MCNEIL REAL ESTATE FUND X LTD, 10-K405, 1998-03-30

MCNEIL REAL ESTATE FUND X LTD
10-K405, 1998-03-30
OPERATORS OF NONRESIDENTIAL BUILDINGS

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

FORM 10-K405

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

For the fiscal year ended December 31, 1997
------------------------------------------------

[ ] 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 0-9325
--------

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

California 94-2577781
- --------------------------------------------------------------------------------
(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 ]

133,248 of the registrant's 134,980 limited partnership units are held by
non-affiliates of this registrant. 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 44

TOTAL OF 48 PAGES
<PAGE>
PART I

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

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

McNeil Real Estate Fund X, Ltd. (the "Partnership") was organized on June 1,
1979 as a limited partnership under 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 ("McNeil"). The Partnership is governed by an amended and restated
partnership agreement dated October 9, 1991, as amended (the "Amended
Partnership Agreement"). Prior to October 9, 1991, Pacific Investors Corporation
(the prior "Corporate General Partner"), a wholly-owned subsidiary of Southmark
Corporation ("Southmark"), and McNeil were the general partners of the
Partnership, which was governed by an agreement of limited partnership (the
"Original Partnership Agreement") dated June 1, 1979. The principal place of
business for the Partnership and the General Partner is 13760 Noel Road, Suite
600, LB70, Dallas, Texas, 75240.

On December 14, 1979, a Registration Statement on Form S-11 was declared
effective by the Securities and Exchange Commission whereby the Partnership
offered for sale $67,500,000 of limited partnership units ("Units"). The Units
represent equity interests in the Partnership and entitle the holders thereof to
participate in certain allocations and distributions of the Partnership. The
sale of Units closed on July 17, 1980, with 135,000 Units sold at $500 each, or
gross proceeds of $67,500,000 to the Partnership. The original general partners
purchased an additional 200 Units for $100,000. Limited partners relinquished
220 Units between 1993 and 1996, leaving 134,980 Units outstanding at December
31, 1997.

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, McNeil nor the
Corporate 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 interest in the Corporate 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.

On February 14, 1991, pursuant to the asset purchase agreement as amended on
that date: (a) an affiliate of McNeil purchased the Corporate General Partner's
economic interest in the Partnership; (b) McNeil became the managing general
partner of the Partnership pursuant to an agreement with the Corporate General
Partner that delegated management authority to McNeil; and (c) 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 and commenced management of the Partnership's
properties pursuant to an assignment of the existing property management
agreements from the Southmark affiliates.
<PAGE>
On October 11, 1991, the limited partners approved a restructuring proposal
providing for (i) the replacement of the Corporate General Partner and McNeil
with the General Partner; (ii) the adoption of the Amended Partnership
Agreement, which substantially alters provisions of the Original Partnership
Agreement relating to, among other things, compensation, reimbursement of
expenses, and voting rights; and (iii) the approval of a new property management
agreement with McREMI, the Partnership's property manager.

The Amended Partnership Agreement provides for a Management Incentive
Distribution ("MID") to replace all other forms of general partner compensation
other than property management fees and reimbursement of certain costs.
Additional Units may be issued in connection with the payment of the MID
pursuant to the Amended Partnership Agreement. See Item 8 - Note 2 -
"Transactions with Affiliates." For a discussion of the methodology for
calculating and distributing the MID see Item 13 - Certain Relationships and
Related Transactions.

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, and such
settlement was approved by the Bankruptcy Court.

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 $69,234 in
cash, and common and preferred stock in the reorganized Southmark. The cash and
stock represent the Partnership's pro-rata share of Southmark assets available
for Class 8 Claimants. The Partnership sold the Southmark common and preferred
stock in May 1995 for $22,283 which, when combined with the cash proceeds from
Southmark, resulted in a gain on settlement of litigation of $91,517.

CURRENT OPERATIONS
- ------------------

General:

The Partnership is engaged in diversified real estate activities, including the
ownership, operation and management of residential and commercial real estate
and other real estate related assets. At December 31, 1997, the Partnership
owned nine income-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 is managed by the General Partner, and, in accordance with the
Amended Partnership Agreement, the Partnership reimburses affiliates of the
General Partner for certain expenses incurred by the affiliates in connection
with the management of the Partnership's business.
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 business of the Partnership is not seasonal.

<PAGE>
Business Plan:

Pursuant to the Partnership's previously announced liquidation plans, the
Partnership has recently retained PaineWebber, Incorporated as its exclusive
financial advisor to explore alternatives to maximize the value of the
Partnership. The alternatives being considered by the Partnership include,
without limitation, a transaction in which limited partnership interests in the
Partnership are converted into cash. The General Partner of the Partnership or
entities or persons affiliated with the General Partner will not be involved as
a purchaser in any of the transactions contemplated above. Any transaction will
be subject to certain conditions including (i) approval by the limited partners
of the Partnership, and (ii) receipt of an opinion from an independent financial
advisory firm as to the fairness of the consideration received by the
Partnership pursuant to such transaction. Finally, there can be no assurance
that any transaction will be consummated, or as to the terms thereof.

Competitive Conditions:

Since the principal business of the Partnership is to own and operate real
estate, the Partnership is subject to all of the risks incident 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 or rent 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) 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 competitive conditions at the Partnership's
properties.

Forward-Looking Information:

Within this document, certain statements are made as to the expected occupancy
trends, financial condition, results of operations, and cash flows of the
Partnership for periods after December 31, 1997. All of these statements are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These statements are not
historical and involve risks and uncertainties. The Partnership's actual
occupancy trends, financial condition, results of operations, and cash flows for
future periods may differ materially due to several factors. These factors
include, but are not limited to, the Partnership's ability to control costs,
make necessary capital improvements, negotiate sales or refinancings of its
properties and respond to changing economic and competitive factors.

<PAGE>
Environmental Matters:

The environmental laws of the Federal government and of certain state and local
governments impose liability on current property owners for the clean-up of
hazardous and toxic substances discharged on the property. This liability may be
imposed without regard to the timing, cause or person responsible for the
release of such substances onto the property. The Partnership could be subject
to such liability in the event that it owns properties having such environmental
problems. The Partnership has no knowledge of any pending claims or proceedings
regarding such environmental problems.

Other Information:

In August 1995, High River Limited Partnership, a Delaware limited partnership
controlled by Carl C. Icahn ("High River") made an unsolicited tender offer to
purchase from holders of Units up to approximately 45% of the outstanding Units
of the Partnership for a purchase price of $72 per Unit. In September 1996, High
River made another unsolicited tender offer to purchase any and all of the
outstanding Units of the Partnership for a purchase price of $85.50 per Unit. In
addition, High River made unsolicited tender offers for certain other
partnerships controlled by the General Partner. The Partnership recommended that
the limited partners reject the tender offers made with respect to the
Partnership and not tender their Units. The General Partner believes that as of
January 31, 1998, High River has purchased 8.8% 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.

Management has begun to review its information technology infrastructure to
identify any systems that could be affected by the year 2000 problem. The year
2000 problem is the result of computer programs being written using two digits
rather than four to define the applicable year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in major systems failure or
miscalculations. The information systems used by the Partnership for financial
reporting and significant accounting functions were made year 2000 compliant
during recent systems conversions. The Partnership is in the process of
evaluating the computer systems at the various properties. The Partnership also
intends to communicate with suppliers, financial institutions and others to
coordinate year 2000 issues. Management believes that the remediation of any
outstanding year 2000 conversion issues will not have a material or adverse
effect on the Partnership's operations.

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

The following table sets forth the real estate investment portfolio of the
Partnership at December 31, 1997. The buildings and the land on which they are
located are owned by the Partnership in fee, subject in each case to a first
lien deed of trust as set forth more fully in Item 8 - Note 5 - "Mortgage Notes
Payable" and Note 6 - "Mortgage Notes Payable - Affiliate." See also Item 8 -
Note 4 - "Real Estate Investments" and Schedule III - "Real Estate Investments
and Accumulated Depreciation and Amortization." In the opinion of management,
the properties are adequately covered by insurance.
<TABLE>
<CAPTION>

Net Basis 1997 Date
Property Description of Property Debt Property Tax Acquired
- -------- ----------- ----------- ---- ------------ --------

Real Estate Investments:

<S> <C> <C> <C> <C> <C>
Briarwood (1) Apartments
Tucson, AZ 196 units $ 1,796,412 $ 2,085,745 $ 55,440 07/80

Coppermill (2) Apartments
Tulsa, OK 544 units 3,496,112 4,962,725 91,866 10/80

La Plaza Office Building
Las Vegas, NV 105,500 sq. ft. 4,740,655 3,136,029 63,301 09/80

Lakeview Plaza Retail Center
Lexington, KY 172,252 sq. ft. 3,488,111 3,119,519 74,252 07/80

Orchard (3) Apartments
Lawrence, IN 378 units 3,194,711 6,072,238 231,467 12/80

Quail Meadows (4) Apartments
Wichita, KS 440 units 4,036,535 5,754,137 69,133 06/80

Regency Park (5) Apartments
Ft. Wayne, IN 226 units 1,970,586 2,355,844 134,145 06/80

Sandpiper (6) Apartments
Westminster, CO 360 units 3,526,993 5,350,389 60,008 04/80

Spanish Oaks (7) Apartments
San Antonio, TX 239 units 2,316,311 3,932,977 124,223 08/80
--------------- ------------- ---------

$ 28,566,426 $ 36,769,603 $ 903,835
=============== ============= =========
</TABLE>
- ----------------------------------------
Total: Apartments - 2,383 units
Retail Center - 172,252 sq. ft.
Office Building - 105,500 sq. ft.

<PAGE>
(1) Briarwood Apartments is owned by Briarwood Fund X Limited Partnership,
which is wholly-owned by the Partnership.

(2) Coppermill Apartments is owned by Coppermill Fund X Limited
Partnership, which is wholly-owned by the Partnership.

(3) Orchard Apartments is owned by Orchard Fund X Limited Partnership,
which is wholly-owned by the Partnership.

(4) Quail Meadows Apartments is owned by Quail Meadows Fund X Limited
Partnership, which is wholly-owned by the Partnership.

(5) Regency Park Apartments is owned by Regency Park Fund X Associates,
L.P. which is wholly-owned by the Partnership and the General
Partner.

(6) Sandpiper Apartments is owned by Sandpiper Fund X Limited Partnership,
which is wholly-owned by the Partnership.

(7) Spanish Oaks Apartments is owned by Spanish Fund X, Ltd., which is
wholly-owned by the Partnership.

The following table sets forth the occupancy rates and rent per square foot of
the Partnership's properties for each of the last five years:

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
------------- ------------- -------------- ------------- -------
<S> <C> <C> <C> <C> <C>
Briarwood
Occupancy Rate............ 95% 84% 92% 99% 99%
Rent Per Square Foot...... $9.57 $9.34 $9.91 $9.62 $8.58

Coppermill
Occupancy Rate............ 92% 89% 94% 92% 92%
Rent Per Square Foot...... $6.01 $5.74 $5.46 $5.28 $4.99

La Plaza
Occupancy Rate............ 78% 88% 77% 97% 99%
Rent Per Square Foot...... $13.06 $12.41 $10.10 $13.97 $12.56

Lakeview Plaza
Occupancy Rate............ 92% 99% 98% 100% 100%
Rent Per Square Foot...... $5.26 $5.55 $4.71 $5.69 $5.35

Orchard
Occupancy Rate............ 86% 93% 98% 94% 93%
Rent Per Square Foot...... $7.26 $7.40 $7.25 $6.95 $6.24

Quail Meadows
Occupancy Rate............ 97% 91% 94% 89% 77%
Rent Per Square Foot...... $6.65 $6.21 $5.80 $5.62 $5.53

Regency Park
Occupancy Rate............ 87% 89% 92% 94% 89%
Rent Per Square Foot...... $5.49 $5.19 $5.45 $5.09 $4.46
</TABLE>

Sandpiper
Occupancy Rate............ 94% 96% 94% 95% 94%
Rent Per Square Foot...... $9.83 $9.48 $9.29 $8.93 $8.33

Spanish Oaks
Occupancy Rate............ 94% 87% 90% 91% 96%
Rent Per Square Foot...... $6.13 $6.17 $6.18 $5.97 $5.64

</TABLE>

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

Competitive Conditions at Properties
- ------------------------------------

Briarwood Apartments
- --------------------

Most of the tenants at Briarwood Apartments are students at nearby University of
Arizona. Briarwood has an excellent location near the university and a bike
route to the university. Due to the heavy student-tenant profile, occupancy at
the property typically drops during the summer months, giving Briarwood an
average occupancy rate four to five percentage points below market averages.
After a two-year decline, the Tucson market began a recovery in the second half
of 1997. Briarwood's year end occupancy rate improved to 95% at December 31,
1997, up from 84% a year earlier. New construction in the submarket has ceased,
except for dormitory rooms being added by the University of Arizona. Briarwood's
excellent location helps the property absorb market fluctuations better than
most of its competitors.

Coppermill Apartments
- ---------------------

The average occupancy rate at Coppermill Apartments is 92%, slightly less than
the local area average of 93 to 94%. Most properties in the immediate area,
including Coppermill, were built by the same developer using identical floor
plans. Thus, the local market is very price-sensitive. Management is working to
differentiate Coppermill's units by upgrading interior fixtures and appliances.
Major road work is expected to commence this summer in front of Coppermill. The
road work is expected to completely block the two main entrances to the
property. As a result, occupancy rates are expected to decrease as prospective
and current tenants will find it difficult to get to the property. The road work
is expected to last until the summer of 1999.

<PAGE>
La Plaza Business Center
- ------------------------

The average occupancy rate for La Plaza Business Center was 85% for 1997. Year
end occupancy fell to 78% after one tenant vacated its space in December. The
Partnership plans an aggressive leasing program for 1998 aimed at increasing
occupancy to 96% by year end. The Partnership continues to invest significant
sums into capital improvements at La Plaza for tenant improvements, building
code compliance, updating building interiors, and reconfiguring interior space.
The investments will continue through 1998. The Partnership intends to fund the
tenant improvements as lease negotiations proceed with new tenants. Demand for
office space in Las Vegas is expected to be strong in 1998. New construction is
aimed at the high-end of the market, and is not expected to compete with La
Plaza.

Lakeview Plaza
- --------------

Lakeview Plaza's ideal location and good curb appeal have served the property
well. Over the past two years, there has been significant turnover amongst the
property's tenants. One of the two anchor tenant spaces was sublet to two
tenants in 1996. Several other tenants have vacated their space or have
indicated that they will when their respective leases expire. The local market
area appears to be strong, with several national retailers opening new stores or
announcing plans for new stores in the Lexington area. There are several, newer
competing properties in close proximity to Lakeview Plaza.

Orchard Apartments
- ------------------

Reflecting a soft Indianapolis-area market, occupancy at Orchard Apartments
decreased during 1997. Continued first-time home buying in 1998 as well as
continued new apartment construction is expected to keep occupancy rates
depressed during the coming year. Rental revenue, as a result, will likely not
increase significantly in 1998. Due to good curb appeal and a favorable local
reputation, Orchard Apartments is able to command rental rates slightly in
excess of its competitors.

Quail Meadows Apartments
- ------------------------

Quail Meadows Apartments is one of the nicer properties in the Wichita area.
Both interiors and exteriors of the property are above average relative to the
competition. Quail Meadows has maintained occupancy rates higher than market
averages. The Wichita economy is thriving with record employment levels. Quail
Meadows is expected to maintain strong occupancy rates, and to increase rental
rates during 1998. Some new apartment construction is under way in the Wichita
area, but no new construction is planned for Quail Meadows' submarket.

<PAGE>
Regency Park Apartments
- -----------------------

Occupancy rates at Regency Park Apartments have been negatively impacted by low
interest rates and a strong single-family housing market. However, the capital
improvements placed in service over the past several years have enabled Regency
Park to be a solid performer in its market. The property competes with numerous
properties, some of which are newer or have more appeal to prospective tenants.
The rental market in the Ft. Wayne area, however, remains price sensitive.
Improvements in operating results generally are coming through improved
occupancy rather than rate increases.

Sandpiper Apartments
- --------------------

Capital improvements placed in service since 1992 have allowed Sandpiper
Apartments to repeatedly increase its base rental rates. Occupancy and rental
rates are above market averages. There is significant new construction under
development in the metropolitan area, but only minimal construction is expected
in Sandpiper's submarket. A well-maintained Sandpiper should be able to maintain
high occupancy rates as well as periodically increase rental rates.

Spanish Oaks Apartments
- -----------------------

The average occupancy rate at Spanish Oaks Apartments has decreased to 90.5%
during the past three years due to competition with new construction, older
properties that have been renovated, and rate hikes at Spanish Oaks. Rental
rates at Spanish Oaks remain below San Antonio market averages. The interiors at
Spanish Oaks will need to be updated to allow the property to raise its rents to
current market levels. Also of concern is the reliance upon personnel employed
or stationed at Fort Sam Houston Army Base for many of the property's tenants.

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

<TABLE>
<CAPTION>
Number of Annual % of Gross
Expirations Square Feet Rent Annual Rent
----------- ----------- ------ -----------
Real Estate Investments:
<C> <C> <C> <C> <C>
La Plaza
1998 18 17,494 $ 269,244 21%
1999 4 13,826 252,306 20%
2000 5 27,452 422,928 33%
2001 10 20,728 326,356 26%
2002-2007 0 - - -

Lakeview Plaza
1998 4 10,677 97,171 13%
1999 2 6,071 59,196 8%
2000 3 3,479 36,923 5%
2001 1 6,165 72,500 10%
2002 0 - - -
2003 1 3,150 26,772 3%
2004 2 121,942 455,705 61%
2005-2007 0 - - -

</TABLE>

<PAGE>
No residential tenant leases 10% or more of the available rental space of any
residential property. The following schedule reflects information on commercial
tenants occupying 10% or more of the leasable square feet for each property:

Nature of
Business Square Footage Lease
Use Leased Annual Rent Expiration
- --------- -------------- ----------- ----------
<S> <C> <C> <C>
La Plaza:
Governmental agency 12,097 $226,053 1999

Lakeview Plaza:
Discount department store 78,337 253,000 2004
Grocery store 43,605 202,705 2004

</TABLE>

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 as noted below.

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

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

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

Defendants filed a demurrer to the consolidated and amended complaint and a
motion to strike on February 14, 1997, seeking to dismiss the consolidated
and amended complaint in all respects. A hearing on Defendant's demurrer
and motion to strike was held on May 5, 1997. The Court granted Defendants'
demurrer, dismissing the consolidated and amended complaint with leave to
amend. On October 31, 1997, the Plaintiffs filed a second consolidated and
amended complaint. Defendants must move, answer or otherwise respond to the
second consolidated and amended complaint by June 30, 1998.

2) The First National Bank of Chicago, as Trustee Under That Certain Pooling
and Servicing Agreement Dated as of December 1, 1995, for Resolution Trust
Corporation Commercial Mortgage Pass-Through Certificates, Series 1995-C2
v. McNeil Real Estate Fund X, Ltd., McNeil Partners, L.P. and McNeil
Investors, Inc. - U.S. District Court, Northern District of Dallas, Dallas
Division; Civil Action No. 33-96CV3198-D; and District Court, Dallas
County, Texas, F-116th Judicial District; Case No.: 96-13066(P96014).

The Plaintiffs are the holder of a certain Second Lien Wraparound
Promissory Note ("Wraparound Note") secured by the Spanish Oaks Apartments.
This action involves a dispute of the principal payoff amount on the
Wraparound Note. The Plaintiffs contend that the payoff balance is
$3,399,592; however, the Partnership has calculated the payoff balance to
be significantly less. On January 26, 1996, the Partnership refinanced the
Spanish Oaks Apartments. At that time, the $3,399,592 was escrowed with the
American Title Company. The Plaintiffs claim that pursuant to the terms of
the Wraparound Note, the Partnership owes the entire escrowed balance. The
parties have been ordered to mediation before July 28, 1997. However,
settlement was reached in this matter with $3,046,000 being paid to the
Plaintiffs. A Compromise and Settlement Agreement and Release dated June
26, 1997 has been signed by all parties. An Order of Dismissal with
prejudice was entered by the Judge.

For discussion of the Southmark bankruptcy, see Item 1 - Business.

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

None.

<PAGE>
PART II

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

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

(B) Title of Class Number of Record Unit Holders

Limited partnership units 6,323 as of January 31, 1998

(C) No distributions were paid to the limited partners in 1997 or
1996. During the last week of March 1998, the Partnership distributed
$4,500,000 to limited partners of record as of March 1, 1998. The
Partnership accrued distributions of $981,440 and $1,048,667 for the
benefit of the General Partner for the years ended December 31, 1997
and 1996, respectively. These distributions are the Management
Incentive Distribution ("MID") pursuant to the Amended Partnership
Agreement. See Item 8 - Note 2 - "Transactions with Affiliates." See
Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations for a discussion of the likelihood that the
Partnership will continue distributions to the limited partners.

ITEM 6. SELECTED FINANCIAL DATA
- ------- -----------------------

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

<TABLE>
<CAPTION>
Statements of Years Ended December 31,
Operations 1997 1996 1995 1994 1993
- ------------------ -------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Rental revenue............... $ 15,471,277 $ 16,089,109 $ 16,878,076 $ 17,375,904 $ 16,217,889
Gain on involuntary
conversion.................. 65,800 285,127 - - 268,434
Gain on sales of real estate. 3,063,438 353,389 3,183,698 - -
Total revenue................ 18,829,962 16,853,542 20,258,594 17,428,487 16,542,802
Income (loss) before
extraordinary items......... 3,636,976 872,382 2,193,164 (1,199,904) (1,693,057)
Extraordinary items.......... 518,495 269,596 - 292,539 (1,078,519)
Net income (loss)............ 4,155,471 1,141,978 2,193,164 (907,365) (2,771,576)

Net income (loss) per
limited partnership unit:
Income (loss) before
extraordinary items........ $ 14.99 $ 6.14 $ 15.43 $ (10.25) $ (15.62)
Extraordinary items......... 2.14 1.90 - 2.06 (7.58)
-------------- ------------ ------------ ----------- -----------
Net income (loss)........... $ 17.13 $ 8.04 $ 15.43 $ (8.19) $ (23.20)
============== ============ ============ =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
As of December 31,
Balance Sheets 1997 1996 1995 1994 1993
- -------------- ------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Real estate investments, net... $ 28,566,426 $ 30,257,120 $ 36,699,530 $ 37,024,893 $ 45,705,474
Assets held for sale........... - 5,308,731 2,237,733 7,215,032 -
Total assets................... 37,112,416 41,407,352 43,638,649 48,379,933 50,632,244
Mortgage notes payable, net.... 36,769,603 42,412,292 44,454,316 52,078,850 54,484,455
Partners' deficit.............. (3,046,025) (6,220,056) (6,313,367) (7,442,274) (5,900,107)

</TABLE>
See Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations. The Partnership sold the following properties during the
five year period ended December 31, 1997.

Property Date Sold
-------- ---------

Iberia Plaza December 12, 1997
Cave Springs Corners June 5, 1997
Parkway Plaza September 18, 1996
The Courts Apartments September 14, 1995

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

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

The Partnership was formed to acquire, operate and ultimately dispose of a
portfolio of income-producing real properties. As of December 31, 1997, the
Partnership owned seven apartment buildings, one retail shopping center and one
office building. All of the Partnership's properties are subject to mortgage
indebtedness.

The Partnership sold two retail shopping centers during 1997, Cave Spring
Corners, located in Roanoke, Virginia, and Iberia Plaza, located in New Iberia,
Louisiana. The decision to sell the properties was influenced by the General
Partner's belief that the appreciation potential of the two properties was
limited, the impending maturities of the mortgage notes secured by the two
properties, and by the Partnership's announced plan to liquidate its real estate
by December 2001. The Partnership recorded a $3,063,438 gain on the sale of the
two properties. Net proceeds from the sales, after repayment of the related
mortgage notes, amounted to $3,679,598. The net proceeds from the sale were
added to the Partnership's balance of cash reserves.

On February 28, 1997, the Partnership refinanced the La Plaza mortgage note. The
Partnership obtained a 3-year, $2,336,029 mortgage note from McNeil Real Estate
Fund XXVII, L.P. ("Fund XXVII"). Fund XXVII is an affiliate of the General
Partner. The new mortgage note bears interest at a variable rate equal to 1%
plus the prime lending rate (9.5% at December 31, 1997). No net proceeds were
realized from the refinancing. On August 1, 1997, the Partnership and Fund XXVII
agreed to amend the new mortgage note by increasing the principal amount by
$800,000. The additional $800,000 was used to repay the Lakeview Plaza second
mortgage note, which was also due to Fund XXVII.
<PAGE>

On June 26, 1997, the Partnership resolved litigation regarding the disputed
pay-off amount on the former Spanish Oaks mortgage note. The mortgage note had
been refinanced in 1996, but the proceeds from the refinancing were placed in
escrow until a dispute regarding the exact repayment amount could be resolved.
In 1997, the Partnership and the holder of the former mortgage note agreed to
settle the dispute for a cash payment of $3,046,000. All remaining escrowed
funds and interest thereon, in the amount of $602,961, were released to the
Partnership. In connection with this refinancing, the Partnership recognized an
extraordinary gain on the extinguishment of debt of $518,495 and $269,596 in
1997 and 1996, respectively.

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

1997 compared to 1996

Revenue:

Rental revenue decreased $617,832 or 3.8% for 1997 as compared to 1996. However,
after excluding the effects of Cave Spring Corners, sold June 5, 1997, and
Parkway Plaza, sold September 18, 1996, rental revenue at the remainder of the
Partnership's properties increased $371,359 or 2.5% in 1997 as compared to 1996.
Of the Partnership's nine remaining properties, rental revenue increased at six
properties, was unchanged at one property, and decreased at two properties.

Due to strong local markets, four of the Partnership's properties, Quail Meadows
Apartments, Regency Park Apartments, Sandpiper Apartments and La Plaza Office
Building, were able to increase both rental rates and decrease vacancy losses.
Increased rental revenue at these four properties ranged from 3.7% to 6.6%.
Coppermill Apartments was also able to increase its rental rates, but the
increased rental rates were partially offset by an increase in vacancy losses.
The Tulsa property recorded a net increase in rental revenue of 4.6%. Briarwood
Apartments also increased its rental revenue, but the 2.5% increase in rental
revenue at the Tucson property was the result of decreased vacancy losses
partially offset by decreased rental rates.

Increased rental rates at Spanish Oaks Apartments were offset by increases in
discounts and concessions and by increased vacancy losses, resulting in an
$8,773 decrease in rental revenue in 1997 as compared to 1996. Increased vacancy
losses at Orchard Apartments, reflecting strong competitive pressures in the
Indianapolis market, resulted in a 1.9% decrease in rental revenue. Decreased
reimbursements for common area maintenance and property taxes, as well as
decreased contingent rents resulted in a 5.3% decrease in rental revenue at
Lakeview Plaza.

Interest revenue increased 82% to $229,447 in 1997 as the Partnership had
increased amounts of cash reserves invested in interest-bearing accounts as
compared to 1996.

The Partnership also reported $3,063,438 in gains on the sale of Cave Spring
Corners and Iberia Plaza. In 1996, the Partnership reported a $353,389 gain on
the sale of Parkway Plaza. Another non-recurring revenue item was the gain on
involuntary conversion related to a fire at Regency Park Apartments. The gain
amounted to $350,927, of which $65,800 was recognized in 1997, and $285,127 was
recognized in 1996.

<PAGE>
Expenses:

Total Partnership expenses decreased $788,174 or 4.9% in 1997 as compared to
1996. However, after excluding expenses related to Cave Spring Corners and
Parkway Plaza, which were sold during the course of 1997 and 1996, Partnership
expenses decreased $94,415 or 0.6%, in 1997 as compared to 1996. Iberia Plaza
expenses are not excluded because Iberia Plaza was sold on December 12, 1997;
essentially, a full year of Iberia Plaza expenses is included in 1997's figures.
Interest paid to affiliates increased, while interest, general and
administrative and general and administrative expenses paid to affiliates
decreased.

On February 28, 1997, the Partnership refinanced the La Plaza mortgage note due
to an unaffiliated party with a $2,336,029 mortgage note due to an affiliate of
the General Partner. The transfer of the La Plaza mortgage note from
non-affiliate to affiliate status accounts for the $185,870 increase in interest
expense due to affiliates as well as a $195,892 decrease in interest due to
non-affiliates. The 1997 sales of Cave Spring Corners and Iberia Plaza, and the
1996 sale of Parkway Plaza resulted in a $419,723 decrease in interest expense.
The remainder of the $716,788 decrease in interest expense results from regular
monthly amortization of the Partnership's mortgage notes which gradually reduces
the interest expense of the Partnership over time.

General and administrative expenses decreased $124,699 or 29% in 1997 as
compared to 1996. Expenses relating to unsolicited tender offers cost the
Partnership $263,124 in 1996. Such expenses for 1997 decreased to only $20,849.
Legal expenses increased $106,250 in 1997 as compared to 1996. $67,795 of the
increase was attributable to costs incurred to litigate and settle a lawsuit
regarding management of Briarwood Apartments. Also, investor relation services
that had previously been provided by an affiliate of the General Partner were
provided by an independent vendor in 1997. Such costs increased general and
administrative expenses by $30,148 in 1997, and correspondingly, accounted for
much of the $58,021 or 13.5% decrease in general and administrative expenses
paid to affiliates.

On June 26, 1997, the Partnership and the former Spanish Oaks mortgage note
holder agreed to settle their dispute regarding the correct payoff amount of the
former Spanish Oaks mortgage note that was refinanced during 1996. As a result
of the settlement, the Partnership received $602,961, which after appropriate
deductions for costs and related interest revenue, was recorded as a $518,495
extraordinary gain on extinguishment of debt.

1996 compared to 1995

Partnership net income decreased in 1996 to $1,141,978 from $2,193,164 in 1995.
Included in net income for both years are gains on sale of real estate. Gains on
sale of real estate amounted to $353,389 and $3,183,698 for the years 1996 and
1995, respectively. Partnership income from continuing property operations,
excluding gains on sale of real estate and all other one-time transaction gains,
increased to $233,866 in 1996 from a loss of $1,082,051 in 1995. The improved
performance of the Partnership is attributable to the improving performance of
the Partnership's properties generally, and to the elimination of rental
operations at The Courts Apartments which was sold on September 14, 1995.

<PAGE>
Revenue:

Rental revenue decreased $788,967 to $16,089,109 in 1996 compared to 1995.
However, after excluding rental revenue attributable to Parkway Plaza and The
Courts Apartments, the two Partnership properties sold during 1996 and 1995, the
Partnership reported a $747,824 or 5.0% increase in rental revenue in 1996
compared to 1995.

Rental revenue increased at four of the Partnership's seven residential
properties. All of the residential properties increased base rental rates by
small amounts except for Quail Meadows Apartments. The increases in base rental
rates averaged 2.6%. Although Quail Meadows Apartments did not increase its base
rental rates, an increase in average occupancy rates resulted in the Wichita
property reporting the largest net increase in rental revenue of the
Partnership's seven residential properties. Coppermill also reported an increase
in average occupancy rates. Rate hikes at Orchard Apartments and Sandpiper
Apartments were partially offset by decreased average occupancy rates. The
decrease in occupancy at Briarwood Apartments more than offset a small rental
rate increase. The Tucson property was competing in a soft market where new
construction was not being fully absorbed. Rental revenue at Regency Park
Apartments was adversely affected by a fire that destroyed 16 units, and the
following reconstruction. Rental revenue was essentially unchanged at Spanish
Oaks Apartments in 1996 compared to 1995.

The Partnership's four commercial properties reported much larger increases in
rental revenue than did the Partnership's residential properties. The increases
were led by La Plaza Office Building. Rental revenue at La Plaza increased 23%
in 1996. The increase was achieved through an increase in the occupancy rate
from 77% at the end of 1995 to 88% at the end of 1996. The Partnership is in the
process of reconfiguring the Las Vegas property, after the property's two
largest tenants vacated their space in 1995, to take advantage of a strong
market for office space in the Las Vegas market. The Partnership's three retail
centers also posted increased rental revenue, largely through increased
recoveries of operating expenses and property taxes from their respective
tenants.

Expenses:

Partnership expenses decreased $2,084,270 or 11.5% in 1996 compared to 1995.
Expenses decreased in all categories except for property taxes and general and
administrative expenses. However, most of the decrease in expenses is due to the
sale of The Courts Apartments and Parkway Plaza. Expenses incurred by the
Partnership's remaining properties decreased $148,950 or 0.9% in 1996 compared
to 1995. Every expense category changed by less than 5% at the remaining
properties except for property taxes, general and administrative, and general
and administrative expenses paid to affiliates.

Property tax expense increased $147,776 or 17.1% at the eleven properties
remaining in the Partnership's portfolio at the end of 1996. Property tax
expense increased by more than 10% at five properties: Cave Spring Corners,
Iberia Plaza, Lakeview Plaza, Regency Park Apartments and Spanish Oaks
Apartments. Generally, the increases result from increased valuations placed on
properties by local tax jurisdictions. Some of the change, particularly at
Lakeview Plaza, results from adjustments to prior year taxes as a result of
appeal proceedings. The Partnership was able to reduce Lakeview Plaza's 1994
property taxes as the result of a 1995 administrative hearing that reduced the
property's assessed value. However, in 1996 the tax jurisdictions appealed and
won a reversal of the decreased assessed value.

<PAGE>
General and administrative expenses increased $54,481 or 14.7% in 1996 compared
to 1995. Expenses related to the evaluation and dissemination of information
regarding an unsolicited tender offer increased $20,638 in 1996 compared to
1995. Also, the Partnership incurred a $23,139 increase in sales and use taxes
paid to various states and a $13,000 increase in fees paid to appraisers.

General and administrative expenses paid to affiliates decreased $239,503 or 36%
in 1996 compared to 1995. Reimbursements charged to the Partnership decreased
because of reduced expenses incurred by affiliates in managing the Partnership
and other affiliated partnerships. Expenses also decreased because of the sale
of Parkway Plaza and The Courts Apartments in 1996 and 1995, respectively.
Expenses charged by affiliates have and will continue to decrease as the
Partnership liquidates its portfolio of properties.

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

During the three year period ended December 31, 1997, cash provided by the
Partnership's operating activities totaled $10,350,875. Despite the sale of Cave
Spring Corners and Iberia Plaza in 1997, and Parkway Plaza in 1996, cash flow
from operating activities increased 4.9% in 1997 as compared to 1996.

The sale of Cave Spring Corners and Iberia Plaza in 1997 provided cash proceeds
of $8,530,207; however, $4,850,609 of that amount was used to retire the Cave
Spring Corners and Iberia Plaza mortgage notes. The net sales proceeds were
added to the Partnership's cash reserves. See Income Allocations and
Distributions below.

The Partnership continues to invest substantial resources into capital
improvements at its properties. A total of $6,707,804 of improvements have been
added to the Partnership's properties over the past three years. $518,922 of the
improvements were reimbursed to the Partnership by its insurance carrier as a
result of a fire that destroyed 16 units at Regency Park Apartments. An
additional $1.6 million of capital improvements are budgeted for 1998.

On February 28, 1997, the Partnership resolved the impending maturity of the La
Plaza mortgage note by obtaining a $2,336,029 mortgage note from an affiliate of
the General Partner. The new mortgage note bears interest at a variable rate
currently equal to 9.5%, a decrease from the 10.125% interest rate of the former
mortgage note. Payments on the new mortgage note are interest-only. On August 1,
1997, the Partnership amended the La Plaza mortgage note by increasing the
principal balance by $800,000. The $800,000 proceeds were used to retire the
$800,000 second mortgage note secured by Lakeview Plaza which matured on August
1, 1997. The Partnership did not realize any net cash proceeds from these
financing transactions. The Partnership's next maturing mortgage note, the
Coppermill mortgage note, does not mature until January 2002.

MID payments to the General Partner, which had been suspended since the
beginning of 1994, were resumed during 1997. The Partnership paid $2,000,000 of
MID to the General Partner in 1997. See short-term liquidity below.

Short-term liquidity:

At December 31, 1997, the Partnership held cash and cash equivalents of
$5,755,976, up $3,095,297 from the balance at the end of 1996. Cash reserves of
the Partnership have increased significantly from the depressed levels at the
end of 1994. The General Partner is continuing to take steps to increase the
Partnership's liquidity. Some of these steps are discussed in the following
paragraphs.
<PAGE>
Over the past three years, the Partnership has invested large amounts of funds
in capital improvements at the Partnership's properties. Although significant
challenges remain, total capital expenditures for 1998 are expected to decrease
from the average amount expended in each of the past three years. The
Partnership's capital improvement budget for 1998 amounts to $1.6 million. The
largest capital projects of the Partnership will be concentrated at La Plaza
Office Building as the property undergoes refurbishment to allow it to take
advantage of a strong Las Vegas market.

Beginning in 1994, the General Partner deferred collection of the MID. Because
of the Partnership's improving cash position, MID payments were resumed in 1997.
A MID payment of $2,000,000 was paid to the General Partner during 1997. As of
December 31, 1997, $1,696,360 of MID remains accrued but unpaid. The General
Partner anticipates additional MID payments during 1998 if the Partnership's
properties continue to perform as anticipated.

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 $6.7 million of capital
improvements made by the Partnership during the past three years will yield
improved cash flow from property operations in the future. The General Partner
has budgeted an additional $1.6 million of capital improvements for 1998. If the
Partnership's cash position deteriorates, the General Partner may elect to defer
certain of the capital improvements.

Income Allocations and Distributions:

Terms of the Amended Partnership Agreement specify that income before
depreciation is allocated to the General Partner to the extent of the cumulative
amount of MID paid for which no income allocation has previously been made.
Depreciation is allocated in the ratio of 95:5 to the limited partners and the
General Partner, respectively. Therefore, for each of the three years in the
period ended December 31, 1997, net income of $1,843,741, $57,099 and $109,658,
respectively, was allocated to the General Partner. The limited partners were
allocated net income of $2,311,730, $1,084,879 and $2,083,506 for each of the
three years in the period ended December 31, 1997, respectively.

<PAGE>
With the exception of the MID, distributions to partners have been suspended
since 1986 as part of the General Partner's policy of maintaining adequate cash
reserves. In the last week of March 1998, the General Partner distributed
$4,500,000 to limited partners of record as of March 1, 1998. Payments of MID
were resumed in 1997. Such payments had been suspended since the beginning of
1994. The Partnership paid $2,000,000 of MID in 1997 to the General Partner. The
General Partner will continue to monitor the cash reserves and working capital
needs of the Partnership to determine when cash flows will support additional
distributions to the limited partners and MID payments to the General Partner.

<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....................................... 19

Balance Sheets at December 31, 1997 and 1996................................... 20

Statements of Operations for each of the three years in the
period ended December 31, 1997.............................................. 21

Statements of Partners' Equity (Deficit) for each of the three
years in the period ended December 31, 1997................................. 22

Statements of Cash Flows for each of the three years in the
period ended December 31, 1997.............................................. 23

Notes to Financial Statements.................................................. 25

Financial Statement Schedule:

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

</TABLE>

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

<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of
McNeil Real Estate Fund X, Ltd.:

We have audited the accompanying balance sheets of McNeil Real Estate Fund X,
Ltd. (a California limited partnership) as of December 31, 1997 and 1996, and
the related statements of operations, partners' equity (deficit) and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements and the schedule referred to below are the responsibility
of the Partnership's management. Our responsibility is to express an opinion on
these financial statements and the schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of McNeil Real Estate Fund X, Ltd.
as of December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in our audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.

/s/ Arthur Andersen LLP

Dallas, Texas
March 20, 1998

<PAGE>
McNEIL REAL ESTATE FUND X, LTD.

BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
-------------------------------------
1997 1996
---------------- ----------------

ASSETS
- ------
<S> <C> <C>
Real estate investments:
Land..................................................... $ 8,836,046 $ 8,836,046
Buildings and improvements............................... 72,544,744 71,110,263
-------------- -------------
81,380,790 79,946,309
Less: Accumulated depreciation and amortization......... (52,814,364) (49,689,189)
-------------- -------------
28,566,426 30,257,120

Assets held for sale........................................ - 5,308,731

Cash and cash equivalents................................... 5,755,976 2,660,679
Cash segregated for security deposits....................... 358,396 301,259
Accounts receivable......................................... 356,496 575,995
Prepaid expenses and other assets........................... 212,031 329,136
Escrow deposits............................................. 816,017 802,841
Deferred borrowing costs, net of accumulated
amortization of $452,021 and $438,719 at
December 31, 1997 and 1996, respectively................. 1,047,074 1,171,591
-------------- -------------

$ 37,112,416 $ 41,407,352
============== =============

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

Mortgage notes payable, net................................. $ 33,633,574 $ 41,612,292
Mortgage notes payable - affiliate.......................... 3,136,029 800,000
Accounts payable............................................ 76,689 61,356
Accrued property taxes...................................... 470,105 530,973
Accrued interest............................................ 244,393 309,977
Accrued interest - affiliate................................ 24,977 6,625
Other accrued expenses...................................... 296,729 309,981
Payable to affiliates - General Partner..................... 1,858,835 3,555,343
Deferred gain on involuntary conversion..................... - 65,800
Security deposits and deferred rental revenue............... 417,110 375,061
-------------- -------------
40,158,441 47,627,408
-------------- -------------

Partners' equity (deficit)
Limited partners - 135,200 limited partnership units
authorized; 134,980 limited partnership units
outstanding at December 31, 1997 and 1996,
respectively........................................... 1,607,681 (704,049)
General Partner.......................................... (4,653,706) (5,516,007)
-------------- -------------
(3,046,025) (6,220,056)

$ 37,112,416 $ 41,407,352
============== =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
McNEIL REAL ESTATE FUND X, LTD.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------------------
1997 1996 1995
-------------- -------------- ---------------
<S> <C> <C> <C>
Revenue:
Rental revenue........................... $ 15,471,277 $ 16,089,109 $ 16,878,076
Interest................................. 229,447 125,917 105,303
Gain on sales of real estate............. 3,063,438 353,389 3,183,698
Gain on involuntary conversion........... 65,800 285,127 -
Gain on legal settlement................. - - 91,517
------------- ------------- --------------
Total revenue.......................... 18,829,962 16,853,542 20,258,594
------------- ------------- --------------

Expenses:
Interest................................. 3,488,193 4,204,981 4,980,917
Interest - affiliate..................... 260,785 74,915 78,822
Depreciation and amortization............ 3,125,175 3,232,454 3,567,913
Property taxes........................... 978,796 1,035,988 1,010,754
Personnel expenses....................... 1,740,917 1,694,914 1,950,309
Utilities................................ 1,267,432 1,231,498 1,368,713
Repairs and maintenance.................. 1,869,523 1,879,831 2,100,763
Property management fees -
affiliates............................. 765,290 791,081 846,482
Other property operating expenses........ 1,023,196 979,099 1,119,336
General and administrative .............. 300,606 425,305 370,824
General and administrative -
affiliates............................. 373,073 431,094 670,597
------------- ------------- --------------
Total expenses......................... 15,192,986 15,981,160 18,065,430
------------- ------------- --------------

Income before extraordinary items........... 3,636,976 872,382 2,193,164
Extraordinary items......................... 518,495 269,596 -
------------- ------------- --------------

Net income.................................. $ 4,155,471 $ 1,141,978 $ 2,193,164
============= ============= ==============

Net income allocated to limited
partners................................. $ 2,311,730 $ 1,084,879 $ 2,083,506
Net income allocated to General
Partner.................................. 1,843,741 57,099 109,658
------------- ------------- --------------

Net income.................................. $ 4,155,471 $ 1,141,978 $ 2,193,164
============= ============= ==============

Net income per limited partnership unit:
Income before extraordinary items........ $ 14.99 $ 6.14 $ 15.43
Extraordinary items...................... 2.14 1.90 -
------------- ------------- --------------
Net income per limited partnership
unit................................... $ 17.13 $ 8.04 $ 15.43
============= ============= ==============
</TABLE>

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

STATEMENTS OF PARTNERS' EQUITY (DEFICIT)

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

Total
Partners'
General Limited Equity
Partner Partners (Deficit)
---------------- --------------- -----------------
<S> <C> <C> <C>
Balance at December 31, 1994................ $ (3,569,840) $ (3,872,434) $ (7,442,274)

Net income.................................. 109,658 2,083,506 2,193,164

Management Incentive Distribution........... (1,064,257) - (1,064,257)
-------------- ------------- --------------

Balance at December 31, 1995................ (4,524,439) (1,788,928) (6,313,367)

Net income.................................. 57,099 1,084,879 1,141,978

Management Incentive Distribution........... (1,048,667) - (1,048,667)
-------------- ------------- --------------

Balance at December 31, 1996................ (5,516,007) (704,049) (6,220,056)

Net income.................................. 1,843,741 2,311,730 4,155,471

Management Incentive Distribution........... (981,440) - (981,440)
-------------- ------------- --------------

Balance at December 31, 1997................ $ (4,653,706) $ 1,607,681 $ (3,046,025)
============== ============= ==============
</TABLE>

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

STATEMENTS OF CASH FLOWS

Increase (Decrease) in Cash and Cash Equivalents

<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from tenants.................. $ 15,431,085 $ 16,001,867 $ 16,953,669
Cash paid to suppliers...................... (6,146,043) (6,361,556) (6,541,879)
Cash paid to affiliates..................... (1,816,311) (1,622,989) (846,113)
Interest received........................... 229,447 125,917 105,303
Interest paid............................... (3,331,353) (3,904,205) (4,593,039)
Interest paid to affiliate.................. (242,433) (74,915) (77,403)
Gain on legal settlement.................... - - 91,517
Property taxes paid and escrowed............ (943,837) (1,132,168) (953,686)
------------- ------------- --------------
Net cash provided by operating
activities.................................. 3,180,555 3,031,951 4,138,369
------------- ------------- --------------

Cash flows from investing activities:
Additions to real estate investments
and assets held for sale ................. (1,440,625) (2,328,129) (2,939,050)
Proceeds from sale of real estate........... 8,530,207 2,958,375 7,905,804
Insurance proceeds for fire damage.......... 96,303 422,619 -
------------- ------------- ---------------
Net cash provided by investing
activities.................................. 7,185,885 1,052,865 4,966,754
------------- ------------- --------------

Cash flows from financing activities:
Net proceeds from refinancing
mortgage note payable..................... 518,495 600,408 -
Repayment of mortgage note payable.......... (2,373,955) - -
Repayment of mortgage note payable -
affiliate................................. (800,000) - -
Proceeds from mortgage note
payable - affiliate....................... 3,136,029 - -
Retirement of mortgage notes due to
sales of real estate...................... (4,850,609) (2,544,466) (6,616,231)
Principal payments on mortgage notes
payable................................... (901,103) (1,036,077) (1,184,440)
Reduction of mortgage note payable.......... - (132,959) -
Management Incentive Distribution
paid...................................... (2,000,000) - -
Deferred borrowing costs paid............... - (124,637) (65,447)
------------- ------------- --------------

Net cash used in financing activities.......... (7,271,143) (3,237,731) (7,866,118)
------------- ------------- --------------

Net increase in cash and cash
equivalents.............................. 3,095,297 847,085 1,239,005
Cash and cash equivalents at
beginning of year........................ 2,660,679 1,813,594 574,589
------------- ------------- --------------
Cash and cash equivalents at
end of year.............................. $ 5,755,976 $ 2,660,679 $ 1,813,594
============= ============= ==============
</TABLE>

See discussion of noncash investing and financing activity in Note 7 - "Sales of
Real Estate," Note 8 "Refinancing of Mortgage Notes," Note 9 - "Gain on
Extinguishment of Debt" and Note 10 - "Gain on Involuntary Conversion."

See accompanying notes to financial statements.

<PAGE>
McNEIL REAL ESTATE FUND X, LTD.

STATEMENTS OF CASH FLOWS

Reconciliation of Net Income to Net Cash Provided by
Operating Activities

<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------------
1997 1996 1995
-------------- --------------- ---------------
<S> <C> <C> <C>
Net income................................. $ 4,155,471 $ 1,141,978 $ 2,193,164
------------- -------------- --------------

Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization........... 3,125,175 3,232,454 3,567,913
Amortization of deferred borrowing
costs................................. 118,853 132,377 146,047
Amortization of discounts on
mortgage notes payable................ 103,571 144,886 176,137
Gain on sales of real estate............ (3,063,438) (353,389) (3,183,698)
Gain on involuntary conversion.......... (65,800) (285,127) -
Extraordinary items..................... (518,495) (269,596) -
Changes in assets and liabilities:
Cash segregated for security
deposits............................ (57,137) 16,575 93,211
Accounts receivable................... 73,428 (102,151) 57,773
Prepaid expenses and other
assets.............................. 64,021 3,529 32,627
Escrow deposits....................... (13,176) (182,808) 365,109
Accounts payable...................... 15,333 (125,429) 55,929
Accrued property taxes................ (60,868) 8,022 (50,500)
Accrued interest...................... (65,584) 23,513 65,694
Accrued interest - affiliate.......... 18,352 - 1,419
Other accrued expenses................ (13,252) 58,101 11,029
Payable to affiliates - General
Partner............................. (677,948) (400,814) 670,966
Security deposits and deferred
rental revenue...................... 42,049 (10,170) (64,451)
------------- ------------- --------------
Total adjustments................... (974,916) 1,889,973 1,945,205
------------- ------------- --------------

Net cash provided by operating
activities.............................. $ 3,180,555 $ 3,031,951 $ 4,138,369
============= ============= =============

</TABLE>

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

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1997

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

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

McNeil Real Estate Fund X, Ltd. (the "Partnership") was organized on June 1,
1979 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 partnership agreement dated October 9, 1991, as amended (the "Amended
Partnership Agreement"). The principal place of business for the Partnership and
the General Partner is 13760 Noel Road, Suite 600, LB70, Dallas, Texas, 75240.

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.

<PAGE>
The Partnership's financial statements include the accounts of the tier limited
partnerships listed on the following page. These single asset tier limited
partnerships were formed to accommodate the refinancing of the respective
properties. The Partnership's and the General Partner's ownership interests in
each tier limited partnership are detailed below. The Partnership retains
effective control of each tier limited partnership. The General Partner's
minority interest is not presented as it is both negative and immaterial.

% of Ownership Interest
Tier Partnership Partnership General Partner
----------- ---------------
<S> <C> <C>
Briarwood Fund X Limited Partnership (a)..................... 100 -
Coppermill Fund X Limited Partnership (a).................... 100 -
Orchard Fund X Limited Partnership (a)....................... 100 -
Quail Meadows Fund X Limited Partnership (a)................. 100 -
Regency Park Fund X Associates, L.P. ........................ 99 1
Sandpiper Fund X Limited Partnership (a)..................... 100 -
Spanish Fund X, Ltd. (a) (b)................................. 100 -
</TABLE>

(a) The general partner of these limited partnerships is a corporation whose
stock is 100% owned by the Partnership.

(b) Spanish Fund X, Ltd. commenced business activity on January 26, 1996.

The financial statements also include the accounts of the Partnership and its
99% interest in the assets, liabilities and operations (through September 14,
1995) of Courts Fund X Associates, L.P., the tier limited partnership that owned
The Courts Apartments. The General Partner owned the remaining 1% of Courts Fund
X Associates, L.P.

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

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

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

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

<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 on these assets ceases at the time they are
placed on the market for sale.

Depreciation
- ------------

Buildings and improvements are depreciated using the straight-line method over
the estimated useful lives of the assets, ranging from 3 to 38 years. Tenant
improvements are amortized over the terms of the related tenant leases using the
straight-line method.

Cash and Cash Equivalents
- -------------------------

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

Escrow Deposits
- ---------------

The Partnership is required to maintain escrow accounts in accordance with the
terms of various mortgage indebtedness agreements. These escrow accounts are
controlled by the mortgagee and are used for payment of property taxes, hazard
insurance, capital improvements and property replacements. Carrying amounts for
escrow deposits approximate fair value.

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

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

Discounts on Mortgage Notes Payable
- -----------------------------------

Discounts on mortgage notes payable are amortized over the remaining terms of
the related mortgage notes using the effective interest method. Amortization of
discounts on mortgage notes payable is included in interest expense on the
Statements of Operations.

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

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

<PAGE>
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 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 or net loss of the
Partnership for both financial statement and income tax reporting purposes to be
allocated as indicated below. For allocation purposes, net income and net loss
of the Partnership is determined prior to deductions for depreciation.

(a) First, 5% of all deductions for depreciation shall be allocated to the
General Partner, and 95% of all deductions for depreciation shall be
allocated to the limited partners;

(b) then, an amount of net income equal to the cumulative amount of the
Management Incentive Distribution ("MID") paid to the General Partner for
which no income has previously been allocated (see Note 2 "Transactions
with Affiliates") shall be allocated to the General Partner; provided,
however, that if all or a portion of such payment consists of limited
partnership units ("Units"), the amount of net income allocated to the
General Partner shall be equal to the amount of cash the General Partner
would have otherwise received;

(c) then, any remaining net income shall be allocated to the General Partner
and to the limited partners so that the total amount of net income
allocated to the General Partner pursuant to (b) above and this paragraph
(c) and to the limited partners pursuant to this paragraph (c) shall be
in the ratio of 5% to the General Partner and 95% to the limited
partners.

(d) Net loss shall be allocated 5% to the General Partner and 95% to the
limited partners.

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 allocations of Partnership deductions attributable to
debt. The Partnership's tax allocations for 1997, 1996 and 1995 have been made
in accordance with these provisions.

<PAGE>
Distributions
- -------------

Pursuant to the Amended Partnership Agreement and at the discretion of the
General Partner, distributions during each taxable year shall be made as
follows:

(a) first, to the General Partner, an amount equal to the MID, and

(b) any remaining distributable cash, as defined, shall be distributed 100%
to the limited partners.

No distributions were made to the limited partners in 1997, 1996 or 1995. The
Partnership paid or accrued distributions of $981,440, $1,048,667 and $1,064,257
for the benefit of the General Partner for the years ended December 31, 1997,
1996 and 1995, respectively. These distributions are the MID pursuant to the
Amended Partnership Agreement. The General Partner has waived the collection
terms of reimbursable expenses and MID, and has elected for the Partnership to
pay limited partner distributions before the payment of such amounts. The
Partnership plans to distribute approximately $4,500,000 to the limited partners
in March 1998.

Net Income Per Limited Partnership Unit
- ---------------------------------------

Net income per Unit is computed by dividing net income allocated to the limited
partners by the weighted average number of Units outstanding. Per Unit
information has been computed based on 134,980 Units outstanding in 1997 and
1996, and 135,030 Units outstanding in 1995.

NOTE 2 - TRANSACTIONS WITH AFFILIATES
- -------------------------------------

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

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 the
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% of the annualized net
operating income of each property or (ii) a value of $10,000 per apartment unit
for residential property or $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 assets.

<PAGE>
The MID will be paid to the extent of the lesser of the Partnership's excess
cash flow, as defined, or net operating income (the "Entitlement Amount"), 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 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. During 1997, 1996 and 1995,
no Units were issued as payment for the MID.

During 1991, the Partnership amended its capitalization policy and began
capitalizing certain costs of improvements and betterments which, under policies
of prior management, had been expensed when incurred. The purpose of the
amendment was to more properly recognize items which were capital in nature. The
effect of the amendment standing alone was evaluated at the time the change was
made and determined not to be material to the financial statements of the
Partnership in 1991, nor was it expected to be material in any future year.
However, the amendment does have a material effect on the calculation of the
Entitlement Amount which determines the amount of MID earned. Capital
improvements are excluded from cash flow, as defined. The majority of the base
period cash flow was measured under the previous capitalization policy, while
incentive period cash flow is determined using the amended policy. Under the
amended policy, more items are capitalized, and cash flow increases. The
amendment of the capitalization policy did not materially affect MID for 1997,
1996 or 1995 as the Entitlement Amount was sufficient to pay the MID
notwithstanding the amendment to the capitalization policy.

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

Compensation 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,
----------------------------------------------------
1997 1996 1995
-------------- -------------- ---------------
<S> <C> <C> <C>
Property management fees -
affiliates............................... $ 765,290 $ 791,081 $ 846,482
Interest - affiliates....................... 260,785 74,915 78,822
Charged to general and
administrative - affiliates:
Partnership administration............... 373,073 431,094 670,597
------------- ------------- --------------

$ 1,399,148 $ 1,297,090 $ 1,595,901
============= ============= ==============

Charged to General Partner's equity (deficit):
Management Incentive Distribution........ $ 981,440 $ 1,048,667 $ 1,064,257
============= ============= ==============
</TABLE>

<PAGE>
Payable to affiliates - General Partner at December 31, 1997 and 1996 consists
of MID, reimbursable costs and property management fees which are due and
payable from current operations. The General Partner has waived the collection
terms of reimbursable expenses and MID, and has elected for the Partnership to
pay limited partner distributions before the payment of such amounts.

NOTE 3 - TAXABLE LOSS
- ---------------------

McNeil Real Estate Fund X, Ltd. 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 $14,157,196,
$14,833,249 and $13,571,531 at December 31, 1997, 1996 and 1995, respectively.

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

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

<TABLE>
<CAPTION>
Buildings and Accumulated Net Book
1997 Land Improvements Depreciation Value
---- -------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Briarwood
Tucson, AZ $ 489,437 $ 5,260,242 $ (3,953,267) $ 1,796,412
Coppermill
Tulsa, OK 1,176,980 12,388,116 (10,068,984) 3,496,112
La Plaza
Las Vegas, NV 2,761,442 6,808,333 (4,829,120) 4,740,655
Lakeview Plaza
Lexington, KY 1,554,404 7,413,258 (5,479,551) 3,488,111
Orchard
Lawrence, IN 366,938 9,648,427 (6,820,654) 3,194,711
Quail Meadows
Wichita, KS 754,551 11,190,367 (7,908,383) 4,036,535
Regency Park
Ft. Wayne, IN 280,131 5,521,015 (3,830,560) 1,970,586
Sandpiper
Westminster, CO 866,107 8,045,866 (5,384,980) 3,526,993
Spanish Oaks
San Antonio, TX 586,056 6,269,120 (4,538,865) 2,316,311
------------- ------------- ------------- -------------

$ 8,836,046 $ 72,544,744 $ (52,814,364) $ 28,566,426
============= ============= ============= =============
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Buildings and Accumulated Net Book
1996 Land Improvements Depreciation Value
---- -------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Briarwood $ 489,437 $ 5,200,658 $ (3,713,986) $ 1,976,109
Coppermill 1,176,980 12,154,046 (9,474,539) 3,856,487
La Plaza 2,761,442 6,639,931 (4,463,195) 4,938,178
Lakeview Plaza 1,554,404 7,281,188 (5,263,530) 3,572,062
Orchard 366,938 9,383,201 (6,471,474) 3,278,665
Quail Meadows 754,551 10,985,448 (7,469,583) 4,270,416
Regency Park 280,131 5,411,821 (3,575,795) 2,116,157
Sandpiper 866,107 7,868,920 (5,029,650) 3,705,377
Spanish Oaks 586,056 6,185,050 (4,227,437) 2,543,669
------------- ------------- ------------- -------------

$ 8,836,046 $ 71,110,263 $ (49,689,189) $ 30,257,120
============= ============= ============= =============

</TABLE>

During 1994, the General Partner placed The Courts Apartments and Parkway Plaza
on the market for sale. The Courts Apartments was sold on September 14, 1995.
Parkway Plaza was sold on September 18, 1996. On October 1, 1996, the General
Partner placed Cave Spring Corners and Iberia Plaza on the market for sale. Cave
Spring Corners and Iberia Plaza were classified as assets held for sale at
December 31, 1996, with net book values of $2,257,480 and $3,051,251,
respectively. The Partnership sold Cave Spring Corners on June 5, 1997. The
Partnership sold Iberia Plaza on December 12, 1997. See Note 7 - "Sales of Real
Estate."

The results of operations for the assets held for sale at December 31, 1996 were
$339,909, $210,456 and $57,425 for the years ended December 31, 1997, 1996 and
1995, respectively. Results of operations are operating revenues less operating
expenses including depreciation and interest expense.

The Partnership leases its commercial properties under various non-cancelable
operating leases. In most cases, the Partnership expects that in the normal
course of business these leases will be renewed or replaced by other leases.
Future minimum rents to be received from commercial properties as of December
31, 1997, are as follows:

1998...................................... $ 1,722,801
1999...................................... 1,651,406
2000...................................... 1,202,487
2001...................................... 679,291
2002...................................... 482,477
Thereafter................................ 893,514
------------

$ 6,631,976
============

<PAGE>
Future minimum rents do not include contingent rents based on sales volume of
tenants. Contingent rents amounted to $41,589, $199,927 and $86,571 for the
years ended December 31, 1997, 1996 and 1995, respectively. Future minimum rents
also do not include expense reimbursements for common area maintenance, property
taxes, and other expenses. The expense reimbursements amounted to $192,430,
$307,372 and $177,095 for the years ended December 31, 1997, 1996 and 1995,
respectively. These contingent rents and expense reimbursements, including
amounts for assets held for sale, are included in rental revenue on the
Statements of Operations.

The Partnership's real estate investments are encumbered by mortgage
indebtedness as discussed in Note 5 - "Mortgage Notes Payable" and Note 6 -
"Mortgage Notes Payable - Affiliate."

NOTE 5 - MORTGAGE NOTES PAYABLE
- -------------------------------

The following table sets forth the mortgage notes payable of the Partnership at
December 31, 1997 and 1996. All mortgage notes payable are secured by the
Partnership's real estate assets.

<TABLE>
<CAPTION>
Mortgage Annual Monthly
Lien Interest Payments/ December 31,
Property Position (a) Rates % Maturity Date 1997 1996
- -------- -------------- ------- -------------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Briarwood (b) First 8.150 $18,340 07/03 (f) $ 2,127,234 $ 2,172,124
Discount (e) (41,489) (47,482)
------------- -------------
2,085,745 2,124,642
------------- -------------
Cave Spring
Corners First 9.500 27,958 06/98 - 3,077,041
------------- --------------

Coppermill First 10.405 45,800 01/02 (f) 4,962,725 4,994,151
------------- --------------

Iberia Plaza First 9.250 $27,137 11/98 $ - $ 1,944,704
Discount (e) - (85,774)
------------- --------------
- 1,858,930
------------- --------------

La Plaza (c) First 10.125 31,386 03/97 - 2,396,381
------------- --------------

Lakeview Plaza First 9.125 38,815 06/08 3,119,519 3,291,999
------------- --------------

Orchard (b) First 8.150 53,393 07/03 (f) 6,193,025 6,323,712
Discount (e) (120,787) (138,227)
------------- --------------
6,072,238 6,185,485
------------- --------------
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
Mortgage Annual Monthly
Lien Interest Payments/ December 31,
Property Position (a) Rates % Maturity Date 1997 1996
- -------- -------------- ------- -------------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Quail Meadows (b) First 8.150 $50,634 07/03 (f) $ 5,873,015 $ 5,996,949
Discount (e) (118,878) (124,824)
------------- -------------
5,754,137 5,872,125
------------- -------------

Regency Park First 8.375 23,382 10/17 2,710,189 2,761,437
Discount (e) (354,345) (370,643)
------------- --------------
2,355,844 2,390,794
------------- --------------

Sandpiper (b) First 8.150 47,046 07/03 (f) 5,456,817 5,571,968
Discount (e) (106,428) (121,927)
------------- --------------
5,350,389 5,450,041
------------- --------------

Spanish Oaks (d) First 7.710 28,546 01/03 (f) 3,932,977 3,970,703
------------- --------------

$ 33,633,574 $ 41,612,292
============= ==============
</TABLE>

(a) The debt is non-recourse to the Partnership.

(b) Financing was obtained under the terms of a Real Estate Mortgage
Investment Conduit financing. The mortgage notes payable are
cross-collateralized and may not be prepaid in whole or part before July
1998. Any prepayments made during the sixth or seventh loan years are
subject to a Yield Maintenance premium, as defined. Additionally, the
Partnership must pay a release payment equal to 25% of the prepaid
balance which will be applied to the remaining mortgage notes in the
collateral pool.

(c) On February 28, 1997, the Partnership refinanced the La Plaza mortgage
note with a $2,336,029 mortgage note from an affiliate of the General
Partner. See Note 6 - "Mortgage Note Payable - Affiliate."

(d) The Partnership refinanced the Spanish Oaks mortgage note on January
26, 1996. See Note 8 - "Refinancing of Mortgage Notes."

(e) The discount for the Iberia Plaza mortgage note was based on an effective
interest rate of 12%. The discount for the Regency Park mortgage note is
based on an effective interest rate of 10.375%. Discounts for the
Briarwood, Orchard, Quail Meadows and Sandpiper mortgage notes are based
on an effective interest rate of 8.622%.

<PAGE>
(f) Balloon payments on the Partnership's mortgage notes are due as follows:

Property Balloon Payment Date
-------- --------------- ----

Coppermill....................... $ 4,798,763 01/02
Spanish Oaks..................... 3,689,221 01/03
Briarwood........................ 1,804,449 07/03
Orchard.......................... 5,253,301 07/03
Quail Meadows.................... 4,981,860 07/03
Sandpiper........................ 4,628,805 07/03

Scheduled principal maturities of the Partnership's mortgage notes, but before
consideration of discounts of $741,927, are shown below.

1998............................. $ 768,163
1999............................. 835,952
2000............................. 909,755
2001............................. 990,111
2002............................. 5,823,614
Thereafter....................... 25,047,906
-----------
$ 34,375,501
===========

Based on borrowing rates currently available to the Partnership for mortgage
loans with similar terms and average maturities, the fair value of the
Partnership's mortgage notes payable was approximately $35,310,000 and
$41,672,000 at December 31, 1997 and 1996, respectively.

NOTE 6 - MORTGAGE NOTES PAYABLE - AFFILIATE
- -------------------------------------------

The following table sets forth the Partnership's mortgage notes payable -
affiliate at December 31, 1997 and 1996. The affiliate mortgage notes are
secured by real estate investments of the Partnership.

Lakeview Plaza (b) Second (d) (d) 08/97 - 800,000
---------- ---------

$ 3,136,029 $ 800,000
========== =========
</TABLE>

<PAGE>
(a) The debt is non-recourse to the Partnership.

(b) On August 1, 1994, the Partnership obtained an $800,000 second
mortgage note for Lakeview Plaza from McNeil Real Estate Fund XXVII,
L.P., an affiliate of the General Partner ("Fund XXVII"). The Lakeview
mortgage note was repaid on August 1, 1997. See (c) below.

(c) On February 28, 1997, the Partnership refinanced the La Plaza mortgage
note with a $2,336,029 mortgage note from Fund XXVII. See Note 8 -
"Refinancing of Mortgage Notes." On August 1, 1997, the new La Plaza
mortgage note was amended to increase the principal amount by $800,000.
The Partnership used the $800,000 additional borrowing to repay the
Lakeview Plaza second mortgage note.

(d) The mortgage notes due to Fund XXVII require monthly payments of
interest only equal to 1% plus the prime lending rate of Bank of
America. The prime lending rate of Bank of America was 8.5% and 8.25%
at December 31, 1997 and 1996, respectively.

Under terms of the Amended Partnership Agreement, borrowings from affiliates
approximate fair market value.

NOTE 7 - SALES OF REAL ESTATE
- -----------------------------

On June 5, 1997, the Partnership sold Cave Spring Corners Shopping Center to an
unaffiliated purchaser for a cash sales price of $5,250,000. Cave Spring Corners
Shopping Center is located in Roanoke, Virginia. Cash proceeds from this
transaction, as well as the gain on sale are detailed below.

<TABLE>
<CAPTION>
Gain on Sale Cash Proceeds
------------- -------------
<S> <C> <C>
Cash sales price..................................... $ 5,250,000 $ 5,250,000

Selling costs........................................ (15,346) (15,346)
Deferred borrowing costs written off................. (3,901)
Straight-line rent receivables written off........... (33,977)
Prepaid leasing commissions written off.............. (25,232)
Basis of real estate sold............................ (2,259,104)
-------------

Gain on sale......................................... $ 2,912,440
============== -------------

Proceeds from sale of real estate.................... 5,234,654
Retirement of mortgage note.......................... (3,058,762)
-------------

Net cash proceeds.................................... $ 2,175,892
=============
</TABLE>

<PAGE>
On December 12, 1997, the Partnership sold Iberia Plaza to an unaffiliated
purchaser for a cash sales price of $3,384,000. Iberia Plaza is located in New
Iberia, Louisiana. Cash proceeds from this transaction, as well as the gain on
sale are detailed below.

<TABLE>
<CAPTION>
Gain on Sale Cash Proceeds
---------------- ---------------
<S> <C> <C>
Cash sales price..................................... $ 3,384,000 $ 3,384,000

Selling costs........................................ (88,447) (88,447)
Mortgage discount written off........................ (43,378)
Deferred borrowing costs written off................. (1,763)
Straight-line rent receivables written off........... (15,791)
Prepaid leasing commissions written off.............. (27,852)
Basis of real estate sold............................ (3,055,771)
-------------

Gain on sale......................................... $ 150,998
============== -------------

Proceeds from sale of real estate.................... 3,295,553
Retirement of mortgage note.......................... (1,791,847)
-------------

Net cash proceeds.................................... $ 1,503,706
=============
</TABLE>

On September 18, 1996, the Partnership sold Parkway Plaza to an unaffiliated
purchaser for a cash sales price of $2,900,000. Parkway Plaza is located in
Lafayette, Louisiana. Cash proceeds from this transaction, as well as the gain
on sale are detailed below.

<TABLE>
<CAPTION>
Gain on Sale Cash Proceeds
------------ -------------
<S> <C> <C>
Cash sales price..................................... $ 2,900,000 $ 2,900,000

Selling costs........................................ (71,949) (71,949)
Mortgage discount written off........................ (250,817)
Straight-line rent receivables written off........... (56,303)
Basis of real estate sold............................ (2,245,507)
-------------

Gain on sale......................................... $ 275,424
============== -------------

Proceeds from sale of real estate.................... 2,828,051
Retirement of mortgage note.......................... (2,544,466)
-------------

Net cash proceeds.................................... $ 283,585
=============
</TABLE>
<PAGE>
On January 9, 1996, the Partnership sold an outparcel of land, amounting to
0.675 acres, connected with Iberia Plaza for a purchase price of $142,985. The
Partnership recorded a $77,965 gain on the sale. Proceeds from the sale of the
outparcel were used to paydown the Iberia Plaza mortgage note.

On September 14, 1995, the Partnership sold The Courts Apartments to an
unaffiliated buyer for a cash sales price of $8,050,000. The buyer also assumed
the improvement district liens that encumbered the property. The Courts
Apartments is located in Kent, Washington. Cash proceeds from this transaction,
as well as the gain on sale of The Courts Apartments are detailed below.

<TABLE>
<CAPTION>
Gain on Sale Cash Proceeds
--------------- --------------
<S> <C> <C>
Cash sales price..................................... $ 8,050,000 $ 8,050,000
Improvement district liens assumed
by buyer........................................... 140,358 140,358
------------- -------------
Total sales price.................................... 8,190,358 8,190,358

Selling costs........................................ (284,554) (284,554)
Basis of deferred borrowing costs written off........ (48,307)
Basis of real estate sold............................ (4,673,799)
-------------

Gain on sale......................................... $ 3,183,698
============== -------------

Proceeds from sale of real estate.................... 7,905,804
Retirement of mortgage note.......................... (6,475,873)
Assumption of improvement district liens............. (140,358)
-------------

Net cash proceeds.................................... $ 1,289,573
=============

</TABLE>

NOTE 8 - REFINANCING OF MORTGAGE NOTES
- --------------------------------------

On February 28, 1997, the Partnership refinanced the La Plaza mortgage note with
a $2,336,029 mortgage note from Fund XXVII, an affiliate of the General Partner.
The new mortgage note bears interest at a variable interest rate equal to 1%
plus the prime lending rate of Bank of America and requires monthly
interest-only debt service payments until the February 28, 2000 maturity date.
Cash used to close the refinancing transaction is as follows:

New loan proceeds.................................... $ 2,336,029
Amount required to payoff existing debt.............. (2,373,955)
-----------

Cash used to refinance mortgage note................. $ (37,926)
===========

<PAGE>
On August 1, 1997, the new La Plaza mortgage note was amended to increase the
principal amount by $800,000. The Partnership used the $800,000 additional
borrowing to repay the Lakeview Plaza second mortgage note which was also due to
Fund XXVII.

On January 26, 1996, the Partnership refinanced the Spanish Oaks mortgage note.
The new mortgage note, in the amount of $4,000,000, bears interest at 7.71%,
requires monthly principal and interest payments of $28,546, and matures on
January 26, 2003. Cash proceeds from the refinancing transaction received in
1996 are as follows:

New loan proceeds.................................... $ 4,000,000
New loan proceeds placed in escrow................... (3,399,592)
-----------

Proceeds received in 1996............................ $ 600,408
===========

See Note 9 - "Gain on Extinguishment of Debt" for a discussion of proceeds from
the refinancing transaction received in 1997.

The Partnership incurred $166,403 of deferred borrowing costs related to the
refinancing of the Spanish Oaks mortgage note. The Partnership was also required
to fund $165,291 into various escrows for property taxes, hazard insurance and
deferred maintenance.

NOTE 9 - GAIN ON EXTINGUISHMENT OF DEBT
- ---------------------------------------

In connection with the refinancing of the Spanish Oaks mortgage note (see Note 8
- - "Refinancing of Mortgage Notes"), the Partnership and the former mortgage note
holder did not agree on the amount of funds necessary to retire the former
mortgage note. At the time the mortgage note was refinanced, the Partnership and
the former mortgage note holder agreed to place $3,399,592 of the proceeds from
the new mortgage note in escrow pending negotiations regarding the amount of
funds necessary to retire the former mortgage note. The excess of the carrying
amount of the former mortgage note over the funds placed in escrow was recorded
in 1996 as a $269,596 extraordinary gain on extinguishment of debt. Neither the
former mortgage note nor the related funds placed in escrow were included on the
Partnership's December 31, 1996 Balance Sheet.

<PAGE>
On June 26, 1997, the Partnership and the former mortgage note holder reached an
agreement to retire the former mortgage note for $3,046,000. The funds in the
escrow account in excess of $3,046,000, plus accrued interest thereon, were
released to the Partnership. The funds so released amounted to $602,961. The
payment to the Partnership resulted in a $518,495 extraordinary gain on
extinguishment of debt, computed as follows:

New loan proceeds placed in escrow................... $ 3,399,592
Interest earned on funds placed in escrow............ 249,369
Amount required to payoff former mortgage
note payable....................................... (3,046,000)
-----------
Escrowed funds released to Partnership............... 602,961

Interest recorded on funds placed in escrow.......... (41,206)
Litigation and other costs........................... (43,260)
-----------

Cash proceeds received in 1997 and
extraordinary gain on extinguishment
of debt............................................ $ 518,495
===========

NOTE 10 - GAIN ON INVOLUNTARY CONVERSION
- ----------------------------------------

On March 31, 1996, a fire destroyed or damaged 16 units and 2 laundry rooms at
Regency Park Apartments. The total cost to repair the fire damage was $530,148.
The Partnership's insurance carrier will reimburse the Partnership for all costs
incurred as a result of the fire less a standard deductible. The excess of cash
to be received over the basis of the property destroyed in the fire resulted in
a $350,927 gain on involuntary conversion.

Because only part of the insurance proceeds were received by December 31, 1996,
only $285,127 of the gain on involuntary conversion was recognized on the
Partnership's Statement of Operations for the year ended December 31, 1996. The
remainder of the gain was shown as a $65,800 deferred gain on involuntary
conversion on the Partnership's December 31, 1996 Balance Sheet. The $65,800
deferred gain was recognized in 1997 as a gain on involuntary conversion when
the Partnership received the remaining proceeds of $96,303 from its insurance
carrier.

<PAGE>
NOTE 11 - LEGAL PROCEEDINGS
- ---------------------------

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

<PAGE>
2) The First National Bank of Chicago, as Trustee Under That Certain Pooling
and Servicing Agreement Dated as of December 1, 1995, for Resolution Trust
Corporation Commercial Mortgage Pass-Through Certificates, Series 1995-C2
v. McNeil Real Estate Fund X, Ltd., McNeil Partners, L.P. and McNeil
Investors, Inc. - U.S. District Court, Northern District of Dallas, Dallas
Division; Civil Action No. 33-96CV3198-D; and District Court, Dallas
County, Texas, F-116th Judicial District; Case No.: 96-13066(P96014).

3) Alenda and Joseph Gruenwald vs. McNeil Real Estate Management, Inc.
d/b/a Briarwood Apartments; ABC Corporations, XYZ Partnerships (Employee
Discrimination-EEOC (Sex)) - Superior Court of the State of Arizona in and
for the County of Pima; Case No. C 314017 (L96009).

The Plaintiff, a former property manager for the Partnership, filed a
complaint alleging that she was wrongfully terminated from her position in
violation of the Arizona Civil Rights Act. The Partnership claims that
Plaintiff's termination was a proper business decision resulting from
serious concerns about the property's management. After numerous
discussions, the parties agreed to a monetary settlement. A Settlement
Agreement and Release of All Claims was signed on May 22, 1997. The Judge
entered an Order on May 22, 1997, dismissing the case with prejudice.

<PAGE>
McNEIL REAL ESTATE FUND X, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1997

<TABLE>
<CAPTION>
Costs
Initial Cost (b) Cumulative Capitalized
Related (b) Buildings and Write-down for Subsequent
Description Encumbrances Land Improvements Impairment (c) To Acquisition
- ----------- ------------ ---- ------------- -------------- --------------

Apartments:
<S> <C> <C> <C> <C> <C>
Briarwood
Tucson, AZ $ 2,085,745 $ 489,437 $ 4,356,477 $ - $ 903,765

Coppermill
Tulsa, OK 4,962,725 1,176,980 13,146,794 (2,600,000) 1,841,322

Orchard
Lawrence, IN 6,072,238 366,938 7,611,708 - 2,036,719

Quail Meadows
Wichita, KS 5,754,137 754,551 9,387,261 - 1,803,106

Regency Park
Fort Wayne, IN 2,355,844 280,131 4,060,970 - 1,460,045

Sandpiper
Westminster, CO 5,350,389 866,107 5,991,007 - 2,054,859

Spanish Oaks
San Antonio, TX 3,932,977 586,056 4,618,711 - 1,650,409

Office Building:

La Plaza
Las Vegas, NV 3,136,029 2,761,442 4,388,847 - 2,419,486

Retail Center:

Lakeview Plaza
Lexington, KY 3,119,519 1,554,404 6,986,277 (129,914) 556,895
-------------- -------------- -------------- ------------ -------------

$ 36,769,603 $ 8,836,046 $ 60,548,052 $ (2,729,914) $ 14,726,606
============== ============== ============== ============ =============

</TABLE>

(b) The encumbrances reflect the present value of future loan payments
discounted, if appropriate, at a rate estimated to be the prevailing
interest rate at the date of acquisition or refinancing.

(c) The carrying value of Coppermill Apartments was reduced by $1,228,000
and $1,372,000 in 1986 and 1989, respectively. The carrying value of
Lakeview Plaza was reduced by $129,914 in 1991.

See accompanying notes to Schedule III.

<PAGE>
McNEIL REAL ESTATE FUND X, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1997

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

<S> <C> <C> <C> <C>
Briarwood
Tucson, AZ $ 489,437 $ 5,260,242 $ 5,749,679 $ (3,953,267)

Coppermill
Tulsa, OK 1,176,980 12,388,116 13,565,096 (10,068,984)

Orchard
Lawrence, IN 366,938 9,648,427 10,015,365 (6,820,654)

Quail Meadows
Wichita, KS 754,551 11,190,367 11,944,918 (7,908,383)

Regency Park
Fort Wayne, IN 280,131 5,521,015 5,801,146 (3,830,560)

Sandpiper
Westminster, CO 866,107 8,045,866 8,911,973 (5,384,980)

Spanish Oaks
San Antonio, TX 586,056 6,269,120 6,855,176 (4,538,865)

Office Building:

La Plaza
Las Vegas, NV 2,761,442 6,808,333 9,569,775 (4,829,120)

Retail Center:

Lakeview Plaza
Lexington, KY 1,554,404 7,413,258 8,967,662 (5,479,551)
-------------- -------------- --------------- --------------

$ 8,836,046 $ 72,544,744 $ 81,380,790 $ (52,814,364)
============== ============== =============== ==============
</TABLE>

(a) For Federal income tax purposes, the properties are depreciated over lives
ranging from 5-27.5 years using ACRS or MACRS methods. The aggregate cost
of real estate investments for Federal income tax purposes was $84,617,090
and accumulated depreciation was $52,153,047 at December 31, 1997.

See accompanying notes to Schedule III.

<PAGE>
McNEIL REAL ESTATE FUND X, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1997

<TABLE>
<CAPTION>
Date of Date Depreciable
Description Construction Acquired lives (years)
- ----------- ------------ -------- -------------
Apartments:
<S> <C> <C> <C>
Briarwood
Tucson, AZ 1978 07/80 4-33

Coppermill
Tulsa, OK 1978 10/80 6-38

Orchard
Lawrence, In 1973 12/80 3-33

Quail Meadows
Wichita, KS 1978 06/80 6-35

Regency Park
Fort Wayne, IN 1970 06/80 3-30

Sandpiper
Westminster, CO 1974 04/80 3-34

Spanish Oaks
San Antonio, TX 1968 08/80 3-30

Office Building:

La Plaza
Las Vegas, NV 1977 09/80 4-34

Retail Center:

Lakeview Plaza
Lexington, KY 1979 07/80 15-35

</TABLE>

See accompanying notes to Schedule III.

<PAGE>
McNEIL REAL ESTATE FUND X, LTD.

Notes to Schedule III

Real Estate Investments and Accumulated Depreciation and Amortization

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

<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------------
1997 1996 1995
-------------- ------------- ----------------
Real estate investments:

<S> <C> <C> <C>
Balance at beginning of year............... $ 79,946,309 $ 89,351,035 $ 86,475,540

Improvements............................... 1,434,481 2,233,614 2,875,495

Sale of real estate........................ - (52,359) -

Assets replaced............................ - (370,287) -

Reclassification of assets held
for sale................................ - (11,215,694) -
------------- ------------- ---------------

Balance at end of year..................... $ 81,380,790 $ 79,946,309 $ 89,351,035
============= ============= ===============

Accumulated depreciation and amortization:

Balance at beginning of year............... $ 49,689,189 $ 52,651,505 $ 49,450,647

Depreciation and amortization.............. 3,125,175 3,232,454 3,200,858

Assets replaced............................ - (201,066) -

Reclassification of assets held
for sale................................ - (5,993,704) -
------------- ------------- --------------

Balance at end of year..................... $ 52,814,364 $ 49,689,189 $ 52,651,505
============= ============= ==============

Assets Held for Sale:

Balance at beginning of year............... $ 5,308,731 $ 2,237,733 $ 7,215,032

Reclassification of assets held
for sale................................ - 5,221,990 -

Improvements............................... 6,144 94,515 63,555

Depreciation and amortization.............. - - (367,055)

Sale of assets held for sale............... (5,314,875) (2,245,507) (4,673,799)
------------- ------------- --------------

Balance at end of year..................... $ - $ 5,308,731 $ 2,237,733
============= ============= ==============
</TABLE>

<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
- ------- -----------------------------------------------------------
AND FINANCIAL DISCLOSURE
------------------------
None.

PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------- --------------------------------------------------

Neither the Partnership nor the General Partner has any directors or executive
officers. The names and ages of, as well as the positions held by, the officers
and directors of McNeil Investors, Inc., the general partner of the General
Partner, are as follows:

<TABLE>
<CAPTION>
Other Principal Occupations and Other
Name and Position Age Directorships During the Past 5 Years
- ----------------- --- -------------------------------------

<S> <C> <C>
Robert A. McNeil, 77 Mr. McNeil is also Chairman of the
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 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.

Carole J. McNeil 54 Mrs. McNeil is Co-Chairman, with
Co-Chairman of the husband Robert A. McNeil, of McNeil
Board Investors, Inc. Mrs. McNeil has twenty
years of real estate experience, most
recently as a private investor from 1986
to 1993. In 1982, she founded Ivory &
Associates, a commercial real estate
brokerage firm in San Francisco, CA.
Prior to that, she was a commercial real
estate 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.

</TABLE>

<PAGE>
<TABLE>
<CAPTION>
Other Principal Occupations and Other
Name and Position Age Directorships During the Past 5 Years
- ----------------- --- -------------------------------------
<S> <C> <C>
Ron K. Taylor 40 Mr. Taylor is the President and Chief
President and Chief Executive Officer of McNeil Real Estate
Executive Officer Management which is an affiliate of the
General Partner. Mr. Taylor has been in
this capacity since the resignation of
Donald K. Reed on March 4, 1997. Prior
to assuming his current
responsibilities, Mr. Taylor served as a
Senior Vice President of McREMI. Mr.
Taylor has been in this capacity since
McREMI commenced operations in 1991.
Prior to joining McREMI, Mr. Taylor
served as an Executive Vice President
for a national syndication/property
management firm. In this capacity, Mr.
Taylor had the responsibility for the
management and leasing of a 21,000,000
square foot portfolio of commercial
properties. Mr. Taylor has been actively
involved in the real estate industry
since 1983.
</TABLE>

Each director shall serve until his successor shall have been duly elected and
qualified.

ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------

No direct compensation was paid or payable by the Partnership to directors or
officers (since it does not have any directors or officers) for the year ended
December 31, 1997, nor was any direct compensation paid or payable by the
Partnership to directors or officers of the general partner of the General
Partner for the year ended December 31, 1997. The Partnership has no plans to
pay any such remuneration to any directors or officers of the general partner of
the General Partner in the future.

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

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

(A) Security ownership of certain beneficial owners.

No individual or group, as defined by Section 13(d)(3) of the
Securities Exchange Act of 1934, known to the Partnership is the
beneficial owner of more than 5 percent of the Partnership's securities
except as noted below:

1. High River Limited Partnership, 100 S. Bedford Road, Mount
Kisco, New York, 10549, owns 11,836 Units (8.8%) as of
January 31, 1998.

(B) Security ownership of management.

The General Partner and the officers and directors of its general
partner collectively own 1,732 Units (1.3%) as of January 31, 1998.

None.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------

Under terms of the Amended Partnership Agreement, the Partnership is paying the
MID to the General Partner. The maximum MID is calculated as 1% of the
Partnership's tangible asset value. The maximum MID percentage decreases
subsequent to 1999. Tangible asset value is determined by using the greater of
(i) an amount calculated by applying a capitalization rate of 9% to the
annualized net operating income of each property or (ii) a value of $10,000 per
apartment unit for residential property and $50 per gross square foot for
commercial property to arrive at the property tangible asset value. The property
tangible asset value is then added to the book value of all other assets
excluding intangible items.

MID will be paid to the extent of the lesser of the Partnership's excess cash
flow, as defined, or net operating income (the "Entitlement Amount"), 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 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. For the year ended December 31, 1997, the
Partnership accrued MID in the amount of $981,440.

During 1991, the Partnership amended its capitalization policy and began
capitalizing certain costs of improvements and betterments which under policies
of prior management had been expensed when incurred. The purpose of the
amendment was to more properly recognize items which were capital in nature. The
effect of the amendment standing alone was evaluated at the time the change was
made and determined not to be material to the financial statements of the
Partnership in 1991, nor was it expected to be material in any future year.
However, the amendment does have a material effect on the calculation of the

<PAGE>
Entitlement Amount which determines the amount of MID earned. Capital
improvements are excluded from cash flow, as defined. The majority of the base
period cash flow was measured under the previous capitalization policy, while
incentive period cash flow is determined using the amended policy. Under the
amended policy, more items are capitalized, and cash flow increases. The
amendment of the capitalization policy did not materially affect the MID for
1997, 1996 or 1995 as the Entitlement Amount was sufficient to pay MID
notwithstanding the amendment to the capitalization policy.

Any amount of the MID which 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.

The Partnership pays property management fees equal to 5% of gross rental
receipts of the Partnership's properties to McREMI for providing property
management and leasing services for the Partnership's residential properties and
property management services for the Partnership's commercial properties. The
Partnership reimburses McREMI for its costs, including overhead, of
administering the Partnership's affairs. For the year ended December 31, 1997,
the Partnership paid or accrued $1,138,363 in property management fees and
reimbursements.

On August 1, 1994, the Partnership obtained a $1,000,000 mortgage loan
commitment from McNeil Real Estate Fund XXVII, L.P. ("Fund XXVII"), an affiliate
of the General Partner. An initial amount of $800,000 was borrowed pursuant to
the commitment on December 6, 1994. The mortgage note was secured by a second
lien on Lakeview Plaza and required monthly interest-only payments of 1% plus
the prime lending rate of Bank of America. The mortgage note matured on August
1, 1997 and was retired on that date. The funds used to retire the note were
obtained from additional borrowings collateralized by La Plaza Office Building
(see below). Total interest expense for this mortgage note was $50,324 for the
year ended December 31, 1997.

On February 28, 1997, the Partnership refinanced the La Plaza mortgage note with
a $2,336,029 mortgage note obtained from Fund XXVII. The new mortgage note is
secured by a first lien on La Plaza Office Building. On August 1, 1997, the La
Plaza mortgage note was amended to increase the amount outstanding by $800,000
to $3,136,029. The mortgage note bears a variable interest rate of 1% plus the
prime lending rate of Bank of America. The mortgage note matures on February 28,
2000. Total interest expense for this mortgage note was $210,461 for the year
ended December 31, 1997.

See Item 1 - Business, Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations, Item 8 - Note 2 - "Transactions
with Affiliates" and Note 6 - "Mortgage Notes Payable - Affiliate."

<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 Date.

(A) The following documents are incorporated by reference and are an integral
part of this report:

Exhibits

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
3. Limited Partnership Agreement
(Incorporated by reference to the
Annual Report on Form 10-K for the
fiscal year ended September 30,
1987).

3.1 The Amended and Restated Limited
Partnership Agreement (incorporated
by reference to the Quarterly Report
on Form 10-Q for the quarter ended
September 30, 1991).

3.2 Amendment No. 1 to the Amended and
Restated Partnership Agreement of
McNeil Real Estate Fund X, Ltd.
dated to be effective July 31, 1993.
(4)

3.3 Amendment No. 2 to the Amended and
Restated Partnership Agreement of
McNeil Real Estate Fund X, Ltd.
dated March 28, 1994. (4)

10.1 Assignment and Assumption Agree-
ment, dated as of October 9, 1991,
between Pacific Investors
Corporation, Robert A. McNeil and
McNeil Partners, L.P. regarding
McNeil Real Estate Fund X, Ltd. (1)

10.2 Property Management Agreement,
dated as of October 9, 1991, between
McNeil Real Estate Fund X, Ltd. and
McNeil Real Estate Management, Inc.
(1)

10.3 Asset Management Agreement, dated
as of October 9, 1991, between
McNeil Real Estate Fund X, Ltd. and
McNeil Partners, L.P. (1)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
10.5 Amendment of Property Management
Agreement dated March 5, 1993,
between the Partnership and McNeil
Real Estate Management, Inc. (2)

10.6 Loan Agreement dated June 24,
1993, between Lexington Mortgage
Company and McNeil Real Estate Fund
X, Ltd., et. al. (3)

10.7 Master Property Management
Agreement, dated as of June 24,
1993, between McNeil Real Estate
Management, Inc. and McNeil Real
Estate Fund X, Ltd. (4)

10.8 Multifamily Note, dated as of
December 8, 1994, between Coppermill
Fund X Limited Partnership and Arbor
National Commercial Mortgage
Corporation. (5)

10.12 Promissory Note, dated February 25,
1992, between McNeil Real Estate
Fund X, Ltd. and Life Insurance
Company of the Southwest. (5)

10.13 Multifamily Note, dated September
4, 1992, between Regency Park Fund X
Associates, L.P. and Metmor
Financial, Inc. (5)

10.15 Note, dated July 1, 1978, between
M H Kentucky Ventures and First of
Boston Mortgage Corporation. (5)

10.18 Property Management Agreement,
dated November 30, 1994, between
Coppermill Fund X Limited
Partnership and McNeil Real Estate
Management, Inc. (5)

11. Statement regarding computation of
Net Income per Limited Partnership
Unit (see Item 8 - Note 1 -
"Organization and Summary of
Significant Accounting Policies").

</TABLE>

<PAGE>
Exhibit
Number Description

22. List of subsidiaries of the
Partnership.
<TABLE>
<CAPTION>
Names Under
Jurisdiction of Which It Is
Name of Subsidiary Incorporation Doing Business
------------------ --------------- --------------

<S> <C> <C>
Briarwood Fund X
Limited Partnership Delaware None

Coppermill Fund X
Limited Partnership Texas None

Orchard Fund X
Limited Partnership Delaware None

Quail Meadows Fund X
Limited Partnership Delaware None

Regency Park Fund X
Associates, L.P. Indiana None

Sandpiper Fund X
Limited Partnership Delaware None

Spanish Fund X, Ltd. Texas None

</TABLE>
27. Financial Data Schedule for the year
ended December 31, 1997.

(1) Incorporated by reference to the Annual Report
of McNeil Real Estate Fund X, Ltd., (File No.
0-9325), on Form 10-K for the period ended
December 31, 1991, as filed with the Securities
and Exchange Commission on March 30, 1992.

(2) Incorporated by reference to the Annual Report
of McNeil Real Estate Fund X, Ltd. (File No.
0-9325), on Form 10-K for the period ended
December 31, 1992, as filed with the Securities
and Exchange Commission on March 30, 1993.

(3) Incorporated by reference to the Annual Report
of McNeil Real Estate Fund XI, Ltd. (File No.
0-9783), on Form 10-K for the period ended
December 31, 1993, as filed with the Securities
and Exchange Commission on March 30, 1994.

<PAGE>

(4) Incorporated by reference to the Annual Report
of McNeil Real Estate Fund X, Ltd. (File No.
0-9325), on Form 10-K for the period ended
December 31, 1993, as filed with the Securities
and Exchange Commission on March 30, 1994.

(5) Incorporated by reference to the Annual Report
of McNeil Real Estate Fund X, Ltd. (File No.
0-9325), on Form 10-K for the period ended
December 31, 1994, as filed with the Securities
and Exchange Commission on March 30, 1995.

The Partnership has omitted instruments with respect to long-term debt where the
total amount of the securities authorized thereunder does not exceed 10% of the
total assets of the Partnership. The Partnership agrees to furnish a copy of
each such instrument to the Commission upon request.

(B) Reports on Form 8-K. On December 18, 1997, the Partnership filed a
Current Report on Form 8-K reporting the sale of Iberia Plaza to
CenterAmerican Property Trust, L.P., for $3,450,000.

<PAGE>
McNEIL REAL ESTATE FUND X, LTD.
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 X, LTD.

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

By: McNeil Investors, Inc., General Partner

March 30, 1998 By: /s/ Robert A. McNeil
- -------------- --------------------------------------
Date Robert A. McNeil
Chairman of the Board and Director
(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

March 30, 1998 By: /s/ Ron K. Taylor
- -------------- --------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)

March 30, 1998 By: /s/ Brandon K. Flaming
- -------------- --------------------------------------
Date Brandon K. Flaming
Vice President of McNeil
Investors, Inc.
(Principal Accounting Officer)

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 5,755,976
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 81,380,790
<DEPRECIATION> (52,814,364)
<TOTAL-ASSETS> 37,112,416
<CURRENT-LIABILITIES> 0
<BONDS> 36,769,603
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 37,112,416
<SALES> 15,471,277
<TOTAL-REVENUES> 18,829,962
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11,444,008
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,748,978
<INCOME-PRETAX> 3,636,976
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 518,495
<CHANGES> 0
<NET-INCOME> 4,155,471
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>