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, 1998
                                 -----------------------------------------------

                                       OR

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

     For the transition period from ______________ to_____________

     Commission file number  0-17173
                           -----------

                       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 ]

4,492,275 of the registrant's  5,162,909  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 43

                                TOTAL OF 45 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, 1998,
385,979 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.  The balance of the  revolving  credit
agreement was repaid by the  Partnership in 1998 and the agreement was cancelled
by the  Partnership  in  March  1999  as  further  discussed  in 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,  1998,  the  Partnership  had one  mortgage  loan
investment to an affiliate 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:

As previously announced, the Partnership has retained PaineWebber,  Incorporated
("PaineWebber")  as its exclusive  financial advisor to explore  alternatives to
maximize  the  value  of  the  Partnership,  including,  without  limitation,  a
transaction  in which  limited  partnership  interests  in the  Partnership  are
converted into cash. The Partnership,  through  PaineWebber,  provided financial
and other  information to interested  parties as part of an auction  process and
until early March 1999 was conducting  discussions with one bidder in an attempt
to reach a definitive  agreement  with respect to a sale  transaction.  In early
March 1999, because the Partnership had been unable to conclude negotiations for
a transaction with such bidder, the Partnership  terminated such discussions and
commenced   discussions   with  respect  to  a  sale  transaction  with  another
well-financed  bidder who had been  involved in the  original  auction  process.
During  the last full  week of  March,  the  Partnership  entered  into a 45 day
exclusivity  agreement with such party.  It is possible that the General Partner
and its  affiliates  will receive  non-cash  consideration  for their  ownership
interests in  connection  with any such  transaction.  There can be no assurance
regarding whether any such agreement will be reached nor the terms thereof.

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


<PAGE>
Environmental Matters:

Environmental laws create potential liabilities that may affect property owners.
The environmental  laws of Federal and certain state  governments,  for example,
impose liability on current and certain past owners of property from which there
is a release  or threat of  release  of  hazardous  substances.  This  liability
includes costs of investigation and remediation of the hazardous  substances and
natural resource  damages.  Liability for costs of investigation and remediation
is strict and may be imposed  irrespective  of whether the property owner was at
fault,  although  there are a number of  defenses.  Both  governments  and third
parties may seek recoveries under these laws.

Third parties also may seek  recovery  under the common law for damages to their
property  or person,  against  owners of  property  from which  there has been a
release of hazardous and other substances.

The presence of  contamination  or the failure to remediate  contaminations  may
adversely  affect the owner's  ability to sell or lease real estate or to borrow
using the real estate as collateral.

Various  buildings at properties do or may contain  building  materials that are
the subject of various  regulatory  programs  intended to protect  human health.
Such building materials include,  for example,  asbestos,  lead-based paint, and
lead plumbing components.  The Company has implemented programs to deal with the
presence  of those  materials,  which  include,  as  appropriate,  reduction  of
potential  exposure  situations.  The Company does not believe that the costs of
such programs are likely to have a material adverse effect. Failure to implement
such programs can result in regulatory  violations or liability claims resulting
from alleged exposure to such materials.

In connection with the proposed sale  transaction as more fully described above,
Phase I  environmental  site  assessments  have been completed for each property
owned  by the  Partnership.  Such  environmental  assessments  performed  on the
properties  have not revealed any  environmental  liability that the Partnership
believes  would have a material  adverse effect on the  Partnership's  business,
assets,  or results of operations.  The Partnership has not been notified by any
governmental  authority  of any  non-compliance,  liability  or  other  claim in
connection with any of its properties. There can be no assurances, however, that
environmental   liabilities   have  not  developed   since  such   environmental
assessments were prepared, or that future uses or conditions (including, without
limitation,  changes in applicable  environmental laws and regulations) will not
result in imposition of environmental liability.

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 February 1, 1999,  High River has purchased 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.


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

The  following  table sets forth the real  estate  investment  portfolio  of the
Partnership  at December 31, 1998.  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  secured a $5 million  line of credit.  The  balance of the line of
credit was repaid during 1998 and the line of credit  agreement was cancelled in
March  1999  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                              1998            Date
Property              Description          of Property           Debt         Property Taxes     Acquired
--------              -----------          -----------           ----         --------------     --------

Real Estate Investments:

AAA Sentry            Mini-Storage
<S>                   <C>                  <C>                 <C>            <C>                  <C>  
N. Lauderdale, FL     795 units            $       590,309     $         -    $    60,069          10/90

Forest Hill           Mini-Storage
W. Palm Beach, FL     683 units                  1,847,895               -         41,559           8/90

Fountainbleau         Mini-Storage
Miami, FL             771 units                  1,296,523               -         64,709          11/90

Kendall Sunset        Mini-Storage
Miami, FL             945 units                  3,317,124               -         74,435          10/90

Margate               Mini-Storage
Margate, FL           640 units                  1,135,156               -         52,533          10/90

Military Trail        Mini-Storage
W. Palm Beach, FL     685 units                  1,796,286               -         42,767           8/90

One Corporate
  Center I            Office Building
Edina, MN             111,146 sq. ft.            4,179,729               -        358,309          12/89

One Corporate
  Center III          Office Building
Edina, MN             111,252 sq. ft.            4,079,032               -        346,832          12/89
                                            --------------    ------------    -----------
                                           $    18,242,054   $           -   $  1,041,213
                                            ==============    ============    ===========

Assets Held for Sale:

AAA Century
  Airport             Mini-Storage
Inglewood, CA         567 units            $     1,913,276   $           -   $     33,776           9/90

Burbank               Mini-Storage
Burbank, CA           983 units                  2,700,110               -         42,338           9/90
                                            --------------    ------------    -----------
                                           $     4,613,386   $           -   $     76,114
                                            ==============    ============    ===========
</TABLE>

-----------------------------------------
Total:    Office Buildings  -  222,398 sq. ft.
          Mini-storage and self-storage warehouses - 6,069 units


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

<TABLE>
<CAPTION>
                                        1998           1997            1996           1995          1994
                                    -------------  -------------  --------------  -------------  -------

Real Estate Investments:

AAA Sentry
<S>                                       <C>             <C>            <C>            <C>              <C>
   Occupancy Rate............             91%             94%            96%            96%              95%
   Rent Per Square Foot......          $ 8.60          $ 8.23         $ 8.01         $ 7.70           $ 7.00

Forest Hill
   Occupancy Rate............             94%            100%            98%            97%              99%
   Rent Per Square Foot......          $10.70          $10.72         $10.41         $ 9.82           $ 9.22

Fountainbleau
   Occupancy Rate............             93%             93%            96%            97%              99%
   Rent Per Square Foot......          $10.00          $ 9.27         $ 8.98         $ 8.38           $ 8.08

Kendall Sunset
   Occupancy Rate............             92%             94%            92%            95%              96%
   Rent Per Square Foot......          $12.43          $12.06         $11.75         $11.72           $11.71

Margate
   Occupancy Rate............             94%             88%            94%            90%             100%
   Rent Per Square Foot......          $10.51          $10.42         $ 9.95         $ 9.90           $10.06

Military Trail
   Occupancy Rate............             85%             88%            88%            91%              90%
   Rent Per Square Foot......          $ 9.73          $ 9.82         $10.11         $ 9.35           $ 8.46

One Corporate Center I
   Occupancy Rate............             99%             98%           100%            93%              95%
   Rent Per Square Foot......          $16.99          $13.07         $11.88         $10.92           $10.34

One Corporate Center III
   Occupancy Rate............             88%             94%            95%            97%              96%
   Rent Per Square Foot......          $14.65          $13.72         $12.31         $11.17           $11.03

Assets Held for Sale:

AAA Century Airport
   Occupancy Rate............             98%             95%            96%            94%              95%
   Rent Per Square Foot......          $10.95          $10.31         $10.12         $10.19           $ 8.87

Burbank
   Occupancy Rate............             99%             92%            87%            81%              81%
   Rent Per Square Foot......          $12.07          $11.25         $10.80         $10.29           $10.32
</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,  net of bad debt expense,
derived from the property's operations divided by the leasable square footage of
the property.


<PAGE>
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
795 units, with 85% of these units air conditioned.

The  property  is  located  in North  Lauderdale,  Florida,  in a  predominately
commercial  area,  with  a  mixture  of  single  and  multi-family   residential
properties.  Occupancy  decreased in 1998 as a result of new  competition in the
area that 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.
Two new  competing  facilities  are  scheduled  to open in  1999.  AAA  Sentry's
occupancy and rental rates are  competitive  with  properties of the same age in
the area.  For 1999,  management  will  continue to provide  excellent  customer
service. Rental rates will be closely monitored and adjusted according to market
conditions with  concessions and discounts  offered to attract new renters.  The
Partnership expects to maintain occupancy in the low 90% range in 1999.

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
683 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.  Occupancy
decreased in 1998 as a result of new  competition in the area that has created a
surplus in storage units.  Two new competing  facilities  were built in 1998 and
another new  facility is  scheduled to open in 1999.  Currently,  Forest  Hill's
rental rates are slightly higher than the competition.  The Partnership  expects
to  maintain  occupancy  in the  mid  90%  range  in  1999  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 middle of 1999.  The  immediate  neighborhood  is
predominately   industrial  with  single  family  residential  and  multi-family
communities  further  to the south and north.  The  customer  profile  currently
consists of local businesses.


<PAGE>
The  area  has  been  saturated  by new  mini-storage  construction  along  with
renovation of existing  facilities.  A competing  facility  located within three
miles of  Fountainbleau  opened  in 1998 and is  still  in the  lease-up  stage.
Another  competitor was recently sold and is offering  discounts to new renters.
In 1998,  the  street  in front  of the  property  was  under  construction  and
Fountainbleau  maintained  occupancy in the low 90% range by offering  discounts
and  concessions  to renters.  The  property is expected to benefit  from direct
drive-by  exposure  when  the  road  construction  is  completed  in  1999.  The
Partnership  expects to  maintain  occupancy  in the low 90% range in 1999 while
offering minimal discounts and free rent.

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
945 units. 35% of the units are air conditioned.

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,  the
property has been faced with new  competitors  added to the market in 1996. Rent
concessions  and discounts  have been offered to maintain  occupancy and compete
within the market.  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 1999 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 Margate, Florida in a predominately commercial/retail
neighborhood  with single family homes and  multi-family  communities  along the
secondary  streets.  The  property's  rental rates are slightly  higher than the
competition,  however,  discounts and concessions have been given to attract new
renters as a result of competition  from new  self-storage  facilities  over the
past several years. The property has an excellent  reputation in the marketplace
and management expects to maintain occupancy in the mid 90% range in 1999.

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  of
West Palm Beach,  Florida.  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.  Beginning  in  1996,  occupancy  began  to drop  due to four  new
facilities  being built in the area, and another older facility being renovated.
An increased  amount of discounts and concessions have been given to attract and
retain renters.  For 1999, the Partnership  will continue to offer discounts and
concessions and expects to increase occupancy to the high 80% range in 1999.


<PAGE>
One Corporate Center I and One Corporate Center III
---------------------------------------------------

One Corporate  Center I and III are six-story  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.

Rental  rates  increased  over the past three  years 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 and  tenants  moving to
single-story or  owner-occupied  buildings.  A generous parking ratio has helped
the  buildings  compete  with  properties  that have  covered  parking but lower
parking ratios. A tenant that occupied approximately 12% of the available rental
space of One  Corporate  Center I vacated upon the  expiration of their lease in
January 1999.  The vacated space is expected to be released in 1999.  Management
will attempt to renew any other expiring 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 1999 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 91%,
and the Partnership expects to maintain occupancy in the high 90% range in 1999.

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 983 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.  The property suffers from
lack of exposure and ease of access because it is located in an area that is not
visible  from the  freeway  or any major  cross  streets.  Management  increased
occupancy in 1998 by discounting the upstairs units with poor accessibility that
are seldom rented. One of the four competing self-storage properties in the area
has superior visibility and highway access. Another competitor,  recently opened
for business,  is currently installing security alarms on each unit.  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. In 1999, management
will  install new signs to improve  visibility  to drive-by  traffic.  Burbank's
occupancy is currently  above the average  occupancy in the area of 86%, and the
Partnership expects to maintain occupancy in the high 90% range in 1999.


<PAGE>
The following  schedule shows lease  expirations  for each of the  Partnership's
commercial properties for 1999 through 2008:

<TABLE>
<CAPTION>
                                 Number of                           Annual                % of Gross
                                Expirations          Square Feet      Rent                 Annual Rent
                                -----------          -----------     -------               -----------
One Corporate Center I
<C>                                   <C>               <C>       <C>                            <C>
1999                                  4                 17,672    $    221,836                   13%
2000                                  3                  5,705          88,380                    5%
2001                                 10                 31,764         528,506                   30%
2002                                  6                 36,879         635,126                   37%
2003                                  1                 12,624         253,470                   15%
2004-2008                             -                      -               -                    -

One Corporate Center III
1999                                  5                 18,365    $    236,668                   15%
2000                                  3                 12,301         188,981                   12%
2001                                  8                 21,728         420,364                   27%
2002                                  4                 19,769         287,748                   19%
2003                                  3                 16,203         298,763                   19%
2004                                  2                  6,577         122,129                    8%
2005-2008                             -                      -               -                    -
</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
----------                             --------------            -------------                   ----------

One Corporate Center I

<S>                                        <C>                   <C>                                  <C> 
   Bank                                    13,666                $    160,576                         1999
   General Office                          10,750                     202,805                         2002
   General Office                          19,626                     314,016                         2002
   General Office                          12,624                     253,470                         2003
</TABLE>

One Corporate Center III

   None



<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:

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

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

Defendants  filed a demurrer to the  consolidated  and amended  complaint  and a
motion to strike on February 14, 1997,  seeking to dismiss the  consolidated and
amended complaint in all respects.  A hearing on Defendant's demurrer and motion
to strike  was held on May 5,  1997.  The Court  granted  Defendants'  demurrer,
dismissing  the  consolidated  and  amended  complaint  with leave to amend.  On
October  31,  1997,  the  Plaintiffs  filed a second  consolidated  and  amended
complaint. The case was stayed pending settlement discussions.  A Stipulation of
Settlement dated September 15, 1998 has been signed by the parties.  Preliminary
Court  approval was received on October 6, 1998. A hearing for Final Approval of
Settlement, initially scheduled for December 17, 1998, has been continued to May
25, 1999.


<PAGE>
Because McNeil Real Estate Fund XXIII,  L.P., Hearth Hollow  Associates,  McNeil
Midwest  Properties I, L.P. and Regency North Associates,  L.P. would be part of
the  transaction  contemplated  in the settlement  and Plaintiffs  claim that an
effort should be made to sell the McNeil Partnerships,  Plaintiffs have included
allegations with respect to McNeil Real Estate Fund XXIII,  L.P.,  Hearth Hollow
Associates, McNeil Midwest Properties I, L.P. and Regency North Associates, L.P.
in the third consolidated and amended complaint.

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


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

None.

                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNERSHIP
-------  --------------------------------------------------------
         AND RELATED SECURITY HOLDER MATTERS
         -----------------------------------

(A)      There is no established  public trading market for limited  partnership
         units, nor is one expected to develop.

(B)      Title of Class                    Number of Record Unit Holders

         Limited partnership units         2,079 as of February 1, 1999

(C)      Distributions  paid to the limited partners totaled  $5,522,998 in 1998
         and $3,999,970 in 1997 from cash from operations. No distributions were
         paid to the  General  Partner in 1998 or 1997.  During the last week of
         March 1999, the Partnership distributed approximately $1,508,000 to the
         limited  partners  of  record  as  of  March  1,  1999.  See  Item  7 -
         Management's Discussion and Analysis of Financial Condition and Results
         of  Operations,  and Item 8 - Note 1 -  "Organization  and  Summary  of
         Significant Accounting Policies - Distributions."



<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
------- -----------------------

The  following  table sets forth a summary  of  certain  financial  data for the
Partnership.  This summary should be read in conjunction with the  Partnership's
financial  statements  and  notes  thereto  appearing  in  Item  8  -  Financial
Statements and Supplementary Data.

<TABLE>
<CAPTION>
Statements of                                             Years Ended December 31,
Operations                              1998          1997          1996          1995          1994
------------------                  -----------   -----------   -----------   -----------    -----------
<S>                                 <C>           <C>           <C>           <C>            <C>        
Rental revenue ..................   $ 9,135,799   $ 8,366,664   $ 7,943,383   $ 7,517,404    $ 7,234,070
Interest income on mort-
   gage loan investments ........       414,070       766,211       268,665       440,658        451,841
Income before extra-
   ordinary item ................     2,815,090     2,788,653     2,245,414     3,268,110      1,355,563
Extraordinary item ..............            --            --            --      (252,402)            --
Net income ......................     2,815,090     2,788,653     2,245,414     3,015,708      1,355,563

Net income per weighted
   average hundred limited
   partnership units:
   Income before extra-
     ordinary item ..............   $     53.60   $     52.72   $     42.15   $     60.93    $     25.09
   Extraordinary item ...........            --            --            --         (4.71)            --
                                    -----------   -----------   -----------   -----------    -----------
   Net income ...................   $     53.60   $     52.72   $     42.15   $     56.22    $     25.09
                                    ===========   ===========   ===========   ===========    ===========

Distributions per weighted
   average hundred limited
   partnership units ............   $    106.21   $     76.38   $    113.77             $    -$          -
                                    ===========   ===========   ===========   ===========    ===========
</TABLE>


<TABLE>
<CAPTION>
                                                                As of December 31,
Balance Sheets                          1998           1997            1996           1995         1994
--------------                      ------------- -----------    ------------   ------------  -------------
<S>                                 <C>           <C>            <C>            <C>           <C>          
Real estate investments, net...     $  18,242,054 $18,630,576    $ 23,888,948   $ 24,977,575  $  25,921,989
Assets held for sale...........         4,613,386   4,549,881               -              -              -
Mortgage loan investments,
   net.........................         1,306,488   6,956,487       4,692,760      3,597,673      4,679,929
Total assets...................        27,841,371  33,681,114      32,641,270     35,489,741     39,501,853
Long-term debt.................                 -   3,437,648       1,101,619              -      6,726,266
Partners' equity...............        25,958,341  28,999,177      30,543,422     34,630,930     31,948,150
</TABLE>



<PAGE>
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.  The balance of the revolving credit
agreement was repaid by the  Partnership in 1998 and the agreement was cancelled
by the  Partnership  in  1999  as  more  fully  discussed  in  Item 8 - Note 7 -
"Revolving Credit Agreement."

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

1998 compared to 1997

Revenue:

Total  revenue  increased by $453,965 in 1998 as compared to 1997.  The increase
was mainly due to an  increase  in rental  revenue  and other  interest  income,
partially offset by a decrease in interest income on mortgage loan investments -
affiliates, as discussed below.

Rental revenue  increased by $769,135 in 1998 as compared to 1997, mainly due to
increases of  approximately  $436,000 and $103,000 at One Corporate Center I and
III office  buildings,  respectively,  as a result of increases in rental rates.
Rental rate  increases  also resulted in increased  rental revenue at all of the
mini-storage  properties  in 1998  except for Forest  Hill and  Military  Trail.
Rental revenue at these two properties  decreased slightly due to an increase in
discounts  and  concessions  given to tenants at Forest  Hill and a decrease  in
occupancy  at  Military  Trail.  See  Item 2 -  Properties  for a more  detailed
analysis of occupancy and rents per square foot.

Interest  income on mortgage loan  investments - affiliates in 1998 decreased by
$352,141 in relation to 1997.  The decrease was mainly due to the  collection of
approximately $5.7 million of affiliate loans in the second quarter of 1998.


<PAGE>
Other  interest  income  increased  by $36,971 in 1998 as compared to 1997.  The
increase  is  mainly  due  to an  increase  in  cash  available  for  short-term
investment in 1998. The Partnership held  approximately $2.8 million of cash and
cash equivalents at December 31, 1998 as compared to approximately  $2.4 million
at December  31, 1997.  The majority of the increase  occurred at the end of the
second quarter of 1998 when the Partnership collected approximately $5.7 million
of affiliate  loans.  Approximately  $3.4 million of this amount was used to pay
off the revolving  credit  agreement in June 1998. The  Partnership  distributed
approximately  $5.5 million to the limited partners in 1998,  approximately $3.3
million of which was distributed at the end of September 1998.

Expenses:

Total  expenses  increased by $427,528 in 1998 as compared to 1997. The increase
was mainly due to increased property taxes, personnel costs, property management
fees - affiliates and general and administrative expenses, partially offset by a
decrease in interest and other property operating expenses, as discussed below.

Interest  expense  decreased in 1998 by $102,423 in relation to 1997, due to the
payoff of the Partnership's line of credit in June 1998.

In 1998, property taxes increased by $139,244 in relation to the prior year. The
increase  was mainly due to an increase  in the  assessed  taxable  value of One
Corporate Center I and III office buildings by taxing authorities.

Personnel  costs  increased by $97,768 in 1998 as compared to 1997. The increase
was mainly due to the hiring of maintenance  personal at AAA Century Airport and
Margate mini-storages.

Property  management fees - affiliates  increased by $46,437 in 1998 as compared
to 1997. The increase was mainly due to an increase in gross rental  receipts at
One Corporate Center I and III office buildings, on which the fees are based.

Other property  operating  expenses  decreased by $59,907 in 1998 in relation to
1997.  The decrease was  primarily due to a decline in  amortization  of prepaid
leasing commissions at the two office buildings due to the expiration of several
leases in 1998. In addition,  there was a decrease in earthquake insurance costs
at AAA Century Airport and Burbank mini-storages in 1998.

General and administrative expenses increased by $404,840 in 1998 as compared to
1997. The increase was mainly due to costs incurred to explore  alternatives  to
maximize the value of the Partnership (see Liquidity and Capital Resources).

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.


<PAGE>
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.

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.


<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

The Partnership  generated  $5,078,996 of cash through  operating  activities in
1998,  $4,409,938  in 1997 and  $4,134,772  in  1996.  The  increase  in 1998 as
compared to 1997 was mainly due to an increase in cash received from tenants and
a decrease in cash paid to affiliates.  The increases were partially offset by a
decrease in interest  received from  affiliates  and an increase in cash paid to
suppliers and property  taxes paid. The increase in 1997 as compared to 1996 was
mainly due to an increase in cash  received  from tenants and interest  received
from affiliates. These 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).

The Partnership expended $1,025,133,  $724,380 and $540,072 for additions to its
real  estate  investments  and  assets  held for sale in  1998,  1997 and  1996,
respectively.  The  increase in 1998 as compared to 1997 and 1996 was mainly due
to roofs being replaced at AAA Sentry and Fountainbleau mini storages. A greater
amount of tenant improvements were completed at the two office buildings in 1998
and 1997 as compared to 1996. In addition,  a lighting  upgrade was completed at
One Corporate Center I 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  collected (net of new loans made) $5,649,999 from affiliates in
1998 for repayments of mortgage loan  investments - affiliates.  The Partnership
made loans to affiliates  (net of  collections)  of $2,263,727 and $2,456,858 in
1997 and 1996, respectively.

In  1997  and  1996,  the  Partnership   received   $2,336,029  and  $1,101,619,
respectively,  from its revolving  credit  agreement.  In 1998, the  Partnership
repaid the $3,437,648 balance of this revolving credit agreement.

The  Partnership  distributed  $5,522,998,  $3,999,970,  and  $5,999,994  to the
limited  partners  in  1998,  1997,  and  1996,  respectively,  from  cash  from
operations.

Short-term liquidity:

At  December  31,  1998,  the  Partnership  held  cash and cash  equivalents  of
$2,844,032.  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 1999. The  Partnership has budgeted  approximately  $1,047,000 for
necessary capital improvements for all properties in 1999, 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 1999, the  Partnership  distributed  approximately
$1,508,000 to the limited partners of record as of March 1, 1999.

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.
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.


<PAGE>
As previously announced, the Partnership has retained PaineWebber,  Incorporated
("PaineWebber")  as its exclusive  financial advisor to explore  alternatives to
maximize  the  value  of  the  Partnership,  including,  without  limitation,  a
transaction  in which  limited  partnership  interests  in the  Partnership  are
converted into cash. The Partnership,  through  PaineWebber,  provided financial
and other  information to interested  parties as part of an auction  process and
until early March 1999 was conducting  discussions with one bidder in an attempt
to reach a definitive  agreement  with respect to a sale  transaction.  In early
March 1999, because the Partnership had been unable to conclude negotiations for
a transaction with such bidder, the Partnership  terminated such discussions and
commenced   discussions   with  respect  to  a  sale  transaction  with  another
well-financed  bidder who had been  involved in the  original  auction  process.
During  the last full  week of  March,  the  Partnership  entered  into a 45 day
exclusivity  agreement with such party.  It is possible that the General Partner
and its  affiliates  will receive  non-cash  consideration  for their  ownership
interests in  connection  with any such  transaction.  There can be no assurance
regarding whether any such agreement will be reached nor the terms thereof.

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

YEAR 2000 DISCLOSURE
--------------------

State of readiness
------------------

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.

Management has assessed its  information  technology  ("IT")  infrastructure  to
identify  any systems  that could be affected by the year 2000  problem.  The IT
used by the  Partnership  for  financial  reporting and  significant  accounting
functions was made year 2000 compliant  during recent systems  conversions.  The
software  utilized for these  functions  are licensed by third party vendors who
have warranted that their systems are year 2000 compliant.

Management  is  in  the  process  of  evaluating  the  mechanical  and  embedded
technological systems at the various properties.  Management has inventoried all
such systems and queried suppliers,  vendors and manufacturers to determine year
2000 compliance. Management will complete assessment of findings by May 1, 1999.
In  circumstances  of  non-compliance  management  will work with the  vendor to
remedy the  problem or seek  alternative  suppliers  who will be in  compliance.
Management believes that the remediation of any outstanding year 2000 conversion
issues  will  not  have a  material  or  adverse  effect  on  the  Partnership's
operations. However, no estimates can be made as to the potential adverse impact
resulting  from the failure of third party  service  providers and vendors to be
year 2000 compliant.

Cost
----

The cost of IT and  embedded  technology  systems  testing  and  upgrades is not
expected to be material to the Partnership. Because all the IT systems have been
upgraded  over the last three years,  all such systems were  compliant,  or made
compliant at no additional cost by third party vendors.  Management  anticipates
the costs of assessing,  testing, and if necessary replacing embedded technology
components will be less than $50,000.  Such costs will be funded from operations
of the Partnership.


<PAGE>
Risks
-----

Ultimately,  the potential impact of the year 2000 issue will depend not only on
the corrective measures the Partnership undertakes, but also on the way in which
the year 2000 issue is  addressed  by  government  agencies  and  entities  that
provide services or supplies to the  Partnership.  Management has not determined
the most likely worst case scenario to the  Partnership.  As management  studies
the findings of its property  systems  assessment and testing,  management  will
develop  a better  understanding  of what  would  be the  worst  case  scenario.
Management  believes  that  progress  on all  areas is  proceeding  and that the
Partnership  will  experience  no  adverse  effect  as a result of the year 2000
issue. However, there is no assurance that this will be the case.

Contingency plans
-----------------

Management  is  developing  contingency  plans to  address  potential  year 2000
non-compliance of IT and embedded technology  systems.  Management believes that
failure of any IT system could have an adverse  impact on  operations.  However,
management  believes  that  alternative  systems  are  available  that  could be
utilized to minimize  such impact.  Management  believes that any failure in the
embedded  technology  systems  could have an adverse  impact on that  property's
performance.  Management  will assess these risks and develop  plans to mitigate
possible failures by June, 1999.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
--------  -----------------------------------------------------------

Not Applicable.

<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.......................................                       21

   Balance Sheets at December 31, 1998 and 1997...................................                       22

   Statements of Operations for each of the three years in the period
      ended December 31, 1998.....................................................                       23

   Statements of Partners' Equity (Deficit) for each of the three years
      in the period ended December 31, 1998.......................................                       24

   Statements of Cash Flows for each of the three years in the period
      ended December 31, 1998.....................................................                       25

   Notes to Financial Statements..................................................                       27

   Financial Statement Schedule -

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


</TABLE>








All other  schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.


<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Partners of McNeil Real Estate Fund 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, 1998 and 1997,
and the related  statements of operations,  partners'  equity (deficit) and cash
flows for each of the three years in the period ended  December 31, 1998.  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, 1998 and 1997, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1998, 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 19, 1999



<PAGE>
                       MCNEIL REAL ESTATE FUND XXVII, L.P.

                                 BALANCE SHEETS

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

Real estate investments:
<S>                                                                    <C>                  <C>         
   Land .......................................................        $  4,196,277         $  4,196,277
   Buildings and improvements .................................          24,202,659           23,241,031
                                                                       ------------         ------------
                                                                         28,398,936           27,437,308
   Less:  Accumulated depreciation and amortization ...........         (10,156,882)          (8,806,732)
                                                                       ------------         ------------
                                                                         18,242,054           18,630,576

Assets held for sale ..........................................           4,613,386            4,549,881

Mortgage loan investments - affiliates ........................           1,306,488            6,956,487

Cash and cash equivalents .....................................           2,844,032            2,440,084
Cash segregated for security deposits and
   repurchase of limited partnership units ....................             467,207              442,193
Accounts receivable ...........................................             178,537              426,825
Accrued interest receivable ...................................              12,206               64,991
Prepaid expenses and other assets .............................             177,461              170,077
                                                                       ------------         ------------
                                                                       $ 27,841,371         $ 33,681,114
                                                                       ============         ============

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

Revolving credit agreement ....................................        $         --         $  3,437,648
Accounts payable and accrued expenses .........................              70,657              107,549
Payable to limited partners ...................................             332,928              332,928
Payable to affiliates .........................................           1,230,795              542,045
Security deposits and deferred rental revenue .................             248,650              261,767
                                                                       ------------         ------------
                                                                          1,883,030            4,681,937
                                                                       ------------         ------------

Partners' equity (deficit):
   Limited partners - 10,000,000 limited partnership
     units authorized; 5,162,909 and 5,199,901 limited
     partnership units outstanding at December 31, 1998
     and 1997, respectively ...................................          26,007,139           29,076,126
   General Partner ............................................             (48,798)             (76,949)
                                                                       ------------         ------------
                                                                         25,958,341           28,999,177
                                                                       ------------         ------------
                                                                       $ 27,841,371         $ 33,681,114
                                                                       ============         ============
</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,
                                                   ----------------------------------------------
                                                       1998             1997               1996
                                                   ----------        ----------        ----------
Revenue:
<S>                                                <C>               <C>               <C>       
   Rental revenue .........................        $9,135,799        $8,366,664        $7,943,383
   Interest income on mortgage loan
     investment ...........................                --                --            32,444
   Interest income on mortgage loan
     investments - affiliates .............           414,070           766,211           236,221
   Other interest income ..................           187,328           150,357           299,982
   Gain on extinguishment of mortgage
     loan investment ......................                --                --            52,841
                                                   ----------        ----------        ----------
     Total revenue ........................         9,737,197         9,283,232         8,564,871
                                                   ----------        ----------        ----------

Expenses:
   Interest ...............................           166,866           269,289           122,307
   Depreciation and amortization ..........         1,350,150         1,432,871         1,628,699
   Property taxes .........................         1,117,327           978,083           803,600
   Personnel costs ........................           817,209           719,441           667,758
   Repairs and maintenance ................           584,959           594,984           590,986
   Property management fees -
     affiliates ...........................           508,726           462,289           435,159
   Utilities ..............................           430,832           459,243           455,718
   Other property operating expenses ......           530,980           590,887           581,026
   General and administrative .............           512,400           107,560           141,310
   General and administrative -
     affiliates ...........................           902,658           879,932           892,894
                                                   ----------        ----------        ----------
     Total expenses .......................         6,922,107         6,494,579         6,319,457
                                                   ----------        ----------        ----------

Net income ................................        $2,815,090        $2,788,653        $2,245,414
                                                   ==========        ==========        ==========

Net income allocable to limited
   partners ...............................        $2,786,939        $2,760,766        $2,222,960
Net income allocable to General
   Partner ................................            28,151            27,887            22,454
                                                   ----------        ----------        ----------
Net income ................................        $2,815,090        $2,788,653        $2,245,414
                                                   ==========        ==========        ==========

Net income per weighted average
   hundred limited partnership units ......        $    53.60        $    52.72        $    42.15
                                                   ==========        ==========        ==========

Distributions per weighted average
   hundred limited partnership units ......        $   106.21        $    76.38        $   113.77
                                                   ==========        ==========        ==========
</TABLE>

                 See accompanying notes to financial statements.

<PAGE>

                       McNEIL REAL ESTATE FUND XXVII, L.P.

                    STATEMENTS OF PARTNERS' EQUITY (DEFICIT)

              For the Years Ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>
                                                                                             Total
                                                  General             Limited              Partners'
                                                  Partner            Partners               Equity
                                               -------------        -------------        -------------
<S>                                            <C>                  <C>                  <C>         
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

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

Net income ............................              28,151            2,786,939            2,815,090

Distributions to limited partners .....                  --           (5,522,998)          (5,522,998)
                                               ------------         ------------         ------------

Balance at December 31, 1998 ..........        $    (48,798)        $ 26,007,139         $ 25,958,341
                                               ============         ============         ============
</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,
                                                     ----------------------------------------------------
                                                         1998                1997                1996
                                                     ------------        ------------        ------------
Cash flows from operating activities:
<S>                                                  <C>                 <C>                 <C>        
   Cash received from tenants ...............        $ 9,304,733         $ 8,203,733         $ 7,881,796
   Cash paid to suppliers ...................         (2,873,093)         (2,308,949)         (2,278,401)
   Cash paid to affiliates ..................           (722,634)         (1,171,013)         (1,210,260)
   Interest received ........................            187,328             150,357             344,947
   Interest received from affiliates ........            466,855             744,420             215,064
   Interest paid ............................           (166,866)           (230,527)            (14,774)
   Property taxes paid ......................         (1,117,327)           (978,083)           (803,600)
                                                     -----------         -----------         -----------
Net cash provided by operating
   activities ...............................          5,078,996           4,409,938           4,134,772
                                                     -----------         -----------         -----------

Cash flows from investing activities:
   Additions to real estate investments
     and assets held for sale ...............         (1,025,133)           (724,380)           (540,072)
   Proceeds from collection of mortgage
     loan investments .......................                 --                  --           1,404,026
   Mortgage loan investments -
     affiliates .............................            (75,000)         (2,336,029)         (3,409,396)
   Proceeds from collection of mortgage
     loan investments - affiliates ..........          5,724,999              72,302             952,538
                                                     -----------         -----------         -----------
Net cash provided by (used in)
   investing activities .....................          4,624,866          (2,988,107)         (1,592,904)
                                                     -----------         -----------         -----------

Cash flows from financing activities:
   Net increase in cash segregated
     for repurchase of limited
     partnership units ......................             (6,340)             (7,729)             (6,371)
   Proceeds from revolving credit
     agreement ..............................                 --           2,336,029           1,101,619
   Repayment of revolving credit
     Agreement ..............................         (3,437,648)                 --                  --
   Repurchase of limited partnership
     units ..................................           (332,928)           (332,928)           (332,928)
   Distributions to limited partners ........         (5,522,998)         (3,999,970)         (5,999,994)
                                                     -----------         -----------         -----------
Net cash used in financing activities .......         (9,299,914)         (2,004,598)         (5,237,674)
                                                     -----------         -----------         -----------

Net increase (decrease) in cash and
   cash equivalents .........................            403,948            (582,767)         (2,695,806)

Cash and cash equivalents at
   beginning of year ........................          2,440,084           3,022,851           5,718,657
                                                     -----------         -----------         -----------

Cash and cash equivalents at end
   of year ..................................        $ 2,844,032         $ 2,440,084         $ 3,022,851
                                                     ===========         ===========         ===========
</TABLE>

See  discussion  of non-cash  investing  activities  in Note 6 - "Mortgage  Loan
Investments - Affiliates."

                 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,
                                                     ---------------------------------------------------
                                                         1998               1997                1996
                                                     -----------         -----------         -----------
<S>                                                  <C>                 <C>                 <C>        
Net income ..................................        $ 2,815,090         $ 2,788,653         $ 2,245,414
                                                     -----------         -----------         -----------

Adjustments to reconcile net income to
   net cash  provided  by  operating
   activities:
   Depreciation and amortization ............          1,350,150           1,432,871           1,628,699
   Amortization of deferred borrowing
     costs ..................................                 --              48,765              97,530
   Gain on extinguishment of mortgage
     loan investment ........................                 --                  --             (52,841)
   Changes in assets and liabilities:
     Cash segregated for security
       deposits .............................            (18,674)             (7,341)            (13,187)
     Accounts receivable ....................            248,288            (128,883)              1,893
     Accrued interest receivable ............             52,785             (21,791)             (8,636)
     Prepaid expenses and other
       assets ...............................             (7,384)             49,604              98,482
     Accounts payable and accrued
       expenses .............................            (36,892)             29,914               9,164
     Payable to affiliates ..................            688,750             171,208             117,793
     Security deposits and deferred
       rental revenue .......................            (13,117)             46,938              10,461
                                                     -----------         -----------         -----------

         Total adjustments ..................          2,263,906           1,621,285           1,889,358
                                                     -----------         -----------         -----------

Net cash provided by operating
   activities ...............................        $ 5,078,996         $ 4,409,938         $ 4,134,772
                                                     ===========         ===========         ===========
</TABLE>


                 See accompanying notes to financial statements.
<PAGE>

                       McNEIL REAL ESTATE FUND XXVII, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 1998

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 was used to fund  additional  loans made to affiliates of the
General Partner. The balance of the revolving credit agreement was repaid by the
Partnership  in  1998  as  further  discussed  in  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,  1998,  the  Partnership  had one  mortgage  loan
investment  to an  affiliate  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>
As previously announced, the Partnership has retained PaineWebber,  Incorporated
("PaineWebber")  as its exclusive  financial advisor to explore  alternatives to
maximize  the  value  of  the  Partnership,  including,  without  limitation,  a
transaction  in which  limited  partnership  interests  in the  Partnership  are
converted into cash. The Partnership,  through  PaineWebber,  provided financial
and other  information to interested  parties as part of an auction  process and
until early March 1999 was conducting  discussions with one bidder in an attempt
to reach a definitive  agreement  with respect to a sale  transaction.  In early
March 1999, because the Partnership had been unable to conclude negotiations for
a transaction with such bidder, the Partnership  terminated such discussions and
commenced   discussions   with  respect  to  a  sale  transaction  with  another
well-financed  bidder who had been  involved in the  original  auction  process.
During  the last full  week of  March,  the  Partnership  entered  into a 45 day
exclusivity  agreement with such party.  It is possible that the General Partner
and its  affiliates  will receive  non-cash  consideration  for their  ownership
interests in  connection  with any such  transaction.  There can be no assurance
regarding whether any such agreement will be reached nor the terms thereof.

The Partnership 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.

Adoption of Recent Accounting Pronouncements
--------------------------------------------

The Partnership has adopted Statement of Financial Accounting Standards No. 131,
"Disclosures  About  Segments of an Enterprise  and Related  Information  ("SFAS
131"). SFAS 131 requires an enterprise to report financial information about its
reportable operating segments, which are defined as components of a business for
which  separate  financial  information  is  evaluated  regularly  by the  chief
decision  maker  in  allocating   resources  and  assessing   performance.   The
Partnership  does not  prepare  such  information  for  internal  use,  since it
analyzes  the   performance  of  and  allocates   resources  for  each  property
individually.  The Partnership's  management has determined that it operates one
line of business and it would be  impracticable  to report segment  information.
Therefore, the adoption of SFAS 131 has no impact on the Partnership's financial
statements.

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 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". 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.

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


<PAGE>
Assets Held for Sale
--------------------

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

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

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

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.

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 1998, 1997, and 1996 have been made
in accordance with these provisions.


<PAGE>
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 $5,522,998,  $3,999,970, and $5,999,994 of cash from
operations in 1998, 1997, and 1996, respectively.  No distributions were paid to
the General Partner in 1998,  1997 or 1996.  During the last week of March 1999,
the Partnership distributed  approximately $1,508,000 to the limited partners of
record as of March 1, 1999.

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 51,999,
52,369  and 52,739  (in  hundreds)  Units  outstanding  in 1998,  1997 and 1996,
respectively.

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.


<PAGE>
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 to .75% in 2000, .50% in 2001 and
 .25% thereafter.

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

<TABLE>
<CAPTION>
                                                      For the Years Ended December 31,
                                              ----------------------------------------------
                                                  1998             1997              1996
                                              ----------        ----------        ----------
<S>                                           <C>               <C>               <C>       
Property management fees .............        $  508,726        $  462,289        $  435,159
Charged to general and
   administrative - affiliates:
   Partnership administration ........           287,865           270,653           314,832
   Asset management fee ..............           614,793           609,279           578,062
                                              ----------        ----------        ----------
                                              $1,411,384        $1,342,221        $1,328,053
                                              ==========        ==========        ==========
</TABLE>

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  are met.
Conditions for payment have not yet been met and, at December 31, 1998 and 1997,
$141,647 of amounts accrued in prior years are included in payable to affiliates
on the Balance Sheets.

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, 1998 and 1997  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.


<PAGE>
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 $13,867,070 in 1998,
$12,759,576 in 1997 and $12,040,518 in 1996.

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

The basis and accumulated  depreciation  and  amortization of the  Partnership's
real  estate  investments  at  December  31,  1998 and 1997 are set forth in the
following tables:

<TABLE>
<CAPTION>
                                                                         Accumulated
                                                   Buildings and         Depreciation         Net Book
       1998                         Land           Improvements        and Amortization         Value
       ----                    --------------      --------------      ---------------     --------------

AAA Sentry
<S>                            <C>                 <C>                 <C>                 <C>           
   N. Lauderdale, FL           $       70,337      $      799,102      $     (279,130)     $      590,309
Forest Hill
   W. Palm Beach, FL                  510,780           2,028,226            (691,111)          1,847,895
Fountainbleau
   Miami, FL                          287,114           1,437,444            (428,035)          1,296,523
Kendall Sunset
   Miami, FL                          672,756           3,957,464          (1,313,096)          3,317,124
Margate
   Margate, FL                        233,575           1,387,811            (486,230)          1,135,156
Military Trail
   W. Palm Beach, FL                  571,715           1,874,290            (649,719)          1,796,286
One Corporate Center I
   Edina, MN                          925,000           6,175,817          (2,921,088)          4,179,729
One Corporate Center III
   Edina, MN                          925,000           6,542,505          (3,388,473)          4,079,032
                                -------------       -------------       -------------       -------------
                               $    4,196,277      $   24,202,659      $  (10,156,882)     $   18,242,054
                                =============       =============       =============       ==============

                                                                         Accumulated
                                                   Buildings and         Depreciation          Net Book
       1997                         Land           Improvements        and Amortization         Value
       ----                    --------------      --------------      ----------------    --------------

AAA Sentry                     $       70,337      $      612,992      $     (211,565)     $      471,764
Forest Hill                           510,780           1,995,632            (598,301)          1,908,111
Fountainbleau                         287,114           1,237,674            (351,439)          1,173,349
Kendall Sunset                        672,756           3,915,577          (1,144,141)          3,444,192
Margate                               233,575           1,354,964            (411,706)          1,176,833
Military Trail                        571,715           1,869,813            (560,022)          1,881,506
One Corporate Center I                925,000           5,975,937          (2,563,037)          4,337,900
One Corporate Center III              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>
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, 1998 and 1997 with a net book
value of $1,913,276 and $1,908,947, respectively.

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,  1998  and 1997  with a net book  value of
$2,700,110 and $2,640,934, respectively.

 The  results  of  operations  for the  assets  held for sale  were  $1,050,539,
$836,166  and $724,265  for the years ended  December  31, 1998,  1997 and 1996,
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, 1998 are as
follows:

            1999....................................        $ 3,055,918
            2000....................................          2,896,147
            2001....................................          2,262,079
            2002....................................          1,483,799
            2003....................................            490,709
            Thereafter..............................             73,549
                                                             ----------
              Total                                         $10,262,201
                                                             ==========

Future  minimum  rents do not  include  expense  reimbursements  for common area
maintenance,  property taxes and other  expenses.  These expense  reimbursements
amounted to $267,686,  $265,764  and  $132,563 for the years ended  December 31,
1998,  1997 and 1996,  respectively,  and are included in rental  revenue on the
Statements of Operations.

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.


<PAGE>
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 of
interest  income for the year ended  December 31, 1996.  The effective  interest
rate of this interest  income was 10.8%.  Interest  income of $32,444 would have
been recognized under the terms of the modification agreement for the year ended
December 31, 1996, if the Partnership had not adopted SFAS 114.

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,
1998,  the  Partnership  had  one  outstanding   first  priority  mortgage  loan
investment to an affiliate of $1,306,488.  For the year ended December 31, 1998,
the  Partnership  recognized  $414,070 of interest  income  related to affiliate
loans. The following sets forth the  Partnership's  mortgage loan investments to
affiliates  of the  General  Partner at December  31, 1998 and 1997.  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             1998             1997
--------                           ---------     ----------       -----------     -------------   --------------

McNeil Pension Investment
   Fund, Ltd.:
   Brice Road Office
<S>                                <C>             <C>               <C>          <C>             <C>           
     Building                      First           11.00             05/98        $           -   $      411,062
   Verre Center Office
     Building                      First           11.00             11/99            1,306,488          820,426
McNeil Real Estate Fund X,
   Ltd.:
   La Plaza Business Center        First           11.00             02/00                    -        3,136,029
McNeil Real Estate Fund
   XI, Ltd.:
   The Village Apartments          First           11.00             11/99                    -        2,588,970
                                                                                  -------------    -------------
                                                                                 $    1,306,488   $    6,956,487
                                                                                  =============    =============
</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 7.75% at December 31, 1998 and 8.5% at
     December 31, 1997.


<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 was  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.  On May 1, 1998,  McPIF
repaid  the loan with  proceeds  received  from a new loan from the  Partnership
secured by Verre Center Office Building, as discussed below.

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.  An  additional  $75,000  was
borrowed in January 1998. McPIF borrowed an additional  $411,062 in May 1998 and
repaid the  $411,062  mortgage  loan  investment  secured  by Brice Road  Office
Building located in Reynoldsburg,  Ohio. 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 was
secured by a first lien on La Plaza Business Center located in Las Vegas, Nevada
and was paid in full in June 1998.

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 was
secured by a first lien on The Village  Apartments  located in Gresham,  Oregon.
This loan was paid in full in May 1998.


<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,  1998,  1997 and 1996,  the General  Partner had paid  $19,557,
$113,432  and  $78,391,  respectively,  representing  the  aggregate  amount  of
interest  which  would be owed for one year  pursuant  to this  arrangement.  In
addition,  the General  Partner paid $62,761,  $139,236 and $83,510 of interest,
points, closing costs and expenses required to be received by the Partnership on
all  affiliate  loans  during  1998,  1997 and  1996,  respectively.  All  other
requirements  for affiliated  loans, as specified in the  Partnership's  Amended
Partnership  Agreement,  were  met at  December  31,  1998,  1997 and  1996,  in
connection with these loans.

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

<TABLE>
<CAPTION>
                                                     For the Years Ended December 31,
                                           ----------------------------------------------------
                                              1998                1997                 1996
                                           ------------        ------------        ------------
<S>                                        <C>                 <C>                 <C>        
Balance at beginning of year.......        $ 6,956,487         $ 4,692,760         $ 2,235,902
Mortgage loans funded .............             75,000           2,336,029           3,409,396
Mortgage loans repaid .............         (5,724,999)            (72,302)           (952,538)
                                           -----------         -----------         -----------
Balance at end of year ............        $ 1,306,488         $ 6,956,487         $ 4,692,760
                                           ===========         ===========         ===========
</TABLE>

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, 1998 and 1997.

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

NOTE 7 - REVOLVING CREDIT AGREEMENT
-----------------------------------

The following sets forth the revolving  credit  agreement of the  Partnership at
December 31, 1998 and 1997.  The revolving  credit  agreement was secured by the
related real estate investments.

<TABLE>
<CAPTION>
                         Mortgage         Annual          Monthly
                         Lien             Interest        Payments/                 December 31,
Property                 Position         Rate %          Maturity              1998             1997
--------                 ------------     ------       ----------------    --------------    ------------

Kendall Sunset,
One Corporate
Center I and
One Corporate
<S>                                        <C>                   <C>        <C>              <C>         
Center III               First             9% (a)          (a)   7/99       $          -     $  3,437,648
                                                                             ===========      ===========
</TABLE>

(a)  The interest  rate and monthly  payment  varied based on the PNC Bank prime
     lending rate plus 1/2%. The rate listed above represents the rate in effect
     as of June 1998, when the loan was repaid.


<PAGE>
A $5 million  revolving  credit agreement was secured by the Partnership in June
1995.  The  Partnership  had  borrowed  $3,437,648  under the  revolving  credit
agreement  at December 31,  1997.  Any  borrowings  under the  revolving  credit
agreement  bore  interest at prime plus one-half of one percent or a LIBOR-based
rate, if so elected by the  Partnership.  The  Partnership was 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 1998, 1997 and
1996 were $5,538,  $3,887 and $12,708,  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 was  secured  by One  Corporate  Center I and III office
buildings  and  Kendall  Sunset  Mini-Storage.  The  line  of  credit  contained
financial  covenants  that  required  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, 1998 and 1997. The balance of the
loan  was paid in full in June  1998  and the  revolving  credit  agreement  was
cancelled by the Partnership in March 1999.

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.

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  1999,  1998 and  1997,  $332,928  was used  each  period  to
repurchase  36,992  Units each period for requests  submitted in 1998,  1997 and
1996, respectively.

NOTE 9  - LEGAL PROCEEDINGS
----------------------------

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

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


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

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

Defendants  filed a demurrer to the  consolidated  and amended  complaint  and a
motion to strike on February 14, 1997,  seeking to dismiss the  consolidated and
amended complaint in all respects.  A hearing on Defendant's demurrer and motion
to strike  was held on May 5,  1997.  The Court  granted  Defendants'  demurrer,
dismissing  the  consolidated  and  amended  complaint  with leave to amend.  On
October  31,  1997,  the  Plaintiffs  filed a second  consolidated  and  amended
complaint. The case was stayed pending settlement discussions.  A Stipulation of
Settlement dated September 15, 1998 has been signed by the parties.  Preliminary
Court  approval was received on October 6, 1998. A hearing for Final Approval of
Settlement, initially scheduled for December 17, 1998, has been continued to May
25, 1999.

Because McNeil Real Estate Fund XXIII,  L.P., Hearth Hollow  Associates,  McNeil
Midwest  Properties I, L.P. and Regency North Associates,  L.P. would be part of
the  transaction  contemplated  in the settlement  and Plaintiffs  claim that an
effort should be made to sell the McNeil Partnerships,  Plaintiffs have included
allegations with respect to McNeil Real Estate Fund XXIII,  L.P.,  Hearth Hollow
Associates, McNeil Midwest Properties I, L.P. and Regency North Associates, L.P.
in the third consolidated and amended complaint.

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


<PAGE>
NOTE 10 - COMMITMENTS AND CONTINGENCIES
---------------------------------------

Environmental laws create potential liabilities that may affect property owners.
The environmental  laws of Federal and certain state  governments,  for example,
impose liability on current and certain past owners of property from which there
is a release  or threat of  release  of  hazardous  substances.  This  liability
includes costs of investigation and remediation of the hazardous  substances and
natural resource  damages.  Liability for costs of investigation and remediation
is strict and may be imposed  irrespective  of whether the property owner was at
fault,  although  there are a number of  defenses.  Both  governments  and third
parties may seek recoveries under these laws.

Third parties also may seek  recovery  under the common law for damages to their
property  or person,  against  owners of  property  from which  there has been a
release of hazardous and other substances.

The presence of  contamination  or the failure to remediate  contaminations  may
adversely  affect the owner's  ability to sell or lease real estate or to borrow
using the real estate as collateral.

Various  buildings at properties do or may contain  building  materials that are
the subject of various  regulatory  programs  intended to protect  human health.
Such building materials include,  for example,  asbestos,  lead-based paint, and
lead plumbing components.  The Company has implemented programs to deal with the
presence  of those  materials,  which  include,  as  appropriate,  reduction  of
potential  exposure  situations.  The Company does not believe that the costs of
such programs are likely to have a material adverse effect. Failure to implement
such programs can result in regulatory  violations or liability claims resulting
from alleged exposure to such materials.

In connection with the proposed sale transaction as more fully described in Note
1 -  "Organization  and Summary of  Significant  Accounting  Policies",  Phase I
environmental  site  assessments  have been completed for each property owned by
the Partnership. Such environmental assessments performed on the properties have
not revealed any  environmental  liability that the  Partnership  believes would
have a material adverse effect on the Partnership's business, assets, or results
of  operations.  The  Partnership  has not  been  notified  by any  governmental
authority of any non-compliance, liability or other claim in connection with any
of its  properties.  There can be no  assurances,  however,  that  environmental
liabilities  have  not  developed  since  such  environmental  assessments  were
prepared,  or that future uses or  conditions  (including,  without  limitation,
changes in applicable  environmental  laws and  regulations)  will not result in
imposition of environmental liability.

<PAGE>


                       McNEIL REAL ESTATE FUND XXVII, L.P.
                                  SCHEDULE III
      REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AND AMORTIZATION
                                December 31, 1998
<TABLE>
<CAPTION>
                                                                                                       Costs
                                                       Initial Cost               Cumulative        Capitalized
                            Related                           Buildings and      Write-down for     Subsequent
Description             Encumbrances             Land         Improvements       Impairment (a)   To Acquisition
-----------             ------------             ----         -------------      ---------------  --------------

MINI-STORAGE WAREHOUSES:

AAA Sentry
<S>                       <C>               <C>               <C>               <C>               <C>           
   N. Lauderdale, FL      $             -   $        69,890   $       380,110   $            -    $      419,439

Forest Hill
   West Palm Beach, FL                  -           507,422         1,862,578                -           169,006

Fountainbleau
   Miami, FL                            -           285,854           864,146                -           574,558

Kendall Sunset
   Miami, FL                            -           672,000         3,808,000                -           150,220

Margate
   Margate, FL                          -           233,101         1,156,899                -           231,386

Military Trail
   West Palm Beach, FL                  -           568,405         1,681,595                -           196,005

OFFICE BUILDINGS:

One Corporate Center I
   Edina, MN                            -           925,000         5,250,000       (1,300,000)        2,225,817

One Corporate Center III
   Edina, MN                            -           925,000         5,255,000       (1,300,000)        2,587,505
                           --------------    --------------    --------------     ------------     -------------
                          $             -   $     4,186,672   $    20,258,328    $  (2,600,000)   $    6,553,936
                           ==============    ==============    ==============     ============     =============

Assets Held for Sale (c):

AAA Century Airport
   Inglewood, CA          $             -

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


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

(c)  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 and amortization cease 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, 1998

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

AAA Sentry
<S>                          <C>                <C>               <C>                 <C>            
   N. Lauderdale, FL         $        70,337    $       799,102   $        869,439    $     (279,130)

Forest Hill
   West Palm Beach, FL               510,780          2,028,226          2,539,006          (691,111)

Fountainbleau
   Miami, FL                         287,114          1,437,444          1,724,558          (428,035)

Kendall Sunset
   Miami, FL                         672,756          3,957,464          4,630,220        (1,313,096)

Margate
   Margate, FL                       233,575          1,387,811          1,621,386          (486,230)

Military Trial
   West Palm Beach, FL               571,715          1,874,290          2,446,005          (649,719)

OFFICE BUILDINGS:

One Corporate Center I
   Edina, MN                         925,000          6,175,817          7,100,817        (2,921,088)

One Corporate Center III
   Edina, MN                         925,000          6,542,505          7,467,505        (3,388,473)
                              --------------     --------------    ---------------     -------------
                             $     4,196,277    $    24,202,659   $     28,398,936    $  (10,156,882)
                              ==============     ==============    ===============     =============

Assets Held for Sale (c):

AAA Century Airport
   Inglewood, CA                                                 $       1,913,276

Burbank
   Burbank, CA                                                           2,700,110
                                                                  ----------------
                                                                 $       4,613,386
                                                                  ================
</TABLE>

(b)  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 $36,691,467 and
     accumulated depreciation was $7,919,529 at December 31, 1998.

(c)  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 and amortization cease 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, 1998

<TABLE>
<CAPTION>

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

MINI-STORAGE WAREHOUSES:

AAA Sentry
<S>                             <C>                         <C>                     <C> 
   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 (c):

AAA Century Airport
   Inglewood, CA                1987                        09/90

Burbank
   Burbank, CA                  1987                        09/90

</TABLE>

(c)  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 and amortization cease 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,
                                                        -----------------------------------------------------
                                                             1998                1997                1996
                                                        ------------        ------------         ------------
Real estate investments:

<S>                                                     <C>                 <C>                  <C>         
Balance at beginning of year ...................        $ 27,437,308        $ 32,563,740         $ 32,023,668

Improvements ...................................             961,628             720,137              540,072

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

Balance at end of year .........................        $ 28,398,936        $ 27,437,308         $ 32,563,740
                                                        ============        ============         ============


Accumulated depreciation and amortization:

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

Depreciation and amortization ..................           1,350,150           1,432,871            1,628,699

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

Balance at end of year .........................        $ 10,156,882        $  8,806,732         $  8,674,792
                                                        ============        ============         ============


Assets Held for Sale:

Balance at beginning of year ...................        $  4,549,881        $         --         $         --

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

Improvements ...................................              63,505               4,243                   --
                                                        ------------        ------------         ------------

Balance at end of year .........................        $  4,613,386        $  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:

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

Robert A. McNeil,              78       Mr.  McNeil  is also  Chairman  of   the
Chairman of the                         Board and Director of McNeil Real Estate
Board and Director                      Management,  Inc. ("McREMI") which is an
                                        affiliate of the General Partner. He has
                                        held the foregoing  positions  since the
                                        formation of such an entity in 1990. Mr.
                                        McNeil  received  his B.A.  degree  from
                                        Stanford  University  in  1942  and  his
                                        L.L.B.  degree from  Stanford Law School
                                        in 1948. He is a member of the State Bar
                                        of  California  and has been involved in
                                        real  estate  financing  since  the late
                                        1940's and in real estate  acquisitions,
                                        syndications  and   dispositions   since
                                        1960. From 1986 until active  operations
                                        of  McREMI  and  McNeil  Partners,  L.P.
                                        began in February 1991, Mr. McNeil was a
                                        private investor. Mr. McNeil is a member
                                        of the International  Board of Directors
                                        of the Salk  Institute,  which  promotes
                                        research in improvements in health care.


<PAGE>
Carole J. McNeil               55       Mrs. McNeil is Co-Chairman, with husband
Co-Chairman of the                      Robert A. McNeil,  of McNeil  Investors,
Board                                   Inc.  Mrs.  McNeil has  twenty  years of
                                        real estate experience, most recently as
                                        a private investor from 1986 to 1993. In
                                        1982, she founded Ivory & Associates,  a
                                        commercial real estate brokerage firm in
                                        San  Francisco,  CA. Prior to that,  she
                                        was a commercial  real estate  associate
                                        with the Madison Company and, earlier, a
                                        commercial  sales  associate and analyst
                                        with   Marcus  and   Millichap   in  San
                                        Francisco.    In   1978,   Mrs.   McNeil
                                        established   Escrow  Training  Centers,
                                        California's first accredited commercial
                                        training   program  for  title   company
                                        escrow  officers and real estate  agents
                                        needing  college  credits to qualify for
                                        brokerage  licenses.  She  began in real
                                        estate as Manager and Marketing Director
                                        of Title  Insurance  and  Trust in Marin
                                        County,  CA. Mrs.  McNeil  serves on the
                                        International  Board of Directors of the
                                        Salk Institute.

Ron K. Taylor                  41       Mr.  Taylor is the  President  and Chief
President and Chief                     Executive  Officer of McNeil Real Estate
Executive Officer                       Management  which is an affiliate of the
                                        General Partner.  Mr. Taylor has been in
                                        this capacity  since the  resignation of
                                        Donald K. Reed on March 4,  1997.  Prior
                                        to       assuming       his      current
                                        responsibilities, Mr. Taylor served as a
                                        Senior  Vice  President  of McREMI.  Mr.
                                        Taylor has been in this  capacity  since
                                        McREMI  commenced  operations  in  1991.
                                        Prior  to  joining  McREMI,  Mr.  Taylor
                                        served as an  Executive  Vice  President
                                        for  a   national   syndication/property
                                        management  firm. In this capacity,  Mr.
                                        Taylor  had the  responsibility  for the
                                        management  and leasing of a  21,000,000
                                        square  foot   portfolio  of  commercial
                                        properties. Mr. Taylor has been actively
                                        involved  in the  real  estate  industry
                                        since 1983.

Each director  shall serve until his successor  shall have been duly elected and
qualified.
<PAGE>
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,  1998,  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, 1998. 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.

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  13% of  the  outstanding  limited  partnership  units  at
           February 1, 1999.

     (C)   Change in control.

           None



<PAGE>
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 to .75% in 2000, .50% in 2001 and .25% thereafter.  For the
year ended December 31, 1998, the Partnership  paid or accrued  $614,793 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, 1998, $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, 1998,  the  Partnership  paid or accrued  $796,591 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."

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 was  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.  On May 1, 1998,  McPIF
repaid  the loan with  proceeds  received  from a new loan from the  Partnership
secured by Verre Center Office Building, as discussed below.

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.  An  additional  $75,000  was
borrowed in January 1998. McPIF borrowed an additional  $411,062 in May 1998 and
repaid the  $411,062  mortgage  loan  investment  secured  by Brice Road  Office
Building located in Reynoldsburg,  Ohio. 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.


<PAGE>
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 was secured by a first lien
on La Plaza Business Center located in Las Vegas,  Nevada.  The loan was paid in
full in June 1998.

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 was
secured by a first lien on The Village  Apartments  located in Gresham,  Oregon.
The loan was paid in full in May 1998.

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.
At December 31, 1998,  the General  Partner had paid $19,557,  representing  the
aggregate  amount of interest  which would be owed for one year pursuant to this
arrangement.  In addition, the General Partner paid $62,761 of interest, points,
closing  costs and expenses  required to be received by the  Partnership  on all
affiliate  loans  during  1998.  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

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

      10.10                       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.


(B)      Reports  on Form 8-K.  There  were no  reports on Form 8-K filed by the
         Partnership during the quarter ended December 31, 1998.


<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, 1999                 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, 1999                 By: /s/  Ron K. Taylor
--------------                    ----------------------------------------------
Date                               Ron K. Taylor
                                   President and Director of McNeil 
                                     Investors, Inc.
                                   (Principal Financial Officer)



March 31, 1999                 By: /s/  Carol A. Fahs
--------------                    ----------------------------------------------
Date                               Carol A. Fahs
                                   Vice President of McNeil Investors, Inc.
                                   (Principal Accounting Officer)