UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C.  20549





FORM 10-Q





(Mark One)





T
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the quarterly period ended March 31, 2009





or





£
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the transition period from
to





Commission File Number 000-52566





CORNERSTONE CORE PROPERTIES REIT, INC.


(Exact name of registrant as specified in its charter)





MARYLAND
73-1721791(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)1920 MAIN STREET, SUITE 400, IRVINE, CA
92614(Address of principal executive offices)
(Zip Code)





949-852-1007


(Registrant’s telephone number, including area code)





Not Applicable


(Former name, former address and former fiscal year, if changed since last report)





Indicate by check mark whether the issuer (1) filed all reports required to be filed by section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


T  Yes      £  No




Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).


o  Yes      o  No





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.





Large accelerated filer    £
Accelerated filer    £
Non-accelerated filer    £
Smaller reporting company    T





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).


£  Yes     x  No








As of April 30, 2009, we had approximately 21,959,330 shares issued and outstanding.




1




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, 2009 and December 31, 2008 (unaudited)
3Condensed Consolidated Statements of Operations for the Three Months ended March 31, 2009 and March 31, 2008 (unaudited)
4Condensed Consolidated Statements of Equity for the Three Months ended March 31, 2009 and March 31, 2008 (unaudited)
5Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2009 and March 31, 2008 (unaudited)
6Notes to Condensed Consolidated Financial Statements (unaudited)
7Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
16Item 3.
Quantitative and Qualitative Disclosure about Market Risk
20Item 4T.
Controls and Procedures
20PART II.
OTHER INFORMATION
21Item 1A.
Risk Factors
21Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
21Item 5.
Other Information
21Item 6.
Exhibits
23SIGNATURES
24


2
 Table of Contents





CORNERSTONE CORE PROPERTIES REIT, INC. AND SUBSIDIARIES





CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)




March 31,


December 31,2009


2008ASSETSCash and cash equivalents

$
16,307,000


$
26,281,000Investments in real estate:Land


39,138,000



39,138,000Buildings and improvements, net


91,626,000



92,327,000Intangible lease assets, net


1,259,000



1,490,000132,023,000



132,955,000Note receivable


4,750,000



3,875,000Note receivable from related party


14,000,000



—Deferred costs and deposits


431,000



351,000Deferred financing costs, net


146,000



211,000Tenant and other receivables, net


849,000



802,000Other assets, net


710,000



629,000Total assets

$
169,216,000


$
165,104,000LIABILITIES AND EQUITYLiabilities:Notes payable

$
45,582,000


$
45,626,000Accounts payable and accrued liabilities


1,045,000



683,000Payable to related parties


25,000



122,000Prepaid rent, security deposits and deferred revenue


1,021,000



969,000Intangible lease liability, net


327,000



393,000Distributions payable


869,000



827,000Total liabilities


48,869,000



48,620,000Commitments and contingencies (Note 12)Equity:Stockholders’ Equity :Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares were issued or outstanding at March 31, 2009 and December 31, 2008


—



—Common stock, $0.001 par value; 290,000,000 shares authorized; 21,507,149 and 20,570,120 shares issued and outstanding at March 31, 2009 and December 31, 2008, respectively


22,000



21,000Additional paid-in capital


125,858,000



121,768,000Accumulated deficit


(5,681,000
)


(5,456,000
)Total stockholders’ equity


120,199,000



116,333,000Noncontrolling interest


148,000



151,000Total equity


120,347,000



116,484,000Total liabilities and equity

$
169,216,000


$
165,104,000




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


3
 Table of Contents





CORNERSTONE CORE PROPERTIES REIT, INC. AND SUBSIDIARIES





CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)





Three Months Ended March 31,2009


2008Revenues:Rental revenues

$
2,110,000


$
2,065,000Tenant reimbursements and other income


539,000



500,000Interest income from notes receivable


297,000



—2,946,000



2,565,000Expenses:Property operating and maintenance


865,000



725,000General and administrative


463,000



408,000Asset management fees


375,000



306,000Real estate acquisition costs


172,000



—Depreciation and amortization


931,000



790,0002,806,000



2,229,000Operating income


140,000



336,000Other income (expense):Interest income


2,000



55,000Interest expense


(367,000
)


(947,000
)Net loss


(225,000
)


(556,000
)Less: Loss attributable to the noncontrolling interest


-



2,000Net loss attributable to common stockholders

$
(225,000
)

$
(554,000
)Net loss per share – basic and diluted

$
(0.01
)

$
(0.05
)Weighted average number of common shares


20,931,999



11,535,060Dividends declared, per common share

$
0.12


$
0.10




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




4
 Table of Contents





CORNERSTONE CORE PROPERTIES REIT, INC. AND SUBSIDIARIES





CONDENSED CONSOLIDATED STATEMENTS OF EQUITY


For the Three Months Ended March 31, 2009 and March 31, 2008





(Unaudited)





Common StockNumber of
Shares


Common
Stock Par
Value


Additional
Paid-In Capital


Accumulated
Deficit


Total Stockholders’ Equity


Noncontrolling Interest


Total EquityBalance - December 31, 2008


20,570,120


$
21,000


$
121,768,000


$
(5,456,000
)

$
116,333,000


$
151,000


$
116,484,000Issuance of common stock


1,268,280



1,000



10,070,000



—



10,071,000



—



10,071,000Redeemed shares


(331,251
)


—



(2,538,000
)


—



(2,538,000
)


—



(2,538,000
)Offering costs


—



—



(958,000
)


—



(958,000
)


—



(958,000
)Distributions


—



—



(2,484,000
)


—



(2,484,000
)


(3,000
)


(2,487,000
)Net loss


—



—



—



(225,000
)


(225,000
)


—



(225,000
)Balance – March 31, 2009


21,507,149


$
22,000


$
125,858,000


$
(5,681,000
)

$
120,199,000


$
148,000


$
120,347,000








Common StockNumber of
Shares


Common
Stock Par
Value


Additional
Paid-In Capital


Accumulated
Deficit


Total Stockholders’ Equity


Noncontrolling Interest


Total EquityBalance - December 31, 2007


9,908,551


$
10,000


$
64,239,000


$
(4,001,000
)

$
60,248,000


$
309,000


$
60,557,000Issuance of common stock


1,708,138



2,000



13,631,000



—



13,633,000



—



13,633,000Redeemed shares


(27,396
)


—



(199,000
)


—



(199,000
)


—



(199,000
)Offering costs


—



—



(1,491,000
)


—



(1,491,000
)


—



(1,491,000
)Distributions


—



—



(1,204,000
)


—



(1,204,000
)


(3,000
)


(1,207,000
)Net loss


—



—



—



(554,000
)


(554,000
)


(2,000
)


(556,000
)Balance – March 31, 2008


11,589,293


$
12,000


$
74,976,000


$
(4,555,000
)

$
70,433,000


$
304,000


$
70,737,000




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




5
 Table of Contents





CORNERSTONE CORE PROPERTIES REIT, INC. AND SUBSIDIARIES





CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)





Three Months Ended March,2009


2008Cash flows from operating activitiesNet loss

$
(225,000
)

$
(556,000
)Adjustments to reconcile net loss to net cash provided by operating activities:Amortization of deferred financing costs


64,000



166,000Depreciation and amortization


931,000



790,000Straight-line rents and amortization of acquired above (below) market leases


(44,000
)


(58,000
)Provisions for bad debt


136,000



—Change in operating assets and liabilities:Tenant and other receivables


(129,000
)


132,000Other assets


83,000



(34,000
)Payable and accrued liabilities


362,000



(276,000
)Payable to related parties


(88,000
)


89,000Net cash provided by operating activities


1,090,000



253,000Cash flows from investing activitiesReal estate acquisition costs and deposits


(37,000
)


(279,000
)Notes receivable


(14,875,000
)


(375,000
)Net cash used in investing activities


(14,912,000
)


(654,000
)Cash flows from financing activitiesIssuance of common stock


8,488,000



12,971,000Redeemed shares


(2,538,000
)


(199,000
)Repayment of notes payable


(44,000
)


(2,332,000
)Offering costs


(1,058,000
)


(1,699,000
)Distributions paid to stockholders


(997,000
)


(450,000
)Distributions paid to noncontrolling interest


(3,000
)


(3,000
)Deferred financing costs


—



(5,000
)Net cash provided by financing activities


3,848,000



8,283,000Net (decrease) increase in cash and cash equivalents


(9,974,000
)


7,882,000Cash and cash equivalents - beginning of period


26,281,000



6,648,000Cash and cash equivalents - end of period

$
16,307,000


$
14,530,000Supplemental disclosure of cash flow information:Cash paid for interest

$
328,000


$
968,000Supplemental disclosure of non-cash financing and investing activities:Distributions declared not paid

$
869,000


$
456,000Distributions accrued to noncontrolling interest

$
—


$
1,000Receivable from transfer agent

$
138,000


$
—Distributions reinvested

$
1,445,000


$
662,000Payable to related parties

$
25,000


$
235,000





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




6
 Table of Contents





CORNERSTONE CORE PROPERTIES REIT, INC. AND SUBSIDIARIES





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2009





UNAUDITED





1.
Organization





Cornerstone Core Properties REIT, Inc., a Maryland Corporation, was formed on October 22, 2004 under the General Corporation Law of Maryland for the purpose of engaging in the business of investing in and owning commercial real estate.  As used in this report, “we,” “us” and “our” refer to Cornerstone
Core Properties REIT, Inc. and its consolidated subsidiaries except where the context otherwise requires. Subject to certain restrictions and limitations, our business is managed by an affiliate, Cornerstone Realty Advisors, LLC, a Delaware limited liability company that was formed on November 30, 2004 (the “Advisor”) pursuant to an advisory agreement.





Cornerstone Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”) was formed on November 30, 2004.  At March 31, 2009, we owned a 99.87% general partner interest in the Operating Partnership while the advisor owned a 0.13% limited partnership interest.  We anticipate that
we will conduct all or a portion of our operations through the Operating Partnership.  Our financial statements and the financial statements of the Operating Partnership are consolidated in the accompanying consolidated financial statements.  All intercompany accounts and transactions have been eliminated in consolidation.





2.
Public Offering





On January 6, 2006, we commenced a public offering of a minimum of 125,000 shares and a maximum of 55,400,000 shares of our common stock, consisting of 44,400,000 shares for sale to the public (the “Primary Offering”) and 11,000,000 shares for sale pursuant to our distribution reinvestment plan (collectively, the “Offering”).  We
retained Pacific Cornerstone Capital, Inc.  (“PCC”), an affiliate of the advisor, to serve as the dealer manager for the Offering.  PCC is responsible for marketing our shares being offered pursuant to the Offering.





Our dealer manager has been the subject of a non-public inquiry by FINRA focused on private placements conducted by our dealer manager during the period from January 1, 2004 through October 31, 2007.  FINRA has informed our dealer manager that it has concluded its inquiry and has verbally indicated its intention to allege that the
dealer manager violated NASD conduct rules 2210 (Communications with the Public), 3010 (Supervision) and 2110 (Standards of Commercial Honor and Principles of Trade) (which is now FINRA rule 2010) and has proposed significant sanctions.  It does not, however, propose to seek to limit our dealer manager from continuing to conduct its business. Our dealer manager believes that it has complied within the conduct requirements of these rules and intends to challenge these findings under FINRA’s dispute
resolution protocol before an independent hearing panel.  If the hearing panel finds against the dealer manager and imposes sanctions against our dealer manager, its business could be materially adversely impacted, which could impact the offering.





We intend to invest the net proceeds from the Primary Offering primarily in investment real estate including multi-tenant industrial real estate located in major metropolitan markets in the United States.  As of March 31, 2009, a total of 19.5 million shares of our common stock had been sold for aggregate gross proceeds of $156.0
million, excluding, approximately, 1.0 million shares that were reinvested pursuant to our distribution reinvestment plan and approximately 1.6 million shares issued in connection with the special 10% stock dividend, reduced by approximately 0.6 million shares pursuant to our stock repurchase program.





On November 25, 2008 we filed a registration statement on Form S-11 with the SEC to register a secondary public offering.  We subsequently amended the registration statement on February 17, 2009.  Pursuant to the registration statement, as amended, we propose to register up to 56,250,000 shares of common stock in a primary
offering for $8.00 per share, with discounts available to certain categories of purchasers. We will also register approximately 21,250,000 shares pursuant to our dividend reinvestment plan at a purchase price equal to the higher of $7.60 per share or 95% of the fair market value of a share of our common stock.  We expect to commence our secondary public offering during the second quarter of 2009.  We intend to cease offering shares of common stock in the Offering upon the earlier of June 1,
2009 or the date the registration statement relating to our proposed secondary offering is declared effective by the Securities and Exchange Commission (the “SEC”).





3.
Summary of Significant Accounting Policies





The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base these estimates on various assumptions that we believe to be reasonable under the circumstances, and these estimates form the basis for our judgments concerning the
carrying values of assets and liabilities that are not readily apparent from other sources. We periodically evaluate these estimates and judgments based on available information and experience. Actual results could differ from our estimates under different assumptions and conditions. If actual results significantly differ from our estimates, our financial condition and results of operations could be materially impacted. For more information regarding our critical accounting policies and estimates please refer
to "Summary of Significant Accounting Policies” contained in our Annual Report on Form 10-K for the year ended December 31, 2008. There have been no material changes to the critical accounting policies previously disclosed in that report except as discussed below.


7
 Table of Contents





Interim Financial Information





The accompanying interim condensed consolidated financial statements have been prepared by our management in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conjunction with the rules and regulations of the SEC.  Certain information and footnote disclosures required
for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations.  Accordingly, the interim condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements.  The accompanying financial information reflects all adjustments which are, in the opinion of our management, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations
and cash flows for the interim periods. Interim results of operations are not necessarily indicative of the results to be expected for the full year.  The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the 2008 Annual Report on Form 10-K as filed with the SEC.  Operating results for the three months ended March 31, 2009 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2009.





Adoption of Accounting Pronouncements





In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141(R), “Business Combinations” (“SFAS 141(R)”).  In summary, SFAS 141(R) requires the acquirer of a business combination to measure at fair value the
assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, with limited exceptions.  In addition, this standard requires acquisition costs to be expensed as incurred.  The standard is effective for fiscal years beginning after December 15, 2008, and is to be applied prospectively, with no earlier adoption permitted.  We have adopted this standard on January 1, 2009 and as a result, $172,000 of real estate acquisition costs are
included within expenses in our condensed consolidated statement of operations for the three months ended March 31, 2009.





On January 1, 2009, we adopted SFAS 160, which clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS 160 also requires consolidated net income to be reported at amounts that include the amounts attributable
to both the parent and the noncontrolling interest and requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest.





SFAS 160 was required to be applied prospectively after adoption, with the exception of the presentation and disclosure requirements, which were applied retrospectively for all periods presented. As a result of the adoption of SFAS 160, we reclassified $151,000 and $309,000 in noncontrolling interest to permanent equity on the consolidated
balance sheets as of December 31, 2008 and 2007, respectively.  The impact of such adoption on net loss for the periods ended March 31, 2009 and 2008 was insignificant. In periods subsequent to the adoption of SFAS 160, we will periodically evaluate individual noncontrolling interests for the ability to continue to recognize the noncontrolling interest as permanent equity in the consolidated balance sheets. Any noncontrolling interest that fails to qualify as permanent equity will be reclassified as
temporary equity and adjusted to the greater of (a) the carrying amount, or (b) its redemption value as of the end of the period in which the determination is made.





SFAS 160 requires retrospective application of the presentation and disclosure requirements for all periods presented or to be incorporated by reference in any registration statements to be filed by the Company subsequent to the adoption of SFAS 160.  However, given that the amounts changed as a result of the retrospective application
of SFAS 160 are insignificant, we will make such prior period adjustments in future filings.





In February 2008, FASB issued Financial Statement of Position (“FSP”) No. FAS 157-2, “Effective Date of FASB Statement No. 157” (“FSP FAS 157-2”) which delays the effective date of Statement of Financial Accounting Standard (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS
157”) to fiscal years beginning after November 15, 2008 for certain nonfinancial assets and nonfinancial liabilities.





On January 1, 2009, we applied the provisions of SFAS 157 to the nonfinancial assets and nonfinancial liabilities within the scope of FSP FAS 157-2.  The adoption of FAS 157 did not materially impact the fair values of nonfinancial assets and nonfinancial liabilities within the scope of this FSP.




Recently Issued Accounting Pronouncements




On April 9, 2009, the FASB issued three FSP’s to provide additional application guidance and enhance disclosures regarding fair value measurements and impairments of securities.


8
 Table of Contents





FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”, provides additional guidance for estimating fair value in accordance with FASB Statement
No. 157, “Fair Value Measurements” when the volume and level of activity for the asset or liability have significantly decreased in relation to normal market activity. This FSP states a reporting entity shall evaluate circumstances to determine whether the transaction is orderly based on the weight of the evidence. Additional disclosures required by this FSP include the inputs and valuation techniques used to measure fair values and any changes
in such.




FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” requires disclosures about fair value of financial instruments for interim reporting periods as well as in annual financial statements.




FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments,” intends to bring greater consistency to the timing of impairment recognition, and provide greater clarity to investors about the credit and noncredit components of impaired debt
securities that are not expected to be sold.  The FSP also requires increased and timely disclosures regarding expected cash flows, credit losses, and an aging of securities with unrealized losses.




The FSPs are effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. If an entity elects to early adopt one of the FSPs, the other two must also be adopted. The adoption of these FSPs are not expected to have a significant impact on our condensed consolidated
financial statements.




On April 13, 2009, SEC Office of the Chief Accountant and Division of Corporation Finance issued SEC Staff Accounting Bulletin 111 ("SAB 111"). SAB 111 amends and replaces SAB Topic 5M, "Miscellaneous Accounting - Other Than Temporary Impairment of Certain Investments in Equity Securities" to reflect FSP FAS 115-2 and FAS 124-2. This FSP provides
guidance for assessing whether an impairment of a debt security is other than temporary, as well as how such impairments are presented and disclosed in the financial statements. The amended SAB Topic 5M maintains the prior staff views related to equity securities but has been amended to exclude debt securities from its scope. SAB 111 is effective upon the adoption of FSP FAS 115-2 and FAS 124-2. We are currently evaluating the impact, if any, that the adoption of SAB 111 will have on our results of operations,
financial position, and cash flows.


4.
Investments in Real Estate




As of March 31, 2009, our portfolio consists of twelve properties which were approximately 86.0% leased.  The following table provides summary information regarding our properties.





Property

Location

Date Purchased

Square
Footage


Purchase
Price


Associated Debt


March 31, 2009
% Leased2111 South Industrial Park

North Tempe, AZ

June 1, 2006


26,800


$
1,975,000


$
—



79.1
%Shoemaker Industrial Buildings

Santa Fe Springs, CA

June 30, 2006


18,921



2,400,000



—



75.7
%15172 Goldenwest Circle

Westminster, CA

December 1, 2006


102,200



11,200,000



2,824,000



100.0
%20100 Western Avenue

Torrance, CA

December 1, 2006


116,433



19,650,000



4,702,000



74.2
%Mack Deer Valley

Phoenix, AZ

January 21, 2007


180,985



23,150,000



3,868,000



80.2
%Marathon Center

Tampa Bay, FL

April 2, 2007


52,020



4,450,000



—



81.2
%Pinnacle Park Business Center

Phoenix, AZ

October 2, 2007


159,661



20,050,000



4,553,000



100.0
%Orlando Small Bay PortfolioCarter

Winter Garden, FL

November 15, 2007


49,125











80.9
%Goldenrod

Orlando, FL

November 15, 2007


78,646











72.5
%Hanging Moss

Orlando, FL

November 15, 2007


94,200











83.7
%Monroe South

Sanford, FL

November 15, 2007


172,500











87.7
%394,471



37,128,000



22,420,000



82.9
%Monroe North CommerCenter

Sanford, FL

April 17, 2008


181,348



14,275,000



7,215,000



89.2
%1,232,839


$
134,278,000


$
45,582,000



86.0
%


9
 Table of Contents




As of March 31, 2009, cost and accumulated depreciation and amortization related to real estate assets and related lease intangibles were as follows:





Buildings and
Improvements


Site
Improvements


In-Place Leases


Acquired Above
Market Leases


Acquired Below
Market LeasesCost

$
86,108,000


$
10,360,000


$
2,009,000


$
1,692,000


$
(834,000
)Accumulated depreciation and amortization


(3,927,000
)


(915,000
)


(1,133,000
)


(1,309,000
)


507,000Net

$
82,181,000


$
9,445,000


$
876,000


$
383,000


$
(327,000
)





As of December 31, 2008, cost and accumulated depreciation and amortization related to real estate assets and related lease intangibles were as follows:





Buildings and
Improvements


Site
Improvements


In-Place Leases


Acquired Above
Market Leases


Acquired Below
Market LeasesCost

$
86,071,000


$
10,360,000


$
2,009,000


$
1,692,000


$
(834,000
)Accumulated depreciation and amortization


(3,361,000
)


(743,000
)


(979,000
)


(1,232,000
)


441,000Net

$
82,710,000


$
9,617,000


$
1,030,000


$
460,000


$
(393,000
)





Depreciation expense associated with buildings and improvements and site improvements for the three months ended March 31, 2009 and 2008 was approximately $738,000 and $622,000, respectively.




Amortization expense, net associated with the lease intangible assets and liabilities for the three months ended March 31, 2009 and March 31, 2008 was $166,000 and $176,000, respectively.  Estimated amortization expense, net for April 1, 2009 through December 31, 2009 and each of the four subsequent years is as follows:
 
 Lease Intangibles AmortizationApril 1, 2009 to December 31, 2009

$
286,0002010

$
331,0002011

$
185,0002012

$
66,0002013

$
41,000


The estimated useful lives for lease intangibles range from approximately one month to nine years.  As of March 31, 2009, the weighted-average amortization period for in-place leases, acquired above market leases and acquired below market leases were 4.1 years, 4.7 years and 3.5 years, respectively.




5.
Allowance for Doubtful Accounts





Our allowance for doubtful accounts was approximately $453,000 and $316,000 as of March 31, 2009 and December 31, 2008, respectively.





6.
Concentration of Credit Risk





Financial instruments that potentially subject us to a concentration of credit risk are primarily cash investments.  Cash is generally invested in government backed securities and investment-grade short-term instruments and the amount of credit exposure to any one commercial issuer is limited.  Currently, the Federal Deposit
Insurance Corporation, or FDIC, generally insures amounts up to $250,000 per depositor per insured bank, which is scheduled to be reduced to $100,000 after December 31, 2009.  As of March 31, 2009, we had cash accounts in excess of FDIC insured limits.





As of March 31, 2009, we owned three properties in the state of California, three properties in the state of Arizona and six properties in the state of Florida.  Accordingly, there is a geographic concentration of risk subject to fluctuations in each State’s economy.





7.
Notes Receivable





In May 2008, we committed to fund up to $5.0 million to Servant Healthcare Investments LLC and Servant Investments LLC (collectively “Servant”), two real estate operating companies that are parties to an alliance agreement with the managing member of the Advisor pursuant to which they are responsible for providing certain acquisition
and asset management services for programs sponsored by the Advisor and its affiliates. Effective March 12, 2009, we increased the commitment to Servant to a total of $10.0 million. The unsecured loans bear interest at a rate of 10% per year and mature on May 19, 2013.  As of March 31, 2009 we have funded approximately $4.8 million under the loan agreements.





On January 22, 2009, we made a $14.0 million acquisition bridge loan to Caruth Haven L.P, a Delaware limited partnership that is a wholly-owned subsidiary of Cornerstone Growth & Income REIT, Inc., a publicly offered, non-traded real estate investment trust (“REIT”) sponsored by affiliates of our sponsor.  The loan is
secured by a property and will mature on January 21, 2010, with no option to extend and bears interest at a variable rate of 300 basis points over the prime rate for the term of the loan.  Caruth Haven, L.P. may repay the loan, in whole or in part, on or before January 21, 2010 without incurring any prepayment penalty.  Monthly installments on the loan are interest-only and the entire principal amount is due on the maturity date, assuming no prior principal prepayment.  As of
March 31, 2009, the outstanding balance on this acquisition bridge loan was $14.0 million.


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8.
Payable to Related Parties





Payable to related parties at March 31, 2009 and December 31, 2008 consists of offering costs, acquisition fees, and expense reimbursement payable and sales commissions and dealer manager fees incurred to the advisor and PCC.





9.
Stockholders’ Equity





Common Stock





Our articles of incorporation authorize the issuance of 290,000,000 shares of common stock with a par value of $0.001 and 10,000,000 shares of preferred stock with a par value of $0.001.  As of March 31, 2009, we have issued approximately 19.5 million shares of common stock for total gross proceeds of approximately $156.0 million.  As
of December 31, 2008, we had issued approximately 18.4 million shares of common stock for a total of approximately $147.3 million of gross proceeds.





Distribution





We have adopted a distribution reinvestment plan that allows our stockholders to have dividends and other distributions otherwise distributable to them invested in additional shares of our common stock.  We have registered 11,000,000 shares of our common stock for sale pursuant to the distribution reinvestment plan.  The
purchase price per share is 95% of the price paid by the purchaser for our common stock, but not less than $7.60 per share.  As of March 31, 2009 and December 31, 2008, approximately 984,000 and 794,000 shares, respectively, had been issued under the distribution reinvestment plan.





The following are the distributions declared during the three months ended March 31, 2009 and 2008:





Distribution DeclaredPeriod

Cash

Reinvested

TotalFirst quarter 2008 (1)


$
486,000


$
719,000


$
1,205,000First quarter 2009


$
1,021,000


$
1,463,000


$
2,484,000





(1)
Distributions declared represented a return of capital for tax purposes.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.





The declaration of distributions is at the discretion of our board of directors and our board will determine the amount of distributions on a regular basis.  The amount of distributions will depend on our funds from operations, financial condition, capital requirements, annual distribution requirements under the REIT provisions of
the Internal Revenue Code and other factors our board of directors deems relevant.  We may amend or terminate the distribution reinvestment plan for any reason at any time upon 10 days prior written notice to participants.





Special 10% Stock Distribution





Our board of directors authorized a special 10% stock distribution to be paid to the stockholders of record on the date that we raised the first $125.0 million in the Offering, which was achieved on July 23, 2008. All stockholders of record on July 23, 2008 received one additional share of stock for every 10 shares of stock they owned as of
that date.  This special 10% stock distribution had the effect of lowering the effective purchase price per share paid by these investors by approximately 10%.  The price at which we will redeem stock pursuant to our stock repurchase program is based on the actual purchase price paid for shares and is not affected by the special 10% stock distribution.  We intend to treat these distributions as adjustments to the per share price for stock. All per share computations have been adjusted
to reflect common stock dividends declared for all periods presented.





Share Repurchase Program





We have adopted a share repurchase program for investors who have held their shares for at lease one year, unless the shares are being redeemed in connection with a stockholder’s death.  Under our current stock repurchase program, the repurchase price will vary depending on the purchase price paid by the stockholder and the
number of years the shares were held.  Our board of directors may amend, suspend or terminate the program at any time on 30 days prior notice to stockholders. We have no obligation to repurchase our stockholders’ shares.  Until September 21, 2012 our stock repurchase program limits the number of shares of stock we can redeem (other than redemptions due to death of a stockholder) to those that we can purchase with net proceeds from the sale of stock under our distribution reinvestment
plan in the prior calendar year. Until September 21, 2012 we do not intend to redeem more than the lesser of (i) the number of shares that could be redeemed using the proceeds from our distribution reinvestment plan in the prior calendar year or (ii) 5% of the number of shares outstanding at the end of the prior calendar year.


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During the three months ended March 31, 2009, we redeemed shares pursuant to our stock repurchase program as follows:





Period

Total Number of Shares Redeemed (1)


Average Price Paid per ShareJanuary 2009


40,873


$
6.77February 2009


137,395


$
7.51March 2009


152,984


$
7.61331,252





Period

Total Number of Shares Redeemed (1)


Average price Paid Per ShareJanuary 2008


12,500


$
7.20February 2008


12,484


$
7.36March 2008


2,016


$
7.1527,000


_________________________


(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.




Our board of directors may modify our stock repurchase program so that we can redeem stock using the proceeds from the sale of our real estate investments or other sources.





Employee and Director Incentive Stock Plan





We have adopted an Employee and Director Incentive Stock Plan (“the Plan”) which provides for the grant of awards to our directors and full-time employees, as well as other eligible participants that provide services to us.  We have no employees, and we do not intend to grant awards under the Plan to persons who are not
directors of ours.  Awards granted under the Plan may consist of nonqualified stock options, incentive stock options, restricted stock, share appreciation rights, and distribution equivalent rights.  The term of the Plan is 10 years.  The total number of shares of common stock reserved for issuance under the Plan is equal to 10% of our outstanding shares of stock at any time.





Effective January 1, 2006, we adopted the provisions of SFAS No. 123R “Share-Based Payment”, which requires the measurement and recognition of compensation expense for all share-based payment awards to employees and directors based on estimated fair values.  On August 6, 2008 and August 8, 2007, we granted our non-employee
directors nonqualified stock options to purchase an aggregate of 20,000 and 20,000 shares of common stock, respectively, at an exercise price of $8.00 per share.  Of these options, 15,000 lapsed on November 8, 2008 due to the resignation of one director from the board of directors on August 6, 2008.  Outstanding stock options became immediately exercisable in full on the grant date, expire in ten years after the grant date, and have no intrinsic value as of March 31, 2009.  For the
three months ended March 31, 2009 and 2008, we did not incur any non-cash compensation expenses.  No stock options were exercised or canceled during the three months ended March 31, 2009.





10.
Related Party Transactions





On January 22, 2009, we made a $14.0 million acquisition bridge loan to Caruth Haven L.P, a Delaware limited partnership that is a wholly-owned subsidiary of Cornerstone Growth & Income REIT, Inc., a publicly offered, non-traded REIT sponsored by affiliates of our sponsor.  The loan matures on January 21, 2010, with no option
to extend and bears interest at a variable rate of 300 basis points over the prime rate for the term of the loan.  As of March 31, 2009, the outstanding balance on this acquisition bridge loan was $14.0 million.





Our company has no employees. The Advisor is primarily responsible for managing our business affairs and carrying out the directives of our board of directors.  We have an advisory agreement with the Advisor and a dealer manager agreement with PCC which entitle the advisor and PCC to specified fees upon the provision of certain services
with regard to the Offering and investment of funds in real estate projects, among other services, as well as reimbursement for organizational and offering costs incurred by the advisor and PCC on our behalf and reimbursement of certain costs and expenses incurred by the Advisor in providing services to us.




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Advisory Agreement





Under the terms of the advisory agreement, the Advisor will use commercially reasonable efforts to present to us investment opportunities to provide a continuing and suitable investment program consistent with the investment policies and objectives adopted by our board of directors.  The advisory agreement calls for the Advisor to
provide for our day-to-day management and to retain property managers and leasing agents, subject to the authority of our board of directors, and to perform other duties.





The fees and expense reimbursements payable to the Advisor under the advisory agreement are described below.





Organizational and Offering Costs.  Organizational and offering costs of the Offering are being paid by the Advisor on our behalf and will be reimbursed to the Advisor from the proceeds of the Offering.  Organizational and offering costs consist of all expenses
(other than sales commissions and the dealer manager fee) to be paid by us in connection with the Offering, including our legal, accounting, printing, mailing and filing fees, charges of our escrow holder and other accountable offering expenses, including, but not limited to, (i) amounts to reimburse the Advisor for all marketing related costs and expenses such as salaries and direct expenses of employees of the Advisor and its affiliates in connection with registering and marketing our shares (ii) technology
costs associated with the offering of our shares; (iii) our costs of conducting our training and education meetings; (iv) our costs of attending retail seminars conducted by participating broker-dealers; and (v) payment or reimbursement of bona fide due diligence expenses.  In no event will we have any obligation to reimburse the Advisor for organizational and offering costs totaling in excess of 3.5% of the gross proceeds from the Primary Offering.  As of March 31, 2009, the Advisor and its
affiliates had incurred on our behalf organizational and offering costs totaling approximately $4.7 million, including approximately $0.1 million of organizational costs that have been expensed, approximately $0.4 million related to the secondary offering and approximately $4.2 million of offering costs which reduce net proceeds of the Offering.  As of December 31, 2008, the Advisor and its affiliates had incurred on our behalf organizational and offering costs totaling approximately $4.5 million, including
approximately $0.1 million of organizational costs that have been expensed, approximately $0.3 million related to the secondary offering and approximately $4.1 million of offering costs which reduce net proceeds of the Primary Offering.





Acquisition Fees and Expenses.  The advisory agreement requires us to pay the Advisor acquisition fees in an amount equal to 2% of the gross proceeds of the Primary Offering.  We will pay the acquisition fees upon receipt of the gross proceeds the Offering.  However,
if the advisory agreement is terminated or not renewed, the advisor must return acquisition fees not yet allocated to one of our investments.  In addition, we are required to reimburse the advisor for direct costs the advisor incurs and amounts the Advisor pays to third parties in connection with the selection and acquisition of a property, whether or not ultimately acquired.  For the three months ended March 31, 2009, the Advisor earned approximately $0.2 million of acquisition fees, which
had been expensed as incurred in accordance with our adoption of SFAS 141(R) effective January 1, 2009.  For the three months ended March 31, 2008, the Advisor earned approximately $0.3 million of acquisitions fees, which had been capitalized.





Management Fees.  The advisory agreement requires us to pay the Advisor a monthly asset management fee of one-twelfth of 1.0% of the sum of the aggregate book basis carrying values of our assets invested, directly or indirectly, in equity interests in and loans secured
by real estate before reserves for depreciation or bad debts or other similar non-cash reserves, calculated in accordance with generally accepted accounting principals in the United States of America (GAAP).  In addition, we will reimburse the Advisor for the direct costs and expenses incurred by the Advisor in providing asset management services to us.  These fees and expenses are in addition to management fees that we pay to third party property managers.  For the three months
ended March 31, 2009 and 2008, the Advisor earned approximately $0.4 million and $0.3 million of asset management fees, respectively, which were expensed and included in asset management fees in our condensed consolidated statement of operations.




Operating Expenses. The advisory agreement provides for reimbursement of the Advisor’s direct and indirect costs of providing administrative and management services to us.  For the three months ended March 31, 2009 and 2008, approximately $0.1 million and $0.2
million of such costs, respectively, were reimbursed and included in general and administrative expenses in our condensed consolidated statement of operations.  The Advisor must pay or reimburse us the amount by which our aggregate annual operating expenses exceed the greater of 2% of our average invested assets or 25% of our net income unless a majority of our independent directors determine that such excess expenses were justified based on unusual and non-recurring factors.





Disposition Fee.  The advisory agreement provides that if the Advisor or its affiliate provides a substantial amount of the services (as determined by a majority of our directors, including a majority of our independent directors) in connection with the sale of one
or more properties, we will pay the advisor or such affiliate shall receive at closing a disposition fee up to 3% of the sales price of such property or properties.  This disposition fee may be paid in addition to real estate commissions paid to non-affiliates, provided that the total real estate commissions (including such disposition fee) paid to all persons by us for each property shall not exceed an amount equal to the lesser of (i) 6% of the aggregate contract sales price of each property or (ii)
the competitive real estate commission for each property.  We will pay the disposition fees for a property at the time the property is sold.


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Subordinated Participation Provisions.  The Advisor is entitled to receive a subordinated participation upon the sale of our properties, listing of our common stock or termination of the advisor, as follows:





·
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.





·
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





PCC, as dealer manager, is entitled to receive a sales commission of up to 7% of gross proceeds from sales in the Primary Offering.  PCC, as dealer manager, is also entitled to receive a dealer manager fee equal to up to 3% of gross proceeds from sales in the Primary Offering.  The dealer manager is also entitled to receive
a reimbursement of bona fide due diligence expenses up to 0.5% of the gross proceeds from sales in the Primary Offering.  The advisory agreement requires the Advisor to reimburse us to the extent that offering expenses including sales commissions, dealer manager fees and organization and offering expenses (but excluding acquisition fees and acquisition expenses discussed above) to the extent are in excess of 13.5% of gross proceeds from the Offering.  For the three months ended March 31, 2009
and 2008, our dealer manager earned sales commission and dealer manager fees of approximately $849,000 and $1.3 million respectively.  Dealer manager fees and sales commissions paid to PCC are a cost of capital raised and, as such, are included as a reduction of additional paid in capital in the accompanying consolidated balance sheets.





11.
Notes Payable





On June 30, 2006, we entered into a credit agreement with HSH Nordbank AG, New York Branch, for a temporary credit facility that we will use during the offering period to facilitate our acquisitions of properties in anticipation of the receipt of offering proceeds.  As of March 31, 2009 and December 31, 2008, we had net borrowings
of approximately $15.9 million, under the credit agreement.





The credit agreement permits us to borrow up to $50.0 million secured by real property at a borrowing rate based on 30-day LIBOR plus a margin ranging from 115 to 135 basis points and requires payment of a usage premium of up to 0.15% and an annual administrative fee.  We may use the entire credit facility to acquire real estate
investments and we may use up to 10% of the credit facility for working capital.  We are entitled to prepay the borrowings under the credit facility at any time without penalty.  On March 24, 2009, we notified the lender of our intent to exercise the second of two one-year options to extend the loan maturity date.  We intend to satisfy conditions expressed by the lender and extend our loan maturity date to June 30, 2010.  The repayment of obligations under the credit agreement
may be accelerated in the event of a default, as defined in the credit agreement.  The facility contains various covenants including financial covenants with respect to consolidated interest and fixed charge coverage and secured debt to secured asset value.  As of March 31, 2009, we were in compliance with all these financial covenants.  During the three months ended March 31, 2009 and 2008, we incurred approximately $64,000 and $513,000 of interest expense, respectively, related
to the credit agreement.





On November 13, 2007, we entered into a loan agreement with Wachovia Bank, National Association to facilitate the acquisition of properties during our offering period.  Pursuant to the terms of the loan agreement, we may borrow $22.4 million at an interest rate of 140 basis points over 30-day LIBOR, secured by specified real estate
properties.  The loan agreement has a maturity date of November 13, 2009, and may be prepaid without penalty.  We have the option to extend the term of the loan for one year upon satisfaction of conditions set by Wachovia Bank.  The entire $22.4 million available under the terms of the loan was used to finance an acquisition of properties that closed on November 15, 2007.  During the three months ended March 31, 2009 and 2008, we incurred approximately $104,000 and $270,000
of interest expense, respectively, related to the loan agreement.





In connection with our acquisition of Monroe North CommerCenter, on April 17, 2008, we entered into an assumption and amendment of note, mortgage and other loan documents (the “Loan Assumption Agreement”) with Transamerica Life Insurance Company (“Transamerica”).  Pursuant to the Loan Assumption Agreement,
we assumed the outstanding principal balance of approximately $7.4 million on the Transamerica mortgage loan.  The loan matures on November 1, 2014 and bears interest at a fixed rate of 5.89% per annum.  During the three months ended March 31, 2009 and 2008, we incurred approximately $106,000 and $0 of interest expense, respectively, related to the loan agreement.  As of March 31, 2009 and December 31, 2008, we had net borrowings of approximately $7.2 million and $7.3 million, respectively,
under the Loan Assumption Agreement.


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The principal payments due on Monroe North CommerCenter mortgage loan for April 1, 2009 to December 31, 2009 and each of the subsequent years is as follows:





Year

Principal amountApril 1, 2009 to December 31, 2009

$
137,0002010

$
193,0002011

$
204,0002012

$
217,0002013

$
230,0002014 and thereafter

$
6,234,000





In connection with our notes payable, we had incurred financing costs totaling approximately $1.4 million as of March 31, 2009 and December 31, 2008.  These financing costs have been capitalized and are being amortized over the life of the agreements.  For the three months ended March 31, 2009 and 2008, approximately $92,000
and $166,000, respectively, of deferred financing costs were amortized and included in interest expense in the consolidated statements of operations.  Consistent with our borrowing policies, during our Primary Offering, we will borrow periodically to acquire properties and for working capital.  We will determine whether to use the proceeds of our Offering to repay amounts borrowed under the credit agreement and loan agreements depending on a number of factors, including the investments that
are available to us for purchase at the time and the cost of the credit facility.  Following the closing of our Primary Offering, we will endeavor to repay all amounts owing under the credit agreement and loan agreements or that are secured by our properties and which have not previously been paid.  To the extent sufficient proceeds from our Offering are unavailable to repay the indebtedness secured by properties within a reasonable time following the closing of our Primary Offering as determined
by our board of directors, we may sell properties or raise equity capital to repay the secured debt, so that we will own our properties with no permanent acquisition financing.





12.
Commitments and Contingencies





We committed to fund up to $10.0 million to Servant. As of March 31, 2009, we have funded approximately $4.8 million to Servant. See note 7 for further detail.





We monitor our properties for the presence of hazardous or toxic substances.  While there can be no assurance that a material environment liability does not exist, we are not currently aware of any environmental liability with respect to the properties that would have a material effect on our financial condition, results of operations
and cash flows.  Further, we are not aware of any environmental liability or any unasserted claim or assessment with respect to an environmental liability that we believe would require additional disclosure or the recording of a loss contingency.





Our commitments and contingencies include the usual obligations of real estate owners and operators in the normal course of business.  In the opinion of management, these matters are not expected to have a material impact on our consolidated financial position, cash flows and results of operations.  We are not presently
subject to any material litigation nor, to our knowledge, is any material litigation threatened against the Company which if determined unfavorably to us would have a material adverse effect on our cash flows, financial condition or results of operations.





13.
Subsequent Event





Sale of Shares of Common Stock





As of April 30, 2009, we had raised approximately $159.7 million through the issuance of approximately 20.0 million shares of our common stock under our Offering, excluding, approximately 1.1 million shares that were reinvested pursuant to our distribution reinvestment plan and approximately 1.6 million shares issued in connection with the
special 10% stock dividend, reduced by approximately 0.7 million shares pursuant to our stock repurchase program.


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Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations





The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with our financial statements and notes thereto contained elsewhere in this report.





This section contains forward-looking statements, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based.  These forward-looking statements generally are identified by the words “believes,” “project,”
“expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions.  Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking
statements.  Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false.  We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.  All forward-looking statements should be read in light of the risks identified in Part II, Item 1A herein and Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2008 filed with
the Securities and Exchange Commission (the “SEC”).





Overview





Cornerstone Core Properties REIT, Inc., a Maryland corporation, was formed on October 22, 2004 under the General Corporation Law of Maryland for the purpose of engaging in the business of investing in and owning commercial real estate.  As used in this report, “we,” “us” and “our” refer to Cornerstone
Core Properties REIT, Inc. and its consolidated subsidiaries except where the context otherwise requires. We have no paid employees and are externally managed by an affiliate, Cornerstone Realty Advisors, LLC, a Delaware limited liability company that was formed on November 30, 2004 (the “Advisor”) pursuant to an advisory agreement.





Cornerstone Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”) was formed on November 30, 2004.  At March 31, 2009, we owned 99.87% general partner interest in the Operating Partnership while the Advisor owned a 0.13% limited partnership interest.  We anticipate that we
will conduct all or a portion of our operations through the Operating Partnership.  Our financial statements and the financial statements of the Operating Partnership are consolidated in the accompanying condensed consolidated financial statements.  All intercompany accounts and transactions have been eliminated in consolidation.





On January 6, 2006, we commenced a public offering of a minimum of 125,000 shares and a maximum of 55,400,000 shares of our common stock, consisting of 44,400,000 shares for sale to the public (the “Primary Offering”) and 11,000,000 shares for sale pursuant to our distribution reinvestment plan (collectively, the “Offering”).  We
retained Pacific Cornerstone Capital, Inc. (“PCC”), an affiliate of the Advisor, to serve as the dealer manager for the Offering.  PCC is responsible for marketing our shares being offered pursuant to the Offering.





We intend to invest the net proceeds from the Offering primarily in investment real estate including multi-tenant industrial real estate located in major metropolitan markets in the United States.





As of March 31, 2009, we raised approximately $156.0 million of gross proceeds from the sale of approximately 19.5 million shares of our common stock and had acquired twelve properties.





On November 25, 2008 we filed a registration statement on Form S-11 with the SEC to register a secondary public offering.  We subsequently amended the registration statement on February 17, 2009.  Pursuant to the registration statement, as amended, we propose to register up to 56,250,000 shares of common stock in a primary
offering for $8.00 per share, with discounts available to certain categories of purchasers.





Critical Accounting Policies





There have been no material changes to our critical accounting policies as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2008, as filed with the SEC.





Results of Operations





Comparison of the Three Months Ended March 31, 2009 to the Three Months Ended March 31, 2008





We owned twelve and eleven properties during the three months ended March 31, 2009 and 2008, respectively. In addition, we owned two notes receivable outstanding as of March 31, 2009.  We did not have any notes receivable as of March 31, 2008.  Accordingly, for the three months ended March 31, 2009 and March 31, 2008, interest
income generated from the notes receivables was $297,000 and $0, respectively.


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Rental revenues increased to $2,110,000 from $2,065,000 as a result of approximately $287,000 in revenues related to the additional property acquired during the second quarter of 2008 offset by a decrease in rental revenue from other properties of approximately $242,000 due to higher vacancies.





Tenant reimbursement and other income increased to $539,000 from $500,000 as a result of approximately $84,000 in tenant reimbursements related to the additional property acquired during the second quarter of 2008 offset by decreased tenant reimbursements from other properties of approximately $45,000 due to higher vacancies.





Property operating and maintenance expenses increased to $865,000 from $725,000 primarily due to the additional property acquired during the second quarter of 2008





General and administrative increased to $463,000 from $408,000 due primarily to increased professional fees and board of director expenses of $104,000 offset by decreased operating expenses of $49,000.





Asset management fees increased to $375,000 from $306,000 due primarily to fees earned from the additional property acquired during the second quarter of 2008 and a bridge loan acquired during the first quarter of 2009.





Real estate acquisition costs increased to $172,000 from $0 for the comparable 2008 period.  The increase is due to acquisition-related fees that have been expensed as a result of our adoption of Statement of Financial Accounting Standard No. 141(R), "Business Combinations" on January 1, 2009.





Depreciation and amortization increased to $931,000 from $790,000 due primarily to the additional property acquired during the second quarter of 2008.





Interest income decreased to $2,000 from $55,000 for the comparable period of 2008.  The decrease is due primarily to lower investment rates on short term investments during the three months ended March 31, 2009.  Interest expense decreased to $367,000 from $947,000 for the comparable period of 2008 primarily due to lower
debt balance and interest rates on our credit agreement with HSH Nordbank and Wachovia Bank.





Liquidity and Capital Resources





We expect that primary sources of capital over the long term will include net proceeds from the sale of our common stock and net cash flows from operations.  We expect that our primary uses of capital will be for property acquisitions, for the payment of tenant improvements and leasing commissions, operating expenses, including interest
expense on any outstanding indebtedness, cash distributions, and for the repayment of notes payable. In addition, we will continue to use temporary debt financing to facilitate our acquisitions of properties in anticipation of receipt of offering proceeds.




We have adopted a stock repurchase program that enables our stockholders to sell their stock to us in limited circumstances. Our stock repurchase program has limitations and restrictions and may be cancelled. We intend to redeem shares using proceeds from our distribution reinvestment plan but we may use other available cash to repurchase
the shares of a deceased shareholder. Our board of directors may modify our  stock repurchase program so that we can also redeem stock using the proceeds from the sale of our properties or other sources.


As of March 31, 2009, a total of approximately 19.5 million shares of our common stock had been sold in our Primary Offering for aggregate gross proceeds of approximately $156.0 million.  Because we did not raise the maximum offering proceeds of $355.2 million in our initial public offering prior to the previously scheduled September
21, 2007 offering termination date, we have extended the initial offering period. Under no circumstances will the initial offering period be extended beyond June 1, 2009.





On November 25, 2008 we filed a registration statement on Form S-11 with the SEC to register a secondary public offering.  We subsequently amended the registration statement on February 17, 2009.  Pursuant to the registration statement, as amended, we propose to register up to 56,250,000 shares of common stock in a primary
offering for $8.00 per share, with discounts available to certain categories of purchasers. We will also register approximately 21,250,000 shares pursuant to our dividend reinvestment plan at a purchase price equal to the higher of $7.60 per share or 95% of the fair market value of a share of our common stock.  We expect to commence our secondary public offering during the second quarter of 2009.  We intend to cease offering shares of common stock in Offering upon the earlier of June 1, 2009
or the date the registration statement relating to our proposed secondary offering is declared effective by the Securities and Exchange Commission.





As of March 31, 2009, we had approximately $16.3 million in cash and cash equivalents on hand and approximately $34.1 million available under our acquisition credit facility with HSH Nordbank.




We may use the available credit to acquire real estate investments and we may use up to 10% of the credit facility for working capital.  We are entitled to prepay the borrowings under the credit facility at any time without penalty.  On March 24, 2009, we notified the lender of our intent to exercise the second of two one-year
options to extend the loan maturity date.  We intend to satisfy conditions expressed by the lender and extend our loan maturity date to June 30, 2010.  The repayment of obligations under the credit agreement may be accelerated in the event of a default, as defined in the credit agreement.  The facility contains various covenants including financial covenants with respect to consolidated interest and fixed charge coverage and secured debt to secured asset value.  As of March
31, 2009, we were in compliance with all these financial covenants.  We anticipate paying down the existing debt obligation with proceeds raised from the Offering.  Our liquidity will increase as additional subscriptions are accepted and decrease as net offering proceeds are expended in connection with the acquisition and operation of properties.





There may be a delay between the sale of our shares and the purchase of properties.  During this period, net offering proceeds will be temporarily invested in short-term, liquid investments that could yield lower returns than investments in real estate.


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Until proceeds from our Offering are invested and generating operating cash flow sufficient to make distributions to stockholders, we intend to pay all or a substantial portion of our distributions from the proceeds of our Offering or from borrowings in anticipation of future cash flow.  For the three months ended March 31, 2009,
distributions to stockholders were paid from cash flow from operations.





As of March 31, 2009, the Advisor and its affiliates had incurred on our behalf organizational and offering costs totaling approximately $4.7 million, including approximately $0.1 million of organizational costs that have been expensed, approximately $0.4 million related to the secondary offering and approximately $4.2 million of offering
costs which reduce net proceeds of our Primary Offering.  In no event will we have any obligation to reimburse the Advisor for these costs totaling in excess of 3.5% of the gross proceeds from our Primary Offering.  As of March 31, 2009, we had reimbursed to the Advisor a total of $4.7 million.  The Advisor will pay all of our organization and offering expenses described above that are in excess of this 3.5% limitation.  At March 31, 2009, organization and offering costs
incurred by and reimbursed to the Advisor are approximately 3% of the gross proceeds of our Primary Offering.  In addition, the Advisor will pay all of our organization and offering expenses that, when combined with the sales commissions and dealer manager fees that we incur exceed 13.5% of the gross proceeds from our Primary Offering public offering.





We will not rely on advances from the Advisor to acquire properties but the Advisor and its affiliates may loan funds to special purposes entities that may acquire properties on our behalf pending our raising sufficient proceeds from our initial public offering to purchase the properties from the special purpose entity.





We will endeavor to repay any temporary acquisition debt financing promptly upon receipt of proceeds in our initial public offering.  To the extent sufficient proceeds from the Offering are unavailable to repay such debt financing within a reasonable time as determined by our board of directors, we will endeavor to raise additional
equity or sell properties to repay such debt so that we will own our properties with no permanent financing.  In the event that our initial public offering is not fully sold, our ability to diversify our investments may be diminished.  We are not aware of any material trends or uncertainties, favorable or unfavorable, other than national economic conditions affecting real estate generally, which we anticipate may have a material impact on either capital resources or the revenues or income
to be derived from the operation of real estate properties.





Financial markets have recently experienced unusual volatility and uncertainty. Liquidity has tightened in all financial markets, including the debt and equity markets.  Our ability to fund property acquisitions or development projects, as well as our ability to repay or refinance debt maturities could be adversely affected by an
inability to secure financing at reasonable terms, if at all. While we currently do not expect any difficulties, it is possible, in these unusual and uncertain times, our revolving credit agreement with HSH Nordbank could fail to fund a borrowing request. Such an event could adversely affect our ability to access funds from the revolving credit facility when needed.





Funds from Operations





Funds from operations (“FFO”) is a non-GAAP financial measure that is widely recognized as a measure of REIT operating performance.  We compute FFO in accordance with the definition outlined by the National Association of Real Estate Investment Trusts (“NAREIT”).  NAREIT defines FFO as net income
(loss), computed in accordance with GAAP, excluding extraordinary items, as defined by GAAP, and gains (or losses) from sales of property, plus depreciation and amortization on real estate assets, and after adjustments for unconsolidated partnerships, joint ventures, noncontrolling interests and subsidiaries.  Our FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently
than we do.  We believe that FFO is helpful to investors and our management as a measure of operating performance because it excludes depreciation and amortization, gains and losses from property dispositions, and extraordinary items, and as a result, when compared year to year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, development activities, general and administrative expenses, and interest costs, which is not immediately apparent from net income.  Historical
cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate diminishes predictably over time.  Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting alone to be insufficient.  As a result, our management believes that the use of FFO, together with the required
GAAP presentations, provide a more complete understanding of our performance.  Factors that impact FFO include start-up costs, fixed costs, delay in buying assets, lower yields on cash held in accounts pending investment, income from portfolio properties and other portfolio assets, interest rates on acquisition financing and operating expenses.  FFO should not be considered as an alternative to net income (loss), as an indication of our performance, nor is it indicative of funds available
to fund our cash needs, including our ability to make distributions.  Our calculations of FFO for the three and three months ended March 31, 2009 and 2008 are presented below:


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Three months endedMarch 31,2009


2008Net loss attributable to common stockholders

$
(225,000
)

$
(556,000
)Adjustments:Net loss attributable to noncontrolling interest


-



2,000Real estate assets depreciation and amortization


931,000



790,000Funds from operations (FFO)

$
706,000



236,000Weighted average shares outstanding


20,931,999



11,535,060





In addition, FFO may be used to fund all or a portion of certain capitalizable items that are excluded from FFO, such as capital expenditures and payments of principal on debt, each of which may impact the amount of cash available for distribution to our stockholders.





Some or all of our distributions have been paid from sources other than operating cash flow, such as offering proceeds, cash advanced to us or reimbursements of expenses from the Advisor and proceeds from loans including those secured by our assets.  Given the uncertainty arising from numerous factors, including both the raising
and investing of capital in the current financing environment, ultimate FFO performance cannot be predicted with certainty.  Currently, we make cash distributions to our stockholders from capital at an annualized rate of 6.0%, based on an $8.00 per share purchase price. These distributions are being paid in anticipation of future cash flow from our investments. Until proceeds from our offering are invested and generating operating cash flow sufficient to make distributions to stockholders, we intend
to pay a substantial portion of our distributions from the proceeds of our offering or from borrowings in anticipation of future cash flow, reducing the amount of funds that would otherwise be available for investment.




Contractual Obligations





The following table reflects our contractual obligations as of March 31, 2009, specifically our obligations under long-term debt agreements and notes receivable:





Payment due by periodContractual Obligations

Total

Less than 1 year


1-3 years


3-5 years

More than 5 yearsLong-Term Debt Obligations (1)

$
45,582,000


$
38,551,000


$
403,000


$
453,000


$
6,175,000Interest expense related to long term debt (2)

$
2,633,000


$
861,000


$
806,000


$
756,000


$
210,000Note receivable (3)

$
5,200,000


$
5,200,000


$
-


$
-


$
-


_________________________


(1) This represents the sum of credit agreement with HSH Nordbank, AG, Wachovia Bank National Association and Transamerica Life Insurance Company.  On March 24, 2009, we notified HSH Nordbank, AG of our intent to exercise the second of two one-year options to extend the loan maturity date.  We intend to satisfy conditions
expressed by the lender and extend our loan maturity date to June 30, 2010.  The loan agreement with Wachovia has a maturity date of November 13, 2009, and may be prepaid without penalty.  We have the option to extend the term of the loan for one year upon satisfaction of conditions set by Wachovia Bank.





(2) Interest expense related to the credit agreement with HSH Nordbank, AG and loan agreement with Wachovia Bank National Association are calculated based on the loan balances outstanding at March 31, 2009, one month LIBOR at March 31, 2009 plus appropriate margin ranging from 1.15% and 1.40%.  Interest expense related to loan agreement
with Transamerica Life Insurance Company is based on a fixed rate of 5.89% per annum.





(3) We have committed to funding $10.0 million to entities that are parties to an alliance with the managing member of our advisor.  As of March 31, 2009, we have funded approximately $4.8 million to Servant.


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Item 3.
Quantitative and Qualitative Disclosures about Market Risk





We invest our cash and cash equivalents in short-term, highly liquid investments including government backed obligations, bank certificates of deposit and interest-bearing accounts which, by their nature, are subject to interest rate fluctuations.  As of March 31, 2009, we had borrowed approximately $45.6 million under our credit
facility and loan agreements.





The credit facility with HSH Nordbank and future borrowing on the credit facility is subject to a variable rate through its maturity date.  Under the terms of the amended agreement, the principal balance will be due on June 30, 2009.  The loan agreement with Wachovia Bank, National Association is subject to a variable rate
through its maturity date of November 13, 2009.  The loan agreement with Transamerica Life Insurance Company is based on a fixed rate of 5.89% per annum and therefore is not subject to any interest rate fluctuations.





An increase in the variable interest rate on the facilities constitutes a market risk as a change in rates would increase or decrease interest incurred and therefore cash flows available for distribution to shareholders.  Based on the debt outstanding as of March 31, 2009, a 1% change in interest rates would result in a change in
interest expense of approximately $384,000 per year.  During the period from January 1, 2009 through March 31, 2009, 30-day LIBOR has been flat. There can be no assurance whether this rate will increase or decrease.





Item 4(T).
Controls and Procedures





We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our senior management,
including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.  Our Chief Executive Officer and our Chief Financial Officer have reviewed the effectiveness of our disclosure controls and procedures and have concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report.





In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship
of possible controls and procedures.





There have been no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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PART II - OTHER INFORMATION





Item 1A.
Risk Factors





The following risk supplements the risks disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2008.





We have, and may in the future, pay distributions from sources other than cash provided from operations.





Until proceeds from the offering are invested and generating operating cash flow sufficient to make distributions to stockholders, we intend to pay a substantial portion of our distributions from the proceeds of our offerings or from borrowings in anticipation of future cash flow. To the extent that we use offering proceeds to fund distributions
to stockholders, the amount of cash available for investment in properties will be reduced. The distributions paid for the four quarters ended March 31, 2009 were approximately $8.1 million. Of this amount approximately $4.9 million was reinvested through our dividend reinvestment plan and approximately $3.2 million was paid in cash to stockholders. For the four quarters ended March 31, 2009 cash flow from operations and FFO were approximately $3.4 million and $2.6 million, respectively. Accordingly, for the
four quarters ended March 31, 2009, total distributions exceeded cash flow from operations and FFO for the same period. During the four quarters ended March 31, 2009, cash flow from operations exceeded distributions paid in cash to stockholders, however, based on the timing of cash flows as compared to the timing of cash distribution payments, we used offering proceeds to pay cash distributions in excess of cash flow from operations during the fourth quarter of 2008.





Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds





We did not sell any equity securities that were not registered under the Securities Act of 1933 during the period covered by this Form 10-Q.





Our registration statement (SEC File No.  333-121238) for our initial public offering of up to 44,400,000 shares of our common stock at $8.00 per share and up to 11,000,000 additional shares at $7.60 per share pursuant to our distribution reinvestment plan was declared effective on September 22, 2005.  The aggregate offering
amount of the shares registered for sale in our initial public offering, assuming the maximum number of shares is sold, is $438,800,000.  The offering commenced on January 13, 2006 and has not terminated.





As of March 31, 2009, excluding issuance of approximately 984,000 shares under our distribution reinvestment plan, we had sold approximately 19.5 million shares of common stock in our ongoing offering, raising gross offering proceeds of approximately $156.0 million.  From this amount, we incurred approximately $15.4 million in selling
commissions and dealer manager fees payable to our dealer manager and approximately $3.1 million in acquisition fees payable to our advisor.  We have used approximately $92.8 million of the net offering proceeds to acquire properties and reduce notes payable balance as of March 31, 2009.  As of March 31, 2009, the advisor and its affiliates had incurred on our behalf organizational and offering costs totaling approximately $4.7 million, including approximately $0.1 million of organizational
costs that have been expensed, approximately $0.4 million related to the second offering and approximately $4.2 million of offering costs which reduce net proceeds of our offering.




During the three months ended March 31, 2009, we redeemed shares pursuant to our stock repurchase program as follows:





Period

Total Number of Shares Redeemed (1)


Average Price Paid per Share


Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the ProgramJanuary 2009


40,873


$
6.77


$
6,248,000February 2009


137,395


$
7.51


$
5,928,000March 2009


152,984


$
7.61


$
6,315,000331,252


_________________________


(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.





Item 5.
Other Information





Effective January 1, 2009, we adopted Statement of Financial Accounting Standards (SFAS) 160, “Nonconrolling interests in Consolidated Financial Statements – an amendment of ARB No. 51 (“SFAS 160”), as described more fully in Note 3 to the unaudited interim condensed
consolidated financial statements.  The adoption of SFAS 160 did not have a material impact on our financial condition, results of operations or cash flows.  However, it did impact the presentation and disclosure of noncontrolling (minority) interest in our consolidated financial statements.  As a result of the retrospective presentation and disclosure requirements of SFAS 160, we will be required to reflect the change in presentation and disclosure for all periods presented in future
filings.


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The principal effect on the prior year balance sheets related to the adoption of SFAS 160 is summarized as follows:




December 31,Balance Sheets

2008

2007Equity, as previously reported

$
116,333,000


$
60,248,000Increase for SFAS 160 re-class of noncontrolling interest


151,000



309,000Equity, as adjusted

$
116,484,000


$
60,557,000





Additionally, the adoption of SFAS had the effect of reclassifying earnings attributable to noncontrolling interest in the consolidated statement of operations from other income and expense to separate line items.  SFAS 160 also requires that net income be adjusted to include the net income attributable to the noncontrolling interest,
and a new separate caption for net income attributable to common shareholders be presented in the consolidated statement of earnings.  Thus, after adoption of SFAS 160, net loss will decrease (increase) by $3,000, ($3,000) and ($11,000) for the years ended December 31, 2008, 2007 and 2006, respectively, and net loss attributable to common shareholders will be equal to net loss as previously reported prior to the adoption of SFAS 160.


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Item 6.
Exhibits




Ex.

Description3.1

Articles of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to Pre-Effective Amendment No. 2 to the Registration Statement on Form S-11 (No. 333-121238) filed on May 25, 2005)3.2

Amendment and Restatement of Articles of Incorporation (incorporated by reference to Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K filed on March 24, 2006)3.3

Amended and Restated Bylaws (incorporated by reference to Exhibit 3.3 to Post-Effective Amendment No. 1)4.1

Subscription Agreement (incorporated by reference to Appendix A to the prospectus included on Post-Effective Amendment No. 5 to the Registration Statement on Form S-11 (No. 333-121238) filed on February 28, 2007)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 included on Post-Effective Amendment No. 1)4.4

Escrow Agreement between registrant and U.S. Bank, N.A. (incorporated by reference to Exhibit 4.4 to Pre-Effective Amendment No. 2 to the Registration Statement on Form S-11 (No. 333-121238) filed on May 25, 2005)10.1

Promissory Note made as of January 22, 2009 by CARUTH HAVEN, L.P., to and in favor of CORNERSTONE OPERATING PARTNERSHIP, LP. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 27, 2009)10.2

Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing made as of January 22, 2009, by CARUTH HAVEN, L.P., as grantor, for the benefit of Cornerstone Operating Partnership, LP,, as lender (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 27, 2009)10.3

First Amendment to the Amended and Restated Advisory Agreement between Cornerstone Core Properties REIT, Inc. and Cornerstone Realty Advisors, dated as of March 10, 2009 (incorporated by reference to Exhibit 10.1 to the Registration Current Report on Form 8-K filed on March 16, 200931.1

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. Sec.1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.




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SIGNATURES





Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized this 13th day of May 2009.





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 andPrincipal Accounting Officer)





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