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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 or
 o
    
    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 000-51868
 CORNERSTONE REALTY FUND, LLC
  CALIFORNIA
(State or other jurisdiction of incorporation or organization)
    
    33-0827161
(I.R.S. Employer Identification No.)1920 MAIN STREET, SUITE 400, IRVINE, CA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
    
    92614
(ZIP CODE)
 949-852-1007
 Not Applicable
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    

Smaller Reporting Company þ(Do not check if a smaller reporting company)
  o þ




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PART I. FINANCIAL INFORMATIONItem 1. Financial Statements:Condensed Balance Sheets as of March 31, 2011 (unaudited) and December 31, 2010
    
    
    3Condensed Statements of Operations for the Three months ended March 31, 2011(unaudited) and
March 31, 2010 (unaudited)
    
    
    4Condensed Statement of Members Capital for the Three months ended March 31, 2011 (unaudited)
    
    
    5Condensed Statements of Cash Flows for the Three months ended March 31, 2011 (unaudited) and
March 31, 2010 (unaudited)
    
    
    6Notes to Condensed Financial Statements (unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    13Item 4. Controls and Procedures
    
    
    13PART II. OTHER INFORMATIONItem 6. Exhibits
    
    
    15SIGNATURES
    
    
    16EX-31.1EX-31.2EX-32
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CORNERSTONE REALTY FUND, LLC
(a California Limited Liability Company)
 
 CONDENSED BALANCE SHEETS
(UNAUDITED)
 March 31, 2011
    
    
    December 31, 2010ASSETSCash and cash equivalents
    
    $
    3,892,000
    
    
    $
    4,356,000Investments in real estateLand
    
    
    9,593,000
    
    
    
    9,593,00Buildings and improvements, net
    
    
    15,474,000
    
    
    
    15,649,000Intangible asset  in-place leases, net
    
    
    92,000
    
    
    
    104,00025,159,000
    
    
    
    25,346,000Other assetsTenant and other receivables, net
    
    
    261,000
    
    
    
    292,000Prepaid expenses and other assets
    
    
    67,000
    
    
    
    19,000Deferred financing cost, net
    
    
    70,000
    
    
    
    77,000Leasing commissions, net
    
    
    173,000
    
    
    
    195,000Total assets
    
    $
    29,622,000
    
    
    $
    30,285,000LIABILITIES AND MEMBERS CAPITALLiabilitiesAccounts payable, accrued liabilities and prepaid rent
    
    $
    304,000
    
    
    $
    157,000Distributions payable
    
    
    
    
    
    
    622,000Real estate taxes payable
    
    
    200,000
    
    
    
    231,000Tenant security deposits
    
    
    259,000
    
    
    
    254,000Note payable
    
    
    3,974,000
    
    
    
    3,987,000Total liabilities
    
    
    4,737,000
    
    
    
    5,251,000Commitments and contingencies (Note 7)Members capital (100,000 units authorized and issued as
of March 31, 2011 and December 31, 2010; 98,670 and
98,670 units outstanding as of March 31, 2011 and
December 31, 2010, respectively)
    
    
    24,885,000
    
    
    
    25,034,000Total liabilities and members capital
    
    $
    29,622,000
    
    
    $
    30,285,000
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CORNERSTONE REALTY FUND, LLC
(a California Limited Liability Company)
 
 CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
 Three Months EndedMarch 31,2011
    
    
    2010RevenuesRental revenues
    
    $
    618,000
    
    
    $
    688,000Tenant reimbursements and other income
    
    
    177,000
    
    
    
    159,000795,000
    
    
    
    847,000ExpensesProperty operating and maintenance
    
    
    228,000
    
    
    
    266,000Property taxes
    
    
    152,000
    
    
    
    150,000General and administrative
    
    
    169,000
    
    
    
    109,000Depreciation and amortization
    
    
    275,000
    
    
    
    214,000824,000
    
    
    
    739,000Other income
    
    
    
    
    
    
    51,000Interest expense
    
    
    (64,000
    )
    
    
    Net (loss) income
    
    $
    (93,000
    )
    
    $
    159,000Net (loss) income allocable to managing member
    
    $
    (9,000
    )
    
    $
    16,000Net (loss) income allocation to unit holders
    
    $
    (84,000
    )
    
    $
    143,000Per unit amounts:Basic and diluted (loss) income allocable to unit holders
    
    $
    (0.85
    )
    
    $
    1.45Basic and diluted weighted average units outstanding
    
    
    98,670
    
    
    
    98,790
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CORNERSTONE REALTY FUND, LLC
(a California Limited Liability Company)
 
 CONDENSED STATEMENT OF MEMBERS CAPITAL
(Unaudited)
 Balance, December 31, 2010
    
    $
    25,034,000Cash distributions to managing member
    
    
    (56,000
    )Net loss
    
    
    (93,000
    )Balance, March 31, 2011
    
    $
    24,885,000
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CORNERSTONE REALTY FUND, LLC
(a California Limited Liability Company)
 
 CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
 Three Months EndedMarch 31,2011
    
    
    2010OPERATING ACTIVITIESNet (loss) income
    
    $
    (93,000
    )
    
    $
    159,000Adjustments to reconcile net (loss) income to net cash provided by operating
activities:Amortization of deferred financing costs
    
    
    7,000
    
    
    
    Depreciation and amortization
    
    
    275,000
    
    
    
    214,000Provision for bad debt
    
    
    7,000
    
    
    
    41,000Straight-line rent and amortization of acquired above/below market leases, net
    
    
    18,000
    
    
    
    (29,000
    )Changes in operating assets and liabilities:Tenant and other receivables, net
    
    
    7,000
    
    
    
    (30,000
    )Prepaid expenses and other assets
    
    
    (60,000
    )
    
    
    (82,000
    )Accounts payable, accrued liabilities and prepaid rent
    
    
    144,000
    
    
    
    (14,000
    )Real estate taxes payable
    
    
    (31,000
    )
    
    
    22,000Net cash provided by operating activities
    
    
    274,000
    
    
    
    281,000INVESTING ACTIVITIESInvestments in real estate
    
    
    (47,000
    )
    
    
    (22,000
    )Net cash used in investing activities
    
    
    (47,000
    )
    
    
    (22,000
    )FINANCING ACTIVITIESRepayment of note payable
    
    
    (13,000
    )
    
    
    Cash distributions to unit holders
    
    
    (622,000
    )
    
    
    (622,000
    )Cash distributions to managing member
    
    
    (56,000
    )
    
    
    Units repurchased and retired
    
    
    
    
    
    
    (49,000
    )Net cash used in financing activities
    
    
    (691,000
    )
    
    
    (671,000
    )Net decrease in cash and cash equivalents
    
    
    (464,000
    )
    
    
    (412,000
    )Cash and cash equivalents at beginning of period
    
    
    4,356,000
    
    
    
    761,000Cash and cash equivalents at end of period
    
    $
    3,892,000
    
    
    $
    349,000Supplemental disclosure of non-cash financing and investing activities:Cash paid for interest
    
    $
    57,000
    
    
    $
    
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CORNERSTONE REALTY FUND, LLC
(a California Limited Liability Company)
 
 NOTES TO CONDENSED FINANCIAL STATEMENTS   (Unaudited)
 1. Organization and Business
      Proposed Plan of liquidation
     7




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2. Summary of Significant Accounting Policies
 Use of Estimates
  Interim Financial Information
  Reclassifications
  3. Investment in Real Estate
   8




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Buildings and
    
    
    IntangibleLand
    
    
    Improvements
    
    
    Lease ValueInvestments in real estate
    
    $
    9,593,000
    
    
    $
    18,255,000
    
    
    $
    108,000Less: accumulated depreciation and amortization
    
    
    
    
    
    
    (2,781,000
    )
    
    
    (16,000
    )$
    9,593,000
    
    
    $
    15,474,000
    
    
    $
    92,000
  Buildings and
    
    
    IntangibleLand
    
    
    Improvements
    
    
    Lease ValueInvestments in real estate
    
    $
    9,593,000
    
    
    $
    18,208,000
    
    
    $
    108,000Less: accumulated depreciation and amortization
    
    
    
    
    
    
    (2,559,000
    )
    
    
    (4,000
    )$
    9,593,000
    
    
    $
    15,649,000
    
    
    $
    104,000
   Lease IntangiblesApril 1, 2011 to December 31, 2011
    
    $
    8,0002012
    
    
    11,0002013
    
    
    7,0002014
    
    
    4,0002015 and thereafter
    
    
    62,000Total
    
    $
    92,000
 4. Allowance for Doubtful Accounts
  5. Concentration of Credit Risks
   6. Note Payable
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PrincipalYear
    
    AmountApril 1, 2011 to December 31, 2011
    
    $
    38,0002012
    
    $
    54,0002013
    
    $
    3,882,0002014
    
    $
    2015
    
    $
    
 7. Commitments and Contingencies
   8. Subsequent Event
 Proposed Liquidation
   10




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   Overview
  Proposed Plan of liquidation
     11




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Market Outlook  Real Estate and Real Estate Finance Markets
     Critical Accounting Policies
   Results of Operations
   Three months ended March 31, 2011 and 2010
     12




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Liquidity and Capital Resources
    
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
   
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  13




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PART II  OTHER INFORMATION
 
 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, LLCBy:
    CORNERSTONE INDUSTRIAL PROPERTIES, LLCits Managing Member By:
    CORNERSTONE VENTURES, INC.its Manager By:
    /s/ TERRY G. ROUSSELTerry G. Roussel, President(Principal Executive Officer)By:
    /s/ SHARON C. KAISERSharon C. Kaiser,Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer) 16