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 period ended September 30, 1995
-------------------

[ ] 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 0-13356

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

California 33-0030615
- ------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

13760 Noel Road, Suite 700, LB70, Dallas, Texas, 75240
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code (214) 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___

MCNEIL REAL ESTATE FUND XXI, L.P.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BALANCE SHEETS (Unaudited)

September 30, December 31,
1995 1994
------------ -----------
ASSETS
- ------

Real estate investments:
Land..................................................... $ 3,607,307 $ 3,607,306
Buildings and improvements............................... 33,123,927 32,646,371
36,731,234 36,253,677
Less: Accumulated depreciation and amortization......... (14,879,046) (13,696,125)
21,852,188 22,557,552

Assets held for sale........................................ - 8,153,520

Cash and cash equivalents................................... 2,027,768 1,151,098
Cash segregated for security deposits....................... 182,238 205,581
Accounts receivable, net of allowance for doubtful accounts
of $17,302 and $51,086 at September 30, 1995
and December 31, 1994, respectively...................... 124,556 663,548
Advances to affiliates - General Partner.................... - 362,186
Escrow deposits............................................. 648,457 252,798
Deferred borrowing costs, net of accumulated amortization
of $73,379 and $186,603 at September 30, 1995
and December 31, 1994, respectively...................... 486,581 413,094
Prepaid expenses and other assets........................... 73,688 225,680
----------- ----------
$ 25,395,476 $33,985,057
=========== ==========

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

Mortgage notes payable, net................................. $ 22,062,706 $28,914,573
Mortgage notes payable - affiliates......................... 733,900 2,064,900
Accounts payable and accrued expenses....................... 334,329 430,340
Accrued property taxes...................................... 367,315 480,166
Payable to affiliates - General Partner..................... 4,019,343 3,079,178
Advances from affiliates - General Partner.................. 661,145 1,910,982
Security deposits and deferred rental income................ 193,080 228,012
---------- ----------
28,371,818 37,108,151
---------- ----------

Partners' deficit:
Limited partners - 50,000 Units authorized;
47,308 and 47,326 Units outstanding at September 30,
1995 and December 31, 1994, respectively,
(24,949 and 24,960 Current Income Units
outstanding at September 30, 1995 and December 31,
1994, respectively, and 22,359 and 22,366
Growth/Shelter Units outstanding at September 30,
1995 and December 31,1994, respectively)............... (2,628,966) (2,774,251)
General Partner.......................................... (347,376) (348,843)
---------- ----------
(2,976,342) (3,123,094)
---------- ----------
$25,395,476 $33,985,057
========== ==========

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 XXI, L.P.

STATEMENTS OF OPERATIONS
(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
1995 1994 1995 1994
---------- ---------- ---------- ---------

Revenue:
- -------
Rental revenue................ $1,523,538 $2,009,084 $5,057,887 $6,065,037
Interest...................... 27,334 21,109 86,576 54,880
Gain on disposition of real
estate...................... - - 1,615,811 29,440
Other income.................. 1,524 - 3,952 154,134
--------- --------- --------- ---------
Total revenue............... 1,552,396 2,030,193 6,764,226 6,303,491
--------- --------- --------- ---------

Expenses:
Interest...................... 541,237 771,140 1,844,910 2,235,843
Interest - affiliates......... 31,277 85,091 165,581 226,315
Depreciation and
amortization................ 418,203 535,037 1,325,801 1,533,793
Property taxes................ 144,023 194,537 442,160 531,655
Personnel costs............... 199,148 210,485 613,232 615,655
Utilities..................... 114,335 121,767 335,573 359,073
Repairs and maintenance....... 199,156 245,200 547,099 677,972
Property management
fees - affiliates........... 78,324 108,653 271,870 335,755
Other property operating
expenses.................... 152,716 130,158 428,311 344,698
General and administrative.... 4,537 15,164 41,715 57,855
General and administrative -
affiliates.................. 193,735 235,371 601,222 715,451
--------- --------- --------- ---------
Total expenses.............. 2,076,691 2,652,603 6,617,474 7,634,065
--------- --------- --------- ----------

Net income (loss)................ $ (524,295) $ (622,410) $ 146,752 $(1,330,574)
========= ========= ========= ==========

Net income (loss) allocable
to limited partners - Current
Income Unit................... (47,186) (56,017) 13,208 (119,752)
Net income (loss) allocable to
to limited partners - Growth/
Shelter Unit.................. (471,865) (560,169) 132,077 (1,197,516)
Net income (loss) allocable
to General Partner............ (5,244) (6,224) 1,467 (13,306)
--------- --------- --------- ----------
Net income (loss)................ (524,295) (622,410) 146,752 (1,330,574)
========= ========= ========= ==========
Net income (loss) per limited
partnership unit:
Current Income Units.......... $ (1.89) $ (2.24) $ .53 $ (4.79)
========= ========= ========= ==========

Growth/Shelter Units.......... $ (21.10) (25.01) 5.91 (53.46)
========= ========= ========= ==========

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 XXI, L.P.

STATEMENTS OF PARTNERS' DEFICIT
(Unaudited)

For the Nine Months Ended September 30, 1995 and 1994

Total
Partners'
General Limited Equity
Partner Partners (Deficit)
---------- ----------- -----------

Balance at December 31, 1993.............. $(329,927) $ (901,571) $(1,231,498)

Net loss
General Partner........................ (13,306) - (13,306)
Current Income Units................... - (119,752) (119,752)
Growth/Shelter Units................... - (1,197,516) (1,197,516)
--------- ---------- ----------
Total net loss............................ (13,306) (1,317,268) (1,330,574)
--------- ---------- ----------

Balance at September 30, 1994............. $ (343,233) $(2,218,839) $(2,562,072)
========= ========== ==========

Balance at December 31, 1994.............. $ (348,843) $(2,774,251) $(3,123,094)

Net income
General Partner........................ 1,467 - 1,467
Current Income Units................... - 13,208 13,208
Growth/Shelter Units................... - 132,077 132,077
--------- ---------- ----------
Total net income.......................... 1,467 145,285 146,752
--------- ---------- ----------

Balance at September 30, 1995............. $ (347,376) $(2,628,966) $(2,976,342)
========= ========== ==========

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 XXI, L.P.

STATEMENTS OF CASH FLOWS
(Unaudited)

Increase (decrease) in Cash and Cash Equivalents

Nine Months Ended
September 30,
-----------------------------------
1995 1994
---------- ----------

Cash flows from operating activities:
Cash received from tenants........................ $5,224,781 $6,332,236
Cash paid to suppliers............................ (1,904,727) (2,516,718)
Cash paid to affiliates........................... (278,977) (730,528)
Interest received................................. 77,148 31,702
Interest received - affiliates.................... 71,614 -
Interest paid..................................... (1,882,234) (2,004,961)
Deferred borrowing costs paid..................... (169,146) (20,000)
Interest paid to affiliates....................... (496,075) (97,948)
Property taxes paid............................... (673,395) (541,111)
---------- ----------
Net cash provided by (used in)
operating activities............................ (31,011) 452,672
---------- ----------

Cash flows from investing activities:
Additions to real estate investments.............. (484,174) (634,688)
Net proceeds from disposition of real estate...... 2,199,917 39,850
Repayment of advances to affiliates............... 300,000 20,874
---------- ----------
Net cash provided by (used in)
investing activities.............................. 2,015,743 (573,964)
---------- ----------

Cash flows from financing activities:
Proceeds from refinancings........................ 60,103 -
Principal payments on mortgage notes
payable......................................... (195,165) (259,553)
Repayment of advances from affiliates............. (973,000) -
---------- ----------
Net cash used in financing activities................ (1,108,062) (259,553)
---------- ----------

Net increase (decrease) in cash and cash
equivalents....................................... 876,670 (380,845)

Cash and cash equivalents at beginning of
period............................................ 1,151,098 1,773,720
---------- ----------

Cash and cash equivalents at end of period........... $ 2,027,768 $1,392,875
========== =========

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 XXI, L.P.

STATEMENTS OF CASH FLOWS
(Unaudited)

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

Nine Months Ended
September 30,
---------------------------------
1995 1994
--------- ---------

Net income (loss).................................... $ 146,752 $(1,330,574)

Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization..................... 1,325,801 1,533,793
Amortization of deferred borrowing costs.......... 45,270 62,908
Amortization of discounts on mortgage
notes payable................................... 15,823 131,937
Interest added to advances to affiliates -
General Partner, net of payments................ 62,186 (23,178)
Interest added to advances from affiliates -
General Partner, net of payments................ (276,837) 93,828
Gain on disposition of real estate................ (1,615,811) (29,440)
Changes in assets and liabilities:
Cash segregated for security deposits........... 23,343 28,527
Accounts receivable............................. 141,264 57,560
Escrow deposits................................. (395,659) 79,443
Deferred borrowing costs........................ (169,146) (20,000)
Prepaid expenses and other assets............... 48,408 (24,086)
Accounts payable and accrued expenses........... 50,100 (434,790)
Accrued property taxes.......................... (36,594) (25,787)
Payable to affiliates - General Partner......... 594,115 320,677
Security deposits and deferred rental income.... 9,974 31,854
---------- ----------

Total adjustments............................. (177,763) 1,783,246
---------- ----------

Net cash provided by (used in)
operating activities............................ $ (31,011) $ 452,672
=========== =========

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 XXI, L.P.

Notes to Financial Statements
(Unaudited)

September 30, 1995

NOTE 1.
- ------

McNeil Real Estate Fund XXI, L.P., (the "Partnership"), formerly known as
Southmark Realty Partners, Ltd. was organized on November 23, 1983 as a limited
partnership under the provisions of the California Revised Limited Partnership
Act to acquire and operate commercial and residential properties. The general
partner of the Partnership is McNeil Partners, L.P. (the "General Partner"), a
Delaware limited partnership, an affiliate of Robert A. McNeil ("McNeil"). The
principal place of business for the Partnership and the General Partner is 13760
Noel Road, Suite 700, LB70, Dallas, Texas, 75240.

In the opinion of management, the financial statements reflect all
adjustments necessary for a fair presentation of the Partnership's financial
position and results of operations. All adjustments were of a normal recurring
nature. However, the results of operations for the nine months ended September
30, 1995 are not necessarily indicative of the results to be expected for the
year ending December 31, 1995.

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, 1994, and the notes thereto, as filed with the
Securities and Exchange Commission, which is available upon request by writing
to McNeil Real Estate Fund XXI, L.P. c/o McNeil Real Estate Management, Inc.,
Investor Services, 13760 Noel Road, Suite 700, LB70, Dallas, Texas 75240.

NOTE 3.
- ------

The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. The Partnership has suffered
recurring losses from operations and has relied on advances from affiliates to
meet its debt obligations and to fund capital improvements. There is no
guarantee that such advances will continue to be available. These conditions
raise substantial doubt about the Partnership's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

NOTE 4.
- ------

Certain reclassifications have been made to prior period amounts to conform
to the current presentation.

NOTE 5.
- ------
The Partnership pays property management fees equal to 5% of
gross rental receipts for its residential properties 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 residential and commercial properties
and leasing services for its residential properties. 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.

The Partnership is paying an asset management fee which is payable 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% to the annualized net operating income of each property or (ii) a value of
$10,000 per apartment unit for residential property and $50 per gross square
foot for commercial property to arrive at the property tangible asset value. The
property tangible asset value is then added to the book value of all other
assets excluding intangible items. The fee percentage decreases subsequent to
1999. Total accrued but unpaid asset management fees of $2,430,388 were
outstanding at September 30, 1995.

The Partnership pays a disposition fee to an affiliate of the General
Partner equal to 3% of the gross sales price for brokerage services performed in
connection with the sale of the Partnership's properties. The fee is due and
payable at the time the sale closes. In connection with the sales of Suburban
Plaza and Wyoming Mall, total accrued but unpaid disposition fees of $346,050
were outstanding at September 30, 1995.

The General Partner has, in its discretion, advanced funds to the
Partnership to meet its working capital requirements. These advances, which are
unsecured and due on demand, accrue interest at a rate equal to the prime
lending rate plus 1%.

The total advances from affiliates at September 30, 1995 and December 31, 1994
consist of the following:

September 30, December 31,
------------ -----------
1995 1994
---------- ---------

Advances from General Partner - revolver............. $ - $ 92,371
Advances from General Partner - other................ - 380,060
Advances purchased by General Partner................ 630,574 1,131,143
Accrued interest payable............................. 30,571 307,408
---------- ---------
$ 661,145 $1,910,982

In April 1995, the Partnership utilized $1,320,745 of the proceeds from the
sales of Suburban Plaza and Wyoming Mall to repay affiliate advances and accrued
interest.

McNeil Real Estate Fund XXVII, L.P., ("McNeil XXVII") an affiliate of the
General Partner, is permitted to make nonrecourse mortgage loans to affiliates
under certain conditions and limitations and subject to availability of funds.
In 1992, the Partnership borrowed $972,000 from McNeil XXVII, which was secured
by a third lien mortgage on Suburban Plaza. This loan and the accrued interest
were repaid at the sale of Suburban Plaza.

Additionally, the Partnership had a $359,000 mortgage loan from an
affiliate of the General Partner that was secured by a second lien mortgage on
Suburban Plaza. This loan and the related accrued interest were also repaid at
the sale of Suburban Plaza.

During 1992, the Partnership made advances totaling $320,874 to McNeil Real
Estate Fund XXII, L.P. ("McNeil XXII"), the joint owner of Wyoming Mall, for
tenant improvements and operations at Wyoming Mall. The advances, which were
unsecured and due on demand, accrued interest at 9 1/2%. During the second
period of 1994, McNeil XXII was able to repay $20,874 of the advances, leaving
$300,000 of advances still owed to the Partnership, plus accrued interest. In
April 1995, McNeil XXII utilized the proceeds from the sale of Wyoming Mall to
repay the remaining balance of $300,000 of the advance plus the accrued interest
of $71,614.

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

Nine Months Ended
September 30,
-------------------------------
1995 1994
------- -------

Property management fees............................. $ 271,870 $335,755
Charged to gain on disposition of real estate:
Disposition fee........................................ 346,050 -
Charged to interest -affiliates:
Interest on advances from affiliates - General
Partner......................................... 70,908 93,828
Interest on mortgage note payable - affiliates.... 94,673 132,487
Charged to general and administrative -affiliates:
Partnership administration........................ 301,077 310,230
Asset management fee.............................. 300,145 405,221
--------- ---------
$1,384,723 $1,277,521
========= =========

The payable to affiliates - General Partner at September 30, 1995 and
December 31, 1994 consisted primarily of unpaid asset management fees, property
management fees, disposition fees and partnership general and administrative
expenses and are due and payable from current operations.

NOTE 6.
- ------

On March 31, 1995, Suburban Plaza was sold to an unrelated third party for
a cash price of $6,910,000. Cash proceeds and the gain on the disposition is
detailed below:

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

Sales Price.......................................... $ 6,910,000 $ 6,910,000

Selling costs........................................ (293,754) (86,454)
Retirement of mortgage discount...................... (683,198)
Carrying value....................................... (3,691,594)
Accounts receivable.................................. (315,979)
Deferred borrowing costs............................. (479)
Prepaid expenses..................................... (63,548)
----------
Gain on disposition of real estate................... $ 1,861,448
==========

Retirement of mortgage note.......................... (3,963,489)
Retirement of mortgage notes - affiliates............ (1,331,000)
Accrued interest paid on retired notes............... (146,111)
Real estate tax proration............................ (38,368)
Credit for security deposit liability................ (22,325)
----------
Net cash proceeds.................................... $ 1,322,253
==========

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

Sales Price.......................................... $4,625,000 $4,625,000

Selling costs........................................ (234,838) (96,088)
Mortgage note prepayment penalty..................... (138,441) (138,441)
Carrying value....................................... (4,325,663)
Accounts receivable.................................. (81,749)
Deferred borrowing costs............................. (49,910)
Prepaid expenses..................................... (40,036)
----------

Loss on disposition of real estate................... $ (245,637)
==========

Retirement of mortgage note.......................... (3,452,337)
Payment of 1994 taxes at closing..................... (23,735)
Real estate tax proration............................ (14,154)
Credit for security deposit liability................ (22,581)
----------
Net cash proceeds.................................... $ 877,664
==========

NOTE 7.
- ------

The mortgage notes payable on Bedford Green and Woodcreek Apartments that
matured in June 1995 were refinanced in July 1995 for $3,300,000 and $2,812,500,
respectively. The new mortgage loans bear an interest rate of 8.48%, require
monthly principal and interest payments of $25,327 and $21,586, respectively,
and mature in July 2002. The following is a summary of the cash proceeds
relating to the refinancings:

Bedford
Green Woodcreek Total
--------- --------- ---------

New loan proceeds.................. $3,300,000 $2,812,500 $6,112,500
Existing debt retired.............. (3,118,570) (2,933,827) (6,052,397)
--------- --------- ---------
Loan proceeds.................... $ 181,430 $ (121,327) $ 60,103
========= ========= =========

The Partnership incurred loan costs of $169,146 related to the refinancing.
An additional $404,074 of tax, insurance and property replacement escrows were
established at the closing of the refinancing.

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

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

Net income for the first nine months of 1995 was $146,752 as compared to a
net loss of $1,330,574 for the same period in 1994.

On March 31, 1995, Wyoming Mall was sold to an unrelated third party for a
cash price of $9,250,000. The Partnership had a 50% undivided interest in the
assets, liabilities and operations of Wyoming Mall, owned jointly with McNeil
Real Estate Fund XXII, L.P. The Partnership received net cash proceeds of
$877,664 from the sale of the property and recorded a loss on disposition of
real estate of $245,637. The Partnership recorded $258,066 of revenue and
$272,049 of expense for the first nine months of 1995 for Wyoming Mall.

Suburban Plaza was sold to an unrelated third party for a cash price of
$6,910,000. The Partnership received net cash proceeds of $1,322,253 and
recorded a gain on disposition of real estate of $1,861,448. The Partnership
recorded $306,746 of revenue and $328,727 of expense for the first nine months
of 1995 for Suburban Plaza.

The Partnership's working capital needs have been supported by net proceeds
from the December 1993 sale of Hickory Lake Apartments and the March 1995 sales
of Suburban Plaza and Wyoming Mall and by deferring certain affiliate payables.
In addition, the sale of Homestead Manor on February 22, 1994 provided net cash
proceeds of $39,850.

The Partnership has had little ready cash reserves since its inception. It
has been largely dependent on affiliates to support its operations. Although no
additional advances from affiliates were required during the first nine months
of 1995, at September 30, 1995 the Partnership owed affiliate advances of
$661,145 and payables to affiliates for property management fees, Partnership
general and administrative expenses, asset management fees and disposition fees
totaling $4,019,343. In April 1995, the proceeds from the sales of Suburban
Plaza and Wyoming Mall enabled the Partnership to repay $1,320,745 of affiliate
advances and accrued interest.

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

Revenue:

Rental revenue decreased by $485,546 and $1,007,150 for the three and nine
months ended September 30, 1995, respectively, as compared to the same periods
in 1994. The decrease is primarily due to the sales of Suburban Plaza and
Wyoming Mall in the first quarter of 1995.

Interest income increased by $6,225 and $31,696 for the three and nine
months ended September 30, 1995, respectively, as compared to the same periods
in 1994. The increase was due primarily to higher average cash balances that
resulted from the sale proceeds of Suburban Plaza and Wyoming Mall.

During the first quarter of 1995, the partnership recognized a gain on
disposition of real estate on Suburban Plaza of $1,861,448 and a loss on the
sale of Wyoming Mall of $245,637. During the first quarter of 1994, the
partnership recognized a gain on disposition of real estate on Homestead Manor
Apartments of $29,440. Also related to the sale of Homestead Manor Apartments,
the partnership reduced previously accrued property taxes of $154,134, which was
recorded as other income during the first quarter of 1994.

Expenses:

Total expenses decreased by $575,912 and $1,016,591 for the three and nine
months ended September 30, 1995, respectively, as compared to the same periods
in 1994. The decreases in interest expense, depreciation and amortization
expense, property taxes, utilities and property management fees are primarily
due to the sales of Suburban Plaza and Wyoming Mall in the first quarter of
1995.

Interest expense-affiliates decreased by $53,814 and $60,734 for the three
and nine months ended September 30, 1995, respectively, as compared to the same
periods in 1994. The decrease was mainly due to the repayment of $973,000 of
advances from affiliates in the second quarter of 1995.

Repairs and maintenance expense decreased by $46,044 and $130,873 for the
three and nine months ended September 30, 1995, respectively as compared to the
same periods in 1994. The decrease was mainly due to the sales of Suburban Plaza
and Wyoming Mall. Additionally, Evergreen Square and Governour's Square
Apartments completed interior upgrade programs in early 1994; therefore contract
painting and supplies as well as interior light fixture replacement expenses
decreased in 1995.

Other property operating expenses increased by $22,558 and $83,613 for the
three and nine months ended September 30, 1995, respectively, as compared to the
same period in 1994, mainly due to an increase in property hazard insurance
rates at Governour's Square, Breckenridge and Evergreen Square Apartments. In
addition, Suburban Plaza had an increase in legal fees relating to the sale of
the property in March 1995.

General and administrative expense decreased by $10,627 and $16,140 for the
three and nine months ended September 30, 1995, as compared to the same period
in 1994. In 1994 the Partnership paid approximately $11,000 of state withholding
taxes on behalf of the limited partners. No such withholding taxes were paid in
1995.

General and administrative expense-affiliates decreased by $41,636 and
$114,229 for the three and nine months ended September 30, 1995, as compared to
the same period in 1994. The decrease was due mainly to a decline in the asset
management fees, the result of a decrease in tangible asset value of the
partnership, on which the fee is based, primarily because of the sale of
Homestead Manor Apartments, Suburban Plaza and Wyoming Mall.

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

At September 30, 1995, the Partnership held cash and cash equivalents of
$2,027,768.

The Partnership used $31,011 of cash from operating activities during the
first nine months of 1995 as compared to cash provided by operations of $452,672
for the same period of 1994. The decrease in cash received from tenants, cash
paid to suppliers and interest paid is primarily due to the sales of Suburban
Plaza and Wyoming Mall. Interest paid to affiliates increased due to the payment
of accrued interest on affiliate advances. The Partnership incurred $169,146 of
deferred borrowing costs relating to the refinancings of Bedford Green and
Woodcreek Apartments. Property taxes paid and escrowed increased due to the
additional escrow deposits required when Bedford Green and Woodcreek Apartments
were refinanced.

Cash provided by investing activities totaled $2,015,743 for the first nine
months of 1995 as compared to cash used in investing activities of $573,964 for
the same period of 1994. Cash used for additions to real estate totaled $484,174
for the nine months ended September 30, 1995 as compared to $634,688 for the
same period of the prior year. The Partnership received $2,199,917 of proceeds
from the sales of Suburban Plaza and Wyoming Mall during the first nine months
of 1995. The Partnership received $39,850 from the sale of Homestead Manor
Apartments during the first nine months of 1994. Additionally, in 1995 the
Partnership received $300,000 from McNeil XXII for repayment of previous
advances for Wyoming Mall.

Cash used in financing activities totaled $1,108,062 for the first nine
months of 1995 as compared to $259,553 for the same period of 1994. In April
1995, the Partnership utilized a portion of the property sales proceeds to repay
affiliate advances totaling $973,000. This increase was partially offset by a
reduction in mortgage principal payments due to the retirement of the mortgage
notes related to Wyoming Mall and Suburban Plaza when the properties were sold.
Additionally the mortgage notes related to Bedford Green and Woodcreek
Apartments were refinanced in July 1995 giving the Partnership $60,103 of net
proceeds.

Short-term liquidity
- --------------------

In March 1995, the Partnership sold two of its properties, Suburban Plaza
and Wyoming Mall, for net cash proceeds of $2,199,917. In April 1995, the
Partnership utilized $1,320,745 of the proceeds to repay advances from
affiliates and accrued interest.

The mortgage notes payable on Bedford Green and Woodcreek Apartments that
matured in June 1995 were refinanced in July 1995 for $3,300,000 and $2,812,500,
respectively. The new mortgage loans bear an interest rate of 8.48%, require
monthly principal and interest payments of $25,327 and $21,586, respectively,
and mature in July 2002. The Partnership incurred loan costs of $169,146 related
to the refinancing. An additional $404,074 of tax, insurance and property
replacement escrows were established at the closing of the refinancing.

For the rest of 1995, present cash balances, operations of the properties
and proceeds from the sale of Suburban Plaza and Wyoming Mall are expected to
provide sufficient cash for normal operating expenses, debt service payments and
budgeted capital improvements. The Partnership has no established lines of
credit from outside sources. Although affiliates of the Partnership have
previously funded cash deficits, there can be no assurance the Partnership will
receive additional funds. Other possible actions to resolve cash deficiencies
include refinancing, deferring major capital or repair expenditures on
Partnership properties except where improvements are expected to enhance the
competitiveness and marketability of the properties, deferring payables to or
arranging financing from affiliates or the ultimate sale of other properties.

The General Partner has established a revolving credit facility not to
exceed $5,000,000 in the aggregate which is available on a "first-come
first-served" basis to the Partnership and other affiliated partnerships, if
certain conditions are met. Borrowings under the facility may be used to fund
deferred maintenance, refinancing obligations and working capital needs. There
is no assurance that the Partnership will receive any additional funds under the
facility because no amounts have been reserved for any particular partnership.
As of September 30, 1995, $2,362,004 remained available for borrowing under the
facility; however, additional funds could be available as other partnerships
repay existing borrowings. Additionally, the General Partner has, in its
discretion, advanced funds to the Partnership in addition to the revolving
credit facility. The General Partner is not obligated to advance funds to the
Partnership and there is no assurance that the Partnership will receive
additional funds.

McNeil Real Estate Fund XXVII, L.P., ("McNeil XXVII") an affiliate of the
General Partner, is permitted to make nonrecourse mortgage loans to affiliates
under certain conditions and limitations and subject to availability of funds.
In 1992, the Partnership borrowed $972,000 from McNeil XXVII, which was secured
by a third lien mortgage on Suburban Plaza. This loan was repaid at the sale of
Suburban Plaza on March 31, 1995.

Long-term liquidity
- -------------------

Operations of the Partnership's properties are expected to provide
sufficient cash flow for operating expenses, debt service payments and capital
improvements in the foreseeable future. The proceeds from the sales of Wyoming
Mall and Suburban Plaza will enable the Partnership to reduce a significant
portion of its affiliate debt as well as affiliate payables. The Partnership has
significant mortgage maturities during 1997, and management expects to refinance
these mortgage notes as they mature. If management is unable to refinance the
mortgage notes as they mature; the Partnership will require other sources of
cash. No such sources have been identified.

These conditions raise substantial doubt about the Partnership's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

Distributions
- -------------

To maintain adequate cash balances of the Partnership, distributions to
Current Income Unit holders were suspended in 1989. There have been no
distributions to Growth/Shelter Units holders. Distributions to Unit holders
will remain suspended for the foreseeable future. The General Partner will
continue to monitor the cash reserves and working capital needs of the
Partnership to determine when cash flows will support distributions to the Unit
holders.

PART II. OTHER INFORMATION

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

(a) Exhibits.

Exhibit
Number Description

4. Amended and Restated Limited Partnership Agreement dated March 26, 1992.
(Incorporated by reference to the Current Report of the Registrant on Form 8-K
dated March 26, 1992, as filed on April 9, 1992).

10.15 Loan Agreement dated July 14, 1995 between Fleet Real Estate Capital, Inc. and
Bedford Green Fund XXI, L.P.

10.16 Loan Agreement dated July 14, 1995 between Fleet Real Estate Capital, Inc. and
Woodcreek Fund XXI, L.P.

11. Statement regarding computation of Net Income (Loss) per Limited Partnership
Unit: Net income (loss) per limited partnership unit is computed by dividing
net income (loss) allocated to the limited partners by the weighted average
number of limited partnership units outstanding. Per unit information has
been computed based on 24,949 and 24,982 Current Income Units outstanding in
1995 and 1994, respectively, and 22,359 and 22,400 Growth/Shelter Units
outstanding in 1995 and 1994, respectively.

(b) Reports on Form 8-K. There were no reports on Form 8-K filed during the
quarter ended September 30, 1995.

MCNEIL REAL ESTATE FUND XXI, L.P.

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 XXI, L.P.

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

By: McNeil Investors, Inc., General Partner

November 13, 1995 By: /s/ Donald K. Reed
- ------------------------------------- ---------------------------------------------
Date Donald K. Reed
President and Chief Executive Officer

November 13, 1995 By: /s/ Robert C. Irvine
- ------------------------------------- ---------------------------------------------
Date Robert C. Irvine
Chief Financial Officer of McNeil Investors, Inc.
Principal Financial Officer

November 13, 1995 By: /s/ Carol A. Fahs
- ------------------------------------- ---------------------------------------------
Date Carol A. Fahs
Chief Accounting Officer of McNeil Real Estate
Management, Inc.