##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 000-52566
 CORNERSTONE CORE PROPERTIES REIT, INC.
  MARYLAND
(State or other jurisdiction of incorporation or organization)
    
    73-1721791
(I.R.S. Employer Identification No.)1920 MAIN STREET, SUITE 400, IRVINE, CA
(Address of principal executive offices)
    
    92614
(Zip Code)
 949-852-1007
 Not Applicable
  þ o
  o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company þ  o þ




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##### 



PART I  FINANCIAL INFORMATION
FORM 10-Q
Cornerstone Core Properties REIT, Inc.
TABLE OF CONTENTS
 PART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements:Condensed Consolidated Balance Sheets as of March 31, 2011 and December 31, 2010 (unaudited)
    
    
    3Condensed Consolidated Statements of Operations for the Three Months ended March 31, 2011
and 2010 (unaudited)
    
    
    4Condensed Consolidated Statements of Equity for the Three Months ended March 31, 2011 and
2010 (unaudited)
    
    
    5Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2011
and 2010 (unaudited)
    
    
    6Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4.
    
    Controls and Procedures
    
    
    24PART II.
    
    OTHER INFORMATIONItem 1A.
    
    Risk Factors
    
    
    25Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    26Item 6.
    
    Exhibits
    
    
    27SIGNATURES
    
    
    
    
    28EX-31.1EX-31.2EX-32
  2




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##### Table of Contents



CORNERSTONE CORE PROPERTIES REIT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
 March 31,
    
    
    December 31,2011
    
    
    2010ASSETSCash and cash equivalents
    
    $
    1,010,000
    
    
    $
    2,014,000Investments in real estateLand
    
    
    38,680,000
    
    
    
    38,680,000Buildings and improvements, net
    
    
    83,831,000
    
    
    
    84,119,000Intangible lease assets, net
    
    
    385,000
    
    
    
    462,000122,896,000
    
    
    
    123,261,000Notes receivable, net
    
    
    4,000,000
    
    
    
    4,000,000Note receivable from related party
    
    
    8,000,000
    
    
    
    8,000,000Deferred costs and deposits
    
    
    66,000
    
    
    
    33,000Deferred financing costs, net
    
    
    204,000
    
    
    
    271,000Tenant and other receivables, net
    
    
    633,000
    
    
    
    748,000Other assets, net
    
    
    639,000
    
    
    
    670,000Total assets
    
    $
    137,448,000
    
    
    $
    138,997,000LIABILITIES AND EQUITYLiabilities:Notes payable
    
    $
    35,440,000
    
    
    $
    35,874,000Accounts payable and accrued liabilities
    
    
    1,602,000
    
    
    
    925,000Payable to related parties
    
    
    
    
    
    
    11,000Prepaid rent, security deposits and deferred revenue
    
    
    770,000
    
    
    
    933,000Intangible lease liabilities, net
    
    
    108,000
    
    
    
    127,000Distributions payable
    
    
    156,000
    
    
    
    157,000Total liabilities
    
    
    38,076,000
    
    
    
    38,027,000Commitments and contingencies (Note 13)Equity:Stockholders equity:Preferred stock, $0.001 par value; 10,000,000
shares authorized; no shares were issued or
outstanding at March 31, 2011 and December 31,
2010
    
    
    
    
    
    
    Common stock, $0.001 par value; 290,000,000
shares authorized; 23,027,235 and 23,074,381
shares issued and outstanding at March 31, 2011
and December 31, 2010, respectively
    
    
    23,000
    
    
    
    23,000Additional paid-in capital
    
    
    116,697,000
    
    
    
    117,520,000Accumulated deficit
    
    
    (17,462,000
    )
    
    
    (16,690,000
    )Total stockholders equity
    
    
    99,258,000
    
    
    
    100,853,000Noncontrolling interest
    
    
    114,000
    
    
    
    117,000Total equity
    
    
    99,372,000
    
    
    
    100,970,000Total liabilities and equity
    
    $
    137,448,000
    
    
    $
    138,997,000
  3




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##### Table of Contents



CORNERSTONE CORE PROPERTIES REIT, INC. AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
 Three Months Ended March 31,2011
    
    
    2010RevenuesRental revenues
    
    $
    1,543,000
    
    
    $
    1,960,000Tenant reimbursements and other income
    
    
    441,000
    
    
    
    481,000Interest income from notes receivable
    
    
    159,000
    
    
    
    424,0002,143,000
    
    
    
    2,865,000ExpensesProperty operating and maintenance
    
    
    677,000
    
    
    
    686,000General and administrative
    
    
    615,000
    
    
    
    609,000Asset management fees and expenses
    
    
    416,000
    
    
    
    420,000Real estate acquisition costs
    
    
    
    
    
    
    6,000Depreciation and amortization
    
    
    833,000
    
    
    
    824,0002,541,000
    
    
    
    2,545,000Operating (loss) income
    
    
    (398,000
    )
    
    
    320,000Interest income
    
    
    
    
    
    
    1,000Interest expense
    
    
    (374,000
    )
    
    
    (301,000
    )Net (loss) income
    
    
    (772,000
    )
    
    
    20,000Less: Net (loss) income attributable to the noncontrolling interest
    
    
    
    
    
    
    Net (loss) income attributable to common stockholders
    
    $
    (772,000
    )
    
    $
    20,000Basic and diluted net (loss) income per common share attributable to
common stockholders
    
    $
    (0.03
    )
    
    $
    0.00Weighted average number of common shares
    
    
    23,039,021
    
    
    
    23,003,489Dividend declared per common share
    
    $
    0.02
    
    
    $
    0.12
  4




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##### Table of Contents



CORNERSTONE CORE PROPERTIES REIT, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the Three Months Ended March 31, 2011 and 2010
 (Unaudited)
 Common StockCommon
    
    
    
    
    
    
    
    
    
    
    TotalNumber of
    
    
    Stock Par
    
    
    Additional
    
    
    Accumulated
    
    
    Stockholders
    
    
    NoncontrollingShares
    
    
    Value
    
    
    Paid-In Capital
    
    
    Deficit
    
    
    Equity
    
    
    Interest
    
    
    Total EquityBalance  December
31, 2010
    
    
    23,074,381
    
    
    $
    23,000
    
    
    $
    117,520,000
    
    
    $
    (16,690,000
    )
    
    $
    100,853,000
    
    
    $
    117,000
    
    
    $
    100,970,000Issuance of common
stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Redeemed shares
    
    
    (47,146
    )
    
    
    
    
    
    
    (369,000
    )
    
    
    
    
    
    
    (369,000
    )
    
    
    
    
    
    
    (369,000
    )Dividends declared
    
    
    
    
    
    
    
    
    
    
    (454,000
    )
    
    
    
    
    
    
    (454,000
    )
    
    
    (3,000
    )
    
    
    (457,000
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (772,000
    )
    
    
    (772,000
    )
    
    
    
    
    
    
    (772,000
    )Balance  March
31, 2011
    
    
    23,027,235
    
    
    $
    23,000
    
    
    $
    116,697,000
    
    
    $
    (17,462,000
    )
    
    $
    99,258,000
    
    
    $
    114,000
    
    
    $
    99,372,000
 Common StockCommon
    
    
    
    
    
    
    
    
    
    
    TotalNumber of
    
    
    Stock Par
    
    
    Additional
    
    
    Accumulated
    
    
    Stockholders
    
    
    NoncontrollingShares
    
    
    Value
    
    
    Paid-In Capital
    
    
    Deficit
    
    
    Equity
    
    
    Interest
    
    
    Total EquityBalance  December
31, 2009
    
    
    23,114,201
    
    
    $
    24,000
    
    
    $
    128,559,000
    
    
    $
    (13,559,000
    )
    
    $
    115,024,000
    
    
    $
    131,000
    
    
    $
    115,155,000Issuance of common
stock
    
    
    283,916
    
    
    
    
    
    
    
    2,193,000
    
    
    
    
    
    
    
    2,193,000
    
    
    
    
    
    
    
    2,193,000Redeemed shares
    
    
    (509,624
    )
    
    
    
    
    
    
    (3,866,000
    )
    
    
    
    
    
    
    (3,866,000
    )
    
    
    
    
    
    
    (3,866,000
    )Offering costs
    
    
    
    
    
    
    
    
    
    
    (135,000
    )
    
    
    
    
    
    
    (135,000
    )
    
    
    
    
    
    
    (135,000
    )Dividends declared
    
    
    
    
    
    
    
    
    
    
    (2,711,000
    )
    
    
    
    
    
    
    (2,711,000
    )
    
    
    (3,000
    )
    
    
    (2,714,000
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    20,000
    
    
    
    
    
    
    
    20,000Balance  March
31, 2010
    
    
    22,888,493
    
    
    $
    24,000
    
    
    $
    124,040,000
    
    
    $
    (13,539,000
    )
    
    $
    110,525,000
    
    
    $
    128,000
    
    
    $
    110,653,000
  5




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##### Table of Contents



CORNERSTONE CORE PROPERTIES REIT, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Three Months EndedMarch 31,2011
    
    
    2010Cash flows from operating activitiesNet (loss) income
    
    $
    (772,000
    )
    
    $
    20,000Adjustments to reconcile net (loss) income to net cash provided by operating activities:Amortization of deferred financing costs
    
    
    84,000
    
    
    
    53,000Depreciation and amortization
    
    
    833,000
    
    
    
    824,000Straight-line rents and amortization of acquired above (below) market leases, net
    
    
    36,000
    
    
    
    (52,000
    )Provision for bad debt
    
    
    (15,000
    )
    
    
    (77,000
    )Change in operating assets and liabilities:Tenant and other receivables
    
    
    103,000
    
    
    
    140,000Prepaid and other assets
    
    
    (9,000
    )
    
    
    28,000Payable and accrued liabilities
    
    
    385,000
    
    
    
    452,000Payable to related parties
    
    
    
    
    
    
    (217,000
    )Prepaid rent, security deposit and deferred revenues
    
    
    (164,000
    )
    
    
    (68,000
    )Net cash provided by operating activities
    
    
    481,000
    
    
    
    1,103,000Cash flows from investing activitiesReal estate improvements
    
    
    (168,000
    )
    
    
    (9,000
    )Notes receivable
    
    
    
    
    
    
    (250,000
    )Notes receivable to related parties
    
    
    
    
    
    
    (364,000
    )Net cash used in investing activities
    
    
    (168,000
    )
    
    
    (623,000
    )Cash flows from financing activitiesIssuance of common stock
    
    
    
    
    
    
    689,000Redeemed shares
    
    
    (369,000
    )
    
    
    (3,866,000
    )Repayment of notes payable
    
    
    (434,000
    )
    
    
    (47,000
    )Offering costs
    
    
    (5,000
    )
    
    
    (125,000
    )Deferred offering costs
    
    
    (35,000
    )
    
    
    Distributions paid to stockholders
    
    
    (454,000
    )
    
    
    (1,216,000
    )Distributions paid to noncontrolling interest
    
    
    (3,000
    )
    
    
    (3,000
    )Deferred financing costs
    
    
    (17,000
    )
    
    
    Net cash used in financing activities
    
    
    (1,317,000
    )
    
    
    (4,568,000
    )Net decrease in cash and cash equivalents
    
    
    (1,004,000
    )
    
    
    (4,088,000
    )Cash and cash equivalents  beginning of period
    
    
    2,014,000
    
    
    
    18,673,000Cash and cash equivalents  end of period
    
    $
    1,010,000
    
    
    $
    14,585,000Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    210,000
    
    
    $
    223,000Supplemental disclosure of non-cash financing and investing activities:Distribution declared not paid
    
    $
    156,000
    
    
    $
    932,000Accrued real estate improvements
    
    $
    291,000
    
    
    $
    Distribution reinvested
    
    $
    
    
    
    $
    1,504,000Payable to related party
    
    $
    
    
    
    $
    10,000
  6




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##### Table of Contents



CORNERSTONE CORE PROPERTIES REIT, INC. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011
 UNAUDITED
 1. Organization
   2. Public Offerings
    3. Summary of Significant Accounting Policies
  7




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##### Table of Contents



Interim Financial Information
  Fair Value of Financial Instruments
 Financial
Instruments
      8




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##### Table of Contents



4. Investments in Real Estate
  March 31,Square
    
    
    Purchase
    
    
    
    
    
    
    2011Property
    
    Location
    
    
    Date Purchased
    
    
    Footage
    
    
    Price
    
    
    Debt
    
    
    % Leased2111 South Industrial Park
    
    North Tempe, AZ
    
    June 1, 2006
    
    
    26,800
    
    
    $
    1,975,000
    
    
    $
    
    
    
    
    82.09
    %Shoemaker Industrial Buildings
    
    Santa Fe Springs, CA
    
    June 30, 2006
    
    
    18,921
    
    
    
    2,400,000
    
    
    
    
    
    
    
    100.00
    %15172 Goldenwest Circle
    
    Westminster, CA
    
    December 1, 2006
    
    
    102,200
    
    
    
    11,200,000
    
    
    
    2,257,000
    
    
    
    0.00
    %20100 Western Avenue
    
    Torrance, CA
    
    December 1, 2006
    
    
    116,433
    
    
    
    19,650,000
    
    
    
    3,757,000
    
    
    
    74.23
    %Mack Deer Valley
    
    Phoenix, AZ
    
    January 21, 2007
    
    
    180,985
    
    
    
    23,150,000
    
    
    
    3,092,000
    
    
    
    97.30
    %Marathon Center
    
    Tampa Bay, FL
    
    April 2, 2007
    
    
    52,020
    
    
    
    4,450,000
    
    
    
    
    
    
    
    26.07
    %Pinnacle Park Business Center
    
    Phoenix, AZ
    
    October 2, 2007
    
    
    159,661
    
    
    
    20,050,000
    
    
    
    3,639,000
    
    
    
    100.00
    %Orlando Small Bay PortfolioCarter
    
    Winter Garden, FL
    
    November 15, 2007
    
    
    49,125
    
    
    
    
    
    
    
    
    
    
    
    50.38
    %Goldenrod
    
    Orlando, FL
    
    November 15, 2007
    
    
    78,646
    
    
    
    
    
    
    
    
    
    
    
    77.35
    %Hanging Moss
    
    Orlando, FL
    
    November 15, 2007
    
    
    94,200
    
    
    
    
    
    
    
    
    
    
    
    91.08
    %Monroe South
    
    Sanford, FL
    
    November 15, 2007
    
    
    172,500
    
    
    
    
    
    
    
    
    
    
    
    58.29
    %Orlando Small Bay Portfolio
    
    
    
    
    
    
    
    
    
    
    394,471
    
    
    
    37,128,000
    
    
    
    15,860,000
    
    
    
    68.90
    %Monroe North Commerce Center
    
    Sanford, FL
    
    April 17, 2008
    
    
    181,348
    
    
    
    14,275,000
    
    
    
    6,835,000
    
    
    
    73.16
    %1830 Santa Fe
    
    Santa Ana, CA
    
    August 5, 2010
    
    
    12,200
    
    
    
    1,315,000
    
    
    
    
    
    
    
    100.00
    %1,245,039
    
    
    $
    135,593,000
    
    
    $
    35,440,000
    
    
    
    71.76
    %
  Acquired
    
    
    
    
    
    
    AcquiredAbove-
    
    
    
    
    
    
    Below-Buildings and
    
    
    Market
    
    
    In-Place
    
    
    MarketLand
    
    
    Improvements
    
    
    Leases
    
    
    Lease Value
    
    
    LeasesInvestment in real estate
    
    $
    38,680,000
    
    
    $
    93,993,000
    
    
    $
    1,700,000
    
    
    $
    1,992,000
    
    
    $
    (824,000
    )Less: accumulated depreciation and amortization
    
    
    
    
    
    
    (10,162,000
    )
    
    
    (1,572,000
    )
    
    
    (1,735,000
    )
    
    
    716,000Net investments in real estate and related lease intangibles
    
    $
    38,680,000
    
    
    $
    83,831,000
    
    
    $
    128,000
    
    
    $
    257,000
    
    
    $
    (108,000
    )
  Acquired
    
    
    
    
    
    
    AcquiredAbove-
    
    
    
    
    
    
    Below-Buildings and
    
    
    Market
    
    
    In-Place
    
    
    MarketLand
    
    
    Improvements
    
    
    Leases
    
    
    Lease Value
    
    
    LeasesInvestment in real estate
    
    $
    38,680,000
    
    
    $
    93,534,000
    
    
    $
    1,700,000
    
    
    $
    1,992,000
    
    
    $
    (823,000
    )Less: accumulated depreciation and amortization
    
    
    
    
    
    
    (9,415,000
    )
    
    
    (1,549,000
    )
    
    
    (1,681,000
    )
    
    
    696,000Net investments in real estate and related lease intangibles
    
    $
    38,680,000
    
    
    $
    84,119,000
    
    
    $
    151,000
    
    
    $
    311,000
    
    
    $
    (127,000
    )
   9




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##### Table of Contents



Lease Intangibles AmortizationApril 1, 2011 to December 31, 2011
    
    $
    123,0002012
    
    $
    82,0002013
    
    $
    51,0002014
    
    $
    12,0002015
    
    $
    9,000
  Leasing Commissions
  5. Allowance for Doubtful Accounts
  6. Concentration of Risk
   7. Notes Receivable
   10




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##### Table of Contents



:
 2011
    
    
    2010Balance at
January 1,
    
    $
    4,000,000
    
    
    $
    2,875,000Additions:Additions to note receivable
    
    
    
    
    
    
    250,000Deductions:Note receivable repayments
    
    
    
    
    
    
    Note receivable impairments
    
    
    
    
    
    
    Balance at March 31,
    
    $
    4,000,000
    
    
    $
    3,125,000
   8. Note Receivable from Related Party
   :
 2011
    
    
    2010Balance at
January 1,
    
    $
    8,000,000
    
    
    $
    6,911,000Additions:Additions to note receivable from related parties
    
    
    
    
    
    
    364,000Deductions:Repayments of note receivable from related
parties
    
    
    
    
    
    
    Balance at March 31,
    
    $
    8,000,000
    
    
    $
    7,275,000
  11




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##### Table of Contents



9. Payable to Related Parties
  10. Equity
 Common Stock
  Distributions
     Cash flows fromDistribution Declared (2)
    
    operatingPeriod
    
    Cash
    
    Reinvested
    
    Total
    
    activitiesFirst quarter
2010 (1)
    
    $
    1,221,000
    
    
    $
    1,490,000
    
    
    $
    2,711,000
    
    
    $
    1,103,000First quarter 2011
    
    $
    454,000
    
    
    $
    
    
    
    $
    454,000
    
    
    $
    481,000
 
 (1)
    
    Distributions declared represented a return of capital for tax purposes.(2)
    
    In order to meet the requirements for being treated as a REIT under the
Internal Revenue Code, we must pay distributions to our shareholders
each taxable year equal to at least 90% of our net ordinary taxable
income. Some of our distributions have been paid from sources other
than operating cash flow, such as offering proceeds. Until proceeds
from our offering are fully invested and generating operating cash flow
sufficient to fully cover distributions to stockholders, we intend to
pay a portion of our distributions from the proceeds of our offering or
from borrowings in anticipation of future cash flow. 12




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##### Table of Contents



Stock Repurchase Program
   Total Number of SharesPeriod
    
    Redeemed (1)
    
    Average Price Paid per ShareJanuary 2011
    
    
    47,146
    
    
    $
    7.82February 2011
    
    
    
    
    
    $
    March 2011
    
    
    
    
    
    $
    47,146
   Total Number of SharesPeriod
    
    Redeemed (1)
    
    Average Price Paid per ShareJanuary 2010
    
    
    249,146
    
    
    $
    7.46February 2010
    
    
    100,999
    
    
    $
    7.63March 2010
    
    
    159,479
    
    
    $
    7.76509,624
 
 (1)
    
    As long as our common stock is not listed on a national securities exchange or traded
on an over -the-counter market, our stockholders who have held their stock for at least one
year may be able to have all or any portion of their shares redeemed in accordance with the
procedures outlined in the prospectus relating to the shares they purchased. As noted
above, this program was suspended effective December 31, 2010 for an indefinite period. Employee and Director Incentive Stock Plan
  13




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##### Table of Contents



, Compensation  Stock
Compensation
 11. Related Party Transactions
  Advisory Agreement
   Organizational and Offering Costs.
  Acquisition Fees and Expenses
 14




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##### Table of Contents



Management Fees
 Operating Expenses
 Property Management Fees.
 Disposition Fee
 Subordinated Participation Provisions
 
    
    After stockholders have received cumulative distributions equal to
$8.00 per share (less any returns of capital) plus cumulative,
non-compounded annual returns on net invested capital, the Advisor
will be paid a subordinated participation in net sale proceeds ranging
from a low of 5% of net sales provided investors have earned
annualized returns of 6% to a high of 15% of net sales proceeds if
investors have earned annualized returns of 10% or more.
    
    Upon termination of the advisory agreement, the Advisor will receive
the subordinated performance fee due upon termination. This fee ranges
from a low of 5% of the amount by which the sum of the appraised value
of our assets minus our liabilities on the date the advisory agreement
is terminated plus total distributions (other than stock
distributions) paid prior to termination of the advisory agreement
exceeds the amount of invested capital plus annualized returns of 6%,
to a high of 15% of the amount by which the sum of the appraised value
of our assets minus its liabilities plus all prior distributions
(other than stock distributions) exceeds the amount of invested
capital plus annualized returns of 10% or more.
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##### Table of Contents




    
    In the event we list our stock for trading, the Advisor will receive a
subordinated incentive listing fee instead of a subordinated
participation in net sales proceeds. This fee ranges from a low of 5%
of the amount by which the market value of our common stock plus all
prior distributions (other than stock distributions) exceeds the
amount of invested capital plus annualized returns of 6%, to a high of
15% of the amount by which the sum of the market value of our stock
plus all prior distributions (other than stock distributions) exceeds
the amount of invested capital plus annualized returns of 10% or more.
 Dealer Manager Agreement
  12. Notes Payable
   HSH Nordbank AG
  Wells Fargo Bank, National Association
  16




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##### Table of Contents



Transamerica Life Insurance Company
   Year
    
    Principal amountApril 1, 2011 to December 31, 2011
    
    $
    154,0002012
    
    $
    217,0002013
    
    $
    230,0002014 and thereafter
    
    $
    6,234,000
 13. Commitments and Contingencies
   14. Subsequent Event
  17




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   Overview
   
    
    Effective November 23, 2010, we discontinued making or accepting offers to
purchase shares of stock in our public offering while our board of directors evaluates
strategic alternatives to maximize value.
 
    
    Effective December 14, 2010, we suspended our distribution reinvestment plan. As
a result, all distributions paid after that date will be in cash until further notice.
 
    
    Effective December 1, 2010, our board of directors resolved to reduce
distributions on our common stock to a current annualized rate of $0.08 per share (1% based on
a share price of $8.00), from the prior annualized rate of $0.48 per share (6% based on a
share price of $8.00), in order to preserve capital that may be needed for capital
improvements, debt repayment or other corporate purposes.
 
    
    Our board of directors approved an amendment to our stock repurchase program to
suspend redemptions under the program, effective December 31, 2010.
     18




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##### Table of Contents



Market Outlook  Real Estate and Real Estate Finance Markets
     Critical Accounting Policies
  Results of Operations
  Three months ended March 31, 2011 and 2010
    19




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##### Table of Contents



Liquidity and Capital Resources
    Short Term Liquidity Requirements
  Credit Facilities
   20




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##### Table of Contents



Distributions
   Organization and offering costs
       Funds from Operations and Modified Funds from Operations
  21




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##### Table of Contents




    
    Real estate acquisition expenses. In evaluating investments
in real estate, including both business combinations and
investments accounted for under the equity method of
accounting, managements investment models and analysis
differentiate costs to acquire the investment from the
operations derived from the investment. These acquisition
costs have been funded from the proceeds of our initial
public offering and other financing sources and not from
operations. We believe by excluding expensed acquisition
costs, MFFO provides useful supplemental information that
is comparable for each type of our real estate investments
and is consistent with managements analysis of the
investing and operating performance of our properties. Real
estate acquisition expenses include those paid to our
advisor and to third parties.
    
    Adjustments for amortization of above or below market rent.
Similar to depreciation and amortization of other real
estate related assets that are excluded from FFO, GAAP
implicitly assumes that the value of lease assets
diminishes predictably over time and that these charges be
recognized currently in revenue. Since real estate values
and market lease rates in the aggregate have historically
risen or fallen with market conditions, management believes
that by excluding these charges, MFFO provides useful
supplemental information on the operating performance of
our real estate.
 
    
    Adjustments for straight line rents. Under GAAP, rental
income recognition can be significantly different than
underlying contract terms. By adjusting for these items,
MFFO provides useful supplemental information on the
economic impact of our lease terms and presents results in
a manner more consistent with managements analysis of our
operating performance.
    
    Impairment charges. Impairment charges relate to a fair
value adjustment, which is based on the impact of current
market fluctuations and underlying assessments of general
market conditions and the specific performance of the
holding, which may not be directly attributable to our
current operating performance. As these losses relate to
underlying long-term assets and liabilities, where we are
not speculating or trading assets, management believes MFFO
provides useful supplemental information by focusing on the
changes in our core operating fundamentals rather than
changes that may reflect anticipated losses. In particular,
because GAAP impairment charges are not allowed to be
reversed if the underlying fair values improve or because
the timing of impairment charges may lag the onset of
certain operating consequences, we believe MFFO provides
useful supplemental information related to the
sustainability of rental rates, occupancy and other core
operating fundamentals.
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##### Table of Contents



Three months endedMarch 31,2011
    
    
    2010Net (loss) income
    
    $
    (772,000
    )
    
    $
    20,000Adjustments:Net (loss) income attributable to noncontrolling interest
    
    
    
    
    
    
    Real estate assets depreciation and amortization
    
    
    833,000
    
    
    
    824,000Funds from operations (FFO)
    
    $
    61,000
    
    
    $
    844,000Adjustments:Real estate acquisition costs
    
    $
    
    
    
    $
    6,000Reverse amortization of above/below market rent
    
    
    4,000
    
    
    
    15,000Straight line rent
    
    
    32,000
    
    
    
    (67,000
    )Modified funds from operations (MFFO)
    
    $
    97,000
    
    
    $
    798,000Weighted average shares
    
    
    23,039,021
    
    
    
    23,003,489FFO per weighted average shares
    
    $
    0.00
    
    
    $
    0.04MFFO per weighted average shares (1)
    
    $
    0.00
    
    
    $
    0.03
 
 (1)
    
    Effective November 23, 2010, we stopped making and or
accepting offers to purchase shares of our stock, as a
result, we did not raise capital in the first quarter of 2011.
The results presented for the periods in this table are not directly
comparable and should not be considered an indication of our
historical operating performance.  Cash flows fromDistribution Declared (2)
    
    Funds from
    
    operatingPeriod
    
    Cash
    
    Reinvested
    
    Total
    
    Operations
    
    activitiesFirst quarter 2010 (1)
    
    $
    1,221,000
    
    
    $
    1,490,000
    
    
    $
    2,711,000
    
    
    $
    844,000
    
    
    $
    1,103,000First quarter 2011
    
    $
    454,000
    
    
    $
    
    
    
    $
    454,000
    
    
    $
    61,000
    
    
    $
    481,000
 
 (1)
    
    Distributions declared represented a return of capital for tax purposes.(2)
    
    In order to meet the requirements for being treated as a REIT under the
Internal Revenue Code, we must pay distributions to our shareholders
each taxable year equal to at least 90% of our net ordinary taxable
income. Some of our distributions have been paid from sources other
than operating cash flow, such as offering proceeds. Until proceeds
from our offering are fully invested and generating operating cash flow
sufficient to fully cover distributions to stockholders, we intend to
pay a portion of our distributions from the proceeds of our offering or
from borrowings in anticipation of future cash flow. 23




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##### Table of Contents



Contractual Obligations
  Payment due by periodLess than 1
    
    
    
    
    
    
    
    
    
    More than 5Contractual Obligations
    
    Total
    
    year
    
    1-3 years
    
    3-5 years
    
    yearsLong-Term Debt Obligations (1)
    
    $
    35,440,000
    
    
    $
    28,812,000
    
    
    $
    6,628,000
    
    
    $
    
    
    
    $
    Interest expense related to long term debt (2)
    
    $
    1,698,000
    
    
    $
    703,000
    
    
    $
    995,000
    
    
    $
    
    
    
    $
    
 
 (1)
    
    This represents the sum of a credit agreement with HSH Nordbank,
AG and loan agreements with Wells Fargo Bank National Association
and Transamerica Life Insurance Company.(2)
    
    Interest expenses related to the credit agreement with HSH
Nordbank, AG and loan agreement with Wells Fargo National
Association are calculated based on the loan balances outstanding
at March 31, 2011, one month LIBOR at March 31, 2011 plus
appropriate margin ranging from 1.40% and 3.75%. Interest expense
related to loan agreement with Transamerica Life Insurance
Company is based on a fixed rate of 5.89% per annum. 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
     
 Item 4. Controls and Procedures
  24




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1A. Risk Factors
  We have, and may in the future, pay distributions from sources other than cash provided from
operations.
  Any adverse changes in the financial health of our advisor or its affiliates or our relationship
with them could hinder our operating performance and the return on your investment. The dealer
manager of our currently suspended public offering has recently experienced significant personnel
reductions. As a result, we do not expect that we will be able to recommence our public offering
unless and until we are able to engage a new dealer manager. We may have difficulty finding a
qualified dealer manager and/or advisor, and any successor dealer manager or advisor may not be as
well suited to manage us or our offering. These potential changes could result in a significant
disruption of our business and may adversely affect the value of your investment in us.
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##### Table of Contents



We no longer have funds available from the distribution reinvestment plan offering to use for
general corporate purposes, therefore we may have to use a greater proportion of our cash flow from
operations to meet our general cash requirements, which would reduce cash available for
distributions.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    Approximate Dollar Value ofShares Available That May YetTotal Number of Shares
    
    Average Price Paid
    
    Be Redeemed Under thePeriod
    
    Redeemed (1)
    
    per Share
    
    ProgramJanuary 2011
    
    
    47,146
    
    
    $
    7.82
    
    
    $
    February 2011
    
    
    
    
    
    $
    
    
    
    $
    March 2011
    
    
    
    
    
    $
    
    
    
    $
    47,146
 
 (1)
    
    As long as our common stock is not listed on a national securities
exchange or traded on an over the-counter market, our stockholders
who have held their stock for at least one year may be able to have
all or any portion of their shares redeemed in accordance with the
procedures outlined in the prospectus relating to the shares they
purchased.   26




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##### Table of Contents



Item 6. Exhibits
 Ex.
    
    Description3.1
    
    Articles of Amendment and Restatement of Articles of Incorporation (incorporated by reference to Exhibit 3.2
to the Registrants Annual Report on Form 10-K for the year ended December 31, 2005)3.2
    
    Amended and Restated Bylaws (incorporated by reference to Exhibit 3.3 to Post-Effective Amendment No. 1 to the
Registration Statement on Form S-11 (No. 333-121238) filed on December 23, 2005)4.1
    
    Form of Subscription Agreement (incorporated by reference to Appendix A to the prospectus dated April 16, 2010)4.2
    
    Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate
or to be sent upon request and without charge to stockholders issued shares without certificates)
(incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-11 (No. 333-121238) filed on
December 14, 2004)4.3
    
    Distribution Reinvestment Plan (incorporated by reference to Appendix B to the prospectus dated April 16, 2010)31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32
    
    Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. §1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 27




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##### Table of Contents



SIGNATURES
  CORNERSTONE CORE PROPERTIES REIT, INC.By:
    /s/ Terry G. RousselTerry G. Roussel, Chief Executive OfficerBy:
    /s/ Sharon C. KaiserSharon C. Kaiser, Chief Financial Officer(Principal Financial Officer and
Principal Accounting Officer) 28