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SECURITIES AND EXCHANGE  COMMISSIONWashington, D.C. 20549

________________

**Form 10Q**___________
 

QUARTERLY REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934

For the  fiscal quarter ended

**March 31, 2003**

Commission file number:  000-29778

**Merry Land Properties,  Inc.**

 
State      of Incorporation: GeorgiaI.R.S.        Employer Identification Number: 58-2412761
________________

P.O. Box 1417Augusta, Georgia(Address of Principal Executive Offices)
706      722-675630903(Registrant’s      Telephone(Zip        Code)Number,      Including Area Code)
 
Indicate by check mark  whether  the  registrant  (1) has filed all  reports  required to be filed by Section 13 or15(d) of the Securities  Exchange Act of 1934 during the preceding twelve months,  and (2) has been subject to suchfiling requirements for the past ninety days:  Yes X No____
Indicate by check markwhether the registrant is an accelerated filer (as defined in Exchange Act Rule12b-2): Yes____ No X

The number of shares ofcommon stock outstanding as of March 14, 2003 was 2,756,763. 

Form 10-Q - Merry Land Properties, Inc.Index
PART I.     FINANCIAL INFORMATION                                                                          Page                                                                                                           ----Item 1.          Financial Statements                 Consolidated Balance Sheets - March 31, 2003 and December 31, 2002 .........................3                 Consolidated Statements of Income -                    Three months ended March 31, 2003 and 2002...............................................4                 Consolidated Statements of Cash Flows -                    Three months ended March 31, 2003 and 2002...............................................5                 Notes to Consolidated Financial Statements..................................................6Item 2.          Management's Discussion and Analysis of Financial Condition                    and Results of Operations...............................................................10Item 3.          Quantitative and Qualitative Disclosures about Market Risk.................................18Item 4           Controls and Procedures....................................................................19PART II.    OTHER INFORMATIONItem 1.           Legal Proceedings.........................................................................20Item 2.           Changes in Securities and Use of Proceeds.................................................20Item 3.           Defaults upon Senior Securities...........................................................20Item 4.           Submission of Matters to a Vote of Security Holders.......................................20Item 5.           Other Information.........................................................................20Item 6.           Exhibits and Reports on Form 8-K..........................................................21SIGNATURES..................................................................................................22CERTIFICATIONS..............................................................................................23
Form 10-Q - Part I. Financial InformationItem 1-..Financial Statements

Merry Land Properties, Inc. and Subsidiaries                                                      CONSOLIDATED BALANCE SHEETS
                                                                                    Unaudited                                                                                 March 31, 2003       December 31, 2002                                                                                -------------------------------------------ASSETS      Real estate assets, at cost:      Land held for mining, development and sale                                  $   3,817,368           $  4,185,624      Apartments                                                                    111,214,733            104,284,968      Commercial rental property                                                      3,349,861              3,371,086      Furniture and equipment                                                         2,014,624              2,009,367      Development in progress                                                         2,640,316              8,152,440                                                                                -------------------------------------------           Total cost                                                               123,036,902            122,003,485      Accumulated depreciation and depletion                                        (20,241,627)           (19,301,776)                                                                                -------------------------------------------                                                                                    102,795,275            102,701,709INVESTMENT IN JOINT VENTURE                                                           1,492,859              1,539,930CASH AND CASH EQUIVALENTS                                                             2,256,995              2,984,334ESCROWED CASH                                                                         1,196,708              1,748,261OTHER ASSETS      Notes receivable                                                                  332,014                339,115      Deferred loan costs                                                             1,258,325              1,281,098      Other receivable                                                                  411,946                398,795      Deferred tax asset                                                              2,910,202              2,322,511      Other                                                                             776,972                275,183                                                                                -------------------------------------------                                                                                      5,689,459              4,616,702                                                                                -------------------------------------------TOTAL ASSETS                                                                      $ 113,431,296           $113,590,936                                                                                ===========================================NOTES PAYABLE      Construction loans                                                          $  27,596,281           $ 26,753,291      Mortgage loans                                                                 63,663,970             63,843,303                                                                                -------------------------------------------                                                                                     91,260,251             90,596,594ACCOUNTS PAYABLE AND ACCRUED LIABILITIES      Accrued interest                                                                  564,117                561,959      Accrued property taxes                                                            421,550                414,066      Construction retainage                                                          1,807,386              1,772,821      Payables and accrued liabilities                                                1,068,644              1,337,153                                                                                -------------------------------------------                                                                                      3,861,697              4,085,999COMMITMENT AND CONTINGENCIES                                                                  -                      -STOCKHOLDERS' EQUITY      Common stock, at $1 stated value 5,000,000 shares authorized,      2,756,763 and2,740,763 shares issued and outstanding at March      31, 2003 and December 31, 2002, respectively                                    2,756,763              2,740,763      Capital surplus                                                                10,084,692              9,955,892      Unamortized compensation                                                       (1,608,940)            (1,613,909)      Cumulative undistributed net earnings                                           7,215,985              8,186,230      Receivable from ESOP                                                             (139,152)              (360,633)                                                                                -------------------------------------------                                                                                     18,309,348             18,908,343                                                                                -------------------------------------------TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY                                         $ 113,431,296           $113,590,936                                                                                ===========================================
The accompanying notes are an integral part of these consolidated balance sheets.

Form 10-Q - Part I. Financial InformationItem 1-  Financial Statements

Merry Land Properties, Inc. and Subsidiaries                                                    CONSOLIDATED STATEMENTS OF INCOME                                                               (Unaudited)
                                                                                    Three months ended March 31,                                                                                -------------------------------------INCOME                                                                                2003               2002                                                                                -------------------------------------Rental income                                                                     $ 3,990,420        $ 3,595,650Royalty income                                                                        168,874            123,420Interest income                                                                        12,203             14,052Management fees                                                                        97,084            108,908Development fees                                                                      114,450            100,000Sale of condominium                                                                   295,000                  -Gain on sale of land                                                                  115,208             98,742Other income                                                                           12,091             (7,399)                                                                                -------------------------------------                                                                                    4,805,330          4,033,373EXPENSESRental expense                                                                      1,652,751          1,213,870Cost of condominium sold                                                              360,230                  -Interest expense                                                                    1,542,970          1,246,082Depreciation                                                                          964,458            626,253Amortization                                                                           43,048             17,461General and administrative expense                                                  1,799,807          1,079,185                                                                                -------------------------------------                                                                                    6,363,264          4,182,851                                                                                -------------------------------------LOSS FROM CONTINUING OPERATIONS BEFORE TAXES                                       (1,557,934)          (149,478)Income tax benefit                                                                   (587,691)           (56,756)                                                                                -------------------------------------LOSS FROM CONTINUING OPERATIONS                                                      (970,243)           (92,721)DISCONTINUED OPERATIONS:Gain from sale of apartments, net of $46,902 in income taxes                                -             76,622Income from apartments sold, net of an income tax expense of $2,010,217                     -          3,238,545                                                                                -------------------------------------INCOME FROM DISCONTINUED OPERATIONS                                                         -          3,315,167NET (LOSS)  INCOME                                                                $  (970,243)       $ 3,222,446                                                                                =====================================WEIGHTED AVERAGE COMMON SHARES  Basic                                                                             2,426,262          2,349,806  Diluted                                                                           2,426,262          2,349,806EARNINGS FROM CONTINUING OPERATIONS PER COMMON SHARE  Basic                                                                           $     (0.40)       $     (0.04)  Diluted                                                                         $     (0.40)       $     (0.04)EARNINGS FROM DISCONTINUED OPERATIONS PER COMMON SHARE  Basic                                                                           $         -        $      1.41  Diluted                                                                         $         -        $      1.41EARNINGS PER COMMON SHARE  Basic                                                                           $     (0.40)       $      1.37  Diluted                                                                         $     (0.40)       $      1.37
The accompanying notes are an integral part of these consolidated income statements.

Form 10-Q - Part I.   Financial InformationItem 1-  Financial Statements

Merry Land Properties, Inc. and Subsidiaries                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS                                                              (Unaudited)
                                                                               Three months ended March 31,                                                                           ------------------------------------CASH FLOWS FROM OPERATING ACTIVITIES:                                             2003              2002                                                                           ------------------------------------Net (loss) income                                                             $  (970,243)     $ 3,222,446Adjustments to reconcile net (loss) income to net cash used in operations:Income from discontinued operations, net of taxes                                       -       (3,315,167)Deferred income tax benefit                                                      (587,691)         (56,756)Gain on sale real property and land                                              (115,208)         (98,742)Cost of condominium sold                                                          360,230                -Depreciation and amortization expense                                           1,007,506          643,714Amortization of compensation element of restricted stock grants                    95,469           92,423Decrease in net payables and liabilities                                         (258,867)        (403,464)Increase in other assets and receivables                                         (531,977)        (801,353)                                                                           ------------------------------------  Net cash used in operating activities                                        (1,000,781)        (716,900)CASH FLOWS FROM INVESTING ACTIVITIES:Expenditures for development                                                   (1,106,285)      (3,513,323)Sale of real property and land                                                    183,725          102,600Capitalized costs, improvements and replacements                                 (321,312)        (710,528)Decrease in receivable from ESOP                                                  221,481           72,721Distributions from joint ventures                                                  47,071           41,485Payments received on notes receivable                                               7,101           10,421                                                                           ------------------------------------ Net cash used in investing activities                                           (968,219)      (3,996,624)CASH FLOWS FROM FINANCING ACTIVITIES:Net proceeds from construction loans                                              842,990        1,950,754(Repayment of) net proceeds from mortgage loans                                  (179,333)         893,395Decrease in escrows                                                               578,004          312,373                                                                           ------------------------------------  Net cash provided by financing activities                                     1,241,661        3,156,522CASH FLOWS FROM DISCONTINUED OPERATIONS                                                 -        3,018,974NET (DECREASE) INCREASE IN CASH                                                  (727,339)       1,461,972CASH AT BEGINNING OF PERIOD                                                   $ 2,984,334      $ 3,601,636                                                                           ====================================CASH AT END OF PERIOD                                                         $ 2,256,995      $ 5,063,608                                                                           ====================================Interest paid:                                                                $ 1,636,809      $ 2,034,775Income taxes paid:                                                            $         -      $         -
**Merry LandProperties, Inc. and SubsidiariesNotes To Consolidated Financial Statements**
*1.        Organization*
        MerryLand Properties, Inc. was formed on September 3, 1998, as a corporate subsidiaryof Merry Land & Investment Company, Inc. On October 15, 1998, the commonstock of Merry Land Properties was spun off to the common shareholders of MerryLand & Investment Company on the basis of one share of Merry Land Propertiesstock for every twenty shares of Merry Land & Investment Company. 

*2.        Basis of Presentation and Summary of Significant Accounting Policies*
        Theconsolidated financial statements were prepared by Merry Land without audit, butin the opinion of management reflect all adjustments necessary (whichadjustments are of a normal and recurring nature) for the fair presentation ofits financial position as of March 31, 2003 and results of operations for thethree month period ended March 31, 2003. Results of operations for the interim2003 period are not necessarily indicative of results expected for the fullyear. Certain information and disclosures have been condensed or omittedpursuant to the rules and regulations of the Securities and Exchange Commission.Merry Land believes that the disclosures herein are adequate to make theinformation presented not misleading. 

        Thesefinancial statements should be read in conjunction with the audited financialstatements and notes included in the company’s latest annual report on Form10-K for the fiscal year ended December 31, 2002. 

        InDecember 2002, SFAS 148, Accounting for Stock-Based Compensation –Transition and Disclosure, was issued which amends SFAS No. 123, Accounting forStock-Based Compensation. This Statement amends FASB Statement No. 123,Accounting for Stock-Based Compensation, to provide alternative methods oftransition for an entity that voluntarily changes to the fair value based methodof accounting for stock-based employee compensation. It also amends thedisclosure provisions of that Statement to require prominent disclosure aboutthe effects on reported net income of an entity’s accounting policydecisions with respect to stock-based employee compensation. This standard hadno effect of the financial position and results of operations of the company. 

*3.        Discontinued Operations*
        OnMarch 12, 2002, Merry Land sold both *Magnolia Villas* and *West Wind*apartments, located in Savannah, for a total of $16.4 million, recognizing apretax gain of $5.2 million. In December, 2002, Merry Land also sold *SummitPlace* apartments, located in Charleston. As a result of these sales, thecompany’s financial statements have been prepared with these threecommunities’ results of operations, cash flows, and the gain from sale ofthe two apartments presented and shown as “discontinued operations”.All historical statements have been restated to conform to this presentation inaccordance with SFAS No. 144. 

Summarized financialinformation for the discontinued operations is as follows: 
                                                    Three months ending                                                       March 31, 2002                                                  -------------------------                Rental income                             $  955,420                Operating expenses                          (401,850)                Depreciation                                (78,499)                                                  -------------------------                Operating income                             475,071                Interest expense                            (346,144)                Amortization expense                          (5,402)                                                  -------------------------                Net income before taxes                      123,525                Income tax expense                           (46,902)                                                  -------------------------                Net income after taxes                    $   76,622                                                  =========================
*4.        Earnings Per Share and Share Information*
        Basicearnings per common share is computed on the basis of the weighted averagenumber of shares outstanding during each period excluding the unvested sharesissued to employees under our Management Incentive Plan. Diluted earnings pershare is computed giving effect to dilutive stock equivalents resulting fromoutstanding options and restricted stock using the treasury stock method. Sincethe company had a loss from continuing operations for the first three months in2003 and 2002, all stock equivalents were antidilutive during these periods andhave been excluded from weighted shares outstanding. 

        A reconciliation of the average outstanding shares used in the two calculations is as follows:
                                                                Three months ended March 31,                                                             ------------------------------------                                                                  2003                2002                                                             ----------------    ----------------        Weighted average shares outstanding-basic               2,426,262           2,349,806        Dilutive potential common shares (1)                            -                   -                                                             ----------------    ----------------        Weighted average shares outstanding-diluted             2,426,262           2,349,806
        (1)        Dilutive potential common shares not included because the company's continuing operations were in a loss position for         both periods. The total potential common shares outstanding were 2,497,766 and 2,606,468 at March 31, 2002 and 2003,         respectively.

*5.        Segment Information*
        Thecompany has three reportable segments: Apartment Communities, CommercialProperties and Land, and Third Party Services. The accounting policies of thesegments are the same as those described in the summary of significantaccounting policies in the Form 10-K of the year ended December 31, 2002. Thefollowing information has been presented in a presentation consistent to theinformation utilized by the chief decision makers in managing the company. Thecompany measures performance for each segment based on segment income. 
                                                           Commercial &      Third PartyThree months ending March 31, 2003         Apartments          Land            Services         Corporate        Consolidated                                        ----------------------------------------------------------------------------------------Real estate rental revenue                 $ 3,861,320      $  129,100        $       -       $         -        $  3,990,420Real estate expense                         (1,571,533)        (81,218)               -                 -          (1,652,751)Depreciation and amortization                 (877,453)        (62,607)               -           (67,446)         (1,007,506)                                        ----------------------------------------------------------------------------------------Income from real estate                      1,412,334         (14,725)               -           (67,446)          1,330,163Other income                                         -         333,302           97,084            24,294             454,680                                        ----------------------------------------------------------------------------------------Segment income                               1,412,334         318,577           97,084           (43,152)          1,784,843Interest expense                                     -               -                -        (1,542,970)         (1,542,970)General and administrative                    (153,907)       (194,881)        (131,463)       (1,319,556)         (1,799,807)                                        ----------------------------------------------------------------------------------------Income before taxes                          1,258,427         123,696          (34,379)       (2,905,678)         (1,557,934)Income tax benefit                                   -               -                -           587,691             587,691                                        ----------------------------------------------------------------------------------------Net income-continuing operations             1,258,427         123,696          (34,379)       (2,317,987)           (970,243)Income-discontinued operations                       -               -                -                  -                  -                                        ----------------------------------------------------------------------------------------Net income                                 $ 1,258,427      $  123,696        $ (34,379)      $(2,317,987)       $   (970,243)                                        ========================================================================================Capital investments                        $   294,686      $1,127,654        $       -       $     5,257        $  1,427,597                                        ========================================================================================Total real estate assets                   $93,970,029      $8,711,116        $       -       $   114,130        $102,795,275                                        ========================================================================================                                                           Commercial &      Third PartyThree months ending March 31, 2002         Apartments          Land            Services         Corporate         Consolidated                                        ----------------------------------------------------------------------------------------Real estate rental revenue                 $ 3,527,701      $   67,949        $       -       $         -       $   3,595,650Real estate expense                         (1,143,738)        (70,132)               -                 -          (1,213,870)Depreciation and amortization                 (535,523)        (52,127)               -           (56,064)           (643,714)                                        ----------------------------------------------------------------------------------------Income from real estate                      1,848,440         (54,310)               -           (56,064)          1,738,066Other income                                         -         322,162          108,908             6,653             437,723                                        ----------------------------------------------------------------------------------------Segment income                               1,848,440         267,852          108,908           (49,411)          2,175,789Interest expense                                     -               -                -        (1,246,082)         (1,246,082)General and administrative                    (286,076)        (94,852)        (185,580)         (512,677)         (1,079,185)                                        ----------------------------------------------------------------------------------------Income before taxes                          1,562,364         173,000          (76,672)       (1,808,170)           (149,478)Income tax benefit                           5,723,833               -                -            56,756              56,756                                        ----------------------------------------------------------------------------------------Net income-continuing operations             1,562,364         173,000          (76,672)       (1,751,414)            (92,721)Income-discontinued operations               5,723,833               -                -        (2,408,665)          3,315,167                                        ----------------------------------------------------------------------------------------Net income                                 $ 7,286,197      $  173,000        $ (76,672)      $(4,160,079)      $   3,222,446                                        ========================================================================================Capital investments                        $   137,940      $3,291,905        $       -       $       202       $   3,430,047                                        ========================================================================================
*6.        Commitments and Contingencies*
        Thecompany is party****to various claims, legal actions, and complaints arisingin the ordinary course of business. In the opinion of management, thedisposition of these matters will not have a material adverse effect on thefinancial condition of the company. 

        Thecompany is subject to the usual obligations associated with entering intocontracts for the development and management of the routine conduct of itsbusiness. 

        OnFebruary 19, 2003, the company entered into an agreement to merge Merry LandProperties, Inc. into a subsidiary of Cornerstone Realty Income Trust, Inc., aNew York Stock Exchange listed real estate investment trust (REIT) headquarteredin Richmond, Virginia. Cornerstone will issue new securities to the holders ofMerry Land’s common shares. The total value of the common stock to bereceived by Merry Land shareholders (including common stock receivable uponconversion) as of the date of the merger agreement was approximately $42 millionto Merry Land shareholders and Cornerstone will assume approximately $94 millionin debt and other liabilities. The transaction will be tax free to ourshareholders and is expected to close in the second quarter 2003, subject to theapproval of Merry Land’s shareholders and other customary closingconditions. The proposed transaction can be terminated at our option, if theclosing price of Cornerstone’s common shares is below $6.50 per share for10 of any 30 consecutive trading days prior to the consummation of the merger. 

Merry Land shareholderswill receive 1.818 Cornerstone common shares and 0.220 shares of Cornerstonenon-dividend paying Series B Convertible Preferred Stock for each Merry Landshare. The preferred stock will be convertible into 0.220 Cornerstone commonshares upon the completion and lease up of our *Merritt at Whitemarsh*project in Savannah and in certain other circumstances. 

 In order tofacilitate the merger transaction, a private company called Merry Land &Investment Company, LLC, has been formed by members of Merry Land’smanagement to buy the company’s non-apartment assets, which Cornerstone didnot desire, and to continue development of apartment projects for Cornerstone. 

        OnFebruary 25, 2003, a plaintiff claiming to be a shareholder of Merry Land fileda purported class action against Merry Land and its directors in the SuperiorCourt of Richmond County, Georgia, alleging that the directors breached theirfiduciary duties to the shareholders by approving the proposed mergertransaction with Cornerstone Realty Income Trust, Inc. and related transactions,including the sale by Merry Land of the non-apartment assets to Merry Land &Investment Company, LLC. The action seeks, among other things, an injunctionbarring the transactions and the payment of the plaintiff’s attorneys’and experts’ fees. Merry Land and its directors believe the action iswithout merit and will vigorously defend against the action. 

Form 10-Q - Part I. Financial InformationItem 2.

**Merry LandProperties, Inc.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS**
**Recent Events**
        On February 19, 2003, weentered into an agreement to merge Merry Land Properties, Inc. into a subsidiaryof Cornerstone Realty Income Trust, Inc., a New York Stock Exchange listed realestate investment trust (REIT) headquartered in Richmond Virginia. The mergerwill integrate our portfolio of apartment properties with Cornerstone’s 81apartment communities containing over 21,000 apartment units throughout theSoutheast and Texas. The combined company will have total assets of over $1.1billion. 

         For each share ofMerry Land common stock, our shareholders will receive 1.818 Cornerstone commonshares and 0.220 shares of Cornerstone non-dividend paying Series B ConvertiblePreferred Stock, which will be convertible into 0.220 Cornerstone common sharesupon the completion and lease up of our *Merritt at Whitemarsh* project inSavannah and in certain other circumstances. The total value of the common stock(including the common stock to be received upon conversion of the preferredstock) as of the date of the merger agreement was approximately $15.00 per MerryLand common share, which represents a 65% premium over our previous forty-fiveday average share price of $9.17. The transaction will be a tax-free exchange toour shareholders. 

         To facilitate themerger transaction, a private company called Merry Land & InvestmentCompany, LLC, has been formed by certain members of Merry Land’s managementto buy the company’s non-apartment assets, which Cornerstone did notdesire, and to continue development of apartment projects for Cornerstone. As acondition of the merger agreement, we have agreed to sell to this new companycertain commercial real estate properties, development land and other unimprovedreal estate, including land subject to clay leases and former landfill sites,for aggregate consideration of $7.4 million, including assumed indebtedness,plus the new entity’s obligation to assume and indemnify us for certainexisting and future liabilities (including environmental matters) related tothese properties. The new entity’s principals are Tennent Houston, MikeThompson, Dorrie Green and Fred Bolt. 

        Thetransactions were approved and recommended by an independent committee of MerryLand’s board of directors that consisted entirely of directors who will notbe owners of the new company. The independent committee was advised by anindependent financial advisor. 

        Theproposed transaction can be terminated at our option, if the closing price ofCornerstone’s common shares is below $6.50 per share for 10 of any 30consecutive trading days prior to the consummation of the merger. Uponcompletion of the merger, Tennent Houston will be added to Cornerstone’sBoard of Directors. The company expects the transactions to close in the secondquarter of 2003, subject to the approval of Merry Land’s shareholders andother customary closing conditions. 

        OnFebruary 25, 2003, a plaintiff claiming to be a shareholder of Merry Land fileda purported class action against Merry Land and its directors in the SuperiorCourt of Richmond County, Georgia, alleging that the directors breached theirfiduciary duties to the shareholders by approving the proposed mergertransaction with Cornerstone and related transactions, including the sale byMerry Land of the non-apartment assets to Merry Land & Investment Company,LLC. The action seeks, among other things, an injunction barring thetransactions and the payment of the plaintiff’s attorneys’ andexperts’ fees. Merry Land and its directors believe the action is withoutmerit and will vigorously defend against the action. 

        Inconnection with the proposed merger, Cornerstone filed a registration statementwith the Securities and Exchange Commission that contains the prospectus ofCornerstone relating to the securities to be issued as consideration in themerger and the proxy statement of Merry Land relating to the special meeting atwhich the proposed merger will be considered and voted upon by Merry Land’sshareholders, as well as other relevant documents concerning the proposedmerger. Investors and security holders are urged to read the proxystatement/prospectus, along with any other documents filed with the SEC becausethey contain important information. You can obtain a free copy of theregistration statement, including the exhibits filed therewith, at theSEC’s website at www.sec.gov. In addition, you may obtain the proxystatement/prospectus and other documents filed with the SEC free of charge byrequesting them from Cornerstone, in writing, at Cornerstone Realty IncomeTrust, Inc., Attention: Mark M. Murphy, 306 East Main Street, Richmond, Virginia23219, or by telephone at (804) 643-1761; or from Merry Land, in writing, atMerry Land Properties, Inc., Attention: Dorrie E. Green, 209 Seventh Street,Suite 300, Augusta, Georgia 30901, or by telephone at (706) 722-6756. 

        MerryLand, its directors and executive officers have been deemed to be participantsin the solicitation of proxies from Merry Land shareholders in favor of theproposed merger. A description of any interests that the directors and executiveofficers of Merry Land have in the transaction are available in the proxystatement/prospectus. 

**Apartments**
        AtMarch 31, 2003 Merry Land owned or had an interest in 2,292 apartment units inten communities. These communities are described in the following table. 
                                                                Three months ended March 31,                                                                ----------------------------                                                     Average Occupancy (1)        Average Rental Rate (2)                                                     ---------------------        -----------------------                    COMMUNITY             Units       2003           2002            2003          2002                    ---------             -----       ----           ----            ----          ----         WHOLLY OWNED COMMUNITIES         ------------------------         Quarterdeck                       230         94%            97%          $  769        $  782         Waters Edge                       204         90%            98%             648           646         Merritt at James Island (3)       230         80%            39%           1,063         1,046         Windsor Place                     224         96%            94%             649           655                                           ---         ---            ---           -----         -----           Total-Charleston                888         90%            81%             787           750         Greentree                         194         88%            96%             681           669         Hammocks at Long Point            308         88%            96%             868           898         Huntington                        147         94%            98%             691           676         Marsh Cove                        188         93%            96%             758           758         Merritt at Whitemarsh (3)         241         41%            N/A           1,037           N/A                                           ---         ---            ---           -----         -----           Total-Savannah                1,078         80%            96%             829           774         Total-Wholly Owned (4)          1,966         84%            89%          $  810        $  763         JOINT VENTURE COMMUNITIES         -------------------------         Cypress Cove (5)                  326         98%            95%          $  806        $  789                                           ---         ---            ---          ------         -----         Total-Joint Venture               326         98%            95%             806           789         Total-all                       2,292         86%            90%          $  809        $  767
        (1)        Represents the average physical occupancy at each month end for each period owned.        (2)        Represents the weighted average monthly rent charged for occupied owned units andrents asked for unoccupied owned units at March 31.        (3)        Development communities under lease up.        (4)        All wholly owned communities are "same store" with the exception of the two development communities under lease up.        (5)        Merry Land holds a 10% equity interest in this apartment community.

                 At the end of April 2003 the 230 unit *Merritt at James Island* in Charleston was 85% occupied and the lease up should becompleted this summer. At *Merritt at Whitemarsh* in Savannah all 241 apartment units have been placed in service, and 113units, or 57%, have been leased.

                 In March 2002, the company sold West Wind, a 192 unit apartment community, and Magnolia Villas, a 144 unit apartmentcommunity, both located in Savannah. In December 2002, the company sold Summit Place, a 226 unit apartment community located inCharleston.

**Results of Operations for the Three Months Ended March 31, 2003 and 2002**

                 Rental Operations-All Apartments. The following table describes the operating performance of the wholly owned apartmentcommunities that the company owned at March 31, 2003. (Dollars in thousands, except average monthly rent)
                                           %       Change from     Three months ended March 31,                                        Change    2002 to 2003           2003        2002                                     ---------------------------------------------------------         Rental income                     9 %       $ 333              $3,861      $3,528         Operating expenses               37 %         428               1,572       1,144         Depreciation                     64 %         341                 877         536                                     ---------------------------------------------------------         Total expenses                   36 %         769               2,449       2,160         Income from apartments (1)      (24)%       $(436)             $1,412      $1,848         Average occupancy (2)            N/A           (5)%                84%         89%         Average monthly rent (3)          6 %       $  47              $  810      $  763         Expense ratio (4)                N/A            8 %                41%         32%
       (1)         Income from apartments is total revenues less operating expenses and depreciation.         (2)              Represents the average physical occupancy at each month end for the period held.         (3)              Represents weighted average monthly rent charged for occupied units and rents asked for unoccupied units at March 31.         (4)              Represents total operating expenses divided by rental revenues.

         Income from apartments wasdown $436 thousand, or 24%, for the first three months in 2003 with a revenueincrease of $333 thousand, or 9%, an operating expense increase of $428thousand, or 37%, and a depreciation expense increase of $341 thousand, or 64%. 

        Apartmentincome from *Merritt at James Island* was $75 thousand and $69 thousand forthe first three months in 2003 and 2002, respectively. Rental income increased$293 thousand to $550 thousand in 2003 from $257 thousand in 2002 due to theaddition of 118 units. Expenses increased $287 thousand to $475 thousand in 2003from $189 thousand in 2002. 

        Theloss from apartments from the *Merritt at Whitemarsh*, which was completedin the first quarter 2003, was $89 thousand for the first three months in 2003.In 2003, rental income and expenses were $256 thousand and $346 thousand,respectively. In 2002, *Whitemarsh’*s income from apartments was $15thousand on rental income of $29 thousand and expenses of $14 thousand. 

        *RentalOperations-Same Store Apartments.* The following table compares theperformance of the 1,491 units of our seven wholly owned residential communitieswhich we owned for the first quarters of both 2003 and 2002. (“samestore” results) (Dollars in thousands, except average monthly rent)
                                                                   Three months ended March 31,                                             %      Change from    ----------------------------                                           Change   2002 to 2003       2003         2002                                        -------------------------------------------------------         Rental income                      (6)%      $ (187)         $3,055       $3,242         Personnel                          14 %          42             335          293         Utilities                          27 %          20              95           75         Operating                          10 %          12             137          125         Maintenance and grounds            28 %          45             206          161         Taxes and insurance                 6 %          22             385          363         Depreciation                        2 %          10             470          460                                        -------------------------------------------------------         Total expenses                     10 %         151           1,628        1,477         Income from apartments (1)        (19)%      $ (338)         $1,427       $1,765         Average occupancy (2)              N/A           (4)%            92%          96%         Average monthly rent (3)           (1)%      $   (6)         $  734       $  740         Expense ratio (4)                  N/A            7 %            38%          31%
       (1)        Income from apartments is total revenues less operating expenses and depreciation.        (2)        Represents the average physical occupancy at each month end for the period held.        (3)        Represents weighted average monthly rent charged for occupied units and rents asked for unoccupied units at March 31.        (4)        Represents total operating expenses divided by rental revenues.

        Samestore income from apartments for the first quarter in 2003 was down 19% on arevenue decrease of 6% and an increase in expenses of 10%. Non depreciationexpenses increased 14%. Overall occupancy at March 31, 2003 was 90.6%, down from95.8% a year ago. 

        Incomefrom apartments for the first quarter in 2003 in Charleston was down 22% on arevenue decrease of 4% and an increase in expenses of 16%. The decrease inrevenue was primarily due to a 3% decrease in average occupancy and the increasein expenses was due to an increase in maintenance employees and maintenancecosts. 

        Incomefrom apartments for the first quarter in 2003 in Savannah was down 17% on arevenue decrease of 7% and an increase in expenses by 6%. The decrease inrevenue was primarily due to a 5% decrease in average occupancy. 

        Likemost of the country, our markets in Savannah and Charleston are suffering weakapartment demand as the struggling economy has slowed job growth and lowinterest rates have encouraged home ownership at the expense of apartmentrentals. However, rental activity has picked up in recent weeks and we hope thatthis will continue as the economy begins to expand and as mortgage rates moveup. 

        *RentalOperations-Commercial.*The company owns three commercial properties in theAugusta area. In 2002, we relocated our corporate offices from the Ellis Streetoffice building to the newly renovated space in our Leonard building, also indowntown Augusta. 

        Rentalrevenue increased to $124 thousand in 2003 from $64 thousand in 2002 primarilydue to the new lease on our Ellis Street building.

        *Land. We own 4,131 acres of unimproved land, of which 2,948 acres are subject to clay and sand mining leases. Land income,for the most part mineral royalties and mitigation credits, was $177 thousand and $113 thousand for the first three months in 2003and 2002, respectively.
        *PropertyManagement Fees.*Management fee income decreased $12 thousand in the firstthree months of 2003 to $97 thousand from $109 thousand the same period in 2002.The total units managed were 1,254 at the end of the first quarter 2003, down204 units from 1,458 units in 2002. 

        *DevelopmentFees.* Development fee income was $114 thousand for the first quarter 2003,up from $100 thousand in 2002. All of the fee income in 2002 and $54 thousand offee income in 2003 was from the *Preserve at Godley Station Phase II*, athird party development community, and $60 thousand of the fee income in 2003was from the *Merritt at Godley Station Phase I*, a joint venturedevelopment community in which Merry Land has a 35% ownership interest. MerryLand also received $33 thousand in distributions in 2003 from the *Merritt atGodley Station Phase I* joint venture. Both of these developments arelocated in Savannah. 

        *Saleof Land.*In March 2003, we sold a 74 acre tract of land located inLexington, South Carolina for $165 thousand, recognizing a pretax gain of $122thousand.**In January 2002, we sold a 5.7 acre tract of land from the*Brickyard Tract* in Augusta for $103 thousand, recognizing a pretax gainof $99 thousand. 

        *Saleof Condominium.*We have sold all of the seven condominium units at *214Calhoun Street*in Charleston; four units in 2001 and two units in 2002 andthe final unit in March 2003. Total sales proceeds have been $3.0 million, andwe have recognized cumulative pretax gains of $218 thousand. During the firstquarter of 2003, we sold the remaining unit for $295 thousand, recognizing apretax loss of $65 thousand. 

        *InterestExpense.*Total interest expense decreased $49 thousand to $1.5 million forthe first three months in 2003, from $1.6 million in 2002. The $346 thousanddecrease in mortgage interest expense resulting from the purchaser’sassumption of the *West Wind, Magnolia Villas*and*Summit Place*apartments’ mortgages in 2002 was mostly offset by the decrease in interestcapitalized to development. (Dollars in thousands for the following table)
                                                                            Three months ended March 31,                                                       Change from      ---------------------------------                                                      2002 to 2003           2003                2002                                                    ----------------    --------------     --------------         Construction loans                              $  55             $  398             $   343         Mortgage loans                                    (11)             1,241               1,252                                                    ----------------    --------------     --------------         Total interest cost                                44              1,639               1,595         Capitalized for development                       253                (96)               (349)                                                    ----------------    --------------     --------------         Interest expense-continuing operations            297              1,543               1,246         Mortgage loans-discontinued operations           (346)                 -                 346                                                    ----------------    --------------     --------------         Total interest expense                         $  (49)           $ 1,543             $ 1,592
        In2002, the purchasers of *West Wind*, *Magnolia Villa*and *SummitPlace* apartment communities assumed $20.6 million in mortgage debt. 

        Capitalizedinterest related to development decreased due to the completion of the*Merritt at James Island* and the *Merritt at Whitemarsh* communities. 

        *Generaland Administrative Expenses.*General and administrative expenses increased$721 thousand, or 67%, to $1.8 million for the first quarter 2003 due to the$662 thousand increase in the proposed merger costs and due to the increase inlegal and audit fees. 

        *LossFrom Continuing Operations Before Taxes.* The loss from continuing operationsbefore taxes increased $1.4 million to a $1.6 million loss for the three monthperiod in 2003 from a $150 thousand loss for 2002. The increase in loss wasprimarily due to the $721 thousand increase in general and administrativeexpense, the decrease in apartment income (net of rental, depreciation andinterest expenses) from the “same store” communities and from the $406thousand decrease in apartment income from both the *Merritt at JamesIsland* and the *Merritt at Whitemarsh* development communities. 

        *IncomeFrom Discontinued Operations.* On March 12, 2002, Merry Land sold both*Magnolia Villas* and *West Wind* apartments, located in Savannah, fora total of $16.4 million, recognizing a pretax gain of $5.2 million. Their totalcost was $13.1 million and they had a net book value of $10.9 million. Inaddition, the company sold *Summit Place* apartments in December 2002. Thetotal net income after interest and income taxes for these three apartmentcommunities was $77 thousand for the first three months in 2002. 

        *FundsFrom Operations.*For the first quarter of 2003 the (deficit) funds fromoperations totaled $(27) thousand down from $638 thousand in 2002. The reductionin FFO was due primarily to the sale of *Magnolia Villas, West Wind*and*Summit Place*apartment*s*in 2002 and the increase in expenses relatedto the merger. (Dollars in thousands) 
                                                                               Three months ended March 31,                                                                             ---------------------------------                                                                                 2003                 2002                                                                             -------------        ------------Loss from continuing operations                                                $ (970)              $  (93)Add: depreciation of real estate owned                                            962                  585Add: tax benefit resulting from permanent difference in book and tax basis         52                   52Less: gain on sale of land, net of tax effect                                     (71)                 (61)                                                                             -------------        ------------Funds from continuing operations                                                  (27)                 483Income from discontinued operations                                                 -                3,315Add: depreciation of real estate owned                                              -                   79Less: gain on sale of apartments, net of tax effect                                 -               (3,239)                                                                             -------------        ------------Funds from discontinued operations                                                  -                  155                                                                             -------------        ------------Total funds from operations                                                    $  (27)              $  638Weighted average common shares outstanding-          Basic                                                                 2,426                2,350          Diluted                                                               2,426                2,350
        Thecompany believes that funds from operations are an important measure of itsoperating performance. Funds from operations do not represent cash flows fromoperations as defined by accounting principles generally accepted in the UnitedStates, GAAP, and should not be considered as an alternative to net income, oras an indicator of the company’s operating performance, or as a measure ofthe company’s liquidity. The company defines funds from operations as netincome computed in accordance with GAAP, excluding non-recurring items and netrealized gains (losses), plus depreciation of operating real estate. 

        *FinancialStructure.* We use debt to finance most of our acquisitions and developmentactivities and, as a result, are a highly leveraged company. At March 31, 2003total debt equaled 83% of total capitalization at cost and 72% of totalcapitalization with equity valued at market. (2,756,763 shares outstanding atthe March 31, 2003 closing price of $13.08 per share). (Dollars in thousands)
                                        Equity at                     Equity at                                             Book         % of           Market          % of                                            Value        Total            Value         Total                                      --------------  -----------  ---------------  ------------          Construction loan             $  63,664          59%        $  63,664           50%          Mortgage loans                   27,596          25%           27,596           22%                                      --------------  -----------  ---------------  ------------          Total debt                       91,260          83%           91,260           72%          Common stock                     18,720          17%           36,058           28%                                      --------------  -----------  ---------------  ------------          Total capitalization          $ 109,980         100%        $ 127,318          100%                                      ==============  ===========  ===============  ============
        *Liquidity. We expect to meet our short-term liquidity requirements with working capital, cash provided by operatingactivities, lines of credit, construction loans, and the possible sale of land or other assets. Our primary short-term liquidityneeds include operating expenses, capital improvements, purchase of land, the completion of the Merritt at Whitemarsh and the Merrittat James Island development communities, and the development of the Merritt at Central Park and Merritt at Godley Station apartmentcommunities and the development of the First Ward property. Possible additional construction costs and a slower than projected leaseup of the two development communities could have a negative impact on our short term cash requirements. In addition, a weak nationaleconomy might continue to affect cash generated by our stabilized communities.
        Weexpect to meet our long-term liquidity requirements from a variety of sourcesincluding operating cash flow, additional mortgage loans and other borrowings,the possible sale of apartment communities and other assets and the issuance andsale of debt and equity securities in public and private markets. Our long termliquidity needs include the maturity of the mortgage and term loan debt and thefinancing of acquisitions and development. 

        *CashFlows.* Cash and cash equivalents totaled $2.3 million at March 31, 2003,down $727 thousand from $3.0 million at December 31, 2002. Net cash used bycontinuing operations was $1.1 million and the company used an additional $321thousand for capital improvements on existing properties and for renovating ournew corporate office and used $263 thousand net of construction loans on theexisting developments. We also received $275 thousand from the repayment variousreceivables and investments, $184 thousand from the sale of land and a net $399from mortgage loans and escrow repayments. 

**CriticalAccounting Policies**
        Acritical accounting policy is one which is both important to the portrayal of acompany’s financial condition and results and requires significant judgmentor complex estimation processes. As Merry Land is in the business of developing,owning and managing apartment properties, our critical accounting policiesrelate to cost capitalization, depreciation and amortization, and impairment oflong-lived assets. 

        Weexpense pre-development costs incurred on a potential project until it becomesprobable that the project will go forward. After a project becomes probable, allsubsequently incurred predevelopment costs are capitalized. If the decision ismade to not commence development of a project that had been deemed probable, allpreviously capitalized predevelopment costs are expensed. Once development ofthe project commences, Merry Land capitalizes interest, real estate taxes, andcertain internal personnel and associated costs directly related to the projectunder development and construction based on the portion of the project whichremains under construction. 

        Whena project is completed and placed in service, it is depreciated on astraight-line basis over its estimated useful life. Projects are depreciatedover 5 to 50 years. As required by generally accepted accounting principles,Merry Land periodically evaluates its real estate assets to determine if therehas been any impairment in their carrying values and records impairment lossesif the undiscounted cash flows estimated to be generated by those assets areless than the assets’ carrying amounts or there are other indicators ofimpairment. Merry Land did not own any real estate assets that required animpairment charge in 2003. 

                 *Inflation. Substantially all of our leases are for terms of one year or less, which should enable us to replace existingleases with new leases at higher rental rates in times of rising prices. We believe that this would offset the effect of costincreases stemming from inflation.
        *ForwardLooking Statements.* This filing includes statements that are “forwardlooking statements” within the meaning of Section 27A of the Securities Actof 1933 and Section 21E of the Securities Exchange Act of 1934 regardingexpectations with respect to market conditions, development projects,acquisitions, occupancy rates, capital requirements, sources of funds, expenselevels, operating performance, and other matters. These assumptions andstatements are subject to various factors, unknown risks and uncertainties,including general economic conditions, local market factors, delays and costoverruns in construction, completion and rent up of development communities,performance of consultants or other third parties, environmental concerns, andinterest rates, any of which may cause actual results to differ from thecompany’s current expectations. 

Form 10-Q - Part I. Financial InformationItem 3.

Merry Land Properties, Inc.                                      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Therehave been no significant changes to the company’s reported market risksince December 31, 2002. 

Form 10-Q - Part I. Financial Information

 Merry Land Properties, Inc.                                                        Controls and Procedures

        Withinthe 90 days prior to the filing of this report, the Company carried out anevaluation, under the supervision of the Company’s Chief Executive Officerand Chief Financial Officer and with the participation of the Company’smanagement, including the of the effectiveness of the design and operation ofthe Company’s disclosure controls and procedures pursuant to Exchange ActRule 13a-14. Based upon that evaluation, the Chief Executive Officer and ChiefFinancial Officer concluded that the Company’s disclosure controls andprocedures are effective in timely alerting them to material informationrelating to the Company required to be included in the Company’s periodicSecurities and Exchange Commission filings. No significant changes were made inthe Company’s internal controls or in other factors that couldsignificantly affect these controls subsequent to the date of their evaluation. 

Form 10-Q - Merry Land Properties, Inc.PART II. OTHER INFORMATION

Item 1. Legal Proceedings

        OnFebruary 25, 2003, a plaintiff claiming to be a shareholder of Merry Land fileda purported class action against Merry Land and its directors in the SuperiorCourt of Richmond County, Georgia, alleging that the directors breached theirfiduciary duties to the shareholders by approving the proposed mergertransaction with Cornerstone Realty Income Trust, Inc. and related transactions,including the sale by Merry Land of certain non-apartment assets to an entityformed by certain members of Merry Land’s management. The action seeks,among other things, an injunction barring the transactions and the payment ofthe plaintiff’s attorneys’ and experts’ fees. Merry Land and itsdirectors believe the action is without merit and is vigorously defendingagainst the action. 

Item 2. Changes in Securities and Use of Proceeds

                    None

Item 3. Defaults Upon Senior Securities

                    None

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

                    None

Item 5. Other Information

                    None

Item 6.  Exhibits and Reports on Form 8-K

        a.        Exhibits:

                  (99.1)        Certification of Periodic Financial Report

        b.        Reports on Form 8-K. The registrant filed one report on Form 8-K during the first quarter of 2003, which was filed on        February 26, 2003 in regard to the proposed merger between Cornerstone Realty Income Trust and Merry Land                  Properties, Inc.

Form 10-Q - Merry Land Properties, Inc.SIGNATURES

 

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereunto dulyauthorized. 

 MERRY LAND PROPERTIES, INC.

 

/s/ Dorrie E. Green    Dorrie E. GreenSenior Vice President andChief Financial Officer

May 14, 2003

**Certifications**

 

I, W. Tennent Houston, certify that:
- I have reviewed      this quarterly report on Form 10-Q of Merry Land Properties, Inc.;
- Based on my knowledge, this      quarterly report does not contain any untrue statement of a material fact      or omit to state a material fact necessary to make the statements made,      in light of the circumstances under which such statements were made, not      misleading with respect to the period covered by this quarterly report;
- Based on my knowledge, the      financial statements, and other financial information included in this quarterly      report, fairly present in all material respects the financial condition,      the results of operations and cash flows of the registrant as of, and for,      the periods presented in this quarterly report; 
- The registrant's other certifying      officers and I are responsible for establishing and maintaining disclosure      controls and procedures (as defined in Exchange Act Rules 13a -- 14 and      15d -- 14) for the registrant and we have:    - designed          such disclosure controls and procedures to ensure that material information          relating to the registrant, including its consolidated subsidiaries,          is made known to us by others within those entities, particularly during          the period in which this quarterly report is being prepared;
  - evaluated the effectiveness          of the registrant's disclosure controls and procedures as of a date          within 90 days prior to the filing date of this quarterly report (the          "Evaluation Date"); and
  - presented in this quarterly          report our conclusions about the effectiveness of the disclosure controls          and procedures based on our evaluation as of the Evaluation Date; 
- The registrant's other certifying      officers and I have disclosed, based on our most recent evaluation, to the      registrant's auditors and the audit committee of registrant's board of directors:    - all          significant deficiencies in the design or operation of internal controls          which could adversely affect the registrant's ability to record, process,          summarize and report financial data and have identified for the registrant's          auditors any material weaknesses in internal controls; and 
  - any fraud, whether or not          material, that involves management or other employees who have a significant          role in the registrant's internal controls; and 
- The registrant's other certifying      officers and I have indicated in this quarterly report whether or not there      were significant changes in internal controls or in other factors that could      significantly affect internal controls subsequent to the date of our most      recent evaluation, including any corrective actions with regard to significant      deficiencies and material weaknesses.
By:     /s/ W. Tennent HoustonDate:      May 14, 2003W.      Tennent Houston      Chief Executive Officer  
I, Dorrie E. Green, certify that:
- I have reviewed      this quarterly report on Form 10-Q of Merry Land Properties, Inc.;
- Based on my knowledge, this      quarterly report does not contain any untrue statement of a material fact      or omit to state a material fact necessary to make the statements made,      in light of the circumstances under which such statements were made, not      misleading with respect to the period covered by this quarterly report;
- Based on my knowledge, the      financial statements, and other financial information included in this quarterly      report, fairly present in all material respects the financial condition,      the results of operations and cash flows of the registrant as of, and for,      the periods presented in this quarterly report; 
- The registrant's other certifying      officers and I are responsible for establishing and maintaining disclosure      controls and procedures (as defined in Exchange Act Rules 13a -- 14 and      15d -- 14) for the registrant and we have:    - designed          such disclosure controls and procedures to ensure that material information          relating to the registrant, including its consolidated subsidiaries,          is made known to us by others within those entities, particularly during          the period in which this quarterly report is being prepared;
  - evaluated          the effectiveness of the registrant's disclosure controls and procedures          as of a date within 90 days prior to the filing date of this quarterly          report (the "Evaluation Date"); and
  - presented          in this quarterly report our conclusions about the effectiveness of          the disclosure controls and procedures based on our evaluation as of          the Evaluation Date; 
- The registrant's other certifying      officers and I have disclosed, based on our most recent evaluation, to the      registrant's auditors and the audit committee of registrant's board of directors:    - all          significant deficiencies in the design or operation of internal controls          which could adversely affect the registrant's ability to record, process,          summarize and report financial data and have identified for the registrant's          auditors any material weaknesses in internal controls; and 
  - any          fraud, whether or not material, that involves management or other employees          who have a significant role in the registrant's internal controls; and 
- The registrant's other certifying      officers and I have indicated in this quarterly report whether or not there      were significant changes in internal controls or in other factors that could      significantly affect internal controls subsequent to the date of our most      recent evaluation, including any corrective actions with regard to significant      deficiencies and material weaknesses.

  
By:/s/ Dorrie E. GreenDate:     May 14, 2003Dorrie      E. Green      Chief Financial Officer  ***