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

FORM 10-Q

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

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

[ ] 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 0-9783
---------

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

California 94-2669577
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

13760 Noel Road, Suite 600, LB70, Dallas, Texas 75240
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code (972) 448-5800
-----------------------------

Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---

PART I. FINANCIAL INFORMATION

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

MCNEIL REAL ESTATE FUND XI, LTD.

BALANCE SHEETS
(Unaudited)

September 30, December 31,
1998 1997
------------- -------------
ASSETS
- ------

Real estate investments:

Land ....................................................... $ 4,407,325 $ 4,407,325
Buildings and improvements ................................. 48,088,210 47,211,527
------------ ------------
52,495,535 51,618,852
Less: Accumulated depreciation ............................ (32,559,858) (30,941,665)
------------ ------------
19,935,677 20,677,187

Assets held for sale .......................................... 4,730,291 5,910,865

Cash and cash equivalents ..................................... 2,535,586 3,045,785
Cash segregated for security deposits ......................... 455,394 413,487
Accounts receivable ........................................... 102,776 40,018
Prepaid expenses and other assets ............................. 111,886 242,961
Escrow deposits ............................................... 1,017,490 683,785
Deferred borrowing costs (net of accumulated
amortization of $643,128 and $677,649 at
September 30, 1998 and December 31, 1997,
respectively) .............................................. 1,207,186 1,355,831
------------ ------------
$ 30,096,286 $ 32,369,919
============ ============

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

Mortgage notes payable, net ................................... $ 36,163,013 $ 36,207,678
Mortgage note payable - affiliate ............................. -- 2,588,971
Accrued interest .............................................. 187,493 271,877
Accrued interest - affiliate .................................. -- 20,889
Accrued expenses .............................................. 807,508 382,446
Payable to affiliates - General Partner ....................... 3,029,715 2,231,389
Security deposits and deferred rental revenue ................. 470,430 460,567
------------ ------------
40,658,159 42,163,817
------------ ------------

Partners' deficit:
Limited partners - 159,813 limited partnership units
authorized and outstanding at September 30, 1998
and December 31, 1997 .................................... (3,899,998) (3,602,274)
General Partner ............................................ (6,661,875) (6,191,624)
------------ ------------
(10,561,873) (9,793,898)
------------ ------------
$ 30,096,286 $ 32,369,919
============ ============

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

See accompanying notes to financial statements.

MCNEIL REAL ESTATE FUND XI, LTD.

STATEMENTS OF OPERATIONS
(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
Revenue:

Rental revenue ....................... $ 3,693,935 $ 3,816,132 $11,276,346 $11,329,456
Interest ............................. 53,435 34,629 149,557 87,490
Gain on sale of real estate .......... -- -- 3,319,137 --
Gain on involuntary
conversion ......................... -- -- -- 172,987
----------- ----------- ----------- -----------
Total revenue ...................... 3,747,370 3,850,761 14,745,040 11,589,933
----------- ----------- ----------- -----------

Expenses:
Interest ............................. 948,619 882,605 2,656,708 2,655,158
Interest - affiliate mortgage......... -- 62,543 89,621 183,418
Depreciation ......................... 591,362 503,239 1,618,193 1,549,369
Property taxes ....................... 224,908 217,794 682,511 653,382
Personnel expenses ................... 476,688 493,521 1,423,084 1,408,160
Utilities ............................ 309,706 313,379 857,481 860,057
Repair and maintenance ............... 501,015 459,527 1,427,331 1,513,633
Property management
fees - affiliates .................. 181,129 189,258 557,958 563,127
Other property operating
expenses ........................... 205,240 213,088 600,266 588,442
General and administrative ........... 94,884 50,370 442,961 151,590
General and administrative -
affiliates ......................... 84,183 65,752 258,725 197,761
----------- ----------- ----------- -----------
Total expenses ..................... 3,617,734 3,451,076 10,614,839 10,324,097
----------- ----------- ----------- -----------

Net income .............................. $ 129,636 $ 399,685 $ 4,130,201 $ 1,265,836
=========== =========== =========== ===========

Net income allocable to
limited partners ..................... $ 123,154 $ 274,397 $ 3,923,691 $ 71,586
Net income allocable
to General Partner ................... 6,482 125,288 206,510 1,194,250
----------- ----------- ----------- -----------
Net income .............................. $ 129,636 $ 399,685 $ 4,130,201 $ 1,265,836
=========== =========== =========== ===========

Net income per limited
partnership unit ..................... $ .77 $ 1.72 $ 24.55 $ .45
=========== =========== =========== ===========
Distribution per limited
limited partnership unit ............. $ 13.90 $ -- $ 26.41 $ --
=========== =========== =========== ===========

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

See accompanying notes to financial statements.

MCNEIL REAL ESTATE FUND XI, LTD.

STATEMENTS OF PARTNERS' DEFICIT
(Unaudited)

For the Nine Months Ended September 30, 1998 and 1997

Total
General Limited Partners'
Partner Partners Deficit
--------------- ------------- -------------

Balance at December 31, 1996 ............ $ (6,454,008) $ (4,179,456) $(10,633,464)

Net income .............................. 1,194,250 71,586 1,265,836

Management Incentive Distribution........ (667,026) -- (667,026)
-------------- ------------ ------------

Balance at September 30, 1997 ........... $ (5,926,784) $ (4,107,870) $(10,034,654)
============== ============ ============

Balance at December 31, 1997 ............ $ (6,191,624) $ (3,602,274) $ (9,793,898)

Net income .............................. 206,510 3,923,691 4,130,201

Management Incentive Distribution ....... (676,761) -- (676,761)

Distributions to limited partners ....... -- (4,221,415) (4,221,415)
-------------- ------------ ------------

Balance at September 30, 1998 ........... $ (6,661,875) $ (3,899,998) $(10,561,873)
============== ============ ============

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

See accompanying notes to financial statements.

MCNEIL REAL ESTATE FUND XI, LTD.

STATEMENTS OF CASH FLOWS
(Unaudited)

Increase (Decrease) in Cash and Cash Equivalents

Nine Months Ended
September 30,
----------------------------------
1998 1997
------------- -------------
Cash flows from operating activities:

Cash received from tenants ........................... $ 11,174,442 $ 11,357,484
Cash paid to suppliers ............................... (4,514,412) (4,498,797)
Cash paid to affiliates .............................. (695,118) (794,461)
Interest received .................................... 149,557 87,490
Interest paid ........................................ (2,564,090) (2,515,433)
Interest paid - affiliates ........................... (110,510) (185,768)
Property taxes paid .................................. (677,813) (595,862)
------------ ------------
Net cash provided by operating activities ............... 2,762,056 2,854,653
------------ ------------

Cash flow from investing activities:
Additions to real estate investments ................. (876,683) (1,020,402)
Additions to assets held for sale .................... (168,755) --
Proceeds from sale of real estate .................... 4,787,389 --
Insurance proceeds from fire ......................... -- 172,987
------------ ------------
Net cash provided by (used in)
investing activities ................................. 3,741,951 (847,415)
------------ ------------

Cash flows from financing activities:
Principal payments on mortgage notes
payable ............................................ (382,706) (357,390)
Proceeds from mortgage notes payable ................. 8,860,000 --
Retirement of mortgage notes payable ................. (8,540,387) --
Repayment of mortgage note payable - affiliate........ (2,588,971) --
Deferred borrowing costs paid ........................ (140,727) --
Management Incentive Distribution .................... -- (1,271,718)
Distributions to limited partners .................... (4,221,415) --
------------ ------------
Net cash used in financing activities ................... (7,014,206) (1,629,108)
------------ ------------

Net increase (decrease) in cash and cash
equivalents .......................................... (510,199) 378,130

Cash and cash equivalents at beginning of
period ............................................... 3,045,785 2,351,879
------------ ------------

Cash and cash equivalents at end of period .............. $ 2,535,586 $ 2,730,009
============ ============

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

See accompanying notes to financial statements.

MCNEIL REAL ESTATE FUND XI, LTD.

STATEMENTS OF CASH FLOWS
(Unaudited)

Reconciliation of Net Income to Net Cash Provided by
Operating Activities

Nine Months Ended
September 30,
-------------------------------
1998 1997
----------- -----------

Net income ............................................ $ 4,130,201 $ 1,265,836
----------- -----------

Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation ....................................... 1,618,193 1,549,369
Amortization of deferred borrowing costs ........... 158,574 121,459
Amortization of discounts on mortgage
notes payable .................................... 18,428 17,649
Gain on sale of real estate ........................ (3,319,137) --
Gain on involuntary conversion ..................... -- (172,987)
Changes in assets and liabilities:
Cash segregated for security deposits ............ (41,907) 1,342
Accounts receivable .............................. (62,758) (7,281)
Prepaid expenses and other assets ................ 131,075 128,976
Escrow deposits .................................. (333,705) (469,816)
Accounts payable ................................. -- (52,886)
Accrued interest ................................. (84,384) 617
Accrued interest-affiliates ...................... (20,889) (2,350)
Accrued expenses ................................. 436,937 476,012
Payable to affiliates - General Partner .......... 121,565 (33,573)
Security deposits and deferred rental
revenue ........................................ 9,863 32,286
----------- -----------
Total adjustments .............................. (1,368,145) 1,588,817
----------- -----------

Net cash provided by operating activities ............. $ 2,762,056 $ 2,854,653
=========== ===========

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

See accompanying notes to financial statements.

McNEIL REAL ESTATE FUND XI, LTD.

Notes to Financial Statements
(Unaudited)

September 30, 1998

NOTE 1.
- -------

McNeil Real Estate Fund XI, Ltd. (the "Partnership") was organized June 2, 1980
as a limited partnership under the provisions of the California Uniform Limited
Partnership Act. The general partner of the Partnership is McNeil Partners, L.P.
(the "General Partner"), a Delaware limited partnership, an affiliate of Robert
A. McNeil. The Partnership is governed by an amended and restated limited
partnership agreement, dated August 6, 1991 (the "Amended Partnership
Agreement"). The principal place of business for the Partnership and for the
General Partner is 13760 Noel Road, Suite 600, LB70, Dallas, Texas 75240.

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

NOTE 2.
- -------

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

NOTE 3.
- -------

The Partnership pays property management fees equal to 5% of gross rental
receipts of the Partnership's properties to McNeil Real Estate Management, Inc.
("McREMI"), an affiliate of the General Partner, for providing property
management and leasing services.

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

Under terms of the Amended Partnership Agreement, the Partnership is paying a
Management Incentive Distribution ("MID") to the General Partner. The maximum
MID is calculated as 1% of the tangible asset value of the Partnership. The
maximum MID percentage decreases subsequent to 1999. Tangible asset value is
determined by using the greater of (i) an amount calculated by applying a
capitalization rate of 9% to the annualized net operating income of each
property or (ii) a value of $10,000 per apartment unit to arrive at the property
tangible asset value. The property tangible asset value is then added to the
book value of all other assets excluding intangible items.

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

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

In November 1996, the Partnership obtained a loan from McNeil Real Estate Fund
XXVII, L.P., an affiliate of the General Partner, for $2,588,971. The note was
secured by The Village Apartments and required monthly interest-only payments
equal to the prime lending rate of Bank of America plus 1% with the principal
balance due November 25, 1999. This mortgage note was paid off on April 27,
1998.

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

Nine Months Ended
September 30,
------------------------
1998 1997
-------- --------

Property management fees - affiliates ................. $557,958 $563,127
Interest - affiliates ................................. 89,621 183,418
Charged to general and administrative affiliates:
Partnership administration ......................... 258,725 197,761
-------- --------
$906,304 $944,306
======== ========

Charged to General Partner's deficit:
MID ................................................ $676,761 $667,026
======== ========

NOTE 4.
- -------

On April 30,1998, the Partnership sold to an unaffiliated buyer, The Park, a 192
unit apartment complex in Joplin, Missouri, for a cash purchase price of
$4,900,000. Net cash proceeds to the Partnership, after payoff of the first
mortgage note and various closing costs, amounted to approximately $2,161,000.
Cash proceeds from this transaction, as well as the gain on sale are detailed
below.

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

Cash sales price .......................... $ 4,900,000 $ 4,900,000

Selling costs ............................. (112,611) (112,611)
Basis of real estate sold ................. (1,337,454)
Basis of deferred borrowing costs
written off ............................. (130,798)
-----------

Gain on sale of real estate ............... $ 3,319,137
===========

Proceeds from sale of real estate ......... 4,787,389
Retirement of mortgage note payable (2,565,604)
-----------

Net cash proceeds ......................... $ 2,221,785
===========

NOTE 5.
- -------

On April 27, 1998, the Partnership refinanced The Village mortgage note. The new
mortgage note, in the amount of $2,635,000 bears interest at a variable rate
equal to 1.75% plus the London Interbank Offered Rate per annum. The new
mortgage note requires monthly interest-only payments and quarterly principal
payments in an amount necessary to reduce the principal balance of the note by
5% annually. The maturity date of the new mortgage note is May 1, 2001. Cash
proceeds from the refinancing transaction are as follows:

New mortgage note proceeds........................... $ 2,635,000
Amount required to payoff existing debt.............. 2,588,971
------------

Cash proceeds from refinancing....................... $ 46,029
============

The Partnership incurred $60,438 of deferred borrowing costs related to the
refinancing of The Village mortgage note.

NOTE 6.
- -------

On September 28, 1998, the Partnership refinanced the Rock Creek mortgage note.
The new mortgage note, in the amount of $6,225,000 bears interest at a variable
rate equal to 1.75% plus the London Interbank Offered Rate per annum. The new
mortgage note requires monthly interest-only payments and quarterly principal
payments in an amount necessary to reduce the principal balance of the note by
5% annually. The maturity date of the new mortgage note is October 1, 2001. Cash
proceeds from the refinancing transaction are as follows:

New mortgage note proceeds........................... $ 6,225,000
Amount required to payoff existing debt.............. 5,974,783
------------

Cash proceeds from refinancing....................... $ 250,217
============

The Partnership incurred $80,289 of deferred borrowing costs related to the
refinancing of the Rock Creek mortgage note.

NOTE 7.
- -------

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

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

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

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

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

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

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

The Partnership is engaged in real estate activities, including the ownership,
operation and management of residential and other real estate related assets. At
September 30, 1998, the Partnership owned seven apartment properties, which are
all subject to mortgage notes.

The Partnership recorded a $3,319,137 gain on the sale of The Park Apartments.
Net proceeds from the sale, after repayment of the related mortgage note,
amounted to $2,221,785. The net proceeds from the sale were added to the
Partnership's balance of cash reserves.

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

Revenue:

Partnership revenues decreased $90,996 for the three months and increased
$3,340,489 for the nine months ended September 30, 1998 as compared to the same
period last year. Excluding the effects of the sale of The Park Apartments,
Partnership revenues increased $352,690 or 3% for the nine months ended
September 30, 1998. Interest income increased $18,806 and $62,067 for the three
and nine months ended September 30, 1998 as compared to the same period last
year. This increase is due to an increase in cash balances being invested in
interest bearing accounts.

Rental revenues increased at all seven of the Partnership's remaining
properties. Excluding rental revenue at The Park Apartments, rental revenues
increased $84,272 and $298,579 for the three months and nine months compared to
the same period last year. The properties reporting the largest increases in
rental revenue were Acacia Lakes, Rock Creek and Villa Del Rio. This increase in
revenue on Acacia Lakes, Rock Creek and Villa Del Rio is due to an increase in
the rental rates, as compared to the prior year.

Expenses:

Partnership expenses increased $166,658 and $290,742 for the three months and
nine months ended September 30, 1998 as compared to the same period last year.
Excluding the effects of the sale of The Park Apartments, Partnership expenses
increased $261,701 or 1% for the nine months ended September 30, 1998.

Interest expense - affiliates decreased by $62,543 and $93,797 for the three and
nine months ended September 30, 1998. This decrease is due to the refinancing of
the mortgage loan at The Village in April 1998, which replaced affiliate debt
with a third party mortgage note payable.

General and administrative expenses increased $291,371 for the first nine months
of 1998 as compared to the same period last year. The increase was mainly due to
costs incurred to explore alternatives to maximize the value of the Partnership
(see Liquidity and Capital Resources). The increase was partially offset by
decreases attributable to investor services. During 1997, charges for investor
services were provided by a third party vendor. Beginning with 1998, these
services are provided by affiliates of the General Partner.

General and administrative - affiliates expense increased by $60,964 or 31% for
the first nine months of 1998 as compared to the same period last year due to
the change in investor services charges as discussed above.

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

The Partnership generated $2,762,056 through operating activities for the period
ending September 30, 1998 as compared to $2,854,653 for the same period in 1997.
This decrease is primarily due to a decrease in cash received from tenants, and
an increase in property taxes paid.

The Partnership expended $1,045,438 and $1,020,402 for capital improvements to
its properties in the first nine months of 1998 and 1997, respectively. The
Partnership also received proceeds of $4,787,389 for the sale of The Park in
April 1998.

Total principal payments on mortgage notes payable were $382,706 for the nine
months ended September 30, 1998 as compared to $357,390 for the same period in
1997. The Partnership used $2,565,604 of the proceeds from The Park sale to
retire the related mortgage note payable.

On April 27, 1998, the Partnership refinanced the mortgage note payable on The
Village. The new mortgage note, in the amount of $2,635,000 bears interest at a
variable rate equal to 1.75% plus the London Interbank Offered Rate per annum.
The new mortgage note requires monthly interest only payments and quarterly
principal payments in the amount necessary to reduce the principal balance of
the note by 5% annually. The maturity date of the new mortgage note is May 1,
2001. The Partnership realized $46,029 of cash proceeds from the transaction;
however, $60,438 of the cash proceeds together with additional cash reserves
were used to fund various deferred borrowing costs related to the transaction.

On September 28, 1998, the Partnership refinanced the mortgage note payable on
Rock Creek. The new mortgage note, in the amount of $6,225,000 bears interest at
a variable rate equal to 1.75% plus the London Interbank Offered Rate per annum.
The new mortgage note requires monthly interest only payments and quarterly
principal payments in the amount necessary to reduce the principal balance of
the note by 5% annually. The maturity date of the new mortgage note is October
1, 2001. The Partnership realized $250,217 of cash proceeds from the
transaction; however, $80,289 of the cash proceeds and cash reserves were used
to fund various deferred borrowing costs related to the transaction.

The Partnership used its cash flow from operations as well as its cash reserves
to distribute $4,221,415 to the limited partners in 1998. The distribution
amounted to $26.41 per limited partnership unit.

Short-term liquidity:

At September 30, 1998, the Partnership held cash and cash equivalents of
$2,535,586. The General Partner considers this level of cash reserves to be
adequate to meet the Partnership's operating needs. The General Partner believes
that anticipated operating results for 1998 will be sufficient to fund the
Partnership's budgeted $1.3 million in capital improvements for 1998 and to
repay the current portion of the Partnership's mortgage notes.

Long-term liquidity:

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

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

Income/Loss Allocation and Distributions:

Terms of the Amended Partnership Agreement specify that income/loss before
depreciation is allocated to the General Partner to the extent of MID paid in
cash. Depreciation is allocated in the ratio of 95:5 to the limited partners and
the General Partner, respectively. Therefore, for the nine months ended
September 30, 1998 and 1997, net income of $206,510 and $1,194,250,
respectively, was allocated to the General Partner. The limited partners
received net income allocations of $3,923,691 and $71,586 for the nine months
ended September 30, 1998 and 1997, respectively.

The Partnership distributed $4,221,415 to the limited partners in 1998. A
distribution of $676,761 for the MID has been accrued by the Partnership for the
nine month period ending September 30, 1998 for the General Partner.

Forward-Looking Information:

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

Other Information:

Management has reviewed its information technology infrastructure to identify
any systems that could be affected by the year 2000 problem. The year 2000
problem is the result of computer programs being written using two digits rather
than four to define the applicable year. Any programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in major systems failure or miscalculations. The
information systems used by the Partnership for financial reporting and
significant accounting functions were made year 2000 compliant during recent
systems conversions.

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

PART II. - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------

(a) Exhibits.

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

4. Amended and Restated Limited Partnership
Agreement dated as of August 6, 1991.
(Incorporated by reference to the Quarterly
Report on Form 10-Q, for the quarter ended
June 30, 1991).

11. Statement regarding computation of net loss
per limited partnership unit: Net loss per
limited partnership unit is computed by
dividing net loss allocated to the limited
partners by the number of limited
partnership units outstanding. Per unit
information has been computed based on
159,813 limited partnership units
outstanding in 1998 and 1997.

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

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

McNEIL REAL ESTATE FUND XI, LTD.

SIGNATURES

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

McNEIL REAL ESTATE FUND XI, Ltd.

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

By: McNeil Investors, Inc., General Partner

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

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