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

                                    FORM 10-Q

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

                     For the period ended September 30, 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 November 1, 1999, there were outstanding 38,844,517 shares of
common stock, no par value, of the registrant.

<PAGE>


                      CORNERSTONE REALTY INCOME TRUST, INC.
                                    FORM 10-Q

                                      INDEX

                                                                   Page Number
                                                                   -----------
PART I.    FINANCIAL INFORMATION

   Item 1.   Financial Statements (Unaudited)

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

                  Consolidated Statements of Operations -               4
                  Three months ended September 30, 1999
                  and  September 30, 1998
                  Nine months ended September 30, 1999
                  and September 30, 1998

                  Consolidated Statement of Shareholders' Equity-       5
                  Nine months ended September 30, 1999

                  Consolidated Statements of Cash Flows -               6
                  Nine months ended September 30, 1999
                  and September 30, 1998

                  Notes to Consolidated Financial Statements            7

   Item 2.   Management's Discussion and Analysis                      12
             of Financial Condition and Results of
             Operations

   Item 3.   Quantitative and Qualitative Disclosures about            17
             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               18
                      Security Holders.

         Item 5.      Other Information (not applicable)

         Item 6.      Exhibits and Reports on Form 8-K                 21

<PAGE>

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

<TABLE>
<CAPTION>

                                                                       September 30,              December 31,
                                                                           1999                       1998
                                                                    ------------------         ------------------
<S>                                                                        <C>                       <C>
ASSETS

Investment in rental property:
Land                                                                     $ 135,475,420               $ 87,100,659
Buildings and property improvements                                        750,830,044                487,972,647
Furniture and fixtures                                                      20,463,789                 12,365,052
                                                                     ------------------         ------------------
                                                                           906,769,253                587,438,358
Less accumulated depreciation                                              (68,079,254)               (48,227,760)
                                                                     ------------------         ------------------
                                                                           838,689,999                539,210,598

Cash and cash equivalents                                                   19,559,391                  2,590,364
Prepaid expenses                                                             1,073,328                  1,372,498
Other assets                                                                 8,002,943                  9,174,148
                                                                     ------------------         ------------------

                Total Assets                                              $867,325,661               $552,347,608
                                                                     ==================         ==================

LIABILITIES and SHAREHOLDERS' EQUITY

Liabilities
Notes payable-unsecured                                                  $ 150,000,000              $ 201,892,999
Notes payable-secured                                                      105,241,662                          -
Distributions payable                                                        4,485,881                          -
Accounts payable                                                             6,498,715                  4,301,682
Accrued expenses                                                            10,458,325                  2,730,418
Rents received in advance                                                      269,677                    506,649
Tenant security deposits                                                     2,065,322                  1,729,671
                                                                     ------------------         ------------------

                Total Liabilities                                          279,019,582                211,161,419

Minority interest of unitholders in operating partnership                    1,939,890                  2,014,693

Shareholders' equity
Preferred stock, no par value, authorized 25,000,000
  shares; 12,666,019 shares, $25 liquidation preference,
  Series A Cumulative Convertible Redeemable issued
  and outstanding                                                          263,038,214                           -
Common stock, no par value, authorized 100,000,000
   shares; issued and outstanding 39,076,617 shares
   and 39,113,916 shares, respectively                                     387,460,456                388,131,512
Deferred compensation                                                          (79,835)                  (108,905)
Distributions greater than net income                                      (64,052,646)               (48,851,111)
                                                                     ------------------         ------------------

                Total Shareholders' Equity                                 586,366,189                339,171,496
                                                                     ------------------         ------------------

                Total Liabilities and Shareholders' Equity                $867,325,661               $552,347,608
                                                                     ==================         ==================

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

                                        3

<PAGE>

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

<TABLE>
<CAPTION>


                                                                  Three Months Ended                       Nine Months Ended
                                                        September 30,           September 30,       September 30,      September 30,
                                                             1999                   1998                1999                1998
                                                       ----------------------------------------- ----------------------------------
      <S>                                                     <C>                <C>                   <C>               <C>
REVENUE:
           Rental income                                $ 34,887,760       $ 23,138,533          $ 82,309,910       $ 65,130,354
           Other income                                      212,837          1,860,746             3,954,604          3,553,300

EXPENSES:
           Property and maintenance                        9,640,510          6,623,932            22,495,898         18,099,464
           Taxes and insurance                             3,415,101          1,957,514             7,291,159          5,162,507
           Property management                               627,444            512,327             1,722,673          1,567,707
           General and administrative                        538,307            424,479             2,667,834          1,347,816
           Amortization expense                                    -                709                55,657             16,891
           Other depreciation                                  5,740              7,467                17,228             21,569
           Depreciation of rental property                 8,141,281          5,305,327            19,851,494         14,995,402
           Other                                             151,763            761,534               752,414          1,530,189
                                                     -----------------------------------      -----------------------------------

                         Total expenses                   22,520,146         15,593,289            54,854,357         42,741,545
                                                     -----------------------------------      -----------------------------------

Income before interest and dividend income (expense)      12,580,451          9,405,990            31,410,157         25,942,109

   Interest and dividend income                              109,904            102,490               323,203            323,689
   Interest expense                                       (3,943,225)        (3,219,107)          (10,876,360)        (9,227,446)
                                                     -----------------------------------      -----------------------------------

Income before minority interest in
       operating partnership                               8,747,130          6,289,373            20,857,000         17,038,352

  Minority Interest of unitholders in
     operating partnership                                    15,008                  -                73,907                  -
                                                     -----------------------------------      -----------------------------------

Net income                                               $ 8,732,122        $ 6,289,373          $ 20,783,093       $ 17,038,352

Distributions to preferred shareholders                    4,923,280                  -             4,923,280                  -
                                                     -----------------------------------      -----------------------------------

Net income available to common shareholders              $ 3,808,842        $ 6,289,373          $ 15,859,813       $ 17,038,352
                                                     ===================================      ===================================


Net Income per share-basic and diluted                        $ 0.10             $ 0.16                $ 0.40             $ 0.46
                                                     ===================================      ===================================

Distributions per common share                                $ 0.27             $ 0.26                $ 0.80             $ 0.77
                                                     ===================================      ===================================
</TABLE>


See accompanying notes to consolidated financial statements.

                                        4
<PAGE>

CORNERSTONE REALTY INCOME TRUST, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                        Distributions
                                  Number       Common           Number     Preferred                   (Greater)        Total
                                of Common       Stock        of Preferred    Stock        Deferred      Less than     Shareholders'
                                  Shares       Amount          Shares       Amount     Compensation    Net Income       Equity
                                ---------------------------------------------------------------------------------------------------
<S>                                <C>           <C>             <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 income                               -              -            -              -           -      20,783,093      20,783,093
Issuance of Series A
 Convertible Preferred Stock             -              -   12,666,019    263,038,214           -               -     263,038,214
Cash distributions declared
  to common shareholders                 -              -            -              -           -     (31,498,747)    (31,498,747)
  ($.80 per share)
Preferred stock dividend
   declared ($.35 per share)             -              -            -              -                  (4,485,881)     (4,485,881)
Exercise of stock options              539          5,390            -              -           -               -           5,390
Purchase of common stock held
   by Apple Residential Income
   Trust Inc. ("Apple")           (758,000)    (7,769,500)           -              -                                  (7,769,500)
Amortization of deferred
   compensation                          -              -            -              -      29,070               -          29,070
Shares issued through dividend
  reinvestment plan                720,162      7,093,054            -              -           -               -       7,093,054
                                ---------------------------------------------------------------------------------------------------

Balance at September 30, 1999   39,076,617   $387,460,456   12,666,019   $263,038,214    ($79,835)   ($64,052,646)   $586,366,189
                                ===================================================================================================

</TABLE>

See accompanying notes to consolidated financial statements.

                                        5

<PAGE>

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

<TABLE>
<CAPTION>

                                                                                           Nine Months Ended
                                                                                   September 30,         September 30,
                                                                                       1999                   1998
                                                                                -----------------------------------------
<S>                                                                                   <C>                      <C>
Cash flow from operating activities:

   Net income                                                                      $20,783,093            $17,038,352
   Adjustments to reconcile net income to net cash
   provided by operating activities
     Depreciation and amortization                                                  19,924,379             15,033,862
     Minority interest of unitholders in operating partnership                          73,907                      -
     Amortization of deferred compensation                                              29,070                 16,497
     Amortization of Apple Realty Group contract purchase                              241,438              1,043,349
     Amortization of deferred financing costs                                          172,172                161,890
     Changes in operating assets and liabilities:
       Operating assets                                                             (2,323,837)            (1,169,524)
       Operating liabilities                                                          (889,372)             1,452,259
                                                                                  -------------           ------------
            Net cash provided by  operating activities                              38,010,850             33,576,685
Cash flow from investing activities:
   Purchase of Apple Residential Income
      Trust, Inc., net of cash
   Acquistions of rental property                                                     (868,173)           (56,908,659)
   Proceeds from the sale of land                                                      764,668                      -
   Capital improvements                                                            (17,890,876)           (19,295,398)
                                                                                  -------------           ------------
            Net cash used in investing activities                                  (17,994,381)           (76,204,057)
Cash flow from financing activities:
   Proceeds from short-term borrowings                                              52,467,001             86,189,852
   Repayments of short-term borrowings                                            (104,360,000)           (52,259,000)
   Proceeds from secured notes payable                                              73,500,000                      -
   Repayment of mortgage notes                                                        (105,430)                     -
   Net proceeds from issuance of common shares                                       7,098,444             36,466,737
   Cash distributions to operating partnership unitholders                            (148,710)                     -
   Cash distributions paid to common shareholders                                  (31,498,747)           (28,214,923)
                                                                                  -------------           -----------
             Net cash provided by (used in) financing activities                    (3,047,442)            42,182,666
             Increase (decrease) in cash and cash equivalents                       16,969,027               (444,706)
Cash and cash equivalents, beginning of year                                         2,590,364              4,513,986
                                                                                  =============           ===========
Cash and cash equivalents, end of period                                           $19,559,391             $4,069,280
                                                                                  =============           ===========
Supplemental information:
   Non-cash transactions associated with:
       Apple Acquisition
                Real estate assets acquired                                      $ 302,204,687                      -
                Issuance of preferred stock                                        263,038,214                      -
                Assumption of mortgage notes                                        31,847,092                      -
                Company common stock held by Apple                                   7,769,500                      -
                Operating assets acquired                                              632,831                      -
                Operating liabilities acquired                                      10,912,991                      -
                Other                                                                3,940,548                      -
       Accretion of preferred dividend                                                 437,399
</TABLE>

See accompanying notes to consolidated financial statements.

                                        6
<PAGE>


                      CORNERSTONE REALTY INCOME TRUST, INC
             Notes to Consolidated Financial Statements (Unaudited)
                               September 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 nine months ended September 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 reflected in amortization 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)  Acquisition of Apple Residential Income Trust, Inc.
     ---------------------------------------------------

         On July 23, 1999, the Company completed the acquisition of Apple
         Residential Income Trust, Inc. ("Apple") which included 29 apartment
         communities containing 7,503 apartment units. The merger qualified as a
         tax-free reorganization and was accounted for under the purchase method
         of accounting. The acquisition was structured as a merger of Apple into
         a majority-owned subsidiary of the Company. The aggregate purchase
         price was approximately $311 million. Under the terms of the merger
         agreement, each Apple shareholder received 0.4 of a share of the
         Company's $25 Series A Convertible Preferred Stock for each share of
         Apple common stock. A total of 12,666,019 shares of the Company's
         Series A Convertible Preferred Stock were issued as a result of the
         merger. The Series A Convertible Preferred Stock has a first year
         dividend rate of $2.125, which will increase to $2.25 in the second
         year and $2.375 in the third year and thereafter. The Company is
         imputing dividends calculated as the present value difference between
         the perpetual preferred stock distribution and the stated distribution
         rate. 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,

                                       7
<PAGE>

         subject to certain conditions. In addition, the Company assumed
         approximately $32 million of Apple debt with an effective interest rate
         of approximately 6.475%.  No goodwill was recorded as a result of this
         transaction.

         The following unaudited pro forma information for the nine months ended
         September 30, 1999 and 1998 assumes the acquisition of Apple was
         completed on January 1 of the respective periods. The pro forma
         information is not necessarily indicative of what the Company's
         consolidated results of operations would have been if the acquisition
         previously described has occurred at the beginning of each period
         presented. Additionally, the pro forma information does not purport to
         be indicative of the Company's results of operations for future
         periods.

                                             Nine Months        Nine Months
                                             Ended              Ended
                                             9-30-99            9-30-98
                                             -------            -------
         Rental income                       $109,595,635       $103,388,563

         Net income available to
            common shareholders                 1,549,151          6,596,634

         Net income per common
            share-basic and diluted                  $.04               $.18

         The pro forma information presented above reflects adjustments for the
         actual rental income and rental expenses of the 22 properties acquired
         during 1998 and the 3 properties acquired in 1999 (including the Apple
         properties) for the respective periods in 1998 prior to acquisition.
         Net income has been adjusted as follows: (1) revenues and expenses
         related to the acquisition have been eliminated; (2) depreciation
         expense has been adjusted based on the Company's basis in the
         properties; (3) interest expense has been adjusted based on the market
         rate available to the Company at the time of acquisition.

(3)   Notes Payable
      -------------

         On September 29, 1999, the Company placed $73.5 million of secured
         debt. The loan is secured by ten properties. The loan is interest only
         and bears interest at a fixed interest rate of 7.29% per annum and the
         maturity date is September, 2006. The proceeds were used to pay down
         short-term debt and to curtail the Company's existing line of credit,
         described below.

         During July, 1999, the Company increased the $175 million unsecured
         line of credit 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. Proceeds from the debt described
         above, were used to repay $25 million of the Company's line of credit,
         a $5.5 million loan, and $25 million of other unsecured debt. At
         September 30, 1999, borrowings under the unsecured line of credit were
         $150 million. At September 30, 1999, the Company had an unused
         borrowing capacity of $35 million under the unsecured line of credit.

                                       8
<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,
         2000. At September 30, 1999, the Company had no outstanding borrowings
         under this agreement.

         In connection with the Apple merger, the Company assumed six mortgage
         notes with a principal amount of $30.8 million. These mortgages were
         recorded at a fair value of $31.8 million at the date of assumption.
         The difference between the fair value and principal is being amortized
         as an adjustment to interest expense over the term of the respective
         notes. Mortgage notes payable are due in monthly installments,
         including principal and interest.

         The aggregate maturities of mortgage notes payable subsequent to
         September 30, 1999 are as follows:


                                 Year              Amount
                                 ----              -------
                                 1999             $159,721
                                 2000              658,443
                                 2001              691,481
                                 2002              726,985
                                 2003            7,953,582
                              Thereafter        21,551,450
                                               -----------
                                               $31,741,662
                                               ===========

(4)   Related Parties
      ---------------

         The service fees received by the Company from Apple terminated upon the
         consummation of the merger described in Note (2).

         Prior to the merger, the Company had entered into subcontract
         arrangements with the companies owned by Mr. Glade M. 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 nine
                                       9
<PAGE>

         months ended September 30, 1999 and 1998 were $1.9 million and $1.5
         million, respectively.

         The Company also previously rendered property acquisition services to
         Apple. The Company paid $350,000 in cash and issued stock valued at
         $1,650,000 for the acquisition/disposition contract. Under the terms of
         the contract, Apple paid a real estate commission equal to 2% of the
         purchase price of the properties acquired. The Company amortized its
         purchase of this contract over the anticipated total acquisitions by
         Apple during the contract period. For the nine months ended September
         30, 1999 and 1998, the Company received $561,484 and $2 million,
         respectively, in real estate commissions under this contract and
         amortized $241,438 and $1 million of the purchase price of this
         contract.

         During 1998 the Company purchased 417,778 shares of Apple for $3.76
         million.  The Company recognized dividend income for the nine months
         ended September 30, 1999 and 1998 of $194,580 and $252,326,
         respectively, on its investment in Apple.

         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
         income.

                                       10
<PAGE>

(5) 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           Nine Months           Three Months           Nine Months
                                          Ended                  Ended                  Ended                 Ended
                                    September 30, 1999     September 30, 1999    September 30, 1998    September 30, 1998
                                    -------------------    ------------------    ------------------    ------------------
<S>                                         <C>                   <C>                     <C>                 <C>
Numerator:
Net income available to
  common shareholders                        $3,808,842           $15,859,813             $6,289,373           $17,038,352
Numerator for basic and
   diluted earnings                           3,808,842            15,859,813              6,289,373            17,038,352
Denominator:
Denominator for basic
    earnings per share-weighted-
    average shares                           39,031,951            39,304,761             38,806,665            37,148,312


Effect of dilutive securities:
     Stock options                                    -                     -                 15,416                27,059
     Series A Convertible Preferred                   -                     -                      -                     -
---------------------------------------------------------------------------------------------------------------------------

Denominator for diluted earnings
     per share-adjusted weighted-
     average shares and assumed
     conversions                             39,031,951            39,304,761             38,822,081            37,175,371
---------------------------------------------------------------------------------------------------------------------------

Basic and diluted earnings per
     common share                         $         .10            $      .40          $        0.16          $        .46
 --------------------------------------------------------------------------------------------------------------------------

*Series A Convertible Preferred Stock was not included in dilutive earnings per
common share calculations since its effect was anti-dilutive.

</TABLE>


(6) Subsequent Events
    -----------------

         In October 1999, the Company distributed to its common shareholders
         approximately $10,755,972 (27 cents per share), of which approximately
         $2,055,047 was reinvested in the purchase of additional shares of the
         Company. In addition, the Company distributed $4,485,637 to its
         preferred shareholders.

         On September 30, 1999, the Company's Board of Directors authorized a
         common share repurchase program to purchase up to $50 million of the
         Company's common shares. As of November 1, 1999, the Company had
         repurchased 226,600 common shares for $2,290,486.

                                       11
<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 achievements 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
         effects 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
         owned 29 apartment communities containing 7,503 apartment units. The
         merger qualified as a tax-free reorganization and was accounted for
         under the purchase method of accounting. The acquisition was structured
         as a merger of Apple into a majority-owned subsidiary of the Company.
         The aggregate purchase price was approximately $311 million. Under the
         terms of the merger agreement, each Apple shareholder received 0.4 of a
         share of the Company's $25 Series A Convertible Preferred Stock for
         each share of Apple common stock. A total of 12,666,019 shares of the
         Company's Series A Convertible Preferred Stock were issued as a result
         of the merger. The Series A Convertible Preferred Stock has a first
         year dividend rate of $2.125, which will increase to $2.25 in the
         second year and $2.375 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
         assumed approximately $32 million of Apple debt with an effective
         interest rate of approximately 6.475%.  (See Note 2 to the consolidated
         financial statements for further information.)

                                       12

<PAGE>


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

         Income and occupancy
         --------------------
         The Company's property operations for the nine months ended September
         30, 1999 include the results of operations from the 87 properties
         acquired to date, including properties acquired through the acquisition
         of Apple on July 23, 1999. The increased rental income and operating
         expenses for the nine and three months ended September 30, 1999 over
         the same period in 1998 is primarily due to a full nine months of
         operation of the 7 properties acquired in 1998 and the operations of
         the 29 properties acquired on July 23, 1999.

         Substantially all of the Company's income is from the rental operation
         of apartment communities. Rental income for the nine months increased
         to $82 million in 1999 from $65 million in 1998 due to the factors
         above. For the third quarter of 1999, the Company's rental income of
         $35 million was $12 million, or 51%, 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 terminated upon completion of the merger, and
         returns on the investment of its cash and cash reserves. In addition,
         other income for the nine months ended reflects the $1.5 million
         payment from Apple to the Company to modify certain contracts described
         in Note 5 of the September 30, 1999 unaudited quarterly financial
         statements.

         Overall economic occupancy for the Company's properties averaged 92%
         for the nine months ended September 30, 1999 and 1998. For the third
         quarter of 1999 and 1998, economic occupancy averaged 93%. Overall
         average rental rates for the portfolio increased 3% from $602 for the
         nine months ended September 30, 1998, to $619 for the nine months ended
         September 30, 1999. For the third quarter of 1999 and 1998, average
         rental rates increased 4% from $597 to $624, respectively.

         Comparable property operations
         ------------------------------
         On a comparative basis, the 61 properties acquired prior to 1998,
         including 10 Apple properties that were owned by Apple prior to 1998,
         provided rental and operating income of $65.6 million and $41.6
         million, respectively during the nine months ended September 30, 1999
         and $62.8 million and $39.4 million for the same period in 1998. This
         represents an increase in rental and operating income from the first
         nine months of 1998 compared to the first nine months of 1999 of 4% and
         6%, respectively. During the third quarter of 1999 and 1998, these same
         community operations provided rental and operating income of $24.6
         million and $14.9 million and $23.7 million and $14.2 million,
         respectively. This represents an increase in rental and operating
         income from the third quarter of 1998 compared to the third quarter of
         1999 of 4% and 5%, respectively.

         Expenses
         --------
         Total expenses for the first nine months increased 28% to $55 million
         in 1999 from $43 million in 1998. For the third quarter of 1999, total
         expenses increased to $23 million from $16 million for the same period
         in 1998. The increases are due largely to full three quarters of
         expenses of the 1998 acquisitions along with the addition of the Apple
         properties acquired on July 23, 1999. The operating expense ratio (the
         ratio of operating expenses, excluding depreciation, amortization,
         general and administrative, and other

                                       13
<PAGE>

         expenses, to rental income) was 38% for both the nine month periods in
         1999 and 1998, respectively. The operating expense ratio for the third
         quarter of 1999 and 1998 was 39%.

         Depreciation expense for the first nine months has increased to $20
         million in 1999 from $15 million in 1998. For the third quarter of 1999
         and 1998 depreciation expense was $8 million and $5 million,
         respectively. The increases are directly attributable to the full three
         quarters of depreciation of the 1998 acquisitions and the addition of
         the Apple properties for the period beginning July 23, 1999.

         General and administrative expenses totaled 3% of rental income for the
         nine months ended September 30, 1999 and 2% for the same period in
         1998. For the third quarter of 1999 and 1998, general and
         administrative expenses totaled 2% 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 $128,623 in 1999 and $71,363 in
         1998 from the investment of its cash and cash reserves. For the third
         quarter of 1999, interest income was $85,354 and $18,940 for the same
         period in 1998. Dividend income from the Company's investment in Apple
         was $194,580 and $252,326 for the nine months ended September 30, 1999
         and 1998, respectively. For the third quarter of 1998, dividend income
         was $83,550 and $21,620 was earned in the third quarter of 1999 as the
         merger was completed on July 23, 1999.

         The Company incurred interest expense of $10.9 million and $9.2 million
         during the first nine months of 1999 and 1998, respectively, associated
         with borrowings under its lines of credit. For the third quarter of
         1999 and 1998, interest expense was $3.9 million and $3.2 million,
         respectively.  The increase in interest expense relates to the
         increased use of the line of credit and the assumption of $32 million
         of mortgage notes through the acquisition of Apple.

         Income and expense from relationship with Apple Residential Income
         Trust
         ------------------------------------------------------------------
         The fees received by the Company from service contracts with Apple
         terminated upon consummation of the merger. The Company received $1.9
         million and $1.5 million for the first nine months of 1999 and 1998,
         respectively, for advisory and property management services rendered to
         Apple. For the third quarter of 1999 and 1998, the Company received
         $212,838 and $647,491, respectively for the same services. The Company
         received $561,484 and $2.1 million for the first nine months of 1999
         and 1998, respectively, in real estate commissions under separate
         contract and amortized $241,438 as of September 30, 1999 and $1 million
         as of September 30, 1998 of the purchase price of this contract. During
         the third quarter of 1998, the Company received $1.2 million in real
         estate commissions and no commissions were received in the same period
         of 1999. The Company amortized in the third quarter of 1998 $579,811 of
         the purchase price of the contract.

         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 and
         the 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.

                                       14
<PAGE>

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

         Capital  Requirements
         ---------------------
         The Company has an ongoing capital expenditure commitment to fund its
         renovation program for recently acquired properties. The Company is
         always assessing potential acquisitions and intends to acquire
         additional properties during 1999. However, no material commitments
         existed on November 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 would be able to obtain debt financing
         from a variety of sources, both secured and unsecured.

         The Company capitalized $18 million of improvements to its various
         properties during the nine month period ended September 30, 1999. It is
         anticipated that some $20 million in additional capital improvements
         will be completed during the next 12 months 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 23% of all
         1999 distributions, totaling $7,093,054, 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.

         Notes payable
         -------------
         On September 29, 1999, the Company placed $73.5 million in secured
         debt. The loan is secured by ten properties. The loan is interest only
         and bears interest at a fixed interest rate of 7.29% per annum and the
         maturity date is September, 2006. The proceeds were used to pay down
         short-term debt and to curtail the Company's existing line of credit,
         described below.

         During July, 1999, the Company increased the $175 million unsecured
         line of credit 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. Proceeds from the debt described
         above, were used to repay $35 million of the Company's line of credit,
         a $5.5 million loan, and $25 million of other unsecured debt. At
         September 30, 1999, borrowings under the unsecured line of credit were
         $150 million.  At September 30, 1999, the Company had an unused
         borrowing capacity

                                       15

<PAGE>

         of $35 million under the unsecured line of credit.

         In connection with the Apple merger, the Company assumed six mortgage
         notes with a principal amount of $30.7 million. Five of these mortgages
         were recorded at a fair value of $31.7 million at the date of
         assumption. The difference between the fair value and principal is
         being amortized as an adjustment to interest expense over the term of
         the respective notes. No adjustment was required for the remaining
         mortgage assumed. Mortgage notes payable are due in monthly
         installments, including principal and interest.

         The Company had no outstanding balance on its $5 million general
         corporate line of credit at September 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.

         As of September 30, 1999, approximately 95% of the Company's computer
         systems have been upgraded and deemed to be year 2000 compliant. The
         Company's accounting, human resource, and payroll applications have
         been upgraded and are currently being tested for year 2000 readiness by
         the Company which is scheduled to be completed in the fourth quarter of
         1999.

         The Company has performed procedures and determined that HVAC,
         elevator, telephone, and security systems are year 2000 compliant.

         Management believes it is devoting the resources necessary to achieve
         year 2000 readiness in a timely manner.  Total costs incurred or
         anticipated to be incurred related to achieve year 2000 readiness are
         not anticipated to be significant.

                                       16
<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         In connection with the acquisition of Apple Residential Income Trust,
         Inc., the Company assumed $31.8 million of mortgage loans. The Company
         marked this debt to market using interest rates available on similar
         loans at the time of assumption, resulting in an effective interest
         rate of approximately 6.475%. In addition, the Company secured 10
         properties with $73.5 million of secured debt with a fixed interest
         rate of 7.29%.

         There have been no other material changes since December 31, 1998. See
         the information provided in the Company's Annual Report on Form 10-K
         under Item 7-Management's Discussion and Analysis of Financial
         Condition and Results of Operations.

                                       17

<PAGE>

Part II

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

         On July 15, 1999, the Company held a Special Meeting of Shareholders
         for the purpose of considering (1) the approval and adoption of the
         Agreement and Plan of Merger, dated as of March 30, 1999, by and
         between the Company, Apple Residential Income Trust, Inc., and
         Cornerstone Acquisition Company (a Virginia corporation and a
         subsidiary of the Company) (the "Merger Agreement"), by which Apple
         Residential Income Trust, Inc. would merge with and into Cornerstone
         Acquisition Company (the "Merger"), the Merger and the other
         transactions contemplated by the Merger Agreement, as more fully
         described in the Joint Proxy Statement/Prospectus of the Company and
         Apple Residential Income Trust, Inc., dated as of June 2, 1999 (the
         "Joint Proxy Statement"), (2) the approval of the issuance by the
         Company of Series A Convertible Preferred Shares in connection with the
         Merger, as defined and more fully described in the Joint Proxy
         Statement, and (3) the approval of certain amendments to the Company's
         Bylaws related to the issuance by the Company of the Series A
         Convertible Preferred Shares in connection with the Merger, as defined
         and more fully described in the Joint Proxy Statement, and as more
         fully set forth below.

         The proposed amendments to the Bylaws would (1) provide that the
         holders of the Series A Convertible Preferred Shares may exercise the
         limited voting rights granted to them under the Articles of Amendment
         creating the shares or under law, (2) permit the Series A Convertible
         Preferred Shares to be issued in uncertificated form, (3) amend the
         Bylaws' limitation on share ownership designed to preserve REIT tax
         classification to provide that no person (as defined in the Bylaws) may
         own more than 9.8% of the total number of issued and outstanding shares
         of any separate class or series of Company capital stock, and (4)
         permit the Company Board of Directors to interpret or amend the Bylaws
         to give effect to the foregoing provisions.

         Set forth below are the amendments to the Bylaws submitted for
         shareholder approval in conjunction with the Merger and the related
         issuance of the Series A Convertible Preferred Shares.

         1.  Add Bylaw 5.20 to Address Preferred Share Voting Rights:

                  5.20 PREFERRED SHARES AND OTHER SECURITIES. Notwithstanding
         anything to the contrary in this Article V or elsewhere in these
         Bylaws, holders of any preferred shares or other Securities of the
         Company who, pursuant to the documents duly creating such preferred
         shares or other Securities, are granted voting rights, including rights
         to nominate and elect Directors, shall have such rights as set forth in
         the documents creating such preferred shares or other Securities.
         Furthermore, notwithstanding anything to the contrary in these Bylaws,
         the Directors may interpret these Bylaws and may propose and adopt
         amendments to these Bylaws as they deem necessary or convenient to give
         effect to the foregoing provision of this Section 5.20.

2.       Renumber existing Bylaw 7.1 as 7.1(a) and add a new Bylaw 7.1(b) to
         address Series A Preferred Shares Being Uncertificated:

                                       18
<PAGE>

                  (b) Notwithstanding anything to the contrary in this Section
         7.1 or elsewhere in these Bylaws, if the documents duly creating any
         preferred shares or other Securities of the Company provide that such
         preferred shares or other Securities of the Company are to be
         "uncertificated," certificates need not be issued in respect of such
         preferred shares or other Securities. The provisions of these Bylaws
         addressing Shares held in uncertificated form shall apply to any such
         preferred shares or other Securities. Notwithstanding anything to the
         contrary in these Bylaws, the Directors may interpret these Bylaws and
         may propose and adopt such amendments to these Bylaws as shall be
         necessary or convenient to give effect to the foregoing provisions of
         this Section 7.1(b).

3. To address Share Accumulation Restrictions:

         Replace Existing Bylaw 7.5(g) with the following:

                  (g) For purposes of Section 7.3, 7.4 and 7.5, "Shares" means
         the Common Shares of the Company and any other stock of the Company (as
         "stock" is defined in applicable Internal Revenue Code Sections
         addressing stock ownership requirements for REITs).

         Amend the first sentence of Bylaw 7.5(a)(i) to read as follows:

                  (a)(i) Subject to the provisions of Section 7.5(b), no Person
         may own in excess of 9.8% of the total number of the issued and
         outstanding Shares of any separate class or series, and no Shares shall
         be transferred (or issued) to any person if, following the transfer or
         issuance, the Person's direct or indirect ownership of Shares would
         exceed this limit.

4. Add sentence to Bylaw 11.11 to enable Bylaw amendments:

         The Board of Directors may also amend or revise the Bylaws to the
         extent other provisions of these Bylaws expressly permit such amendment
         or revision.

   On June 1, 1999, the record date for determining Common Shares entitled
   to vote at the Special Meeting, there were 39,621,222 issued and
   outstanding Common Shares of the Company. At the Meeting, a quorum was
   present. Each of the proposals presented at the Special Meeting of
   Shareholders of the Company on July 15, 1999 was approved, with the
   following representing the vote totals thereon:

(1)      The proposal to approve and adopt the Merger Agreement, the Merger and
         the other transactions contemplated by the Merger Agreement, as more
         fully described in the Joint Proxy Statement.

         APPROVAL    21,925,731     DISAPPROVAL  1,166,486   ABSTAIN    351,594
                     ----------                  ---------              -------

(2)      The proposal to approve the issuance by the Company of Series A
         Convertible Preferred Shares in connection with the Merger, as defined
         and more fully described in the Joint Proxy Statement.

         APPROVAL    21,677,025     DISAPPROVAL  1,307,809   ABSTAIN    458,977
                     ----------                  ---------              -------

                                       19
<PAGE>

(3)      The proposal to approve certain amendments to the Company's Bylaws
         relating to the issuance by the Company of Series A Convertible
         Preferred Shares in connection with the Merger, as defined and more
         fully described in the Joint Proxy Statement.

        APPROVAL    21,672,241      DISAPPROVAL  1,272,273  ABSTAIN     499,297
                    ----------                   ---------              -------
                                       20

<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 September 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           2,5,7            None
         July 23, 1999 and
         filed August 6, 1999

         Form 8-K dated           5,7              None
         June 25, 1999 and
         filed August 12, 1999

                                       21

<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:  11-15-99               BY:  /s/ Stanley J. Olander
       --------------------        ---------------------------
                                   Stanley J. Olander
                                   Vice President and Chief Financial Officer

                                       22