U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549 FORM 10-Q (Mark One) x
  QUARTERLY
  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
  EXCHANGE ACT OF 1934 FOR THE QUARTERLY 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   333-76609 CORNERSTONE REALTY
  FUND, LLC(EXACT NAME OF REGISTRANT AS
  SPECIFIED IN ITS CHARTER)California
  33-0827161(State or other jurisdiction
  (IRS Employerof incorporation or
  organization)
  Identification No.)4590 MACARTHUR
  BLVD., SUITE 610, NEWPORT BEACH, CALIFORNIA 92660(ADDRESS OF PRINCIPAL EXECUTIVE
  OFFICES)949-852-1007(ISSUER'S TELEPHONE NUMBER)Not Applicable(FORMER NAME, FORMER ADDRESS AND
  FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT)
 Check
whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 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. YESxNO ̈ As
of May 15, 2001, the Company had no units of membership interest issued and
outstanding. 
 
 PART I - FINANCIAL INFORMATION

Item 1.
  Financial StatementsCornerstone Realty Fund, LLCCondensed Balance Sheets
  at March 31, 2001 and December 31, 2000Condensed
  Statements of Operations for the Three Months   ended March 31,
  2001 and March 31, 2000Condensed
  Statements of  Members Deficit for
  the Three Months ended   March 31, 2001
  and at December 31, 2000Condensed Statements
  of Cash Flows for the Three Months ended   March 31, 2001
  and March 31, 2000Notes to
  Condensed Financial StatementsCornerstone Industrial
  Properties, LLCCondensed
  Consolidated Balance Sheets at March 31, 2001 and December 31, 2000Notes to
  Condensed Consolidated Balance SheetsCORNERSTONE
REALTY FUND, LLC
(a California Limited Liability Company)

CONDENSED BALANCE SHEETS



ASSETS

March 31,
  2001
  December 31,
  2000(Unaudited)Cash
  $
  $4,500Office
  equipment, less accumulated depreciation of $1,463 in 2001 and $1,321 in 2000
  1,391
  1,533Total
  assets
  $1,391
  $6,033LIABILITIES
AND MEMBERS DEFICIT

Current
  liabilitiesAccounts payable
  $117,189
  $114,798Advances payable to managing member
  762,012
  722,041879,201
  836,839Members
  deficit (100,000 units authorized, none issued or outstanding)
  (877,810)
  (830,806)Total
  liabilities and members deficit
  $1,391
  $6,033

The
accompanying notes are an integral part of these financial statements.

CORNERSTONE REALTY FUND, LLC
(a California Limited Liability Company)

CONDENSED STATEMENTS OF OPERATIONS(Unaudited)

Three
  Months Ended  
  March 31,2001
  2000ExpensesGeneral and administrative expenses
  $1,835
  $28,948Consulting fees to related party
  -
  30,906Interest expense on advances payable to managing member
  17,306
  11,154Net loss
  $(19,141)
  $(71,008)

The
accompanying notes are an integral part of these financial statements.

CORNERSTONE REALTY FUND, LLC
(a California Limited Liability Company)

CONDENSED STATEMENTS OF MEMBERS DEFICIT

Three
  Months EndedMarch
  31,
  2001
  Year Ended
  December 31,
  2000(Unaudited)Deficit at beginning of
  period
  $(830,806)
  $(405,120)Capital contributions
  -
  56,947Deferred offering costs
  (27,863)
  (315,268)Net
  loss
  (19,141)
  (167,365)Members
  deficit at end of period
  $(877,810)
  $(830,806)

The
accompanying notes are an integral part of these financial statements.

CORNERSTONE REALTY FUND, LLC
(a California Limited Liability Company)

CONDENSED STATEMENTS OF CASH FLOWS(Unaudited)

Three
  Months Ended 
  March 31,2001
  2000OPERATING ACTIVITIESNet loss
  $(19,141)
  $(71,008)Adjustments to reconcile net loss to net cash used in operating
  activities:Depreciation
  142
  142Changes in operating assets and liabilitiesAccounts payable
  2,391
  24,514Net cash used in operating activities
  (16,608)
  (46,352)FINANCING ACTIVITIESDeferred offering costs
  (27,863)
  (52,579)Advances from managing member
  39,971
  98,931Net cash provided by
  financing activities
  12,108
  46,352Net change in cash
  (4,500)
  -Cash at beginning of period
  4,500
  -Cash at end of period
  $-
  $-

The
accompanying notes are an integral part of these financial statements.


CORNERSTONE REALTY FUND, LLC
(a California Limited Liability Company) NOTES TO CONDENSED FINANCIAL STATEMENTS(Unaudited) 1. Organization and Business Cornerstone
Realty Fund, LLC, a California Limited Liability Company (the Fund) (formerly
Cornerstone Multi-Tenant Industrial Business Parks Fund, LLC and Cornerstone
Industrial Properties Income and Growth Fund I, LLC), was formed on
October 28, 1998. The members of the Fund are Cornerstone Industrial
Properties, LLC, a California Limited Liability Company (CIP), as the
managing member, and Terry G. Roussel, an individual. The purpose of the Fund
is to acquire, operate and sell multi-tenant industrial properties. The Fund
intends to issue and sell in a public offering equity interests (units) in
the Fund and to admit the new unitholders as members of the Fund. The
Fund is currently dependent on the managing member providing capital
contributions and advances in order for it to meet its obligations as they come
due. The managing member intends to continue providing such capital
contributions and advances until the initial closing of the Funds public
offering, at which time management believes the Fund will have sufficient cash
to meet its obligations as they come due. Each
members liability is limited pursuant to the provisions of the Beverly-Killea
Limited Liability Company Act. The term of the Fund shall continue until
December 31, 2010, unless terminated sooner pursuant to the operating
agreement. 2. Summary of Significant Accounting Policies Interim
Financial Information The
accompanying unaudited condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statement presentation. 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 month period ended March 31, 2001 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2001. For
further information, refer to the audited financial statements and footnotes
thereto included in Cornerstone Realty Funds Annual Report on Form 10-K for
the year ended December 31, 2000. Use of Estimates The
preparation of financial statements in conformity with accounting  principles generally accepted in the United
States requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the financial
statements and the reported amount of revenue and expenses during the reporting
period. Actual results could differ materially from the estimates in the near
term. Office Equipment

Office
equipment is stated at cost. Depreciation is computed on a straight-line basis
over the estimated useful lives of the related assets. The estimated useful
life of the office equipment is five years.

Subscription Proceeds Held in
Escrow

In
connection with the Fund's offering of units, an interest-bearing escrow
account has been established and is maintained by an escrow agent. The Fund is
not entitled to any funds received into escrow, and no amounts deposited in the
escrow account shall become the property of the Fund or its affiliates until
the date of the initial closing of the Fund's public offering. As of March 31,
2001, $64,500 in subscription proceeds have been deposited into the escrow
account.

Deferred Offering Costs

Specific
incremental costs incurred in connection with the offering of membership units
in the Fund are deferred and charged against the gross proceeds of the related
offering.

Income Tax Matters

It
is the intent of the  Fund and its
members that the Fund be treated as a partnership for income tax purposes. As a
limited liability company, the Fund is subject to certain minimal taxes and
fees; however, income taxes on the income or losses realized by the Fund are
generally the obligation of the members.

Reclassifications

Certain
reclassifications have been made to the 2000 account balances to conform to the
2001 presentation.



3. Related Party Transactions

In
order to fund its initial operating costs, the Fund has received unsecured
advances amounting to $762,012 from CIP through March 31, 2001. These advances
bear simple interest at the prevailing prime commercial lending rate plus two
percentage points. Interest expense totaling $17,306 and $11,154 during the
three months ended March 31, 2001 and 2000, respectively, was incurred on these
advances. The accrued interest incurred through March 31, 2001 has been added
to the advances payable balance. These advances and accrued interest are
expected to be repaid with proceeds from the offering of units.

During
the three months ended March 31, 2001 and 2000, the managing member provided
the Fund with office space at no charge.

During
the three months ended March 31, 2000, $30,906 was paid to employees of CIPs
managing member for services related to the planned offering of units.

The
managing member and/or its affiliates are entitled to receive various fees,
compensation, and reimbursements as specified in the Fund's operating
agreement.


CORNERSTONE INDUSTRIAL PROPERTIES, LLC
(a California Limited Liability Company) CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS March 31,
  
  2001
  December
  31, 
  2000(Unaudited)Current assetsCash
  $40,050
  $40,186Marketable equity securities
  733,054
  953,475Advances receivable from members
  43,754
  3,098Total current assets
  816,858
  996,759Office equipment, less
  accumulated depreciation of $6,267 in 2001 and $4,524 in 2000
  29,351
  31,094Security deposits
  7,848
  7,848Deferred offering costs
  718,147
  690,285Total assets
  $1,572,204
  $1,725,986 LIABILITIES AND MEMBERS CAPITAL Current liabilitiesAccounts payable
  $181,287
  $175,492Advances payable to member
  33,752
  45,413Capital lease obligation  office equipment
  13,270
  14,617228,309
  235,522Members capital
  1,469,435
  1,612,797Members capital contribution note
  (125,540)
  (122,333)Members capital, net
  1,343,895
  1,490,464Total liabilities and
  members capital
  $1,572,204
  $1,725,986  The
accompanying notes are an integral part of these financial statements.


CORNERSTONE INDUSTRIAL PROPERTIES, LLC
(a California Limited Liability Company) NOTES TO CONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited) 1. Organization and Business Cornerstone
Industrial Properties, LLC, a California Limited Liability Company (the
Company), was formed on February 5, 1999. The managing member is
Cornerstone Ventures, Inc., a California Corporation (Ventures or Manager).
The purpose of the Company is to sponsor, organize and serve as the managing
member of Cornerstone Realty Fund, LLC, a California Limited Liability Company
(Fund I), and Cornerstone Realty Fund II, LLC, a California Limited
Liability Company (Fund II) (collectively, the Funds). The purpose of the
Funds is to acquire, operate and sell multi-tenant industrial properties. Each
members liability is limited pursuant to the provisions of the Beverly-Killea
Limited Liability Company Act. The term of the Company shall continue until
December 31, 2033, unless terminated sooner pursuant to the operating
agreement. 2. Summary of Significant Accounting Policies Interim
Financial Information The
accompanying unaudited condensed consolidated balance sheets have been prepared
in accordance with accounting principles generally accepted in the United
States for interim financial information and footnotes and the instructions of
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not disclose
all of the information required by accounting principles generally accepted in
the United States for complete financial statements. In the opinion of
management, all adjustments, consisting of normal recurring accruals,
considered necessary for a fair presentation, have been included. For
further information, refer to the audited balance sheet and footnotes thereto
included in Cornerstone Realty Fund's Annual Report on Form 10-K for the year
ended December 31, 2000. Consolidation The
consolidated balance sheets include the accounts of the Company and the Funds.
All significant intercompany transactions have been eliminated in
consolidation. The Company consolidates the Funds because it has control over
all activities of the Funds and has provided 100% of the Funds' required
advances and capital contributions. Use of Estimates The
preparation of the consolidated balance sheets in conformity with
accounting  principles generally
accepted in the United States requires management to make estimates and
assumptions that affect the amounts reported in the balance sheets and
accompanying notes. Actual results could differ materially from those estimates
in the near term. Fair
Value of Financial Instruments The
Company believes all of the financial instruments' recorded values approximate
current values. Marketable
Equity Securities and Members Capital Marketable
equity securities consist of common stock investments. Marketable equity
securities are stated at market value as determined by the most recently traded
price of each security at the balance sheet dates. All marketable securities
are defined as trading securities or available-for-sale securities under the
provisions of Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity
Securities. Management
determines the appropriate classification of its investments in marketable
securities at the time of purchase and reevaluates such determination at each
balance sheet date. Securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading securities
and unrealized holding gains and losses are included in earnings. Equity
securities not classified as trading securities are classified as
available-for-sale. Available-for-sale securities are carried at fair value,
with the unrealized gains and losses reported as a separate component of
members capital. The cost of investments sold is determined on the specific
identification or the first-in, first-out method. As of March 31, 2001 and
December 31, 2000, all marketable equity securities are classified as trading
securities and are carried on the balance sheets at their aggregate fair values
of $733,054 and $953,475, respectively. 
The cost of and unrealized loss on these securities were $1,042,991 and
$309,937, respectively, at March 31, 2001, and $1,048,946 and $95,471,
respectively, at December 31, 2000. As of April 30, 2001, the fair market value
of these securities amounted to approximately $781,000. The
marketable equity securities were contributed to the Company by certain members
as their capital contributions. The purpose of the contributions was to
maintain the Companys net worth as specified in the operating agreement, as
amended. The operating agreement requires that the securities be held in
segregated accounts of the Company (Special Accounts) apart from other assets
and that the Special Accounts are not to be used by the Company for any purpose
other than to maintain the Companys net worth as specified in the operating
agreement. If any of the assets in the Special Accounts are used to pay Company
expenses or fund any of the Companys investees, the funds withdrawn are to
earn interest at the prevailing prime commercial lending rate plus two
percentage points. Any amounts withdrawn from the Special Accounts, plus
interest thereon, are to be repaid into the Special Accounts prior to any other
payments or distributions to the members. The funds in the Special Accounts are
to be invested at the direction of the contributing members or their designees.
At March 31, 2001, due to the decline in the fair market value of the
securities, the aggregate fair market value of the securities in the Special
Accounts was less than the $1,000,000 aggregate initial capital contribution of
the memberscontributed
into the Special Accounts. In the event that the aggregate fair market
value of the assets held in any Special Account is less than the initial capital
contribution of the contributing member, then the Manager may require such
member to make an additional capital contribution to the extent of the
difference. In the event such member defaults in making an additional capital
contribution, the Company may obtain the shortfall from a third party and may
dilute the defaulting members equity ownership percentage as specified in the
operating agreement. Any
member that contributed into a Special Account may request a distribution of
all of the balance in the account upon 120 days notice. The Company is
obligated to distribute the balance if it is able to secure an equal amount of
replacement capital from an existing or new member, otherwise, the Company is
not obligated to distribute such balances to the requesting member. Subscription Proceeds Held in
Escrow In
connection with Fund I's offering of units, an interest-bearing escrow account
has been established and is maintained by an escrow agent. Fund I is not
entitled to any funds received into escrow, and no amounts deposited in the
escrow account shall become the property of Fund I or its affiliates until the
date of the initial closing of Fund I's public offering. As of March 31, 2001,
$64,500 in subscription proceeds have been deposited into the escrow account. Deferred Offering Costs Specific
incremental costs incurred in connection with the offering of membership units
in the Funds are deferred and charged against the gross proceeds of the related
offerings. Deferred costs related to aborted offerings are expensed in the
period the offering is aborted. Income Tax Matters It
is the intent of the Company and its members that the Company be treated as a
partnership for income tax purposes. As a limited liability company, the
Company is subject to certain minimal taxes and fees; however, income taxes on
income or losses realized by the Company are generally the obligation of the
members. Related Party Transactions

Advances
receivable from members include $40,956 advanced to Ventures. Such advances do
not bear interest and are due upon demand.

The
advances payable to member bears simple interest at the prevailing prime
commercial lending rate plus two percentage points.

The
member's capital contribution note represents a $100,000 revolving note receivable
from Ventures. The note bears interest at the prevailing prime commercial
lending rate plus two percentage points. The note matures on December 2, 2001
and is secured by Ventures' interest in a California general partnership and is
personally guaranteed by the sole shareholder of Ventures. Accrued interest
receivable of $25,540 and $22,333 has been added to the note receivable balance
at March 31, 2001 and December 31, 2000, respectively.

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

Liquidity

The
fund is in the organizational stage. 
The funds organizational 
activities have been financed to date through advances from Cornerstone
Industrial Properties, LLC, the funds managing member.  The fund will continue to incur
organizational and offering expenses until it has completed the sale of the
units in the funds initial public offering. 
The fund is currently dependent on its ability to obtain capital
contributions and advances in order for it to meet its obligations as they
become due.  The managing member
believes that it has sufficient liquid assets available to finance all capital
contributions that will be required to pay for the funds obligations as they come
due prior to the closing of the minimum offering (see the managing members
balance sheet included elsewhere in this quarterly report on Form 10-Q).  In the event that the managing member does
not have sufficient liquid assets, the terms of its operating agreement
indicate that its members may be asked to make additional contributions;  however, its members are not committed by
any contract to make such additional contributions or provide any other
financial assistance.  In the event its
members choose not to make such additional contributions, its managing member
would be entitled to look to a third party to fund any shortfall and may reduce
the percentage interest of its non-contributing members.

Provided
the fund is able to sell the minimum offering of 6,000 units, the fund will use
the gross offering proceeds received from the sale of units to pay offering and
other organizational expenses and to reimburse the managing member for amounts
advanced for organizational and other expenses.  Any such expenses incurred by the managing member on behalf of
the fund, that are not reimbursed by the fund, will be reflected as a capital
contribution to the fund by the managing member with an offsetting expense
recognized in the funds statement of operations.

Capital Resources

The
fund intends to use the net proceeds from the sale of its units to acquire
multi-tenant industrial properties and for capital improvement, operating and
other reserves.  The fund has not
identified any properties which it may purchase and has not made any material
commitment for capital expenditures.

Results of Operations

The
fund is in the organizational stage and the fund has generated no
revenues.  The funds expenses,
including interest on advances, aggregated $19,141 and $71,008 for the three
months ended March 31, 2001 and 2000, respectively.   Organizational and other start-up expenses and associated losses
are expected to continue until the organization of the fund is completed.

Forward Looking Statements

The
Private Securities Litigation Reform Act provides a "safe harbor" for
certain forward-looking statements. Certain matters discussed in this filing
could be characterized as forward-looking statements such as statements
relating to plans for future expansion, as well as other capital spending,
financing sources and effects of regulation and competition. Such
forward-looking statements involve important risks and uncertainties that could
cause actual results to differ materially from those expressed in such
forward-looking statements.

Item 3.        Quantitative and
Qualitative Disclosures About Market Risk

As
of March 31, 2001, the fund had $762,012 in unsecured advances payable to its
managing member.  These advances have no
specified maturity date and bear interest at the prevailing prime commercial
lending rate plus two percentage points and, accordingly, are subject to
interest rate fluctuations.

PART II - OTHER INFORMATION

Item 1.Legal
Proceedings.

Inapplicable.

Item 2.Changes
in Securities and Use of Proceeds.

Inapplicable.

Item 3.Defaults
Upon Senior Securities.

Inapplicable.

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

Inapplicable.

Item 5.Other
Information.

Inapplicable.

Item 6.Exhibits
and Reports on Form 8–K.

(a)Exhibits

None.

(b)Reports on Form 8-K

None.

SIGNATURES

In
accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

May 17, 2001
  CORNERSTONE
  REALTY FUND, LLCBy:
  CORNERSTONE
  INDUSTRIAL PARTNERS, LLC
  Its Managing MemberBy:
  CORNERSTONE
  VENTURES, INC.
  Its ManagerBy:
  /s/ TERRY
  G. ROUSSEL
Terry G.
  Roussel, President
  (Principal Executive Officer,
  Principal Financial Officer and
  Principal Accounting Officer)