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| T | QUARTERLY      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|---|---------------------------------------------------------------------------------------------------|

| £ | TRANSITION      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|--------|----------------------------------------------------------------------------------------------------|

| CALIFORNIA                                                          | 33-0827161                                |
|---------------------------------------------------------------------|-------------------------------------------|
| (State      or other jurisdiction of incorporation or organization) | (I.R.S.      Employer Identification No.) |
|                                                                |                                      |
| 1920      MAIN STREET, SUITE 400, IRVINE, CA                        | 92614                                     |
| (ADDRESS      OF PRINCIPAL EXECUTIVE OFFICES)                       | (ZIP      CODE)                           |

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| PART I.        | FINANCIAL      INFORMATION                                                                                                      |   |
|----------------|---------------------------------------------------------------------------------------------------------------------------------|--------|
|           |                                                                                                                            |   |
| Item      1.   | Financial      Statements:                                                                                                      |   |
|           |                                                                                                                            |   |
|           | Condensed Balance Sheets as of March 31, 2008 (unaudited) and      December 31, 2007                                            | 3      |
|           |                                                                                                                            |   |
|           | Condensed Statements of Operations for the Three Months ended      March 31, 2008 (unaudited) and March 31, 2007    (unaudited) | 4      |
|           |                                                                                                                            |   |
|           | Condensed Statement of Members’ Capital for the Three Months      ended March 31, 2008 (unaudited)                        | 5      |
|           |                                                                                                                            |   |
|           | Condensed Statements of Cash Flows for the Three Months ended      March 31, 2008 (unaudited) and March 31, 2007    (unaudited) | 6      |
|           |                                                                                                                            |   |
|           | Notes to Condensed Financial Statements      (unaudited)                                                                        | 7      |
|           |                                                                                                                            |   |
| Item      2.   | Management’s Discussion and Analysis of Financial Condition      and Results of Operations                                | 12     |
|           |                                                                                                                            |   |
| Item      3.   | Quantitative and Qualitative Disclosure About Market      Risk                                                                  | 13     |
|           |                                                                                                                            |   |
| Item      4(T) | Controls and Procedures                                                                                                         | 13     |
|           |                                                                                                                            |   |
| PART      II.  | OTHER      INFORMATION                                                                                                          |   |
|           |                                                                                                                            |   |
| Item      6.   | Exhibits                                                                                                                        | 14     |
|           |                                                                                                                            |   |
| SIGNATURES     |                                                                                                                            | 15     |

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CORNE

|                                                                                                                                                                                                                                                       |   | March 31,      2008 |       |   | December 31,      2007 (a) |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|------------|--------|---------------------------------|--------|
|                                                                                                                                                                                                                                                       |   | (unaudited)              |       |   |                            |   |
| ASSETS                                                                                                                                                                                                                                                     |   |                     |       |   |                            |   |
|                                                                                                                                                                                                                                                       |   |                     |       |   |                            |   |
| Cash      and cash equivalents                                                                                                                                                                                                                             |   | $                        | 3,961,000  |   |                            | $      | 4,201,000 |   |
| Investments      in real estate                                                                                                                                                                                                                            |   |                     |       |   |                            |   |   |   |
| Land                                                                                                                                                                                                                                                       |   |                     | 11,779,000 |   |                            |   | 11,779,000 |   |
| Buildings      and improvements, net                                                                                                                                                                                                                       |   |                     | 21,539,000 |   |                            |   | 21,689,000 |   |
| Intangible      lease assets, net                                                                                                                                                                                                                          |   |                     | 414,000    |   |                            |   | 424,000 |   |
| Intangible      in-place lease asset, net                                                                                                                                                                                                                  |   |                     | 161,000    |   |                            |   | 195,000 |   |
|                                                                                                                                                                                                                                                       |   |                     | 33,893,000 |   |                            |   | 34,087,000 |   |
|                                                                                                                                                                                                                                                       |   |                     |       |   |                            |   |   |   |
| Tenant      and other receivables, net                                                                                                                                                                                                                     |   |                     | 278,000    |   |                            |   | 289,000 |   |
| Prepaid      expenses and other assets                                                                                                                                                                                                                     |   |                     | 143,000    |   |                            |   | 65,000 |   |
| Leasing      commissions, less accumulated amortization of $301,000 as of March 31,      2008 and $269,000 as of December 31, 2007                                                                                                                         |   |                     | 170,000    |   |                            |   | 188,000 |   |
|                                                                                                                                                                                                                                                       |   |                     |       |   |                            |   |   |   |
| Total      assets                                                                                                                                                                                                                                          |   | $                        | 38,445,000 |   |                            | $      | 38,830,000 |   |
|                                                                                                                                                                                                                                                       |   |                     |       |   |                            |   |   |   |
| LIABILITIES      AND MEMBERS’ CAPITAL                                                                                                                                                                                                                |   |                     |       |   |                            |   |   |   |
|                                                                                                                                                                                                                                                       |   |                     |       |   |                            |   |   |   |
| Liabilities                                                                                                                                                                                                                                                |   |                     |       |   |                            |   |   |   |
| Distribution      payable                                                                                                                                                                                                                                  |   | $                        | 996,000    |   |                            | $      | - |   |
| Accounts      payable, accrued and other liabilities                                                                                                                                                                                                       |   |                     | 391,000    |   |                            |   | 338,000 |   |
| Real      estate taxes payable                                                                                                                                                                                                                             |   |                     | 166,000    |   |                            |   | 228,000 |   |
| Tenant      security deposits                                                                                                                                                                                                                              |   |                     | 306,000    |   |                            |   | 316,000 |   |
| Intangible      lease liability, net                                                                                                                                                                                                                       |   |                     | 53,000     |   |                            |   | 61,000 |   |
| Total      liabilities                                                                                                                                                                                                                                     |   |                     | 1,912,000  |   |                            |   | 943,000 |   |
|                                                                                                                                                                                                                                                       |   |                     |       |   |                            |   |   |   |
| Members’      capital (100,000 units authorized and issued as of  March 31,      2008 and December 31, 2007;  99,645 and 99,720 units outstanding      as of  March 31, 2008 and December 31, 2007,      respectively) |   |                     | 36,533,000 |   |                            |   | 37,887,000 |   |
|                                                                                                                                                                                                                                                       |   |                     |       |   |                            |   |   |   |
| Total      liabilities and members’ capital                                                                                                                                                                                                          |   | $                        | 38,445,000 |   |                            | $      | 38,830,000 |   |

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CORNER

|                                                                                      |   | Three      Months Ended |      |
|-------------------------------------------------------------------------------------------|--------|-------------------------|-----------|
|                                                                                      |   | March 31,          |      |
|                                                                                      |   | 2008                    |      |   | 2007 |   |
|                                                                                      |   |                    |      |   |   |   |
| Revenues                                                                                  |   |                    |      |   |   |   |
| Rental      revenues                                                                      |   | $                       | 849,000   |   |   | $ | 802,000 |   |
| Tenant      reimbursements and other income                                               |   |                    | 181,000   |   |   |   | 160,000 |   |
|                                                                                      |   |                    | 1,030,000 |   |   |   | 962,000 |   |
| Expenses                                                                                  |   |                    |      |   |   |   |   |   |
| Property      operating and maintenance                                                   |   |                    | 230,000   |   |   |   | 173,000 |   |
| Property      taxes                                                                       |   |                    | 145,000   |   |   |   | 136,000 |   |
| General      and administrative                                                           |   |                    | 68,000    |   |   |   | 116,000 |   |
| Depreciation      and amortization                                                        |   |                    | 264,000   |   |   |   | 258,000 |   |
|                                                                                      |   |                    | 707,000   |   |   |   | 683,000 |   |
|                                                                                      |   |                    |      |   |   |   |   |   |
| Interest      income                                                                      |   |                    | 23,000    |   |   |   | 16,000 |   |
|                                                                                      |   |                    |      |   |   |   |   |   |
| Income      from continuing operations                                                    |   |                    | 346,000   |   |   |   | 295,000 |   |
|                                                                                      |   |                    |      |   |   |   |   |   |
| Income      from discontinued operations                                                  |   |                    | -         |   |   |   | 29,000 |   |
|                                                                                      |   |                    |      |   |   |   |   |   |
| Net      income                                                                           |   | $                       | 346,000   |   |   | $ | 324,000 |   |
|                                                                                      |   |                    |      |   |   |   |   |   |
| Net      income allocable to managing member                                              |   | $                       | 35,000    |   |   | $ | 32,000 |   |
|                                                                                      |   |                    |      |   |   |   |   |   |
| Net      income allocable to unit holders                                                 |   |                    |      |   |   |   |   |   |
| From      continuing operations                                                           |   |                    | 311,000   |   |   |   | 265,000 |   |
| From      discontinued operations                                                         |   |                    | -         |   |   |   | 27,000 |   |
|                                                                                      |   |                    | 311,000   |   |   |   | 292,000 |   |
| Per      unit amounts:                                                                    |   |                    |      |   |   |   |   |   |
| Basic      and diluted income from continuing operations allocable to unit      holders   |   | $                       | 3.12      |   |   | $ | 2.65 |   |
| Basic      and diluted income from discontinued operations allocable to unit      holders |   | $                       | -         |   |   | $ | 0.27 |   |
| Basic      and diluted income allocable to unit holders                                   |   | $                       | 3.12      |   |   | $ | 2.92 |   |
|                                                                                      |   |                    |      |   |   |   |   |   |
| Basic      and diluted weighted average units outstanding                                 |   |                    | 99,683    |   |   |   | 100,000 |   |

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| Balance,      December 31, 2007                  |   | $      | 37,887,000 |   |
|--------------------------------------------------|--------|--------|------------|--------|
|                                             |   |   |       |   |
| Cash      distributions to unit holders          |   |   | (628,000   | )      |
| Cash      distributions to managing member       |   |   | (44,000    | )      |
| Units      repurchased and retired               |   |   | (32,000    | )      |
| Cash      distributions declared to unit holders |   |   | (996,000   | )      |
| Net      income                                  |   |   | 346,000    |   |
|                                             |   |   |       |   |
| Balance,      March 31, 2008                     |   | $      | 36,533,000 |   |

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CORNERS

|                                                                                       |   | Three      Months Ended |      |
|--------------------------------------------------------------------------------------------|--------|-------------------------|-----------|
|                                                                                       |   | March 31,          |      |
|                                                                                       |   | 2008                    |      |   | 2007 |   |
| OPERATING      ACTIVITIES                                                                  |   |                    |      |   |   |   |
| Net      income                                                                            |   | $                       | 346,000   |   |   | $ | 324,000 |   |
| Adjustments      to reconcile net income to net cash provided by operating      activities |   |                    |      |   |   |   |   |   |
| Depreciation      and amortization                                                         |   |                    | 264,000   |   |   |   | 258,000 |   |
| Changes      in operating assets and liabilities                                           |   |                    |      |   |   |   |   |   |
| Other      assets                                                                          |   |                    | (81,000   | ) |   |   | (98,000 | ) |
| Accounts      payable, accrued and other liabilities                                       |   |                    | (27,000   | ) |   |   | (85,000 | ) |
|                                                                                       |   |                    |      |   |   |   |   |   |
| Net      cash provided by operating activities                                             |   |                    | 502,000   |   |   |   | 399,000 |   |
|                                                                                       |   |                    |      |   |   |   |   |   |
| INVESTING      ACTIVITIES                                                                  |   |                    |      |   |   |   |   |   |
| Investments      in real estate                                                            |   |                    | (38,000   | ) |   |   | (68,000 | ) |
|                                                                                       |   |                    |      |   |   |   |   |   |
| Net      cash used in investing activities                                                 |   |                    | (38,000   | ) |   |   | (68,000 | ) |
|                                                                                       |   |                    |      |   |   |   |   |   |
| FINANCING      ACTIVITIES                                                                  |   |                    |      |   |   |   |   |   |
| Cash      distributions to unit holders                                                    |   |                    | (628,000  | ) |   |   | (630,000 | ) |
| Cash      distributions to managing member                                                 |   |                    | (44,000   | ) |   |   | - |   |
| Units      repurchased and retired                                                         |   |                    | (32,000   | ) |   |   | - |   |
|                                                                                       |   |                    |      |   |   |   |   |   |
| Net      cash used in financing activities                                                 |   |                    | (704,000  | ) |   |   | (630,000 | ) |
|                                                                                       |   |                    |      |   |   |   |   |   |
| Net      decrease in cash                                                                  |   |                    | (240,000  | ) |   |   | (299,000 | ) |
|                                                                                       |   |                    |      |   |   |   |   |   |
| Cash      and cash equivalents at beginning of period                                      |   |                    | 4,201,000 |   |   |   | 2,249,000 |   |
|                                                                                       |   |                    |      |   |   |   |   |   |
| Cash      and cash equivalents at end of period                                            |   | $                       | 3,961,000 |   |   | $ | 1,950,000 |   |
|                                                                                       |   |                    |      |   |   |   |   |   |
| Supplemental      disclosure of non-cash financing and investing activities:               |   |                    |      |   |   |   |   |   |
|                                                                                       |   |                    |      |   |   |   |   |   |
| Cash      distribution declared not paid                                                   |   | $                       | 996,000   |   |   | $ | - |   |

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|   | — | CIP      generally has complete and exclusive discretion in the management and      control of our operations; however, unit holders holding the majority of      all outstanding and issued units have certain specified voting rights      which include the removal and replacement of the Managing      Member. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | — | Net      Cash Flow from Operations, as defined, will be distributed 90% to the unit      holders and 10% to the Managing Member until the unit holders have      received either an 8% or 12% cumulative, non-compounded annual return on      their Invested Capital Contributions, as defined.  The 12%      return applies to specified early investors for the twelve-month period      subsequent to the date of their Invested Capital Contributions and is in      lieu of the 8% return during thatperiod. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | — | Net      Sales Proceeds, as defined, will be distributed first, 100% to the unit      holders in an amount equal to their Invested Capital Contributions; then,      90% to the unit holders and 10% to the Managing Member until the unit      holders have received an amount equal to the unpaid balance of their      aggregate cumulative, non-compounded annual return on their Invested      Capital Contributions; and thereafter, 50% to the unit holders and 50% to      the Managing Member. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | — | Net      Income, as defined, is allocated first, 10% to the Managing Member and 90%      to the unit holders until Net Income allocated equals cumulative Net      Losses, as defined, previously allocated in such proportions; second, in      proportion to and to the extent of Net Cash Flow from Operations and Net      Sales Proceeds previously distributed to the members, exclusive of      distributions representing a return of Invested Capital Contributions; and      then 50% to the Managing Member and 50% to the unit    holders. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | — | Net      Loss is allocated first, 50% to the Managing Member and 50% to the unit      holders, until Net Loss allocated equals cumulative Net Income previously      allocated in such proportions; then remaining Net Loss is allocated 10% to      the Managing Member and 90% to the unitholders. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | — | All      allocations and distributions to the unit holders are to be pro rata in      proportion to their ownershipshares. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------|

|   | — | Effective      February 22, 2007, our Operating Agreement was amended to permit      repurchase of units on such terms and conditions as the managing member      may determine. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                    |   | Lease Intangibles |    |
|-----------------------------------------|--------|-------------------|---------|
| April      1, 2008 to December 31, 2008 |   | $                 | 87,000  |   |
| 2009                                    |   |              | 91,000  |   |
| 2010                                    |   |              | 46,000  |   |
| 2011                                    |   |              | 42,000  |   |
| 2012                                    |   |              | 42,000  |   |
| Thereafter                              |   |              | 214,000 |   |
| Total                                   |   | $                 | 522,000 |   |

|                                                              |   | Land   |       |   | Buildings and Improvements |   |       | Intangible Lease Assets |   |   | In-Place Lease Assets |   |   | Intangible Lease Liability |     |
|-------------------------------------------------------------------|--------|--------|------------|--------|----------------------------|--------|------------|-------------------------|--------|--------|-----------------------|--------|--------|----------------------------|----------|
| Investments      in real estate and related lease intangibles     |   | $      | 11,779,000 |   |                       | $      | 23,579,000 |                    |   | $      | 550,000               |   |   | $                          | 894,000  |   |   | $ | (155,000 | ) |
|                                                              |   |   |       |   |                       |   |       |                    |   |   |                  |   |   |                       |     |   |   |   |   |   |
| Less:      accumulated depreciation and amortization              |   |   | —    |   |                       |   | (2,040,000 | )                       |   |   | (136,000              | )      |   |                       | (733,000 | ) |   |   | 102,000 |   |
| Net      investments in real estate and related lease intangibles |   | $      | 11,779,000 |   |                       | $      | 21,539,000 |                    |   | $      | 414,000               |   |   | $                          | 161,000  |   |   | $ | (53,000 | ) |

|                                                                                                      |   | Land   |       |   | Buildings and Improvements |   |       | Intangible Lease Assets |   |   | In-Place Lease Assets |   |   | Intangible Lease Liability |     |
|-----------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|----------------------------|--------|------------|-------------------------|--------|--------|-----------------------|--------|--------|----------------------------|----------|
| Investments      in Real Estate and related lease intangibles                                             |   | $      | 11,779,000 |   |                       | $      | 23,541,000 |                    |   | $      | 550,000               |   |   | $                          | 894,000  |   |   | $ | (155,000 | ) |
|                                                                                                      |   |   |       |   |                       |   |       |                    |   |   |                  |   |   |                       |     |   |   |   |   |   |
| Less:      accumulated depreciation and amortization from continuing      operations                      |   |   | —    |   |                       |   | (1,852,000 | )                       |   |   | (126,000              | )      |   |                       | (699,000 | ) |   |   | 94,000 |   |
| Net      Investments in Real Estate, Real estate assets held-for sale, and related      lease intangibles |   | $      | 11,779,000 |   |                       | $      | 21,689,000 |                    |   | $      | 424,000               |   |   | $                          | 195,000  |   |   | $ | (61,000 | ) |

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Item 2

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Item 3.

Item4(T).           Controlsand Procedures

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PART II

| Item      6. | Exhibits |
|--------------|----------|

|   | 31.1 | Certification      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley      Act of 2002. |
|--------|------|---------------------------------------------------------------------------------------------------------------|

|   | 31.2 | Certification      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley      Act of 2002. |
|--------|------|---------------------------------------------------------------------------------------------------------------|

|   | 32 | Certification      of Chief Executive Officer and Chief Financial Officer Pursuant to 18      U.S.C. §1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act      of 2002. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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SIGNATURES

|   | CORNERSTONE      REALTY FUND, LLC |
|--------|-----------------------------------|
|   |                              |   |
|   | By:                               | CORNERSTONE      INDUSTRIAL PROPERTIES, LLC |
|   |                              | its      Managing Member |
|   |                              |   |
|   |                              | By: | CORNERSTONE      VENTURES, INC. |
|   |                              |   | its      Manager |
|   |                              |   |   |   |
|   |                              |   | By: | /s/ TERRY G. ROUSSEL |   |
|   |                              |   |   | Terry      G. Roussel, President |
|   |                              |   |   | (Principal      Executive Officer) |
|   |                              |   |   |   |
|   |                              |   | By: | /s/ SHARON C. KAISER |   |
|   |                              |   |   | Sharon      C. Kaiser, |
|   |                              |   |   | Chief      Financial Officer |
|   |                              |   |   | (Principal      Financial Officer and |
|   |                              |   |   | Principal      Accounting Officer) |

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