<PAGE>

                                  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 March 31, 2001

                                       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 May 1, 2001, there were outstanding 47,413,577 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 - March 31, 2001
                           and December 31, 2000                           3

                           Consolidated Statements of Operations -
                           Three months ended March 31, 2001
                           and  March 31, 2000                             4

                           Consolidated Statement of Shareholders' Equity-
                           Three months ended March 31, 2001               5

                           Consolidated Statements of Cash Flows -
                           Three months ended March 31, 2001
                           and March 31, 2000                              6

                           Notes to Consolidated Financial Statements      7

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

         Item 3.      Quantitative and Qualitative Disclosures about
                      Market Risk                                         15

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                    16
<PAGE>

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


<TABLE>
<CAPTION>
                                                                   March 31,                   December 31,
                                                                     2001                          2000
                                                               ------------------          ---------------------
<S>  <C>
ASSETS

Investment in rental property:
Land                                                               $ 127,484,683                  $ 127,440,659
Buildings and property improvements                                  722,542,582                    718,905,719
Furniture and fixtures                                                23,436,656                     22,988,397
                                                               ------------------          ---------------------
                                                                     873,463,921                    869,334,775
Less accumulated depreciation                                       (100,800,264)                   (91,555,114)
                                                               ------------------          ---------------------
                                                                     772,663,657                    777,779,661

Cash and cash equivalents                                             49,748,583                      4,140,641
Prepaid expenses                                                       1,819,350                      1,396,071
Deferred financing costs, net                                          3,947,771                      3,603,021
Other assets                                                          11,530,830                     12,861,301
                                                               ------------------          ---------------------

                Total Assets                                        $839,710,191                   $799,780,695
                                                               ==================          =====================


LIABILITIES and SHAREHOLDERS' EQUITY

Liabilities
Notes payable-unsecured                                                        -                   $ 13,209,908
Notes payable-secured                                              $ 320,758,321                    245,423,492
Distributions payable                                                  7,091,817                      7,102,594
Accounts payable                                                         609,983                        622,371
Accrued expenses                                                       3,194,538                      9,689,464
Rents received in advance                                                251,066                        356,018
Tenant security deposits                                               1,366,011                      1,374,884
                                                               ------------------          ---------------------

                Total Liabilities                                    333,271,736                    277,778,731

Shareholders' equity
Preferred stock, no par value, authorized 25,000,000
  shares; $25 liquidation preference, Series A
  Cumulative Convertible Redeemable; issued and outstanding          265,091,532                    265,194,014
   12,607,675 shares and 12,626,834 shares, respectively
Common stock, no par value, authorized 100,000,000
   shares; issued and outstanding 34,344,066 shares
   and 34,926,276 shares, respectively                               336,170,702                    342,454,886
Deferred compensation                                                    (42,856)                       (46,996)
Distributions greater than net income                                (94,780,923)                   (85,599,940)
                                                               ------------------          ---------------------

                Total Shareholders' Equity                           506,438,455                    522,001,964
                                                               ------------------          ---------------------

                Total Liabilities and Shareholders' Equity          $839,710,191                   $799,780,695
                                                               ==================          =====================
</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
                                                             March 31,               March 31,
                                                               2001                     2000
                                                        --------------------------------------
<S>  <C>
REVENUE:
           Rental income                                   $ 35,949,020           $ 37,097,915

EXPENSES:
           Property and maintenance                           8,492,470              9,040,274
           Taxes and insurance                                4,192,403              4,027,996
           Property management                                  623,774                692,482
           General and administrative                           524,435                484,961
           Other depreciation                                     5,747                  5,742
           Depreciation of rental property                    9,245,150              9,065,610
           Other                                                 12,906                 21,460
                                                        ---------------------------------------

                                   Total expenses            23,096,885             23,338,525
                                                        ---------------------------------------

Income before interest and dividend income (expense)         12,852,135             13,759,390

   Interest and dividend income                                  75,971                109,889
   Interest expense                                          (4,950,457)            (4,651,686)
                                                        ---------------------------------------

Income before gains on sales of investments                   7,977,649              9,217,593

   Gains on sales of investments                                      -             23,406,233
                                                        ---------------------------------------

Net income                                                  $ 7,977,649           $ 32,623,826

Distributions to preferred shareholders                      (7,466,576)            (7,997,200)
                                                        ---------------------------------------

Net income available to common shareholders                   $ 511,073           $ 24,626,626
                                                        =======================================


Net income per share-basic and diluted                           $ 0.01                 $ 0.65
                                                        =======================================

Distributions per common share                                   $ 0.28                 $ 0.27
                                                        =======================================
</TABLE>


See accompanying notes to consolidated financial statements.

                                        4
<PAGE>

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


<TABLE>
<CAPTION>
                                                         Number      Common             Number          Preferred
                                                       of Common     Stock          of Preferred         Stock
                                                         Shares      Amount             Shares           Amount
                                                    -----------------------------------------------------------------
<S>  <C>
Balance at December 31, 2000                          34,926,276    $342,454,886       12,626,834    $ 265,194,014

Net income                                                   -               -               -                 -
Cash distributions declared to common                        -               -               -                 -
  shareholders ($.2775  per share)
Distributions for Series A Convertible                       -               -               -                 -
   Preferred Stock
Imputed distributions on Series A                            -               -               -             376,493
   Convertible Preferred Stock
Exercise of stock options                                 2,000           19,250              -                -
Purchase of common stock                               (745,700)      (8,216,868)             -                -
Preferred stock converted to common stock                30,315          478,975          (19,159)        (478,975)
Amortization of deferred compensation                       -                -                -                -
Shares issued through dividend reinvestment plan        131,175        1,434,459              -                -
                                                    -----------------------------------------------------------------

Balance at March 31, 2001                            34,344,066     $336,170,702       12,607,675     $265,091,532
                                                    =================================================================
</TABLE>



<TABLE>
<CAPTION>
                                                                     Distributions             Total
                                                        Deferred      Greater Than          Shareholders'
                                                      Compensation     Net Income              Equity
                                                    -------------------------------------------------------------
<S>  <C>
                                                       ($46,996)     ($85,599,940)          $522,001,964
Balance at December 31, 2000
                                                            -           7,977,649              7,977,649
Net income                                                  -          (9,692,056)            (9,692,056)
Cash distributions declared to common
  shareholders ($.2775  per share)                                     (7,090,083)            (7,090,083)
Distributions for Series A Convertible
   Preferred Stock                                          -            (376,493)                   -
Imputed distributions on Series A
   Convertible Preferred Stock                              -                 -                   19,250
Exercise of stock options                                   -                 -               (8,216,868)
Purchase of common stock                                    -                 -                      -
Preferred stock converted to common stock                4,140                -                    4,140
Amortization of deferred compensation                       -                 -                1,434,459
Shares issued through dividend reinvestment plan    -------------------------------------------------------------

                                                       ($42,856)     ($94,780,923)          $506,438,455
Balance at March 31, 2001                           =============================================================
</TABLE>




See accompanying notes to consolidated financial statements.

                                        5
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                Three Months Ended
                                                                       March 31,                  March 31,
                                                                          2001                      2000
                                                                   ---------------------------------------------
<S>  <C>
Cash flow from operating activities:

   Net income                                                               $7,977,649              $32,623,826
   Adjustments to reconcile net income to net cash
   provided by operating activities
     Gain on sale on investments                                                     -              (23,406,233)
     Depreciation and amortization                                           9,250,897                9,071,352
     Amortization of deferred compensation                                       4,140                    5,524
     Amortization of deferred financing costs                                  147,899                  117,103
     Amortization of mortgage notes payable premium                            (52,230)                 (52,230)
     Changes in operating assets and liabilities:
       Operating assets                                                        901,443              (25,409,463)
       Operating liabilities                                                (6,621,137)             (16,389,770)
                                                                  ---------------------        -----------------

                         Net cash provided by (used in)
                           operating activities                             11,608,661              (23,439,891)

Cash flow from investing activities:
   Acquistions of rental property, net of debt assumed                               -               (8,791,131)
   Net proceeds from the sale of rental property                                     -              128,182,171
   Capital improvements                                                     (4,129,146)              (7,620,367)
                                                                  ---------------------        -----------------
                         Net cash (used in) provided by
                           investing activities                             (4,129,146)             111,770,673


Cash flow from financing activities:

   Proceeds from short-term borrowings                                      24,743,000               71,517,000
   Repayments of short-term borrowings                                     (37,952,908)            (123,720,000)
   Proceeds from secured notes payable                                      75,500,000                        -
   Repayments of secured notes payable                                        (112,941)                 (73,152)
   Payment of deferred financing costs                                        (492,649)                       -
   Shares issued through dividend reinvestment plan
     and exercise of stock options                                           1,453,709                1,774,505
   Purchase of common stock                                                 (8,216,868)             (32,100,505)
   Cash distributions to operating partnership unitholders                           -                  (50,190)
   Cash distributions paid to preferred shareholders                        (7,100,860)              (7,318,052)
   Cash distributions paid to common shareholders                           (9,692,056)             (10,409,776)
                                                                  ---------------------        -----------------

                         Net cash provided by (used in)
                           financing activities                             38,128,427             (100,380,170)

                         Increase (decrease) in cash and cash equivalents   45,607,942              (12,049,388)


Cash and cash equivalents, beginning of year                                 4,140,641               16,268,336
                                                                  ---------------------        -----------------


Cash and cash equivalents, end of period                                   $49,748,583               $4,218,948
                                                                  =====================        ==================

Supplemental information:
    Non-cash transactions:
       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
       Conversion of minority interest and operating partnership                     -                1,850,268
</TABLE>


See accompanying notes to consolidated financial statements.

                                        6
<PAGE>

                     CORNERSTONE REALTY INCOME TRUST, INC
             Notes to Consolidated Financial Statements (Unaudited)
                                 March 31, 2001


(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 three months ended March 31, 2001 are not necessarily
      indicative of the results that may be expected for the year ended December
      31, 2001. These financial statements should be read in conjunction with
      the Company's December 31, 2000 Annual Report on Form 10-K.

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

(2)  NOTES PAYABLE

      Unsecured
      The Company's existing $50 million unsecured line of credit with a
      commercial bank has a maturity date of December 2002. The unsecured line
      of credit bears interest at one month LIBOR plus 90 basis points. The
      Company had additional borrowings under its unsecured line of credit of
      $12 million during 2001. In connection with the secured financing placed
      in March 2001 as described below, the Company repaid the outstanding
      balance of $25.2 million of the Company's unsecured line of credit. There
      were no amounts outstanding under the unsecured line of credit at March
      31, 2001. The Company is obligated to pay lenders a quarterly commitment
      fee equal to .25% per annum of the unused portion of the line.

      The Company's $7.5 million unsecured line of credit for general corporate
      purposes bears interest at LIBOR plus 120 basis points. The maturity date
      is February 1, 2002. There were no amounts outstanding at March 31, 2001.

      Secured
      On March 23, 2001, the Company placed $75.5 million of secured debt. The
      loan is secured by 7 apartment communities. The loan bears interest at a
      fixed interest rate of 6.99% per annum. The loan is payable in monthly
      installments, interest only through April 2002 and principal and interest
      through the maturity date of March 2011.

                                       7
<PAGE>

      The aggregate maturities of principal for the five years subsequent to
March 31, 2001 are as follows:

                  Year                      Amount
                  --------------------------------
                  2001                    $521,891
                  2002                   1,215,742
                  2003                   8,746,635
                  2004                   4,088,573
                  2005                  10,122,338
                  Thereafter           296,063,142
                                     -------------
                                       320,758,321

(3)   SHAREHOLDERS' EQUITY

      Preferred Stock
      On March 13, 2001, the Company commenced a tender offer for all of its
      outstanding Series A Convertible Preferred Shares ("Exchange Offer").
      The Company offered to exchange each of the Company's issued and
      outstanding Series A Convertible Preferred Shares for either two of the
      Company's common shares or one of the Company's common share and $12.25
      cash.

                                       8
<PAGE>

(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              Three Months
                                                          Ended                     Ended
                                                        3/31/01                   3/31/00
                                                   ------------              ------------
<S>  <C>
      Numerator:
        Net income available to                    $     511,073             $ 24,626,626
           common shareholders
           Numerator for basic and
           diluted earnings per
           share - income available
           to common stockholders
           after assumed conversion                $     511,073             $ 24,626,626
      Denominator:
           Denominator for basic
           earnings per share-weighted-
           average shares                             34,463,297               37,997,170
      Effect of dilutive securities:
           Stock options                                  50,897                        -
           Series A Convertible  Preferred
           Stock*                                              -                        -
      ------------------------------------------------------------------------------------------
      Denominator for diluted earnings
           per share-adjusted weighted-
           average shares and assumed
           conversions                                34,514,194               37,997,170

      ------------------------------------------------------------------------------------------
      Basic and diluted earnings per
           Common share                            $         .01             $       0.65
      ------------------------------------------------------------------------------------------
</TABLE>

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

(5)  SUBSEQUENT EVENTS

      On April 18, 2001, the Company completed its Exchange Offer for the
      Company's outstanding Series A Convertible Preferred Shares. A total of
      12,458,917 preferred shares were validly tendered and not withdrawn
      pursuant to the Exchange Offer, representing 99% of the issued and
      outstanding Series A Convertible Preferred Shares. Of the Series A
      Convertible Preferred Shares tendered, the holders of 742,168 such shares
      exchanged two common shares for each preferred share and the holders of
      11,716,748 shares exchanged one common share and $12.25 in cash for each
      preferred share. The Company issued a total of 13,201,085 common shares
      and paid $143.5 million in cash in exchange for all of the preferred

                                       9
<PAGE>

      shares tendered in the Exchange Offer. The difference between the total
      consideration given and the carrying value of the preferred shares
      totaling approximately $26 million, including direct transaction expenses,
      will reduce net income available to common shareholders for the three
      month period ended June 30, 2001.

      On April 18, 2001, in order to fund part of the cash portion of the
      Exchange Offer for the Company's Series A Convertible Preferred Shares,
      the Company increased its unsecured line of credit to $100 million from
      $50 (see Note 3). The increased line of credit bears interest at a
      variable rate equal to LIBOR plus 90 basis points if the amount
      outstanding is $50 million or less, and LIBOR plus 120 basis points if the
      amount is greater than $50 million. The maturity date is December 2002.

      On April 9, 2001, the Company placed $15.68 million of secured debt. The
      loan bears interest at a fixed interest rate of 6.83% per annum with a
      maturity date of April 2011. The loan is payable in monthly installments,
      including principal and interest, and is secured by 1 apartment community.


                                       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 from the substitution of fixed-rate for variable-rate
     debt. 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, and adverse changes in the
     real estate markets and general and local economies and business
     conditions. 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.


     Results of Operations

     Income and occupancy
     Substantially all of the Company's income is from the rental operation of
     apartment communities. The Company's property operations for the three
     months ended March 31, 2001 include the results of operations for the full
     quarter of 72 properties acquired to date.

     Rental income for the first three months decreased to $36 million in 2001
     from $37 million in 2000. The decreased rental income is the result of the
     sale of the 16 apartment communities in March 2000 offset in part by rental
     increases. During the first quarter of 2001, the Company owned 3,441 fewer
     apartment units than it owned for the same period in 2000. Rental income is
     expected to increase from the impact of improvements, which were made in an
     effort to improve the properties' marketability, economic occupancies, and
     rental rates.

     Overall economic occupancy for the Company's properties averaged 94% and
     93% for the three months ended March 31, 2001 and 2000, respectively.
     Overall average rental rates for the portfolio increased 6% from $635 at
     March 31, 2000, to $674 at March 31, 2001. This increase is due to a
     combination of increased rental rates from new leases and property
     renovation as well as a lower average rental rate on properties disposed
     compared to the remainder of the Company's apartment communities.

                                       11
<PAGE>

     Comparable property operations
     The Company's "same-property" portfolio consists of 69 stabilized
     properties, containing 17,014 apartment units that the Company has owned
     since January 1, 2000, representing approximately 94% of the Company's
     18,076 units. The calculation is adjusted to reduce revenues associated
     with capital improvements made throughout the quarter. For the first
     quarter of 2001, same property net operating income increased 3%. Rental
     income increased 2% while operating expenses increased 1.5%.

     Expenses
     Total expenses for the first three months of 2001 and 2000 were $23
     million. The operating expense ratio (the ratio of operating expenses,
     excluding depreciation, amortization, general and administrative, and other
     expenses, to rental income) was 37% for the three months ended March 31,
     2001 and 2000.

     Depreciation expense for the first three months of 2001 and 2000 was $9
     million. The decrease in depreciation expense for properties disposed of
     during 2000 was offset by increases in depreciation expense associated with
     capital improvements made during 2000 and 2001.

     General and administrative expenses totaled $524,435, or 1.5% of rental
     income for the three months ended March 31, 2001 and $484,961, or 1.3% for
     the same period in 2000. These expenses represent the administrative
     expenses of the Company as distinguished from the operations of the
     Company's properties.

     Interest and investment income and expense
     The Company's interest income decreased to $75,971 in 2001 from $109,889 in
     2000 due to investment of proceeds from the sale of properties pending tax
     free exchanges in 2000. The Company incurred interest expense of $5 million
     and $4.7 million during the first three months of 2001 and 2000,
     respectively. The increase is due to an increase in activity on the
     Company's unsecured line of credit and the additional secured debt.

     LIQUIDITY AND CAPITAL RESOURCES

     The Company's primary sources of liquidity are rental income generated from
     the properties, proceeds from lines of credit, reinvestment of
     distributions, and proceeds from secured debt.

     The Company believes rental income generated from the properties and
     borrowings on its line of credit will be sufficient to meet normal property
     operating expenses, payment of distributions, capital improvements, and
     payment of mortgage debt. At March 31, 2001, the Company had $50 million in
     cash and cash equivalents. The majority of these funds represented a
     portion of the March 2001 secured financing which was done in advance to
     fund the cash portion of the exchange offer for the Company's Series A
     Convertible Preferred Shares.

     In September 2000, the Board of Directors authorized the repurchase of up
     to an additional $50 million of the Company's common shares. For the three
     months ended March 31, 2001, the Company repurchased 745,700 common shares
     at an average price of $11.02 per share.

     On March 13, 2001, the Company commenced a tender offer for all of its
     outstanding Series A Convertible Preferred Shares ("Exchange Offer"). The
     Company offered to exchange each of the Company's issued and outstanding
     Series A Convertible Preferred Shares for either two of the Company's
     common shares or one of the Company's common share and $12.25 cash.

                                       12
<PAGE>

     On April 18, 2001, the Company completed its Exchange Offer. A total of
     12,458,917 preferred shares were validly tendered and not withdrawn
     pursuant to the Exchange Offer, representing 99% of the issued and
     outstanding Series A Convertible Preferred Shares. Of the Series A
     Convertible Preferred Shares tendered, the holders of 742,168 such shares
     exchanged two common shares for each preferred share and the holders of
     11,716,748 shares exchanged one common share and $12.25 in cash for each
     preferred share. The Company issued a total of 13,201,085 common shares and
     paid $143.5 million in cash in exchange for all of the preferred shares
     tendered in the Exchange Offer. After the completion of the Exchange Offer,
     148,758 preferred shares remain outstanding. The difference between the
     total consideration given and the carrying value of the preferred shares
     totaling approximately $26 million, including direct transaction expenses,
     will reduce net income available to common shareholders for the three month
     period ended June 30, 2001. This will be treated as a one time non-
     recurring expense that will be added back for purposes of calculating Funds
     from Operations ("FFO").

     Capital  Requirements

     The Company has an ongoing capital expenditure commitment to fund its
     renovation program for recently acquired properties. In addition, the
     Company is always assessing potential acquisitions and intends to acquire
     additional properties during 2001. However, no material commitments existed
     on May 1, 2001. The expected source to fund the improvements and
     acquisitions is from a variety of sources including equity, excess flow
     from operations over distributions, and debt, provided by its line of
     credit. 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 $4.1 million of improvements to its various
     properties during the first quarter of 2001. The Company anticipates the
     level of capital improvements to decrease from 2000 levels. It is
     anticipated that some $12 million in additional capital improvements will
     be completed during 2001 on the current portfolio.

     Capital resources are expected to grow with the future sale of its shares
     through reinvestment of dividend and from cash flow from operations.
     Approximately 15% of all first quarter 2001 common stock dividend
     distributions, or $1.4 million, 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 2001.

     Notes Payable
     The Company's existing $50 million unsecured line of credit with a
     commercial bank has a maturity date of December 2002. The unsecured line
     of credit bears interest at one month LIBOR plus 90 basis points. The
     Company had additional borrowings under its unsecured line of credit of
     $12 million during 2001. In connection with the secured financing placed
     in March 2001 as described below, the Company repaid the outstanding
     balance of $25.2 million of the Company's unsecured line of credit. There
     were no amounts outstanding under the unsecured line of credit at March
     31, 2001. The Company is obligated to pay lenders a quarterly commitment
     fee equal to .25% per annum of the unused portion of the line.

                                       13
<PAGE>

     On April 18, 2001, in order to fund the cash portion of the Exchange
     Offer, the Company increased its unsecured line of credit to $100 million
     from $50 million (see Note 3 to the unaudited consolidated financial
     statements). The increased line of credit bears interest at a variable rate
     equal to LIBOR plus 90 basis points if the amount outstanding is $50
     million or less, and LIBOR plus 120 basis points if the amount is greater
     than $50 million. The maturity date is December 2002.

     The Company's $7.5 million unsecured line of credit for general corporate
     purposes bears interest at LIBOR plus 120 basis points. The maturity date
     is February 1, 2002. There were no amounts outstanding at March 31, 2001.

     On March 23, 2001, the Company placed $75.5 million of secured debt. The
     loan is secured by 7 apartment communities. The loan bears interest at a
     fixed interest rate of 6.99% per annum. The loan is payable in monthly
     installments, interest only through April 2002 and principal and interest
     through the maturity date of March 2011.

     On April 9, 2001, the Company placed $15.68 million of secured debt. The
     loan bears interest at a fixed interest rate of 6.83% per annum with a
     maturity date of April 2011. The loan is payable in monthly installments,
     including principal and interest, and is secured by 1 apartment community.

     Recent Accounting Pronouncements
     On January 1, 2001, Financial  Accounting Standards Board Statement No. 138
     "Accounting for Derivative Financial  Instruments and Hedging Activities"
     became effective.  The Company currently does not have any financial
     instruments subject to this statement.


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<PAGE>

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

The Company secured 7 apartment communities with $75.5 million of secured debt
with a fixed interest rate of 6.99%.

There have been no other material changes since December 31, 2000. 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.


                                       15
<PAGE>

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

   (a)   Exhibits - Exhibit 27-Financial Data Schedule

   (b)   The following table lists the reports on Form 8-K filed by the Company
         during the quarter ended March 31, 2001, the items reported and the
         financial statements included in such filings.

         None


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<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:    5-15-01                   BY:      /s/ Stanley J. Olander
     ------------------------            -----------------------------------
                                   Stanley J. Olander
                                   Vice President and Chief Financial Officer


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