MCNEIL REAL ESTATE FUND XV LTD /CA, 10-K405, 1999-03-31

MCNEIL REAL ESTATE FUND XV LTD /CA
10-K405, 1999-03-31
REAL ESTATE

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

FORM 10-K405

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

For the fiscal year ended December 31, 1998
------------------------------------------------

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

For the transition period from ______________ to_____________

Commission file number 0-14258
---------

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

California 94-2941516
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

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

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

Securities registered pursuant to Section 12(b) of the Act: None
- ----------------------------------------------------------

Securities registered pursuant to Section 12(g) of the Act: Limited partnership
units
- ----------------------------------------------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No___

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

101,439 of the registrant's 102,796 limited partnership units are held by
non-affiliates of this registrant. The aggregate market value of units held by
non-affiliates is not determinable since there is no public trading market for
limited partnership units and transfers of units are subject to certain
restrictions.

Documents Incorporated by Reference: See Item 14, Page 36

TOTAL OF 38 PAGES

<PAGE>
PART I

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

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

McNeil Real Estate Fund XV, Ltd. (the "Partnership") was organized June 26, 1984
as a limited partnership under the provisions of the California Uniform Limited
Partnership Act. The general partner of the Partnership is McNeil Partners, L.P.
(the "General Partner"), a Delaware limited partnership, an affiliate of Robert
A. McNeil ("McNeil"). The Partnership is governed by an amended and restated
partnership agreement of limited partnership dated October 11, 1991, as amended
(the "Amended Partnership Agreement"). Prior to October 11, 1991, McNeil Realty
Investors Corporation (the prior "Corporate General Partner"), a wholly-owned
subsidiary of Southmark Corporation ("Southmark"), and McNeil were the general
partners of the Partnership, which was governed by an agreement of limited
partnership dated June 26, 1984 (the "Original Partnership Agreement"). The
principal place of business for the Partnership and General Partner is 13760
Noel Road, Suite 600, LB70, Dallas, Texas, 75240.

On September 14, 1984, a Registration Statement on Form S-11 was declared
effective by the Securities and Exchange Commission whereby the Partnership
offered for sale $35,000,000 of limited partnership units ("Units"), with the
General Partners' right to increase the offering up to $60,000,000. The Units
represent equity interests in the Partnership and entitle the holders thereof to
participate in certain allocations and distributions of the Partnership. The
sale of Units closed on January 31, 1986, with 101,519 Units sold at $500 each,
for gross proceeds of $50,759,500 to the Partnership. In addition, the original
general partners purchased a total of 10 Units for $5,000. In 1991 and 1992, 651
and 696 Units, respectively, were issued to the General Partner for payment of
the Management Incentive Distribution ("MID"). From 1993 to 1998, 80 Units were
relinquished leaving 102,796 Units outstanding as of December 31, 1998.

SOUTHMARK BANKRUPTCY AND CHANGE IN GENERAL PARTNER
- --------------------------------------------------

On July 14, 1989, Southmark filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code. Neither the Partnership, McNeil nor the
Corporate General Partner were included in the filing. Southmark's
reorganization plan became effective August 10, 1990. Under the plan, most of
Southmark's assets, which included Southmark's interest in the Corporate General
Partner, were sold or liquidated for the benefit of creditors.

In accordance with Southmark's reorganization plan, Southmark, McNeil and
various of their affiliates entered into an asset purchase agreement on October
12, 1990, providing for, among other things, the transfer of control to McNeil
or his affiliates of 34 limited partnerships (including the Partnership) in the
Southmark portfolio.

<PAGE>
On February 14, 1991, pursuant to the asset purchase agreement as amended on
that date: (a) an affiliate of McNeil purchased the Corporate General Partner's
economic interest in the Partnership; (b) McNeil became the managing general
partner of the Partnership pursuant to an agreement with the Corporate General
Partner that delegated management authority to McNeil; and (c) McNeil Real
Estate Management, Inc. ("McREMI"), an affiliate of McNeil, acquired the assets
relating to the property management and partnership administrative business of
Southmark and its affiliates and commenced management of the Partnership's
properties pursuant to an assignment of the existing property management
agreements from the Southmark affiliates.

On October 11, 1991, the limited partners approved a restructuring proposal
providing for (i) the replacement of the Corporate General Partner and McNeil
with the General Partner; (ii) the adoption of the Amended Partnership
Agreement, which substantially alters provisions of the Original Partnership
Agreement relating to, among other things, compensation, reimbursements of
expenses, and voting rights; and (iii) the approval of a new property management
agreement with McREMI, the Partnership's property manager.

The Amended Partnership Agreement provides for a MID to replace all other forms
of general partner compensation other than property management fees and
reimbursements of certain costs. Additional Units may be issued in connection
with the payment of the MID pursuant to the Amended Partnership Agreement. See
Item 8 - Note 2 "Transactions with Affiliates". In 1992, the General Partner
received 696 Units for such a payment. For a discussion of the methodology for
calculating and distributing the MID see Item 13 - Certain Relationships and
Related Transactions.

Settlement of Claims:

The Partnership filed claims with the United States Bankruptcy Court for the
Northern District of Texas, Dallas Division (the "Bankruptcy Court") against
Southmark for damages relating to improper overcharges, breach of contract and
breach of fiduciary duty. The Partnership settled these claims in 1991, and such
settlement was approved by the Bankruptcy Court.

An Order Granting Motion to Distribute Funds to Class 8 Claimants dated April
14, 1995 was issued by the Bankruptcy Court. In accordance with the Order, in
May 1995 the Partnership received in full satisfaction of its claims, $26,655 in
cash, and common and preferred stock in the reorganized Southmark which
represents the Partnership's pro-rata share of Southmark assets available for
Class 8 Claimants. The Partnership sold the Southmark common and preferred stock
in May 1995 for $8,608 which, combined with the cash proceeds from Southmark,
resulted in a gain on legal settlement of $35,263.

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

General:

The Partnership is engaged in real estate activities, including the ownership,
operation and management of residential real estate and other real estate
related assets. At December 31, 1998, the Partnership owned four
income-producing properties as described in Item 2 - Properties.

<PAGE>
The Partnership does not directly employ any personnel. The Partnership is
managed by the General Partner and, in accordance with the Amended Partnership
Agreement, the Partnership reimburses affiliates of the General Partner for
certain costs incurred by affiliates in connection with the management of the
Partnership's business. See Item 8 - Note 2 - "Transactions With Affiliates."

The business of the Partnership to date has involved only one industry segment.
See Item 8 - Financial Statements and Supplementary Data. The Partnership has no
foreign operations. The business of the Partnership is not seasonal.

Business Plan:

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

The Partnership has placed Cedar Run Apartments on the market for sale effective
August 1, 1997.

Competitive Conditions:

Since the principal business of the Partnership is to own and operate real
estate, the Partnership is subject to all of the risks incident to ownership of
real estate and interests therein, many of which relate to the illiquidity of
this type of investment. These risks include changes in general or local
economic conditions, changes in supply or demand for competing properties in an
area, changes in interest rates and availability of permanent mortgage funds
which may render the sale or refinancing of a property difficult or
unattractive, changes in real estate and zoning laws, increases in real property
tax rates and Federal or local economic or rent controls. The illiquidity of
real estate investments generally impairs the ability of the Partnership to
respond promptly to changed circumstances. The Partnership competes with
numerous established companies, private investors (including foreign investors),
real estate investment trusts, limited partnerships and other entities (many of
which have greater resources than the Partnership) in connection with the sale,
financing and leasing of properties. The impact of these risks on the
Partnership, including losses from operations and foreclosures of the
Partnership's properties, is described in Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations. See Item 2 -
Properties for discussion of competitive conditions at the Partnership's
properties.

<PAGE>
Forward-Looking Information:

Within this document, certain statements are made as to the expected occupancy
trends, financial condition, results of operations, and cash flows of the
Partnership for periods after December 31, 1998. All of these statements are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These statements are not
historical and involve risks and uncertainties. The Partnership's actual
occupancy trends, financial condition, results of operations, and cash flows for
future periods may differ materially due to several factors. These factors
include, but are not limited to, the Partnership's ability to control costs,
make necessary capital improvements, negotiate sales or refinancings of its
properties, and respond to changing economic and competitive factors.

Environmental Matters:

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

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

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

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

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

<PAGE>
Other information:

In August 1995, High River Limited Partnership, a Delaware limited partnership
controlled by Carl C. Icahn ("High River") made an unsolicited tender offer to
purchase from holders of Units up to approximately 6.9% of the outstanding Units
of the Partnership for a purchase price of $95.00 per Unit. In September 1996,
High River made another unsolicited tender offer to purchase any and all of the
outstanding Units of the Partnership for a purchase price of $100.24 per Unit.
In addition, High River made unsolicited tender offers for certain other
partnerships controlled by the General Partner. The Partnership recommended that
the limited partners reject the tender offers made with respect to the
Partnership and not tender their Units. The General Partner believes that as of
February 1, 1999, High River has purchased approximately 10.3% of the
outstanding Units pursuant to the tender offers. In addition, all litigation
filed by High River, Mr. Icahn and his affiliates in connection with the tender
offers have been dismissed without prejudice.

ITEM 2. PROPERTIES
- ------- ----------

The following table sets forth the real estate investment portfolio of the
Partnership at December 31, 1998. The buildings and the land on which they are
located are owned by the Partnership in fee, subject in each case (with the
exception of Cedar Run, which is unencumbered by mortgage indebtedness) to a
first lien deed of trust as set forth more fully in Item 8 - Note 5 - "Mortgage
Notes Payable". See also Item 8 - Note 4 - "Real Estate Investments" and
Schedule III - "Real Estate Investments and Accumulated Depreciation." In the
opinion of management, the properties are adequately covered by insurance.

<TABLE>
<CAPTION>
Net Basis 1998 Date
Property Description of Property Debt Property Tax Acquired
- -------- ----------- ----------- ---- ------------ --------

Real Estate Investments:

Arrowhead (1) Apartments
<S> <C> <C> <C> <C> <C>
Shawnee, KS 436 units $ 7,370,155 $ 6,733,222 $ 157,929 3/85

Mountain
Shadows (2) Apartments
Albuquerque, NM 504 units 11,614,764 11,215,316 197,719 8/85

Woodcreek (3) Apartments
Cary, NC 200 units 5,300,787 5,108,786 62,044 12/85
------------- ------------- -----------
$ 24,285,706 $ 23,057,324 $ 417,692
============= ============= ===========

Asset Held for Sale:

Cedar Run Apartments
Lexington, KY 152 units $ 3,487,893 $ - $ 30,399 12/85
============= ============= ===========
</TABLE>

- -----------------------------------------
Total: Apartments - 1,292 units

<PAGE>
(1) Arrowhead Apartments is owned by Arrowhead Fund XV Limited Partnership
which is wholly-owned by the Partnership.

(2) Mountain Shadows Apartments is owned by McNeil Mountain Shadows Fund XV
Limited Partnership which is wholly-owned by the Partnership.

(3) Woodcreek Apartments is owned by Woodcreek Fund XV, Ltd. which is
wholly-owned by the Partnership.

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

1998 1997 1996 1995 1994
------------- ------------- -------------- ------------- -----------
Arrowhead
<S> <C> <C> <C> <C> <C>
Occupancy Rate............ 96% 94% 95% 95% 95%
Rent Per Square Foot...... $7.79 $7.46 $7.12 $6.76 $6.42

Mountain Shadows
Occupancy Rate............ 84% 92% 87% 88% 94%
Rent Per Square Foot...... $7.40 $7.96 $8.28 $8.24 $7.97

Woodcreek
Occupancy Rate............ 92% 97% 96% 95% 99%
Rent Per Square Foot...... $9.23 $9.27 $8.80 $8.42 $8.08

Asset Held for Sale:

Cedar Run
Occupancy Rate............ 91% 94% 95% 95% 95%
Rent Per Square Foot...... $8.04 $7.92 $7.62 $7.22 $7.14
</TABLE>

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

Competitive Conditions
- ----------------------

Real Estate Investments:

Arrowhead
- ---------

The occupancy rate at Arrowhead is slightly ahead the local area average of 95%.
Arrowhead is located in an affluent county in metropolitan Kansas City. The
apartment market is extremely concentrated with over 3,000 apartment units
within a one-mile radius of Arrowhead. The increase in capital improvements over
the last several years has allowed the property to reposition itself as one of
the leaders in the market. Rental increases of 3% are budgeted for 1999.

<PAGE>
Mountain Shadows
- ----------------

Mountain Shadows is located in a very competitive market in Albuquerque and has
experienced declines in occupancy rates since 1994. This decline can be
attributed to the construction of new multi-family units during the mid-1990's
and an abundance of affordable single family homes. The market maintains an
occupancy level at 88%. The capital improvements program that Mountain Shadows
has implemented has kept the property aggressively competitive in the market.

Woodcreek
- ---------

The occupancy rate at Woodcreek is below the market rate of 96%. The property is
located in a rapidly developing area of Wake County in North Carolina. Since
1995, 11,096 units have been added in the area. The current capital improvement
program has enabled the property to stay competitive in a growing market.

Asset Held for Sale:

Cedar Run
- ---------

Over the past three years, the Lexington market has softened modestly. The
market average occupancy dropped from 92% to 90%, while Cedar Run has maintained
an occupancy rate of 91% in 1998. The property's rent per square foot is
currently 13.5% higher than the local market rate and the property has budgeted
a 4% increase in rental rates in 1999. There has been little new development of
multi-family projects in the area.

ITEM 3. LEGAL PROCEEDINGS
- ------- -----------------

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

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

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

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

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

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

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

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

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

None.

<PAGE>
PART II

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

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

(B) Title of Class Number of Record Unit Holders

Limited partnership units 4,555 as of February 1, 1999

(C) Cash distributions of $749,797 and $1,000,008 were made to the limited
partners during 1998 and 1997, respectively. During the last week of
March 1999, the Partnership distributed approximately $400,000 to the
limited partners of record as of March 1, 1999. The Partnership accrued
distributions of $493,012 and $505,375 for the benefit of the General
Partner for the years ended December 31, 1998 and 1997, respectively, of
which all but $657,102 was paid as of December 31, 1998. These
distributions are the MID pursuant to the Amended Partnership Agreement.
See Item 8 - Note 2 - "Transactions with Affiliates." See Item 7 -
Management's Discussion and Analysis of Financial Condition and Results
of Operations for a discussion of distributions and the likelihood that
they will continue to be made to limited partners.

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

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

<TABLE>
<CAPTION>
Statements of Years Ended December 31,
Operations 1998 1997 1996 1995 1994
- ------------------ ------------ ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Rental revenue ................ $ 7,966,118 $ 8,042,385 $ 7,973,979 $ 7,716,859 $ 7,415,746
Total revenue ................. 8,063,341 8,193,714 8,076,096 7,991,130 7,772,979
Net income (loss) ............. (134,412) 107,228 (133,470) (198,113) (41,096)

Net loss per limited
partnership unit ........... $ (1.29) $ (2.50) $ (5.66) $ (6.90) $ (5.19)
============ ============ ============ ============ ============

Distribution per limited
partnership unit ........... $ 7.29 $ 9.75 $ 9.70 $ - $ 4.86
============ ============ ============ ============ ============

Years Ended December 31,
Balance Sheets 1998 1997 1996 1995 1994
- ------------------ ------------ ------------ ------------- ------------- -------------
Real estate investments,
net ........................ $ 24,285,706 $ 25,525,582 $ 30,251,493 $ 31,548,994 $ 32,336,645
Asset held for sale ........... 3,487,893 3,400,316 -- -- --
Total assets .................. 30,176,809 31,395,272 33,180,985 35,129,849 37,030,171
Mortgage notes payable,
net ........................ 23,057,324 23,474,480 23,857,021 24,216,133 25,443,252
Partners' equity .............. 5,617,266 6,994,487 8,392,642 10,037,853 10,755,778
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ------- -----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------

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

The Partnership was formed to acquire, operate and ultimately dispose of a
portfolio of income-producing real properties. As of December 31, 1998, the
Partnership owned four apartment properties. Three of the four Partnership's
properties are subject to mortgage notes.

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

1998 compared to 1997

Revenue:

Partnership revenues decreased by $130,373 or 2% for the year ended 1998 as
compared to 1997. Rental revenue decreased by $76,267 while interest income
increased by $43,104 in 1998. The Partnership recognized a gain on involuntary
conversion of $97,210 in 1997. No such gain was recognized in 1998.

Rental revenue was $7,966,118 for 1998 as compared to $8,042,385 in 1997. The
decrease in rental revenues is primarily due to a decrease in occupancy rate at
Mountain Shadows. Mountain Shadows, located in Albuquerque, New Mexico, has
experienced a decline in occupancy rates as a result of over building in the
apartment market.

Interest income increased by $43,104 in 1998 as compared to 1997 due to interest
earned in the escrow accounts for Arrowhead Apartments and Mountain Shadows
Apartments.

Expenses:

Partnership expenses increased in 1998 by $111,267 as compared to the same
period last year.

Depreciation expense decreased $130,118 as compared to the same period last
year. This decrease is due to Cedar Run which is currently classified as an
asset held for sale for which no depreciation has been recognized since August
1, 1997.

Personnel expense increased $96,117 in 1998 as compared to 1997. This increase
is primarily due to an increase in maintenance salaries and other personnel
costs at Mountain Shadows.

Utilities expense increased $45,084 in 1998. This increase is due to an
increase in water and sewer expense at Arrowhead and Woodcreek.

General and administrative expenses increased $216,946 in 1998 as compared to
the same period last year. The increase was mainly due to costs incurred to
explore alternatives to maximize the value of the Partnership (see Current
Operations). The increase was partially offset by decreases attributable to
investor services. During 1997, charges for investor services were provided by a
third party vendor. Beginning with 1998, these services are provided by
affiliates of the General Partner.
<PAGE>
1997 compared to 1996

Revenue:

Partnership revenues increased by $117,618 or 1% for the year ended 1997 as
compared to 1996. Rental revenue increased by $68,406, gain on involuntary
conversion increased by $97,210, while interest income decreased $47,998.

Rental revenue was $8,042,385 for 1997 as compared to $7,973,979 in 1996. The
increase of $68,406 is primarily due to increases in rental rates, offset by an
increase in rental discounts given to Mountain Shadow tenants.

On October 30, 1996, four units at Woodcreek Apartments were destroyed by fire
causing $192,775 in damages. In 1997, the Partnership received $182,775 in
insurance reimbursements, of which $97,210 was recorded as a gain on involuntary
conversion.

Interest income decreased by $47,988 or 47% in 1997 as compared to 1996 due
to smaller average cash balances invested in interest-bearing accounts.

Expenses:

Partnership expenses decreased in 1997 by $123,080 or 2% as compared to the same
period last year.

General and administrative expenses decreased $157,626 or 54% for the year ended
December 31, 1997 as compared to the same period last year. In 1996, the
Partnership incurred costs to evaluate and disseminate information regarding an
unsolicited tender offer. The decrease was slightly offset by charges for
investor services, which beginning in 1997, was provided by a third party
vendor. In 1996, these costs were paid to an affiliate of the General Partner
and were included in general and administrative - affiliates.

General and administrative - affiliates expense decreased by $47,310 or 23% for
1997 as compared to the same period last year due to the reduction of overhead
expenses allocable to the Partnership. Allocated expenses decreased in part due
to investor services being performed by an unrelated third party in 1997, as
discussed above.

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

The Partnership has experienced positive cash flow from operations of $6,117,416
for the three years ended December 31, 1998. In 1997, the Partnership received
$182,775 in insurance proceeds from a fire at Woodcreek. Over the last three
years the Partnership has used cash to fund $2,264,213 in additions to real
estate investments, $1,312,677 in scheduled principal payments on mortgage notes
payable, $853,507 for payment of the MID and $2,749,786 for distributions to the
limited partners.

The Partnership generated cash flow of $2,044,440 through operating activities
in 1998 as compared to $2,090,556 in 1997. This decrease of $46,115 is primarily
due to an increase in the cash paid to suppliers.

The Partnership generated cash flow of $2,090,556 through operating activities
in 1997 as compared to $1,982,419 in 1996. This increase of $108,137 is due to a
reduction in the cash paid to affiliates as well as the amounts paid for
interest and property taxes.

<PAGE>
The Partnership expended $739,947, $696,769 and $827,496 for capital
improvements to the properties in 1998, 1997 and 1996, respectively.

During 1998, 1997 and 1996, the Partnership paid distributions to the limited
partners totaling $2,749,786.

Short-term liquidity:

The Partnership held cash and cash equivalents of $1,199,360 at December 31,
1998, up $80,981 from the balance at December 31, 1997. This balance provides a
reasonable level of working capital for the Partnership's operations.

In 1999, operations of the Partnership's properties are expected to provide
positive cash flow from operations. Management will perform routine repairs and
maintenance on the properties to preserve and enhance their value in the market.
In the past three years the Partnership has spent $2,081,438 renovating the
properties so they can remain competitive in their respective markets. In 1999,
the Partnership has budgeted to spend approximately $408,000 on capital
improvements, which are expected to be funded from operations of the properties.

Long-term liquidity:

For the long-term, property operations will remain the primary source of funds.
While the present outlook for the Partnership's liquidity is favorable, market
conditions may change and property operations can deteriorate. In that event,
the Partnership would require other sources of working capital. No such other
sources have been identified, and the Partnership has no established lines of
credit. Other possible actions to resolve working capital deficiencies include
refinancing or renegotiating terms of existing loans, deferring major capital
expenditures on Partnership properties except where improvements are expected to
enhance the competitiveness or marketability of the properties, or arranging
working capital support from affiliates. All or a combination of these steps may
be inadequate or unfeasible in resolving such potential working capital
deficiencies. No affiliate support has been required in the past, and there is
no assurance that support would be provided in the future, since neither the
General Partner nor any affiliates have any obligation in this regard.

The Partnership has placed Cedar Run Apartments on the market for sale effective
August 1, 1997.

<PAGE>
Income allocations and distributions:

Terms of the Amended Partnership Agreement specify that income before
depreciation is allocated to the General Partner to the extent of MID paid in
cash. Depreciation is allocated in the ratio of 99:1 to the limited partners and
the General Partner, respectively. Therefore, for the years ended December 31,
1998, 1997 and 1996, net loss of $1,344 and net income of $364,174 and $448,715,
respectively, was allocated to the General Partner. The limited partners
received allocations of net loss of $133,068, $256,946 and $582,185 for the
three years ended December 31, 1998, 1997 and 1996, respectively.

During 1998, the limited partners received a cash distribution of $749,797. The
distributions consisted of funds from operations and cash reserves. A
distribution of $493,012 for the MID was accrued by the Partnership for the
General Partner in 1998. During the last week of March 1999, the Partnership
distributed approximately $400,000 to the limited partners of record as of March
1, 1999. The General Partner will continue to monitor the cash reserves and
working capital needs of the Partnership to determine when cash flow will
support additional distributions to the limited partners.

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

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

The year 2000 problem is the result of computer programs being written using two
digits rather than four to define the applicable year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in major systems failure or
miscalculations.

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

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

<PAGE>
Cost
- ----

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

Risks
- -----

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

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

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

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

Not Applicable.

<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------

Page
Number
------
INDEX TO FINANCIAL STATEMENTS
- -----------------------------

Financial Statements:

<S> <C>
Report of Independent Public Accountants....................................... 16

Balance Sheets at December 31, 1998 and 1997................................... 17

Statements of Operations for each of the three years in the period
ended December 31, 1998..................................................... 18

Statements of Partners' Equity (Deficit) for each of the three years
in the period ended December 31, 1998....................................... 19

Statements of Cash Flows for each of the three years in the
period ended December 31, 1998.............................................. 20

Notes to Financial Statements.................................................. 22

Financial Statement Schedule -

Schedule III - Real Estate Investments and Accumulated
Depreciation............................................................. 31

</TABLE>

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

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

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

We have audited the accompanying balance sheets of McNeil Real Estate Fund XV,
Ltd. (a California limited partnership) as of December 31, 1998 and 1997, and
the related statements of operations, partners' equity (deficit) and cash flows
for each of the three years in the period ended December 31, 1998. These
financial statements and the schedule referred to below are the responsibility
of the Partnership's management. Our responsibility is to express an opinion on
these financial statements and the schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of McNeil Real Estate Fund XV,
Ltd. as of December 31, 1998 and 1997, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.

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

/s/ Arthur Andersen LLP

Dallas, Texas
March 19, 1999

<PAGE>

McNEIL REAL ESTATE FUND XV, LTD.

BALANCE SHEETS

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

Real estate investments:
<S> <C> <C>
Land ........................................................ $ 6,220,730 $ 6,220,730
Buildings and improvements .................................. 42,086,266 41,433,896
------------ ------------
48,306,996 47,654,626
Less: Accumulated depreciation ............................. (24,021,290) (22,129,044)
------------ ------------
24,285,706 25,525,582

Asset held for sale ............................................ 3,487,893 3,400,316

Cash and cash equivalents ...................................... 1,199,360 1,118,379
Cash segregated for security deposits .......................... 214,190 213,528
Accounts receivable ............................................ 33,736 94,750
Prepaid expenses and other assets .............................. 37,105 36,974
Escrow deposits ................................................ 365,199 341,153
Deferred borrowing costs, net of accumulated
amortization of $455,712 and $344,742 at
December 31, 1998 and 1997, respectively .................... 553,620 664,590
------------ ------------
$ 30,176,809 $ 31,395,272
============ ============

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

Mortgage notes payable, net .................................... $ 23,057,324 $ 23,474,480
Accrued expenses ............................................... 126,907 120,757
Accrued interest ............................................... 160,388 163,621
Accrued property taxes ......................................... 177,643 175,741
Payable to affiliates - General Partner ........................ 851,407 249,503
Security deposits and deferred rental income ................... 185,874 216,683
------------ ------------
24,559,543 24,400,785
------------ ------------

Partners' equity (deficit):
Limited partners - 120,000 limited partnership units
authorized; 102,796 limited partnership units
issued and outstanding at December 31, 1998 and 1997 ..... 6,672,660 7,555,525
General Partner ............................................. (1,055,394) (561,038)
------------ ------------
5,617,266 6,994,487
------------ ------------
$ 30,176,809 $ 31,395,272
============ ============
</TABLE>

See accompanying notes to financial statements.

<PAGE>
McNEIL REAL ESTATE FUND XV, LTD.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------------
1998 1997 1996
----------- ----------- ------------

Revenue:
<S> <C> <C> <C>
Rental revenue ............................... $ 7,966,118 $ 8,042,385 $ 7,973,979
Interest ..................................... 97,223 54,119 102,117
Gain on involuntary conversion ............... -- 97,210 --
----------- ----------- -----------
Total revenue .............................. 8,063,341 8,193,714 8,076,096
----------- ----------- -----------

Expenses:
Interest ..................................... 2,110,229 2,129,976 2,134,252
Depreciation ................................. 1,892,246 2,022,364 2,039,432
Property taxes ............................... 448,091 444,088 433,520
Personnel expenses ........................... 1,000,234 904,117 883,514
Repairs and maintenance ...................... 949,040 1,027,540 1,002,566
Property management fees -
affiliates ................................. 397,758 405,298 399,829
Utilities .................................... 415,218 370,134 362,268
Other property operating expenses ............ 446,359 492,055 458,335
General and administrative ................... 352,601 135,655 293,281
General and administrative -
affiliates ................................. 185,977 155,259 202,569
----------- ----------- -----------
Total expenses ............................. 8,197,753 8,086,486 8,209,566
----------- ----------- -----------

Net income (loss) ............................... $ (134,412) $ 107,228 $ (133,470)
=========== =========== ===========

Net loss allocable to limited partners .......... $ (133,068) $ (256,946) $ (582,185)
Net income (loss) allocable to
General Partner .............................. (1,344) 364,174 448,715
----------- ----------- -----------
Net income (loss) ............................... $ (134,412) $ 107,228 $ (133,470)
=========== =========== ===========

Net loss per limited partnership unit ........... $ (1.29) $ (2.50) $ (5.66)
=========== =========== ===========

Distribution per limited partnership unit........ $ 7.29 $ 9.73 $ 9.70
=========== =========== ===========
</TABLE>

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

STATEMENTS OF PARTNERS' EQUITY (DEFICIT)

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

<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Equity
------------- ------------- -------------
<S> <C> <C> <C>
Balance at December 31, 1995 ............ $ (356,792) $ 10,394,645 $ 10,037,853

Net income (loss) ....................... 448,715 (582,185) (133,470)

Distributions to limited partners ....... -- (999,981) (999,981)

Management Incentive Distribution........ (511,760) -- (511,760)
------------ ------------ ------------

Balance at December 31, 1996 ............ (419,837) 8,812,479 8,392,642

Net income (loss) ....................... 364,174 (256,946) 107,228

Distributions to limited partners ....... -- (1,000,008) (1,000,008)

Management Incentive Distribution ....... (505,375) -- (505,375)
------------ ------------ ------------

Balance at December 31, 1997 ............ (561,038) 7,555,525 6,994,487

Net loss ................................ (1,344) (133,068) (134,412)

Distributions to limited partners ....... -- (749,797) (749,797)

Management Incentive Distribution ....... (493,012) -- (493,012)
------------ ------------ ------------

Balance at December 31, 1998 ............ $ (1,055,394) $ 6,672,660 $ 5,617,266
============ ============ ============

</TABLE>

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

STATEMENTS OF CASH FLOWS

Increase (Decrease) in Cash and Cash Equivalents

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

Cash flows from operating activities:
<S> <C> <C> <C>
Cash received from tenants .................... $ 7,982,278 $ 7,965,817 $ 7,957,172
Cash paid to suppliers ........................ (3,147,932) (2,983,507) (2,999,800)
Cash paid to affiliates ....................... (474,843) (531,923) (593,626)
Interest received ............................. 97,223 54,119 102,117
Interest paid ................................. (1,945,933) (1,983,057) (2,017,275)
Property taxes paid ........................... (466,353) (430,893) (466,169)
----------- ----------- -----------
Net cash provided by operating activities......... 2,044,440 2,090,556 1,982,419
----------- ----------- -----------

Cash flows from investing activities:
Additions to real estate investments
and asset held for sale ..................... (739,947) (696,769) (827,496)
Insurance proceeds from fire .................. -- 182,775 --
----------- ----------- -----------
Net cash used in investing activities ............ (739,947) (513,994) (827,496)
----------- ----------- -----------

Cash flows from financing activities:
Principal payments on mortgage
notes payable ............................... (473,715) (436,589) (402,373)
Distributions to the limited partners ......... (749,797) (1,000,008) (999,981)
Management Incentive Distribution
paid ........................................ -- (384,398) (469,109)
----------- ----------- -----------
Net cash used in financing activities ............ (1,223,512) (1,820,995) (1,871,463)
----------- ----------- -----------

Net increase (decrease) in cash and
cash equivalents .............................. 80,981 (244,433) (716,540)

Cash and cash equivalents at
beginning of year ............................. 1,118,379 1,362,812 2,079,352
----------- ----------- -----------

Cash and cash equivalents at end
of year ....................................... $ 1,199,360 $ 1,118,379 $ 1,362,812
=========== =========== ===========
</TABLE>

See discussion of noncash financing activities in Notes 2 and 7.

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

STATEMENTS OF CASH FLOWS

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

For the Years Ended December 31,
----------------------------------------------------
1998 1997 1996
------------ ----------- ------------
<S> <C> <C> <C>
Net income (loss) ........................... $ (134,412) $ 107,228 $ (133,470)
----------- ----------- -----------

Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Gain on involuntary conversion ........... -- (97,210) --
Depreciation ............................. 1,892,246 2,022,364 2,039,432
Amortization of discounts on
mortgage notes payable ................. 56,559 54,048 43,261
Amortization of deferred borrowing
costs .................................. 110,970 95,850 76,462
Changes in assets and liabilities:
Cash segregated for security
deposits ............................. (662) 49,727 (13,681)
Accounts receivable .................... 61,014 (88,694) 635
Prepaid expenses and other assets ...... (131) 6,292 639
Escrow deposits ........................ (24,046) (30,265) 53,543
Accounts payable ....................... -- -- (42,258)
Accrued expenses ....................... 6,150 (28,567) (47,788)
Accrued interest ....................... (3,233) (2,979) (2,746)
Accrued property taxes ................. 1,902 5,294 5,913
Payable to affiliates - General
Partner .............................. 108,892 28,634 8,772
Security deposits and deferred
rental income ........................ (30,809) (31,166) (6,295)
----------- ----------- -----------

Total adjustments .................. 2,178,852 1,983,328 2,115,889
----------- ----------- -----------

Net cash provided by operating activities... $ 2,044,440 $ 2,090,556 $ 1,982,419
=========== =========== ===========

</TABLE>

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

NOTES TO FINANCIAL STATEMENTS
December 31, 1998

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

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

The Partnership has placed Cedar Run Apartments on the market for sale effective
August 1, 1997.

Basis of Presentation
- ---------------------

The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP"). The preparation of financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

<PAGE>
The Partnership's financial statements include the accounts of the following
listed tier partnerships for the years ended December 31, 1998, 1997 and 1996.
These single asset tier partnerships were formed to accommodate the refinancing
of the respective properties. The general partner of these partnerships is a
corporation whose stock is 100% owned by the Partnership. The Partnership has a
100% ownership interest in each of the following tier partnerships:

Tier Partnership
----------------

Arrowhead Fund XV Limited Partnership
McNeil Mountain Shadows Fund XV
Limited Partnership
Woodcreek Fund XV, Ltd.

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

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

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

Real estate investments are generally stated at the lower of depreciated cost or
fair value. Real estate investments are reviewed for impairment whenever events
or changes in circumstances indicate that their carrying amounts may not be
recoverable in accordance with Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of". When the carrying value of a property exceeds the sum
of all estimated future cash flows, an impairment loss is recognized. At such
time, a write-down is recorded to reduce the basis of the property to its
estimated fair value.

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

Asset Held for Sale
- -------------------

The asset held for sale is stated at the lower of depreciated cost or fair value
less costs to sell. Depreciation on the asset ceased at the time it was placed
on the market for sale.

<PAGE>
Depreciation
- ------------

Buildings and improvements are depreciated using the straight-line method over
the estimated useful lives of the assets, ranging from 3 to 25 years.

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

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

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

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

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

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

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

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

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

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

Income Taxes
- ------------

No provision for Federal income taxes is necessary in the financial statements
of the Partnership because, as a partnership, it is not subject to Federal
income tax and the tax effect of its activities accrues to the partners.

<PAGE>
Allocation of Net Income and Net Loss
- -------------------------------------

The Amended Partnership Agreement provides for net income of the Partnership for
both financial statement and income tax reporting purposes to be allocated as
indicated below. For allocation purposes, net income and net loss of the
Partnership are determined prior to deductions for depreciation:

(a) first, deductions for depreciation shall be allocated 1% to the General
Partner and 99% to the limited partners;

(b) then, net income in an amount equal to the greater of 1) 1% of net income
or 2) the cumulative amount distributed for the Management Incentive
Distribution ("MID") for which no income allocation has previously been
made shall be allocated to the General Partner; provided that if all or a
portion of such distribution consists of limited partnership units
("Units"), the amount of net income allocated shall be equal to the amount
of cash the General Partner would have otherwise received; and

The Amended Partnership Agreement provides that net losses shall be allocated
1% to the General Partner and 99% to the limited partners.

Federal income tax law provides that the allocation of loss to a partner will
not be recognized unless the allocation is in accordance with a partner's
interest in the partnership or the allocation has substantial economic effect.
Internal Revenue Code Section 704(b) and accompanying Treasury Regulations
establish criteria for allocation of Partnership deductions attributable to
debt. The Partnership's tax allocations for 1998, 1997 and 1996 have been made
in accordance with these provisions.

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

Pursuant to the Amended Partnership Agreement and at the discretion of the
General Partner, distributions of cash from property operations shall be made as
follows:

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

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

At the discretion of the General Partner, distribution of cash from sales or
refinancing shall be distributed as follows:

(a) first, to the General Partner, an amount equal to any MID not
satisfied through distributions of cash from property operations;
and

(b) any remaining cash shall be distributed to the limited partners in the
following proportions: 95/270 to Group A subscribers, 90/270 to Group B
subscribers and 85/270 to Group C subscribers of the pro rata portion
of the original invested capital attributable to each group of
subscribers.

<PAGE>
Cash distributions of $749,797, $1,000,008 and $999,981 were made to the limited
partners during 1998, 1997 and 1996, respectively. The Partnership paid or
accrued distributions of $493,012, $505,375 and $511,760 for the benefit of the
General Partner for the years ended December 31, 1998, 1997 and 1996,
respectively. These distributions are the MID pursuant to the Amended
Partnership Agreement.

Net Loss Per Limited Partnership Unit
- -------------------------------------

Net loss per Unit is computed by dividing net loss allocated to the limited
partners by the weighted average number of Units outstanding calculated on the
last day of each calendar month. Per Unit information has been computed based on
102,796 weighted average Units outstanding in 1998 and 1997 and 102,836 weighted
average Units outstanding in 1996.

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

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

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

Under the terms of the Amended Partnership Agreement, the Partnership is paying
the MID to the General Partner. The maximum MID is calculated as 1% of the
tangible asset value of the Partnership. Tangible asset value is determined by
using the greater of (i) an amount calculated by applying a capitalization rate
of 9% to the annualized net operating income of each property or (ii) a value of
$10,000 per apartment unit for residential property to arrive at the property
tangible asset value. The property tangible asset value is then added to the
book value of all other assets excluding intangible assets. The maximum MID
percentage decreases to .75% in 2000, .50% in 2001 and .25% thereafter.

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

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

<PAGE>
However, the amendment can have a material effect on the calculation of the
Entitlement Amount which determines the amount of MID earned. Capital
improvements are excluded from cash flow, as defined. The majority of base
period cash flow was measured under the previous capitalization policy, while
incentive period cash flow is determined using the amended policy. Under the
amended policy, more items are capitalized, and cash flow increases. The
amendment of the capitalization policy did not materially affect the MID for
1998, 1997 or 1996 because the Entitlement Amount was sufficient to pay MID
notwithstanding the amendment to the capitalization policy.

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

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

<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Property management fees - affiliates $397,758 $405,298 $399,829
Charged to general and
administrative - affiliates:
Partnership administration .............. 185,977 155,259 202,569
-------- -------- --------
$583,735 $560,557 $602,398
======== ======== ========

Charged to General Partner's deficit:
MID ..................................... $493,012 $505,375 $511,760
======== ======== ========
</TABLE>

Payable to affiliates - General Partner at December 31, 1998 and 1997 consists
primarily of MID, reimbursable costs and property management fees which are due
and payable from current operations. The General Partner has waived the
collection terms of reimbursable expenses and MID, and has elected for the
Partnership to pay limited partner distributions before the payment of such
amounts.

NOTE 3 - TAXABLE INCOME (LOSS)
- ------------------------------

McNeil Real Estate Fund XV, Ltd. is a partnership and is not subject to Federal
and state income taxes. Accordingly, no recognition has been given to income
taxes in the accompanying financial statements of the Partnership since the
income or loss of the Partnership is to be included in the tax returns of the
individual partners. The tax returns of the Partnership are subject to
examination by Federal and state taxing authorities. If such examinations result
in adjustments to distributive shares of taxable income or loss, the tax
liability of the partners could be adjusted accordingly.

<PAGE>
The Partnership's net assets and liabilities for tax purposes exceeded the net
assets and liabilities for financial reporting purposes by $1,444,042 in 1998
$856,079 in 1997 and $713,934 in 1996.

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

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

<TABLE>
<CAPTION>
Buildings and Accumulated Net Book
1998 Land Improvements Depreciation Value
---- ------------ ------------- ------------ ------------
Arrowhead
<S> <C> <C> <C> <C>
Shawnee, KS $ 1,537,294 $14,345,458 $ (8,512,597) $ 7,370,155
Mountain Shadows
Albuquerque, NM 3,236,768 19,634,317 (11,256,321) 11,614,764
Woodcreek
Cary, NC 1,446,668 8,106,491 (4,252,372) 5,300,787
------------ ------------ ------------ ------------
$ 6,220,730 $ 42,086,266 $(24,021,290) $ 24,285,706
============ ============ ============ ============

Buildings and Accumulated Net Book
1997 Land Improvements Depreciation Value
---- ------------ ------------- ------------ ------------
Arrowhead $ 1,537,294 $14,180,810 $ (7,877,117) $ 7,840,987
Mountain Shadows 3,236,768 19,260,309 (10,403,070) 12,094,007
Woodcreek 1,446,668 7,992,777 (3,848,857) 5,590,588
------------ ----------- ------------ ------------
$ 6,220,730 $41,433,896 $(22,129,044) $ 25,525,582
============ =========== ============ ============
</TABLE>

Effective August 1, 1997, management placed Cedar Run, located in Lexington,
Kentucky, on the market for sale. Therefore, at December 31, 1998 and 1997,
Cedar Run was classified as an asset held for sale at a net book value of
$3,487,893 and $3,400,316, respectively.

The results of operations for the asset held for sale at December 31, 1998 are
$418,278, $283,452 and $129,824 for the years ended December 31, 1998, 1997 and
1996, respectively. Results of operations are operating revenues less operating
expenses, including depreciation expense.

Except for Cedar Run, the Partnership's real estate properties are encumbered by
mortgage indebtedness as discussed in Note 5.

<PAGE>
NOTE 5 - MORTGAGE NOTES PAYABLE
- -------------------------------

The following table sets forth the mortgage notes payable of the Partnership at
December 31, 1998 and 1997. All mortgage notes are secured by real estate
investments.

<TABLE>
<CAPTION>
Mortgage Annual Monthly
Lien Interest Payments/ December 31,
Property Position (a) Rates % Maturity Date (d) 1998 1997
- -------- --------------- ------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Arrowhead (c) First 8.150 $ 60,450 07/03 $ 6,851,705 $ 7,011,548
Discount (b) (118,483) (138,764)
------------- --------------
6,733,222 6,872,784
------------- --------------

Mountain
Shadows (c) First 8.150 100,670 07/03 11,410,470 11,676,664
Discount (b) (195,154) (231,432)
------------- --------------
11,215,316 11,445,232

Woodcreek First 8.540 40,517 08/02 5,108,786 5,156,464
------------- --------------
$ 23,057,324 $ 23,474,480
============= ==============
</TABLE>

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

(b) Discounts are based on an effective interest rate of 8.62%.

(c) Financing was obtained under the terms of a Real Estate Mortgage Investment
Conduit financing. The mortgage notes payable are cross-collateralized.
Principal prepayments made before July 2000 are subject to a Yield
Maintenance premium, as defined. Additionally, the Partnership must pay a
release payment equal to 25% of the prepaid balance which will be applied
to the remaining mortgage notes in the collateral pool.

(d) Balloon payments on the mortgage notes payable are due as follows:

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

Woodcreek $4,894,767 08/02
Arrowhead 5,947,622 07/03
Mountain Shadows 9,904,857 07/03

<PAGE>
Scheduled principal maturities of the mortgage notes payable under existing
agreements, before consideration of discounts of $313,637, are as follows:

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

1999.................................... $ 513,999
2000.................................... 557,708
2001.................................... 605,137
2002.................................... 5,528,392
2003.................................... 16,165,725
Thereafter.............................. -
-----------
Total................................. $ 23,370,961
===========

Based on borrowing rates currently available to the Partnership for mortgage
loans with similar terms and average maturities, the fair value of notes payable
was approximately $23,411,000 at December 31, 1998 and $24,293,000 at December
31, 1997.

NOTE 6 - LEGAL PROCEEDINGS
- --------------------------

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

The action involves purported class and derivative actions brought by limited
partners of each of the limited partnerships that were named as nominal
defendants as listed above (the "Partnerships"). Plaintiffs allege that McNeil
Investors, Inc., its affiliate McNeil Real Estate Management, Inc. and three of
their senior officers and/or directors (collectively, the "Defendants") breached
their fiduciary duties and certain obligations under the respective Amended
Partnership Agreement. Plaintiffs allege that Defendants have rendered such
Units highly illiquid and artificially depressed the prices that are available
for Units on the resale market. Plaintiffs also allege that Defendants engaged
in a course of conduct to prevent the acquisition of Units by an affiliate of
Carl Icahn by disseminating purportedly false, misleading and inadequate
information. Plaintiffs further allege that Defendants acted to advance their
own personal interests at the expense of the Partnerships' public unit holders
by failing to sell Partnership properties and failing to make distributions to
unitholders.
<PAGE>
On December 16, 1996, the Plaintiffs filed a consolidated and amended complaint.
Plaintiffs are suing for breach of fiduciary duty, breach of contract and an
accounting, alleging, among other things, that the management fees paid to the
McNeil affiliates over the last six years are excessive, that these fees should
be reduced retroactively and that the respective Amended Partnership Agreements
governing the Partnerships are invalid.

NOTE 7 - GAIN ON INVOLUNTARY CONVERSION
- ---------------------------------------

NOTE 8 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------

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

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

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

<PAGE>

McNEIL REAL ESTATE FUND XV, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1998

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

APARTMENTS:

Arrowhead
<S> <C> <C> <C> <C> <C>
Shawnee, KS $ 6,733,222 $ 1,537,294 $ 12,035,648 $ - $ 2,309,810

Mountain Shadows
Albuquerque, NM 11,215,316 3,236,768 17,555,977 - 2,078,340

Woodcreek
Cary, NC 5,108,786 1,446,668 6,590,377 - 1,516,114
-------------- -------------- -------------- ------------ -------------

$ 23,057,324 $ 6,220,730 $ 36,182,002 $ - $ 5,904,264
============== ============== ============== ============ =============

Asset Held for Sale:

Cedar Run
Lexington, KY (c) $ -
=============

</TABLE>

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

(c) Asset held for sale is stated at the lower of depreciated cost or fair
value less costs to sell. Historical cost, net of accumulated depreciation
and write-downs, becomes the new cost basis when the asset is classified as
"Held for sale." Depreciation ceases at the time it is placed on the market
for sale.

See accompanying notes to Schedule III.
<PAGE>
McNEIL REAL ESTATE FUND XV, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1998

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

Arrowhead
<S> <C> <C> <C> <C>
Shawnee, KS $ 1,537,294 $ 14,345,458 $ 15,882,752 $ (8,512,597)

Mountain Shadows
Albuquerque, NM 3,236,768 19,634,317 22,871,085 (11,256,321)

Woodcreek
Cary, NC 1,446,668 8,106,491 9,553,159 (4,252,372)
-------------- -------------- ---------------- --------------
$ 6,220,730 $ 42,086,266 $ 48,306,996 $ (24,021,290)
============== ============== ================ ==============

Asset Held for Sale:

Cedar Run
Lexington, KY (c) $ 3,487,893
================

</TABLE>

(a) For Federal income tax purposes, the properties are depreciated over lives
ranging from 5-27.5 years using ACRS or MACRS methods. The aggregate cost
of real estate investments for Federal income tax purposes was $54,198,308
and accumulated depreciation was $24,432,544 December 31, 1998.

See accompanying notes to Schedule III.
<PAGE>
McNEIL REAL ESTATE FUND XV, LTD.
SCHEDULE III
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 1998

Date of Date Depreciable
Description Construction Acquired lives (years)
- ----------- ------------ -------- -------------
APARTMENTS:

Arrowhead
<S> <C> <C> <C>
Shawnee, KS 1971 03/85 3-25

Mountain Shadows
Albuquerque, NM 1986 08/85 3-25

Woodcreek
Cary, NC 1981 12/85 3-25

Asset Held for Sale:

Cedar Run
Lexington, KY 1978 12/85

</TABLE>

See accompanying notes to Schedule III.
<PAGE>
McNEIL REAL ESTATE FUND XV, LTD.

Notes to Schedule III

Real Estate Investments and Accumulated Depreciation

A summary of activity for the Partnership's real estate investments and
accumulated depreciation is as follows:

<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------------------
1998 1997 1996
------------ ------------ ------------

Real estate investments:

<S> <C> <C> <C>
Balance at beginning of year ................. $ 47,654,626 $ 52,650,334 $ 51,977,016

Improvements ................................. 652,370 696,769 827,496

Reclassification to asset held for sale....... -- (5,692,477) --

Replacement of assets ........................ -- -- (154,178)
------------ ------------ ------------

Balance at end of year ....................... $ 48,306,996 $ 47,654,626 $ 52,650,334
============ ============ ============

Accumulated depreciation:

Balance at beginning of year ................. $ 22,129,044 $ 22,398,841 $ 20,428,022

Depreciation ................................. 1,892,246 2,022,364 2,039,432

Reclassification to asset held for sale ...... -- (2,292,161) --

Replacement of assets ........................ -- -- (68,613)
------------ ------------ ------------

Balance at end of year ....................... $ 24,021,290 $ 22,129,044 $ 22,398,841
============ ============ ============

Asset held for sale:

Balance at beginning of year ................. $ 3,400,316 $ -- $ --

Reclassification to asset held for
sale ...................................... -- 3,400,316 --

Improvements ................................. 87,577 -- --
------------ ------------ ------------

Balance at end of year ....................... $ 3,487,893 $ 3,400,316 $ --
============ ============ ============
</TABLE>

<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
- ------- -----------------------------------------------------------
AND FINANCIAL DISCLOSURE
------------------------

None.

PART III

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

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

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

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

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

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

Each director shall serve until his successor shall have been duly elected and
qualified.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------

No direct compensation was paid or payable by the Partnership to directors or
officers (since it does not have any directors or officers) for the year ended
December 31, 1998, nor was any direct compensation paid or payable by the
Partnership to directors or officers of the general partner of the General
Partner for the year ended December 31, 1998. The Partnership has no plans to
pay any such remuneration to any directors or officers of the general partner of
the General Partner in the future.

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

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

(A) Security ownership of certain beneficial owners.

No individual or group, as defined by Section 13(d)(3) of the Securities
Exchange Act of 1934, was known by the Partnership to own more than 5%
of the Units, other than High River Limited Partnership which owns
10,587 Units at February 1, 1999 (10.3% of the outstanding Units). The
business address for High River Limited Partnership is 100 South Bedford
Road, Mount Kisco, New York 10549.

(B) Security ownership of management.

The General Partner and the officers and directors of its general
partner, collectively, own 1,357 Units at February 1, 1999, which
represent less than 2% of the outstanding Units.

None.

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

Under the terms of the Amended Partnership Agreement, the Partnership is paying
the MID to the General Partner. The maximum MID is calculated as 1% of the
tangible asset value of the Partnership. Tangible asset value is determined by
using the greater of (i) an amount calculated by applying a capitalization rate
of 9% to the annualized net operating income of each property or (ii) a value of
$10,000 per apartment unit for residential property and $50 per gross square
foot for commercial property to arrive at the property tangible asset value. The
property tangible asset value is then added to the book value of all other
assets excluding intangible assets. The maximum MID percentage decreases to .75%
in 2000, .50% in 2001 and .25% thereafter.

<PAGE>
The MID will be paid to the extent of the lesser of the Partnership's excess
cash flow, as defined, or net operating income, as defined (the "Entitlement
Amount"), and may be paid (i) in cash, unless there is insufficient cash to pay
the distribution in which event any unpaid portion not taken in Units will be
deferred and is payable, without interest, from the first available cash and/or
(ii) in Units. A maximum of 50% of the MID may be paid in Units. The number of
Units issued in payment of the MID is based on the greater of $50 per Unit or
the net tangible asset value, as defined, per Unit. For the year ended December
31, 1998, the Partnership paid or accrued for the General Partner MID in the
amount of $493,012.

The Partnership pays property management fees equal to 5% of the gross rental
receipts of the Partnership's properties to McREMI, an affiliate of the General
Partner, for providing property management and leasing services for the
Partnership's residential properties. The Partnership reimburses McREMI for its
costs, including overhead, of administering the Partnership's affairs. For the
year ended December 31, 1998, the Partnership paid or accrued $583,735 in
property management fees and reimbursements.

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

<PAGE>
PART IV

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

See accompanying Index to Financial Statements at Item 8 - Financial Statements
and Supplementary Data.

(A) Exhibits

The following exhibits are incorporated by reference and are an integral
part of this Form 10-K.

Exhibit
Number Description
------- -----------
3. Partnership Agreement dated June
26, 1984 and amended as of September
7, 1984. (1)

3.1 Amended and Restated Partnership
Agreement of McNeil Real Estate Fund
XV, Ltd., dated October 11, 1991.
(1)

3.2 Amendment No. 1 to the Amended and
Restated Partnership Agreement,
dated March 28, 1994. (2)

3.3 Amendment No. 2 to the Amended and
Restated Partnership Agreement,
dated March 28, 1994. (2)

10.1 Property Management Agreement,
dated October 11, 1991, between
McNeil Real Estate Fund XV, Ltd. and
McNeil Real Estate Management, Inc.
(1)

10.2 Termination Agreement, dated
October 11, 1991, between McNeil
Real Estate Fund XV, Ltd. and McNeil
Partners, L.P. (1)

10.3 Amendment of Property Management
Agreement, dated March 5, 1993,
between McNeil Real Estate Fund XV,
Ltd. and McNeil Real Estate
Management, Inc. (Incorporated by
reference to the Annual Report on
Form 10-K for the year ended
December 31, 1992)

10.4 Loan Agreement, dated June 24,
1993, between Lexington Mortgage
Company and McNeil Real Estate Fund
XV, Ltd. et al. (Incorporated by
reference to the Annual Report of
McNeil Real Estate Fund XI, Ltd.
(File No. 0-9783), on Form 10-K for
the period ended December 31, 1993)

10.5 Master Property Management Agree-
ment, dated as of June 24, 1993
between McNeil Real Estate
Management, Inc. and McNeil Real
Estate Fund XV, Ltd. (2)

10.6 Mortgage Note, dated August 11,
1995, between Woodcreek Fund XV,
Ltd. and Fleet Real Estate Capital,
Inc. (Incorporated by reference to
the Annual Report on Form 10-K for
the year ended December 31, 1995)

<PAGE>

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

11. Statement regarding computation of
net loss per limited partnership
unit (see Item 8 - Note 1 -
"Organization and Summary of
Significant Accounting Policies").

22. Following is a list of subsidiaries
of the Partnership:

<TABLE>
<CAPTION>
Names Under
Jurisdiction Which It Is
Name of Subsidiary Incorporation Doing Business
------------------ ------------- --------------
<S> <C> <C>
Arrowhead Fund XV Delaware None
Limited Partnership

McNeil Mountain Shadows Delaware None
Fund XV Limited
Partnership

Woodcreek Fund XV, Ltd. Texas None
</TABLE>

(1) Incorporated by reference to the
Annual Report of McNeil Real Estate
Fund XV, Ltd. (File No. 0-14258), on
Form 10-K for the period ended
December 31, 1991, as filed with the
Securities and Exchange Commission
on March 29, 1992.

(2) Incorporated by reference to the
Annual Report of McNeil Real Estate
Fund XV, Ltd. (File No. 0-14258), on
Form 10-K for the period ended
December 31, 1993, as filed with the
Securities and Exchange Commission
on March 30, 1994.

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

27. Financial Data Schedule for the year ended December 31, 1998.

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

<PAGE>

McNEIL REAL ESTATE FUND XV, LTD.
A Limited Partnership

SIGNATURE PAGE

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

McNEIL REAL ESTATE FUND XV, LTD.

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

By: McNeil Investors, Inc., General Partner

March 31, 1999 By: /s/ Robert A. McNeil
- -------------- ---------------------------------------------
Date Robert A. McNeil
Chairman of the Board and Director
(Principal Executive Officer)

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

March 31, 1999 By: /s/ Ron K. Taylor
- -------------- ---------------------------------------------
Date Ron K. Taylor
President and Director of McNeil
Investors, Inc.
(Principal Financial Officer)

March 31, 1999 By: /s/ Brandon K. Flaming
- -------------- ---------------------------------------------
Date Brandon K. Flaming
Vice President of McNeil Investors, Inc.
(Principal Accounting Officer)

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,199,360
<SECURITIES> 0
<RECEIVABLES> 33,736
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 48,306,996
<DEPRECIATION> (24,021,290)
<TOTAL-ASSETS> 30,176,809
<CURRENT-LIABILITIES> 0
<BONDS> 23,057,324
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 30,176,809
<SALES> 7,966,118
<TOTAL-REVENUES> 8,063,341
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,087,524
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,110,229
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (134,412)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (134,412)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>