
gradually  began  moving out during the last  quarter of 1996 and vacated all of
their  units  in  1997.  For  1998,   Fountainbleau  will  offer  discounts  and
concessions to attract and retain tenants.  The Partnership  expects to maintain
occupancy in the low 90% range in 1998.

Kendall Sunset
--------------

Kendall Sunset Mini-Storage  consists of ten, one-story  self-storage  warehouse
buildings and one  apartment/leasing  office. The rentable space is divided into
940 units. 35% of the units are air conditioned.


<PAGE>
The property is located in a residential  neighborhood at the southwestern  edge
of the Miami metroplex. The area is tropical in nature and is in close proximity
to the Everglades  and Key West.  The property's  rental rates and occupancy are
slightly higher than the competition in the immediate area.  However,  occupancy
declined  in  1996  due to new  competitors  being  added  to the  market.  Rent
concessions and discounts were offered to maintain  occupancy and compete within
the market.  Occupancy  increased slightly in 1997 as the new storage units were
absorbed.  Currently,  there is little  available  land in the immediate area on
which to build new storage  facilities.  The Partnership  expects to offer fewer
discounts  to tenants in 1998 and to  maintain  occupancy  in the low to mid 90%
range.

Margate
-------

Margate   Mini-Storage   consists  of  four,   one-story  and  one,  three-story
self-storage warehouse buildings and one apartment/leasing  office. The rentable
space is divided into 640 units, with 11 of the units being recreational vehicle
parking spaces. 52% of the units are air conditioned.

The property is located in a predominately  commercial/retail  neighborhood with
single family homes and multi-family  communities  along the secondary  streets.
Major  repairs on the road  fronting the property have resulted in heavy traffic
congestion.  A competing  facility was built last year  adjacent to Margate that
offers  truck  rentals,  boxes  and  packing  supplies.   Competition  from  new
self-storage facilities over the past several years has had an adverse effect on
the  property's  occupancy,  and  discounts and  concessions  have been given to
attract new renters. The property has an excellent reputation in the marketplace
and management expects to maintain occupancy in the low 90% range in 1998.

Military Trail
--------------

Military Trail Mini-Storage consists of eight,  one-story self-storage warehouse
buildings and one  apartment/leasing  office. The rentable space is divided into
685 units, with 23 of the units being  recreational  vehicle parking spaces. 35%
of the units are air conditioned.

The property is located in a predominately  commercial/retail  neighborhood. The
majority  of the  apartment  complexes  in the area are to the north with single
family  residences to the west.  The location is the most positive  feature with
direct access to Military  Trail,  a major  thoroughfare.  During 1997 and 1996,
occupancy  began to drop due to four new facilities  being built in the area. An
increased  amount of discounts and concessions  were given to attract and retain
renters.  Another older  facility is currently  being  renovated.  For 1998, the
Partnership  will  continue to offer  discounts and  concessions  and expects to
maintain occupancy in the low 90% range throughout 1998.

One Corporate Center I and One Corporate Center III
---------------------------------------------------

One Corporate Center I and III are six-story class "B" office buildings  located
in the southwest suburban Minneapolis/St.  Paul metropolitan area. The buildings
are  two  of  four  identical  buildings  located  in a  commercial  development
identified as One Corporate Center.




<PAGE>
Rental rates increased in 1996 and 1997 due to renewing leases at current market
rates. Average occupancy rates in the area decreased slightly due to several new
office  buildings  being built in 1997.  Although  there are  substantial  lease
expirations  at both  properties in 1998,  management  will attempt to renew the
leases at least six months prior to the expiration of the lease. This will allow
management to market the space to a new tenant if the existing  tenant  declines
to  renew  their  lease.   The  properties  will  continue  to  perform  capital
improvements  in 1998 in order to replace aging building  systems and to upgrade
common areas to remain competitive in the marketplace.  The Partnership  expects
to maintain occupancy in the mid 90% range.

Assets Held for Sale:

AAA Century Airport
-------------------

AAA  Century  Airport  Self-Storage  consists of three,  two-story  self-storage
warehouse  buildings and one  apartment/leasing  office.  The rentable  space is
divided into 567 units,  including 10 recreational  vehicle parking spaces. Each
unit is  individually  alarmed for  additional  security.  The property does not
offer climate-controlled units.

The  property  is  located   approximately   two  miles  from  the  Los  Angeles
International Airport in Inglewood, California. Inglewood is a relatively mature
area with growth to the west  generated by development  around the airport.  The
property  is  located in a low income  area with a high  unemployment  and crime
rate. The  competition is inferior in appearance and  management.  However,  one
competitor  offers a truck and driver and another  competitor  offers crates and
pick-up  trucks for use by its renters.  AAA Century has an advantage in that it
is able to  offer  individually  alarmed  units  for  additional  security.  AAA
Century's occupancy is currently above the average occupancy in the area of 90%,
and the Partnership expects to maintain occupancy in the mid 90% range in 1998.

Burbank
-------

Burbank   Mini-Storage   consists  of  two,   two-story  and  one,   three-story
self-storage warehouse buildings and one apartment/leasing  office. The rentable
space is  divided  into 982 units,  with 10 of these  units  being  recreational
vehicle parking spaces.  All of the buildings have fire  sprinklers,  but do not
offer climate-controlled environments.

The  property is located in the eastern  quadrant of Burbank,  California,  just
west of  Interstate  5 and  approximately  twenty  miles north of  downtown  Los
Angeles and seven miles south of the Burbank  Airport.  There are two  competing
self-storage  properties with superior  visibility and highway access.  However,
one of these properties will be demolished in 1998 to make room for a new retail
center.  Management  increased  occupancy in 1997 by aggressively  marketing the
upstairs  units  that are  seldom  rented.  Management  will  continue  to offer
discounts  for the  upstairs  units while rents will be  increased  on the lower
level  units  which are in high  demand.  The  Partnership  expects to  maintain
occupancy in the low 90% range in 1998.


<PAGE>
The following  schedule shows lease  expirations  for each of the  Partnership's
commercial properties for 1998 through 2007:

<TABLE>
<CAPTION>
                                Number of                             Annual           % of Gross
                               Expirations           Square Feet       Rent            Annual Rent
                               -----------           -----------  ------------         -----------
<C>                                   <C>               <C>       <C>                       <C>
One Corporate Center I
1998                                  9                 28,561    $    390,588              27%
1999                                  6                 17,705         220,550              15%
2000                                  3                  5,705          85,680               6%
2001                                  7                 19,849         313,693              22%
2002                                  7                 36,879         421,662              30%
2003-2007                             -                      -               -               -

One Corporate Center III
1998                                 11                 41,718    $    531,224              37%
1999                                  7                 26,749         356,102              25%
2000                                  4                 15,021         230,956              16%
2001                                  3                  7,953         124,146               9%
2002                                  3                  8,725         107,539               7%
2003                                  -                      -               -               -
2004                                  1                  3,639          70,481               5%
2005                                  -                      -               -               -
2006                                  1                    920          17,484               1%
2007                                  -                      -               -               -
</TABLE>


No  mini-storage  tenant leases 10% or more of the available  rental space.  The
following  schedule reflects  information on commercial tenants occupying 10% or
more of the leasable square feet for each property:

<TABLE>
<CAPTION>
Nature of
Business                              Square Footage                                    Lease
Use                                       Leased               Annual Rent            Expiration
---------                             --------------           -----------            ----------
<S>                                        <C>               <C>                          <C>
One Corporate Center I
   General Office                          10,761            $    134,954                 1998
   Bank                                    13,666                 160,576                 1999
   General Office                          10,750                 198,875                 2002
   General Office                          19,626                 106,721                 2002

One Corporate Center III

   General Office                          12,988            $    158,454                 1998
</TABLE>



<PAGE>
ITEM 3.  LEGAL PROCEEDINGS
-------  -----------------

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

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.

     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.


<PAGE>
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)   Helen Pasco v. McNeil Real Estate Fund XXVII,  L.P.,  Southmark  Prime Plus
     Corp., et al. and Does 1-50 Inclusive.  This complaint alleges that several
     limited  partnerships  and funds,  including  the  Partnership,  along with
     McMachen,  Prudential Securities,  Inc. and other unidentified  defendants,
     transmitted  false and misleading  information  to the plaintiff  which was
     used to entice the plaintiff into investing her money with the  defendants.
     The complaint also alleges that the defendants misrepresented  speculative,
     illiquid  limited  partnerships  as  safe,  revenue-producing   investments
     suitable for  safety-conscious  and  conservative  investors.  Although the
     Partnership is included as a defendant,  the plaintiff's allegations do not
     specify in what way the Partnership was involved in improper  conduct.  The
     complaint  does  not  state,  other  than by  broad  allegations,  that the
     Partnership  acted in an improper  manner with regard to the  operation  or
     management of the limited partnership. An answer was filed on behalf of the
     Partnership in February 1994. Although plaintiff's counsel stated plaintiff
     was going to amend the complaint, no such amended complaint was ever served
     on the  Partnership  and it  presumes  that  plaintiff  either  deleted the
     Partnership  as a  defendant  or  abandoned  the action.  Accordingly,  the
     Partnership  has taken no  further  action on this  claim and it appears to
     have been abandoned.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-------  ---------------------------------------------------

None.

<PAGE>
                                     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                 2,339 as of January 31, 1998

(C)      Distributions  paid to the limited partners totaled  $3,999,970 in 1997
         and $5,999,994 in 1996 from cash from operations. No distributions were
         paid to the  General  Partner in 1997 or 1996.  During the last week of
         March 1998, the Partnership distributed approximately $2,250,000 to the
         limited  partners  of  record  as  of  March  1,  1998.  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."

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...............       $   8,366,664  $   7,943,383  $    7,517,404  $   7,234,070  $   6,546,936
Interest income on mort-
   gage loan investments.....             766,211        268,665         440,658        451,841        674,118
Income before extra-
   ordinary item.............           2,788,653      2,245,414       3,268,110      1,355,563      1,306,745
Extraordinary item...........                   -              -        (252,402)             -              -
Net income...................           2,788,653      2,245,414       3,015,708      1,355,563      1,306,745

Net income per weighted
   average hundred limited
   partnership units:
   Income before extra-
     ordinary item...........       $       52.72  $       42.15  $       60.93   $       25.09  $       24.00
   Extraordinary item........                   -              -          (4.71)              -              -
                                     ------------   ------------   ------------    ------------   ------------
   Net income................       $       52.72  $       42.15  $       56.22   $       25.09  $       24.00
                                     ============   ============   ============    ============   ============

Distributions per weighted
   average hundred limited
   partnership units.........       $       76.38  $      113.77  $           -   $           -  $           -
                                     ============   ============   ============    ============   ============
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
                                                              As of December 31,
Balance Sheets                          1997           1996            1995           1994           1993
--------------                      -------------  -------------  --------------  -------------  --------
<S>                                <C>             <C>            <C>             <C>            <C>
Real estate investments, net...    $   18,630,576  $  23,888,948  $   24,977,575  $  25,921,989  $  26,674,164
Assets held for sale...........         4,549,881              -               -              -              -
Mortgage loan investments,
   net.........................         6,956,487      4,692,760       3,597,673      4,679,929      5,718,144
Total assets...................        33,681,114     32,641,270      35,489,741     39,501,853     38,779,870
Long-term debt.................         3,437,648      1,101,619               -      6,726,266      6,853,753
Partners' equity...............        28,999,177     30,543,422      34,630,930     31,948,150     30,925,518

</TABLE>

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

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

Under the original partnership  agreement,  the Partnership was formed to engage
in the business of making short-term nonrecourse mortgage or deed of trust loans
to affiliates of the Original General Partner and to partnerships or real estate
investment trusts sponsored by affiliates of the Original General Partner formed
for the purpose of acquiring  revenue-producing  real properties and reinvesting
the proceeds from  repayment of such loans in  additional  affiliate  loans.  In
1989,  the  Partnership  initiated  foreclosure  proceedings  on the  collateral
securing each of its mortgage loan  investments.  The  Partnership  acquired two
office buildings in 1989 and eight  mini-storage  warehouses in 1990 as a result
of the  foreclosures.  Also in 1990,  one loan was  collected  in full  when the
borrower  sold the  mini-storage  warehouse  securing  the loan.  The  remaining
mortgage  loan  investment,  secured  by a  mini-storage  warehouse  owned by an
unaffiliated limited partnership, was collected in full in 1996.

In October 1992,  the  Partnership  received  approximately  $6.5 million of net
proceeds  from  a  $7  million  loan  secured  by  five  of  the   Partnership's
mini-storage  warehouses located in Florida. A portion of the proceeds were used
for working capital and for general partnership purposes. The loan proceeds were
also  used to make such  loans to  affiliates  in  accordance  with the  Amended
Partnership  Agreement  as more fully  described  in Item 8 - Note 6 - "Mortgage
Loan Investments - Affiliates" and Item 13 - Certain  Relationships  and Related
Transactions.  The mortgage  note payable was paid in full in 1995. A $5 million
line of credit was obtained during 1995 for the purposing of funding  additional
loans to  affiliates  of the General  Partner.  See Item 8 - Note 7 - "Revolving
Credit Agreement."


<PAGE>
RESULTS OF OPERATIONS
---------------------

1997 compared to 1996

Revenue:

Total  revenue  increased by $718,361 in 1997 as compared to 1996.  The increase
was mainly due to an increase in rental revenue and interest  income on mortgage
loan investments - affiliates,  partially offset by decreases in interest income
on the Partnership's mortgage loan investment to an unaffiliated borrower, other
interest income and a gain on  extinguishment  of mortgage loan  investment,  as
discussed below.

Rental  revenue  increased by $423,281 in 1997 as compared to 1996. The increase
was mainly due to  increases  of  approximately  $133,000  and  $157,000  at One
Corporate  Center I and III  office  buildings,  respectively,  as a  result  of
increases in rental rates in 1997 as well as decreased discounts and concessions
given to tenants.  Also, there was an increase in expense  reimbursements billed
to tenants as a result of an  increase  in  property  taxes  incurred by the two
office  buildings in 1997,  as discussed  below.  In  addition,  rental  revenue
increased at all of the mini-storage properties, except for Military Trail, as a
result of an increase in rental rates in 1997.  Rental revenue at Military Trail
decreased  slightly due to a small decline in average  occupancy  rates in 1997.
See Item 2 - Properties for a more detailed  analysis of occupancy and rents per
square foot.

In 1996, the  Partnership  recorded  $32,444 of interest  income on the mortgage
loan investment related to the A-Quality  Mini-Storage loan. Since this loan was
repaid by the borrower in the first quarter of 1996, no such income was recorded
in 1997.

Interest income on mortgage loan investments - affiliates  increased by $529,990
in 1997 as compared to 1996.  The  increase  was mainly due to a higher  average
amount  of  loans   outstanding   during  1997.  The   Partnership   had  loaned
approximately $7 million to affiliates as of December 31, 1997 and approximately
$4.7 million as of December 31, 1996.

Other  interest  income in 1997  decreased  by  $149,625  in  relation  to 1996,
primarily due to a lower amount of cash available for  short-term  investment in
1997.  The  Partnership  held  approximately  $5.7  million  of  cash  and  cash
equivalents  at the beginning of 1996.  Cash and cash  equivalents  decreased to
approximately  $3  million  at  the  end  of  1996  and  further   decreased  to
approximately $2.4 million at the end of 1997.

In 1996, the Partnership recognized a $52,841 gain on extinguishment of mortgage
loan  investment due to the early payoff of the A-Quality note. No such gain was
recognized in 1997.

Expenses:

Total  expenses  increased by $175,122 in 1997 as compared to 1996. The increase
was mainly due to an increase in interest expense and property taxes,  partially
offset  by  a  decrease  in  depreciation   and  amortization  and  general  and
administrative expenses, as discussed below.




<PAGE>
Interest  expense in 1997  increased  by $146,982 as compared to 1996,  due to a
greater amount  borrowed  under the  Partnership's  line of credit  agreement in
1997. The interest expense  recorded in 1997 and 1996 represents  interest costs
and  amortization of deferred  borrowing costs relating to the  Partnership's $5
million line of credit.  The Partnership did not borrow any funds under the line
of  credit   agreement   until  November  1996.  The  Partnership  had  borrowed
approximately  $3.4 million under the agreement at December 31, 1997 as compared
to approximately $1.1 million at December 31, 1996.

Depreciation and amortization  expense decreased by $195,828 in 1997 as compared
to 1996. The decrease was due to AAA Century  Airport and Burbank  mini-storages
being classified as assets held for sale by the Partnership  effective August 1,
1997. In accordance with the Financial Accounting Standards Board's Statement of
Financial  Accounting  Standards  No. 121,  "Accounting  for the  Impairment  of
Long-Lived  Assets and for Long-Lived Assets to be Disposed Of," the Partnership
ceased recording  depreciation on the assets at the time they were placed on the
market for sale.

Property  taxes in 1997  increased  by $174,483  in relation to 1996,  due to an
increase in the assessed  taxable value of One Corporate Center I and III office
buildings by taxing authorities.

General and administrative  expenses decreased by $33,750 in 1997 as compared to
1996, mainly due to a decrease in costs relating to evaluation and dissemination
of information  regarding an  unsolicited  tender offer as discussed in Item 1 -
Business.

1996 compared to 1995

Revenue:

Total revenue  decreased by $1,085,785 in 1996 as compared to 1995. The decrease
was due to a decrease in interest  income,  a  non-recurring  1995  property tax
refund and gain on legal  settlement,  partially offset by an increase in rental
revenue  and a  non-recurring  1996  gain on  extinguishment  of  mortgage  loan
investment, as discussed below.

Rental  revenue for 1996 increased by $425,979 in relation to 1995. The increase
was mainly due to  increases  of  approximately  $107,000  and  $127,000  at One
Corporate Center I and III office buildings as a result of an increase in rental
rates in 1996. In addition,  rental revenue increased by approximately  $44,000,
$31,000  and  $37,000  at   Fountainbleau,   Forest  Hill  and  Military   Trail
mini-storages as a result of an increase in rental rates in 1996. Rental revenue
at Burbank Mini-Storage increased by approximately $43,000 due to an increase in
occupancy  in 1996.  See Item 2 -  Properties  for a more  detailed  analysis of
occupancy and rents per square foot.

Interest  income on mortgage  loan  investment  decreased by $116,890 in 1996 as
compared  to  1995.  The  decrease  was due to the  repayment  of the  A-Quality
Mini-Storage loan by the borrower in the first quarter of 1996.

Interest income on mortgage loan  investments - affiliates  decreased by $55,103
in 1996 as compared to 1995.  The decrease was due to a lower average  amount of
loans  outstanding  during 1996.  Although  there was a greater  amount of loans
outstanding  at the end of 1996,  $3.4  million of those loans were made in late
November 1996.



<PAGE>
Other  interest  income in 1996  decreased  by $59,773 in relation to 1995.  The
decrease was  primarily due to a lower amount of cash  available for  short-term
investment as a result of approximately  $6 million of distributions  being paid
to the limited partners in 1996.

In 1995,  the  Partnership  received a $30,515  refund of prior years'  property
taxes for AAA Century  Airport  Mini-Storage  as a result of an appeal  filed on
behalf of the property. No such property tax refunds were received in 1996.

As discussed  in Item 1, in 1995 the  Partnership  received  cash and common and
preferred  stock in the  reorganized  Southmark in settlement of its  bankruptcy
claims against  Southmark.  The  Partnership  recognized a $1,302,324  gain as a
result of this settlement. No such gain was recognized in 1996.

In 1996, the Partnership recognized a $52,841 gain on extinguishment of mortgage
loan  investment due to the early payoff of the A-Quality note. No such gain was
recognized in 1995.

Expenses:

Total  expenses  decreased by $63,089 in 1996 as compared to 1995.  The decrease
was mainly due to a decrease in interest expense and general and  administrative
-  affiliates,  partially  offset by an increase  in general and  administrative
expenses, as discussed below.

Interest  expense  in 1996  decreased  by  $262,907  in  relation  to 1995.  The
Partnership's  mortgage note payable was repaid in the second half of 1995.  The
Partnership  borrowed  additional  funds under its line of credit  agreement  in
November  1996,  as further  discussed  in Item 8 - Note 7 -  "Revolving  Credit
Agreement." Interest expense includes amortization of deferred borrowing costs.

General and administrative  expenses increased by $84,894 in 1996 as compared to
1995.  The increase was due to costs incurred in 1996 relating to evaluation and
dissemination  of information  regarding an unsolicited  tender offer in 1996 as
discussed in Item 1 - Business.

General  and  administrative  -  affiliates  decreased  by  $112,735  in 1996 as
compared to 1995. The decrease was mainly due to a decrease in overhead expenses
allocated to the Partnership by McREMI.

In 1995, the Partnership  recognized a $252,402  extraordinary  loss incurred in
connection  with the repayment of its mortgage note payable as discussed in Item
8 - Note 7 -  "Revolving  Credit  Agreement."  The loss  consisted of $66,949 in
prepayment  penalties and a $185,453 write off of deferred  borrowing  costs. No
such loss was recorded in 1996.

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

The Partnership  generated  $4,409,938 of cash through  operating  activities in
1997,  $4,134,772  in 1996 and  $5,157,580  in  1995.  The  increase  in 1997 as
compared to 1996 was mainly due to an increase in cash received from tenants and
interest  received from  affiliates.  The increases were  partially  offset by a
decrease in interest received from  non-affiliates,  and an increase in interest
paid and property taxes paid (see discussion of changes in corresponding revenue
and expense accounts, above).



<PAGE>
The decrease in cash generated through operating  activities in 1996 as compared
to 1995  was  mainly  due to  cash  received  in 1995  from  the  settlement  of
bankruptcy claims against Southmark,  partially offset by a decrease in interest
paid in 1996. The  Partnership's  mortgage note payable was repaid in the second
half of 1995 and  additional  funds were not  borrowed  under the line of credit
until late November 1996; thus the related interest expense decreased.

The Partnership  expended  $724,380,  $540,072 and $563,333 for additions to its
real  estate  investments  and  assets  held for sale in  1997,  1996 and  1995,
respectively.  The  increase in 1997 as compared to 1996 and 1995 was mainly due
to a greater  amount of tenant  improvements  being  performed at One  Corporate
Center I Office Building in 1997.

In 1996, the Partnership received cash of $1,404,026 as repayment in full of the
Partnership's   mortgage  loan  investment  to  an  unaffiliated  borrower.  The
Partnership received $282,420 of principal payments on the loan in 1995. No such
funds were received in 1997.

The  Partnership  made loans to affiliates (net of collections) of $2,263,727 in
1997 and $2,456,858 in 1996. The Partnership  collected $972,000 from affiliates
in 1995.

In  1997  and  1996,  the  Partnership   received   $2,336,029  and  $1,101,619,
respectively,  in proceeds from its revolving credit agreement,  which were used
to make loans to affiliates.

In 1995,  the  Partnership  expended a total of  $6,726,266 to repay in full its
mortgage note payable and paid $66,949 in prepayment  penalties  associated with
such repayment.  The Partnership also paid $195,059 in deferred  borrowing costs
to secure a $5 million line of credit.

The Partnership distributed $3,999,970 and $5,999,994 to the limited partners in
1997 and 1996,  respectively,  from cash from operations.  No distributions were
paid to the partners in 1995.

Short-term liquidity:

At  December  31,  1997,  the  Partnership  held  cash and cash  equivalents  of
$2,440,084.  This balance provides a reasonable level of working capital for the
Partnership's immediate needs in operating its properties.

For the  Partnership  as a whole,  management  projects  positive cash flow from
operations in 1998. The  Partnership has budgeted  approximately  $1,255,000 for
necessary capital improvements for all properties in 1998, which are expected to
be funded from available cash reserves or from operations of the properties.

Additional efforts to maintain and improve  Partnership  liquidity have included
continued attention to property management activities. The objective has been to
obtain maximum  occupancy  rates while holding  expenses to levels  necessary to
maximize  cash flows.  The  Partnership  has made  capital  expenditures  on its
properties where improvements were expected to increase the  competitiveness and
marketability of the properties.

During the last week of March 1998, the  Partnership  distributed  approximately
$2,250,000 to the limited partners of record as of March 1, 1998.




<PAGE>
Long-term liquidity:

While the outlook for  maintenance of adequate levels of liquidity is favorable,
should  operations  deteriorate and present cash resources be  insufficient  for
current needs,  the Partnership  would require other sources of working capital.
The  Partnership  acquired a $5 million  line of credit in 1995 that may be used
for property  operations.  Other possible  actions to resolve cash  deficiencies
include refinancings, deferral of capital expenditures on Partnership properties
except  where  improvements  are expected to increase  the  competitiveness  and
marketability  of the  properties,  arranging  financing from  affiliates or the
ultimate sale of the properties.

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.

The  Partnership  has  placed  AAA  Century  Airport  Self-Storage  and  Burbank
Mini-Storage on the market for sale effective August 1, 1997.



<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.......................................                       20

   Balance Sheets at December 31, 1997 and 1996...................................                       21

   Statements of Operations for each of the three years in the period
      ended December 31, 1997.....................................................                       22

   Statements of Partners' Equity (Deficit) for each of the three years
      in the period ended December 31, 1997.......................................                       23

   Statements of Cash Flows for each of the three years in the period
      ended December 31, 1997.....................................................                       24

   Notes to Financial Statements..................................................                       26

   Financial Statement Schedule -

      Schedule III - Real Estate Investments and Accumulated
         Depreciation and Amortization............................................                       39


</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 XXVII, L.P.:

We have  audited  the  accompanying  balance  sheets of McNeil  Real Estate Fund
XXVII,  L.P. (a Delaware limited  partnership) as of December 31, 1997 and 1996,
and the related  statements of operations,  partners'  equity (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 XXVII,
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 XXVII, L.P.

                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                       ------------------------------------
                                                                            1997                 1996
                                                                       ---------------      ---------------
ASSETS
------
Real estate investments:
<S>                                                                    <C>                  <C>
   Land.....................................................           $     4,196,277      $    5,387,855
   Buildings and improvements...............................                23,241,031          27,175,885
                                                                        --------------       -------------
                                                                            27,437,308          32,563,740
   Less:  Accumulated depreciation and amortization.........                (8,806,732)         (8,674,792)
                                                                        --------------       -------------
                                                                            18,630,576          23,888,948

Assets held for sale........................................                 4,549,881                   -

Mortgage loan investments - affiliates......................                 6,956,487           4,692,760

Cash and cash equivalents...................................                 2,440,084           3,022,851
Cash segregated for security deposits and
   repurchase of limited partnership units..................                   442,193             427,123
Accounts receivable.........................................                   426,825             297,942
Accrued interest receivable.................................                    64,991              43,200
Deferred borrowing costs, net of accumulated
   amortization of $195,059 and $146,294 at
   December 31, 1997 and 1996, respectively.................                         -              48,765
Prepaid expenses and other assets...........................                   170,077             219,681
                                                                        --------------       -------------
                                                                       $    33,681,114      $   32,641,270
                                                                        ==============       =============

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

Revolving credit agreement..................................           $     3,437,648      $    1,101,619
Accounts payable and accrued expenses.......................                   107,549              77,635
Payable to limited partners.................................                   332,928             332,928
Payable to affiliates.......................................                   542,045             370,837
Security deposits and deferred rental revenue...............                   261,767             214,829
                                                                        --------------       -------------
                                                                             4,681,937           2,097,848
                                                                        --------------       -------------

Partners' equity (deficit):
   Limited partners - 10,000,000 limited partnership units
     authorized; 5,199,901 and 5,236,893 limited partner-
     ship units outstanding at December 31, 1997 and 1996,
     respectively...........................................                29,076,126          30,648,258
   General Partner..........................................                   (76,949)           (104,836)
                                                                        --------------       -------------
                                                                            28,999,177          30,543,422
                                                                        --------------       -------------
                                                                       $    33,681,114      $   32,641,270
                                                                        ==============       =============
</TABLE>
                 See accompanying notes to financial statements.

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

<TABLE>
<CAPTION>
                                                            For the Years Ended December 31,
                                                   ----------------------------------------------------
                                                       1997               1996               1995
                                                   --------------     --------------    ---------------
Revenue:
<S>                                                <C>                <C>               <C>
   Rental revenue..........................        $    8,366,664     $    7,943,383    $     7,517,404
   Interest income on mortgage loan
     investment............................                     -             32,444            149,334
   Interest income on mortgage loan
     investments - affiliates..............               766,211            236,221            291,324
   Other interest income...................               150,357            299,982            359,755
   Property tax refund.....................                     -                  -             30,515
   Gain on legal settlement................                     -                  -          1,302,324
   Gain on extinguishment of mortgage
     loan investment.......................                     -             52,841                  -
                                                    -------------      -------------     --------------
     Total revenue.........................             9,283,232          8,564,871          9,650,656
                                                    -------------      -------------     --------------

Expenses:
   Interest................................               269,289            122,307            385,214
   Depreciation and amortization...........             1,432,871          1,628,699          1,507,747
   Property taxes..........................               978,083            803,600            751,848
   Personnel costs.........................               719,441            667,758            627,809
   Repairs and maintenance.................               594,984            590,986            579,543
   Property management fees -
     affiliates............................               462,289            435,159            426,203
   Utilities...............................               459,243            455,718            444,526
   Other property operating expenses.......               590,887            581,026            597,611
   General and administrative..............               107,560            141,310             56,416
   General and administrative -
     affiliates............................               879,932            892,894          1,005,629
                                                    -------------      -------------     --------------
     Total expenses........................             6,494,579          6,319,457          6,382,546
                                                    -------------      -------------     --------------

Net income before extraordinary item.......             2,788,653          2,245,414          3,268,110
Extraordinary item.........................                     -                  -           (252,402)
                                                   --------------      -------------     --------------

Net income.................................       $     2,788,653     $    2,245,414    $     3,015,708
                                                   ==============      =============     ==============

Net income allocable to limited
   partners................................       $     2,760,766     $    2,222,960    $     2,985,551
Net income allocable to General
   Partner.................................                27,887             22,454             30,157
                                                   --------------      -------------     --------------
Net income.................................       $     2,788,653     $    2,245,414    $     3,015,708
                                                   ==============      =============     ==============

Net income per weighted average hundred
   limited partnership units:
   Net income before extraordinary item....       $         52.72     $        42.15    $        60.93
   Extraordinary item......................                     -                  -             (4.71)
                                                   --------------      -------------     -------------
Net income.................................       $         52.72     $        42.15    $        56.22
                                                   ==============      =============     =============

Distributions per weighted average
   hundred limited partnership units.......       $         76.38     $       113.77    $            -
                                                   ==============      =============     =============
</TABLE>

                 See accompanying notes to financialstatements.
<PAGE>
                       McNEIL REAL ESTATE FUND XXVII, L.P.

                    STATEMENTS OF PARTNERS' EQUITY (DEFICIT)

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

<TABLE>
<CAPTION>
                                                                                                      Total
                                                     General                    Limited               Partners'
                                                     Partner                    Partners              Equity
                                                 ----------------           -----------------     ----------------
<S>                                              <C>                        <C>                   <C>
Balance at December 31, 1994..............       $      (157,447)           $     32,105,597      $     31,948,150

Repurchase of 36,992 limited
   partnership units......................                     -                    (332,928)             (332,928)

Net income................................                30,157                   2,985,551             3,015,708
                                                  --------------             ---------------       ---------------

Balance at December 31, 1995..............              (127,290)                 34,758,220            34,630,930

Repurchase of 36,992 limited
   partnership units......................                     -                    (332,928)             (332,928)

Net income................................                22,454                   2,222,960             2,245,414

Distributions to limited partners.........                     -                  (5,999,994)           (5,999,994)
                                                  --------------             ---------------       ---------------

Balance at December 31, 1996..............              (104,836)                 30,648,258            30,543,422

Repurchase of 36,992 limited
   partnership units......................                     -                    (332,928)             (332,928)

Net income................................                27,887                   2,760,766             2,788,653

Distributions to limited partners.........                     -                  (3,999,970)           (3,999,970)
                                                  --------------           -----------------      ----------------

Balance at December 31, 1997..............       $       (76,949)         $       29,076,126     $      28,999,177
                                                  ==============           =================      ================
</TABLE>


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

                            STATEMENTS OF CASH FLOWS

                Increase (Decrease) in Cash and Cash Equivalents

<TABLE>
<CAPTION>
                                                              For the Years Ended December 31,
                                                   -----------------------------------------------------
                                                         1997               1996               1995
                                                   ---------------    ---------------   ----------------
Cash flows from operating activities:
<S>                                                <C>                <C>               <C>
   Cash received from tenants..............        $    8,203,733     $    7,881,796    $     7,754,299
   Cash paid to suppliers..................            (2,308,949)        (2,278,401)        (2,107,840)
   Cash paid to affiliates.................            (1,171,013)        (1,210,260)        (1,405,977)
   Interest received.......................               150,357            344,947            336,925
   Interest received from affiliates.......               744,420            215,064            316,719
   Interest paid...........................              (230,527)           (14,774)          (317,537)
   Property taxes paid.....................              (978,083)          (803,600)          (751,848)
   Property tax refund.....................                     -                  -             30,515
   Cash received from legal settlement.....                     -                  -          1,302,324
                                                    -------------      -------------     --------------
Net cash provided by operating
   activities..............................             4,409,938          4,134,772          5,157,580
                                                    -------------      -------------     --------------

Cash flows from investing activities:
   Additions to real estate investments
     and assets held for sale..............              (724,380)          (540,072)          (563,333)
   Proceeds from collection of mortgage
     loan investments......................                     -          1,404,026            282,420
   Mortgage loan investments -
     affiliates............................            (2,336,029)        (3,409,396)                 -
   Proceeds from collection of mortgage
     loan investments - affiliates.........                72,302            952,538            972,000
                                                    -------------      -------------     --------------
Net cash provided by (used in)
   investing activities....................            (2,988,107)        (1,592,904)           691,087
                                                    -------------      -------------     --------------

Cash flows from financing activities:
   Net increase in cash segregated
     for repurchase of limited
     partnership units.....................                (7,729)            (6,371)            (5,215)
   Deferred borrowing costs paid...........                     -                  -           (195,059)
   Proceeds from revolving credit
     agreement.............................             2,336,029          1,101,619                  -
   Principal payments on mortgage
     note payable..........................                     -                  -         (6,726,266)
   Mortgage prepayment penalty paid........                     -                  -            (66,949)
   Repurchase of limited partnership
     units.................................              (332,928)          (332,928)          (332,931)
   Distributions to limited partners.......            (3,999,970)        (5,999,994)                 -
                                                    -------------      -------------     --------------
Net cash used in financing activities......            (2,004,598)        (5,237,674)        (7,326,420)
                                                    -------------      -------------     --------------

Net decrease in cash and
   cash equivalents........................              (582,767)        (2,695,806)        (1,477,753)

Cash and cash equivalents at
   beginning of year.......................             3,022,851          5,718,657          7,196,410
                                                    -------------      -------------     --------------

Cash and cash equivalents at end
   of year.................................        $    2,440,084     $    3,022,851    $     5,718,657
                                                    =============      =============     ==============
</TABLE>

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

                            STATEMENTS OF CASH FLOWS


              Reconciliation of Net Income to Net Cash Provided by
                              Operating Activities


<TABLE>
<CAPTION>
                                                              For the Years Ended December 31,
                                                   ----------------------------------------------------
                                                         1997               1996               1995
                                                   --------------     --------------    ---------------
<S>                                                <C>                <C>               <C>
Net income.................................        $    2,788,653     $    2,245,414    $     3,015,708
                                                    -------------      -------------     --------------

Adjustments to reconcile net income to
   net cash  provided  by  operating
   activities:
   Depreciation and amortization...........             1,432,871          1,628,699          1,507,747
   Amortization of deferred borrowing
     costs.................................                48,765             97,530             67,677
   Allowance for impairment of
     mortgage loan investment..............                     -                  -           (172,164)
   Gain on extinguishment of mortgage
     loan investment.......................                     -            (52,841)                 -
   Extraordinary item......................                                        -            252,402
   Changes in assets and liabilities:
     Cash segregated for security
       deposits............................                (7,341)           (13,187)             1,962
     Accounts receivable...................              (128,883)             1,893            225,452
     Accrued interest receivable...........               (21,791)            (8,636)            25,395
     Prepaid expenses and other
       assets..............................                49,604             98,482            202,024
     Accounts payable and accrued
       expenses............................                29,914              9,164             (3,960)
     Payable to affiliates.................               171,208            117,793             25,855
     Security deposits and deferred
       rental revenue......................                46,938             10,461              9,482
                                                    -------------      -------------     --------------

         Total adjustments.................             1,621,285          1,889,358          2,141,872
                                                    -------------      -------------     --------------

Net cash provided by operating
   activities..............................        $    4,409,938     $    4,134,772    $     5,157,580
                                                    =============      =============     ==============
</TABLE>

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

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 1997

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

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

McNeil Real  Estate Fund XXVII,  L.P.  (the  "Partnership"),  formerly  known as
Southmark Prime Plus, L.P., was organized by affiliates of Southmark Corporation
("Southmark") on January 16, 1987, as a limited partnership under the provisions
of the Delaware Revised Uniform Limited Partnership Act to make short-term loans
to affiliates of the general partner.  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 30,  1992,  at which time an amended and
restated  partnership  agreement  (the  "Amended  Partnership   Agreement")  was
adopted.  Prior to March 30, 1992, the general  partner of the  Partnership  was
Prime Plus Corp. (the "Original General Partner"), a wholly-owned  subsidiary of
McNeil.  The Original  General Partner was purchased from Southmark by McNeil on
March 13, 1991.  The  principal  place of business for the  Partnership  and the
General Partner is 13760 Noel Road, Suite 600, Dallas, Texas 75240.

The sole limited partner of the Partnership was initially  Southmark  Depositary
Corp. (the "Depositary"), a wholly-owned subsidiary of Southmark. The Depositary
assigned the principal  attributes of its aggregate  limited partner interest in
the  Partnership  to the  Depositary  unit holders.  The  Depositary  units were
subsequently converted to limited partnership units ("Units").

Under the original partnership agreement, the Partnership's primary business was
to make short-term  nonrecourse mortgage or deed of trust loans to affiliates of
the  Original  General  Partner and to  partnerships  or real estate  investment
trusts  sponsored by affiliates of the Original  General  Partner formed for the
purpose of acquiring revenue-producing real properties. Due to borrower defaults
and foreclosures on the properties securing all but one of these mortgages,  the
Partnership's business also includes ownership and operation of real estate.

In 1992, the Partnership used a portion of proceeds from a mortgage note payable
to make  nonrecourse  mortgage  loans to  affiliates  of the General  Partner in
accordance with the Amended Partnership Agreement. The mortgage note payable was
repaid by the Partnership in 1995, and a $5 million  revolving  credit agreement
was obtained that is being used to fund  additional  loans made to affiliates of
the General Partner.  See Note 7 - "Revolving Credit  Agreement." The loans made
to affiliates are secured by revenue-producing real estate and are either junior
or senior to other  indebtedness  as more fully  described in Note 6 - "Mortgage
Loan Investments - Affiliates."

The  Partnership  is engaged  in the  ownership,  operation  and  management  of
commercial real estate and the servicing of mortgage loan investments secured by
real estate.  At December 31,  1997,  the  Partnership  had four  mortgage  loan
investments  to  affiliates  of the  General  Partner as  described  in Note 6 -
"Mortgage  Loan   Investments   Affiliates"  and  owned  ten   revenue-producing
properties as described in Note 4 - "Real Estate Investments."


<PAGE>
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.

The  Partnership  has  placed  AAA  Century  Airport  Self-Storage  and  Burbank
Mini-Storage on the market for sale effective August 1, 1997.

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.

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

Real estate investments are generally stated at the lower of depreciated cost or
fair value. Real estate investments are reviewed for impairment  whenever events
or changes in  circumstances  indicate  that their  carrying  amounts may not be
recoverable.  When the  carrying  value  of a  property  exceeds  the sum of all
estimated  future cash flows, an impairment loss is recognized.  At such time, a
write-down is recorded to reduce the basis of the property to its estimated fair
value.

The  Partnership's  method  of  accounting  for real  estate  investments  is in
accordance with Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" ("SFAS 121"),  which the Partnership  adopted effective January 1, 1996. The
adoption  of  SFAS  121 did  not  have a  material  impact  on the  accompanying
financial statements.

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

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

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




<PAGE>
Depreciation and Amortization
-----------------------------

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

Mortgage Loan Investments
-------------------------

Mortgage  loan  investments  are recorded at their  original  basis,  net of any
allowance for impairment. Interest income is recognized as it is earned.

Cash and Cash Equivalents

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

Deferred Borrowing Costs
------------------------

Loan fees and other related costs incurred to obtain long-term financing on real
property are  capitalized  and amortized  using a method that  approximates  the
effective  interest  method  over the term of the  revolving  credit  agreement.
Amortization of deferred  borrowing costs is included in interest expense on the
Statements of Operations.

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

The Partnership  leases its mini-storage  warehouses under short-term  operating
leases. Lease terms generally are less than one year in duration. Rental revenue
is recognized as earned.

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

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  provides for net income and net loss of the
Partnership  to be allocated  99% to the limited  partners and 1% to the General
Partner.



<PAGE>
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, distributions to the partners are paid
from cash from  operations  available  after payment of affiliate  compensation.
Under the terms of the Amended Partnership Agreement, the General Partner is not
entitled to distributions from operations.

Cash from operations  available for  distribution is determined by provisions of
the Amended Partnership  Agreement,  and differs from the amount reported as net
cash  provided by operating  activities in the  accompanying  Statements of Cash
Flows. Cash from operations available for distribution consists of cash received
from  operations  of the  Partnership  during a given  period  of time  less (1)
operational cash disbursements  during the same period of time including capital
improvements,   unscheduled  mortgage  principal  reductions  and  repayment  of
Partnership  advances from affiliates,  (2) a reasonable allowance for reserves,
contingencies and anticipated obligations as determined at the discretion of the
General  Partner,  (3) proceeds held pending  investment in affiliate loans, and
(4) any monies reserved for repurchase of Units.

Liquidation proceeds will be distributed when the Partnership is dissolved after
taking into account all items of income,  gain, loss or deduction.  Distribution
of liquidation  proceeds will then be made to the partners with positive capital
account balances.

The Partnership distributed $3,999,970 and $5,999,994 of cash from operations in
1997 and 1996, respectively. No distributions were paid to the partners in 1995.
No distributions were paid to the General Partner in 1997, 1996 or 1995.

During  the last  week of  March  1998,  the  Partnership  plans  to  distribute
approximately $2,250,000 to the limited partners of record as of March 1, 1998.

Net Income Per Hundred Limited Partnership Units
------------------------------------------------

Net income per one hundred Units is computed by dividing net income allocated to
the  limited  partners  by the  weighted  average  number  of Units  outstanding
expressed in hundreds.  Per unit  information has been computed based on 52,369,
52,739  and 53,109  (in  hundreds)  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 mini-storage warehouses and 6% of gross rental receipts for its
commercial  properties to McNeil Real Estate  Management,  Inc.  ("McREMI"),  an
affiliate of the General Partner, for providing property management services for
the Partnership's  mini-storage warehouses and commercial properties and leasing
services  for its  mini-storage  warehouses.  McREMI may also  choose to provide
leasing  services for the  Partnership's  commercial  properties,  in which case
McREMI will receive  property  management fees from such  commercial  properties
equal to 3% of the  property's  gross rental  receipts plus leasing  commissions
based on the  prevailing  market rate for such  services  where the  property is
located.

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

Under the terms of the Amended Partnership Agreement,  the Partnership is paying
an  asset  management  fee to the  General  Partner.  Through  1999,  the  asset
management  fee is calculated as 1% of the  Partnership's  tangible asset value.
Tangible  asset  value is  determined  by using  the  greater  of (i) an  amount
calculated by applying a capitalization  rate of 9 percent to the annualized net
operating  income of each  property or (ii) a value of $30 per gross square foot
for  mini-storage  warehouses  and $50 per  gross  square  foot  for  commercial
properties 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:

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

Property management fees...........     $   462,289   $   435,159    $   426,203
Charged to general and
   administrative - affiliates:
   Partnership administration......         270,653       314,832        432,998
   Asset management fee............         609,279       578,062        572,631
                                         ----------    ----------     ----------
                                        $ 1,342,221   $ 1,328,053    $ 1,431,832
                                         ==========    ==========     ==========

Until March 13, 1991, the Original General Partner was entitled to receive,  out
of cash from operations,  a performance incentive fee equal to 20% of all points
received by the Partnership on mortgage loans if the limited  partners  received
distributions of cash from operations  equal to a 10% cumulative  noncompounding
annual return on their original capital  investment.  Such fees were cumulative,
were  accrued in the years earned and are to be paid when  conditions  were met.
Conditions for payment have not yet been met and, at December 31, 1997 and 1996,
$141,647 of amounts accrued in prior years are included in payable to affiliates
on the Balance Sheets.




<PAGE>
Under  the  terms of the  Amended  Partnership  Agreement,  the  Partnership  is
expressly  permitted to make loans to affiliates of the General Partner, so long
as such loans meet certain conditions. See Note 6 - "Mortgage Loan Investments -
Affiliates" for a discussion of these transactions.

Payable to affiliates at December 31, 1997 and 1996  consisted  primarily of the
performance   incentive  fee  of  $141,647  accrued  in  prior  years,  property
management  fees,  Partnership  general  and  administrative   expenses,   asset
management fees and prepaid interest as further  discussed in Note 6 - "Mortgage
Loan  Investments - Affiliates."  Except for the  performance  incentive fee and
prepaid interest, all accrued fees are due and payable from current operations.

NOTE 3 - TAXABLE INCOME
-----------------------

McNeil  Real Estate Fund  XXVII,  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 $12,759,576 in 1997,
$12,040,518 in 1996 and $11,258,459 in 1995.

NOTE 4 - REAL ESTATE INVESTMENTS
--------------------------------

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

<TABLE>
<CAPTION>
                                                                         Accumulated
                                                   Buildings and         Depreciation        Net Book
       1997                         Land           Improvements        and Amortization        Value
       ----                    --------------      ------------        ----------------   ---------------
<S>                            <C>                 <C>                <C>                 <C>
AAA Sentry
   N. Lauderdale, FL           $       70,337      $      612,992     $      (211,565)    $       471,764
Forest Hill
   W. Palm Beach, FL                  510,780           1,995,632            (598,301)          1,908,111
Fountainbleau
   Miami, FL                          287,114           1,237,674            (351,439)          1,173,349
Kendall Sunset
   Miami, FL                          672,756           3,915,577          (1,144,141)          3,444,192
Margate
   Margate, FL                        233,575           1,354,964            (411,706)          1,176,833
Military Trail
   W. Palm Beach, FL                  571,715           1,869,813            (560,022)          1,881,506
One Corporate Center I
   Edina, MN                          925,000           5,975,937          (2,563,037)          4,337,900
One Corporate Center III
   Edina, MN                          925,000           6,278,442          (2,966,521)          4,236,921
                                -------------       -------------       --------------      -------------
                               $    4,196,277      $   23,241,031      $   (8,806,732)     $   18,630,576
                                =============       =============       =============       =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                         Accumulated
                                                   Buildings and         Depreciation        Net Book
       1996                         Land           Improvements        and Amortization        Value
       ----                    --------------      ------------        ----------------   ---------------
<S>                            <C>                 <C>                 <C>                 <C>
AAA Century Airport (a)        $      361,535      $    2,145,958      $     (543,658)     $    1,963,835
AAA Sentry                             70,337             558,674            (162,724)            466,287
Burbank (b)                           830,043           2,505,647            (639,212)          2,696,478
Forest Hill                           510,780           1,987,092            (509,267)          1,988,605
Fountainbleau                         287,114           1,232,975            (288,860)          1,231,229
Kendall Sunset                        672,756           3,905,730            (979,692)          3,598,794
Margate                               233,575           1,340,085            (341,757)          1,231,903
Military Trail                        571,715           1,833,280            (470,276)          1,934,719
One Corporate Center I                925,000           5,621,079          (2,199,151)          4,346,928
One Corporate Center III              925,000           6,045,365          (2,540,195)          4,430,170
                                -------------       -------------       --------------      -------------
                               $    5,387,855      $   27,175,885      $   (8,674,792)     $   23,888,948
                                =============       =============       =============       =============
</TABLE>


(a)    On August 1,  1997,  the  General  Partner  placed  AAA  Century  Airport
       Self-Storage,  located in Inglewood,  California, on the market for sale.
       Accordingly,  the  property was  classified  as such at December 31, 1997
       with a net book value of $1,908,947.

(b)    On August 1, 1997,  the  General  Partner  placed  Burbank  Mini-Storage,
       located in Burbank,  California, on the market for sale. Accordingly, the
       property  was  classified  as such at  December  31, 1997 with a net book
       value of $2,640,934.

The  results of  operations  for the assets  held for sale at December  31, 1997
were $836,166, $724,265 and $702,833 for the years ended December 31, 1997, 1996
and 1995,  respectively.  Results of  operations  are  operating  revenues  less
operating expenses including depreciation and interest expense.

The  Partnership  leases its office  buildings  under  non-cancelable  operating
leases.  Future  minimum  rents to be received  as of  December  31, 1997 are as
follows:

            1998....................................        $ 2,620,623
            1999....................................          1,818,405
            2000....................................          1,540,167
            2001....................................          1,110,987
            2002....................................            754,779
            Thereafter..............................            120,710
                                                             ----------
              Total                                         $ 7,965,671
                                                             ==========

Future  minimum  rents do not  include  expense  reimbursements  for common area
maintenance,  property taxes and other  expenses.  These expense  reimbursements
amounted to $265,764,  $132,563  and  $130,560 for the years ended  December 31,
1997,  1996 and 1995,  respectively,  and are included in rental  revenue on the
Statements of Operations.


<PAGE>
NOTE 5 - MORTGAGE LOAN INVESTMENT
---------------------------------

In 1987,  the  Partnership  made a nonrecourse  mortgage loan to an affiliate of
Southmark secured by A-Quality Mini-Storage.  The property was subsequently sold
to an unaffiliated borrower subject to the Partnership's first priority mortgage
loan.

In April 1994,  the  borrower,  who had filed for  bankruptcy  in 1990,  and the
Partnership reached a settlement concerning the loan. Under the settlement,  the
borrower  paid the  Partnership  $150,000  in cash and the loan was  renewed for
$1,453,194 (representing the original $2,100,000 principal balance less all post
bankruptcy petition payments made by the borrower) effective January 1, 1994. An
additional  second  lien  loan was  executed  in the  amount of  $134,397  at an
interest  rate of 6%,  which  was  paid in full in the  third  quarter  of 1995.
Principal  and interest at a rate of prime plus 2% were  payable  monthly on the
first lien loan. On March 21, 1996, the Partnership  received $1,404,026 as full
settlement  of the first lien  loan.  In  connection  with the  settlement,  the
Partnership   recorded  a  $52,841  gain  on  extinguishment  of  mortgage  loan
investment,  which  represents the excess of the settlement  amount over the net
carrying  amount of the mortgage loan  investment and related  accrued  interest
accounts.

In  accordance  with  Statement  of  Financial  Accounting  Standards  No.  114,
"Accounting by Creditors for Impairment of a Loan" ("SFAS 114"),  the measure of
impairment for a loan restructured in a troubled debt  restructuring is based on
the present  value of  expected  future cash flows  discounted  at the  original
contractual rate. Accordingly, upon the April 1994 modification, the Partnership
measured the impairment of the mortgage loan  investment and determined  that an
allowance for  impairment was still  required.  The allowance for impairment was
written  off in March 1996,  when the first lien loan was paid in full.  For the
year ended December 31, 1995, the allowance for impairment decreased by $172,164
due to the passage of time (the allowance was measured based on discounted  cash
flows).

Subsequent to the April 1994  modification,  interest  income was recorded at an
interest  rate that equated the expected  future cash flows to the mortgage loan
investment balance.  The expected cash flows changed slightly from year to year.
Additionally,  any changes in the  allowance for  impairment  that resulted from
changes in the discount  rate or passage of time were also  recorded as interest
income.  This  accounting  treatment  resulted in the recognition of $32,444 and
$149,334 of  interest  income for the years  ended  December  31, 1996 and 1995,
respectively.  The effective interest rate of this interest income was 10.8% and
10.4% for 1996 and 1995,  respectively.  Interest income of $32,444 and $154,909
would have been recognized under the terms of the modification agreement for the
years ended December 31, 1996 and 1995, respectively, if the Partnership had not
adopted SFAS 114.


<PAGE>
NOTE 6 - MORTGAGE LOAN INVESTMENTS - AFFILIATES
-----------------------------------------------

Under  the  terms of the  Amended  Partnership  Agreement,  the  Partnership  is
expressly  permitted to make  nonrecourse  mortgage  loans to  affiliates of the
General  Partner so long as such loans meet certain  conditions,  including that
such loans bear  interest at a rate equal to the prime  lending  rate of Bank of
America  plus  2.5%,  or plus 3.5% if the loan is junior to other  indebtedness.
These  loans are  secured  by  revenue-producing  real  estate and may be either
junior or senior to other indebtedness secured by such property. At December 31,
1997, the Partnership had outstanding mortgage loan investments to affiliates of
$6,956,487,  all of which were first priority loans. For the year ended December
31, 1997,  the  Partnership  recognized  $766,211 of interest  income related to
these  loans.  The  following  sets  forth  the   Partnership's   mortgage  loan
investments to affiliates of the General  Partner at December 31, 1997 and 1996.
Loans were funded by the proceeds from the mortgage note payable entered into in
October 1992, the line of credit  obtained in June 1995 (see Note 7 - "Revolving
Credit  Agreement")  or other  available  funds.  Interest only payments are due
monthly. The monthly payment varies according to the prime lending rate.
<TABLE>
<CAPTION>

                                   Mortgage      Annual
                                   Lien          Interest                                   December 31,
Property                           Position      Rate % (a)       Maturity             1997             1996
--------                           ---------     ----------       -----------       -------------  -----------
<S>                                <C>             <C>               <C>         <C>               <C>
McNeil Pension Investment
   Fund, Ltd.:
   Brice Road Office
     Building                      First           11.00             05/98       $      411,062    $   483,364
   Verre Center Office
     Building                      First           11.00             11/99              820,426        820,426
McNeil Real Estate Fund X,
   Ltd.:
   La Plaza Business Center        First           11.00             02/00            3,136,029              -
   Lakeview Plaza Shopping
     Center                        Second          12.00             08/97                    -        800,000
McNeil Real Estate Fund
   XI, Ltd.:
   The Village Apartments          First           11.00             11/99            2,588,970      2,588,970
                                                                                  -------------     ----------
                                                                                 $    6,956,487    $ 4,692,760
                                                                                  =============     ==========
</TABLE>

(a)  The loans bear  interest at the prime  lending rate of Bank of America plus
     2.5% for senior  priority  loans and prime  plus 3.5% for  junior  priority
     loans.  The prime  lending  rate was 8.5% at December 31, 1997 and 8.25% at
     December 31, 1996.


<PAGE>
On May 1, 1992, the Partnership agreed to loan an aggregate of $1.115 million to
McNeil Pension  Investment  Fund,  Ltd.  ("McPIF"),  an affiliate of the General
Partner,  at an  interest  rate of prime  plus 1% per annum  (the  maximum  rate
allowed to be incurred by McPIF in connection  with  borrowings  from affiliates
pursuant to McPIF's partnership agreement).  A total of $483,364 was borrowed by
McPIF  pursuant to this  commitment,  $72,302 of which was repaid in 1997.  This
loan is  secured  by a first  lien on Brice  Road  Office  Building  located  in
Reynoldsburg,  Ohio.  The original loan matured in May 1995, at which time a new
loan under  substantially  the same terms was executed.  Interest on the loan is
payable  monthly.  Principal  is  payable  in May 1998.  Management  intends  to
renegotiate the note if it is not repaid at maturity.

On October  25,  1996,  the  Partnership  agreed to loan an  aggregate  of $1.68
million to McPIF at an  interest  rate of prime  plus 1% per annum (the  maximum
rate  allowed  to be  incurred  by  McPIF in  connection  with  borrowings  from
affiliates  pursuant to McPIF's  partnership  agreement).  In 1996, $820,426 was
borrowed by McPIF pursuant to this  commitment.  This loan is secured by a first
lien on Verre Center Office Building located in Chamblee, Georgia.
Interest on the loan is payable monthly. Principal is payable in November 1999.

On February 28, 1997, the  Partnership  loaned  $2,336,029 to McNeil Real Estate
Fund X, Ltd.  ("Fund X"),  at an  interest  rate of prime plus 1% per annum (the
maximum rate allowed to be incurred by Fund X in connection with borrowings from
affiliates pursuant to Fund X's partnership  agreement).  On August 1, 1997, the
mortgage note was amended and the  principal  balance was increased by $800,000,
for  total  borrowings  from  the  Partnership  of  $3,136,029.  Fund X used the
$800,000  additional  proceeds to repay the $800,000  mortgage  loan  investment
secured by Lakeview  Plaza Shopping  Center,  as discussed  below.  This loan is
secured  by a first  lien on La Plaza  Business  Center  located  in Las  Vegas,
Nevada.  Interest  on the loan is payable  monthly,  with  principal  payable in
February 2000.

On August 15, 1994,  the  Partnership  loaned  $800,000 to Fund X at an interest
rate of prime plus 1% per annum (the maximum rate allowed to be incurred by Fund
X in connection with borrowings from affiliates pursuant to Fund X's partnership
agreement).  This loan was secured by a second lien on Lakeview  Plaza  Shopping
Center located in Lexington, Kentucky. Interest on the loan was payable monthly,
with  principal  originally  due and payable in August 1997.  On August 1, 1997,
Fund X  repaid  the  loan  with  proceeds  received  from a new  loan  from  the
Partnership secured by La Plaza Business Center, as discussed above.

On October 25, 1996,  the  Partnership  loaned  $2,588,970 to McNeil Real Estate
Fund XI, L.P.  ("Fund  XI") at an interest  rate of prime plus 1% per annum (the
maximum rate  allowed to be incurred by Fund XI in  connection  with  borrowings
from  affiliates  pursuant  to Fund XI's  partnership  agreement).  This loan is
secured by a first lien on The Village  Apartments  located in Gresham,  Oregon.
Interest on the loan is payable monthly. Principal is payable in November 1999.

On March 1, 1993,  the  Partnership  loaned  $952,538 to McNeil Real Estate Fund
XXVI,  L.P.  ("Fund XXVI") at an interest rate of prime plus 2.5%. This loan was
secured  by a  first  lien on  Continental  Plaza  Office  Building  located  in
Scottsdale,  Arizona.  Interest on the loan was payable monthly,  with principal
payable on the third anniversary date of issuance.  The loan was paid in full in
January 1996.


<PAGE>
In order to induce the Partnership to lend funds to the foregoing  affiliates of
the General  Partner,  the General  Partner  entered  into  agreements  with the
Partnership  whereby  the  General  Partner  agreed to pay:  (i) the  difference
between the interest  rate  required by the  Partnership's  Amended  Partnership
Agreement  to be charged  to  affiliates  (either  prime plus 2.5% or prime plus
3.5%) and the interest  rate  actually  paid by Fund X, Fund XI and McPIF to the
Partnership  (prime plus 1%), and (ii) all points (1.5% of the principal  amount
if a first priority security interest is obtained and 2% of the principal amount
if a junior priority security interest is obtained),  closing costs and expenses
required to be received by the Partnership pursuant to the Partnership's Amended
Partnership Agreement in connection with such affiliated financing arrangements.
At December  31, 1997,  1996 and 1995,  the General  Partner had paid  $113,432,
$78,391 and $27,250, respectively, representing the aggregate amount of interest
which would be owed for one year pursuant to this arrangement.  In addition, the
General Partner paid $139,236,  $83,510 and $27,193 of interest, points, closing
costs and expenses  required to be received by the  Partnership on all affiliate
loans during  1997,  1996 and 1995,  respectively.  All other  requirements  for
affiliated  loans,  as  specified  in  the  Partnership's   Amended  Partnership
Agreement,  were met at December 31, 1997,  1996 and 1995,  in  connection  with
these loans.

A summary of activity  for the mortgage  loan  investments  -  affiliates  is as
follows:

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

Balance at beginning of year.........   $ 4,692,760   $ 2,235,902   $ 3,207,902
Mortgage loans funded................     2,336,029     3,409,396             -
Mortgage loans repaid................       (72,302)     (952,538)     (972,000)
                                         ----------    ----------    ----------
Balance at end of year...............   $ 6,956,487   $ 4,692,760   $ 2,235,902
                                         ==========    ==========    ==========


Based on the lending rates prescribed by the Amended  Partnership  Agreement for
each    applicable    affiliate,    the   fair    value   of    mortgage    loan
investments-affiliates approximated book value at December 31, 1997 and 1996.

The cost of the mortgage loan investments for Federal income tax purposes is the
same as the carrying amount for financial statement purposes.


<PAGE>
NOTE 7 - REVOLVING CREDIT AGREEMENT
-----------------------------------

The following sets forth the revolving  credit  agreement of the  Partnership at
December 31, 1997 and 1996.  The  revolving  credit  agreement is secured by the
related real estate investments.
<TABLE>
<CAPTION>

                         Mortgage         Annual          Monthly
                         Lien             Interest        Payments/              December 31,
Property                 Position         Rate %          Maturity            1997          1996
--------                 ------------     ------       ----------------    -----------  ------------
<S>                      <C>              <C>              <C>   <C>       <C>           <C>
Kendall Sunset,
One Corporate
Center I and
One Corporate
Center III               First            7.9375 (a)       (a)   7/99      $ 3,437,648   $ 1,101,619
                                                                            ==========    ==========
</TABLE>

(a)  The interest  rate and monthly  payment vary based on the London  Interbank
     Offered Rate plus 2%. The rate listed above  represents  the rate in effect
     as of December 31, 1997.

A $5 million  revolving  credit agreement was secured by the Partnership in June
1995. The Partnership had borrowed $3,437,648 and $1,101,619 under the revolving
credit  agreement at December 31, 1997 and 1996,  respectively.  Any  borrowings
under the revolving credit agreement bear interest at prime plus one half of one
percent or a LIBOR-based rate, if so elected by the Partnership. The Partnership
is  required  to pay a  commitment  fee equal to one  quarter of one percent per
annum on any unused portion of the line of credit.  Total  commitment  fees paid
during 1997,  1996 and 1995 were $3,887,  $12,708 and $3,542,  respectively.  In
1995,  the  Partnership  incurred loan costs of $195,059  related to the line of
credit. The line of credit,  which originally expired in July 1997, was extended
during 1997 to mature in July 1999 and is secured by One Corporate  Center I and
III  office  buildings  and  Kendall  Sunset  Mini-Storage.  The line of  credit
contains  financial  covenants  that  require  the  Partnership  to  maintain an
Interest  Expense Coverage Ratio of 3:1, as defined,  among other  restrictions.
The Partnership was in compliance with all financial  covenants  associated with
the revolving credit agreement as of December 31, 1997 and 1996.

In February 1997, $2,336,029 was borrowed by the Partnership under the revolving
credit agreement and loaned to an affiliate of the General Partner (see Note 6 -
"Mortgage Loan Investments - Affiliates").

Based on borrowing  rates  currently  available to the Partnership for long-term
debt with similar terms and average maturities,  the fair value of the revolving
credit  agreement  borrowings  approximated  book value at December 31, 1997 and
1996.


<PAGE>
In October  1992,  the  Partnership  entered into a loan  agreement to borrow an
aggregate of $7 million.  Principal on this loan was due and payable seven years
following issuance,  with interest payable annually at a rate of 10.5% per annum
for the first three years and prime plus 2% thereafter.  The loan was secured by
certain  mini-storage  warehouses  owned by the Partnership.  McNeil  personally
guaranteed  up to $1.75 million of the aggregate  loan amount.  The  Partnership
received net proceeds of  approximately  $6.5 million from the loan, the balance
of the loan amount being used to defray  certain  closing costs and to establish
an escrow account for real estate taxes. The net loan proceeds were used to make
loans to various  affiliates of the General  Partner and to fund working capital
needs. The balance of the proceeds was invested, in accordance with the terms of
the Amended Partnership Agreement, in short-term interest-bearing accounts.

In May 1995, the Partnership  paid down its mortgage note payable by $4,628,250.
In connection with obtaining the revolving credit agreement discussed above, the
Partnership  paid off the  remaining  $2,019,844  balance of its  mortgage  note
payable.  In connection  with the repayments,  the  Partnership  paid prepayment
penalties  of  $66,949  and wrote off  $185,453  of  deferred  borrowing  costs,
resulting in an extraordinary loss of $252,402 in 1995.

NOTE 8 - REPURCHASE OF LIMITED PARTNERSHIP UNITS
------------------------------------------------

Under the provisions of both the original partnership  agreement and the Amended
Partnership  Agreement,  the  Partnership  is  required to  repurchase  Units in
amounts totaling up to 0.6% of gross proceeds per year. The repurchase amount is
equal  to the  lesser  of 90% of  adjusted  invested  capital,  or $9 per  Unit.
Repurchase is based on written requests from limited partners  submitted between
October 1 and October 20 of each year. The  requirement  was first  effective in
1989. In January  1998,  1997 and 1996,  $332,928 was used to repurchase  36,992
Units for requests submitted in 1997, 1996 and 1995, respectively.

NOTE 9 - GAIN ON LEGAL SETTLEMENT
---------------------------------

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,  which
totaled  approximately  $17,024,326,  for  the  full  amount  claimed  and  such
settlement was approved by the Bankruptcy Court.

Pursuant to the settlement agreement, the Partnership released Southmark and its
affiliates  and the  Original  General  Partner  from any further  liability  in
connection  with the  claims  made with the  Bankruptcy  Court.  In  return,  an
affiliate of McNeil  agreed to waive  payment on a dollar for dollar basis in an
amount equal to the settled  claims  against  Partnership  advances owed at that
time. In addition,  the Partnership received Southmark bankruptcy plan assets in
respect to its claims which were not offset  against the  Partnership  advances.
Because the Partnership's claims against Southmark were settled for $17,024,326,
the  Partnership  advances of $223,800  owed at that time were  reduced in their
entirety  and the claims had a remaining  balance of  $16,800,526.  Although the
Partnership  settled the claims against  Southmark for the full amount  claimed,
the settlement agreement provided that the Partnership receive a distribution of
Southmark  bankruptcy  plan  assets  based on a claim  amount  of  approximately
$9,157,000.


<PAGE>
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,  $984,649
in cash, and common and preferred stock in the  reorganized  Southmark which was
subsequently  sold for  $317,675.  These  amounts  represent  the  Partnership's
pro-rata  share of Southmark  assets  available  for Class 8 Claimants  and were
recorded as a gain on legal settlement on the Statements of Operations.

NOTE 10 - LEGAL PROCEEDINGS
---------------------------

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

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)   Helen Pasco v. McNeil Real Estate Fund XXVII,  L.P.,  Southmark  Prime Plus
     Corp., et al. and Does 1-50 Inclusive.  This complaint alleges that several
     limited  partnerships  and funds,  including  the  Partnership,  along with
     McMachen,  Prudential Securities,  Inc. and other unidentified  defendants,
     transmitted  false and misleading  information  to the plaintiff  which was
     used to entice the plaintiff into investing her money with the  defendants.
     The complaint also alleges that the defendants misrepresented  speculative,
     illiquid  limited  partnerships  as  safe,  revenue-producing   investments
     suitable for  safety-conscious  and  conservative  investors.  Although the
     Partnership is included as a defendant,  the plaintiff's allegations do not
     specify in what way the Partnership was involved in improper  conduct.  The
     complaint  does  not  state,  other  than by  broad  allegations,  that the
     Partnership  acted in an improper  manner with regard to the  operation  or
     management of the limited partnership. An answer was filed on behalf of the
     Partnership in February 1994. Although plaintiff's counsel stated plaintiff
     was going to amend the complaint, no such amended complaint was ever served
     on the  Partnership  and it  presumes  that  plaintiff  either  deleted the
     Partnership  as a  defendant  or  abandoned  the action.  Accordingly,  the
     Partnership  has taken no  further  action on this  claim and it appears to
     have been abandoned.



<PAGE>
                       McNEIL REAL ESTATE FUND XXVII, L.P.
                                  SCHEDULE III
      REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AND AMORTIZATION
                                December 31, 1997
<TABLE>
<CAPTION>
                                                                                                       Costs
                                                       Initial Cost               Cumulative        Capitalized
                               Related                          Buildings and     Write-down for     Subsequent
Description                Encumbrances (a)        Land         Improvements      Impairment (b)   To Acquisition
-----------               ----------------  ---------------   ---------------   ----------------   --------------

MINI-STORAGE WAREHOUSES:
<S>                       <C>               <C>               <C>               <C>               <C>
AAA Sentry
   N. Lauderdale, FL      $             -   $        69,890   $       380,110   $          -    $    233,329

Forest Hill
   West Palm Beach, FL                  -           507,422         1,862,578              -         136,412

Fountainbleau
   Miami, FL                            -           285,854           864,146              -         374,788

Kendall Sunset
   Miami, FL                    1,298,667           672,000         3,808,000              -         108,333

Margate
   Margate, FL                          -           233,101         1,156,899              -         198,539

Military Trail
   West Palm Beach, FL                  -           568,405         1,681,595              -         191,528

OFFICE BUILDINGS:

One Corporate Center I
   Edina, MN                    1,025,838           925,000         5,250,000     (1,300,000)      2,025,937

One Corporate Center III
   Edina, MN                    1,113,143           925,000         5,255,000     (1,300,000)      2,323,442
                           --------------    --------------    --------------     ----------   -------------
                          $     3,437,648   $     4,186,672   $    20,258,328    $(2,600,000) $    5,592,308
                           ==============    ==============    ==============     ==========   =============

Assets Held For Sale (d):

AAA Century Airport
   Inglewood, CA          $             -

Burbank
   Burbank, CA                          -
                           --------------
                          $             -
                           ==============
</TABLE>

(a)  The Partnership's  $3,437,648 debt at December 31, 1997 is secured by three
     separate  properties.  For purposes of Schedule III, the  revolving  credit
     agreement has been allocated among the properties  based on their estimated
     relative market values.

(b)  The carrying  value  of  One  Corporate  Center I and III Office  Buildings
     were each reduced by  $1,300,000  in  1991.

(d)  Assets held for sale are stated at lower of depreciated  cost or fair value
     less costs to sell.  Historical  cost, net of accumulated  depreciation and
     write-downs,  becomes  the new cost basis when the asset is  classified  as
     "Held for Sale."  Depreciation  ceases at the time the assets are placed on
     the market for sale.

                     See accompanying notes to Schedule III.

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

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

MINI-STORAGE WAREHOUSES:
<S>                          <C>                <C>              <C>                  <C>
AAA Sentry
   N. Lauderdale, FL         $        70,337    $       612,992  $         683,329    $     (211,565)

Forest Hill
   West Palm Beach, FL               510,780          1,995,632          2,506,412          (598,301)

Fountainbleau
   Miami, FL                         287,114          1,237,674          1,524,788          (351,439)

Kendall Sunset
   Miami, FL                         672,756          3,915,577          4,588,333        (1,144,141)

Margate
   Margate, FL                       233,575          1,354,964          1,588,539          (411,706)

Military Trial
   West Palm Beach, FL               571,715          1,869,813          2,441,528          (560,022)

OFFICE BUILDINGS:

One Corporate Center I
   Edina, MN                         925,000          5,975,937          6,900,937        (2,563,037)

One Corporate Center III
   Edina, MN                         925,000          6,278,442          7,203,442        (2,966,521)
                              --------------     --------------   ----------------     -------------
                             $     4,196,277    $    23,241,031  $      27,437,308    $   (8,806,732)
                              ==============     ==============   ================     =============

Assets Held For Sale (d):

AAA Century Airport
   Inglewood, CA                                                 $       1,908,947

Burbank
   Burbank, CA                                                           2,640,934
                                                                  ----------------
                                                                 $       4,549,881
                                                                  ================
</TABLE>

 (c) For Federal income tax purposes,  the properties are depreciated over lives
     ranging from 5-39 years using ACRS or MACRS methods.  The aggregate cost of
     real estate investments for Federal income tax purposes was $35,739,964 and
     accumulated depreciation was $6,882,639 at December 31, 1997.

(d)  Assets held for sale are stated at lower of depreciated  cost or fair value
     less costs to sell.  Historical  cost, net of accumulated  depreciation and
     write-downs,  becomes  the new cost basis when the asset is  classified  as
     "Held for Sale."  Depreciation  ceases at the time the assets are placed on
     the market for sale.

                     See accompanying notes to Schedule III.
<PAGE>
                       McNEIL REAL ESTATE FUND XXVII, L.P.
                                  SCHEDULE III
      REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AND AMORTIZATION
                                December 31, 1997


<TABLE>
<CAPTION>

                                 Date of                    Date                Depreciable
Description                   Construction                Acquired              Lives (Years)
-----------                   ------------                --------              -------------

MINI-STORAGE WAREHOUSES:

<S>                             <C>                         <C>                     <C>
AAA Sentry
   N. Lauderdale, FL            1987                        10/90                   5-25

Forest Hill
   West Palm Beach, FL          1985                        08/90                   5-25

Fountainbleau
   Miami, FL                    1987                        11/90                   5-25

Kendall Sunset
   Miami FL                     1986                        10/90                   5-25

Margate
   Margate, FL                  1985                        10/90                   5-25

Military Trial
   West Palm Beach, FL          1986                        08/90                   5-25

OFFICE BUILDINGS:

One Corporate Center I
   Edina, MN                    1979                        12/89                   5-25

One Corporate Center III
   Edina, MN                    1980                        12/89                   5-25


Assets Held For Sale (d):

AAA Century Airport
   Inglewood, CA                1987                        09/90

Burbank
   Burbank, CA                  1987                        09/90

</TABLE>

(d)  Assets held for sale are stated at lower of depreciated  cost or fair value
     less costs to sell.  Historical  cost, net of accumulated  depreciation and
     write-downs,  becomes  the new cost basis when the asset is  classified  as
     "Held for Sale."  Depreciation  ceases at the time the assets are placed on
     the market for sale.

                     See accompanying notes to Schedule III.
<PAGE>
                       McNEIL REAL ESTATE FUND XXVII, L.P.

                              Notes to Schedule III

      Real Estate Investments and Accumulated Depreciation and Amortization


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


<TABLE>
<CAPTION>
                                                             For the Years Ended December 31,
                                                   ----------------------------------------------------
                                                        1997               1996               1995
                                                   --------------     --------------    ---------------

Real estate investments:
<S>                                                <C>                <C>               <C>
Balance at beginning of year...............        $   32,563,740     $   32,023,668    $    31,460,335

Improvements...............................               720,137            540,072            563,333

Reclassification to assets held for sale...            (5,846,569)                 -                  -
                                                    -------------      -------------     --------------

Balance at end of year.....................        $   27,437,308     $   32,563,740    $    32,023,668
                                                    =============      =============     ==============


Accumulated depreciation and amortization:

Balance at beginning of year...............        $    8,674,792     $    7,046,093    $     5,538,346

Depreciation and amortization..............             1,432,871          1,628,699          1,507,747

Reclassification to assets held for sale...            (1,300,931)                 -                  -
                                                    -------------      -------------     --------------

Balance at end of year.....................        $    8,806,732     $    8,674,792    $     7,046,093
                                                    =============      =============     ==============


Assets Held For Sale:

Balance at beginning of year...............        $            -     $            -    $             -

Reclassification to assets held for sale...             4,545,638                  -                  -

Improvements...............................                 4,243                  -                  -
                                                    -------------      -------------     --------------

Balance at end of year.....................        $    4,549,881     $            -    $             -
                                                    =============      =============     ==============
</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 Board
Chairman of the                         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  entity in 1990.  Mr.
                                        McNeil  received  his B.A.  degree  from
                                        Stanford  University  in  1942  and  his
                                        L.L.B.  degree from  Stanford Law School
                                        in 1948. He is a member of the State Bar
                                        of  California  and has been involved in
                                        real  estate  financing  since  the late
                                        1940's and in real estate  acquisitions,
                                        syndications  and   dispositions   since
                                        1960. From 1986 until active  operations
                                        of  McREMI  and  McNeil  Partners,  L.P.
                                        began in February 1991, Mr. McNeil was a
                                        private investor.  Mr. McNeil has been a
                                        member  of the  international  board  of
                                        directors of the Salk  Institute,  which
                                        promotes  research  in  improvements  in
                                        health care.

Carole J. McNeil               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 agent and analyst with Marcus and
                                        Millichap  in San  Francisco.  In  1978,
                                        Mrs.   McNeil   established  the  Escrow
                                        Training  Company,   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 of
the General Partner in the future.

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


<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-------- --------------------------------------------------------------

     (A) Security ownership of certain beneficial owners.

           No  individual  or group,  as  defined  by  Section  13(d)(3)  of the
           Securities  Exchange Act of 1934, was known by the Partnership to own
           more than 5% of the Units,  other than the General Partner,  as noted
           in (B) below.

     (B) Security ownership of management.

           The General  Partner and the  officers  and  directors of its general
           partner,  collectively own 670,634 limited  partnership  units, which
           represents approximately 12.9% of the outstanding limited partnership
           units at January 31, 1998.

     (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 $30  per  gross  square  foot  for  mini-storage
warehouses and $50 per gross square foot for commercial  properties 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 $609,279 of such asset management fees.

Until March 13, 1991, the Original General Partner was entitled to receive,  out
of cash from operations,  a performance incentive fee equal to 20% of all points
received  by the  Partnership  on  mortgage  loans if the Unit  holders  receive
distributions of cash from operations  equal to a 10% cumulative  noncompounding
annual return on their original  capital  investment.  Such fees were cumulative
and were accrued in the years earned and are to be paid when conditions are met.
Conditions for payment have not yet been met and, at December 31, 1997, $141,647
of amounts  accrued in prior years are included in payable to  affiliates on the
Balance Sheets.

The  Partnership  pays property  management fees equal to 5% of the gross rental
receipts of mini-storage  properties (6% for commercial) 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  $732,942 of such property
management  fees and  reimbursements.  See Item 7 - Management's  Discussion and
Analysis of Financial  Condition and Results of Operations and Item 8 - Note 2 -
"Transactions With Affiliates."

<PAGE>
Under  the  terms of the  Amended  Partnership  Agreement,  the  Partnership  is
expressly  permitted to make loans to affiliates of the General Partner, so long
as such loans meet certain  conditions,  including that such loans bear interest
at a rate of  either  prime of Bank of  America  plus 2.5% or prime  plus  3.5%,
depending  on whether the  security  for such loans is first  priority or junior
priority.

On May 1, 1992, the Partnership agreed to loan an aggregate of $1.115 million to
McNeil Pension  Investment  Fund,  Ltd.  ("McPIF"),  an affiliate of the General
Partner,  at an  interest  rate of prime  plus 1% per annum  (the  maximum  rate
allowed to be incurred by McPIF in connection  with  borrowings  from affiliates
pursuant to McPIF's partnership agreement).  A total of $483,364 was borrowed by
McPIF  pursuant to this  commitment,  $72,302 of which was repaid in 1997.  This
loan is  secured  by a first  lien on Brice  Road  Office  Building  located  in
Reynoldsburg,  Ohio.  The original loan matured in May 1995, at which time a new
loan under  substantially  the same terms was executed.  Interest on the loan is
payable monthly. Principal is payable in May 1998.

On February  28,1997,  the Partnership  loaned  $2,336,029 to McNeil Real Estate
Fund X, Ltd.  ("Fund X"),  at an  interest  rate of prime plus 1% per annum (the
maximum rate allowed to be incurred by Fund X in connection with borrowings from
affiliates pursuant to Fund X's partnership  agreement).  On August 1, 1997, the
mortgage note was amended and the  principal  balance was increased by $800,000,
for  total  borrowings  from  the  Partnership  of  $3,136,029.  Fund X used the
$800,000  additional  proceeds to repay an  $800,000  mortgage  loan  investment
secured by Lakeview Plaza Shopping Center.  This loan is secured by a first lien
on La Plaza Business Center located in Las Vegas,  Nevada.  Interest on the loan
is payable monthly, with principal payable in February 2000.

On October 25, 1996,  the  Partnership  loaned  $2,588,970 to McNeil Real Estate
Fund XI, L.P.  ("Fund  XI") at an interest  rate of prime plus 1% per annum (the
maximum rate  allowed to be incurred by Fund XI in  connection  with  borrowings
from  affiliates  pursuant  to Fund XI's  partnership  agreement).  This loan is
secured by a first lien on The Village  Apartments  located in Gresham,  Oregon.
Interest on the loan is payable monthly. Principal is payable in November 1999.

In order to induce the  Partnership  to lend funds to  affiliates of the General
Partner,  the General  Partner  entered  into  agreements  with the  Partnership
whereby  the  General  Partner  agreed to pay:  (i) the  difference  between the
interest rate required by the Partnership's  Amended Partnership Agreement to be
charged to  affiliates  (either  prime of Bank of America plus 2.5% or 3.5%) and
the interest rate actually paid by Fund X, Fund XI and McPIF to the  Partnership
(prime plus 1%),  and (ii) all points (1.5% of the  principal  amount if a first
priority  security  interest is  obtained  and 2% of the  principal  amount if a
junior  priority  security  interest is  obtained),  closing  costs and expenses
required to be received by the Partnership pursuant to the Partnership's Amended
Partnership Agreement in connection with such affiliated financing arrangements.
In 1997, the General  Partner paid $139,236 of interest,  points,  closing costs
and expenses  required to be received by the  Partnership on all affiliate loans
during  1997.  In  connection  with  these  loans,  all other  requirements  for
affiliated  loans,  as  specified  in  the  Partnership's   Amended  Partnership
Agreement, were met.



<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

<TABLE>
<CAPTION>

      Exhibit
      Number                      Description
      -------                     -----------
      <S>                         <C>
      4.2                         Amended  and   Restated   Limited  Partnership
                                  Agreement  of McNeil  Real  Estate Fund XXVII,
                                  L.P. (incorporated by reference to the Current
                                  Report  of the  registrant  on Form 8-K  dated
                                  March 30, 1992, as filed on April 10, 1992).

      10.1                        Assignment  of  Partnership    Advances  dated
                                  March 13, 1991  between  Prime Plus Corp.  and
                                  McNeil   Partners,   L.P.   (incorporated   by
                                  reference   to  the   Annual   Report  of  the
                                  registrant  on Form 10-K for the period  ended
                                  December  31,  1990,  as filed  on  March  29,
                                  1991.)

      10.3                        Promissory   Note   dated  November  25,  1996
                                  between  McNeil Real  Estate Fund XXVII,  L.P.
                                  and Village Fund XI Associates Limited. (1)

      10.4                        Promissory   Note  dated   November  25,  1996
                                  between  McNeil Real  Estate Fund XXVII,  L.P.
                                  and McNeil Pension Investment Fund, Ltd. (1)

      10.5                        Property   Management  Agreement  dated  March
                                  30,  1992,  between  McNeil  Real  Estate Fund
                                  XXVII, L.P. and McNeil Real Estate Management,
                                  Inc. (2)

      10.6                        Amendment  of  Property  Management  Agreement
                                  dated  March 5, 1993,  by McNeil  Real  Estate
                                  Fund  XXVII,   L.P.  and  McNeil  Real  Estate
                                  Management, Inc. (2)

      10.7                        Promissory   Note   dated   October 23,  1992,
                                  between  Community  Bank, N.A. and McNeil Real
                                  Estate Fund XXVII, L.P. (2)
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
      Exhibit
      Number                      Description
      -------                     -----------

      <S>                         <C>
      10.8                        Loan    Agreement  dated    October  23, 1992,
                                  between  Community  Bank, N.A. and McNeil Real
                                  Estate Fund XXVII, L.P. (2)

      10.10                       Revolving Credit Loan Agreement dated June 21,
                                  1995, between PNC Bank,  National  Association
                                  and McNeil Real Estate Fund XXVII, L.P. (3)

      10.11                       Consolidated,  Amended and Restated  Revolving
                                  Credit Note dated June 21,  1995,  between PNC
                                  Bank,  National  Association  and McNeil  Real
                                  Estate Fund XXVII, L.P. (3)

      10.12                       First  Amendment  to  Revolving   Credit  Loan
                                  Agreement  dated June 21,  1997,  between  PNC
                                  Bank,  National  Association  and McNeil  Real
                                  Estate Fund XXVII, L.P.

      10.13                       First Amendment to  Consolidated,  Amended and
                                  Restated  Revolving Credit Note dated June 21,
                                  1997, between PNC Bank,  National  Association
                                  and McNeil Real Estate Fund XXVII, L.P.

      11.                         Statement  regarding computation of net income
                                  per hundred   limited  partnership  units (see
                                  Item 8 - Note  1 -  "Organization  and Summary
                                  of Significant Accounting Policies").


                  (1)             Incorporated   by  reference  to   the  Annual
                                  Report of the registrant on Form  10-K for the
                                  period ended  December 31, 1996,  as  filed on
                                  March 28, 1997.

                  (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.

                  (3)             Incorporated  by reference   to   the   Annual
                                  Report of the  registrant on Form 10-K for the
                                  period ended  December  31, 1995,  as filed on
                                  March 29, 1996.

</TABLE>

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


<PAGE>


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

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

                                     By: McNeil Investors, Inc., General Partner



March 31, 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 31, 1998                       By:  /s/  Ron K. Taylor
--------------                          ----------------------------------------
Date                                      Ron K. Taylor
                                          President and Director of McNeil
                                            Investors, Inc.
                                          (Principal Financial Officer)



March 31, 1998                       By:  /s/  Carol A. Fahs
--------------                          ----------------------------------------
Date                                      Carol A. Fahs
                                          Vice President of McNeil
                                            Investors, Inc.
                                          (Principal Accounting Officer)