CARLYLE REAL ESTATE LTD PARTNERSHIP XI, 10-K405, 1998-03-30

CARLYLE REAL ESTATE LTD PARTNERSHIP XI
10-K405, 1998-03-30
REAL ESTATE

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the fiscal year
ended December 31, 1997 Commission file number 0-10494

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(Exact name of registrant as specified in its charter)

Illinois 36-3102608
(State of organization) (I.R.S. Employer Identification No.)

900 N. Michigan Ave., Chicago, Illinois 60611
(Address of principal executive office) (Zip Code)

Registrant's telephone number, including area code 312-915-1987

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange on
Title of each class which registered
- ------------------- -------------------------
None None

Securities registered pursuant to Section 12(g) of the Act:

LIMITED PARTNERSHIP INTERESTS
(Title of class)

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 (or for such shorter period that the
registrant was required to file such reports), 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 ]

State the aggregate market value of the voting stock held by non-affiliates
of the registrant. Not applicable.

Documents incorporated by reference: None

<PAGE>

TABLE OF CONTENTS

Page
----
PART I

Item 1. Business . . . . . . . . . . . . . . . . . . . . 1

Item 2. Properties . . . . . . . . . . . . . . . . . . . 6

Item 3. Legal Proceedings. . . . . . . . . . . . . . . . 8

Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . 8

PART II

Item 5. Market for the Partnership's
Limited Partnership Interests and
Related Security Holder Matters. . . . . . . . . 8

Item 6. Selected Financial Data. . . . . . . . . . . . . 9

Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . 15

Item 7A. Quantitative and Qualitative
Disclosures About Market Risk. . . . . . . . . . 23

Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . . . . 24

Item 9. Changes in and Disagreements
with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . 53

PART III

Item 10. Directors and Executive Officers
of the Partnership . . . . . . . . . . . . . . . 53

Item 11. Executive Compensation . . . . . . . . . . . . . 56

Item 12. Security Ownership of Certain
Beneficial Owners and Management . . . . . . . . 58

Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . . . 59

PART IV

Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K . . . . . . . 59

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 62

<PAGE>

PART I

ITEM 1. BUSINESS

All references to "Notes" are to Notes to Consolidated Financial
Statements contained in this report. Capitalized terms used herein, but
not defined, have the same meanings as used in the Notes.

The registrant, Carlyle Real Estate Limited Partnership - XI (the
"Partnership"), is a limited partnership formed in 1981 and currently
governed by the Revised Uniform Limited Partnership Act of the State of
Illinois to invest in improved income-producing commercial and residential
real property. The Partnership sold $137,500,000 in Limited Partnership
Interests (the "Interests") to the public at $1,000 per Interest commencing
on May 8, 1981 pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933 (Registration No. 2-70724). The offering closed on
May 5, 1982. No Limited Partner has made any additional capital
contribution after such date. The Limited Partners of the Partnership
share in their portion of the benefits of ownership of the Partnership's
real property investments according to the number of Interests held.

The Partnership is engaged solely in the business of the acquisition,
operation and sale and disposition of equity real estate investments. Such
equity investments are or have been held by fee title, leasehold estates
and/or through joint venture partnership interests. The Partnership's real
property investments are located throughout the nation and it has no real
estate investments located outside of the United States. A presentation of
information about industry segments, geographic regions, raw materials or
seasonality is not applicable and would not be material to an understanding
of the Partnership's business taken as a whole. Pursuant to the
Partnership Agreement, the Partnership is required to terminate no later
than December 31, 2031. The Partnership is self-liquidating in nature. At
sale of a particular property, the net proceeds, if any, are generally
distributed or reinvested in existing properties rather than invested in
acquiring additional properties. As discussed further in Item 7, the
Partnership currently expects to conduct an orderly liquidation of its
remaining investment portfolio as quickly as practicable and to wind up its
affairs not later than December 31, 1999 barring any unforeseen economic
developments.

The Partnership has made the real property investments set forth in
the following table:

<PAGE>

<TABLE>
<CAPTION>
SALE OR DISPOSITION
DATE OR IF OWNED
AT DECEMBER 31, 1997,
NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED
AND LOCATION SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP (b)
- ---------------------- ---------- -------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
1. River Hills Apartments
Arlington, Texas. . 476 units 4/14/81 11/26/84 fee ownership of land
and improvements
2. Wood Forest Glen
Apartments
Houston, Texas. . . 336 units 4/15/81 4/2/92 fee ownership of land
and improvements
3. Scotland Yard
Apartments-Phase I
Houston, Texas. . . 332 units 4/15/81 11/1/96 fee ownership of land
and improvements (c)
4. Somerset Lake
Apartments
Indianapolis,
Indiana.. . . . . . 360 units 6/1/81 11/10/88 fee ownership of land
and improvements
5. Pavillion Towers
Office Complex
Aurora, Colorado. . 280,000 5/28/81 4/25/86 fee ownership of land
sq.ft. and improvements (through
n.r.a. joint venture partnership)
6. Bitter Creek
Apartments
Grand Prairie,
Texas . . . . . . . 472 units 6/1/81 6/10/92 fee ownership of land and
improvements (through
joint venture partner-
ship)
7. Mall of Memphis
Memphis, Tennessee. 493,000 8/3/81 15% fee ownership of land and
sq.ft. improvements (through joint
venture partnership)
(d)(f)(g)
8. 767 Third Avenue
Office Building
New York, New York. 284,000 9/30/81 10/31/97 fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnership)
(c)(d)

<PAGE>

SALE OR DISPOSITION
DATE OR IF OWNED
AT DECEMBER 31, 1997,
NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED
AND LOCATION SIZE PURCHASE CAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP (b)
- ---------------------- ---------- -------- ---------------------- ---------------------

9. Riverfront Office
Building
Cambridge,
Massachusetts . . . 340,000 10/22/81 7% fee ownership of improve-
sq.ft. ments and ground leasehold
n.r.a. interest in land (through
joint venture partnership)
(d)(e)(f)(g)
10. Fontaine Woods
Apartments
Red Bank,
Tennessee . . . . . 262 units 12/1/81 12/31/84 fee ownership of land and
improvements (through joint
venture partnership)
11. El Dorado View
Apartments
Webster, Texas. . . 244 units 7/31/81 7/23/96 fee ownership of land and
improvements (c)
12. Gatehall Plaza
Office Building
Parsippany,
New Jersey. . . . . 118,000 3/11/82 10/31/91 fee ownership of improve-
sq.ft. ments and ground leasehold
n.r.a. interest in land (through
joint venture partnership)
13. 824 Market Street
Office Building
Wilmington,
Delaware. . . . . . 195,220 6/15/82 12/12/94 fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnership)
14. Scotland Yard
Apartments-Phase II
Houston, Texas. . . 346 units 6/28/82 11/1/96 fee ownership of land and
improvements (c)
15. South Point
Apartments
Houston, Texas. . . 244 units 5/11/82 7/29/93 fee ownership of land and
improvements
16. Meadowcrest
Apartments
Dallas, Texas . . . 352 units 7/1/82 6/9/92 fee ownership of land and
improvements

<PAGE>

17. Coast Federal
Office Building
Pasadena,
California. . . . . 101,777 9/6/82 11/21/86 fee ownership of land and
sq.ft. improvements
n.r.a.
18. National City Center
Office Building
Cleveland, Ohio . . 786,400 7/27/83 12/18/97 fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnership)(c)(d)
19. Yerba Buena West
Office Building
San Francisco,
California. . . . . 267,687 8/30/85 6/24/92 fee ownership of land and
sq.ft. improvements (through joint
n.r.a. venture partnership)

<PAGE>

<FN>
- -----------------------

(a) The computation of this percentage for properties held at
December 31, 1997 does not include amounts invested from sources other than
the original net proceeds of the public offering as described above and in
Item 7.

(b) Reference is made to the Notes for the current outstanding
principal balances and a description of the long-term mortgage indebtedness
secured by the Partnership's real property investments.

(c) This property or the Partnership's interest in this property has
been sold. Reference is made to the Notes for a description of the sale of
such real property investment.

(d) Reference is made to the Notes for a description of the joint
venture partnership through which the Partnership has made this real
property investment.

(e) Reference is made to the Notes for a description of the leasehold
interest, under a ground lease, in the land on which this real property
investment is situated.

(f) Reference is made to Item 8 - Schedule III filed with this annual
report for further information concerning real estate taxes and
depreciation.

(g) Reference is made to Item 6 - Selected Financial Data for
additional operating and lease expiration data concerning this investment
property.

</TABLE>

<PAGE>

The Partnership's real property investments are subject to competition
from similar types of properties in the respective vicinities in which they
are located. Such competition is generally for the retention of existing
tenants. Additionally, with respect to the Mall of Memphis, the
Partnership is in competition for new tenants in a market where significant
vacancies are present. Reference is made to Item 7 below for a discussion
of competitive conditions and future capital improvement plans of the
Partnership and its remaining investment properties. Approximate occupancy
levels for the properties are set forth on a quarterly basis in the table
set forth in Item 2 below to which reference is hereby made. The
Partnership maintains the suitability and competitiveness of its properties
in its markets primarily on the basis of effective rents, tenant mix,
tenant allowances and service provided to tenants. In the opinion of the
Corporate General Partner of the Partnership, the two remaining investment
properties held at December 31, 1997 are adequately insured.

On September 30, 1997, the 767 Third Avenue joint venture was
liquidated in contemplation of the sale of the Partnership's interest.
Accordingly, the pro rata share of the venture's assets and liabilities was
distributed to the venture partners in a non-cash transaction. The
operations of the 767 Third Avenue office building continued under a co-
tenancy agreement until October 31, 1997, when the Partnership sold its
undivided interest in the property. In addition, on December 18, 1997, the
Partnership, through its unconsolidated joint venture, sold the land and
related improvements of the National City Center office building.
Reference is made to the Notes for a further description of such
transactions.

Reference is made to the Notes for a schedule of minimum lease
payments to be received in each of the next five years, and in the
aggregate thereafter, under leases in effect at the Partnership's
properties as of December 31, 1997.

The Partnership has no employees other than personnel performing on-
site duties at the Mall of Memphis investment property, none of whom are
officers or directors of the Corporate General Partner of the Partnership.

The terms of transactions between the Partnership, the General
Partners and their affiliates are set forth in Item 11 below to which
reference is hereby made for a description of such terms and transactions.

ITEM 2. PROPERTIES

The Partnership owns or owned directly or through joint venture
partnerships the properties or interests in the properties referred to
under Item 1 above to which reference is hereby made for a description of
said properties.

The following is a listing of principal businesses or occupations
carried on in and approximate occupancy levels by quarter during fiscal
years 1997 and 1996 for the Partnership's investment properties owned
during 1997:

<PAGE>

<TABLE>
<CAPTION>
1996 1997
------------------------- -------------------------
At At At At At At At At
Principal Business 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
------------------ ---- ---- ---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. Mall of Memphis
Memphis, Tennessee. . . . . Retail 78% 74% 76% 75% 73% 73% 75% 75%
2. Riverfront Office
Building
Cambridge,
Massachusetts . . . . . . . Insurance/Soft- 99% 99% 80% 85% 90% 90% 98% 100%
ware Development
3. 767 Third Ave.
Office Building
New York, New York. . . . . Foreign
Representation 96% 97% 95% 96% 95% 96% 99% N/A
4. National City Center
Office Building
Cleveland, Ohio . . . . . . Banking 97% 97% 95% 95% 89% 89% 90% N/A

<FN>
- --------------------

Reference is made to Item 6, Item 7 and to the Notes for further information regarding property occupancy,
competitive conditions and tenant leases at the Partnership's investment properties.

An "N/A" indicates that the property was sold or the Partnership's interest in the property was sold and was
not owned by the Partnership at the end of the period.

</TABLE>

<PAGE>

ITEM 3. LEGAL PROCEEDINGS

The Partnership is not subject to any pending material legal
proceedings, other than ordinary litigation incidental to the business of
the Partnership.

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

There were no matters submitted to a vote of security holders during
1997 and 1996.

PART II

ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS

As of December 31, 1997, there were 14,474 record holders of the
137,420 Interests outstanding of the Partnership. There is no public
market for Interests and it is not anticipated that a public market for
Interests will develop. Upon request, the Corporate General Partner may
provide information relating to a prospective transfer of Interests to an
investor desiring to transfer his Interests. The price to be paid for the
Interests, as well as any economic aspects of the transaction, will be
subject to negotiation by the investor. There are certain conditions and
restrictions on the transfer of Interests, including, among other things,
the requirement that the substitution of a transferee of Interests as a
Limited Partner of the Partnership be subject to the written consent of the
Corporate General Partner, which may be granted or withheld in its sole and
absolute discretion. The rights of a transferee of Interests who does not
become a substituted Limited Partner will be limited to the rights to
receive his share of profits or losses and cash distributions from the
Partnership, and such transferee will not be entitled to vote such
Interests or have other rights of a Limited Partner. No transfer will be
effective until the first day of the next succeeding calendar quarter after
the requisite transfer form satisfactory to the Corporate General Partner
has been received by the Corporate General Partner. The transferee
consequently will not be entitled to receive any cash distributions or any
allocable share of profits or losses for tax purposes until such succeeding
calendar quarter. Profits or losses from operations of the Partnership for
a calendar year in which a transfer occurs will be allocated between the
transferor and the transferee based upon the number of quarterly periods in
which each was recognized as the holder of Interests, without regard to the
results of Partnership's operations during particular quarterly periods and
without regard to whether cash distributions were made to the transferor or
transferee. Profits or losses arising from the sale or other disposition
of Partnership properties will be allocated to the recognized holder of the
Interests as of the last day of the quarter in which the Partnership
recognized such profits or losses. Cash distributions to a holder of
Interests arising from the sale or other disposition of Partnership
properties will be distributed to the recognized holder of the Interests as
of the last day of the quarterly period with respect to which distribution
is made.

Reference is made to Item 6 below for a discussion of cash distribu-
tions made to the Limited Partners. The mortgage loan secured by the
Riverfront Office Building restricts the use by Riverfront Office Park
Joint Venture of the cash flow from that property as more fully discussed
in the Notes.

Reference is made to Item 7 for a discussion of unsolicited tender
offers received from unaffiliated third parties.

<PAGE>

<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

DECEMBER 31, 1997, 1996, 1995, 1994 AND 1993
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)

<CAPTION>
1997 1996 1995 1994 1993
------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total income . . . . . . . . $ 25,209,762 33,059,440 35,760,756 36,744,939 37,574,501
============ ============ ============ ============ ============
Earnings (loss) before
gains on sale or
disposition of
investment properties
or interest in invest-
ment property and
extraordinary items . . . . $(15,489,395) (14,103,120) (4,190,895) (8,831,339) (7,966,375)
Gains on sale or disposi-
tion of investment
properties or interest
in investment property,
net of venture partner's
share . . . . . . . . . . . 10,705,403 13,480,719 -- 4,693,546 1,433,916
Extraordinary items. . . . . -- 1,180,286 -- -- --
------------ ------------ ------------ ------------ ------------
Net earnings (loss) . . $ (4,783,992) 557,885 (4,190,895) (4,137,793) (6,532,459)
============ ============ ============ ============ ============

Net earnings (loss) per
limited partnership
interest (b):
Earnings (loss) before
gains on sale or
disposition of
investment properties
or interest in invest-
ment property and
extraordinary items . . $ (108.21) (98.52) (29.27) (61.68) (55.62)

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

DECEMBER 31, 1997, 1996, 1995, 1994 AND 1996 - CONTINUED

1997 1996 1995 1994 1993
------------- ------------- ----------- ------------ ------------

Gains on sale or dis-
position of investment
properties or interest
in investment property,
net of venture
partner's share. . . . . 77.13 97.12 -- 33.80 10.32
Extraordinary items . . . -- 8.50 -- -- --
------------ ------------ ------------ ------------ ------------
Net earnings (loss) . . $ (31.08) 7.10 (29.27) (27.88) (45.30)
============ ============ ============ ============ ============
Total assets . . . . . . . . $ 78,921,540 127,569,676 154,431,514 151,349,909 169,411,131
Long-term debt . . . . . . . $ 46,713,811 130,058,240 128,508,546 108,263,135 106,140,597
Cash distributions
per Interest (c). . . . . . $ -- -- -- -- --
============ ============ ============ ============ ============
<FN>
- -------------

(a) The above selected financial data should be read in conjunction with the consolidated financial
statements and the related notes appearing elsewhere in this annual report.

(b) The net earnings (loss) per Interest is based upon the number of Interests outstanding at the end of each
period.

(c) Cash distributions from the Partnership are generally not equal to Partnership income (loss) for
financial reporting or Federal income tax purposes. Each Partner's taxable income (loss) from the Partnership in
each year is equal to his allocable share of the taxable income (loss) of the Partnership, without regard to the
cash generated or distributed by the Partnership. Accordingly, cash distributions to the Limited Partners since
the inception of the Partnership have not resulted in taxable income to such Limited Partners and have therefore
represented a return of capital.

</TABLE>

<PAGE>

<TABLE>

SIGNIFICANT PROPERTY - SELECTED RENTAL AND OPERATING DATA AS OF DECEMBER 31, 1997

Property
- --------

Mall of Memphis a) The gross leasable area ("GLA") occupancy rate and average base rent per
square foot as of December 31 (excluding percentage rent) for each of the
last five years were as follows:

GLA Avg. Base Rent Per
December 31, Occupancy Rate Square Foot (1)
------------ -------------- ------------------
<S> <C> <C> <C> <C>

1993. . . . . . . 85% $14.09
1994. . . . . . . 85% 14.31
1995. . . . . . . 79% 14.02
1996. . . . . . . 75% 15.52
1997. . . . . . . 75% 10.86
<FN>
(1) Average base rent per square foot is based on GLA occupied as of December 31
of each year.
</TABLE>
<TABLE>
<CAPTION>
Base Rent Scheduled Lease Lease
b) Significant Tenants Square Feet Per Annum Expiration Date Renewal Option
------------------- ----------- --------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>

Dillards 130,266 $563,070 9/2012 --
(Department Store)
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
c) The following table sets forth as of December 31, 1997 certain information with
respect to the expiration of leases for the next ten years at the Mall of Memphis:

Annualized Percent of
Number of Approx. Total Base Rent Total 1997
Year Ending Expiring GLA of Expiring of Expiring Base Rent
December 31, Leases Leases Leases (1) Expiring
------------ -------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>

1998 12 22,000 346,297 8.8%
1999 12 21,000 499,101 12.6%
2000 8 18,000 367,304 9.3%
2001 12 56,000 513,011 13.0%
2002 15 26,000 511,282 12.9%
2003 8 19,000 323,226 8.2%
2004 5 15,000 348,508 8.8%
2005 3 16,000 288,139 7.3%
2006 7 28,000 468,447 11.8%
2007 1 2,000 86,520 2.2%
<FN>
(1) Annualized base rent does not include rents from tenants under rent relief as such
tenants pay a percentage of their monthly sales in lieu of a fixed amount.

</TABLE>

<PAGE>

Property
- --------

Riverfront
Office Building a) The gross leasable area ("GLA") occupancy rate and average base rent per
square foot as of December 31 (excluding percentage rent) for each of the
last five years were as follows:

GLA Avg. Base Rent Per
December 31, Occupancy Rate Square Foot (1)
------------ -------------- ------------------
<S> <C> <C> <C> <C>

1993. . . . . . . 85% 19.05
1994. . . . . . . 95% 17.83
1995. . . . . . . 99% 18.11
1996. . . . . . . 85% 20.03
1997. . . . . . . 100% 18.68
<FN>
(1) Average base rent per square foot is based on GLA occupied as of December 31
of each year.
</TABLE>
<TABLE>
<CAPTION>
Base Rent Scheduled Lease Lease
b) Significant Tenants Square Feet Per Annum Expiration Date Renewal Option
------------------- ----------- --------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>

Icube 35,488 815,761 11/01 NA
Mathsoft, Inc. 34,562 518,430 10/99 NA
Pegasystems 44,277 915,173 03/99 NA
Clam Associates 35,186 559,868 03/98 NA
Perot Systems 57,507 1,475,055 08/02 NA
Weber Group 23,350 487,973 02/00 NA
Weber Group 12,543 313,575 03/02 NA

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
c) The following table sets forth as of December 31, 1997 certain
information with respect to the expiration of leases for
the next ten years at the Riverfront Office Building:

Annualized Percent of
Number of Approx. Total Base Rent Total 1997
Year Ending Expiring GLA of Expiring of Expiring Base Rent
December 31, Leases Leases Leases Expiring
------------ --------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>

1998 3 60,000 1,271,508 19.9%
1999 2 79,000 1,433,603 22.5%
2000 2 23,000 490,473 7.7%
2001 6 46,000 926,217 14.5%
2002 6 127,000 3,262,992 51.2%
2003 2 6,000 144,125 2.3%
2004 -- -- -- --
2005 -- -- -- --
2006 -- -- -- --
2007 -- -- -- --

</TABLE>

<PAGE>

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

LIQUIDITY AND CAPITAL RESOURCES

As a result of the public offering of Interests as described in Item
1, the Partnership had approximately $121,936,000 (after deducting selling
expenses and other offering costs) with which to make investments in
income-producing commercial and residential real property, to pay legal
fees and other costs (including acquisition fees) related to such
investments and to satisfy working capital requirements. Portions of the
proceeds were utilized to acquire the properties described in Item 1 above.

During 1996 and 1997, some of the Holders of Interests in the
Partnership received from an unaffiliated third party unsolicited tender
offers, each to purchase up to 4.9% of the Interests in the Partnership at
between $25 and $75 per Interest. The Partnership recommended against
acceptance of these offers on the basis that, among other things, the offer
prices were inadequate. All of such offers have expired.

The board of directors of JMB Realty Corporation ("JMB") the corporate
general partner of the Partnership, has established a special committee
(the "Special Committee") consisting of certain directors of JMB to deal
with all matters relating to tender offers for Interests in the
Partnership, including any and all responses to such tender offers. The
Special Committee has retained independent counsel to advise it in
connection with any potential tender offers for Interests and has retained
Lehman Brothers Inc. as financial advisor to assist the Special Committee
in evaluating and responding to any additional potential tender offers for
Interests.

The Partnership is also aware that, in January 1998, an unaffiliated
third party made an unsolicited tender offer to some of the Holders of
Interests. This offer sought to purchase up to 4.5% of the Interests in
the Partnership at $110 per Interest. This offer expired in February 1998.

The Special Committee recommended against acceptance of the offer on the
basis that, among other things, the offer price was inadequate. As of the
date of this report, the Partnership is aware that 2.49% of the Interests
have been purchased by such unaffiliated third parties either pursuant to
such tender offers or through negotiated purchases.

It is possible that other offers for Interests may be made by
unaffiliated third parties in the future, although there is no assurance
that any other third party will commence an offer for Interests, the terms
of any such offer or whether any such offer, if made, will be consummated,
amended or withdrawn.

At December 31, 1997, the Partnership and its consolidated ventures
had cash and cash equivalents of approximately $13,841,000. In February
1998, the Partnership received approximately $3,980,000 in proceeds from
the December 1997 sale of the National City Center investment property
(discussed below) and subsequently made a distribution of $14,429,100 ($105
per Interest) to the Holders of Interests of such proceeds and the proceeds
from the 1997 sale of the Partnership's interest in 767 Third Avenue
(discussed below). The remaining funds are available for working capital
requirements. The Partnership and its consolidated ventures have
currently budgeted in 1998 approximately $2,015,000 for tenant improvements
and other capital expenditures. The Partnership's share of such items in
1998 is currently budgeted to be approximately $1,181,000. Actual amounts
expended in 1998 may vary depending on a number of factors including actual
leasing activity, results of property operations, liquidity considerations
and other market conditions over the course of the year. The Mall of
Memphis investment property currently operates in an overbuilt market that
is characterized by lower than normal occupancy and reduced rent levels.
Such competitive conditions have resulted in and will continue to
contribute to net cash flow deficits at the property. The lender was

<PAGE>

unwilling to grant an acceptable loan modification to cover any future net
operating deficits. In addition, as more fully discussed below, the
Partnership has decided not to commit any additional amounts to the
property to cover such deficits and, therefore, suspended the payment of
required debt service effective January 1, 1998. As a result, the
Partnership does not consider the Mall of Memphis to be a source of future
liquidity. In addition, the Partnership does not consider the mortgage
notes receivable arising from the previous sale of the Pavillion Towers
investment property to be a source of future liquidity as collection of any
additional past due or future payments on the Partnership's notes is
considered unlikely. Reference is made to the Notes. The source of
capital for future short-term and long-term liquidity and distributions to
partners is expected to be through the sale of the Partnership's Riverfront
investment property. In such regard, reference is made to the
Partnership's property specific discussions below and also the
Partnership's disclosure of its remaining property lease expirations in
Item 6. The Partnership's and its ventures' mortgage obligations are
separate non-recourse loans secured individually by the investment
properties and are not obligations of the entire investment portfolio, and
the Partnership and its ventures are not personally liable for the payment
of the mortgage indebtedness.

The Partnership currently has adequate cash and cash equivalents to
maintain the operations of the Partnership. However, based upon estimated
operations of certain of the Partnership's investment properties, the
Partnership continues to suspend operating distributions to the Limited and
General Partners. In addition, the Partnership has deferred distributions
of net cash receipts and partnership management fees related to the first
quarter of 1991 as discussed in the Notes.

Based upon current market conditions, the Partnership has decided not
to commit any additional amounts to the Mall of Memphis which is incurring
operating deficits. This will result in the Partnership no longer having
an ownership interest in such property. Such decision will result in a
gain to the Partnership for financial reporting and Federal income tax
purposes, with no corresponding distributable proceeds.

767 Third Avenue Office Building

The property had been considered held for sale or disposition as of
December 31, 1996, and therefore, was not subject to continued
depreciation. On September 30, 1997, the 767 Third Avenue joint venture
was liquidated in contemplation of the sale of the Partnership's interest.
Accordingly, the pro rata share of the venture's assets and liabilities was
distributed to the venture partners in a non-cash transaction. The
operations of the 767 Third Avenue office building continued under a co-
tenancy agreement until October 31, 1997, when the Partnership sold its
undivided interest in the property for $11,000,000 (before selling costs
and prorations). Although replacement of the joint venture with this co-
tenancy arrangement had no economic effect on the Partnership, as of
October 1, 1997, the accompanying consolidated financial statements no
longer reflected 767 Third Avenue Associates' former venture partner's
minority interest and reflected only the Partnership's distributed share of
the assets and liabilities of the venture. Reference is made to the Notes
for a further description of such sale.

Riverfront Office Building

In 1996, Blue Cross Blue Shield, occupying approximately 88,000 square
feet, or approximately 26% of the leasable space of the building, notified
the venture that it would be vacating the premises upon its lease
expiration, originally set for March 1998. As a result, the venture
entered into a termination agreement with Blue Cross Blue Shield whereby
the tenant would vacate certain spaces by certain dates before its lease
expiration date for a set payment. Although the venture incurred
substantial lease-up costs as a result of the Blue Cross Blue Shield lease

<PAGE>

expiration, the venture was able to fulfill the debt service requirements
of the restructured loan. Additionally, the Cambridge, Massachusetts
market, in which the property operates, has been improving. As a result,
the venture has recently been successful in attracting new tenants to the
property such that as of December 31, 1997, the property is 100% occupied.
However, if future operating shortfalls are greater than expected and
funding of deficits becomes necessary, the Partnership would make a
decision to commit additional funds to this investment property based on,
among other things, the likelihood of the return of such additional
investment plus a reasonable profit thereon. The amount of liquidity this
investment property can provide to the Partnership is dependent on the
property's value and the satisfaction of certain preference levels to the
unaffiliated venture partner pursuant to the joint venture agreement.

The restructured loan secured by the building and improvements
requires that net cash flow after debt service and capital be paid into an
escrow account controlled by the lender to be used for future operating
shortfalls, principal payments and costs associated with additional leasing
as approved by the lender. In this regard, in July 1997, $451,409 of
escrowed funds was applied by the lender against the outstanding mortgage
loan balance and, in October 1997, $615,271 of escrowed funds was released
by the lender to fund leasing costs and other capital projects at the
property. The agreement further prohibits the venture owning the property
from distributing excess cash flow after full funding of the escrow
accounts. Such excess funds are to be retained for operating shortfalls,
principal payments and costs associated with additional leasing as approved
by the lender prior to withdrawing escrow deposits.

In addition, as a condition of the loan restructure discussed above,
the ground lease was amended and provides for the deferral of any and all
ground lease payments from February 1993 until the earlier of any future
mortgage loan prepayment date (resulting from a sale or refinancing of the
property) or December 31, 2007. However, if the property produces certain
levels of gross receipts (as defined by the restructured loan) for the
years 1998 through 2003, the restructured loan allows for partial payments
of ground rent to be reinstated beginning in 1998. Based on current
projections, the venture does not expect ground rent payments to resume in
1998. The ground lessor is a general partner of the venture partner. At
December 31, 1997, the total amount of deferred and accrued ground lease
expense is approximately $846,000.

The property has been considered held for sale or disposition as of
December 31, 1996, and therefore, is no longer subject to continued
depreciation.

Mall of Memphis

Occupancy of the property is 75% at December 31, 1997. The Mall of
Memphis trade area population consists primarily of lower to moderate
income residents, and the income level has been decreasing over the last
several years. The mall has experienced a number of store closings, many
prior to lease expiration, primarily as a result of tenants filing for
bankruptcy and liquidating. In addition, the property has been subjected
to increased competition for shoppers and tenants from strip centers and
large discount stores in its market area. Although certain tenants
continue to perform well, overall tenant sales at the property have
continued to decline. Due to poor sales performances, many tenants are
electing not to renew their leases or are renewing at lower rates. Many
other tenants whose leases are not due to expire in the near term have
approached the Partnership seeking rent relief. The Partnership has
granted rent relief to certain tenants that could demonstrate that without
a reduction in their rent, they would no longer be able to remain in
business at the mall. As a result of these market and property conditions,
the property's cash flow declined in 1996 and 1997 and is expected to
decline further in the future.

<PAGE>

The Partnership had initiated discussions with the underlying lender
regarding a loan modification and, in connection with these discussions,
advanced approximately $604,000 to cover the property's required debt
service payments through December 31, 1997. However, the lender was
unwilling to grant an acceptable loan modification to cover future
operating deficits. The Partnership has therefore decided not to commit
any additional amounts to the property and, effective January 1, 1998,
suspended the payment of required debt service on its first, second and
third mortgage notes secured by the property. At December 31, 1997, these
notes had an aggregate principal balance of $39,676,002 and accrued but
unpaid interest of approximately $343,000. As a result, the Partnership is
in default and these mortgage notes have been classified as current in the
accompanying consolidated financial statements. The lender has agreed to
allow the Partnership to recoup its 1997 advance from 1998 operating cash
flow before proceeding to realize on its security in the property. Based
on projected operating results, the Partnership expects the lender to
proceed to realize on its security during the second quarter of 1998. This
would result in the Partnership no longer having an ownership interest in
the property and will result in a gain for financial reporting and Federal
income tax purposes with no corresponding distributable proceeds in 1998.

Pursuant to the terms of the note payable to the former venture
partner, the Partnership guaranteed a portion of the debt service payment
payable on June 1, 1997 in the amount of $300,000. As of the date of this
report, the Partnership has not made the June 1, 1997 guaranteed debt
service payment. As a result, the Partnership is in default and the
$5,000,000 note payable has been classified as current in the accompanying
consolidated financial statements. Due to provisions of the associated
underlying agreements, the former venture partner may generally only
realize upon its security (its former partnership interest in the joint
venture) in the event of default by the Partnership. However, concerning
such June 1997 payment, it is possible that the former venture partner may
attempt to exercise its remedies against the Partnership's other assets
respecting the guaranteed amount.

The current and anticipated market conditions outlined above caused
uncertainty regarding the Partnership's ability to recover the net carrying
value of the Mall of Memphis investment property through future operations
and sale. Therefore, as of June 30, 1997, the Partnership recorded, as a
matter of prudent accounting practice a provision for value impairment of
such investment of $13,143,000. Such provision was recorded to reflect the
then estimated fair value of the property, less costs to sell.

Scotland Yard - Phase I and II Apartments

On November 1, 1996, the Partnership sold the Scotland Yard Apartments
Phase I and II for $23,200,000 (before selling costs). Reference is made
to the Notes for a further description of such sale.

El Dorado View Apartments

On July 23, 1996, the Partnership sold the El Dorado View Apartments
for $6,600,000 (before selling costs). Reference is made to the Notes for
a further description of such sale.

Yerba Buena Office Building

<PAGE>

lender wish to market the property for sale. The lender sold the property
to an unaffiliated third party during 1996. The sale price did not
generate a level of distributable proceeds where the joint venture would
have been entitled to a share. However, the joint venture was not given an
opportunity to purchase the property on the same terms it was sold for.
The joint venture has filed a suit against the lender for breach of its
obligations. There are no assurances that the joint venture will recover
any amounts as a result of this action.

National City Center

On December 18, 1997, the Carlyle/National City joint venture sold the
land and related improvements of the National City Center office building
for $82,150,000. Reference is made to the Notes for a further description
of such event.

General

There are certain risks associated with the Partnership's investment
made through joint ventures including the possibility that the
Partnership's joint venture partners in the investment might become unable
or unwilling to fulfill their financial or other obligations, or that such
joint venture partners may have economic or business interests or goals
that are inconsistent with those of the Partnership.

As a result of the real estate market conditions discussed above, the
Partnership continues to conserve its working capital. All expenditures
are carefully analyzed and certain capital projects are deferred when
appropriate. The Partnership has also sought loan modifications where
appropriate. By conserving working capital, the Partnership will be in a
better position to meet its future needs since outside sources of capital
may be limited given the portfolio's current debt levels. Due to these
factors, the Partnership has held certain of its investment properties
longer than originally anticipated in an effort to maximize the return to
the Limited Partners. Although the Partnership is hopeful it will be able
to distribute sale proceeds from the disposition of the Riverfront office
building, the Limited Partners are expected to receive significantly less
than their full original investment from all sources. After reviewing the
remaining properties and the marketplace in which they operate, the General
Partners of the Partnership expect to be able to conduct an orderly
liquidation of the remaining investment portfolio as quickly as
practicable. In such regard, the Partnership has classified its remaining
investment properties as held for sale or disposition, as discussed above.
Therefore, the affairs of the Partnership are expected to be wound up no
later than December 31, 1999 (sooner if the properties are sold or disposed
of in the nearer term), barring unforeseen economic developments.

RESULTS OF OPERATIONS

Various fluctuations in the consolidated financial statements at and
for the year ended December 31, 1997 as compared to December 31, 1996 are
primarily due to the sale of the Partnership's interest in the 767 Third
Avenue office building in October 1997. Various fluctuations in the
consolidated financial statements for the year ended December 31, 1996, as
compared to December 31, 1995 are primarily due to the sale of three
apartment complexes, El Dorado View on July 23, 1996 and Scotland Yard -
Phase I and II on November 1, 1996.

The increase in cash and cash equivalents at December 31, 1997 as
compared to December 31, 1996 is primarily due to the temporary investment
of proceeds of approximately $11,100,000 received in October 1997 for the
sale of the Partnership's co-tenancy interest in the 767 Third Avenue
office building until substantially distributed to the Holders of Interests
in 1998 as described above. Such increase was partially offset by
operating deficits incurred at the Mall of Memphis during 1997.

<PAGE>

The decrease in escrow deposits and restricted funds at December 31,
1997 as compared to December 31, 1996 is primarily due to (i) the
application by the underlying lender for the Riverfront office building of
approximately $451,000 of previously escrowed net cash flow against the
outstanding mortgage loan balance in July 1997 and (ii) the release by the
same lender of approximately $615,000 of previously escrowed net cash flow
to fund leasing costs at the Riverfront office building in October 1997,
partially offset by deposits of 1997 net cash flow generated by the
property.

The decreases in prepaid expenses, deferred expenses, accrued rents
receivable, accrued interest and venture partner's subordinated equity in
venture at December 31, 1997 as compared to December 31, 1996 is primarily
due to the sale in October 1997 of the Partnership's interest in the 767
Third Avenue office building. Also contributing to the decrease in accrued
rents receivable is the Partnership's recording, as of June 30, 1997, a
provision for value impairment of the Mall of Memphis investment property
as well as rent relief granted to certain tenants at the Mall of Memphis
investment property.

The decrease in properties held for investment at December 31, 1997 as
compared to December 31, 1996 is primarily due to the Partnership's
recording, as of June 30, 1997, a provision for value impairment of the
Mall of Memphis investment property and the June 30, 1997 reclassification
of the remaining net book value of the Mall of Memphis to properties held
for sale or disposition.

The decrease in properties held for sale or disposition at
December 31, 1997 as compared to December 31, 1996 is due to the sale of
the Partnership's interest in the 767 Third Avenue office building in
October 1997, partially offset by the reclassification of the net book
value of the Mall of Memphis in June 1997.

The increase in investment in unconsolidated venture at December 31,
1997 as compared to December 31, 1996 is due to the sale of the National
City Center office building in December 1997 and represents the
Partnership's share of sale proceeds, a significant portion of which were
received in February 1998.

The increase in venture partner's deficit in venture at December 31,
1997 as compared to December 31, 1996 is due to 1997 resumption of loss
allocations to the Partnership's venture partner in the Riverfront joint
venture as described more fully in the Notes.

The increase in current portion of long-term debt and the
corresponding decrease in long-term debt, less current portion at
December 31, 1997 as compared to December 31, 1996 is primarily due to the
reclassification of the first, second and third mortgage notes secured by
the Mall of Memphis and the promissory note payable to the Partnership's
former venture partner in Mall of Memphis as current in the accompanying
consolidated financial statements as a result of the Partnership's defaults
on such obligations. The aggregate decrease in current portion of long-
term debt and long-term debt, less current portion at December 31, 1997 as
compared to December 31, 1996 is primarily due to the sale in October 1997
of the Partnership's interest in the 767 Third Avenue office building.

The decrease in accounts payable at December 31, 1997 as compared to
December 31, 1996 is primarily due to (i) the timing of payments of certain
costs associated with leasing at the Riverfront office building and (ii)
the sale in October 1997 of the Partnership's interest in the 767 Third
Avenue office building.

<PAGE>

The decrease in unearned rents at December 31, 1997 as compared to
December 31, 1996 is primarily due to the timing of payment of tenant rent
obligations at the Mall of Memphis investment property.

The decreases in rental income, mortgage and other interest, property
operating expenses and amortization of deferred expenses for the year ended
December 31, 1997 as compared to the year ended December 31, 1996 is
primarily due to the sales of Scotland Yard I & II Apartments, El Dorado
View Apartments and the Partnership's interest in the 767 Third Avenue
office building on November 1, 1996, July 23, 1996 and October 31, 1997,
respectively. The decrease in rental income for the year ended December
31, 1996 as compared to the year ended December 31, 1995 is primarily due
to: 1) the sales of Scotland Yard I & II apartments and El Dorado View
apartments on November 1, 1996 and July 23, 1996, respectively; 2) the
receipt in 1995 of approximately $672,000 as consideration for the early
termination of a tenant's lease at 767 Third Avenue; 3) a lower average
occupancy rate at Riverfront office building primarily as a result of the
scheduled expiration in September 1996 of a lease for a tenant which
occupied approximately 20% of the building and 4) reduced occupancy in 1996
at the Mall of Memphis.

The increase in interest income for the year ended December 31, 1997
as compared to the year ended December 31, 1996 is primarily due to (i) the
receipt at 767 Third Avenue of interest earned in connection with amounts
received in June 1997 from a former tenant which had been previously deemed
uncollectible by the Partnership and (ii) the increases in the average
balance of short-term investments as a result of the receipt in October
1997 of approximately $11,100,000 in proceeds related to the sale of the
Partnership's interest in the 767 Third Avenue office building. The
increase in interest income for the year ended December 31, 1996 as
compared to the year ended December 31, 1995 is primarily due to an
increase in the average balance of U.S. Government obligations during 1996.

The decreases in mortgage and other interest expense as well as
property operating expenses for the year ended December 31, 1996 as
compared to the year ended December 31, 1995 are primarily due to the sales
of Scotland Yard I & II apartments and El Dorado View apartments in 1996.
Contributing to the decrease in mortgage and other interest expense were
lower mortgage interest at Riverfront office building, as a result of the
restructured loan, and lower contingent interest expense at the Mall of
Memphis, as a result of lower rental income. The decrease in mortgage and
other interest expense was partially offset by additional interest on the
$5,000,000 promissory note secured by the Partnership's additional interest
in the Mall of Memphis, purchased in August 1995.

The decrease in depreciation expense for the year ended December 31,
1997 as compared to the year ended December 31, 1996 is primarily due to
the classification of the Riverfront and 767 Third Avenue office buildings
as held for sale or disposition at December 31, 1996 and the classification
of the Mall of Memphis as held for sale or disposition at June 30, 1997
and, therefore, were not subject to continued depreciation as of those
dates. The decrease in depreciation expense for the year ended December
31, 1996 as compared to the year ended December 31, 1995 is primarily due
to the Scotland Yard I & II apartments (sold November 1, 1996) and El
Dorado View apartments (sold July 23, 1996) being classified as of April 1,
1996 as held for sale and, therefore, were not subject to continued
depreciation as of those dates.

The decrease in amortization of deferred expenses for the year ended
December 31, 1996 as compared to the year ended December 31, 1995 is
primarily due to the write off of deferred mortgage expenses in 1995 as a
result of the 1995 loan restructuring at Riverfront office building.

<PAGE>

The $13,143,000 provision for value impairment for the year ended
December 31, 1997 is due to the Partnership's recording as of June 30,
1997, a provision for value impairment of the Mall of Memphis investment
property.

The $8,500,000 provision for unrealizable venture partner deficit
recorded for the year ended December 31, 1996 is the result of the
uncertainty of the Partnership recovering the deficit capital account from
future operations and ultimate sale of the Riverfront office building.

The increase in the Partnership's share of operations of
unconsolidated venture for the year ended December 31, 1997 as compared to
the year ended December 31, 1996 is primarily due to the National City
Center being classified as held for sale or disposition at December 31,
1996 and, therefore, not subject to continued depreciation.

The decrease in venture partners' share of ventures' operations for
the year ended December 31, 1997 as compared to the year ended December 31,
1996 is primarily due to (i) an increase in the results of operations of
the 767 Third Avenue office building primarily as a result of the property
being classified as held for sale at December 31, 1996 and therefore, not
subject to continued depreciation and (ii) the sale of the Partnership's
interest in the 767 Third Avenue office building in October 1997, partially
offset by the resumption of loss allocations in 1997 to the Partnership's
venture partner in the Riverfront joint venture. The decrease in venture
partner's share of venture operations for the year ended December 31, 1996
as compared to the year ended December 31, 1995 is primarily due to the
suspension as of January 1, 1996 of the allocation of any additional
venture losses to the venture partner as a result of the uncertainty of the
Partnership recovering the deficit capital account from further operations
and ultimate sale of the Riverfront office building.

The gains on sale or disposition of investment properties or interest
in investment property for the year ended December 31, 1997 is due to the
sale of the Partnership's interest in the 767 Third Avenue office building
in October 1997 and the sale of the National City Center office building in
December 1997. The gain on sale or disposition of investment properties or
interest in investment property for the year ended December 31, 1996 is due
to the sale of El Dorado View apartments on July 23, 1996, the Scotland
Yard I & II apartments on November 1, 1996 and $200,000 of deferred gain
recognition as a result of the receipt in April 1996 of a portion of the
past due amounts on the notes receivable related to the 1986 sale of
Pavillion Towers, discussed above.

The extraordinary gain on forgiveness of indebtedness for the year
ended December 31, 1996 was due to the forgiveness of a portion of the
deferred accrued interest associated with the mortgage loans secured by
Scotland Yard I & II apartments as a result of sale of the properties.

<PAGE>

INFLATION

Due to the decrease in the level of inflation in recent years,
inflation generally has not had a material effect on rental income or
property operating expenses.

Inflation is not expected to significantly impact future operations
due to the expected liquidation of the Partnership by 1999. However, to
the extent that inflation in future periods would have an adverse impact on
property operating expenses, the effect would generally be offset by
amounts recovered from tenants as many of the long-term leases at the
Partnership's commercial properties have escalation clauses covering
increases in the cost of operating and maintaining the properties as well
as real estate taxes. Therefore, there should be little effect on
operating earnings if the property remains substantially occupied. In
addition, substantially all of the leases at the Partnership's shopping
center investment contain provisions which entitle the Partnership to
participate in gross receipts of tenants above fixed minimum amounts.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

INDEX

Independent Auditors' Report

Consolidated Balance Sheets, December 31, 1997 and 1996

Consolidated Statements of Operations, years ended December 31, 1997,
1996 and 1995

Consolidated Statements of Partners' Capital Accounts (Deficit),
years ended December 31, 1997, 1996 and 1995

Consolidated Statements of Cash Flows, years ended December 31,
1997, 1996 and 1995

Notes to Consolidated Financial Statements

Schedule
--------

Consolidated Real Estate and Accumulated Depreciation III

SCHEDULES NOT FILED:

All schedules other than the one indicated in the index have been
omitted as the required information is inapplicable or the information is
presented in the financial statements or related notes.

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Partners
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI:

We have audited the consolidated financial statements of Carlyle Real
Estate Limited Partnership - XI (a limited partnership) and consolidated
ventures as listed in the accompanying index. In connection with our
audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the General Partners of the Partnership. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement 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 the General Partners of the
Partnership, 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 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Carlyle Real Estate Limited Partnership - XI and consolidated ventures at
December 31, 1997 and 1996, and the results of their operations and their
cash flows for each of the years in the three-year period ended
December 31, 1997, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule,
when considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly, in all material respects, the
information set forth therein.

As discussed in the Notes to the consolidated financial statements, in
1996, the Partnership and its consolidated ventures changed their method of
accounting for long-lived assets and long-lived assets to be disposed of to
conform with Statement of Financial Accounting Standards No. 121.

KPMG PEAT MARWICK LLP

Chicago, Illinois
March 25, 1998

<PAGE>

<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996

ASSETS
------
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . $ 13,840,535 3,697,163
Rents and other receivables (net of allowance for doubtful accounts
of $281,456 and $1,495,915 at December 31, 1997 and 1996,
respectively). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 561,151 628,039
Escrow deposits and restricted funds . . . . . . . . . . . . . . . . . . 3,055,577 3,678,237
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139,508 1,167,702
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . 17,596,771 9,171,141
------------ ------------
Mortgage notes receivable (net of reserve for uncollectibility
of $327,774) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,867,695 1,867,695
Investment properties - Schedule III:
Land and leasehold interests . . . . . . . . . . . . . . . . . . . . . -- 4,845,861
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . -- 60,783,454
------------ ------------
-- 65,629,315
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . . -- 23,002,534
------------ ------------
Total properties held for investment,
net of accumulated depreciation. . . . . . . . . . . . . . . . -- 42,626,781

Properties held for sale or disposition. . . . . . . . . . . . . . . . 52,350,885 66,102,154
------------ ------------

Total investment properties. . . . . . . . . . . . . . . . . . . 52,350,885 108,728,935
------------ ------------

Investment in unconsolidated venture, at equity. . . . . . . . . . . . . . 4,018,588 628,276
Deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,859,513 3,802,233
Accrued rents receivable . . . . . . . . . . . . . . . . . . . . . . . . . 227,374 2,965,832
Venture partner's deficit in venture . . . . . . . . . . . . . . . . . . . 1,000,714 405,564
------------ ------------

$ 78,921,540 127,569,676
============ ============

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS - CONTINUED

LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
1997 1996
------------ -----------
Current liabilities:
Current portion of long-term debt. . . . . . . . . . . . . . . . . . . . $ 44,676,002 517,413
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,883,723 3,005,313
Unearned rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 433,712 612,197
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,174,074 1,883,331
Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . . . . 712,576 713,459
------------ ------------
Total current liabilities. . . . . . . . . . . . . . . . . . . . 48,880,087 6,731,713

Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . . 180,488 215,186
Long-term debt, less current portion . . . . . . . . . . . . . . . . . . . 46,713,811 130,058,240
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167,466 200,749
------------ ------------
Commitments and contingencies

Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . 95,941,852 137,205,888

Deferred gain on sale of investment properties . . . . . . . . . . . . . . 1,867,695 1,867,695
Venture partner's subordinated equity in venture . . . . . . . . . . . . . -- 2,600,108

Partners' capital accounts (deficit):
General partners:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . . (13,408,309) (12,895,787)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . . (1,116,446) (1,116,446)
------------ ------------
(14,523,755) (14,011,233)
------------ ------------
Limited partners:
Capital contributions, net of offering costs . . . . . . . . . . . . . 121,935,233 121,935,233
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . . (81,231,510) (76,960,040)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . . (45,067,975) (45,067,975)
------------ ------------
(4,364,252) (92,782)
------------ ------------
Total partners' capital accounts (deficits). . . . . . . . . . . (18,888,007) (14,104,015)
------------ ------------
$ 78,921,540 127,569,676
============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>

<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . . . . . . . $24,598,580 32,775,314 35,420,992
Interest income. . . . . . . . . . . . . . . . . . . . 611,182 284,126 339,764
----------- ----------- -----------
25,209,762 33,059,440 35,760,756
----------- ----------- -----------
Expenses:
Mortgage and other interest. . . . . . . . . . . . . . 12,069,706 15,013,553 16,573,287
Depreciation . . . . . . . . . . . . . . . . . . . . . 1,009,322 6,110,344 6,561,402
Property operating expenses. . . . . . . . . . . . . . 13,811,077 17,400,478 17,758,087
Professional services. . . . . . . . . . . . . . . . . 287,978 289,023 272,963
Amortization of deferred expenses. . . . . . . . . . . 944,813 1,057,233 1,273,972
General and administrative . . . . . . . . . . . . . . 450,104 348,185 374,219
Provision for value impairment . . . . . . . . . . . . 13,143,000 -- --
Provision for unrealizable venture
partner deficit. . . . . . . . . . . . . . . . . . . -- 8,500,000 --
----------- ----------- -----------
41,716,000 48,718,816 42,813,930
----------- ----------- -----------

(16,506,238) (15,659,376) (7,053,174)

Partnership's share of operations of
unconsolidated venture . . . . . . . . . . . . . . . . 430,047 80,895 67,570
Venture partners' share of ventures'
operations . . . . . . . . . . . . . . . . . . . . . . 586,796 1,475,361 2,794,709
----------- ----------- -----------
Earnings (loss) before gains on
sale or disposition of investment
properties or interest in
investment property. . . . . . . . . . . . . (15,489,395) (14,103,120) (4,190,895)

Gains from sale or disposition of investment
properties or interest in investment property. . . . . 10,705,403 13,480,719 --
----------- ----------- -----------

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED

1997 1996 1995
------------ ------------ ------------
Earnings (loss) before
extraordinary item . . . . . . . . . . . . . (4,783,992) (622,401) (4,190,895)

Extraordinary gain on forgiveness
of indebtedness. . . . . . . . . . . . . . . . . . . . -- 1,180,286 --
----------- ----------- -----------
Net earnings (loss). . . . . . . . . . . . . . $(4,783,992) 557,885 (4,190,895)
=========== =========== ===========
Net earnings (loss) per limited
partnership interest:
Earnings (loss) before gains on sale
or disposition of investment
properties or interest in
investment property. . . . . . . . . . . $ (108.21) (98.52) (29.27)
Gains from sale or disposition of
investment properties or interest
in investment property . . . . . . . . . 77.13 97.12 --
Extraordinary gain on forgiveness
of indebtedness. . . . . . . . . . . . . -- 8.50 --
----------- ----------- -----------

$ (31.08) 7.10 (29.27)
=========== =========== ===========

<FN>
See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>

<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICIT)

YEARS ENDED DECEMBER 31, 1997, 1996 and 1995

<CAPTION>
GENERAL PARTNERS LIMITED PARTNERS
--------------------------------------------- -------------------------------------------------
CONTRI-
BUTIONS
NET NET OF NET
CONTRI- EARNINGS CASH OFFERING EARNINGS CASH
BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL
------- ---------- ------------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
(deficit)
December 31,
1994. . . . . $1,000 (12,310,636) (1,116,446) (13,426,082) 121,935,233 (73,912,181) (45,067,975) 2,955,077

Net earnings
(loss). . . . -- (167,636) -- (167,636) -- (4,023,259) -- (4,023,259)
----- ----------- ------------ ------------ ----------- ----------- ------------ -----------
Balance
(deficit)
December 31,
1995. . . . . 1,000 (12,478,272) (1,116,446) (13,593,718) 121,935,233 (77,935,440) (45,067,975) (1,068,182)

Net earnings
(loss). . . . -- (417,515) -- (417,515) -- 975,400 -- 975,400
----- ----------- ------------ ------------ ----------- ----------- ------------ -----------
Balance
(deficit)
December 31,
1996. . . . . 1,000 (12,895,787) (1,116,446) (14,011,233) 121,935,233 (76,960,040) (45,067,975) (92,782)

Net earnings
(loss). . . . -- (512,522) -- (512,522) -- (4,271,470) -- (4,271,470)
----- ----------- ------------ ------------ ----------- ----------- ------------ -----------
Balance
(deficit)
December 31,
1997. . . . . $1,000 (13,408,309) (1,116,446) (14,523,755) 121,935,233 (81,231,510) (45,067,975) (4,364,252)
====== =========== ============ ============ =========== =========== ============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>

<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . . . . . . . . $(4,783,992) 557,885 (4,190,895)
Items not requiring (providing) cash
or cash equivalents:
Depreciation . . . . . . . . . . . . . . . . . . . 1,009,322 6,110,344 6,561,402
Amortization of deferred expenses. . . . . . . . . 944,813 1,057,233 1,273,972
Long-term debt - deferred accrued
interest . . . . . . . . . . . . . . . . . . . . 2,269,513 2,389,325 633,264
Provision for value impairment . . . . . . . . . . 13,143,000 -- --
Provision for unrealizable venture
partner deficit. . . . . . . . . . . . . . . . . -- 8,500,000 --
Partnership's share of operations of
unconsolidated ventures. . . . . . . . . . . . . (430,047) (80,895) (67,570)
Venture partners' share of ventures'
operations . . . . . . . . . . . . . . . . . . . (586,796) (1,475,361) (2,794,709)
Total (gain) loss on sale or disposition of
investment properties or interest in
investment property. . . . . . . . . . . . . . . (10,705,403) (13,480,719) --
Extraordinary gain on forgiveness of
indebtedness . . . . . . . . . . . . . . . . . . -- (1,180,286) --
Changes in:
Rents and other receivables. . . . . . . . . . . . . (79,028) 486,921 210,272
Escrow deposits and restricted funds . . . . . . . . (21,542) (1,567,520) (879,223)
Prepaid expenses . . . . . . . . . . . . . . . . . . 557,477 16,551 114,728
Accrued rents receivable . . . . . . . . . . . . . . 1,180,818 (54,995) 609,926
Accounts payable . . . . . . . . . . . . . . . . . . (302,184) 978,918 69,019
Unearned rents . . . . . . . . . . . . . . . . . . . (130,001) (63,037) 35,125
Accrued interest . . . . . . . . . . . . . . . . . . 612,716 (387,546) 2,534,421
Accrued real estate taxes. . . . . . . . . . . . . . (883) (798,146) 35,801
Tenant security deposits . . . . . . . . . . . . . . 45,302 (699) 77,132
Deferred revenue . . . . . . . . . . . . . . . . . . (33,283) (30,429) 231,178
----------- ----------- -----------
Net cash provided by (used in)
operating activities . . . . . . . . . . . . 2,689,802 977,544 4,453,843
----------- ----------- -----------

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

1997 1996 1995
----------- ----------- -----------
Cash flows from investing activities:
Net sales and maturities (purchases) of
short-term investments . . . . . . . . . . . . . . . -- -- 1,392,755
Additions to investment properties . . . . . . . . . . (1,627,130) (2,571,651) (2,396,331)
Payment of deferred expenses . . . . . . . . . . . . . (922,716) (773,585) (658,174)
Cash paid for venture partner's interest . . . . . . . -- -- (544,473)
Cash proceeds from sale of investment properties,
or interest in investment property, net of
selling expenses . . . . . . . . . . . . . . . . . . 11,135,107 2,158,501 --
Collection of notes receivable . . . . . . . . . . . . -- 200,000 --
----------- ----------- -----------
Net cash provided by (used in)
investing activities . . . . . . . . . . . . 8,585,261 (986,735) (2,206,223)
----------- ----------- -----------
Cash flows from financing activities:
Principal payments on long-term debt . . . . . . . . . (968,822) (467,352) (422,172)
Venture partners' contributions to ventures. . . . . . -- 245,000 251,500
Distributions to venture partners. . . . . . . . . . . (162,869) -- (251,030)
----------- ----------- -----------
Net cash provided by (used in)
financing activities . . . . . . . . . . . . (1,131,691) (222,352) (421,702)
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents . . . . . . . . . . . . 10,143,372 (231,543) 1,825,918
Cash and cash equivalents,
beginning of year. . . . . . . . . . . . . . 3,697,163 3,928,706 2,102,788
----------- ----------- -----------
Cash and cash equivalents,
end of year. . . . . . . . . . . . . . . . . $13,840,535 3,697,163 3,928,706
=========== =========== ===========

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

1997 1996 1995
----------- ----------- -----------
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. . . . . . . $ 9,187,477 15,401,099 13,405,602
=========== =========== ===========
Non-cash investing and financing activities:
Sale of investment properties or interest in
investment property:
Total sale proceeds, net of selling expenses . . . $11,135,107 29,049,082 --
Principal balance and deferred accrued
interest due on mortgage payable . . . . . . . . -- (26,890,581) --
----------- ----------- -----------
Cash proceeds from sales of investment
properties or interest in investment
property, net of selling expenses. . . . . . $11,135,107 2,158,501 --
=========== =========== ===========
Escrowed funds applied by lender to
long-term debt. . . . . . . . . . . . . . . . . . . $ 451,409 -- --
Distribution of net assets to venture partner
upon liquidation of joint venture . . . . . . . . . $ 6,150,826
Conversion of note payable and accrued interest
to venture partner's contribution
to venture. . . . . . . . . . . . . . . . . . . . . $ 3,656,921
Purchase of venture partner's interest:
Addition to basis in investment property . . . . . $ -- -- 9,402,453
Note payable . . . . . . . . . . . . . . . . . . . -- -- (5,000,000)
Increase in venture partner's deficit
in venture . . . . . . . . . . . . . . . . . . . -- -- (3,857,980)
----------- ----------- -----------
Cash paid for venture partner's
interest in venture. . . . . . . . . . . . . $ -- -- 544,473
=========== =========== ===========
Accrued interest added to balance
of long-term debt pursuant to
loan modification. . . . . . . . . . . . . . $ -- -- 8,530,153
=========== =========== ===========

<FN>
See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1997, 1996 AND 1995

OPERATIONS AND BASIS OF ACCOUNTING

GENERAL

The Partnership holds (through joint ventures) an equity investment in
an office building and an enclosed shopping mall. Business activities
consist of rentals to a variety of commercial and retail companies, and the
ultimate sale or disposition of such real estate. The Partnership
currently expects to conduct an orderly liquidation of its remaining
investment portfolio and wind up its affairs not later than December 31,
1999.

The accompanying consolidated financial statements include the
accounts of the Partnership and its consolidated ventures; Mall of Memphis
Associates ("Mall of Memphis") (until purchase of the venture partner's
interest in 1995), and Riverfront Office Park Joint Venture ("Riverfront")
in which the Partnership has certain preferential claims and rights, as
discussed below; also included are the accounts of 767 Third Avenue
Associates ("767 Third Avenue") (prior to its liquidation in September
1997, as more fully discussed below). The effect of all transactions
between the Partnership and the consolidated ventures has been eliminated.
The equity method of accounting has been applied in the accompanying
consolidated financial statements with respect to the Partnership's
interest in Carlyle/National City Associates ("Carlyle/National City").
Accordingly, the accompanying consolidated financial statements do not
include the accounts of Carlyle/National City.

The Partnership's records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying consolidated financial statements have been prepared from such
records after making appropriate adjustments to reflect the Partnership's
accounts in accordance with generally accepted accounting principles
("GAAP") and to consolidate the accounts of the ventures as described
above. Such GAAP and consolidation adjustments are not recorded on the
records of the Partnership. The net effect of these items for the years
ended December 31, 1997 and 1996 is summarized as follows:

<PAGE>

1997 1996
------------------------------- ------------------------------
TAX BASIS TAX BASIS
GAAP BASIS (Unaudited) GAAP BASIS (UNAUDITED)
------------ ----------- ------------ -----------

Total assets . . . . . . . . . . . . . $ 78,921,540 37,851,195 127,569,676 26,114,376

Partners' capital accounts
(deficit):
General partners.. . . . . . . . . (14,523,755) (10,003,098) (14,011,233) (12,054,121)
Limited partners.. . . . . . . . . (4,364,252) 14,688,017 (92,782) (8,162,305)

Net earnings (loss):
General partners.. . . . . . . . . (512,522) 2,051,023 (417,515) 191,109
Limited partners.. . . . . . . . . (4,271,470) 22,850,322 975,400 13,770,364

Net earnings (loss) per
limited partnership
interest . . . . . . . . . . . . . . (31.08) 166.28 7.10 100.21
============ =========== =========== ============

</TABLE>

<PAGE>

The net earnings (loss) per limited partnership interest is based upon
the Limited Partnership Interests outstanding at the end of each period.
Deficit capital accounts will result, through the duration of the
Partnership, in net gain for financial reporting and Federal income tax
purposes.

The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of 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.

Statement of Financial Accounting Standards No. 95 requires the
Partnership to present a statement which classifies receipts and payments
according to whether they stem from operating, investing or financing
activities. The required information has been segregated and accumulated
according to the classifications specified in the pronouncement.
Partnership distributions from unconsolidated ventures are considered cash
flow from operating activities only to the extent of the Partnership's
cumulative share of net earnings. The Partnership records amounts held in
U.S. Government obligations at cost, which approximates market. For the
purposes of these statements, the Partnership's policy is to consider all
such amounts held with original maturities of three months or less
($13,404,666 at December 31, 1997 and $3,045,929 at December 31, 1996) as
cash equivalents, which includes investments in an institutional mutual
fund which holds U.S. Government obligations, with any remaining amounts
(generally with original maturities of one year or less) reflected as
short-term investments being held to maturity.

Deferred expenses consist primarily of leasing and financing fees
incurred in connection with the acquisition and operation of the
properties. Deferred leasing fees are amortized using the straight-line
method over the terms stipulated in the related agreements. Deferred
financing fees are amortized using the straight-line method over the terms
stipulated in the related agreements.

Although certain leases of the Partnership provide for tenant
occupancy during periods for which no rent is due, the Partnership accrues
rental income over the full period of occupancy on a straight-line basis.

No provision for Federal or state income taxes has been made as the
liability for such taxes is that of the partners rather than the
Partnership. However, in certain instances, the Partnership has been
required under applicable law to remit directly to the tax authorities
amounts representing withholding from distributions paid to partners.

The Partnership acquired, either directly or through joint ventures,
ten apartment complexes, eight office buildings, and an enclosed shopping
mall. During 1984, the Partnership sold its Arlington, Texas and its Red
Bank, Tennessee apartment complexes. During 1986, the Partnership sold its
interest in Am-Car Real Estate Partnership-I joint venture ("AM-CAR"),
which had ownership interests in the Pavillion Towers office complex
located in Aurora, Colorado and the Coast Federal Office Building located
in Pasadena, California. During 1988, the Partnership (through Somerset
Lake Associates) sold its Indianapolis, Indiana apartment complex. During
1991, the Partnership disposed of its interest in the Gatehall Plaza office
building located in Parsippany, New Jersey. During 1992, the Partnership
sold its interest in the Wood Forest Glen Apartments, the Meadowcrest
Apartments and the Bitter Creek Apartments. In addition, during 1992, the
lender realized upon its security and took title to the Yerba Buena West
Office Building. During 1993, the Partnership sold its interest in the
South Point Apartments. During 1994, the lender realized upon its security

<PAGE>

and took title to the 824 Market Street Office Building. During 1996, the
Partnership sold its interest in the Scotland Yard Phase I and II
Apartments, and the El Dorado View Apartments. During 1997, the
Partnership sold its interest in the 767 Third Avenue office building and
its interest in the National City Center office building. The two
remaining properties owned at December 31, 1997 were operating. The cost
of the investment properties represents the total cost to the Partnership
or its ventures plus miscellaneous acquisition costs.

Depreciation on the operating properties has been provided over
estimated useful lives of the various components as follows:

YEARS
-----

Building and improvements --
straight-line . . . . . . . . . 30
Personal property --
straight-line . . . . . . . . . 5
==

The Partnership's two remaining investment properties are pledged as
security for the long-term debt, for which there is generally no recourse
to the Partnership. The Partnership continues to make payments on its
existing mortgage indebtedness related to the Riverfront office building;
however, due to the unwillingness of the lender to grant an acceptable loan
modification to cover current and anticipated future net operating
deficits, the Partnership suspended the payment of required debt service as
of January 1, 1998 on the mortgage notes secured by the Mall of Memphis.

Maintenance and repair expenses are charged to operations as incurred.

Significant betterments and improvements are capitalized and depreciated
over their estimated useful lives.

The Partnership adopted Statement of Financial Accounting Standards
No. 121 ("SFAS 121") as required in the first quarter of 1996. SFAS 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" requires that the Partnership record an
impairment loss on its properties to be held for investment whenever their
carrying value cannot be fully recovered through estimated undiscounted
future cash flows from their operations and sale. The amount of the
impairment loss to be recognized would be the difference between the
property's carrying value and the property's estimated fair value. The
Partnership's policy is to consider a property to be held for sale or
disposition when the Partnership has committed to a plan to sell or dispose
of such property and active marketing activity has commenced or is expected
to commence in the near term or the Partnership has concluded that it may
dispose of the property by no longer funding operating deficits or debt
service requirements of the property thus allowing the lender to realize
upon its security. In accordance with SFAS 121, any properties identified
as "held for sale or disposition" are no longer depreciated. Adjustments
for impairment loss for such properties (subsequent to the date of adoption
of SFAS 121) are made in each period as necessary to report these
properties at the lower of carrying value or fair value less costs to sell.

In certain situations, such estimated fair value could be less than the
existing non-recourse debt which is secured by the property. There can be
no assurance that any estimated fair value of these properties would
ultimately be realized by the Partnership in any future sale or disposition
transaction.

Under the prior accounting policy, provisions for value impairment
were recorded with respect to investment properties whenever the estimated
future cash flows from a property's operations and projected sale were less
than the property's carrying value. The amount of any such impairment loss
recognized by the Partnership was limited to the excess, if any, of the
property's carrying value over the outstanding balance of the property's
non-recourse indebtedness. An impairment loss under SFAS 121 is determined

<PAGE>

without regard to the nature or the balance of such non-recourse
indebtedness. Upon the disposition of a property with the related
extinguishment of the long-term debt for which an impairment loss has been
recognized under SFAS 121, the Partnership would recognize, at a minimum, a
net gain (comprised of gain on extinguishment of debt and gain or loss on
sale or disposition of property) for financial reporting purposes to the
extent of any excess of the then outstanding balance of the property's non-
recourse indebtedness over the then carrying value of the property,
including the effect of any reduction for impairment loss under SFAS 121.

In addition, upon the disposition of an impaired property, the
Partnership will generally recognize more gain for financial reporting
purposes under SFAS 121 than it would have under the Partnership's prior
impairment policy, without regard to the amount, if any, of cash proceeds
received by the Partnership in connection with the disposition. Although
implementation of this accounting statement could significantly impact the
Partnership's reported earnings, there would be no impact on cash flows.
Further, any such impairment loss is not recognized for Federal income tax
purposes.

The net results of operations for consolidated properties classified
as held for sale or disposition as of December 31, 1997 or sold or disposed
of during the past three years were ($15,946,311), ($15,123,963) and
($6,799,283), respectively, for the years ended December 31, 1997, 1996 and
1995. In addition, the accompanying consolidated financial statements
include $430,047, $80,895 and $67,570, respectively, of the Partnership's
share of total property operations of $3,133,199, $589,373 and $492,296, of
National City Center which was sold in December 1997.

During the second quarter of 1997, Statements of Financial Accounting
Standards No. 128 ("Earnings per Share") and No. 129 ("Disclosure of
Information about Capital Structure") were issued. These standards became
effective for reporting periods after December 15, 1997. As the
Partnership's capital structure only has general and limited partnership
interests, the Partnership will not experience any significant impact on
its consolidated financial statements.

INVESTMENT PROPERTIES

NATIONAL CITY CENTER

In July 1983, the Partnership acquired, through Carlyle/National City
(a joint venture with Carlyle Real Estate Limited Partnership-XII, a
partnership sponsored by the Corporate General Partner of the Partnership
("Carlyle-XII")), an interest in an office building in Cleveland, Ohio.

The Partnership made an initial contribution of $5,445,257 to
Carlyle/National City. The terms of the Carlyle/National City venture
agreement provided that the capital contributions, annual cash flow, net
proceeds from sale or refinancing and profit or loss would be allocated or
distributed 13.7255% to the Partnership. The Partnership's net cash
investment in the property was $3,341,583 after distributions resulting
from the increase in the first mortgage loan.

On December 18, 1997, Carlyle/National City sold the National City
Center Office Building. As the Partnership had committed to a plan to sell
the property, the property was classified as held for sale or disposition
as of December 31, 1996 and therefore was no longer subject to continued
depreciation. The sale price of the land and improvements was $82,150,000.

Cash proceeds, after selling costs and the $54,277,977 mortgage assumed by
the purchaser, were $26,371,722 of which the Partnership's share was
$3,619,652. As a result of the sale, the Partnership recognized a gain of
$2,960,265 for financial reporting purposes and a gain of $7,764,780 for
Federal income tax purposes in 1997. In addition, in connection with the
sale of this property and as is customary in such transactions,
Carlyle/National City agreed to certain representations, warranties and
covenants with a stipulated survival period which expires December 17,
1998. Although it is not expected, Carlyle/National City and the
Partnership may ultimately have some liability under such representations,

<PAGE>

warranties and covenants which are limited to actual damages and shall in
no event exceed $2,000,000 in aggregate of which the Partnership's share is
approximately $275,000.

Carlyle/National City reached an agreement with the current mortgage
lender to refinance the existing mortgage effective April 28, 1994. The
loan was amortized over 22 years with a scheduled balloon payment due on
April 10, 2001. The lender required an escrow account of $612,300 to be
established at the inception of the refinancing for certain specific future
tenant improvement costs at the property. The escrowed funds were to be
released to the venture upon lender approval of such costs. The lender
also required an escrow of the tenant improvement costs related to the
extension of the Baker & Hostetler lease. The Venture was required to
escrow approximately $313,000 per year in 1994 through 1996 and to escrow
approximately $229,000 per year in 1997 and 1998. In 1996, approximately
$92,000 was received from the tenant improvement escrow. Additionally, in
January 1997, approximately $820,000 was received from the tenant
improvement escrow. All remaining amounts held in escrow prior to the sale
of National City Center (including interest earned on the escrowed funds)
were refunded to Carlyle/National City in the fourth quarter of 1997.

767 THIRD AVENUE OFFICE BUILDING

On September 30, 1997, the 767 Third Avenue joint venture was
liquidated in contemplation of the sale of the Partnership's interest.
Accordingly, the pro rata share of the venture's assets and liabilities was
distributed to the venture partner in a non-cash transaction. In addition,
the $2,500,000 unsecured promissory note payable to the venture partner was
satisfied by the venture partner's contribution at the liquidation of the
venture. The operations of the 767 Third Avenue office building continued
under a co-tenancy agreement until October 31, 1997, when the Partnership
sold its undivided interest in the property. Although replacement of the
joint venture with the co-tenancy arrangement had no economic effect on the
Partnership, as of October 1, 1997, the accompanying consolidated financial
statements no longer reflected 767 Third Avenue Associates' former venture
partner's minority interest and reflected only the Partnership's
distributed share of the assets and liabilities of the venture.

On October 31, 1997, the Partnership sold its undivided interest in
the building and related improvements of the 767 Third Avenue Office
Building located in New York City, New York to an affiliate of the former
venture partner for $11,000,000 which was received in cash at closing
(before selling costs and prorations). In addition, the Partnership has no
liability for the approximate $38,000,000 in mortgage debt secured by the
property subsequent to the sale of its interest in the property. As a
result of the sale, the Partnership recognized a gain of $7,745,138 for
financial reporting purposes and a gain of $19,727,956 for Federal income
tax purposes in 1997.

As the Partnership had committed to a plan to sell the property, the
property had been classified as held for sale or disposition as of
December 31, 1996, and therefore, was no longer subject to continued
depreciation.

RIVERFRONT OFFICE BUILDING

Effective November 1995, the joint venture entered into a Loan
Repayment Agreement with the existing lender. The terms of the agreement
generally provide for a loan restructure that retroactively reduces the
interest rate payable on the loans and adjusts the terms of the loans from
their present maturity. The loans (which previously accrued interest at
rates ranging from 10% to 14% per annum) accrued interest at 6% per annum
for the period January 1, 1993 through December 31, 1997. Thereafter, the
interest rate per annum is the greater of the rate derived using the
"Coverage Formula" (as defined) or 7% from January 1, 1998 to December 31,

<PAGE>

1999; 8.25% from January 1, 2000 to December 31, 2002; and 9% from
January 1, 2003 to December 31, 2007. The interest rate per annum
beginning January 1, 1998 is 7%. In addition, as participating interest
and taking into account the annual interest payable as set forth above, the
lender is entitled to earn a minimum internal rate of return ranging from
9% to 10.5% per annum calculated over the restructured loan term and a
Residual Amount (as defined) upon repayment.

For financial reporting purposes, the principal amount of the loan and
accrued interest as of the effective date of the restructuring have been
classified as long-term debt. In addition, notwithstanding the payments
specified above, interest accrues at the effective rate of approximately
9.7% based upon the future cash payments specified by the terms of the
Repayment Agreement. This additional accrued interest is classified as
long-term debt.

The loan restructure also requires that net cash flow after debt
service and capital be paid into an escrow account controlled by the lender
to be used for future operating shortfalls, principal payments and costs
associated with additional leasing as approved by the lender. In this
regard, in July 1997, $451,409 of escrowed funds was applied by the lender
against the outstanding mortgage loan balance and, in October 1997,
$615,217 of escrowed funds was released by the lender to fund leasing costs
and other capital projects at the property. The agreement further
prohibits distributions of excess cash flow after full funding of the
escrow accounts. Such excess funds are to be retained and utilized prior
to withdrawing escrow deposits for operating shortfalls, principal payments
and costs associated with additional leasing as approved by the lender.

In addition, the property operates under a ground lease and the joint
venture has not made the scheduled ground lease payments since February
1993. The ground lessor is a general partner of the venture partner. At
December 31, 1997, the total amount of ground lease payments in arrears is
approximately $846,000. In this regard, as a condition of the loan
restructure discussed above, the ground lease was amended to provide for
the deferral of any and all ground lease payments since February 1993 until
the earlier of any future mortgage loan prepayment date (resulting from a
sale or refinancing of the property) or December 31, 2007. Pursuant to
this amendment, such unpaid ground rent accrues at the lesser of (a)
interest at the amended loan terms or (b) 14% after repayment of the loan
(net of any management fees received by the lessor). However, the loan
restructure also provided that if, during calendar year 1997, projections
of gross rental revenue approved by the lender during the year are not less
than $9 million per year for each of the next five calendar years, annual
payments of ground rent would resume, but at a reduced amount (as defined).

Based on current projections, the venture does not expect ground rent
payments to resume in 1998.

As a result of the adoption of SFAS 121, the Partnership recorded a
provision for unrealizable venture partner deficit of $8,500,000 as a
result of the uncertainty of the Partnership recovering the deficit capital
account from future operations and ultimate sale of the property. Such
provision was recorded in 1996 based upon an analysis of the property's
discounted estimated cash flows over the projected holding period and was
recorded to reduce the venture partner's deficit capital account to its
then estimated recoverable amount. In addition, no additional venture
losses were allocated to the venture partner in 1996. However, the
Cambridge, Massachusetts market, in which the property operates, has been
improving and as of December 31, 1997, the property is 100% occupied.
Based on a current analysis of the property's discounted estimated future
cash flows over the projected holding period, recognizing the improvements
in the market, the Partnership resumed the allocation of losses to the
venture partner in 1997. As the Partnership has committed to a plan to
sell or dispose of the property, the property was classified as held for
sale or disposition as of December 31, 1996, and therefore, is no longer
subject to continued depreciation.

<PAGE>

There are certain risks associated with the Partnership's investment
made through joint venture, including the possibility that the
Partnership's joint venture partner might become unable or unwilling to
fulfill its financial or other obligations, or that the joint venture
partner may have economic or business interests or goals that are
inconsistent with those of the Partnership. Under certain circumstances,
either pursuant to the venture agreement or due to the Partnership's
obligations as a general partner, the Partnership may be required to make
additional cash contributions to the venture.

MALL OF MEMPHIS

In March 1993, the venture finalized, in the form of a third mortgage
loan from the lender for its other mortgage loans, additional financing of
$7,600,000 for ten years at a rate of 10% per annum. The Partnership's
share of the funding in 1993 was $4,719,095 (net of closing costs). Of the
amount funded, the Partnership was required to deposit $1,000,000 in an
escrow account as security against any currently undiscovered environmental
issues.

The Partnership had initiated discussions with the underlying lender
regarding a loan modification and, in connection with these discussions,
advanced approximately $604,000 to cover the property's required debt
service payments through December 31, 1997. However, the lender was
unwilling to grant an acceptable loan modification to cover future net
operating deficits. The Partnership has therefore decided not to commit
any additional amounts to the property and, effective January 1, 1998,
suspended the payment of required debt service on its first, second and
third mortgage notes secured by the property. At December 31, 1997, these
notes had an aggregate principal balance of $39,676,002 and accrued but
unpaid interest of approximately $343,000. As a result, the Partnership is
in default and these mortgage notes have been classified as current in the
accompanying consolidated financial statements. The lender has agreed to
allow the Partnership to recoup its 1997 advance from 1998 operating cash
flow before proceeding to realize on its security in the property. Based
on projected operating results, the Partnership expects the lender to
proceed to realize on its security during the second quarter of 1998. This
will result in the Partnership no longer having an ownership interest in
the property and would result in a gain for financial reporting and Federal
income tax purposes with no corresponding distributable proceeds.

In August 1995, the Partnership purchased the venture partner's 36.94%
interest in Mall of Memphis and concurrently admitted the General Partner
of the Partnership to the venture with a .1% interest. Accordingly, the
Partnership has accounted for its investment in Mall of Memphis as wholly-
owned as of August 1995. The purchase price was approximately $5,500,000,
of which $500,000 (plus certain closing costs) was paid in cash at closing
with the balance represented by a $5,000,000 promissory note. The purchase
price exceeded the venture partner's capital account balance for financial
reporting purposes by $9,402,453. This difference was accounted for as
additional basis in the investment property for financial reporting
purposes. Correspondingly, the venture partner's deficit in ventures was
reduced by $3,857,980. Interest accrues on the unpaid balance of the
promissory note at a rate of 8.0% per annum from the acquisition date and
is payable June 1 of each year solely to the extent of 36.94% of the
venture's annual cash flow (as defined) for the preceding calendar year,
with any unpaid interest also accruing interest at 8.0% per annum. The note
is non-recourse and is secured only by the purchased venture partner's
interest. However, the Partnership guaranteed the venture partner
(seller), on a recourse basis, that the interest payment paid on June 1,
1996 shall be no less than $300,000 and that the interest payment to be
paid on June 1, 1997 shall be no less than $600,000 less the amount
actually paid by the Partnership on June 1, 1996. As of the date of this
report, the Partnership has not made the June 1, 1997 guaranteed payment.
As a result, the Partnership is in default and the $5,000,000 note payable
has been classified as current in the accompanying consolidated financial
statements. Due to provisions of the associated underlying agreements, the

<PAGE>

former venture partner may generally only realize upon its security (its
former partnership interest in the joint venture) in the event of default
by the Partnership. However, concerning such June 1997 payment, it is
possible that the former venture partner may attempt to exercise its
remedies against the Partnership's other assets respecting the guaranteed
amount. Any amounts required to be paid in excess of the interest accrued
to date is applied to the outstanding principal balance of the note. The
promissory note requires repayment of principal and all accrued interest at
maturity (subject to reduction under certain circumstances related to the
property's market value) which is the earlier of August 2002 (lender has
two five-year options to extend) or upon sale of the property. The venture
partner has a right of first opportunity (as defined) to purchase the
property.

In May 1994, an affiliate of the General Partners had assumed management
of the property. Such affiliate had agreed at such time to pay the former
manager (an affiliate of the venture partner) an annual fee of $50,000 as
compensation for the assumption of the management contract. In conjunction
with the August 1995 transfer of the venture partner's interest, the
venture partner's rights to this annual management contract assumption fee
were assigned to the Partnership and settled for $250,000 by such affiliate
(subject to ratable refund by the Partnership should the management
agreement be terminated prior to January 1, 2001).

Current and anticipated market conditions caused uncertainty regarding
the Partnership's ability to recover the net carrying value of the Mall of
Memphis investment property through future operations and sale. Therefore,
as of June 30, 1997, the Partnership recorded, as a matter of prudent
accounting practice a provision for value impairment of such investment of
$13,143,000. Such provision was recorded to reflect the then estimated
fair value of the property, less costs to sell.

SCOTLAND YARD - PHASE I AND II APARTMENTS AND
EL DORADO VIEW APARTMENTS

In December 1990, the Partnership obtained replacement mortgage loans
from an institutional lender to retire the existing long-term mortgage
notes secured by the Scotland Yard - Phase I and II and El Dorado View
apartment complexes. The loans provided for payment of contingent interest
equal to 35% of the amount by which gross receipts attributable to a
calendar year (all as defined) exceed a base amount. For the fiscal years
ended 1996 and 1995, contingent interest was approximately $230,000 and
$282,000, respectively. In the event that these properties were sold 90
days or earlier before the maturity date of the loan, the lender was
entitled to a prepayment penalty of 6% of the mortgage principal and, in
general, the higher of 65% of the sale proceeds or ten times the highest
contingent interest amount in any of the three full calendar years
preceding the sale (all as defined). The lender was also entitled to
additional contingent interest if such prepayment penalty, as calculated
above, was less than certain internal rates of return (13.25%-14.00%) as
defined in the note. The Partnership recorded an accrual for such
additional contingent interest of $4,239,104 as deferred accrued interest.
The lender had the right (with 120 days prior notification) to call the
remaining loans (at par) at any time after January 1, 1996.

The properties were classified as held for sale as of April 1, 1996,
and therefore, were not subject to continued depreciation.

On November 1, 1996, the Partnership sold the Scotland Yard Apartments
Phase I and II located in Houston, Texas for $23,200,000 (before closing
costs and prorations). A major portion of the sale proceeds was utilized
to retire the mortgage loans totaling $18,815,000. The Partnership
received approximately $3,787,000 in connection with the sale after all
fees and closing costs. Of this amount, the lender received an additional
amount of approximately $2,329,000 as participation in the sale proceeds,
as required by the mortgage note, as discussed above. Therefore, the
Partnership received a net amount of cash of approximately $1,458,000. As
a result of the sale, the Partnership recognized a gain of $10,582,373 and

<PAGE>

an extraordinary gain of $1,180,286, due to the retirement of deferred
accrued interest related to the mortgage note, for financial reporting
purposes. In addition, the Partnership recognized a gain of $17,772,687
for Federal income tax purposes in 1996.

On July 23, 1996, the Partnership sold the El Dorado View apartment
complex located in Houston, Texas for $6,600,000 (before closing costs and
prorations). The property was sold together with another apartment
property which was owned by a partnership sponsored by an affiliate of the
Corporate General Partner. A major portion of the sale proceeds was
utilized to retire the related underlying mortgage principal of $4,695,000.

The Partnership received approximately $1,752,000 in connection with the
sale after all fees and closing costs. Of this amount, the lender received
an additional amount of approximately $1,051,000 as participation in the
sale proceeds as required by the mortgage note, as discussed above.
Therefore, the Partnership received a net amount of cash of approximately
$701,000. As a result of the sale, the Partnership recognized a $2,698,346
gain for financial reporting and recognized a gain of $5,438,130 for
Federal income tax purposes in 1996.

PAVILLION TOWERS, AURORA, COLORADO

During April 1986, the Partnership sold its interest in Am-Car Real
Estate Partnership-I ("Am-Car") (which owned the Pavillion Towers office
complex located in Aurora, Colorado) to its venture partners for $1,000,000
in cash, promissory notes aggregating $3,750,000 and the venture partners'
assumption of the Partnership's share of the debt encumbering the property.

The two promissory notes of $3,000,000 and $750,000 bear interest at
various rates and were due in April 1996. Beginning in 1991, the
Partnership has not received the scheduled interest payments of $15,000 on
the $750,000 note and the 1993 or 1994 scheduled interest payments of
$60,000 each on the $3,000,000 note. The Partnership received a $200,000
settlement in 1996 with one of the makers of the $3,000,000 note. The
other maker of this note remains obligated for the balance. Although these
notes are secured by personal guarantees from principals of the venture
partner, collection of all past due and future amounts from these notes are
considered unlikely; however, the Partnership continues to evaluate all of
its legal options. Due to the uncertainty of collection of all past due
and future amounts from these notes, a $527,774 reserve was established at
December 31, 1993, which was reduced to $327,774 in 1996 as a result of the
$200,000 receipt, to reduce the notes receivable balance to an amount not
to exceed the related deferred gain on sale.

The sale was accounted for by the installment method whereby the gain
on sale of $3,057,695 (net of discount on the promissory notes receivable
of $1,682,305) was recognized as collections of principal were received.
Effective January 1, 1990, the Partnership adopted the cost recovery method
of accounting. Accordingly, $0, $200,000 and $0 of gain was recognized in
1997, 1996 and 1995, respectively.

YERBA BUENA OFFICE BUILDING

In June 1992, title to the Yerba Buena Office Building in San
Francisco, California was transferred to the lender by the joint venture (a
partnership comprised of the Partnership, two other limited partnerships
sponsored by the Partnership's Corporate General Partner and four
unaffiliated limited partners). In return for a smooth transition of title
and management of the property, the joint venture negotiated the right to
share in future sales proceeds, if any, above certain specified levels. In
addition, the joint venture had a right of first opportunity to purchase
the property during the time frame of June 1995 through May 1998 should the
lender wish to market the property for sale. The lender sold the property
to an unaffiliated third party during 1996. The sale price did not
generate a level of distributable proceeds where the joint venture would
have been entitled to a share. However, the joint venture was not given an
opportunity to purchase the property on the same terms it was sold for.
The joint venture has filed a suit against the lender for breach of its
obligations. There are no assurances that the joint venture would recover
any amounts in the event it should pursue its legal remedies.

<PAGE>

<TABLE>
LONG-TERM DEBT

Long-term debt consisted of the following at December 31, 1997 and 1996:

<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
10% first mortgage note (in default); secured by the Mall
of Memphis shopping center in Memphis, Tennessee; payable
in monthly installments of principal and interest of $279,823
through January 1, 2018; additional interest payable equal
to 20% of certain rents in excess of a specified level
($0 in 1997 and 1996 and approximately $138,000 for 1995). . . . . . . . $29,034,462 29,465,209

14-1/2% second mortgage note (in default); secured by the
Mall of Memphis shopping center in Memphis, Tennessee;
payable in monthly installments of principal and interest
of $41,958 through January 1, 2018 . . . . . . . . . . . . . . . . . . . 3,280,282 3,306,066

10% third mortgage note (in default); secured by the Mall
of Memphis shopping center in Memphis, Tennessee;
payable in monthly installments of principal and interest
of $66,696 through April 1, 2003 . . . . . . . . . . . . . . . . . . . . 7,361,258 7,422,141

10% mortgage note; assumed by buyer at sale in 1997; secured
by the 767 Third Avenue office building in New York, New York;
payable in monthly installments of interest only until May 12,
1999 when the remaining principal balance of $37,986,531 is
payable; additional interest equal to 5% of certain rents
in excess of a specified level is payable (no additional
interest was due for 1997, 1996 and 1995). . . . . . . . . . . . . . . . -- 37,986,531

Promissory note payable to venture partner; satisfied in 1997
by venture partner contribution at liquidation of venture;
unsecured; related to 767 Third Avenue; bearing interest
at a rate equal to the prime rate (approximately 8.5% and 8.25%
on September 30, 1997 and December 31, 1996, respectively)
plus 2% payable in monthly installments of interest only
until May 1998 when the remaining balance was payable. . . . . . . . . . -- 2,500,000

<PAGE>

1997 1996
----------- -----------

First mortgage note payable secured by the Riverfront office
building in Cambridge, Massachusetts; payable in monthly
installments of interest only at rates ranging from 6% to
9% (7% at January 1, 1998) until December 31, 2007, or
prepayment date, when the remaining balance, including the
Minimum Return and Residual Amount (as defined), is payable;
interest accrued at an effective rate of approximately 9.7%
commencing November 1995 . . . . . . . . . . . . . . . . . . . . . . . . 46,713,811 44,895,706

8% promissory payable (in default); secured by the Partnership's
purchased interest in the Mall of Memphis Associates;
payable annually to the extent of Net Cash Flow (as defined);
subject to certain guaranteed minimum payments in 1996 and 1997;
due August 8, 2002 (Lender has two five-year options to
extend at the lesser of the outstanding balance of the
loan or the Lenders Market Share (as defined)) . . . . . . . . . . . . . 5,000,000 5,000,000
------------ -----------
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,389,813 130,575,653
Less current portion of long-term debt . . . . . . . . . . . . . 44,676,002 517,413
------------ -----------
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . $ 46,713,811 130,058,240
============ ===========
</TABLE>

<PAGE>

Five year maturities of long-term debt are as follows:

1998 . . . . . . . . . . . $ 44,676,002
1999 . . . . . . . . . . . --
2000 . . . . . . . . . . . --
2001 . . . . . . . . . . . --
2002 . . . . . . . . . . . --
===========

Long-Term Debt Modifications - General

The Partnership has received mortgage note modifications on certain
properties. Upon expiration of such modifications or scheduled maturity of
the loans, should the Partnership not seek or be unable to secure new or
additional modifications to the loans, based upon current and anticipated
future market conditions, the Partnership may not commit any significant
additional amounts to these properties. This would likely result in the
Partnership no longer having an ownership (or security interest) in such
properties. Such decisions will be made on a property-by-property basis
and could result in a gain for financial reporting and Federal income tax
purposes to the Partnership with no corresponding distributable proceeds.

PARTNERSHIP AGREEMENT

Pursuant to the terms of the Partnership Agreement, net profits and
losses of the Partnership from operations are allocated 96% to the Limited
Partners and 4% to the General Partners. Profits from the sale or other
disposition of investment properties are allocated first to the General
Partners in an amount equal to the greater of the amount distributable to
the General Partners from the proceeds of any such sale (as described
below) or 1% of the profits from the sale. Losses from the sale or other
disposition of investment properties will be allocated 1% to the General
Partners. The remaining sale profits and losses will be allocated to the
Limited Partners.

The Partnership Agreement also generally provides that notwithstanding
any allocation contained in the Agreement, if at any time profits are
realized by the Partnership, any current or anticipated event which would
cause the deficit balance in absolute amount in the capital account of the
General Partners to be greater than their share of the Partnership's
indebtedness (as defined) after such event, then the allocation of profits
to the General Partners shall be increased to the extent necessary to cause
the deficit balance in the capital account of the General Partners to be no
less than their respective shares of the Partnership's indebtedness after
such event. In general, the effect of this provision is to allow the
deferral of the recognition of taxable gain to the Limited Partners.

The General Partners are not required to make any capital contribu-
tions except under certain limited circumstances upon dissolution and
termination of the Partnership. Distributions of "net cash receipts" of
the Partnership are allocated 90% to the Limited Partners and 10% to the
General Partners (of which 6.25% constitutes a management fee to the
Corporate General Partner for services in managing the Partnership).

The Partnership Agreement provides that the Limited Partners shall
receive 99% and the General Partners shall receive 1% of the sale or
refinancing proceeds of a real property (net after expenses and retained
working capital) until the Limited Partners (i) have received cash
distributions of sale or refinancing proceeds in an amount equal to the
Limited Partners' aggregate initial capital investment in the Partnership,
and (ii) have received cumulative cash distributions from the Partnership's
operations which when combined with sale or refinancing proceeds previously
distributed, equal to a 6% annual return on the Limited Partners' average
capital investment for each year (their initial capital investment as
reduced by sale or refinancing proceeds previously distributed) commencing

<PAGE>

with the first fiscal quarter of 1983. After such distributions, the
General Partners shall receive (to the extent not previously received)
proceeds up to 3% of the aggregate sales price of properties previously
sold by the Partnership with any remaining proceeds allocated 85% to the
Limited Partners and 15% General Partners. The Limited Partners shall
receive 100% of such net sale or refinancing proceeds until the Limited
Partners have received cash distributions of such net sale or refinancing
proceeds in an amount equal to the Limited Partners' aggregate initial
capital investment in the Partnership. If upon the completion of the
liquidation of the Partnership and the distribution of all Partnership
funds the Limited Partners have not received cash disbursements to satisfy
this requirement, the General Partners will be required to return all of
the 1% distribution of net sale or refinancing proceeds received to date,
which as of December 31, 1997 aggregate approximately $208,000. The
Limited Partners are not expected to receive cash distributions of sale or
refinancing proceeds in an amount equal to their initial capital
investment.

Allocations among the partners in the accompanying accrual basis
consolidated financial statements have been made in accordance with the
provisions of the Partnership Agreement and the venture agreements. The
allocation percentages may differ from year to year based on future events.

Differences may therefore result between allocations among the partners on
the GAAP basis and the tax basis. Such differences would have no
significant effect on total assets, total partners' capital or net loss.

MANAGEMENT AGREEMENTS

In May 1994, an affiliate of the General Partners assumed property
management and leasing services at the Mall of Memphis from an affiliate of
the venture partner. Leasing commissions at the Mall of Memphis are
calculated at a rate, which approximates market, based on the terms of the
related lease.

LEASES - AS PROPERTY LESSOR

At December 31, 1997, the Partnership's and its consolidated ventures'
principal assets are one office building and one enclosed shopping mall.
The Partnership has determined that all leases relating to these properties
are properly classified as operating leases; therefore, rental income is
reported when earned and the cost of each of the properties, excluding the
cost of land, is depreciated over their estimated useful lives. Leases
with office building and shopping center tenants range in term from one to
twenty-four years and provide for fixed minimum rent and partial
reimbursement of operating costs. In addition, leases with shopping center
tenants provide for additional rent based upon percentages of tenant sales
volumes. With respect to the Partnership's shopping center investment, a
substantial portion of the ability of retail tenants to honor their leases
is dependent upon the retail economic sector.

Cost of the leased assets net of accumulated depreciation are
summarized as follows at December 31, 1997:

Shopping mall:
Cost . . . . . . . . . . . . . . . . $ 53,651,697
Accumulated depreciation . . . . . . (24,011,856)
------------
29,639,841
------------
Office buildings:
Cost . . . . . . . . . . . . . . . . 39,876,303
Accumulated depreciation . . . . . . (17,165,259)
------------
22,711,044
------------
Total. . . . . . . . . . . . . . . . . $ 52,350,885
============

<PAGE>

Minimum lease payments, including amounts representing executory costs
(e.g., taxes, maintenance, insurance), and any related profit in excess of
specific reimbursements, to be received in the future under the above
commercial operating lease agreements, are as follows:

1998. . . . . . . . . . . . . . . $11,832,602
1999. . . . . . . . . . . . . . . 12,057,161
2000. . . . . . . . . . . . . . . 10,878,753
2001. . . . . . . . . . . . . . . 12,247,089
2002. . . . . . . . . . . . . . . 6,385,651
Thereafter. . . . . . . . . . . . 12,315,852
-----------
Total . . . . . . . . . . . . . . $65,717,108
===========

Additional contingent rent (based on sales by property tenants)
included in consolidated rental income was as follows for the years ended
December 31, 1997, 1996 and 1995:

1995. . . . . . . . . . . . . . . $354,677
1996. . . . . . . . . . . . . . . 300,141
1997. . . . . . . . . . . . . . . --
========

LEASES - AS PROPERTY LESSEE

The following lease agreement has been determined to be an operating
lease.

The Riverfront venture owns a net leasehold interest which expires in
2061 (subject to a 19-year extension) in the land underlying the Cambridge,
Massachusetts office building. The lease provides for annual rent equal to
the greater of 2% of gross income from the property or a minimum amount
(which increases on a fixed schedule from $132,700 at inception,to $298,575
for the years 2007 through 2080). The joint venture has not made the
scheduled ground lease payments since February 1993. At December 31, 1997,
the total amount of deferred and accrued ground lease expense is
approximately $846,000. Reference is made to the Riverfront venture
agreement discussed above regarding the waiver of any and all scheduled
ground rent payments due under the lease since February 1993 in conjunction
with a loan restructure with the mortgage lender.

Future minimum rental commitments under this lease are as follows:

1998 . . . . . . . . . . . $ 212,230
1999 . . . . . . . . . . . 212,230
2000 . . . . . . . . . . . 212,230
2001 . . . . . . . . . . . 212,230
2002 . . . . . . . . . . . 252,130
Thereafter . . . . . . . . 17,430,145
-----------
Total. . . . . . . . . . . $18,531,195
===========

TRANSACTIONS WITH AFFILIATES

The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees, certain of its officers, and other
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's investments. Fees, commissions and other
expenses required to be paid by the Partnership to the General Partners and
their affiliates as of and for the years ended December 31, 1997, 1996 and
1995 are as follows:

<PAGE>

UNPAID AT
DECEMBER 31,
1997 1996 1995 1997
-------- -------- -------- ------------

Property management
and leasing fees. . . . . . $302,061 289,483 344,158 --
Insurance commissions. . . . 25,117 27,639 34,756 --
Reimbursement (at cost)
for accounting
services. . . . . . . . . . 19,001 9,141 115,562 7,783
Reimbursement (at cost)
for portfolio manage-
ment services . . . . . . . 39,521 24,234 27,279 9,851
Reimbursement (at cost)
for legal services. . . . . 7,364 5,451 3,130 3,091
Reimbursement (at cost)
for out-of-pocket
salary and salary-
related to the on-site
and other costs for
the Partnership and
its investment
properties. . . . . . . . . 28 -- 77,031 14
-------- ------- ------- -----
$393,092 355,948 601,916 20,739
======== ======= ======= =====

The Corporate General Partner has deferred payment of partnership
management fees of $11,936. In addition, distributions to the General
Partners of net cash flow of the Partnership aggregating $7,161 have been
deferred.

The General Partners and their affiliates had also deferred payment of
the Partnership's share of property management and leasing fees of
approximately $171,000 for the Partnership's unconsolidated venture, which
was not included in the consolidated financial statements. These amounts,
which did not bear interest, were paid in February 1998 from the
Partnership's share of proceeds from the 1997 sale of National City Center.

<PAGE>

<TABLE> SCHEDULE III
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
<CAPTION>
INITIAL COST TO GROSS AMOUNT AT WHICH CARRIED
PARTNERSHIP (A) AT CLOSE OF PERIOD (B)
--------------------------- COSTS ----------------------------------------
LAND AND BUILDINGS CAPITALIZED LAND AND BUILDINGS
LEASEHOLD AND SUBSEQUENT TO LEASEHOLD AND
ENCUMBRANCE INTEREST IMPROVEMENTS ACQUISITION INTEREST IMPROVEMENTS TOTAL (E)
----------- ----------- ------------ -------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE
BUILDINGS:
Cambridge,
Massachu-
setts (D). . . $46,713,811 (C) 27,114,515 12,761,788 (C) 39,876,303 39,876,303
SHOPPING
MALL:
Memphis,
Tennessee
(D). . . . . . 39,676,002 3,608,935 39,870,758 10,172,004 3,403,077 50,248,620 53,651,697
----------- ---------- ----------- ---------- ---------- ----------- -----------
Total. . . . $86,389,813 3,608,935 66,985,273 22,933,792 3,403,077 90,124,923 93,528,000
=========== ========== =========== ========== ========== =========== ===========
</TABLE>

<PAGE>

<TABLE> SCHEDULE III - CONTINUED
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997

<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
STATEMENT OF 1997
ACCUMULATED DATE OF DATE OPERATION REAL ESTATE
DEPRECIATION(F) CONSTRUCTION ACQUIRED IS COMPUTED TAXES
---------------- ------------ ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
OFFICE BUILDINGS:
Cambridge, Massachusetts
(D). . . . . . . . . . . . $17,165,259 1983 10/22/81 5-30 years 1,253,837
SHOPPING MALL:
Memphis,
Tennessee (D). . . . . . . 24,011,856 1981 8/3/81 5-30 years 1,504,368
----------- ---------

Total. . . . . . . . . . $41,177,115 2,758,205
=========== =========
<FN>
- ------------------
(A) The initial cost to the Partnership represents the original purchase price of the properties, including
amounts incurred subsequent to acquisition which were contemplated at the time the property was acquired.
(B) The aggregate cost of real estate owned at December 31, 1997 for Federal income tax purposes was
approximately $106,245,000.
(C) Property operated under ground lease; see the Notes.
(D) Properties owned and operated by joint ventures; see the Notes.
</TABLE>

<PAGE>

<TABLE> SCHEDULE III - CONTINUED
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997

(E) Reconciliation of real estate owned:

<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period . . . . . . . . . . . $184,599,017 209,499,155 197,649,247
Additions during period. . . . . . . . . . . . . . . 1,627,130 3,038,590 11,849,908
Reductions during period . . . . . . . . . . . . . . (92,698,147) (27,938,728) --
------------ ------------ ------------

Balance at end of period . . . . . . . . . . . . . . $ 93,528,000 184,599,017 209,499,155
============ ============ ============

(F) Reconciliation of accumulated depreciation:

Balance at beginning of period . . . . . . . . . . . $ 75,870,082 81,997,627 75,428,110
Depreciation expense . . . . . . . . . . . . . . . . 1,009,322 6,110,344 6,569,517
Reductions during period . . . . . . . . . . . . . . (35,702,289) (12,237,889) --
------------ ------------ ------------

Balance at end of period . . . . . . . . . . . . . . $ 41,177,115 75,870,082 81,997,627
============ ============ ============

</TABLE>

<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

There were no changes of or disagreements with accountants during
fiscal years 1997 and 1996.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP

The Corporate General Partner of the Partnership is JMB Realty
Corporation ("JMB"), a Delaware corporation. Substantially all of the
outstanding stock of JMB is owned, directly or indirectly, by certain of
its officers, directors, members of their families, and their affiliates.
JMB has responsibility for all aspects of the Partnership's operations,
subject to the requirement that sales of real property must be approved by
the Associate General Partner of the Partnership, ABPP Associates, L.P.
(formerly known as Realty Associates-XI, L.P.), an Illinois limited
partnership with JMB as its sole general partner. The limited partners of
the Associate General Partner are generally officers, directors and
affiliates of JMB or its affiliates.

The Partnership is subject to certain conflicts of interest arising
out of its relationships with the General Partners and their affiliates as
well as the fact that the General Partners and their affiliates are engaged
in a range of real estate activities. Certain services have been and may
in the future be provided to the Partnership or its investment properties
by affiliates of the General Partners, including property management
services and insurance brokerage services. In general, such services are
to be provided on terms no less favorable to the Partnership than could be
obtained from independent third parties and are otherwise subject to
conditions and restrictions contained in the Partnership Agreement. The
Partnership Agreement permits the General Partners and their affiliates to
provide services to, and otherwise deal and do business with, persons who
may be engaged in transactions with the Partnership, and permits the
Partnership to borrow from, purchase goods and services from, and otherwise
to do business with, persons doing business with the General Partners or
their affiliates. The General Partners and their affiliates may be in
competition with the Partnership under certain circumstances, including, in
certain geographical markets, for tenants and/or for the sale of property.
Because the timing and amount of cash distributions and profits and losses
of the Partnership may be affected by various determinations by the General
Partners under the Partnership Agreement, including whether and when to
sell a property, the establishment and maintenance of reasonable reserves,
the timing of expenditures and the allocation of certain tax items under
the Partnership Agreement, the General Partners may have a conflict of
interest with respect to such determinations.

The names, positions held and length of service therein of each
director and the executive and certain other officers of the Corporate
General Partner are as follows:

<PAGE>

SERVED IN
NAME OFFICE OFFICE SINCE
---- ------ ------------

Judd D. Malkin Chairman 5/03/71
Director 5/03/71
Chief Financial Officer 2/22/96
Neil G. Bluhm President 5/03/71
Director 5/03/71
Burton E. Glazov Director 7/01/71
Stuart C. Nathan Executive Vice President 5/08/79
Director 3/14/73
A. Lee Sacks Director 5/09/88
John G. Schreiber Director 3/14/73
H. Rigel Barber Executive Vice President 1/02/87
Chief Executive Officer 8/01/93
Glenn E. Emig Executive Vice President 1/01/93
Chief Operating Officer 1/01/95
Gary Nickele Executive Vice President 1/01/92
and General Counsel 2/27/84
Gailen J. Hull Senior Vice President 6/01/88
Howard Kogen Senior Vice President 1/02/86
Treasurer 1/01/91

There is no family relationship among any of the foregoing directors
or officers. The foregoing directors have been elected to serve a one-year
term until the annual meeting of the Corporate General Partner to be held
on June 3, 1998. All of the foregoing officers have been elected to serve
one-year terms until the first meeting of the Board of Directors held after
the annual meeting of the Corporate General Partner to be held on June 3,
1998. There are no arrangements or understandings between or among any of
said directors or officers and any other person pursuant to which any
director or officer was elected as such.

JMB is the Corporate General Partner of Carlyle Real Estate Limited
Partnership-VII ("Carlyle-VII"), Carlyle Real Estate Limited Partnership-
XII ("Carlyle-XII"), Carlyle Real Estate Limited Partnership-XIII
("Carlyle-XIII"), Carlyle Real Estate Limited Partnership-XIV ("Carlyle-
XIV"), Carlyle Real Estate Limited Partnership-XV ("Carlyle-XV"), Carlyle
Real Estate Limited Partnership-XVI ("Carlyle-XVI"), Carlyle Real Estate
Limited Partnership-XVII ("Carlyle-XVII), JMB Mortgage Partners, Ltd.-III
("Mortgage Partners-III"), JMB Mortgage Partners, Ltd.-IV ("Mortgage
Partners-IV"), Carlyle Income Plus, Ltd. ("Carlyle Income Plus") and
Carlyle Income Plus, Ltd.-II ("Carlyle Income Plus-II"), and the managing
general partner of JMB Income Properties, Ltd.-IV ("JMB Income-IV"), JMB
Income Properties, Ltd.-V ("JMB Income-V"), JMB Income Properties, Ltd.-VII
("JMB Income-VII"), JMB Income Properties, Ltd.-X ("JMB Income-X"), JMB
Income Properties, Ltd.-XI ("JMB Income-XI"), JMB Income Properties, Ltd.-
XII ("JMB Income-XII") and JMB Income Properties, Ltd.-XIII ("JMB Income-
XIII"). JMB is also the sole general partner of the associate general
partner of most of the foregoing partnerships. Most of the foregoing
officers and directors are also officers and/or directors of various
affiliated companies of JMB including Arvida/JMB Managers, Inc. (the
general partner of Arvida/JMB Partners, L.P. ("Arvida")) and Income Growth
Managers, Inc. (the Corporate General Partner of IDS/JMB Balanced Income
Growth, Ltd. ("IDS/BIG"). Most of such directors and officers are also
partners, directly or indirectly, of certain partnerships which are
associate general partners in the following real estate limited
partnerships: the Partnership, Carlyle-VII, Carlyle-XII, Carlyle-XIII,
Carlyle-XIV, Carlyle-XV, Carlyle-XVI, Carlyle-XVII, JMB Income-VI, JMB
Income-VII, JMB Income-X, JMB Income-XI, JMB Income-XII, JMB Income-XIII,
Mortgage Partners-III, Mortgage Partners-IV, Carlyle Income Plus, Carlyle
Income Plus-II and IDS/BIG.

<PAGE>

The business experience during the past five years of each such
director and officer of the Corporate General Partner of the Partnership in
addition to that described above is as follows:

Judd D. Malkin (age 60) is an individual general partner of JMB
Income-IV and JMB Income-V. Mr. Malkin has been associated with JMB since
October, 1969. Mr. Malkin is also a director of Urban Shopping Centers,
Inc. ("USC, Inc."), an affiliate of JMB that is a real estate investment
trust in the business of owning, managing and developing shopping centers.
He is a Certified Public Accountant.

Neil G. Bluhm (age 60) is an individual general partner of JMB Income-
IV and JMB Income-V. Mr. Bluhm has been associated with JMB since August,
1970. Mr. Bluhm is also a principal of Walton Street Real Estate Fund I,
L.P. and a director of USC, Inc. He is a member of the Bar of the State of
Illinois and a Certified Public Accountant.

Burton E. Glazov (age 59) has been associated with JMB since June,
1971 and served as an Executive Vice President of JMB until December 1990.
He is a member of the Bar of the State of Illinois and a Certified Public
Accountant.

Stuart C. Nathan (age 56) has been associated with JMB since July,
1972. He is a member of the Bar of the State of Illinois.

A. Lee Sacks (age 64) has been associated with JMB since December,
1972. He is also President and a director of JMB Insurance Agency, Inc.

John G. Schreiber (age 51) has been associated with JMB since
December, 1970 and served as an Executive Vice President of JMB until
December 1990. Mr. Schreiber is President of Schreiber Investments, Inc.,
a company which is engaged in the real estate investment business. He is
also a senior advisor and partner of Blackstone Real Estate Advisors, L.P.,
an affiliate of the Blackstone Group, L.P. Mr. Schreiber is also a
director of USC, Inc., a trustee of Amli Residential Property Trust and a
director of a number of investment companies advised or managed by T. Rowe
Price Associates and its affiliates. He holds a Masters degree in Business
Administration from Harvard University Graduate School of Business.

H. Rigel Barber (age 48) has been associated with JMB since March,
1982. He holds a J.D. degree from the Northwestern Law School and is a
member of the Bar of the State of Illinois.

Glenn E. Emig (age 50) has been associated with JMB since December,
1979. Prior to becoming Executive Vice President of JMB in 1993, Mr. Emig
was Executive Vice President and Treasurer of JMB Institutional Realty
Corporation. He holds a Masters degree in Business Administration from the
Harvard University Graduate School of Business and is a Certified Public
Accountant.

Gary Nickele (age 45) has been associated with JMB since February,
1984. He holds a J.D. degree from the University of Michigan Law School
and is a member of the Bar of the State of Illinois.

Gailen J. Hull (age 49) has been associated with JMB since March,
1982. He holds a Masters degree in Business Administration from Northern
Illinois University and is a Certified Public Accountant.

Howard Kogen (age 62) has been associated with JMB since March, 1973.
He is a Certified Public Accountant.

<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

The Partnership has no officers or directors. The Partnership is
required to pay a management fee to the Corporate General Partner and the
General Partners are entitled to receive a share of cash distributions,
when and as cash distributions are made to the Limited Partners, and a
share of profits or losses. Reference is also made to the Notes for a
description of such transactions, distributions and allocations. In 1997,
1996 and 1995, no cash distributions were paid to the General Partners. In
1991, the General Partners deferred distributions of $7,161 and management
fees of $11,936.

Urban Retail Properties, Co., an affiliate of the Corporate General
Partner, provided property management and leasing services at the Mall of
Memphis during 1997. In 1997, such affiliate earned and received property
management and leasing fees amounting to $302,061. As set forth in the
Prospectus of the Partnership, the Corporate General Partner must negotiate
such agreements on terms no less favorable to the Partnership than those
customarily charged for similar services in the relevant geographical area
(but in no event at rates greater than 5% of the gross income from a
property), and such agreements must be terminable by either party thereto,
without penalty, upon 60 days' notice.

JMB Insurance Agency, Inc., an affiliate of the Corporate General
Partner, earned and received insurance brokerage commissions in 1997
aggregating $25,117 in connection with the provision of insurance coverage
for certain of the real property investments of the Partnership. Such
commissions are at rates set by insurance companies for the classes of
coverage provided.

The Corporate General Partner of the Partnership and their affiliates
may be reimbursed for their salaries, salary-related and direct expenses
relating to the administration of the Partnership and the acquisition and
operation of the Partnership's real property investments. In 1997, the
Corporate General Partner of the Partnership was due reimbursement for such
expenses in the amount of $65,914. Cumulative amounts unpaid at December
31, 1997 were $20,739.

The Partnership is permitted to engage in various transactions
involving affiliates of the Corporate General Partner of the Partnership.
The relationship of the Corporate General Partner to its affiliates is set
forth above in Item 10.

During 1997, the Partnership owned an approximate 13.7% interest in
Carlyle/National City Associates ("CNCA"), an Illinois general partnership
in which Carlyle Real Estate Limited Partnership-XII ("Carlyle-XII"),
another partnership sponsored by JMB, owned the remaining 86.3% interest in
CNCA. In December 1997, CNCA sold its interest in the land, building and
related improvements of the National City Center (the "Property"), an
approximately 786,000 square foot office building located in Cleveland,
Ohio, to BRE/City Center L.L.C. ("BRE"), a Delaware limited liability
company that is affiliated with Blackstone Real Estate Advisors, L.P.,
("BREA") for $82,150,000 (including mortgage indebtedness of approximately
$54,278,000 secured by the Property), subject to prorations and closing
costs. John G. Schreiber is (i) a director of JMB, which is the Corporate
General Partner of each of the Partnership and Carlyle-XII, and (ii) a
partner in the Associate General Partner of each of the Partnership and
Carlyle-XII. (JMB is also the general partner of the Associate General
Partner.) Mr. Schreiber and his family members, directly or indirectly,
own limited partnership interests in Blackstone Real Estate Associates II
L.P. and Blackstone Real Estate Holdings II L.P., through which Mr.
Schreiber and his family members have an interest up to approximately 3% of
the profits of BRE. Mr. Schreiber and his family members also own a
limited partnership interest in BREA, through which Mr. Schreiber and his

<PAGE>

family members received a portion of the acquisition fee paid by BRE to
BREA in the amount of $120,370. The price and other terms of the sale of
the Property to BRE were determined by arm's-length negotiation. The
decision on behalf of CNCA to sell the property to BRE was made by JMB,
which, as noted above, is the Corporate General Partner (and the general
partner of the Associate General Partner) of each of the Partnership and
Carlyle-XII, the partners in CNCA. Mr. Schreiber did not participate in
JMB's decision on behalf of CNCA to sell the Property, nor did Mr.
Schreiber participate in the decision on behalf of BRE to purchase the
Property.

<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a) No person or group is known by the Partnership to own beneficially more than 5% of the outstanding Interests
of the Partnership.

(b) The Corporate General Partner, its officers and directors and the Associate General Partner own the following
Interests of the Partnership:

NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------
<S> <C> <C> <C>
Limited Partnership
Interests JMB Realty Corporation 85 Interests directly Less than 1%

Limited Partnership
Interests Corporate General 85 Interests directly Less than 1%
Partner, its
officers and
directors and
the Associate
General Partner
as a group

<FN>
No officer or director of the Corporate General Partner of the Partnership possesses a right to acquire beneficial ownership
of Interests of the Partnership.

Reference is made to Item 10 for information concerning ownership of the Corporate General Partner.

(c) There exists no arrangements, known to the Partnership, the operation of which may at a subsequent date result in a
change in control of the Partnership.

</TABLE>

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

There were no significant transactions or business relationships with
the Corporate General Partner, affiliates or their management other than
those described in Items 10 and 11 above.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

(1) Financial Statements (See Index to Financial Statements filed
with this annual report).

(2) Exhibits.

3-A.* The Prospectus of the Partnership dated May 8, 1981, as
supplemented on July 27, 1981, October 9, 1981, November 5, 1981, December
10, 1981, February 19, 1982 and April 23, 1982, as filed with the
Commission pursuant to Rules 424(b) and 424(c), is hereby incorporated
herein by reference to Exhibit 3-A to the Partnership's Form 10-K Report
for December 31, 1994 filed on March 27, 1995.

3-B.* Amended and Restated Agreement of Limited Partnership
set forth as Exhibit A to the Prospectus, which agreement is hereby
incorporated by reference to Exhibit 3-B to the Partnership's Form 10-K
Report for December 31, 1994 filed on March 27, 1995.

4-A. Long-term debt modification relating to the 767 Third
Avenue Office Building in New York, New York is hereby incorporated by
reference to Exhibit 4-A to the Partnership's Report on Form 10-K (File No.
0-10494) for December 31, 1994 dated on March 27, 1995.

4-B. Mortgage loan documents secured by the Mall of Memphis
in Memphis, Tennessee are hereby incorporated by reference to the
Partnership's Registration Statement on Post-Effective Amendment No. 2 to
Form S-11 (File No. 2-70724) dated May 8, 1981.

4-C. First through third mortgage loan documents secured by
the Riverfront Office Building in Cambridge, Massachusetts are hereby
incorporated by reference to the Partnership's Registration Statement on
Post-Effective Amendment No. 3 to Form S-11 (File No. 2-70724) dated May 8,
1981.

4-D.* Fourth mortgage loan document secured by the Riverfront
Office Building in Cambridge, Massachusetts is hereby incorporated by
reference to Exhibit 4-D to the Partnership's Report on Form 10-K for
December 31, 1994 dated on March 27, 1995.

4-E. Deed of trust note document dated March 31, 1993
secured by the Mall of Memphis in Memphis, Tennessee is hereby incorporated
by reference to Exhibit 4-E to the Partnership's Report on Form 10-K for
December 31, 1994 dated on March 27, 1995.

<PAGE>

4-F. Loan repayment agreement related to the first through
fourth mortgage loan documents secured by the Riverfront Office Building in
Cambridge Massachusetts, is incorporated by reference to Exhibit 4-F to the
Partnership's Report for December 31, 1996 on Form 10-K (File No. 0-10494)
dated March 21, 1997.

10-A. Acquisition documents relating to the purchase by the
Partnership of an interest in the 767 Third Avenue Office Building in New
York, New York are hereby incorporated by reference to the Partnership's
Registration Statement on Post-Effective Amendment No. 2 to Form S-11 (File
No. 2-70724) dated May 8, 1981.

10-B. Acquisition Documents relating to the purchase by the
Partnership of an interest in the Mall of Memphis in Memphis, Tennessee are
hereby incorporated by reference to the Partnership's Registration
Statement on Post-Effective Amendment No. 2 to Form S-11 (File No. 2-70724)
dated May 8, 1981.

10-C. Acquisition documents relating to the purchase by the
Partnership of an interest in the Riverfront Office Building in Cambridge,
Massachusetts are hereby incorporated by reference to the Partnership's
Registration Statement on Post-Effective Amendment No. 3 to Form S-11 (File
No. 2-70724) dated May 8, 1981.

10-D. Amended and Restated Promissory Note, dated April 30,
1994 between Carlyle/National City Associates and New York Life Insurance
Company relating to the National City Center Office Building is hereby
incorporated by reference to the Partnership's Report for June 30, 1994 on
Form 10-Q (File No. 0-10494) dated August 12, 1994.

10-E. Acquisition documents relating to the purchase by the
Partnership of the venture partner's interest in the Mall of Memphis in
Memphis, Tennessee, incorporated by reference to the Partnership's Report
for September 30, 1995 on Form 10-Q (File No. 0-10494) dated November 9,
1995.

10-F. Purchase Agreement dated July 23, 1996 related to the
sale of El Dorado View Apartments in Houston, Texas, by and between Carlyle
Real Estate Limited Partnership - XI and Meridian Capital Corporation, is
hereby incorporated by reference to the Partnership's Report for September
30, 1996 on Form 10-Q (File No. 0-10494) dated November 8, 1996.

10-G. Purchase Agreement dated November 1, 1996 related to
the sale of Scotland Yard Apartments - Phase I and II in Houston, Texas, by
and between Carlyle Real Estate Limited Partnership-XI and FCS Realty, LLC,
is hereby incorporated by reference to the Partnership's Report for
December 31, 1996 on Form 10-K (File No. 0-10494) dated March 21, 1997.

10-H. Agreement of Sale between Carlyle Real Estate Limited
Partnership - XI and John Street Fee, LLC dated July 31, 1997 relating to
the sale of the Partnership's interest in the 767 Third Avenue Office
Building is hereby incorporated herein by reference to the Partnership's
Report on Form 8-K (File No. 0-10494) dated November 12, 1997.

<PAGE>

10-I. Purchase Agreement and Exhibits thereto between
Carlyle/National City Associates and BRE/City Center, LLC dated December 3,
1997 is hereby incorporated by reference to the Partnership's Report on
Form 8-K (File No. 0-10494) dated January 16, 1998.

21. List of Subsidiaries.

24. Powers of Attorney

27. Financial Data Schedule
_____________

* Previously filed in Exhibits 3-A, 3-B and 4-D to the
Partnership's Report on Form 10-K for December 31, 1992 of the Securities
Exchange Act of 1934 (File No. 0-10494) filed on March 19, 1993.

(b) The following reports on Form 8K were filed since the beginning
of the last quarter covered by this report.

(i) The Partnership's Report on Form 8-K (File No. 0-10494) for
October 31, 1997 (describing the Item 2 sale of the Partnership's interest
in the 767 Third Avenue Office Building in New York, New York) was filed.
This report was dated November 12, 1997.

(ii) The Partnership's Report on Form 8-K (File No. 0-10494) for
December 18, 1997 (describing the Item 5 sale of the National City Center
office building in Cleveland, Ohio through the Partnership's unconsolidated
joint venture, Carlyle/National City) was filed. The report was dated
January 16, 1998.

No annual report or proxy material for the fiscal year 1997 has been
sent to the Partners of the Partnership. An annual report will be sent to
the Partners subsequent to this filing.

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI

By: JMB Realty Corporation
Corporate General Partner

GAILEN J. HULL
By: Gailen J. Hull
Senior Vice President
Date: March 25, 1998

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.

By: JMB Realty Corporation
Corporate General Partner

JUDD D. MALKIN*
By: Judd D. Malkin, Chairman and
Chief Financial Officer
Date: March 25, 1998

NEIL G. BLUHM*
By: Neil G. Bluhm, President and Director
Date: March 25, 1998

H. RIGEL BARBER*
By: H. Rigel Barber, Chief Executive Officer
Date: March 25, 1998

GLENN E. EMIG*
By: Glenn E. Emig, Chief Operating Officer
Date: March 25, 1998

GAILEN J. HULL
By: Gailen J. Hull, Senior Vice President
Principal Accounting Officer
Date: March 25, 1998

A. LEE SACKS*
By: A. Lee Sacks, Director
Date: March 25, 1998

STUART C. NATHAN*
By: Stuart C. Nathan, Executive Vice President
and Director
Date: March 25, 1998

*By: GAILEN J. HULL, Pursuant to a Power of Attorney

GAILEN J. HULL
By: Gailen J. Hull, Attorney-in-Fact
Date: March 25, 1998

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
EXHIBIT INDEX

DOCUMENT
INCORPORATED
BY REFERENCE PAGE
------------ ----
3-A. The Prospectus of the
Partnership dated May 8,
1981 Yes

3-B. Amended and Restated Agreement of
Limited Partnership Yes

4-A. Mortgage loan documents secured
by the 767 Third Avenue
Office Building Yes

4-B. Mortgage loan documents secured
by the Mall of Memphis Yes

4-C. First through third mortgage
loan documents secured by the
Riverfront Office Building Yes

4-D. Fourth mortgage loan document
secured by the Riverfront
Office Building Yes

4-E. Deed of trust note dated
March 31, 1993 secured by the
Mall of Memphis Yes

4-F. Loan Repayment Agreement
secured by the Riverfront
Office Building Yes

10-A. Acquisition documents related
to the 767 Third Avenue
Office Building Yes

10-B. Acquisition documents related
to the Mall of Memphis Yes

10-C. Acquisition documents related
to the Riverfront Office Building Yes

10-D. Amended and Restated Promissory
Note, between Carlyle/National
City Center Office Building Yes

10-E. Acquisition documents relating
to the purchase by the Partnership
of the venture partner's interest
in the Mall of Memphis Yes

10-F. Purchase Agreement related to
the Sale of the El Dorado View
Apartments Yes

10-G. Purchase Agreement related to
the sale of the Scotland Yard
Apartments - Phase I and II Yes

<PAGE>

CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
EXHIBIT INDEX - CONTINUED

DOCUMENT
INCORPORATED
BY REFERENCE PAGE
------------ ----

10-H. Agreement of Sale between
Carlyle Real Estate Limited
Partnership - XI and John Street
Fee LLC. Yes

10-I. Purchase Agreement and Exhibits
thereto between Carlyle/National
City Associates and BRE/City
Center, LLC. Yes

21. List of Subsidiaries No

24. Powers of Attorney No

27. Financial Data Schedule No

EXHIBIT 21

LIST OF SUBSIDIARIES

The Partnership is a partner of Riverfront Office Park Joint Venture, a
general partnership which holds title to the Riverfront Office Building in
Cambridge, Massachusetts. The developer of the property was a partner in the
joint venture.

EXHIBIT 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB
Realty Corporation, the corporate general partner of CARLYLE REAL ESTATE
LIMITED PARTNERSHIP - XI, do hereby nominate, constitute and appoint GARY
NICKELE, GAILEN J. HULL, DENNIS M. QUINN or any of them, attorneys and
agents of the undersigned with full power of authority to sign in the name
and on behalf of the undersigned officers a Report on Form 10-K of said
partnership for the fiscal year ended December 31, 1997, and any and all
amendments thereto, hereby ratifying and confirming all that said attorneys
and agents and any of them may do by virtue hereof.

IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 30th day of January, 1998.

H. RIGEL BARBER
- -----------------------
H. Rigel Barber Chief Executive Officer

GLENN E. EMIG
- -----------------------
Glenn E. Emig Chief Operating Officer

The undersigned hereby acknowledge and accept such power of authority
to sign, in the name and on behalf of the above named officers, a Report on
Form 10-K of said partnership for the fiscal year ended December 31, 1997,
and any and all amendments thereto, the 30th day of January, 1998.

GARY NICKELE
-----------------------
Gary Nickele

GAILEN J. HULL
-----------------------
Gailen J. Hull

DENNIS M. QUINN
-----------------------
Dennis M. Quinn

<PAGE>

EXHIBIT 24

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned have executed this Power of
Attorney the 30th day of January, 1998.

NEIL G. BLUHM
- ----------------------- President and Director
Neil G. Bluhm

JUDD D. MALKIN
- ----------------------- Chairman and Chief Financial Officer
Judd D. Malkin

A. LEE SACKS
- ----------------------- Director of General Partner
A. Lee Sacks

STUART C. NATHAN
- ----------------------- Executive Vice President
Stuart C. Nathan Director of General Partner

GARY NICKELE
-----------------------
Gary Nickele

GAILEN J. HULL
-----------------------
Gailen J. Hull

DENNIS M. QUINN
-----------------------
Dennis M. Quinn

<ARTICLE> 5

<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997

<CASH> 13,840,535
<SECURITIES> 0
<RECEIVABLES> 3,756,236
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,596,771
<PP&E> 52,350,885
<DEPRECIATION> 0
<TOTAL-ASSETS> 78,921,540
<CURRENT-LIABILITIES> 48,880,087
<BONDS> 46,713,811
<COMMON> 0
0
0
<OTHER-SE> (18,888,007)
<TOTAL-LIABILITY-AND-EQUITY> 78,921,540
<SALES> 24,598,580
<TOTAL-REVENUES> 25,209,762
<CGS> 0
<TOTAL-COSTS> 15,765,212
<OTHER-EXPENSES> 13,881,082
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,069,706
<INCOME-PRETAX> (16,506,238)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15,489,395)
<DISCONTINUED> 10,705,403
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,783,992)
<EPS-PRIMARY> (31.08)
<EPS-DILUTED> (31.08)

</TABLE>