<PAGE>

                     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 JUNE 30, 2000

         [ ]      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 Employer
of 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.

                                    Yes X  No
                                       ---

         As of August 10, 2000, the Company had no units of membership interest
issued and outstanding.



<PAGE>


<TABLE>
<CAPTION>

PART I - FINANCIAL INFORMATION

                                                                                                               PAGE
ITEM 1.     FINANCIAL STATEMENTS

CORNERSTONE REALTY FUND, LLC

<S>                                                                                                            <C>
Condensed Balance Sheets at June 30, 2000 and December 31, 1999.................................................F-1

Condensed Statements of Operations for the Three Months ended June 30, 2000 and
  June 30, 1999 and the Six Months ended June 30, 2000 and June 30, 1999........................................F-2

Condensed Statements of Cash Flows for the Six Months ended June 30, 2000
  and June 30, 1999 ............................................................................................F-3

Notes to Condensed Financial Statements ........................................................................F-4

CORNERSTONE INDUSTRIAL PROPERTIES, LLC

Condensed Consolidated Balance Sheets at June 30, 2000 and December 31, 1999....................................F-6

Notes to Condensed Consolidated Balance Sheets .................................................................F-7

</TABLE>



                                                             -2-

<PAGE>




                         PART I - FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS


                                          CORNERSTONE REALTY FUND, LLC
                                    (A CALIFORNIA LIMITED LIABILITY COMPANY)

                                            CONDENSED BALANCE SHEETS


                                                     ASSETS
<TABLE>
<CAPTION>
                                                                                JUNE 30, 2000    DECEMBER 31, 1999
                                                                            ----------------------------------------
                                                                                 (UNAUDITED)
<S>                                                                        <C>                     <C>
Office equipment, less accumulated depreciation of $1,035 in 2000 and
   $751 in 1999..........................................................      $     1,819           $     2,103
Deferred offering costs..................................................          350,616               178,350
                                                                            ----------------------------------------
Total assets.............................................................      $   352,435           $   180,453
                                                                            ========================================

                        LIABILITIES AND MEMBERS' DEFICIT

Current liabilities
   Accounts payable......................................................      $    39,888           $     5,235
   Advances payable to managing member...................................          579,377               401,988
                                                                            ----------------------------------------
                                                                                   619,265               407,223
Members' deficit (100,000 units authorized, none issued or outstanding)..         (266,830)             (226,770)
                                                                            ----------------------------------------
Total liabilities and members' deficit...................................      $   352,435           $   180,453
                                                                            ========================================
</TABLE>


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

                                                            F-1

<PAGE>



                          CORNERSTONE REALTY FUND, LLC
                    (A CALIFORNIA LIMITED LIABILITY COMPANY)

                 CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED                    SIX MONTHS ENDED
                                                       JUNE 30,                             JUNE 30,
                                                 2000               1999              2000             1999
                                        ---------------------------------------------------------------------------
<S>                                   <C>                     <C>              <C>              <C>
Expenses
   General and administrative
     expenses........................      $     17,029          $      6,506     $     45,977      $     18,880
   Consulting fees to related party..            29,242                16,234           60,148            32,627
   Interest expense on advances
     payable to member...............             7,649                 4,645           18,803             7,177
                                        ---------------------------------------------------------------------------
   Net loss..........................      $    (53,920)         $    (27,385)    $   (124,928)     $    (58,684)
                                        ===========================================================================
</TABLE>

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


                                                       F-2


<PAGE>



                                        CORNERSTONE REALTY FUND, LLC
                                  (A CALIFORNIA LIMITED LIABILITY COMPANY)

                               CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                         SIX MONTHS ENDED
                                                                                             JUNE 30,
                                                                                      2000              1999
                                                                                ------------------------------------
<S>                                                                              <C>             <C>
OPERATING ACTIVITIES
Net loss....................................................................       $   (124,928)    $    (58,684)
Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation...........................................................                284              230
     Changes in operating assets and liabilities
              Accounts payable..............................................             34,653          (23,605)
                                                                                ------------------------------------
Net cash used in operating activities.......................................            (89,991)         (82,059)

FINANCING ACTIVITIES
Deferred offering costs.....................................................           (172,266)         (54,310)
Advances from managing member...............................................            177,389          136,369
Capital contributions.......................................................             84,868                -
                                                                                ------------------------------------
Net cash provided by financing activities                                                89,991           82,059
                                                                                ------------------------------------

Net change in cash..........................................................                  -                -

Cash at beginning of period.................................................                  -                -
                                                                                ------------------------------------

Cash at end of period.......................................................       $          -     $          -
                                                                                ====================================
</TABLE>


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


                                                        F-3
<PAGE>

                          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 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. BASIS OF PRESENTATION

         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 statements. 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 and six month periods ended June 30, 2000 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000.

         The balance sheet at December 31, 1999 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements.

         For further information, refer to the financial statements and
footnotes thereto included in Cornerstone Realty Fund's Registration Statement
on Form S-11 filed with the Securities and Exchange Commission on June 14, 2000.

                                      F-4

<PAGE>

                          CORNERSTONE REALTY FUND, LLC
                    (A CALIFORNIA LIMITED LIABILITY COMPANY)

               NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

3. RELATED PARTY TRANSACTIONS

         In order to fund its initial operating costs, the Fund has received
unsecured advances amounting to $579,377 from CIP through June 30, 2000. These
advances bear simple interest at the prevailing prime commercial lending rate
plus two percentage points. Interest expense totaling $7,649 and $4,645 during
the three months ended June 30, 2000 and 1999, respectively, and $18,803 and
$7,177 during the six months ended June 30, 2000 and 1999, respectively, was
incurred on these advances. The accrued interest incurred through June 30, 2000
has been added to the advances payable balance. These advances and accrued
interest are expected to be repaid with proceeds from the planned offering of
units. During the three months ended June 30, 2000, $84,868 in advances were
forgiven and accounted for as a capital contribution to the Fund.

         During the three months ended June 30, 2000 and 1999, $29,242 and
$16,234, respectively, and during the six months ended June 30, 2000 and 1999,
$60,148 and $32,627, respectively, was paid to employees of CIP's managing
member for services related to the planned offering of units.

                                      F-5

<PAGE>

                     CORNERSTONE INDUSTRIAL PROPERTIES, LLC
                    (A CALIFORNIA LIMITED LIABILITY COMPANY)

                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                     ASSETS

                                                                                                    DECEMBER 31,
                                                                               JUNE 30, 2000            1999
                                                                          ------------------------------------------
                                                                                (UNAUDITED)
<S>                                                                       <C>                       <C>
Current assets
   Cash................................................................      $      20,278          $     117,497
   Prepaid rent........................................................              1,200                      -
   Marketable equity securities........................................          1,143,553              1,034,580
                                                                          ----------------------------------------
Total current assets...................................................          1,165,031              1,152,077

Office equipment, less accumulated depreciation of $893 in 2000 and
   $751 in 1999........................................................              5,811                  2,103
Security deposits......................................................              7,847                      -
Deferred offering costs................................................            560,411                325,774
                                                                          ----------------------------------------
Total assets...........................................................      $   1,739,100          $   1,479,954
                                                                          ==========================================

                        LIABILITIES AND MEMBERS' CAPITAL

Current liabilities
   Accounts payable....................................................      $      73,018          $      10,384
   Advances payable to member..........................................             10,794                 45,837
                                                                          ------------------------------------------
                                                                                    83,812                 56,221

Members' capital.......................................................          1,770,823              1,533,187
   Member's capital contribution note..................................           (115,535)              (109,454)
                                                                          ------------------------------------------
   Member's capital, net...............................................          1,655,288              1,423,733
                                                                          ------------------------------------------
Total liabilities and members' capital.................................      $   1,739,100          $   1,479,954
                                                                          ==========================================
</TABLE>

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

                                      F-6

<PAGE>

                     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"). 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. BASIS OF PRESENTATION

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.

         The balance sheet at December 31, 1999 has been derived from the
audited consolidated balance sheet at that date but does not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements.

         For further information, refer to the financial statements and
footnotes thereto included in Cornerstone Realty Fund's Registration Statement
on Form S-11 filed with the Securities and Exchange Commission on June 14, 2000.

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 date. All
marketable securities are defined as trading securities or available-for-sale
securities under the provisions of Statement of Financial Accounting Standards
No. ("SFAS") 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

                                      F-7

<PAGE>

2. BASIS OF PRESENTATION (CONTINUED)

MARKETABLE EQUITY SECURITIES AND MEMBERS' CAPITAL (CONTINUED)

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' equity. The cost
of investments sold is determined on the specific identification or the
first-in, first-out method. As of June 30, 2000 and December 31, 1999, all
marketable equity securities are classified as trading securities and are
carried on the balance sheet at their aggregate fair value. The cost of and
unrealized gain on these securities are $973,895 and $169,658, respectively at
June 30, 2000 and $1,007,600 and $26,980, respectively, at December 31, 1999.
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 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,
is 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. 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.

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.

                                      F-8

<PAGE>

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATION

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
$53,920 and $27,385 for the three months ended June 30, 2000 and 1999,
respectively, and aggregated $124,928 and $58,684 for the six months ended June
30, 2000 and 1999, respectively. Organizational and other start-up expenses and
associated losses are expected to continue until the organization of the fund is
completed.

                                      -3-

<PAGE>

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 June 30, 2000, the fund had $597,377 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.

                                      -4-

<PAGE>

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

                  27.1     Financial Data Schedule

         (b)      REPORTS ON FORM 8-K

                  None.

                                      -5-

<PAGE>


                                   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.

August 10, 2000            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 and Financial Officer)

                                      -6-