ITEM 2.  ACQUISITION OR DISPOSITION OF ASSETS


                             CAPE LANDING APARTMENTS
                          Myrtle Beach, South Carolina

     On October 16, 1998,  Cornerstone Realty Income Trust, Inc. (the "Company")
acquired an approximately 88 percent interest in Cornerstone  Partners,  L.P., a
Virginia limited partnership (the "Limited Partnership"), which was organized by
the Company to acquire Cape Landing  Apartments,  a 288-unit  apartment  complex
located  at  3851  Cape  Landing  Drive,   Myrtle  Beach,  South  Carolina  (the
"Property"). The Company is the general partner of the Limited Partnership.

     The  Company  entered  into  an  agreement  of  limited   partnership  (the
"Agreement")  with  Cape  Landing  Apartments,  LLC,  a North  Carolina  limited
liability  company (the "Limited  Partner"),  which is not  affiliated  with the
Company or its  affiliates.  Pursuant  to the  Agreement,  the  Limited  Partner
contributed an  approximately 12 percent interest in the Property to the Limited
Partnership in exchange for 185,887  partnership units with an agreed upon value
of $2 million.  The Limited Partner sold its remaining  interest in the Property
to  the  Limited   Partnership  for  $15.1  million.   The  Company  contributed
$15,100,000  to the  Limited  Partnership,  $11.05  million of which the Company
borrowed  under its  unsecured  line of credit  and $4.05  million  of which was
funded with cash from operations,  in exchange for 1,403,445  partnership  units
representing an approximately  88 percent  interest in the Limited  Partnership.
The Limited Partnership's sole asset is the Property.  Title to the Property was
conveyed to the Limited Partnership by limited warranty deed.

     Each  partnership unit held by the Limited Partner is exchangeable any time
after  a  one-year  holding  period  for a  Common  Share  of the  Company  on a
one-for-one basis. Each partnership unit held by the Limited Partner is entitled
to a preferred  return  equal to the  dividend  paid on one Common  Share of the
Company.  Except for certain  limited  matters,  all management  powers over the
affairs of the Limited  Partnership  are exclusively  vested in the Company,  as
general partner.

     LOCATION.  The Property is in Myrtle Beach,  Horry County,  South Carolina.
The  following  information  is based in part upon  information  provided by the
greater Myrtle Beach Chamber of Commerce.

     The Myrtle Beach MSA is comprised of Horry and  Georgetown  Counties.  This
area covers 1,956 square miles and has an approximate population of 215,000. The
Myrtle Beach area,  also known as South  Carolina's  Grand Strand,  is a 60-mile
stretch of coastline.  Highways providing direct access to the Myrtle Beach area
include  U.S.  Routes  17,  501 and South  Carolina  Highways  9 and 544.  These
connections  can be  made  from  Interstates  95 and 20.  Considered  one of the
nation's  top  vacation  destinations,  the Grand  Strand  hosts an estimated 13
million visitors annually.  The increasing number of entertainment  attractions,
live  music  theaters,  shopping  centers  and golf  courses  attracts  visitors
throughout the year. In April 1995, American





<PAGE>



Demographics  ranked  Myrtle Beach as the second  fastest  growing metro area in
both projected annual  population  growth and projected  employment  growth from
1995 to 2005.

     Money magazine rated the Grand Strand as one of the top 20 places to retire
in America. The number of persons over the age of 65 has grown from nearly 5,000
in 1970 to 20,840 in 1996.  This increase of 317 percent boosted this portion of
the population of Horry County to nearly 13 percent of the resident  population.
Similarly,  in Georgetown County the population of persons over the age of 65 is
6,650, which is 12.9 percent of the total county population.

     Myrtle Beach is rated as one of the fastest  growing  areas in the U.S. and
current  development  includes a wide range of new businesses.  These businesses
include entertainment centers,  restaurants,  motels, golf courses, business and
resort centers and general services.  Entertainment  center openings during 1997
included The All-American Music Theater and The Savoy Theater at Fantasy Harbor.
Construction  projects  planned for 1998 and 1999 include a $20 million baseball
stadium  for an  Atlanta  Braves  Carolina  League  Class A team.  Additionally,
Burroughs and Chapin plans to begin  development of the Grande Dunes project,  a
high-profile,  full-service  resort.  Further  development  will include a large
shopping center and several new residential  communities,  and Myrtle Beach city
government  will also  continue  with  plans to  redevelop  the  downtown  area,
including a large park.

     Tourism  continues to be the Grand Strand's  dominant  economic theme.  The
majority  of jobs in Horry  County are  related to the  services  necessary  for
tourism  businesses.  Sixty-five to 70 percent of Horry  County's  employment is
tourism  related.  Over the years,  as Horry County has  increased the number of
employment  opportunities and has seen a growth in population,  it has been able
to steadily  decrease the annual  unemployment  rate,  dropping this year to 4.9
percent  from the 1996 level of 5.3  percent.  Some of the largest  employers in
both Horry County and Georgetown  County  include Horry County School  District,
AVX, Horry County Government,  Sands Oceanfront Resort, Conway Hospital, Coastal
Carolina University and Santee Cooper Electric.

     Myrtle Beach is served by the Myrtle Beach International Airport.

     The  neighborhood  in which  the  Property  is  located  consists  of other
multi-family housing,  single-family housing, commercial and retail development.
The Property is located near businesses, major shopping, entertainment,  schools
and churches.  The Property is located on U.S. Highway 17 Bypass,  approximately
two miles from U.S. Highway 501.

     DESCRIPTION  OF THE  PROPERTY.  The Property  consists of 288  garden-style
apartment units in 14 three-story  buildings on  approximately 21 acres of land.
The Property was built in 1997 and 1998.

     The Property is newly constructed and thus is, in the opinion of management
of the Company, in excellent  condition.  Since the Property is new, the Company
has not budgeted any sums for  significant  improvements  or  renovations to the
Property for at least six months after its acquisition by the Company.


                                       2


<PAGE>



     The Property offers 11 unit types. The unit mix and rents being charged new
tenants as of August 1998 are as follows:

<TABLE>
<CAPTION>
                                                                       APPROXIMATE
                                                                        INTERIOR                MONTHLY RENTAL
     QUANTITY                         TYPE                           SQUARE FOOTAGE             --------------
     --------                         ----                           --------------

<S>                <C>                                                    <C>                       <C> 
        9             One Bedroom/One Bath W/D Connections                 695                       $549

        48          One Bedroom/One Bath W/D Connections, FP               695                        549

        15              One Bedroom/One Bath Handicapped                   695                        549

        20            One Bedroom/One Bath W/D Connections                 744                        570

        40          One Bedroom/One Bath W/D Connections, FP               744                        570

        16           Two Bedrooms/Two Baths W/D Connections                883                        670

        32          Two Bedrooms/Two Baths W/D Connections,                883                        670
                                       FP

        20               Two Bedrooms/Two Baths/Den W/D                   1108                        750
                                   Connections

        40               Two Bedrooms/Two Baths/Den W/D                   1108                        750
                                 Connections, FP

        16          Three Bedrooms/Two Baths W/D Connections              1356                        839

        32                Three Bedrooms/Two Baths W/D                    1356                        839
                                 Connections, FP
</TABLE>

     The  apartments  provide a combined total of  approximately  269,000 square
feet of net rentable area.

     Leases at the Property are generally for terms of one year or less. Average
rental  rates for the past year  have  generally  increased.  As an  example,  a
two-bedroom,  two-bathroom  apartment  unit (883 square feet) rented for $650 in
1997.  The average  effective  annual rental per square foot at the Property for
1997 was $8.28.


                                       3


<PAGE>



     The  buildings  are  wood-frame  construction  on concrete  slabs,  and the
exteriors  are covered  with vinyl  siding.  Roofs are pitched and covered  with
asphalt shingles.

     Each  apartment  unit has  wall-to-wall  carpeting  in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has smoke detectors, a
cable  television  hook-up  and  an  individually  controlled  heating  and  air
conditioning  unit. The owner of the property supplies cold water, sewer service
and trash removal.  Each resident is responsible  for his or her own electricity
usage, which includes air conditioning, lights, heat, hot water and cooking.

     Each unit (other than the smallest  one-bedroom  modified  units)  includes
washer/dryer connections for full-sized appliances,  miniblinds, walk-in closets
and a patio or balcony. A total of 192 units have a wood-burning fireplace. Each
kitchen is equipped with a  refrigerator/freezer  with icemaker,  electric range
and oven, dishwasher and garbage disposal.

     The Property has an outdoor  swimming pool,  two lighted  tennis courts,  a
fitness center with sauna and steam room, and a laundry  facility.  The Property
also includes a clubhouse with an  entertainment  area,  kitchenette and leasing
office. There is ample paved parking for tenants.

     There are at least five apartment  properties in the area that compete with
the  Property.  All offer similar  amenities  and have rents that  generally are
comparable to those of the Property.  Based on a recent  telephone  survey,  the
Company  estimates  that occupancy in nearby  competing  properties now averages
approximately 93%.

     According to  information  provided by the seller,  leasing at the Property
began in May 1997 and physical occupancy at the Property averaged  approximately
63% during the first nine months of 1998. On October 12, 1998,  the Property was
88% occupied.

     The  tenants at the  Property  are a mix of  white-collar  and  blue-collar
workers, students and retired persons.

     For 1998,  Horry County  specified an assessed value for the Property equal
to  $11,176,600.  The taxable  value is equal to 6% of the  assessed  value,  or
$670,596.  The tax rate was  $0.1919,  and the  total  real  estate  taxes  were
calculated as $128,687.37.

     The basis of the  depreciable  residential  real  property  portion  of the
Property  (currently  estimated at about  $15,826,975)  will be depreciated over
27.5 years on a straight-line  basis. The basis of the personal property portion
will be depreciated in accordance  with the modified  accelerated  cost recovery
system of the Internal Revenue Code of 1986, as amended (the "Code"). Amounts to
be spent by the  Property  on repairs and  improvements  will be treated for tax
purposes as permitted by the Code based on the nature of the expenditures.

     The  Company  believes  that  the  Property  is  and  will  continue  to be
adequately covered by property and liability insurance.


                                       4


<PAGE>



     MATERIAL  FACTORS  CONSIDERED  IN  ASSESSING  THE  PROPERTY.   The  factors
considered  by the  Company  to be  relevant  in  evaluating  the  Property  for
acquisition by the Company included the following.

     1. The Company  believes  that the greater  Myrtle  Beach,  South  Carolina
metropolitan area will continue to enjoy steady  population  increase and steady
economic  development and that such increase and development will support stable
occupancy  rates  and  reasonable  increases  in  rents  at  the  Property.   In
particular,  the Company believes that the Property is located in a particularly
desirable part of the Myrtle Beach metropolitan area.

     2. The Property is newly-constructed  and was available for purchase by the
Company at an attractive price.

     3. The  Property  is  located  near  major  employment  centers,  including
Broadway at the Beach, Allied Signal, and Coca-Cola.

     The Company is not aware of any material  adverse  factors  relating to the
Property not set forth in this report that would cause the financial information
contained in this report not to be indicative of future operating results.



                                       5