**U.S. SECURITIES AND EXCHANGECOMMISSION**

**WASHINGTON,D.C.  20549**

**FORM 10-Q**

**(MarkOne)**

**ý****            QUARTERLY REPORTPURSUANT TO SECTION 13 OR 15(d)**

**OF THE SECURITIES EXCHANGE ACT OF 1934**

**FOR THE QUARTERLYPERIOD ENDED SEPTEMBER 30, 2001**

**o****            TRANSITION REPORTPURSUANT TO SECTION 13**

**OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**

**FOR THE TRANSITION PERIOD FROM _______________ TO_______________**

**CommissionFile Number   333-63656  **

**CORNERSTONE REALTY FUND, LLC**

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

 

| **California**                                                  |   | **33-0827161**                     |
|-----------------------------------------------------------------|--------|------------------------------------|
| (State or other  jurisdiction of incorporation or organization) |   | (IRS Employer  Identification No.) |

 

**4590 MACARTHUR BLVD., SUITE 610, NEWPORT BEACH,CALIFORNIA 92660**

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

**949-852-1007**

(ISSUER'S TELEPHONE NUMBER)

**NotApplicable**

(FORMER NAME, FORMER ADDRESS AND FORMER FISCALYEAR, IF CHANGED SINCE LAST REPORT)

Check whether the issuer (1) filed all reportsrequired to be filed by Section 13 or 15(d) of the Exchange Act of 1934during the past 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

YES ý          NO o

As of November 12, 2001, the fund had no units ofmembership interest issued and outstanding.

 

 

**PART I -FINANCIAL INFORMATION**

 

**Item 1.                    FinancialStatements**
| **Cornerstone Realty Fund, LLC**                                                                                |   |
|-----------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                            |   |
| Balance  Sheets at September 30, 2001 and December 31, 2000                                                     |   |
|                                                                                                            |   |
| Statements  of Operations for the Three Months and Nine Months ended September 30, 2001  and September 30, 2000 |   |
|                                                                                                            |   |
| Statements of  Members’ Deficit for the Nine Months ended September 30, 2001 and at December  31, 2000     |   |
|                                                                                                            |   |
| Statements  of Cash Flows for the Nine Months ended September 30, 2001 and September 30,  2000                  |   |
|                                                                                                            |   |
| Notes  to Financial Statements                                                                                  |   |
|                                                                                                            |   |
| **Cornerstone Industrial Properties,  LLC**                                                                     |   |
|                                                                                                            |   |
| Consolidated  Balance Sheets at September 30, 2001 and December 31, 2000                                        |   |
|                                                                                                            |   |
| Notes  to Consolidated Balance Sheets                                                                           |   |

 

 

**CORNERSTONE REALTY FUND, LLC****(aCalifornia Limited Liability Company)**

 

**BALANCESHEETS**

 

 

**ASSETS**

 
|                                                                                  |   | **September 30,** |   | **December 31,** |   |
|---------------------------------------------------------------------------------------|--------|-------------------|--------|------------------|--------|
|                                                                                  |   | **2001**          |   | **2000**         |   |
|                                                                                  |   | **(Unaudited)**   |   |             |   |
| Cash                                                                                  |   | $                 | – |             | $      | 4,500 |   |
| Office  equipment, less accumulated depreciation of $1,747 in 2001 and $1,321 in 2000 |   | 1,107             |   | 1,533            |   |
| Total assets                                                                          |   | $                 | 1,107  |             | $      | 6,033 |   |

 

**LIABILITIES AND MEMBERS’ DEFICIT**

 
| Current  liabilities                                                          |   |       |    |     |   |
|-------------------------------------------------------------------------------|--------|------------|---------|----------|--------|
| Accounts  payable                                                             |   | $          | 144,107 |     | $      | 114,798 |   |
| Advances  payable to managing member                                          |   | 1,002,248  |    | 722,041  |   |
|                                                                          |   | 1,146,355  |    | 836,839  |   |
| Members’ deficit  (100,000 units authorized, none issued or outstanding) |   | (1,145,248 | )       | (830,806 | )      |
| Total  liabilities and members’ deficit                                  |   | $          | 1,107   |     | $      | 6,033 |   |

 

The accompanying notesare an integral part of these financial statements.

 

 

**CORNERSTONE REALTY FUND, LLC****(a CaliforniaLimited Liability Company)**

 

**STATEMENTS OF OPERATIONS (Unaudited)**

 

 
|                                                     |   | **Three Months Ended** |    | **Nine Months Ended** |   |
|----------------------------------------------------------|--------|------------------------|---------|-----------------------|--------|
|                                                     |   | **September 30,**      |    | **September 30,**     |   |
|                                                     |   | **2001**               |    | **2000**              |   | **2001** |   | **2000** |   |
| Expenses                                                 |   |                   |    |                  |   |   |   |   |   |
| General and  administrative expenses                     |   | $                      | 70,011  |                  | $      | 12,956 |   | $ | 84,593 |   | $ | 58,933 |   |
| Consulting fees  to related party                        |   | –                 |    | 2,691                 |   | – |   | 62,839 |   |
| Interest expense  on advances payable to managing member |   | 18,641                 |    | 16,931                |   | 52,691 |   | 35,734 |   |
| Net  loss                                                |   | $                      | (88,652 | )                     | $      | (32,578 | ) | $ | (137,284 | ) | $ | (157,506 | ) |

 

The accompanying notesare an integral part of these financial statements.

 

 

**CORNERSTONE REALTY FUND, LLC****(aCalifornia Limited Liability Company)**

 

**STATEMENTS OF MEMBERS’ DEFICIT**

 

 
|                                    |   | **Nine Months Ended**  |       | **Year Ended**        |   |
|-----------------------------------------|--------|------------------------|------------|-----------------------|--------|
|                                    |   | **September 30, 2001** |       | **December 31, 2000** |   |
|                                    |   | **(Unaudited)**        |       |                  |   |
|                                    |   |                   |       |                  |   |
| Deficit at  beginning of period         |   | $                      | (830,806   | )                     | $      | (405,120 | ) |
| Capital  contributions                  |   | –                 |       | 56,947                |   |
| Deferred  offering costs                |   | (177,158               | )          | (315,268              | )      |
| Net  loss                               |   | (137,284               | )          | (167,365              | )      |
|                                    |   |                   |       |                  |   |
| Members’  deficit at end of period |   | $                      | (1,145,248 | )                     | $      | (830,806 | ) |

 

The accompanying notesare an integral part of these financial statements.

 

 

**CORNERSTONE REALTY FUND, LLC****(aCalifornia Limited Liability Company)**

 

**STATEMENTS OF CASH FLOWS (Unaudited)**

 

 
|                                                                         |   | **Nine Months Ended** |     |
|------------------------------------------------------------------------------|--------|-----------------------|----------|
|                                                                         |   | **September 30,**     |     |
|                                                                         |   | **2001**              |     | **2000** |   |
| OPERATING  ACTIVITIES                                                        |   |                  |     |   |   |
| Net  loss                                                                    |   | $                     | (137,284 | ) | $ | (157,506 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities: |   |                  |     |   |   |
| Depreciation                                                                 |   | 426                   |     | 426 |   |
| Changes in  operating assets and liabilities                                 |   |                  |     |   |   |
| Accounts payable                                                             |   | 29,309                |     | 109,505 |   |
| Net cash used in  operating activities                                       |   | (107,549              | )        | (47,575 | ) |
|                                                                         |   |                  |     |   |   |
| FINANCING  ACTIVITIES                                                        |   |                  |     |   |   |
| Deferred  offering costs                                                     |   | (177,158              | )        | (299,291 | ) |
| Advances from  managing member                                               |   | 280,207               |     | 261,998 |   |
| Capital  contributions                                                       |   | –                |     | 89,368 |   |
| Net  cash provided by financing activities                                   |   | 103,049               |     | 52,075 |   |
|                                                                         |   |                  |     |   |   |
| Net change in  cash                                                          |   | (4,500                | )        | 4,500 |   |
|                                                                         |   |                  |     |   |   |
| Cash at  beginning of period                                                 |   | 4,500                 |     | – |   |
|                                                                         |   |                  |     |   |   |
| Cash  at end of period                                                       |   | $                     | –   |   | $ | 4,500 |   |

 

The accompanying notesare an integral part of these financial statements.

 

 

**CORNERSTONE REALTY FUND, LLC****(aCalifornia Limited Liability Company)**

 

**NOTES TO FINANCIAL STATEMENTS (Unaudited)**

 

 

**1.Organization and Business**

Cornerstone Realty Fund,LLC, a California limited liability company (the “Fund”) (formerly CornerstoneMulti-Tenant Industrial Business Parks Fund, LLC and Cornerstone IndustrialProperties Income and Growth Fund I, LLC), was formed on October 28, 1998.The members of the Fund are Cornerstone Industrial Properties, LLC, aCalifornia limited liability company (“CIP”), as the managing member, and TerryG. Roussel, an individual. The purpose of the Fund is to acquire, operate andsell multi-tenant industrial properties. The Fund intends to issue and sell ina public offering equity interests (“units”) in the Fund and to admit the newunitholders as members of the Fund.

The Fund is currentlydependent on the managing member providing capital contributions and advancesin order for it to meet its obligations as they come due. The managing memberintends to continue providing such capital contributions and advances until theinitial closing of the Fund’s public offering, at which time managementbelieves the Fund will have sufficient cash to meet its obligations as theycome due.

Each member’s liabilityis limited pursuant to the provisions of the Beverly-Killea Limited LiabilityCompany 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 FinancialInformation*

The accompanyingunaudited financial statements have been prepared in accordance with accountingprinciples generally accepted in the United States for interim financialinformation and with the instructions to Form 10-Q and Article 10 of RegulationS-X. Accordingly, they do not include all of the information and footnotesrequired by accounting principles generally accepted in the United States forcomplete financial statement presentation. In the opinion of management, all adjustments,consisting of normal recurring accruals, considered necessary for a fairpresentation, have been included. Operating results for the nine month periodended September 30, 2001 are not necessarily indicative of the results that maybe expected for the year ending December 31, 2001.

For furtherinformation, refer to the audited financial statements and footnotes theretoincluded in Cornerstone Realty Fund’s Annual Report on Form 10-K for the yearended December 31, 2000.

## *Use of Estimates*

The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities as ofthe date of the financial statements and the reported amount of revenue andexpenses during the reporting period. Actual results could differ materiallyfrom the estimates in the near term.

*OfficeEquipment*

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

## *Deferred OfferingCosts*

Specificincremental costs incurred in connection with the offering of membership unitsin the Fund are deferred and charged against the gross proceeds of the relatedoffering.

## *Income Tax Matters*

It is the intentof the Fund and its members that the Fund be treated as a partnership forincome tax purposes. As a limited liability company, the Fund is subject tocertain minimal taxes and fees; however, income taxes on the income or lossesrealized by the Fund are generally the obligation of the members.

## *Reclassifications*

Certainreclassifications have been made to the 2000 account balances to conform to the2001 presentation.

**3. Related Party Transactions**

In order to fundits initial operating costs, the Fund has received unsecured advances amountingto $1,002,248 from CIP through September 30, 2001. These advances bear simpleinterest at the prevailing prime commercial lending rate plus two percentagepoints. Interest expense totaling $18,641 and $16,931 during the three monthsended September 30, 2001 and 2000, respectively, and $52,691 and $35,734 duringthe nine months ended September 30, 2001 and 2000, respectively, was incurredon these advances. The accrued interest incurred through September 30, 2001 hasbeen added to the advances payable balance. These advances and accrued interestare expected to be repaid with proceeds from the offering of units.

During the nine monthsended September 30, 2001 and 2000, the managing member provided the Fund withoffice space at no charge.

During the three monthsended September 30, 2000 and the nine months ended September 30, 2000, $2,691and $62,839, respectively, was paid to employees of CIP’s managing member forservices related to the planned offering of units.

The managing memberand/or its affiliates are entitled to receive various fees, compensation andreimbursements as specified in the Fund’s operating agreement.

**CORNERSTONEINDUSTRIAL PROPERTIES, LLC(a California Limited Liability Company)**

 

**CONSOLIDATED BALANCE SHEETS**

 

 

**ASSETS**

 
|                                                                                  |   | **September 30,** |      | **December 31,** |   |
|---------------------------------------------------------------------------------------|--------|-------------------|-----------|------------------|--------|
|                                                                                  |   | **2001**          |      | **2000**         |   |
|                                                                                  |   | **(Unaudited)**   |      |             |   |
|                                                                                  |   |              |      |             |   |
| Current assets                                                                        |   |              |      |             |   |
| Cash                                                                                  |   | $                 | 8,442     |             | $      | 40,186 |   |
| Marketable  equity securities                                                         |   | 670,282           |      | 953,475          |   |
| Advances  receivable from members                                                     |   | 255,304           |      | 3,098            |   |
| Total current  assets                                                                 |   | 934,028           |      | 996,759          |   |
|                                                                                  |   |              |      |             |   |
| Office  equipment, less accumulated depreciation of $9,753 in 2001 and $4,524 in 2000 |   | 25,865            |      | 31,094           |   |
| Security  deposits                                                                    |   | 7,848             |      | 7,848            |   |
| Deferred  offering costs                                                              |   | 867,443           |      | 690,285          |   |
| Total assets                                                                          |   | $                 | 1,835,184 |             | $      | 1,725,986 |   |

 

**LIABILITIES AND MEMBERS’ CAPITAL**

 
| Current  liabilities                              |   |      |      |      |   |
|---------------------------------------------------|--------|-----------|-----------|-----------|--------|
| Accounts payable                                  |   | $         | 214,886   |      | $      | 175,492 |   |
| Advances payable  to member                       |   | 14,000    |      | 45,413    |   |
| Capital lease  obligation – office equipment |   | 10,384    |      | 14,617    |   |
|                                              |   | 239,270   |      | 235,522   |   |
|                                              |   |      |      |      |   |
| Members’ capital                             |   | 1,727,343 |      | 1,612,797 |   |
| Member’s capital  contribution note          |   | (131,429  | )         | (122,333  | )      |
| Members’  capital, net                       |   | 1,595,914 |      | 1,490,464 |   |
| Total  liabilities and members’ capital      |   | $         | 1,835,184 |      | $      | 1,725,986 |   |

 

The accompanying notesare an integral part of these balance sheets.

 

 

**CORNERSTONE INDUSTRIAL PROPERTIES, LLC**

**(a California Limited Liability Company)**

 

**NOTES TO CONSOLIDATED BALANCE SHEETS (Unaudited)**

 

 

**1. Organization and Business**

Cornerstone IndustrialProperties, LLC, a California limited liability company (the “Company”), wasformed on February 5, 1999. The managing member is Cornerstone Ventures,Inc., a California corporation (“Ventures” or “Manager”). The purpose of theCompany is to sponsor, organize and serve as the managing member of CornerstoneRealty Fund, LLC, a California limited liability company (“Fund I”), andCornerstone Realty Fund II, LLC, a California limited liability company (“FundII”) (collectively, the “Funds”). The purpose of the Funds is to acquire,operate and sell multi-tenant industrial properties.

Each member’s liabilityis limited pursuant to the provisions of the Beverly-Killea Limited LiabilityCompany Act. The term of the Company shall continue until December 31,2033, unless terminated sooner pursuant to the operating agreement.

**2. Summary of Significant AccountingPolicies**

## *InterimFinancial Information*

The accompanyingunaudited consolidated balance sheets have been prepared in accordance withaccounting principles generally accepted in the United States for interimfinancial information and footnotes and the instructions of Form 10-Q andArticle 10 of Regulation S-X. Accordingly, they do not disclose all of theinformation required by accounting principles generally accepted in the UnitedStates for complete financial statements. In the opinion of management, alladjustments, consisting of normal recurring accruals, considered necessary for afair presentation, have been included.

For furtherinformation, refer to the audited balance sheet and footnotes thereto includedin Cornerstone Realty Fund’s Annual Report on Form 10-K for the year endedDecember 31, 2000.

*Consolidation*

The consolidatedbalance sheets include the accounts of the Company and the Funds. Allsignificant intercompany transactions have been eliminated in consolidation.The Company consolidates the Funds because it has control over all activitiesof the Funds and has provided 100% of the Funds’ required advances and capitalcontributions.

*Use of Estimates*

The preparation ofthe consolidated balance sheets in conformity with accounting principlesgenerally accepted in the United States requires management to make estimatesand assumptions that affect the amounts reported in the balance sheets andaccompanying notes. Actual results could differ materially from those estimatesin the near term.

*FairValue of Financial Instruments*

The Company believes allof the financial instruments’ recorded values approximate current values.

# ***Marketable Equity Securities and Members’ Capital***

Marketable equitysecurities consist of common stock investments. Marketable equity securitiesare stated at market value as determined by the most recently traded price ofeach security at the balance sheet dates. All marketable securities are definedas trading securities or available-for-sale securities under the provisions ofStatement of Financial Accounting Standards (“SFAS”) No. 115, *Accountingfor Certain Investments in Debt and Equity Securities*.

Managementdetermines the appropriate classification of its investments in marketablesecurities at the time of purchase and reevaluates such determination at eachbalance sheet date. Securities that are bought and held principally for thepurpose of selling them in the near term are classified as trading securitiesand unrealized holding gains and losses are included in earnings. Equitysecurities not classified as trading securities are classified as available-for-sale.Available-for-sale securities are carried at fair value, with the unrealizedgains and losses reported as a separate component of members’ capital. The costof investments sold is determined on the specific identification or thefirst-in, first-out method. As of September 30, 2001 and December 31, 2000, allmarketable equity securities are classified as available-for-sale securitiesand are carried on the balance sheets at their aggregate fair values of$670,282 and $953,475, respectively. The cost of and unrealized loss on these securities are $1,028,297 and$358,015, respectively, at September 30, 2001, and $1,048,946 and $95,471,respectively, at December 31, 2000. As of October 31, 2001, the fair marketvalue of these securities amounted to approximately $693,000.

The marketableequity securities were contributed to the Company by certain members as theircapital contributions. The purpose of the contributions was to maintain theCompany’s net worth as specified in the operating agreement, as amended. Theoperating agreement requires that the securities be held in segregated accountsof the Company (“Special Accounts”) apart from other assets and that theSpecial Accounts are not to be used by the Company for any purpose other thanto maintain the Company’s net worth as specified in the operating agreement. Ifany of the assets in the Special Accounts are used to pay Company expenses orfund any of the Company’s investees, the funds withdrawn are to earn interestat the prevailing prime commercial lending rate plus two percentage points. Anyamounts withdrawn from the Special Accounts, plus interest thereon, are to berepaid into the Special Accounts prior to any other payments or distributionsto the members. The funds in the Special Accounts are to be invested at thedirection of the contributing members or their designees. At September 30,2001, due to the decline in the fair market value of the securities, theaggregate fair market value of the securities in the Special Accounts was lessthan the $1,000,000 aggregate initial capital contribution of the memberscontributed into the Special Accounts. In the event that the aggregate fairmarket value of the assets held in any Special Account is less than the initialcapital contribution of the contributing member, then the Manager may requiresuch member to make an additional capital contribution to the extent of thedifference. In the event such member defaults in making an additional capitalcontribution, the Company may obtain the shortfall from a third party and maydilute the defaulting member’s equity ownership percentage as specified in theoperating agreement.

Any member thatcontributed into a Special Account may request a distribution of all of thebalance in the account upon 120 days notice. The Company is obligated todistribute the balance if it is able to secure an equal amount of replacementcapital from an existing or new member, otherwise, the Company is not obligatedto distribute such balances to the requesting member.

## *Deferred OfferingCosts*

Specificincremental costs incurred in connection with the offering of membership unitsin the Funds are deferred and charged against the gross proceeds of the relatedofferings. Deferred costs related to aborted offerings are expensed in the periodthe offering is aborted.

## *Income Tax Matters*

It is the intentof the Company and its members that the Company be treated as a partnership forincome tax purposes. As a limited liability company, the Company is subject tocertain minimal taxes and fees; however, income taxes on income or lossesrealized by the Company are generally the obligation of the members.

**3. Related Party Transactions**

Advances receivable frommembers at September 30, 2001 include $235,120 advanced to Ventures. Suchadvances do not bear interest and are due upon demand.

The advancespayable to member bears simple interest at the prevailing prime commerciallending rate plus two percentage points.

The member’scapital contribution note represents a $100,000 revolving note receivable fromVentures. The note bears interest at the prevailing prime commercial lendingrate plus two percentage points. The note matures on December 2, 2001 and issecured by Ventures’ interest in a California general partnership and ispersonally guaranteed by the sole shareholder of Ventures. Accrued interestreceivable of $31,429 and $22,333 has been added to the note receivable balanceat September 30, 2001 and December 31, 2000, respectively.

 

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

**Liquidity**

The fund is in the organizational stage.  The fund’s organizational  activities have been financed to datethrough advances from Cornerstone Industrial Properties, LLC, the fund’smanaging member.  The fund will continueto incur organizational and offering expenses until it has completed the saleof the units in the fund’s public offering. The fund is currently dependent on its ability to obtain capitalcontributions and advances in order for it to meet its obligations as theybecome due.  The managing memberbelieves that it will have sufficient liquid assets available to finance allcapital contributions that will be required to pay for the fund’s obligationsas they come due prior to the closing of the minimum offering (see the managingmember’s balance sheet included elsewhere in this quarterly report on Form10-Q).  In the event that the managingmember does not have sufficient liquid assets, the terms of its operating agreementindicate that its members may be asked to make additional contributions;  however, its members are not committed byany contract to make such additional contributions or provide any otherfinancial assistance.  In the event itsmembers choose not to make such additional contributions, its managing memberwould be entitled to look to a third party to fund any shortfall and may reducethe ownership of its non-contributing members.

Provided the fund is able to sell the minimum offeringof 6,000 units, the fund will use the gross offering proceeds received from thesale of units to pay offering and other organizational expenses and toreimburse the managing member for amounts advanced for organizational and otherexpenses.  Any such expenses incurred bythe 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.

**Capital Resources**

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

**Results of Operations**

The fund is in the organizational stage and the fundhas generated no revenues.  The fund’sexpenses, exclusive of offering costs, aggregated $137,284 and $157,506 for thenine months ended September 30, 2001 and 2000, respectively.  Offering costs aggregated $177,158 and$299,291 for the nine months ended September 30, 2001 and 2000,respectively.  Organizational and otherstart-up expenses and associated losses are expected to continue until theorganization of the fund is completed.

**ForwardLooking Statements**

ThePrivate Securities Litigation Reform Act provides a "safe harbor" forcertain forward-looking statements. Certain matters discussed in this filingcould be characterized as forward-looking statements such as statementsrelating to plans for future expansion, as well as other capital spending,financing sources and effects of regulation and competition. Suchforward-looking statements involve important risks and uncertainties that couldcause actual results to differ materially from those expressed in suchforward-looking statements.

 

**Item 3.                    Quantitativeand Qualitative Disclosures About Market Risk**

Asof September 30, 2001, the fund had $1,002,248 in unsecured advances payable toits managing member.  These advanceshave no specified maturity date and bear interest at the prevailing prime commerciallending rate plus two percentage points and, accordingly, are subject tointerest 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 ExchangeAct, the Registrant caused this report to be signed on its behalf by theundersigned, thereunto duly authorized.
| November 14, 2001 | CORNERSTONE REALTY FUND, LLC |
|-------------------|------------------------------|
|              |                         |   |   |
|              | By:                          | CORNERSTONE INDUSTRIAL PARTNERS, LLC |
|              | Its Managing Member          |
|              |                         |   |   |
|              | By:                          | CORNERSTONE VENTURES, INC. |
|              | Its Manager                  |
|              |                         |   |
|              |                         |   |
|              | By:                          | /s/ TERRY G. ROUSSEL |   |
|              |                         |   | Terry G. Roussel, President |
|              |                         |   | (Principal Executive Officer, |
|              |                         |   | Principal Financial Officer and |
|              |                         |   | Principal Accounting Officer) |
|                   |                              |  |  |  |  |  |  |  |  |