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

                                    FORM 10-Q

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

                       For the period ended June 30, 1999

                                       OR

         [ ] 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 1-12875

                      CORNERSTONE REALTY INCOME TRUST, INC.
             (Exact name of registrant as specified in its charter)

          VIRGINIA                                     54-1589139
 (State or other jurisdiction                        (IRS Employer
 of incorporation or organization)                Identification No.)


     306 EAST MAIN STREET
     RICHMOND, VIRGINIA                                  23219
 (Address of principal executive offices)              (Zip Code)

                                 (804) 643-1761
              (Registrant's telephone number, including area code)

                                 Not Applicable
                 (Former name, former address, and former fiscal
                       year, if changed since last report)

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

          At August 1, 1999, there were outstanding  39,832,242 shares of common
stock, no par value, of the registrant.

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<PAGE>

                      CORNERSTONE REALTY INCOME TRUST, INC.
                                    FORM 10-Q

                                                       INDEX
<TABLE>
<CAPTION>

                                                                               Page Number
                                                                               -----------
PART I.     FINANCIAL INFORMATION
<S>                                                                                <C>
         Item 1. Financial Statements (Unaudited)

                           Consolidated Balance Sheets - June 30, 1999             3
                           and December 31, 1998

                           Consolidated Statements of Operations -                 4
                           Three months ended June 30, 1999
                           and  June 30, 1998
                           Six months ended June 30, 1999
                           and June 30, 1998

                           Consolidated Statement of Shareholders' Equity-         5
                           Six months ended June 30, 1999

                           Consolidated Statements of Cash Flows -                 6
                           Six months ended June 30, 1999
                           and June 30, 1998

                           Notes to Consolidated Financial Statements              7

         Item 2.  Management's Discussion and Analysis                             11
                      of Financial Condition and Results of
                      Operations

         Item 3. Quantitative and Qualitative Disclosures about                    16
                      Market Risk

PART II. OTHER INFORMATION:

         Item 1. Legal Proceedings (not applicable).

         Item 2. Changes in Securities (not applicable).

         Item 3. Defaults Upon Senior Securities
                      (not applicable)

         Item 4. Submission of Matters to a Vote of
                      Security Holders (not applicable)

         Item 5. Other Information (not applicable)

         Item 6. Exhibits and Reports on Form 8-K                                  17

</TABLE>

                                       2
<PAGE>

CORNERSTONE REALTY INCOME TRUST, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)

<TABLE>
<CAPTION>


                                                                                                 June 30,             December 31,
                                                                                                   1999                   1998
                                                                                            ------------------     ----------------
<S>                                                                                         <C>                      <C>
ASSETS
Investment in rental property:
Land                                                                                         $  86,391,086            $  87,100,659
Buildings and property improvements                                                            494,424,667              487,972,647
Furniture and fixtures                                                                          13,820,715               12,365,052
                                                                                             -------------            -------------
                                                                                               594,636,468              587,438,358
Less accumulated depreciation                                                                  (59,937,973)             (48,227,760)
                                                                                             -------------            -------------
                                                                                               534,698,495              539,210,598

Cash and cash equivalents                                                                        6,030,496                2,590,364
Prepaid expenses                                                                                 1,492,208                1,372,498
Other assets                                                                                     9,186,193                9,174,148
                                                                                             -------------            -------------

                Total Assets                                                                 $ 551,407,392            $ 552,347,608
                                                                                             =============            =============


LIABILITIES and SHAREHOLDERS' EQUITY

Liabilities
Notes payable                                                                                $ 205,499,999            $ 201,892,999
Accounts payable                                                                                 1,200,526                4,301,682
Accrued expenses                                                                                 5,722,083                2,730,418
Rents received in advance                                                                          158,987                  506,649
Tenant security deposits                                                                         1,455,477                1,729,671
                                                                                             -------------            -------------

                Total Liabilities                                                              214,037,072              211,161,419

Minority interest of unitholders in operating partnership                                        1,975,072                2,014,693

Shareholders' equity
Preferred stock, no par value, authorized 25,000,000
  shares; issued and outstanding 0 shares                                                               --                       --
Common stock, no par value, authorized 100,000,000
   shares; issued and outstanding 39,623,714 shares
   and 39,113,916 shares, respectively                                                         393,081,307              388,131,512
Deferred compensation                                                                              (85,858)               (108,905)
Distributions greater than net income                                                          (57,600,201)            (48,851,111)
                                                                                             -------------            -------------

                Total Shareholders' Equity                                                     335,395,248              339,171,496
                                                                                             -------------            -------------

                Total Liabilities and Shareholders' Equity                                   $ 551,407,392            $ 552,347,608
                                                                                             =============            =============


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

                                       3
<PAGE>



CORNERSTONE REALTY INCOME TRUST, INC.
CONSOLIDATED STATEMENTS  OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>


                                                                             Three Months Ended              Six Months Ended
                                                                           June 30,       June 30,         June 30,      June 30,
                                                                            1999            1998            1999          1998
                                                                       --------------  -------------    ------------- --------------
<S>                                                                    <C>             <C>               <C>           <C>
REVENUE:
           Rental income                                               $ 23,955,059    $ 21,871,386     $47,422,150    $ 41,991,821
           Other income                                                   2,680,480         850,520       3,741,767       1,692,554

EXPENSES:
                    Property and maintenance                              6,756,501       5,976,007      12,855,388      11,475,532
                    Taxes and insurance                                   1,813,692       1,681,144       3,876,058       3,204,993
                    Property management                                     545,861         543,061       1,095,229       1,055,380
                    General and administrative                            1,680,931         566,998       2,129,527         923,337
                    Amortization expense and other depreciation               5,746          14,146          67,145          30,284
                    Depreciation of rental property                       5,907,842       5,006,691      11,710,213       9,690,075
                    Other                                                   302,945         361,697         600,651         768,656
                                                                       ------------    ------------    ------------    ------------

                                   Total expenses                        17,013,518      14,149,744      32,334,211      27,148,257
                                                                       ------------    ------------    ------------    ------------

Income before interest and dividend income (expense)                      9,622,021       8,572,162      18,829,706      16,536,118

   Interest and dividend income                                             122,425         128,189         213,299        221,199
   Interest expense                                                      (3,517,687)     (3,187,420)     (6,933,135)    (6,008,338)
                                                                       ------------    ------------    ------------    ------------

Income before minority interest in operating partnership                  6,226,759       5,512,931      12,109,870      10,748,979

  Minority interest of unitholders in operating partnership                   8,198          --             58,899           --
                                                                       ------------    ------------    ------------    ------------
Net income                                                             $  6,218,561    $  5,512,931    $ 12,050,971    $ 10,748,979
                                                                       ============    ============    ============    ============
Basic and diluted earnings per common share                            $       0.16    $       0.15    $       0.31    $       0.30
                                                                       ============    ============    ============    ============
Distributions per common share                                         $       0.27    $       0.26    $       0.53    $       0.51
                                                                       ============    ============    ============    ============

</TABLE>

See accompanying notes to consolidated financial statements.

                                       4
<PAGE>

<TABLE>
<CAPTION>
                                                                                                        Distributions
                                                                                                          (Greater)        Total
                                                                 Number                     Deferred      Less than   Shareholders'
                                                               of Shares     Amount       Compensation    Net Income      Equity
                                                             ------------- -----------    ------------ ------------- ---------------

<S>                                                           <C>          <C>            <C>          <C>             <C>
Balance at December 31, 1998                                  39,113,916   $388,131,512   ($108,905)   ($48,851,111)   $339,171,496

Net proceeds from the sale of shares                                  --             --          --              --              --
Net income                                                            --             --          --      12,050,971      12,050,971
Cash distributions declared to shareholders ($.53  per share)         --             --          --     (20,800,061)    (20,800,061)
Exercise of stock options                                            539          5,390          --              --           5,390
Amortization of deferred compensation                                 --             --      23,047              --          23,047
Shares issued through dividend reinvestment plan                 509,259      4,944,405          --              --       4,944,405
                                                             ------------- -----------    ------------ ------------- ---------------


Balance at June 30, 1999                                      39,623,714   $393,081,307    ($85,858)   ($57,600,201)   $335,395,248
                                                             ------------- -----------    ------------ ------------- ---------------

</TABLE>

See accompanying notes to consolidated financial statements.


                                       5
<PAGE>

CORNERSTONE REALTY INCOME TRUST, INC.
CONSOLIDATED STATEMENTS  OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                                           Six Months Ended
                                                                                                       June 30,          June 30,
                                                                                                         1999            1998
                                                                                                   ------------        ------------
<S>                                                                                                <C>                 <C>
Cash flow from operating activities:
   Net income                                                                                      $ 12,050,971        $ 10,748,979
   Adjustments to reconcile net income to net cash
   provided by operating activities
     Depreciation and amortization                                                                   11,777,358           9,720,359
     Minority interest of unitholders in operating partnership                                           58,899                --
     Amortization of deferred compensation                                                               23,047              10,998
     Amortization of Apple Realty Group contract purchase                                               241,438             463,538
     Amortization of deferred financing costs                                                           113,664             106,531
     Changes in operating assets and liabilities:
       Prepaid expenses                                                                                (119,710)            291,329
       Other assets                                                                                    (434,292)           (630,503)
       Accounts payable                                                                              (3,101,156)         (1,815,305)
       Accrued expenses                                                                               2,991,665           2,139,060
       Rent received in advance                                                                        (347,662)           (274,199)
       Tenant security deposits                                                                        (274,194)            (10,635)
                                                                                                    ------------        ------------
                              Net cash provided by  operating activities                             22,980,028          20,750,152
Cash flow from investing activities:
   Acquistions of rental property                                                                         --            (36,200,620)
   Proceeds from the sale of land                                                                      764,668                --
   Capital improvements                                                                              (7,962,778)        (11,541,946)
                                                                                                   ------------        ------------
                              Net cash used in investing activities                                  (7,198,110)        (47,742,566)
Cash flow from financing activities:

   Proceeds from short-term borrowings                                                               23,887,000          53,883,852
   Repayments of short-term borrowings                                                              (20,280,000)        (43,005,000)
   Net proceeds from issuance of shares                                                               4,949,795          33,993,273
   Cash distributions to operating partnership unitholders                                              (98,520)             --
   Cash distributions paid to shareholders                                                          (20,800,061)        (18,174,819)
                                                                                                   ------------        ------------
                              Net cash provided by (used in) financing activities                   (12,341,786)         26,697,306

                              Increase (decrease) in cash and cash equivalents                        3,440,132            (295,108)

Cash and cash equivalents, beginning of year                                                          2,590,364           4,513,986
                                                                                                   ------------        ------------
Cash and cash equivalents, end of period                                                           $  6,030,496        $  4,218,878
                                                                                                   =============       =============
</TABLE>

See accompanying notes to consolidated financial statements.

                                       6
<PAGE>

                      CORNERSTONE REALTY INCOME TRUST, INC
             Notes to Consolidated Financial Statements (Unaudited)
                                  June 30, 1999


(1)  Basis of Presentation

         The accompanying  unaudited financial  statements have been prepared in
         accordance  with the  instructions  for Form  10-Q  and  Article  10 of
         Regulation S-X. Accordingly, they do not include all of the information
         required by generally accepted accounting principles. In the opinion of
         management,  all adjustments  (consisting of normal recurring accruals)
         considered  necessary  for a  fair  presentation  have  been  included.
         Operating  results  for the six  months  ended  June  30,  1999 are not
         necessarily indicative of the results that may be expected for the year
         ended December 31, 1999. These financial  statements  should be read in
         conjunction with the Company's  December 31, 1998 Annual Report on Form
         10-K.

         In April 1998, the American  Institute of Certified Public  Accountants
         issued  Statement  of  Position  (SOP)  98-5,  "Reporting  the Costs of
         Start-up  Activities".  The SOP is  effective  beginning  on January 1,
         1999, and requires that start-up costs  capitalized prior to January 1,
         1999 be  written  off and any  future  start-up  costs be  expensed  as
         incurred.  The unamortized balance of organization costs of $55,657 was
         written  off as a  cumulative  effect  of an  accounting  change  as of
         January 1, 1999 and is included in other amortizaton expense.

         Certain  previously  reported amounts have been reclassified to conform
         with the current financial statement presentation.

         The Company did not have any items of  comprehensive  income  requiring
         separate reporting and disclosure for the periods presented.

(2)  Notes Payable

         On  June 28, 1999,  the Company  entered into a loan  agreement  with a
         commercial   bank  in the  amount  of $5.5  million  to  refinance  the
         Company's   $5.5 million  unsecured  note issued on June 25, 1996.  The
         note  bears  interest   at LIBOR  plus 135 basis  points  and is due on
         September 27, 1999. The  Company is currently negotiating a new loan, a
         portion  of  the  proceeds  of which  would  repay  this  $5.5  million
         borrowing.

         During  October,  1998,  the  Company  closed a $25  million  unsecured
         bridge  facility with a commercial  bank. The  maturity date is October
         13, 1999.  The line of credit  bears  interest  at one month LIBOR plus
         120 basis points,  reduced from one month LIBOR  plus 135 basis points.
         At June 30, 1999, borrowings under the agreement  were $25 million. The
         Company intends to use a portion of the proceeds of  the new loan it is
         negotiating to repay this debt.

         During July,  1999, the Company  increased the unsecured line of credit
         $10 million to $185 million with a consortium of six banks and extended
         the maturity date to July 9, 2002. The line of credit bears interest at
         one month  LIBOR plus 120 basis  points,  reduced  from one month LIBOR
         plus 135 basis points. At June 30, 1999, borrowings under the agreement
         were $175 million.


                                       7
<PAGE>


         The Company has  available  a $5 million  unsecured  line of credit for
         general corporate purposes. This line of credit bears interest at LIBOR
         plus 135 basis points and the maturity date was extended to October 31,
         1999. There were no borrowings under this agreement at June 30, 1999.

(3)      Related Parties

         In August 1996, Glade M. Knight,  Chairman and Chief Executive  Officer
         of the  Company,  established  Apple  Residential  Income  Trust,  Inc.
         ("Apple") for the purpose of acquiring apartment  communities in Texas.
         Companies owned by Mr. Knight provided advisory,  property  management,
         and asset  acquisition  services to Apple.  In March 1997,  the Company
         entered into subcontract  arrangements  with the companies owned by Mr.
         Knight to provide property management services and advisory services to
         Apple.  Property management fees were 5% of monthly gross revenues plus
         certain expense reimbursements. Advisory fees were .1% to. 25% of total
         capital raised by Apple based on the financial  performance of Apple as
         defined in the  agreement.  The amount of fees  received by the Company
         under the  contracts  for the six months  ended June 30,  1999 and 1998
         were $1,680,282 and $817,954, respectively.

         During March 1997, the Company  acquired all the assets of Apple Realty
         Group,  Inc.,  which provided the real estate  acquisition and disposal
         services for Apple. The sole asset of Apple Realty Group,  Inc. was the
         acquisition/disposition  contract with Apple,  which expires on October
         31,  2001.  The Company paid  $350,000  cash and issued stock valued at
         $1,650,000  for this contract.  Under the terms of the contract,  Apple
         pays a real estate  commission equal to 2% of the purchase price of the
         properties  acquired.  The Company is  amortizing  its purchase of this
         contract over the  anticipated  total  acquisitions by Apple during the
         contract  period.  For the six months ended June 30,1999 and 1998,  the
         Company received  $561,484 and $874,600,  respectively,  in real estate
         commissions under this contract and amortized  $241,438 and $463,538 of
         the purchase price of this contract.

         In April 1997, the Company  purchased 417,778 shares of Apple for $3.76
         million.  This  represents  approximately  1.4% of the common shares of
         Apple outstanding as of June 30, 1999. The Company recognized  dividend
         income for the six months  ended June 30, 1999 and 1998 of $170,030 and
         $168,776, respectively, on its investment in Apple.

         The income and fees  received by the Company from Apple will  terminate
         upon consummation of the merger described in note (5) below.

         During May,  1999,  Apple paid the Company  $1.5  million to modify the
         Company's  right of first refusal to purchase  Apple's common shares or
         business  and the service  contracts  between  Apple and the Company to
         allow for  termination  of such  agreements in the event of a change of
         control of the  Company.  The  Company  recorded  the  payment as other

                                       8
<PAGE>

         income.

(4) Earnings Per Share

         The  following  table sets forth the  computation  of basic and diluted
earnings per share in accordance with FAS 128:

<TABLE>
<CAPTION>


                                                   Three Months      Six Months          Three Months       Six Months
                                                      Ended            Ended                 Ended             Ended
                                                   June 30, 1999    June 30, 1999        June 30, 1998     June 30, 1998
                                                  --------------    -------------        -------------     -------------
<S>                                                 <C>                <C>                  <C>                <C>
Numerator:
Net income                                        $ 6,218,561         $12,050,971         $ 5,512,931         $10,748,979
Numerator for basic and
   diluted earnings                                 6,218,561          12,050,971           5,512,931          10,748,979
Denominator:
Denominator for basic
    earnings per share-weighted-
    average shares                                 39,569,424          39,443,428          36,894,332          36,301,575
Effect of dilutive securities:
     Stock options                                         --                  --               5,651               5,651
                                                   ----------          ----------         -----------          ----------
Denominator for diluted earnings
     per share-adjusted weighted-
     average shares and assumed
     conversions                                   39,569,424          39,443,428          36,899,983          36,307,226
                                                   ----------          ----------         -----------          ----------
Basic and diluted earnings per
     common share                                 $       .16         $       .30         $      0.15         $       .30
                                                   ----------          ----------         -----------          ----------
</TABLE>
(5) Subsequent Events

         In July 1999, the Company distributed to its shareholders approximately
         $10,698,686 (27 cents per share), of which approximately $2,163,475 was
         reinvested in the purchase of additional shares of the Company.

         On July 23, 1999, the Company  completed the acquisition of Apple which
         included 29 apartment communities containing 7,503 apartment units. The
         acquisition  was structured as a merger of Apple into a  majority-owned
         subsidiary of the Company.  The transaction is valued at  approximately
         $310  million.  Under the terms of the  merger  agreement,  each  Apple
         shareholder  will receive .4 of a share of the  Company's  $25 Series A
         Convertible  Preferred Stock for each share of Apple common stock.  The
         Series A  Convertible  Preferred  Stock will have a first year dividend
         yield of 8.5%, which will increase to 9% in the second year and 9.5% in
         the third  year and  thereafter.  Each  share of  Series A  Convertible
         Preferred Stock carries a $25 per share  liquidation  preference and is
         convertible  into 1.5823  shares of the Company's  common stock,  which
         reflects a conversion  price of $15.80 for the Company's  common stock.
         After five  years,  the Series A  Convertible  Preferred  Stock will be
         redeemable at $25 per share plus any accrued  dividends,  at the option
         of the  Company,  in whole or in part,  for cash or stock,  subject  to
         certain conditions.  In addition, the Company will assume approximately
         $32   million  of  Apple  debt  with  an  average   interest   rate  of


                                       9

<PAGE>

         approximately 6.475%. The transaction has been structured as a tax-free
         reorganization  and will be accounted for under the purchase  method of
         accounting.


                                       10
<PAGE>


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


         This report contains  forward-looking  statements within the meaning of
         Section 27A of the Securities Act of 1993, as amended,  and Section 21E
         of  the   Securities   Exchange   Act  of  1934,   as   amended.   Such
         forward-looking  statements  include,  without  limitation,  statements
         concerning  anticipated   improvements  in  financial  operations  from
         completed and planned property renovations,  and expected benefits from
         the Company's  acquisition of Apple. Such statements  involve known and
         unknown  risks,  uncertainties,  and other  factors which may cause the
         actual  results,  performance,  or  achievement  of the  Company  to be
         materially  different from the results of operations or plans expressed
         or implied by such  forward-looking  statements.  Such factors include,
         among  other  things,   unanticipated   adverse  business  developments
         affecting  the  Company  or the  properties,  as the case  may be,  the
         possibility  that the merger of the Company and Apple will not have the
         effect  anticipated by the Company,  adverse changes in the real estate
         markets and general and local  economies  and business  conditions  and
         year 2000  compliance  issues.  Although the Company  believes that the
         assumptions underlying the forward-looking  statements contained herein
         are  reasonable,  any of  the  assumptions  could  be  inaccurate,  and
         therefore  there can be no assurance that such  statements  included in
         this  quarterly  report  will  prove  to be  accurate.  In light of the
         significant  uncertainties  inherent in the forward-looking  statements
         included  herein,  the  inclusion  of such  information  should  not be
         regarded as a  representation  by the Company or any other  person that
         the  results  or  conditions   described  in  such  statements  or  the
         objectives and plans of the Company will be achieved.

         Merger with Apple Residential Income Trust, Inc.
         On July 23, 1999, the Company  completed the acquisition of Apple which
         included 29 apartment communities containing 7,503 apartment units. The
         acquisition  was  structured  as merger of Apple into a  majority-owned
         subsidiary of the Company.  The transaction is valued at  approximately
         $310  million.  Under the terms of the  merger  agreement,  each  Apple
         shareholder  will receive .4 of a share of the  Company's  $25 Series A
         Convertible  Preferred Stock for each share of Apple common stock.  The
         Series A  Convertible  Preferred  Stock will have a first year dividend
         yield of 8.5%, which will increase to 9% in the second year and 9.5% in
         the third  year and  thereafter.  Each  share of  Series A  Convertible
         Preferred Stock carries a $25 per share  liquidation  preference and is
         convertible  into 1.5823  shares of the Company's  common stock,  which
         reflects a conversion  price of $15.80 for the Company's  common stock.
         After five  years,  the Series A  Convertible  Preferred  Stock will be
         redeemable at $25 per share plus any accrued  dividends,  at the option
         of the  Company,  in whole or in part,  for cash or stock,  subject  to
         certain conditions.  In addition, the Company will assume approximately
         $32   million  of  Apple  debt  with  an  average   interest   rate  of
         approximately 6.475%. The transaction has been structured as a tax-free
         reorganization  and will be accounted for under the purchase  method of
         accounting.


                                       11

<PAGE>


Results of Operations

         Income and occupancy
         The  Company's  property  operations  for the six months ended June 30,
         1999 include the results of operations from the 58 properties  acquired
         to date. The increased rental income and operating expenses for the six
         and three  months  ended June 30,  1999 over the same period in 1998 is
         primarily  due to a full six months of  operation  of the 7  properties
         acquired in 1998.

         Substantially  all of the Company's income is from the rental operation
         of apartment communities. Rental income for the six months increased to
         $47 million in 1999 from $42 million in 1998 due to the factors  above.
         For the second  quarter of 1999,  the  Company's  rental  income of $24
         million was $2 million,  or 9.5%,  higher than the same period of 1998.
         Rental  income is expected  to continue to increase  from the impact of
         planned improvements,  which are being made in an effort to improve the
         properties' marketability,  economic occupancies, and rental rates. The
         Company's  other  sources  of  income  were fees for  certain  services
         provided to Apple, which terminate upon consummation of the merger, and
         returns on the investment of its cash and cash  reserves.  In addition,
         other income for the second quarter  reflects the $1.5 million  payment
         from Apple to the Company.

         Overall economic  occupancy for the Company's  properties  averaged 91%
         and 92% for the six months ended June 30, 1999 and 1998,  respectively.
         For the second quarter of 1999 and 1998,  economic  occupancy  averaged
         92%  and  93%,  respectively.  Overall  average  rental  rates  for the
         portfolio  increased  5% from $587 for the six  months  ended  June 30,
         1998,  to $614 for the six months ended June 30,  1999.  For the second
         quarter of 1999 and 1998,  average rental rates  increased 5% from $589
         to $618, respectively.

         Comparable property operations
         On a  comparative  basis,  the 50  properties  acquired  prior  to 1998
         provided  rental and  operating  income of $41 million and $27 million,
         respectively  during the six months ended June 30, 1999 and $39 million
         and $25  million  for the same  period  in  1998.  This  represents  an
         increase  in rental and  operating  income from the first six months of
         1998  compared  to  the  first  six  months  of  1999  of  5%  and  6%,
         respectively.  During the second  quarter of 1999 and 1998,  these same
         community  operations  provided  rental  and  operating  income  of $20
         million and $13 million and $19 million and $12 million,  respectively.
         This  represents  an increase in rental and  operating  income from the
         second quarter of 1998 compared to the second quarter of 1999 of 5% and
         7%, respectively.

         Expenses
         Total expenses for the first six months increased 19% to $32 million in
         1999 from $27 million in 1998.  For the second  quarter of 1999,  total
         expenses  increased to $17 million from $14 million for the same period
         in 1998. The increases are due largely to full two quarters of expenses
         of the 1998  acquisitions.  The  operating  expense ratio (the ratio of
         operating expenses, excluding depreciation,  amortization,  general and
         administrative,  and other expenses,  to rental income) was 38% and 37%
         for both the second quarter and the six month periods in 1999 and 1998,
         respectively.


                                       12
<PAGE>


         Depreciation  expense for the first six months has  increased  to $11.7
         million in 1999 from $9.7  million in 1998.  For the second  quarter of
         1999 and 1998  depreciation  expense  was $6  million  and $5  million,
         respectively.  The increases are directly  attributable to the full two
         quarters of depreciation of the 1998 acquisitions.


         General and administrative expenses totaled 4% of rental income for the
         six months ended June 30, 1999 and 2% for the same period in 1998.  For
         the  second  quarter  of 1999  and  1998,  general  and  administrative
         expenses  totaled  7% and 3%,  respectively,  of rental  income.  These
         expenses  represent  the  administrative  expenses  of the  Company  as
         distinguished  from the  operations  of the Company's  properties.  The
         Company continues to expand its internal administrative  infrastructure
         to keep pace with its growth.

         Interest and investment income and expense
         The Company  earned  interest  income of $43,268 in 1999 and $52,422 in
         1998 from the investment of its cash and cash reserves.  For the second
         quarter of 1999,  interest  income was $35,944 and $42,962 for the same
         period in 1998. Dividend income from the Company's  investment in Apple
         was  $170,030  and  $168,776 for the six months ended June 30, 1999 and
         1998,  respectively.  For the second quarter of 1999 and 1998, dividend
         income was $86,480 and $85,226, respectively.

         The Company  incurred  interest  expense of $6.9 million and $6 million
         during the first six months of 1999 and 1998, respectively,  associated
         with  borrowings  under its lines of credit.  For the second quarter of
         1999 and 1998,  interest  expense was $3.5  million  and $3.2  million,
         respectively.  This is a result  of the  increased  use of its lines of
         credit to fund acquisitions.

         Income and expense  from  relationship  with Apple  Residential  Income
         Trust

         The  Company received  $1,680,282 and $817,954 for the first six months
         of 1999  and 1998,  respectively,  for advisory and property management
         services  rendered  to Apple.  For the second quarter of 1999 and 1998,
         the Company received  $932,480 and $466,420,  respectively for the same
         services. The  Company received $561,485 and $874,600 for the first six
         months  of 1999  and 1998,  respectively,  in real  estate  commissions
         under separate  contract and amortized $241,438 as of June 30, 1999 and
         $463,538 as of June 30, 1998  of the purchase  price of this  contract.
         During  the  second  quarter  of 1999 and 1998,  the  Company  received
         $248,000 and $384,100,  respectively,  in  real estate commissions. The
         Company amortized $106,640 in the second  quarter of 1999 and amortized
         $203,573  for the same  period  in 1998 of  the  purchase  price of the
         contract. The  fees  received by the  Company from Apple will terminate
         upon consummation of the merger.

         During May,  1999,  Apple paid the Company  $1.5  million to modify the
         Company's  right of first refusal to purchase  Apple's common shares or
         business and the service  contracts  between Apple and  Cornerstone  to
         allow for  termination  of such  agreements in the event of a change of
         control of the  Company.  The  Company  recorded  the  payment as other
         income.

                                       13
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

         Capital  Requirements
         The Company has an ongoing capital  expenditure  commitment to fund its
         renovation program for recently acquired properties. In addition to the
         Company's acquisition of Apple,  discussed above, the Company is always
         assessing  potential  acquisitions  and  intends to acquire  additional
         properties during 1999.  However,  no material  commitments  existed on
         August 1, 1999 for the purchase of additional properties.  The expected
         source to fund the  improvements  and acquisitions is from a variety of
         sources including additional equity, cash reserves,  and debt, provided
         by its lines of credit (including possible increases  thereunder).  The
         Company  may  seek to  obtain  additional  debt  financing  to meet its
         objectives.  Given the  Company's  current  debt level,  the Company is
         confident  that it will be able to obtain debt financing from a variety
         of sources, both secured and unsecured.

         The  Company  capitalized  $8 million of  improvements  to its  various
         properties  during the six months of 1999. It is anticipated  that some
         $14 million in additional capital improvements will be completed during
         the next year on the current portfolio.

         The  Company  has  short-term  cash flow needs in order to conduct  the
         operation  of its  properties.  The rental  income  generated  from the
         properties supplies sufficient cash to provide for the payment of these
         operating expenses and distributions.

         Capital  resources  are  expected  to grow with the future  sale of its
         shares  and from cash flow from  operations.  Approximately  24% of all
         1999 distributions,  totaling $4,944,405, were reinvested in additional
         common  shares.  In  general,   the  Company's  liquidity  and  capital
         resources are expected to be adequate to meet its cash  requirements in
         1999.

         Investment  in Apple Residential Income Trust
         As of June 30, 1999,  the Company owned 417,778  common shares of Apple
         representing  approximately  1.4% of common shares of Apple outstanding
         at June 30, 1999.

         Notes payable During  June,  1999, the Company  obtained a $5.5 million
         unsecured  loan  from a  commercial  bank.  In  conjunction  with  this
         agreement,  the  Company  repaid  an  existing  unsecured  note of $5.5
         million plus  interest.  The new unsecured note is due on September 27,
         1999. The Company is currently negotiating a new loan, a portion of the
         proceeds of which would repay this $5.5 million borrowing.

         At  June 30,  1999,  borrowings  on the $25  million  unsecured  bridge
         facility   were $25 million and the due date is October 13,  1999.  The
         Company intends  to use a portion of the proceeds of the new loan it is
         negotiating to repay this debt.

         During July,  1999, the Company  increased the unsecured line of credit
         $10  million to $185 million and extended the due date to July 9, 2002.
         At July 30, 1999, borrowings under this agreement were $185 million.


                              14

<PAGE>

         The  Company  had no  outstanding  balance  on its $5  million  general
         corporate line of credit at June 30, 1999.

         Impact of Year 2000
         The Year 2000 issue is the result of computer  programs  being  written
         using two digits rather than four to define the applicable year. Any of
         the Company's  computer  programs or hardware that have  date-sensitive
         software or embedded  chips may recognize a date using "00" as the year
         1900 rather than the year 2000.  This could result in a system  failure
         or miscalculations  causing  disruptions of operations  including among
         other  things a  temporary  inability  to  process  transactions,  send
         invoices or engage in similar normal business activities.

         There have been no  significant  changes  to the Year 2000  disclosures
         included in the 1998 Form 10-K.

         Management  believes it is devoting the resources  necessary to achieve
         year 2000 readiness in a timely manner.


                                       15
<PAGE>




Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         There have been no material  changes since  December 31, 1998.  See the
         information  provided in the Company's Annual Report on Form 10-K under
         Item 2-Management's  Discussion and Analysis of Financial Condition and
         Results of Operations.

                                       16

<PAGE>


Part II, Item 6.  Exhibits and Reports on Form 8-K

   (a)   Exhibits - Exhibit 27-Financial Data Schedule

   (b)   Reports on Form 8-K

         The following  table lists the reports on Form 8-K filed by the Company
         during the quarter  ended June 30,  1999,  the items  reported  and the
         financial statements included in such filings.

         Type and Date
         of Reports         Items Reported    Financials Statements Filed

         Form 8-K dated     5,7               None
         March 31, 1999

         Form 8-K dated     7(b)              Pro Forma Consolidated Statement
         April 9, 1999                        of Operations for the year ended
                                              December 31, 1998.


                                       17
<PAGE>





                                   SIGNATURES



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

                      Cornerstone Realty Income Trust, Inc.
                                  (Registrant)



DATE:  8-13-99                      BY:  /s/ Stanley J. Olander
                                        ---------------------------------------
                                    Stanley J. Olander
                                    Vice President and Chief Financial Officer

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