<PAGE>

                                                                    Exhibit 10.3


                                                          (St. Andrews Place II)


                   MEMBERSHIP INTEREST CONTRIBUTION AGREEMENT

                                 by and between

                     Cornerstone Realty Income Trust, Inc.,

                  Cornerstone NC Operating Limited Partnership

                                       and

                                State Street, LLC

                                   dated as of

                               September 30, 2001
<PAGE>

<TABLE>
<CAPTION>

Exhibits

<S>                  <C>
Exhibit A             -    Operating Partnership Agreement
Exhibit B             -    Swap Agreement


Schedules

Schedule 2.1          -    List of Subsidiaries
Schedule 2.2          -    Operating Partnership Units
Schedule 4.4          -    Conflicts of Cornerstone or Operating Partnership
Schedule 5.3          -    Liens on Membership Interests
Schedule 5.4          -    Conflicts of LLC
Schedule 5.7(a)       -    August 31, 2001 Financial Statements
Schedule 5.7(b)       -    Liabilities not Disclosed on August 31, 2001 Balance Sheet
Schedule 5.8          -    Changes Since Balance Sheet Date
Schedule 5.9          -    Litigation
Schedule 5.10         -    Intellectual Property
Schedule 5.11         -    Leases
Schedule 5.12         -    Material Contracts
Schedule 5.13         -    Owned and Leased Real Property
Schedule 5.13(l)           Permitted Liens
Schedule 5.15         -    Governmental Permits and Licenses
Schedule 5.17         -    Employment Agreements and Arrangements
Schedule 5.19              Insurance
Schedule 5.20         -    Bank Accounts
Schedule 5.21         -    Environmental Matters
Schedule 5.22(c)           List of Warranties for Improvements to Real Property
Schedule 6.4          -    Exceptions to Conduct in the Ordinary Course
Schedule 6.4(e)       -    Additional Borrowings
Schedule 6.5          -    Consents
Schedule 6.6          -    Exceptions for Disclosure
Schedule 6.12         -    Construction of Improvements on Real Property
Schedule 11.1         -    Officers of Cornerstone with Knowledge
Schedule 11.2         -    Officers of the LLC or the Subsidiaries with Knowledge
Schedule 11.3         -    Indebtedness and Collateral Agreements
</TABLE>

                                      -2-

<PAGE>

                   MEMBERSHIP INTEREST CONTRIBUTION AGREEMENT

     This MEMBERSHIP INTEREST CONTRIBUTION AGREEMENT (the "Agreement"), dated as
of September 30, 2001 is entered into by and between Cornerstone Income Realty
Trust, Inc., a Virginia corporation ("Cornerstone"), Cornerstone NC Operating
Limited Partnership, a Virginia limited partnership (the "Operating
Partnership"), and State Street, LLC, a North Carolina limited liability company
(the "LLC").

                                    Recitals
                                    --------

     The Operating Partnership desires to acquire from the LLC, and the LLC
desires to contribute to the Operating Partnership, for the consideration stated
herein, all of the outstanding membership interests of the Subsidiary (as
defined herein) on the terms and subject to the conditions set forth herein.

     The LLC desires to acquire from the Operating Partnership, and the
Operating Partnership desires to distribute and transfer to the LLC, for the
consideration stated herein, the Operating Partnership Units (as defined herein)
of the Operating Partnership on the terms and subject to the conditions set
forth herein.

                                    Covenants
                                    ---------

     NOW, THEREFORE, in consideration of the foregoing and the premises set
forth herein, the parties hereto, intending to be legally bound, hereby agree as
follows:

                                   ARTICLE I

                         DEFINITIONS AND INTERPRETATION

     1.1 Defined Terms. Certain capitalized terms used herein are defined
         -------------
parenthetically in this Agreement. Capitalized terms used but not defined
parenthetically herein are defined in Article X hereto. The meanings assigned to
such terms shall be applicable to each use of such terms throughout this
Agreement.

     1.2 Singular and Plural; Gender. Whenever appropriate in the context, terms
         ---------------------------
used in this Agreement in the singular also include the plural, and vice versa,
and each masculine, feminine or neuter pronoun shall also include the other
genders.

     1.3 Meaning of "Including". As used herein, the word "including" shall be
         ---------------------
deemed to mean "including, without limitation," unless otherwise expressly
provided in any instance.

     1.4 Headings. The article, section and other headings in this Agreement are
         --------
for convenience of reference only and shall not be deemed to alter or affect the
meaning or interpretation of any provisions of this Agreement.

                                      -3-
<PAGE>

     1.5 Drafting. The parties have participated jointly in the negotiation and
         --------
drafting of this Agreement, and they agree that any ambiguity or question of
intent or interpretation that may arise shall be construed as if drafted jointly
by the parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.

                                   ARTICLE II

                    MEMBERSHIP INTEREST CONTRIBUTION; CLOSING

     2.1 Contribution of the Membership Interests. On the terms and subject to
         ----------------------------------------
the conditions set forth in this Agreement, the LLC agrees to contribute and
deliver to the Operating Partnership, and the Operating Partnership agrees to
accept from the LLC (the "Acquisition"), in exchange for the consideration set
forth in Section 2.2 below, all of issued and outstanding membership interests
(the "Membership Interests") of the subsidiary of the LLC as set forth on
Schedule 2.1 (the "Subsidiary").
------------

     2.2 Consideration. The consideration to be paid by the Operating
         -------------
Partnership to the LLC in connection with the Acquisition shall be the number of
Operating Partnership units (the "Operating Partnership Units") set forth in
Schedule 2.2 representing a limited partnership interest in the Operating
------------
Partnership with the rights and preferences as set forth in the Operating
Partnership Agreement, a copy of which is attached hereto as Exhibit A. The
Operating Partnership Units shall be granted and delivered to the LLC at
Closing.

     2.3 Completion of Contribution. The closing of the Acquisition (the
         --------------------------
"Closing") shall take place on October 1, 2001 (effective September 30, 2001 at
11:59 P.M.) or such other date that the Operating Partnership and the LLC shall
mutually agree upon in writing. The date on which the Closing actually occurs is
referred to herein as the "Closing Date"; provided, however that the effective
date of the Closing shall be deemed to be September 30, 2001 at 11:59 P.M. In no
event shall the Closing take place after October 15, 2001 (the "Drop-Dead
Date").

     2.4  Contribution Adjustment.
          -----------------------

          (a)  Prior to the Closing, the Subsidiary shall distribute to the LLC
               all of the cash assets of the Subsidiary except the Subsidiary
               shall retain sufficient cash to satisfy all accrued expenses and
               accounts payable accruable through the Closing. To the extent
               that the Subsidiary does not have sufficient cash to satisfy all
               accrued expenses and accounts payable accruals, then the LLC
               shall contribute such deficit to the Operating Partnership. To
               the extent that the Subsidiary has excess cash to satisfy all
               accrued expenses and accounts payable accruals, then the
               Subsidiary shall refund such excess to the LLC. The deficit or
               excess, as the case may be, shall be referred to as the
               "Contribution Adjustment."

          (b)  The Operating Partnership shall deliver its calculation of the
               Contribution Adjustment (the "Contribution Adjustment Notice") to
               the LLC within 30 days of Closing. The LLC may object to the
               Contribution Adjustment

                                      -4-

<PAGE>

               by delivery of a written statement of objections (stating the
               basis of the objections with reasonable specificity) to Operating
               Partnership within 10 days following delivery of the Contribution
               Adjustment Notice. If LLC makes such objection, the Operating
               Partnership and LLC shall seek in good faith to resolve such
               differences within 10 days following the delivery of such
               objections. If LLC does not so object to the Contribution
               Adjustment within such 10 day period, the Contribution Adjustment
               shall be considered final and binding upon the parties and the
               Contribution Adjustment shall be made within 45 days of Closing
               If LLC and the Operating Partnership are unable to mutually
               resolve any disputes with respect to the Contribution Adjustment
               within the periods described above, the parties shall, within 10
               days following the expiration of such periods, engage a mutually
               agreed upon Mediator (the "Mediator") to act as a Mediator and
               determine, in accordance with the provisions of this Section 2.4,
               the appropriate Contribution Adjustment.

          (c)  If the Mediator is engaged pursuant to this Section 2.4, then,
               within 10 days of the engagement, the Mediator shall be furnished
               with a copy of this Agreement, a letter from LLC describing LLC's
               position on the disputed amount and a letter from Operating
               Partnership describing Operating Partnership's position on the
               disputed amount. Neither party shall make any additional
               submission except pursuant to the Mediator's written request. The
               Mediator shall have 30 days to review such documents and such
               other information as the Mediator deems appropriate. Within such
               30-day period, the Mediator will furnish both parties with its
               written determination with respect to each of the unresolved
               issues in dispute. In arriving at its determination, the Mediator
               may select either the LLC's or the Operating Partnership's
               position, or make its own determination. The determination of the
               Mediator with respect to the Contribution Adjustment will be
               final and binding upon the parties and a judgment, based on the
               Mediator's determination, may be entered into a court of
               competent jurisdiction. The Contribution Adjustment shall be made
               within 5 days after the Mediator's determination. The fee of the
               Mediator shall be borne by the Operating Partnership, if the
               mediator accepts LLC's position, by the LLC, if the Mediator
               accepts the Operating Partnership's position, and by the
               Operating Partnership and LLC equally if the Mediator accepts
               neither the Operating Partnership's nor the LLC's position. In
               the process of preparing and reviewing the Contribution
               Adjustment and conducting of review by either party or the
               Mediator, each party will grant the other party all reasonable
               access to the records of the business and any workpapers,
               including auditor's workpapers, prepared with respect to the
               Contribution Adjustment.

                                      -5-
<PAGE>

                                  ARTICLE III

                    REPRESENTATIONS AND WARRANTIES OF THE LLC

     In order to induce the Operating Partnership to enter into this Agreement
and each of the other Acquisition Documents to which it is or shall be a party,
and to consummate the transactions contemplated hereby and thereby, the LLC
hereby represents and warrants to the Operating Partnership on and as of the
date hereof:

     3.1 Organization and Good Standing. The LLC is a North Carolina limited
         ------------------------------
liability company duly organized, validly existing and in good standing under
the laws of North Carolina with all requisite power and authority to own,
operate and lease its properties and to carry on its business as now being
conducted. The LLC is qualified to do business and is in good standing in each
jurisdiction in which such qualification is necessary except where the failure
to be qualified would not have a Material Adverse Effect on the LLC.

     3.2 Power and Authority. The LLC has all the requisite limited liability
         -------------------
company power and authority to execute, deliver and perform this Agreement and
the other Acquisition Documents to which it is or shall be a party and to
consummate the transactions contemplated hereby and thereby.

     3.3 Due Authorization. The execution, delivery and performance by the LLC
         -----------------
of this Agreement and the other Acquisition Documents to which it is or shall be
a party and the consummation of the transactions contemplated hereby and thereby
by the LLC have been duly authorized by all necessary limited liability company
proceedings.

     3.4 No Conflicts. Neither the execution and delivery by the LLC of this
         ------------
Agreement or the other Acquisition Documents to which it is or shall be a party
nor the consummation by the LLC of the transactions contemplated hereby or
thereby:

          (a)  violates or conflicts with the LLC's Articles of Organization or
               any other organizational document;

          (b)  violates, or conflicts with, or constitutes a default under, or
               results in a breach of, any term or provision of, or requires any
               consent (except for those disclosed on Schedule 5.4),
                                                      ------------
               authorization or approval under, any term or provision of any
               Lien, lease, license or other agreement or instrument to which
               the LLC or the Subsidiary is a party or by which its or the
               Subsidiary's properties are bound, except to the extent that such
               circumstance would not reasonably be expected to have or result
               in a material adverse effect on the ability of the LLC to
               consummate the Acquisition and the transactions contemplated in
               the other Acquisition Documents to which it is a party or to
               carry out its obligations hereunder or thereunder; or

          (c)  (i) legally requires the LLC to obtain any Consent from, or make
               any filing with, any governmental agency, court, body or
               instrumentality

                                      -6-

<PAGE>

               (whether federal, state, local or foreign) ("Governmental
               Authority") or other Person (except for those disclosed on
               Schedule 5.4); or (ii) violates any provision of (x) any
               Applicable Law or (y) any judicial, administrative or arbitration
               order, award, judgment, writ, injunction or decree (collectively,
               "Judgment") to which the LLC is a party or to which it or any of
               its properties are subject.

     3.5 Enforceability. This Agreement is, and when executed and delivered,
         --------------
each of the other Acquisition Documents to which the LLC is or shall be a party
shall be, a valid and binding agreement of the LLC, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other laws affecting the enforcement of creditors rights
generally, and the application of equitable principles (whether considered in a
proceeding at law or in equity).

     3.6 Litigation. The LLC is not engaged in, and there is not, to the
         ----------
Knowledge of the LLC pending, nor has the LLC received any written notice of,
any Legal Proceeding which would prevent or otherwise inhibit the LLC from
consummating the transactions contemplated hereby or carrying out its
obligations hereunder or under the other Acquisition Documents to which it is or
shall be a party.

     3.7 No Brokers. No broker has acted on behalf of the LLC in connection with
         ----------
this Agreement, the other Acquisition Documents or the transactions contemplated
hereby or thereby, and there are no brokerage commissions, finders' fees or
similar fees or commissions payable in connection therewith based on any
agreement, arrangement or understanding with the LLC or any action taken by the
LLC.

     3.8 Securities Law Compliance. The LLC understands and acknowledges that
         -------------------------
the Operating Partnership Units have not been registered under the Securities
Act or the state securities or blue sky laws of any jurisdiction, and that the
transactions contemplated by this Agreement have not been reviewed by, passed on
by or submitted to any federal or state agency or commission. The LLC is
acquiring the Operating Partnership Units for its own account, for investment,
and not with a view to, or for resale in connection with, a distribution
thereof, and the LLC acknowledges that the Operating Partnership Units acquired
hereunder cannot be transferred without being registered under the Securities
Act or pursuant to a valid exemption therefrom. The LLC represents that it is an
"accredited investor" within the meaning of Rule 501(a)(8) and that it has
determined that its equity investors are "accredited investors" within the
meaning of Rule 501(a).

                                   ARTICLE IV

              REPRESENTATIONS AND WARRANTIES OF CORNERSTONE AND THE
                             OPERATING PARTNERSHIP

     In order to induce the LLC to enter into this Agreement and each of the
other Acquisition Documents to which it is or shall be a party, and to
consummate the transactions contemplated hereby and thereby, Cornerstone and the
Operating Partnership hereby jointly and severally represent and warrant to the
LLC on and as of the date hereof:

                                      -7-

<PAGE>

     4.1 Organization and Good Standing. The Operating Partnership is a limited
         ------------------------------
partnership organized, validly existing and in good standing under the laws of
the Commonwealth of Virginia. Cornerstone is a corporation organized, validly
existing and in good standing under the laws of the Commonwealth of Virginia.

     4.2 Power and Authority. Cornerstone and the Operating Partnership each
         -------------------
have the requisite corporate or partnership power and authority, as the case may
be, to execute, deliver and perform this Agreement and the other Acquisition
Documents to which it is or shall be a party and to consummate the transactions
contemplated hereby and thereby.

     4.3 Due Authorization. The execution, delivery and performance by
         -----------------
Cornerstone and the Operating Partnership of this Agreement and the other
Acquisition Documents to which they are or shall be a party and the consummation
of the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate or partnership proceedings.

     4.4 No Conflicts. Neither the execution and delivery by Cornerstone or the
         ------------
Operating Partnership of this Agreement or the other Acquisition Documents to
which they are or shall be a party nor the consummation by them of the
transactions contemplated hereby or thereby:

          (a)  violates or conflicts with the Operating Partnership's
               Certificate of Partnership or other organizational document or
               Cornerstone's Articles of Incorporation, by-laws, or any other
               organizational document;

          (b)  violates, or conflicts with, or constitutes a default under, or
               results in a breach of, any term or provision of, or requires any
               consent (except for those disclosed on Schedule 4.4),
                                                      ------------
               authorization or approval under, any term or provision of any
               Lien, lease, license or other agreement or instrument to which
               Cornerstone or the Operating Partnership is a party or by which
               their respective properties are bound, except to the extent that
               such circumstance would not reasonably be expected to have or
               result in a material adverse effect on the ability of Cornerstone
               or the Operating Partnership to consummate the Acquisition and
               the transactions contemplated in the other Acquisition Documents
               to which it is a party or to carry out its obligations hereunder
               or thereunder; or

          (c)  (i) legally requires Cornerstone or the Operating Partnership to
               obtain any Consent from, or make any filing with, any
               Governmental Authority or other Person (except for those
               disclosed on Schedule 4.4); or (ii) violates any provision of (x)
               any Applicable Law or (y) any Judgment to which Cornerstone or
               the Operating Partnership is a party or to which it or any of its
               properties are subject.

     4.5 Enforceability. This Agreement is, and when executed and delivered,
         --------------
each of the other Acquisition Documents to which Cornerstone or the Operating
Partnership is or shall be a party shall be, a valid and binding agreement of
Cornerstone or the Operating Partnership, as the

                                      -8-

<PAGE>

case may be, enforceable against such party in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium or other laws affecting
the enforcement of creditors rights generally, and the application of equitable
principles (whether considered in a proceeding at law or in equity).

     4.6 Cornerstone Formation of Operating Partnership. Cornerstone represents
         ----------------------------------------------
that the Operating Partnership has engaged in no business except in connection
with this Agreement and that the Operating Partnership has no liabilities or
obligations to any Person, except pursuant to this Agreement.

     4.7 Litigation. Cornerstone and the Operating Partnership are not engaged
         ----------
in, and there is not, to the Knowledge of Cornerstone pending, nor has
Cornerstone received any written notice of, any Legal Proceeding which would
prevent or otherwise inhibit Cornerstone or the Operating Partnership from
consummating the transactions contemplated hereby or carrying out its
obligations hereunder or under the other Acquisition Documents to which it is or
shall be a party.

     4.8 No Brokers. No broker has acted on behalf of Cornerstone or the
         ----------
Operating Partnership in connection with this Agreement, the other Acquisition
Documents or the transactions contemplated hereby or thereby, and there are no
brokerage commissions, finders' fees or similar fees or commissions payable in
connection therewith based on any agreement, arrangement or understanding with
Cornerstone or the Operating Partnership or any action taken by them.

     4.9      Capitalization.
              --------------

          (a) Cornerstone. The authorized capital stock of Cornerstone consists
              -----------
     of (i) Common Shares, no par value, of which 100,000,000 shares are
     authorized and 47,581,920 shares were issued and outstanding as of
     September 20, 2001; and (ii) Preferred Shares, no par value, of which
     25,000,000 shares are authorized and 127,988 were issued and outstanding as
     of September 20, 2001 as Series A Convertible Preferred Shares. All shares
     of Cornerstone to be issued upon conversion of the Operating Partnership
     Units (as described more fully in the Limited Partnership Agreement) will,
     at the time of issuance, be duly authorized, validly issued, fully paid and
     non-assessable, and will be free and clear of any Liens or other
     encumbrances which would prevent or otherwise encumber the delivery of such
     shares to the owners of the Operating Partnership Units upon their
     conversion.

          (b) Operating Partnership. All of the Operating Partnership Units to
              ---------------------
     be delivered to the LLC at the Closing have been duly authorized by all
     necessary action on the part of the Operating Partnership, and will be
     validly issued to the LLC. The Operating Partnership Units to be delivered
     to the LLC at the Closing will be free of any Liens or other encumbrances
     which would prevent or otherwise encumber the delivery of the Operating
     Partnership Units to the LLC, and have not been reserved for any other
     purpose, and such Operating Partnership Units are available for issuance as
     provided pursuant to this Agreement.

                                      -9-

<PAGE>

     4.10 Securities Documents. Cornerstone has filed with Securities and
          --------------------
Exchange Commission (the "SEC") each report, registration statement and
definitive proxy statement (the "SEC Documents") required to be filed under the
Exchange Act since January 1, 2001. As of the time it was filed with the SEC,
or, if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing: (a) each of the SEC Documents complied in all
material respects with the applicable requirements of the Exchange Act; and (b)
none of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.

     4.11 Operations Since Balance Sheet Date. Since the date of the most recent
          -----------------------------------
balance sheet included in the SEC Documents, Cornerstone and its subsidiaries
have conducted business in the ordinary course and in conformity with past
practice, except as otherwise disclosed in the SEC Documents.

     4.12 Securities Law Compliance. Each of Cornerstone and the Operating
          -------------------------
Partnership understand and acknowledge that the Membership Interests have not
been registered under the Securities Act or the state securities or blue sky
laws of any jurisdiction, and that the transactions contemplated by this
Agreement have not been reviewed by, passed on by or submitted to any federal or
state agency or commission. The Operating Partnership is acquiring the
Membership Interests for its own account, for investment and not with a view to,
or for resale in connection with, a distribution thereof, and the Operating
Partnership acknowledges that the Membership Interests acquired hereunder cannot
be transferred without being registered under the Securities Act or pursuant to
a valid exemption therefrom.

                                   ARTICLE V

                        REPRESENTATIONS AND WARRANTIES OF
                        THE LLC REGARDING THE TRANSACTION

     In order to induce Cornerstone and the Operating Partnership to enter into
this Agreement and each of the other Acquisition Documents to which they are or
shall be a party, and to consummate the transactions contemplated hereby and
thereby, the LLC hereby represents and warrants to Cornerstone and the Operating
Partnership on and as of the date hereof.

     5.1 Organization and Good Standing. The Subsidiary is a limited liability
         ------------------------------
company duly organized, validly existing and in good standing under the laws of
North Carolina.

     5.2 Power and Authority. The LLC and the Subsidiary have all requisite
         -------------------
limited liability company power and authority to own, operate and lease their
properties and to carry on their business as presently conducted by them.

     5.3 Ownership of Interest The LLC owns all of the Membership Interests in
         ---------------------
the Subsidiary free and clear of any Liens or other encumbrances which would
prevent or otherwise

                                     -10-

<PAGE>

encumber the transfer of the Membership Interests (except for those Liens shown
on Schedule 5.3).

     5.4 No Conflicts. Except as set forth in Schedule 5.4 hereto, neither the
         ------------
execution and delivery by the LLC of this Agreement or the Acquisition Documents
to which it is or shall be a party nor the consummation of the transactions
contemplated hereby or thereby:

          (a)  violates or conflicts with the operating agreements or other
               organizational documents of the Subsidiary.

          (b)  violates, or conflicts with, or constitutes a default under, or
               results in a breach of, any term or provision of, or requires any
               consent (except for those disclosed on Schedule 5.4),
               authorization or approval under, any term or provision of any
               Lien, lease, license or other agreement or instrument to which
               the Subsidiary is a party or by which it or any of its properties
               is bound, except to the extent that such circumstance would not
               reasonably be expected to have or result in a Material Adverse
               Effect on such Subsidiary or a material adverse effect on the
               ability of the LLC to consummate the Acquisition and the
               transactions contemplated in the other Acquisition Documents to
               which it is a party or to carry out its obligations hereunder or
               thereunder; or

          (c)  legally requires the Subsidiary to obtain any Consent from, or
               make any filing with, any Governmental Authority or other Person
               (except for those disclosed on Schedule 5.4) or (ii) violates any
               provision of (x) any Applicable Law or (y) any Judgment to which
               the Subsidiary is a party or to which any of its properties is
               subject.

     5.5 Investments. Neither the LLC nor the Subsidiary has granted any Option
         -----------
with respect to any Membership Interest in the Subsidiary to any Person. The
Subsidiary does not have any Investment in any partnership, limited partnership,
company, limited liability company or other business entity.

     5.6 Compliance. Neither the LLC nor the Subsidiary has taken any actions in
         ----------
violation in any material respect of any provision of its respective Articles of
Organization and Operating Agreement. The Subsidiary has complied in all
material respects with all Applicable Law. Neither the LLC nor the Subsidiary
has received any written notice that it is in violation or breach of, or in
default under, any provision of any Applicable Law or Judgment, or any license,
permit, certificate, authorization or other approval of any Governmental
Authority applicable to it except as would not have a Material Adverse Effect on
the Subsidiary.

     5.7 Financial Statements.
         --------------------

          (a)  Attached as Schedule 5.7(a) hereto is a true and complete copy of
                           ---------------
               the balance sheet of the Subsidiary prepared on an income tax
               basis as of August 31, 2001 (the "Balance Sheet Date"), and the
               related statements of revenue and expense for the eight months
               then ended also prepared on an income tax basis (the "Financial
               Statements"). The Financial

                                     -11-
<PAGE>

               Statements have been prepared by management of the LLC, and have
               not been reviewed or audited by independent public accountants.
               The Financial Statements present fairly, in all material
               respects, the financial position and results of operations of the
               Subsidiary as of the dates and for the periods indicated on the
               Financial Statements and are consistent with the form
               historically used by the LLC.

          (b)  Except as disclosed on Schedule 5.7(b) hereto, the LLC has no
                                      ---------------
               liability which is required by federal income tax law to be
               reflected or reserved on the Financial Statements other than
               liabilities so reflected, or liabilities incurred in the ordinary
               course of business since the Balance Sheet Date (none of which
               would have a Material Adverse Effect on the LLC and the
               Subsidiary, taken as a whole).

     5.8 Operations Since Balance Sheet Date. Since the Balance Sheet Date, the
         -----------------------------------
LLC and the Subsidiary have conducted business in the ordinary course and in
conformity with past practice, except as disclosed on Schedule 5.8.

     5.9 Litigation. Except as set forth in Schedule 5.9 hereto, there is not
         ----------                         ------------
pending, nor to the Knowledge of the LLC, threatened, nor has the LLC or the
Subsidiary received written notice of, any legal action, suit, investigation,
inquiry or proceeding by any Governmental Authority or other Person ("Legal
Proceeding") against the LLC or the Subsidiary which, if decided adversely,
would have a Material Adverse Effect on the Subsidiary.

     5.10 Intellectual Property. The Subsidiary owns or has the right to use all
          ---------------------
of its respective Intellectual Property. Schedule 5.10 sets forth a list of all
the Intellectual Property that the Subsidiary does not own but has the right to
use. Other than as set forth on Schedule 5.10, no consents of any third party
are required for the Subsidiary to use such listed Intellectual Property after
the Acquisition. There are no claims pending against the Subsidiary alleging
that its use of any Intellectual Property infringes, misappropriates or
otherwise violates the intellectual property or other proprietary rights of any
Person and, to the Knowledge of the LLC, no Person is infringing upon the
respective rights of the Subsidiary in such Intellectual Property.

     5.11 Leases. The Subsidiary is the lessee of equipment used by the
          ------
Subsidiary (collectively, the "Leases"). Schedule 5.11 sets forth a true and
                                         -------------
complete list of the Leases.

     5.12 Material Contracts.
          ------------------

          (a)  Schedule 5.12 identifies all of the following to which the
               -------------
               Subsidiary is a party or by which it is bound (collectively,
               "Material Contracts"):

               (i)  each purchase order, agreement or commitment obligating the
                    Subsidiary to purchase any products or services and
                    providing for an aggregate payment of $1,000 or not
                    cancelable on 60 days notice;

                                     -12-

<PAGE>

               (ii)   all agreements relating to the borrowing of money, or
                      liability for the deferred purchase price of property or
                      services (excluding normal and customary trade payables
                      which are not overdue), or any instrument guaranteeing any
                      indebtedness or other liability or any obligation to incur
                      any indebtedness, including any interest rate swap or
                      other agreement affecting or relating to interest payable
                      by the Subsidiary under any of the foregoing agreements;

               (iii)  any joint venture, partnership, strategic alliance or
                      other similar arrangement;

               (iv)   any guarantee of the obligations of the suppliers,
                      officers, directors or employees of the Subsidiary;

               (v)    any agreement limiting, in any manner, the ability of the
                      Subsidiary to engage in any business anywhere in the world
                      (including, without limitation, any agreements with
                      manufacturers or retailers which contain exclusive dealing
                      or similar provisions);

               (vi)   any employment, consulting, management, severance or other
                      similar agreement with any Person;

               (vii)  any union, collective bargaining, works council or similar
                      agreement; or

               (viii) any other material contract, agreement, commitment,
                      understanding or instrument providing for payments to or
                      from the Subsidiary.

          (b)  Each Material Contract is the valid and binding obligation of the
               Subsidiary, as applicable, enforceable against it in accordance
               with its respective terms, subject to applicable bankruptcy,
               insolvency moratorium or other laws affecting the enforcement of
               creditors' rights generally, and the application of equitable
               principles (whether considered in a proceeding at law or in
               equity). The Subsidiary, or to the Knowledge of the LLC any of
               the other parties thereto, is not in breach or default under
               (including any circumstances that would result in a breach or
               default with notice or lapse of time or both) any such Material
               Contract in any material respect, nor has it waived any material
               provision of any such Material Contract or agreed to do so.
               Neither the LLC nor the Subsidiary has received any written
               notice of breach or default (including any written notice of
               circumstances that would constitute a breach or default with
               notice or lapse of time or both) or termination under any
               Material Contract.

          (c)  A true, complete and correct copy of each agreement and
               instrument listed on Schedule 11.3 is attached at the end
                                    -------------
               thereof. On and after the Closing Date, amendments of such
               agreements and instruments, if any, may be made only by, or with
               the consent of, the Subsidiary.

                                     -13-
<PAGE>

     5.13 Real Property.
          -------------

          (a)  Schedule 5.13 sets forth a list of all real property owned,
               -------------
               leased, occupied or used by the Subsidiary (the "Real Property").
               All title documents, leases and subleases pursuant to which any
               of the Real Property is owned, occupied or used are set forth on
               Schedule 5.13 and such titles, leases and subleases are valid,
               subsisting, binding and enforceable against the LLC or the
               Subsidiary, as applicable, in accordance with their respective
               terms, and there are no existing breaches of a material provision
               thereof or defaults thereunder by the LLC or the Subsidiary, as
               applicable, or to the Knowledge of the LLC any other parties
               thereto, or events that with notice or lapse of time or both
               would constitute defaults thereunder by the LLC or the
               Subsidiary, as applicable, and no party under any such contract,
               lease or sublease has given or received a written notice of
               termination thereunder.

          (b)  All Real Property is appropriately zoned under the applicable
               zoning ordinances of the city, county and state in which such the
               Real Property is located for current use and its intended use. To
               the Knowledge of the LLC, there are no proceedings pending or
               threatened that could or would cause the change, redefinition, or
               other modification of the zoning classification, or of other
               legal requirements applicable to the Real Property or any part
               thereof, or any property adjacent to the Real Property, or any
               moratorium that could or would in any way impair the use of the
               Real Property for the operation of apartment complexes.

          (c)  All Real Property that has been constructed, is occupied or has
               been made available for occupancy is and has been used and
               operated in compliance in all material respects with the zoning,
               building, health, toxic and hazardous waste, environmental and
               other laws, codes, ordinances, regulations, orders and
               requirements of any Governmental Authority having jurisdiction
               thereof; and all certificates, licenses, permits, authorizations,
               consents and approvals required by any such Governmental
               Authority for the continued use, occupancy and operation of the
               Real Property have been obtained, except for those the failure to
               obtain would not have a Material Adverse Effect on the LLC or the
               Subsidiary.

          (d)  All improvements located on the Real Property are in good working
               order and repair (ordinary wear and tear excepted), free from
               patent defects and have been completed in all material respects
               in accordance with all applicable zoning, building, fire, health,
               pollution, subdivision, environmental protection, waste disposal
               and other governmental laws, ordinances, codes and regulations.

          (e)  All work done or materials furnished by or on behalf of the
               Subsidiary for construction of or repairs to the improvements
               located on the Real

                                     -14-

<PAGE>

               Property have been paid for in full and there are no claims,
               existing or otherwise, or rights to claims for, mechanics',
               materialmen's or vendors liens with respect to any of the Real
               Property.

          (f)  No tenant has paid rent in advance for more than a month and,
               except as presented in the Rent Roll, no party has any right to
               rent-free occupancy or rent reductions or concessions. No tenant
               is in default under their lease (as to rent or otherwise), except
               for such defaults which would not individually or in the
               aggregate have a Material Adverse Effect on the Subsidiary. Each
               lease is in full force and effect, enforceable in accordance with
               its terms, subject to applicable bankruptcy, insolvency,
               moratorium or other laws affecting the enforcement of creditors'
               rights generally, and the application of equitable principles
               (whether considered in a proceeding at law or in equity. The
               landlord under the leases is not required to render any services
               to any tenant except as specifically provided in the leases.
               There are no parties in possession of the Real Property or
               entitled to possession thereof other than the Subsidiary and
               tenants under the leases listed on Schedule 5.13.

          (g)  Neither the LLC nor the Subsidiary has received any notice or has
               Knowledge of any pending or threatened condemnation or eminent
               domain proceedings which would affect any of the Real Property.

          (h)  The Real Property has adequate legal access to public roads and
               all buildings and other improvements are located entirely within
               the boundary lines of the Real Property. There are no
               encroachments on the Real Property and no portion of the Real
               Property is located within any Special Flood Hazard Area
               designated by the U.S. Department of Housing and Urban
               Development, or in any area similarly designated by any other
               Governmental Authority having jurisdiction thereof.

          (i)  To the Knowledge of the LLC, there are no unpaid special
               assessments affecting the Real Property and notice has not been
               received of any special improvements to be made for the benefit
               of any of the Real Property or requiring the construction of or
               repairs to any public rights of way contiguous to any of the Real
               Property.

          (j)  To the Knowledge of the LLC, (i) there are no "hazardous
               substances" (as defined in the Comprehensive Environmental
               Response, Compensation and Liability Act of 1980, 42
               U.S.C.ss.ss.9601 et seq., as amended) at the Real Property; (ii)
               there has been no release or threat of release of any such
               hazardous substance; (iii) the Real Property is not subject to
               regulation by any Governmental Authority as a result of the
               presence of (A) stored, leaked or spilled petroleum products, (B)
               underground storage tanks, (C) an accumulation of rubbish, debris
               or other solid waste, or because of the presence, release, threat
               of release, discharge, storage, treatment, generation or disposal
               of any "hazardous waste" (as defined in

                                     -15-

<PAGE>

               the Resource Conservation and Recovery Act, 42 U.S.C.ss.6901 et.
               seq., as amended), or "toxic substance" (as defined in the Toxic
               Substance Control Act, 15 U.S.C.ss.2601 et seq., as amended),
               including without limitation asbestos and items or equipment
               containing polychlorinated biphenyls (PCBs) in excess of 50 parts
               per million; (iv) no environmental conditions exist on the Real
               Property that either (X) requires the owner to report such
               condition to any authority or agency of the states in which the
               Real Property is located or (Y) requires the owner of the Real
               Property to make a notation of such condition in any public
               records or conveyancing instrument upon the conveyance of the
               Real Property; and (v) no condition exists that is or may be
               characterized by any Governmental Authority as an actual or
               potential danger to the environment or public health.

          (k)  To the Knowledge of the LLC, there are no material patent or
               latent defects in the Real Property or any part thereof.

          (l)  The Subsidiary owns fee simple title to its respective Real
               Property, free and clear of all Liens, except Permitted Liens and
               free and clear of encumbrances and other matters of title except
               as shown on Schedule 5.13(1).
                           ----------------

          (m)  There are no pending litigation actions, suits, proceedings or
               claims with respect to any aspect of the Real Property nor, to
               the Knowledge of the LLC, have any such actions, suits,
               proceedings or claims been threatened or asserted.

          (n)  All utilities (including, without limitation, water, storm and
               sanitary sewer, gas, electricity and telephone) are available on
               the Real Property through private easements or dedicated public
               easements in capacities sufficient to serve and operate each
               project. Private drives located upon the Real Property and
               appurtenant easements have been completed and connect to public
               roads.

     5.14 Title to Personal Property and Related Matters.
          ----------------------------------------------

          (a)  The Subsidiary has good and marketable title to and possession of
               all tangible and intangible personal property identified on such
               Subsidiary's Balance Sheet, free and clear of all Liens, except
               for Permitted Liens.

          (b)  All of the tangible personal property owned or leased by the
               Subsidiary is in good operating condition and repair (ordinary
               wear and tear excepted), is free from significant defects of
               workmanship or material and is usable and adequate for the
               operations of the business of the Subsidiary, and requires no
               more repair, replacement and rehabilitation than is normal in the
               LLC's industry. All titles, leases and subleases pursuant to
               which any such property is owned or leased are valid, subsisting,
               binding and enforceable against the Subsidiary, as applicable, in
               accordance with their

                                     -16-

<PAGE>

               respective terms, subject to applicable bankruptcy, insolvency,
               moratorium or other laws affecting the enforcement of creditors'
               rights generally, and the application of equitable principles
               (whether considered in a proceeding at law or in equity) and
               there are no existing breaches of a material provision thereof or
               defaults thereunder by the Subsidiary, or to the Knowledge of the
               LLC any of the other parties thereto, or events that with notice
               or lapse of time or both would constitute defaults thereunder by
               the Subsidiary, or to the Knowledge of the LLC any of the other
               parties thereto, and no party under any such contract, lease or
               sublease has given or received a written notice of termination
               thereunder.

     5.15 Governmental Permits. Schedule 5.15 hereto contains a list of all
          --------------------  -------------
franchises, licenses, permits, certificates, authorizations, rights and
approvals of Governmental Authorities (collectively, "Governmental Permits")
held by the Subsidiary in connection with the operation of its business. Each
Governmental Permit held by the Subsidiary has been duly and validly issued and
is in full force and effect, and neither the LLC or the Subsidiary has received
any written notice that any proceeding to revoke, cancel, encumber or adversely
affect in any manner any such Governmental Permit listed on Schedule 5.15 has
                                                            -------------
been initiated or is threatened. Other than the Governmental Permits set forth
on Schedule 5.15, no other Governmental Permits are necessary to continue to
   -------------
conduct business in the manner currently conducted.

     5.16 Taxes and Tax Returns.
          ---------------------

          (a)  The LLC and the Subsidiary have timely filed all of their United
               States, Federal and state tax returns required to be filed by
               them as of the date hereof (or have timely filed for extensions
               with the appropriate taxing authorities with respect to such tax
               returns). The LLC and the Subsidiary have paid or made provision
               for the payment of all taxes, including any interest, penalty or
               addition thereto (whether or not such taxes are required to be
               shown on such tax returns), except where payment of any such
               taxes is being contested in good faith by appropriate
               proceedings.

          (b)  There is no audit or examination now pending, with respect to
               which the owner of the LLC, the LLC or the Subsidiary has been
               notified in writing, regarding any material tax returns, the
               failure to file any material tax returns, or any material tax
               liability of any of the following: (i) LLC, (ii) the Subsidiary,
               or (iii) the owner of the LLC if such item is related to the LLC
               or the Subsidiary. None of the owner of the LLC, the LLC or the
               Subsidiary has waived any statute of limitations in respect of
               any material taxes or agreed to any extension of time with
               respect to any tax assessment or deficiency.

          (c)  All taxes required to be deposited, withheld or collected have
               been so deposited, withheld or collected, and such deposit,
               withholding or collection has either been paid to the respective
               governmental agencies or set aside in accounts for such purpose
               or secured and reserved against and entered on the LLC's or the
               Subsidiary's financial statements.

                                     -17-

<PAGE>

          (d)  There are no Liens for taxes on any properties or assets of the
               Subsidiary (other than Liens for taxes which are not yet due and
               for which adequate reserves have been made on the Financial
               Statements).

          (e)  Neither the LLC nor the Subsidiary is a party to or bound by or
               obligated under any tax sharing, tax benefit or similar
               agreement.

     5.17 Employees.
          ---------

          (a)  Except as described on Schedule 5.17, the Subsidiary has no
                                      -------------
               employees and is not a party to any written or oral employment
               contract, agreement, commitment or arrangement.

          (b)  The Subsidiary is not a party to or subject to (i) any labor
               union or collective bargaining agreement with respect to any of
               its employees or any representative of any such employees, (ii)
               any material labor or employment dispute, and (iii) to the
               Knowledge of the LLC, no labor union or bargaining agent or
               representative holds bargaining rights with respect to the
               Subsidiary's employees or to the Knowledge of the LLC and the
               Subsidiary, has applied or indicated an intention to apply to be
               elected, recognized or certified as the bargaining agent of any
               of its employees.

     5.18 Employee Benefit Matters.
          ------------------------

          (a)  Neither the LLC nor the Subsidiary maintains or contributes to or
               has any obligation or liability to or with respect to any
               employee benefit plans, programs, arrangements or employment
               contracts, bonus arrangements, stock option, incentive plans or
               other benefit plans or practices, including employee benefit
               plans within the meaning set forth in Section 3(3) of the
               Employee Retirement Income Security Act of 1974, as amended
               ("ERISA"), or other similar material arrangements for the
               provision of benefits (including any "Multi-employer Plan" within
               the meaning of Section 3(37) of ERISA or a "Multiple Employer
               Plan" within the meaning of Section 413(c) of the Code) (such
               plans, programs, arrangements or practices of the LLC and the
               Subsidiary being referred to as the "Employee Plans").

          (b)  Neither the LLC nor the Subsidiaries is obligated to pay
               separation, severance, termination or similar-type benefits
               solely as a result of any transaction contemplated by this
               Agreement or solely as a result of a "change in control," as
               contemplated by Section 280G of the Code.

     5.19 Insurance. Schedule 5.19 hereto sets forth a list of all policies or
          ---------  -------------
binders of insurance maintained, owned or held by the LLC and the Subsidiary
covering the Subsidiary which are in effect. Such policies and binders are in
full force and effect and all premiums required to be paid thereunder on or
prior to the date hereof have been paid and all such premiums required to be
paid on or prior to the Closing Date shall have been paid on or prior to

                                     -18-

<PAGE>

such date. The LLC and the Subsidiary have complied in all material respects
with each of such insurance policies and binders. Neither the LLC nor the
Subsidiary has received any written notice of cancellation or nonrenewal of any
such policy or binder.

     5.20 Bank Accounts. Schedule 5.20 hereto sets forth the name of all bank
          -------------  -------------
accounts, lock-boxes, safe deposit boxes, money market funds, certificates of
deposit, stocks, bonds, notes and other securities in the name of or owned or
controlled by the Subsidiary and the names of all persons authorized to draw
thereon or to have access thereto. The Subsidiary has not granted a power of
attorney in favor of any Person.

     5.21 Environmental Laws. Except as set forth in Schedule 5.21, (i) none of
          ------------------                         -------------
the Subsidiary's operations are in violation of or delinquent under any
Environmental Laws in any material respect, nor is there any consent decree,
consent order, fine or penalty, or similar document relating to any violations
of any Environmental Law to which the LLC or the Subsidiary is a party relating
to any property or facility currently or previously owned, leased or operated by
the Subsidiary; (ii) to the Knowledge of the LLC, there are no circumstances or
conditions existing that would prevent or interfere with carrying on the
business of the Subsidiary as it is currently conducted in compliance with
Environmental Laws; (iii) the Subsidiary has obtained all material Permits
required to be obtained by them under all Environmental Laws; and (iv) there is
no Environmental Claim related to or arising out of the Subsidiary's past or
present operations pending or, to the Knowledge of the LLC and the Subsidiary,
threatened against the Subsidiary, its assets, properties, facilities or
businesses and the LLC and the Subsidiary have not received a request for
information under the Environmental Laws.

     5.22 Miscellaneous.
          -------------

          (a)  The LLC and the Subsidiary are residents of the United States
               pursuant to the Code.

          (b)  The Subsidiary has not guaranteed the obligations of the LLC to
               any third party except as will be released at Closing.

          (c)  Schedule 5.22(c) sets forth a true and complete list of all
               warranties in favor of the Subsidiary with respect to
               improvements located on the Real Property or tangible personal
               property of the Subsidiary, all of which warranties are in full
               force and effect.

          (d)  Other than the personal guaranty by Jeffrey W. Kenter in favor of
               First Union National Bank, there is no Credit Support Document,
               (as defined in the Swap Agreement) and, other than Jeffrey W.
               Kenter, there is no Credit Support Provider (as defined in the
               Swap Agreement) under the ISDA Master Agreement, dated as of
               September 21, 2001 (the "Master Agreement"), between First Union
               National Bank and St. Andrews Place II, LLC and the Swap
               Transaction Confirmation, dated October 1, 2001 (together with
               the Master Agreement, the "Swap Agreement") for the


                                     -19-
<PAGE>

               interest rate swap transaction (Ref. No. 81083/161578) between
               First Union National Bank and St. Andrews Place II, LLC, as
               counterparty.

     5.23 Full Disclosure. None of the representations and warranties of the LLC
          ---------------
made in this Article contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.

                                   ARTICLE VI

                                    COVENANTS

     6.1 Access and Information. Subject to the provisions of this Section 6.1,
         ----------------------
from the date hereof until the Closing Date, or if earlier, the date of
termination of this Agreement pursuant to Article X, the LLC and the Subsidiary
shall to afford to the Operating Partnership and to the Operating Partnership's
officers, employees, accountants, counsel, lenders and other authorized
representatives reasonable access, upon reasonable notice to the LLC and the
Subsidiary, to their facilities, properties, books and records during normal
business hours for the purpose of making such investigations as the Operating
Partnership shall reasonably desire in connection with the completion of the
transactions contemplated hereby.

     6.2 Supplemental Information. From time to time prior to the Closing Date,
         ------------------------
the LLC and the Subsidiary will promptly advise the Operating Partnership if any
matter arises hereafter which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in this
Agreement or the Schedules, or if it becomes necessary to correct any
information in any such Schedule which has become inaccurate.

     6.3 Further Assurances. Consistent with the terms and conditions hereof,
         ------------------
each party hereto will execute and deliver such instruments and take such other
actions as the other parties hereto may reasonably require or request in order
to carry out this Agreement and the other Acquisition Documents and the
transactions contemplated hereby and thereby and use commercially reasonable
efforts to cause the conditions precedent to the Closing to occur and/or not
fail to occur.

     6.4 Conduct of Business Prior to the Closing Date. The LLC and the
         ---------------------------------------------
Subsidiary agree that from the date hereof and prior to the Closing Date, and
except (i) as set forth in Schedule 6.4 hereto, (ii) otherwise consented to or
                           ------------
approved by an authorized officer of the Operating Partnership (such consent or
approval not to be unreasonably withheld) or (iii) as required by this
Agreement:

          (a)  the business of the LLC and the Subsidiary shall be conducted in
               the ordinary course;

          (b)  no change shall be made in the Articles of Organization or
               Operating Agreement of the Subsidiary;

                                     -20-

<PAGE>

          (c)  neither the LLC nor the Subsidiary shall enter into nor
               terminate, amend, release or modify any Material Contract
               concerning the operations or assets of the Subsidiary;

          (d)  neither the LLC nor the Subsidiary will take, agree to take, or
               do anything in the conduct of its business which would be
               contrary to or in material breach of any of the terms or
               provisions of this Agreement, or which would cause any of the
               representations of the LLC or the Subsidiary contained herein to
               be or become untrue in any material respect or which would result
               in a Material Adverse Effect to the Subsidiary; and

          (e)  Except for the indebtedness set forth on Schedule 6.4(e), the
               Subsidiary shall not incur any indebtedness for borrowed money,
               prepay any outstanding indebtedness for borrowed moneys on a
               "term loan" basis (except for scheduled payments or required
               pre-payments of outstanding debt), or adopt or agree to adopt any
               new employee benefit plan except as required by applicable law or
               terminate the employment or contract of any employee or
               contractor or accrue any liability beyond the Closing Date for
               severance.

     6.5 Consents. Following the execution hereof, the LLC and the Subsidiary
         --------
shall use commercially reasonable efforts to obtain all Consents prior to the
Closing Date including those shown on Schedule 6.5. Cornerstone and the
Operating Partnership shall use commercially reasonable efforts to assist the
LLC and the Subsidiary in obtaining all Consents prior to the Closing Date. In
addition, Cornerstone and the Operating Partnership shall take all commercially
reasonable actions to cause the lenders to the Subsidiary to release all
guarantors or "key principals" of indebtedness shown in Schedule 11.3.
Notwithstanding any provisions in this Agreement to the contrary, nothing in
this Agreement will be deemed to constitute a transfer or attempted transfer of
any Governmental Permit or contract which by its terms or under Applicable Law
requires the Consent of a third party (including, without limitation, a
Governmental Authority) unless such Consent shall have been obtained.

     6.6 Public Announcements.
         --------------------

          (a)  The Operating Partnership and the LLC and the Subsidiary shall
               not, and shall each cause their respective managers, managing
               partners, officers, employees and other authorized
               representatives not to, prior to the Closing Date, issue any
               press release or make any other public disclosure or announcement
               or otherwise make any disclosure to any third Persons, except
               those Persons set forth on Schedule 6.6, concerning the
                                          ------------
               transactions contemplated by this Agreement or the terms and
               provisions hereof.

          (b)  Should any press release or other public disclosure be required
               to be made, then the party required to make such release or
               disclosure shall not make such release or disclosure without
               first using its commercially reasonable efforts to obtain the
               prior consent of the other parties hereto as to both the

                                     -21-

<PAGE>

               timing and content of such press release or public disclosure,
               which consent shall not be unreasonably withheld.

     6.7 Tax Matters. The following provisions shall govern the allocation of
         -----------
responsibility between the Operating Partnership and the LLC and the Subsidiary
for certain tax matters following the Closing Date:

          (a)  The LLC and the Subsidiary will include the income of the LLC and
               the Subsidiary on the LLC's federal income tax return and
               corresponding state tax returns for all periods through the
               Closing Date and pay any federal and state income taxes
               attributable to such income. The LLC and the Subsidiary will
               furnish tax information to Operating Partnership for inclusion in
               Operating Partnership's federal income tax return for the period
               that includes the Closing Date in accordance with the LLC's past
               custom and practice. The owner of the LLC and the LLC will take
               no position on such returns that would adversely affect the
               Operating Partnership after the Closing Date.

          (b)  The LLC agrees to indemnify the Operating Partnership for any
               additional tax owed by the Subsidiary (including tax owed by
               Subsidiary due to this indemnification payment) resulting from
               any transactions not in the ordinary course of business occurring
               on or before the Closing Date and any additional tax arising from
               any action taken by or at the direction of the LLC.

          (c)  The income (loss) of the LLC and the Subsidiary shall be
               apportioned to the period up to and including the Closing Date by
               closing the books of the Subsidiary as of the Closing Date.

     6.8 Resignations of Managers and Officers. At the Closing, the Subsidiary
         -------------------------------------
shall cause the resignations of all Managers and Officers of the Subsidiary as
requested by the Operating Partnership. Concurrent with the Closing, Cornerstone
shall offer employment to all of the on-site managers listed in Schedule 6.8.
Such managers who elect to become employees of Cornerstone shall be deemed to
have become employees of Cornerstone as of the time the Closing becomes
effective contingent, to the extent permitted by law, upon successful completion
after Closing of Cornerstone's standard conditions precedent to employment,
including without limitation, Cornerstone's drug and alcohol testing. At the
Closing, the Operating Partnership will be entitled to ownership and possession
of all the records of the Subsidiary, including in particular, but without
limitation, their minute books, corporate seals, if any, financial and tax
records, intellectual property records, employee information, leases, material
contracts and all records relating to litigation matters.

     6.9 Registration.
         ------------

          (a)  Before the date on which the Operating Partnership Units may be
               converted into shares of Cornerstone pursuant to the Limited
               Partnership Agreement (the "Conversion Date"), Cornerstone shall
               file a Registration

                                     -22-

<PAGE>

               Statement on Form S-3 (the "Registration Statement") under the
               Securities Act with respect (i) to issuance of any such shares on
               conversion of the Operating Partnership Units and (ii) resales by
               the LLC of such shares. Cornerstone shall use its reasonable best
               efforts to cause the Registration Statement to become effective
               as promptly as practicable after the filing thereof. Cornerstone
               shall promptly prepare and file any amendments (including
               post-effective amendments) and supplements to the Registration
               Statement and to the prospectus included therein (the
               "Prospectus") as may be necessary to keep the Registration
               Statement continuously current and effective and to comply with
               the provisions of the Securities Act and the rules and
               regulations promulgated thereunder with respect to the
               disposition of the shares (the "Registered Shares") covered by
               such registration statement for the period required to effect the
               distribution of the Registered Shares, provided that such
               obligation shall expire when such shares may be sold by the LLC
               pursuant to Rule 144(k) under the Securities Act. The LLC shall
               furnish to Cornerstone such information regarding itself and the
               distribution of the Registered Shares covered by the Registration
               Statement as Cornerstone may from time to time reasonably request
               in writing and as shall be required under the Securities Act.

          (b)  Cornerstone shall notify the LLC and confirm such advice in
               writing (i) when the filing of any post-effective amendment to
               the Registration Statement or supplement to the Prospectus is
               required, when the same is filed and, in the case of the
               Registration Statement and any post-effective amendment, when the
               same becomes effective, (ii) of any request by the Securities and
               Exchange Commission for any amendment of or supplement to the
               Registration Statement or the Prospectus or for additional
               information and (iii) of the entry of any stop order suspending
               the effectiveness of the Registration Statement or the initiation
               or threatening of any proceedings for that purpose, and, if such
               stop order shall be entered, Cornerstone shall use its best
               efforts promptly to obtain the lifting thereof.

          (c)  Cornerstone shall furnish to the LLC, at Cornerstone's expense,
               such number of copies of the final Prospectus and of each
               post-effective amendment or supplement thereto, as may reasonably
               be required in order to facilitate the disposition of the
               Registered Shares in conformity with the requirements of the
               Securities Act and the rules and regulations promulgated
               thereunder, but only while Cornerstone is required under the
               provisions hereof to cause the Registration Statement to remain
               effective.

          (d)  Cornerstone shall use its best efforts to register or qualify
               such shares under such other securities or "blue sky" laws of
               such jurisdictions as the LLC reasonably requests and do any and
               all other acts and things which may be reasonably necessary or
               advisable to enable the LLC to consummate the disposition in such
               jurisdictions of the Registered Shares

                                     -23-

<PAGE>

               (provided that Cornerstone shall not be required to (i) qualify
               generally to do business in any jurisdiction in which it would
               not otherwise be required to qualify but for this Section 6.9,
               (ii) subject itself to taxation in any such jurisdiction, or
               (iii) consent to general service of process in any such
               jurisdiction).

          (e)  Cornerstone shall take all steps necessary to enable the LLC to
               avail itself of the prospectus delivery mechanism set forth in
               Rule 153 under the Securities Act or any successor thereto. (a)

          (f)  If any event, fact or circumstance requiring an amendment to the
               Registration Statement or a supplement to the Prospectus shall
               exist, Cornerstone shall, upon becoming aware thereof, promptly
               so notify the LLC and prepare and furnish to the LLC, and file
               with the Securities and Exchange Commission, a post-effective
               amendment to the Registration Statement or a supplement to the
               Prospectus or any document incorporated by reference therein, or
               file any other required document, so that, as thereafter
               delivered to the purchasers of Registered Shares, the Prospectus
               will not contain an untrue statement of a material fact or omit
               to state any material fact required to be stated therein or
               necessary to make the statements therein, in the light of the
               circumstances under which they were made, not misleading.

     6.10 Indemnification and Contribution with Respect to the Registration
          -----------------------------------------------------------------
Statement.
---------

          (a)  By Cornerstone. In connection with the registration under the
               --------------
               Securities Act of the Registered Shares for resale pursuant to
               Section 6.9, Cornerstone shall indemnify and hold harmless the
               LLC against any losses, claims, damages or liabilities, joint or
               several (or actions or proceedings, whether commenced or
               threatened, in respect thereof) ("Losses"), to which it may
               become subject, under the Securities Act or otherwise, but only
               to the extent such Losses arise out of or are based upon (1) any
               untrue statement or alleged untrue statement of any material fact
               contained, on the effective date thereof, in the Registration
               Statement, in any preliminary Prospectus (if used prior to the
               effective date of the Registration Statement) or in any final
               Prospectus or in any post-effective amendment or supplement
               thereto (if used during the period Cornerstone is required to
               keep the Registration Statement effective) including any document
               incorporated therein by reference (the "Disclosure Documents"),
               or (2) any omission or alleged omission to state in any of the
               Disclosure Documents a material fact required to be stated
               therein or necessary to make the statements made therein not
               misleading, or (3) any violation of any federal or state
               securities laws or rules or regulations thereunder committed by
               Cornerstone in connection with the performance of its obligations
               under Section 6.9; and Cornerstone will reimburse the LLC for all
               legal and other expenses reasonably incurred by it in
               investigating or defending against any such claims, whether or
               not

                                     -24-

<PAGE>

               resulting in any liability, or in connection with any
               investigation or proceeding by any governmental agency or
               instrumentality with respect to any offering of Registered Shares
               for resale pursuant to Section 6.9, including any amounts paid in
               settlement of any action, suit, arbitration, proceeding,
               litigation or investigation (collectively "Litigation"),
               commenced or threatened, provided, however, that Cornerstone
               shall not be liable to an indemnified party in any such case to
               the extent that any such Losses arise out of or are based upon
               (i) an untrue statement or omission or alleged omission made in
               any such Disclosure Documents in reliance upon and in conformity
               with written information furnished to Cornerstone by the LLC for
               use therein, or (ii) the use of any Prospectus after such time as
               Cornerstone has advised the LLC in writing that the filing of a
               post-effective amendment or supplement thereto is required,
               except the Prospectus as so amended or supplemented, or the use
               of any Prospectus after such time as the obligation of
               Cornerstone to keep the same current and effective has expired.

          (b)  By LLC. In connection with the registration under the Securities
               ------
               Act of the Registered Shares for resale pursuant to Section 6.9,
               the LLC shall indemnify and hold harmless Cornerstone, each of
               its directors, each of its officers who have signed the
               Registration Statement, and each other person, if any, who
               controls Cornerstone within the meaning of Section 15 of the
               Securities Act against any Losses to which such indemnified party
               may become subject under the Securities Act or otherwise, but
               only to the extent such Losses arise out of or are based upon (i)
               any untrue statement or alleged untrue statement of any material
               fact contained in any of the Disclosure Documents or any omission
               or alleged omission to state therein a material fact required to
               be stated therein or necessary to make the statements therein not
               misleading, if the statement or omission was made in reliance
               upon and in conformity with written information furnished to
               Cornerstone by or on behalf of the LLC for use therein; (ii) the
               use by or on behalf of the LLC of any Prospectus after such time
               as Cornerstone has advised the LLC in writing that the filing of
               a post-effective amendment or supplement thereto is required,
               except the Prospectus as so amended or supplemented, or after
               such time as the obligation of Cornerstone to keep the
               Registration Statement effective and current has expired, or
               (iii) any information given or representation made by or on
               behalf of the LLC in connection with the resale of Registered
               Shares which is not contained in and not in conformity with the
               Prospectus (as amended or supplemented at the time of the giving
               of such information or making of such representation); and the
               LLC shall reimburse each such indemnified party for all legal and
               other expenses reasonably incurred by such party in investigating
               or defending against any such claims, whether or not resulting in
               any liability, or in connection with any investigation or
               proceeding by any governmental agency or instrumentality relating
               to any such claims with respect to any offering of the Registered
               Shares pursuant

                                     -25-

<PAGE>

               to Section 6.9, including any amounts paid in settlement of any
               Litigation, commenced or threatened.

          (c)  Notice. If a third party commences any action or proceeding
               ------
               against an indemnified party related to any of the matters
               subject to indemnification under Section 6.10(a) or (b) hereof,
               such indemnified party shall promptly give notice to the
               indemnifying party in writing of the commencement thereof, but
               failure so to give notice shall not relieve the indemnifying
               party from any liability which it may have hereunder unless the
               indemnifying party is prejudiced thereby.

          (d)  Control of Defense. The indemnifying party shall be entitled to
               ------------------
               control the defense or prosecution of such claim or demand in the
               name of the indemnified party, with counsel satisfactory to the
               indemnified party, if it notifies the indemnified party in
               writing of its intention to do so within 30 days of its receipt
               of the notice from the indemnified party, subject, however, to
               the right of the indemnified party to participate therein through
               counsel of its own choosing, which participation shall be at the
               indemnified party's expense; provided, however, that if (i) the
               indemnified party shall have reasonably concluded that there are
               likely to be defenses available to it that are different from or
               additional to those available to the indemnifying party, or (ii)
               the indemnifying party shall fail vigorously to defend or
               prosecute such claim or demand within a reasonable time then in
               either case the indemnifying party shall not have the right to
               direct the defense of such action on behalf of the indemnified
               party and the indemnified shall have the right to employ separate
               counsel at the indemnifying party's expense and to control its
               own defense of such action. Whether or not the indemnifying party
               chooses to defend or prosecute such claim, the parties hereto
               shall cooperate in the prosecution or defense of such claim and
               shall furnish such records, information and testimony and attend
               such conferences, discovery proceedings, hearings, trials and
               appeals as may be requested in connection therewith.

          (e)  Contribution. If the indemnification provided for in subsections
               ------------
               (a) or (b) of this Section 6.10 is unavailable to or insufficient
               to hold the indemnified party harmless under subsections (a) or
               (b) above in respect of any Losses referred to therein for any
               reason other than as specified therein, then the indemnifying
               party shall contribute to the amount paid or payable by such
               indemnified party as a result of such Losses in such proportion
               as is appropriate to reflect the relative fault of the
               indemnifying party on the one hand and such indemnified party on
               the other in connection with the statements or omissions which
               resulted in such Losses, as well as any other relevant equitable
               considerations. The relative fault shall be determined by
               reference to, among other things, whether the untrue or alleged
               untrue statement of a material fact or the omission or alleged
               omission to state a material fact relates to information supplied
               by (or omitted to be supplied by) Cornerstone or the LLC and the

                                     -26-

<PAGE>

               parties' relative intent, knowledge, access to information and
               opportunity to correct or prevent such statement or omission. The
               amount paid or payable by an indemnified party as a result of the
               Losses referred to above in this subsection (d) shall be deemed
               to include any legal or other expenses reasonably incurred by
               such indemnified party in connection with investigation or
               defending any such action or claim. No person guilty of
               fraudulent misrepresentation (within the meaning of Section 11(f)
               of the Securities Act) shall be entitled to contribution from any
               person who was not guilty of such fraudulent misrepresentation.

          (f)  Limitation of Liability of the LLC. The indemnification
               ----------------------------------
               obligation under Section 6.10(b), and the contribution obligation
               under Section 6.10(d), of the LLC shall be limited to the amount
               of net proceeds received by the LLC upon the resale of Registered
               Shares under the Registration Statement.

          (g)  Application. The provisions of Article IX shall not be applicable
               -----------
               to Section 6.9 and this Section 6.10.

     6.11 Financial Information. LLC acknowledges that Cornerstone is a public
          ---------------------
entity and that it may be required to furnish financial statements to the
Securities and Exchange Commission in connection with the Acquisition. LLC
agrees to make the information available for Cornerstone to audit the last 12
months of operation of the Subsidiary so that a report can be generated that is
in compliance with accounting Regulation S-X of the Securities and Exchange
Commission.

     6.12 Construction. The LLC shall complete construction of the improvements
          ------------
on the Real Property pursuant to the terms and conditions attached hereto as
Schedule 6.12.
-------------

     6.13 Assignment of Cable Television Revenues. Cornerstone and the Operating
          ---------------------------------------
Partnership shall cause the Subsidiary and/or St. Andrews Place Apartments, LLC
(the "Recipients") to assign and pay over to LLC all monies received by the
Recipients after the Closing in connection with the Exclusive Cable Television
Installation and Wiring Agreement dated January 23, 1998 by and between the
Subsidiary and Time Warner Entertainment - Advance/Newhouse Partnership, a New
York general partnership.

     6.14 Swap Transaction. The LLC shall pay on or before the applicable
          ----------------
Payment Date (as defined in the Swap Agreement) any and all payments required to
be made by St. Andrews Place II, LLC under the Swap Agreement dated September
21, 2001, ISDA Master Agreement, dated as of September 21, 2001 (the "Master
Agreement"), between First Union National Bank and St. Andrews Place II, LLC and
the Swap Transaction Confirmation, dated October 1, 2001 (together with the
Master Agreement, the "Swap Agreement"), (attached hereto as Exhibit B) for the
interest rate swap transaction (Ref. No. 81083/161578) which have a Payment Date
(as defined in the Swap Agreement) occurring on or before the later of (i) Final
Completion (as that term is defined under Schedule 6.12 hereof) of Trinity
                                          -------------
Commons II or (ii) November 1, 2002. At the direction of Cornerstone, the LLC
will make all payments required pursuant to this

                                     -27-

<PAGE>

Section 6.14 directly to First Union National Bank in accordance with the
payment instructions included in the Swap Agreement.

                                  ARTICLE VII

                        CLOSING CONDITIONS AND DELIVERIES

     7.1 Conditions to the Operating Partnership's Consummation of the
         -------------------------------------------------------------
Acquisition. The obligation of the Operating Partnership to consummate the
-----------
Acquisition shall be subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions, each of which may be waived by the
Operating Partnership:

          (a)  Each of the representations and warranties of the LLC and the
               Subsidiary contained in this Agreement shall be true and correct
               in all material respects as of the Closing Date as though made on
               the Closing Date, except for those representations and warranties
               which address matters only as of a particular date (which shall
               be correct in all material respects as of such date).

          (b)  Each of the obligations of the LLC and the Subsidiary to be
               performed by it on or before the Closing Date pursuant to the
               terms of this Agreement, shall have been duly performed and
               complied with in all material respects.

          (c)  All Consents shall have been obtained.

          (d)  No Judgment prohibiting the transactions contemplated by this
               Agreement or the other Acquisition Documents shall have been
               entered by a Governmental Authority with proper jurisdiction
               which remains in effect, and no Legal Proceeding shall have been
               instituted by any Governmental Authority challenging this
               Agreement or the Acquisition or the other transactions
               contemplated by this Agreement or the other Acquisition
               Documents.

          (e)  The LLC shall have duly executed and delivered the Operating
               Partnership Agreement in substantially the form attached as
               Exhibit A.

          (f)  The LLC and the Subsidiary shall have tendered to the Operating
               Partnership all documents which the LLC and the Subsidiary are
               required by Section 6.8 to deliver to the Operating Partnership.

          (g)  The LLC and the Subsidiary shall have tendered to the Operating
               Partnership all documents and the Membership Interest required by
               Section 2.1.

          (h)  A rent roll (the "Rent Roll") certified by the LLC to be true and
               correct in all material respects as of the date of closing
               showing the name of, and the

                                     -28-

<PAGE>

               amount of monthly rental payable, by each tenant of the Real
               Property, the apartment occupied by the tenant, the date to which
               rent has been paid, any advance payment of rent, and the amount
               of any escrow, or security deposit of the tenant.

     7.2 Conditions to the LLC's Consummation of the Acquisition. The obligation
         -------------------------------------------------------
of the LLC to consummate the Acquisition shall be subject to the satisfaction,
on or prior to the Closing Date, of each of the following conditions, each of
which may be waived by the LLC:

          (a)  Each of the representations and warranties of Cornerstone and the
               Operating Partnership contained in this Agreement shall be true
               and correct in all material respects as of the Closing Date as
               though made on the Closing Date.

          (b)  Each of the obligations of Cornerstone and the Operating
               Partnership to be performed by it on or before the Closing Date
               pursuant to the terms of this Agreement, shall have been duly
               performed and complied with in all material respects.

          (c)  All Consents shall have been obtained.

          (d)  No Judgment prohibiting the transactions contemplated by this
               Agreement or the other Acquisition Documents shall have been
               entered by a Governmental Authority with proper jurisdiction
               which remains in effect, and no Legal Proceeding shall have been
               instituted by any Governmental Authority challenging this
               Agreement or the Acquisition or the other transactions
               contemplated by this Agreement or the other Acquisition
               Documents.

          (e)  Cornerstone shall have duly executed and delivered the Operating
               Partnership Agreement in substantially the form attached as
               Exhibit A.

          (f)  The Operating Partnership shall have tendered to the LLC all
               documents and the Operating Partnership Units required by Section
               2.2.

                                  ARTICLE VIII

                                    CLOSING

     8.1 Closing. The Closing shall take place on the Closing Date as set forth
         -------
in Section 2.3. The Closing shall be held at the offices of the McGuireWoods
LLP, or any other place the Operating Partnership and the LLC shall mutually
agree. At the Closing, each of the parties shall take all action and deliver all
documents, instruments, certificates, agreements and other items as required
under this Agreement in order to perform, fulfill and observe all covenants,
conditions and agreements on its part to be performed, fulfilled and observed at
or prior to the Closing Date (and not theretofore accomplished) and cause all
conditions precedent to the other party's obligations hereunder to be satisfied
in full.

                                     -29-

<PAGE>

     8.2 Closing Documents.
         -----------------

          (a)  At the Closing, the LLC shall deliver to the Operating
               Partnership all of the following:

               (i)   the Membership Interests, together with duly executed
                     instruments of assignment and transfer;

               (ii)  a certificate from or on behalf of the LLC certifying that
                     the conditions set forth in Section 7.1 have been satisfied
                     by the LLC;

               (iii) written resignations (as contemplated in Section 6.8) from
                     the managers, officers and other employees of the
                     Subsidiary that are requested by the Operating Partnership;
                     and

               (iv)  The resolutions of the LLC granting the Membership Interest
                     to the Operating Partnership.

          (b)  At the Closing, the Operating Partnership shall deliver to the
               LLC the following:

               (i)  a certificate from the Operating Partnership certifying that
                    the conditions set forth in Section 7.2 have been satisfied
                    by the Operating Partnership; and

               (ii) The resolutions of the Operating Partnership, together with
                    duly executed instruments of assignment and transfer,
                    granting the Operating Partnership Units to the LLC.

                                   ARTICLE IX

                                INDEMNIFICATION

     9.1 Indemnification of Operating Partnership. The LLC hereby agrees to
         ----------------------------------------
indemnify, defend and hold harmless Cornerstone, the Operating Partnership and
the Subsidiary and their managers, officers, employees, independent contractors,
agents, successors and assigns (collectively, the "Operating Partnership
Parties") from and against any and all liabilities, losses, costs or expenses
which any of the Operating Partnership Parties may suffer or for which any of
the Operating Partnership Parties may become liable and which are based on, the
result of, arise out of or are otherwise related to any of the following:

          (a)  any inaccuracy or misrepresentation in, or breach of any
               representation or warranty of the LLC contained in this Agreement
               or schedules hereto or any certificate furnished by the LLC or
               the Subsidiary pursuant to this Agreement;

                                     -30-

<PAGE>

          (b)  any breach or failure of the LLC to perform any covenant or
               agreement required to be performed by the LLC or the Subsidiary
               pursuant to this Agreement (except with respect to Section 6.9
               and Section 6.10);

          (c)  all liabilities of the Subsidiary that relate to or arise out of
               the assets, business, operations, conduct or employees of the
               Subsidiary relating to or accruing out of occurrences prior to
               the Closing Date; and

          (d)  any and all actions, suits, proceedings, demands, assessments,
               judgments, costs and expenses, including reasonable attorneys'
               fees (collectively, "Related Expenses"), incident to any of the
               foregoing (collectively, "Operating Partnership Indemnifiable
               Claims").

     9.2 Indemnification of LLC. Cornerstone and the Operating Partnership each
         ----------------------
hereby agree to indemnify, defend and hold harmless the LLC and its owners,
managers, officers, employees, independent contractors, agents, successors and
assigns (collectively, the "LLC Parties") from and against any and all
liabilities, losses, costs or expenses which any of the LLC Parties may suffer
or for which any of the LLC Parties may become liable and which are based on,
the result of, arise out of or are otherwise related to any of the following:

          (a)  any inaccuracy or misrepresentation in, or breach of any
               representation or warranty of Cornerstone or the Operating
               Partnership contained in this Agreement or any schedule hereto or
               any certificate furnished by Cornerstone or the Operating
               Partnership pursuant to this Agreement;

          (b)  any breach or failure of Cornerstone or Operating Partnership to
               perform any covenant or agreement required to be performed by
               Operating Partnership pursuant to this Agreement (except with
               respect to Section 6.9 and Section 6.10); and

          (c)  any and all Related Expenses incident to any of the foregoing
               (collectively, "LLC Indemnifiable Claims").

     9.3 Third Party Claims. The obligation of an indemnifying party to
         ------------------
indemnify another party to this Agreement under the provisions of this Article
with respect to claims resulting from the assertion of liability by Persons not
parties to this Agreement (including governmental claims for penalties, fines
and assessments) shall be subject to the following terms and conditions:

          (a)  The indemnified party shall give prompt written notice to the
               indemnifying party of any assertion of liability by a third party
               which might give rise to a claim for indemnification, which
               notice shall state the nature and basis of the assertion and the
               amount thereof, to the extent known, provided, however, that no
               delay on the part of the indemnified party in giving notice shall
               relieve the indemnifying party of any obligation to indemnify
               unless (and then solely to the extent that) the indemnifying
               party is prejudiced by such delay.

                                     -31-

<PAGE>

          (b)  If any action, suit or proceeding (a "Legal Action") is brought
               against an indemnified party with respect to which the
               indemnifying party may have an obligation to indemnify, the Legal
               Action shall be defended by the indemnifying party and such
               defense shall include all proceedings and appeals which counsel
               for the indemnified party shall reasonably deem appropriate.

          (c)  Notwithstanding the provisions of the previous subsection of this
               Article, until the indemnifying party shall have assumed the
               defense of any such Legal Action, the defense shall be handled by
               the indemnified party. Furthermore, (i) if the indemnified party
               shall have reasonably concluded that there are likely to be
               defenses available to the indemnified party that are different
               from or in addition to those available to the indemnifying party;
               (ii) if the indemnifying party fails to provide the indemnified
               party with evidence reasonably acceptable to the indemnified
               party that the indemnifying party has sufficient financial
               resources to defend and fulfill its indemnification obligation
               with respect to the Legal Action; (iii) if the Legal Action
               involves other than money damages and seeks injunctive or other
               equitable relief; or (iv) if a judgment against the indemnified
               party will, in the good faith opinion of the indemnified party,
               establish a custom or precedent which will be materially adverse
               to the best interests of its continuing business, the
               indemnifying party shall not be entitled to assume the defense of
               the Legal Action and the defense shall be handled by the
               indemnified party. If the defense of the Legal Action is handled
               by the indemnified party under the provisions of this subsection,
               the indemnifying party shall pay all legal and other expenses
               reasonably incurred by the indemnified party in conducting such
               defense.

          (d)  In any Legal Action initiated by a third party and defended by
               the indemnifying party (i) the indemnified party shall have the
               right to be represented by advisory counsel and accountants, at
               its own expense, (ii) the indemnifying party shall keep the
               indemnified party fully informed as to the status of such Legal
               Action at all stages thereof, whether or not the indemnified
               party is represented by its own counsel, (iii) the indemnifying
               party shall make available to the indemnified party, and its
               attorneys, accountants and other representatives, all books and
               records of the indemnifying party relating to such Legal Action
               and (iv) the parties shall render to each other such assistance
               as may be reasonably required in order to ensure the proper and
               adequate defense of the Legal Action.

          (e)  In any Legal Action initiated by a third party and defended by
               the indemnifying party, the indemnifying party shall not make any
               settlement of any claim without the written consent of the
               indemnified party, which consent shall not be unreasonably
               withheld. Without limiting the generality of the foregoing, it
               shall not be deemed unreasonable to withhold consent to a
               settlement involving injunctive or other equitable relief against
               the indemnified party or its assets, employees or business, or


                                     -32-

<PAGE>

               relief which the indemnified party reasonably believes could
               establish a custom or precedent which will be adverse to the best
               interests of its continuing business.

     9.4 Limitation on Indemnities.
         -------------------------

          (a)  Any provision of this Agreement to the contrary notwithstanding,
               no claim for indemnification by an indemnified party against an
               indemnifying party pursuant to this Article IX for any inaccuracy
               or misrepresentation in, or breach of any representation or
               warranty shall be valid and capable of assertion unless and until
               the aggregate amount of all claims against the indemnifying party
               exceeds $35,000 (the "Basket Amount"), but then the indemnified
               party may seek indemnification for the full amount of such
               claims.

          (b)  Any provision of this Agreement to the contrary notwithstanding,
               the maximum amount for which an indemnifying party may be liable
               to the indemnified party hereunder for any inaccuracy or
               misrepresentation in, or breach of any representation or warranty
               shall not exceed, in the aggregate, the sum of $4,801,151 ("Cap
               Amount").

          (c)  Notwithstanding anything to the contrary herein, no indemnified
               party shall be subject to the Basket Amount or the Cap Amount in
               seeking indemnification from an indemnifying party involving
               fraud or willful or intentional misrepresentations.

          (d)  In the event that the LLC is the indemnifying party hereunder,
               the LLC shall have the option of transferring Operating
               Partnership Units to the Operating Partnership in partial or
               complete satisfaction of claims. The parties shall seek to treat
               any such claim which is satisfied through the transfer of
               Operating Partnership Units as a unit adjustment rather than a
               separate independent taxable event.

     9.5 Survival. The representations and warranties of Cornerstone and the
         --------
Operating Partnership in Article III and the LLC in Articles IV and V hereof
shall survive for a period of 36 months after the Closing Date, except that the
representations and warranties of the LLC in Sections 3.2, 3.3, 3.5, 5.3,
5.13(l) and 5.14(a) shall survive indefinitely and the representations and
warranties of the LLC in Sections 5.16 and 5.21 shall survive for the applicable
statute of limitations.

                                     -33-

<PAGE>

                                   ARTICLE X

                                   TERMINATION


     10.1 Termination Events. This Agreement may be terminated and the
          ------------------
transactions contemplated hereby may be abandoned:

          (a)  At any time, by the mutual written agreement of the Operating
               Partnership and the LLC;

          (b)  By either the Operating Partnership or the LLC, upon written
               notice to the other, if the conditions to its obligations set
               forth in Sections 7.1 and 7.2, respectively, shall not have been
               satisfied or waived on or before the Drop Dead Date for any
               reason other than a breach or default by such terminating party
               of its respective covenants, agreements or other obligations
               hereunder, or any of its representations or warranties herein not
               being true and accurate when made or when otherwise required by
               this Agreement to be true and accurate in all material respects;

          (c)  By the Operating Partnership by reason of a material breach or
               default by the LLC under this Agreement and provided that the
               Operating Partnership has not materially breached or defaulted
               hereunder and has performed or stands ready, willing and able to
               perform, its obligations under this Agreement in all material
               respects; provided that, if the breach or default by the LLC is
               capable of being cured, the LLC shall have had 30 days following
               notice of such breach or default to cure, and such breach or
               default shall not have been cured; or

          (d)  By the LLC by reason of a material breach or default by the
               Operating Partnership under this Agreement and provided that the
               LLC has not materially breached or defaulted hereunder and has
               performed or stands ready, willing and able to perform, its
               obligations under this Agreement in all material respects;
               provided that, if the breach or default by the Operating
               Partnership is capable of being cured, the Operating Partnership
               shall have had 30 days following notice of such breach or default
               to cure, and such breach or default shall not have been cured.

     10.2 Manner of Exercise. In the event of the termination of this Agreement
          ------------------
by either the Operating Partnership or the LLC pursuant to this Article X,
notice thereof shall forthwith be given to the other party and this Agreement
shall terminate and the transactions contemplated hereunder shall be abandoned
without further action by the Operating Partnership or the LLC.

     10.3 Effect of Termination. In the event of the termination and abandonment
          ---------------------
of this Agreement, the obligations of the parties under Section 12.1 shall
survive any such termination. If this Agreement is terminated pursuant to
Section 10.1(a), no party shall have any liability for any costs, expenses, loss
of anticipated profits or any further obligation for breach of warranty or

                                     -34-

<PAGE>

otherwise to any party to this Agreement. Any termination of this Agreement
pursuant to Sections 10.1(b), 10.1(c) or 10.1(d) shall be without prejudice to
any other rights or remedies of the respective parties.

                                   ARTICLE XI

                                   DEFINITIONS

     As used in this Agreement, the following terms shall have the meaning
assigned thereto in this Article (or the meaning assigned thereto in the
referenced Section or Article of this Agreement):

     "Acquisition" shall have the meaning assigned thereto in Section 2.1 of
this Agreement.

     "Acquisition Documents" shall mean this Agreement and all documents
executed in connection with this Agreement.

     "Affiliate" shall mean, with respect to any Person, any other Person or
entity which shall be directly or indirectly controlling or controlled by or
under common control with such Person. For purposes of this Agreement, a
particular Person shall be deemed to control another entity if that Person or
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of such entity, whether through ownership of voting
securities, by contract or otherwise.

     "Agreement" shall have the meaning assigned thereto in the introduction to
this Agreement and as the same may be amended from time to time in accordance
with its terms.

     "Applicable Law" shall mean any Federal, state, local or foreign code, law,
ordinance, regulation, reporting or licensing requirement, rule or statute
applicable to a Person or its assets, properties, liabilities or business,
including those promulgated, interpreted or enforced by any Governmental
Authority.

     "Balance Sheet Date" shall have the meaning assigned thereto in Section
5.7(a) of this Agreement.

     "Basket Amount" shall have the meaning assigned thereto in Section 9.4(a)
of this Agreement.

     "Cap Amount" shall have the meaning assigned thereto in Section 9.4(b) of
this Agreement.

     "Closing" shall have the meaning assigned thereto in Section 2.3 of this
Agreement.

                                     -35-

<PAGE>

     "Closing Date" shall have the meaning assigned thereto in Section 2.3 of
this Agreement.

     "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and any successor statute thereto and all final or temporary rules and
regulations promulgated thereunder, and all published and generally applicable
rulings entitled to precedential effect, in each case to the extent such rules,
regulations or rulings are effective and applicable.

     "Consents" shall mean the consents, permits, approvals and authorizations
of Governmental Authorities and other Persons necessary to transfer the
Membership Interests to the Operating Partnership or the Operating Partnership
Units to the LLC or otherwise to consummate the transactions contemplated by
this Agreement.

     "Contribution Adjustment" shall have the meaning assigned thereto in
Section 2.4(a) of this Agreement.

     "Contribution Adjustment Notice" shall have the meaning assigned thereto in
Section 2.4(b) of this Agreement.

     "Conversion Date" shall have the meaning assigned thereto in Section 6.9(a)
of this Agreement.

     "Disclosure Documents" shall have the meaning assigned thereto in Section
6.10(a) of this Agreement.

     "Drop-Dead Date" shall have the meaning assigned thereto in Section 2.3 of
this Agreement.

     "Employee Plans" shall have the meaning assigned thereto in Section 5.18 of
this Agreement.

     "Environmental Claim" means any claim, demand, complaint, action, suit
proceeding, investigation or notice by any Person alleging potential liability
arising out of, based on, or relating to Environmental Laws.

     "Environmental Laws" means all federal, state, and local laws (including,
without limitation, common law), statutes, ordinances, judgments, decrees,
agreements with any Governmental Authority, licenses, permits, rules and
regulations relating to pollution or the environment or occupational or worker
health and safety including, without limitation, laws, statutes, ordinances,
judgments, decrees, agreements with any Governmental Authority, licenses,
permits, rules and regulations relating to the release of any Hazardous Material
at any location or otherwise relating to the use, treatment, storage, disposal,
transport, or handling of any Hazardous Material.

                                     -36-

<PAGE>

     "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.

     "Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended.

     "Governmental Authority" shall have the meaning assigned thereto in Section
3.4(c) of this Agreement.

     "Governmental Permit" shall have the meaning assigned thereto in Section
5.15 of this Agreement.

     "Hazardous Material" means any material, substance or compound regulated
under Environmental Laws.

     "Intellectual Property" shall mean all right, title and interest in and to
all trade names, trademarks, and service marks, along with the goodwill
appurtenant to any of the foregoing, and all domain names, copyrights, trade
secrets (including client and vendor lists), and other information, data and
materials developed by or on behalf of the Subsidiary, but only to the extent
that the Subsidiary has used such Intellectual Property in, or that such
Intellectual Property is necessary to, the conduct of such Subsidiary's
ownership or operation of its business as such business is presently being
conducted.

     "Investments" shall mean any (a) investment in shares of capital stock,
evidence of indebtedness or other securities issued by any other Person, (b)
loan, advance or extension of credit to, or contribution to the capital of, any
other Person, (c) purchase of the securities or business of any other Person or
commitment to make such purchase, and (d) other investment in any other Person.

     "Judgment" shall have the meaning assigned thereto in Section 3.4(c) of
this Agreement.

     "Knowledge of Cornerstone" shall mean the actual knowledge after reasonable
inquiry of the officers of Cornerstone listed on Schedule 11.1.

     "Knowledge of the LLC" shall mean the actual knowledge after reasonable
inquiry of the Managers or Officers of the LLC and the Subsidiary listed on
Schedule 11.2.

     "Legal Action" shall have the meaning assigned thereto in Section 9.3(b) of
this Agreement.

     "Legal Proceeding" shall have the meaning assigned thereto in Section 5.9
of this Agreement.

     "Lien" shall mean (a) any encumbrance, mortgage, pledge, lien, charge or
other security interest of any kind upon any property or upon the income or
profits therefrom, (b) any

                                     -37-

<PAGE>

right of redemption, put or call option or other right to sell or acquire any
property, or (c) any acquisition of or agreement to have an option to acquire
any property or assets upon conditional sale or other title retention agreement,
device or arrangement (including a capitalized lease).

     "Litigation" shall have the meaning assigned thereto in Section 6.10(a) of
this Agreement.

     "Losses" shall have the meaning assigned thereto in Section 6.10(a) of this
Agreement.

     "Material Adverse Effect" in respect of a Person shall mean any material
adverse effect on the business, assets, properties, condition (financial or
other) or results of operations of such Person, taken as a whole together with
any subsidiary, or on the ability of such Person to consummate the Acquisition
or to carry out the other transactions contemplated by this Agreement and the
other Acquisition Documents.

     "Material Contract" shall have the meaning assigned thereto in Section
5.12(a) of this Agreement.

     "Mediator" shall have the meaning assigned thereto in Section 2.4(b) of
this Agreement.

     "Membership Interests" shall have the meaning assigned thereto in Section
2.1 of this Agreement.

     "Operating Partnership Units" shall have the meaning assigned thereto in
Section 2.2 of this Agreement.

     "Options" shall mean, with respect to any Person, securities or other
rights or interests which are convertible into or exchangeable or exercisable
for shares of capital stock of such Person, or any other options, warrants,
rights, contracts, commitments, understandings or arrangements or claims of any
character pursuant to which such Person is or may become bound to issue,
transfer, sell, repurchase or otherwise acquire or retire any shares of capital
stock of such Person or any Membership Interests.

     "Permitted Lien" shall mean (a) liens for taxes and assessments or
governmental charges or levies not at the time due or the validity of which is
currently being contested in good faith by appropriate proceedings, for which
adequate reserves have been recorded on the books and financial statements in
accordance with federal income tax law, (b) liens incurred in the ordinary
course of business in respect of pledges or deposits under workers' compensation
laws or similar legislation, carriers', warehousemen's, mechanics', laborers'
and materialmen's and similar liens, if the obligations secured by such liens
are not then delinquent or are being contested in good faith by appropriate
proceedings, for which adequate reserves have been recorded on the books and
financial statements, (c) liens incidental to the conduct of the business which
were not incurred in connection with the borrowing of money or the obtaining of
advances or credit and which do not, individually or in the aggregate,
materially detract from the value of

                                     -38-

<PAGE>

the property or materially impair the use thereof in the operation of the
business, (d) liens arising out of this Agreement or any other Acquisition
Document to which the Operating Partnership is or shall be a party, and (e)
indebtedness and collateral obligations set forth in Schedule 11.3.

     "Person" shall mean a natural person, a sole proprietorship, a partnership,
a joint venture, a corporation, a limited liability company, a trust, an
unincorporated organization, an institution, a government or any department,
division or agency thereof, and any other entity.

     "Prospectus" shall have the meaning assigned thereto in Section 6.9(a) of
this Agreement.

     "Real Property" shall have the meaning assigned thereto in Section 5.13(a)
of this Agreement.

     "Recipients" shall have the meaning assigned thereto in Section 6.13 of
this Agreement.

     "Registered Shares" shall have the meaning assigned thereto in Section
6.9(a) of this Agreement.

     "Registration Statement" shall have the meaning assigned thereto in Section
6.9(a) of this Agreement.

     "Rent Roll" shall have the meaning assigned thereto in Section 7.1(h) of
this Agreement.

     "SEC" shall have the meaning assigned thereto in Section 4.10 of this
Agreement.

     "SEC Documents" shall have the meaning assigned thereto in Section 4.10.
"Securities Act" shall mean the Securities Act of 1933, as amended.

     "Subsidiary" shall have the meaning assigned thereto in Section 2.1 of this
Agreement.

                                  ARTICLE XII

                                  MISCELLANEOUS

     12.1 Expenses. Each of the parties hereto shall bear its own costs, fees
          --------
and expenses in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, including, without limitation, fees,
commissions and expenses (including, without limitation, all filing, printing,
copying, mailing, telephone, transportation and delivery charges) payable to
brokers, finders, investment bankers, consultants, exchange, transfer or paying
agents, attorneys, accountants and

                                     -39-

<PAGE>

other professionals, whether or not the transactions contemplated by this
Agreement are consummated.

     12.2 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
          -------------
ACCORDANCE WITH THE INTERNAL SUBSTANTIVE LAWS OF THE COMMONWEALTH OF VIRGINIA
WITHOUT CONSIDERATION OF PRINCIPLES OF CONFLICTS OR CHOICE OF LAWS.

     12.3 Notices. All notices, requests, demands or other communications made
          -------
pursuant to this Agreement shall be in writing in the English language and shall
be deemed to have been duly given upon receipt when delivered personally, by
mail, by courier, by facsimile, telegram, telex or similar means of
communication (in all instances other than delivery by mail with confirmation by
mail to be provided by the party giving notice) to the recipient party, to the
following addresses:

                    If to Cornerstone or the Operating Partnership:

                    Cornerstone Realty Group, Inc.
                    306 East Main Street
                    Richmond, Va 23219
                    Facsimile: (804) 782-9302
                    Attention: Gus G. Remppies

                    with a copy to:

                    McGuireWoods LLP
                    901 East Cary Street
                    Richmond, VA  23219
                    Facsimile:  (804) 698-2259
                    Attention: James W. C. Canup, Esq.

                    If to State Street LLC:

                    State Street Companies, Inc., Manager
                    211 East Boulevard
                    Charlotte, NC  28203
                    Facsimile:  (704) 372-3704
                    Attention: Jeffery W. Kentner, President

                                     -40-

<PAGE>

                    with copy to:

                    Womble Carlyle Sandridge & Rice, PLLC
                    200 West Second Street
                    Winston-Salem, NC 27102
                    Facsimile:  (336) 721-3660
                    Attention: C. Mark Wiley, Esquire

Any party may change its address for purposes of this Section 12.3 by notice to
the others of such change in the manner specified above. Notices, requests,
demands or other communications shall be deemed given (i) if delivered
personally, upon delivery, (ii) if delivered by registered or certified mail
(postage prepaid, return receipt requested), upon the earlier of actual delivery
or three business days after being mailed, (iii) if delivered by overnight
courier or similar service, upon delivery, or (iv) if given by facsimile, upon
receipt of confirmation of transmission by facsimile; provided that if such
notices or other communications would otherwise be deemed given on a day which
is not a business day, the delivery shall be deemed the first business day
following such day.

     12.4 Assignment; Successors. This Agreement and all of the provisions
          ----------------------
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests, or obligations hereunder shall be assigned by
any of the parties hereto, either in whole or in part, without the prior written
consent of the other parties hereto.

     12.5 Annexes; Entire Agreement. The Schedules and Exhibits hereto
          -------------------------
constitute an integral part of this Agreement. This Agreement and the other
Acquisition Documents constitute the entire and sole agreement and understanding
between the parties hereto with respect to the subject matter hereof and thereof
and supersede any prior or contemporaneous understanding, agreements,
representations or warranties, whether oral or written, with respect to the
subject matter hereof and thereof.

     12.6 Severability. Any provision of this Agreement which may be determined
          ------------
by competent authority to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions of this
Agreement, and any such prohibition or unenforceability in such jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.

     12.7 Time. Subject to any required notice and the lapse of any applicable
          ----
cure periods, time is of the essence of this Agreement with respect to each and
every provision of this Agreement in which time is specifically expressed to be
a factor.

     12.8 Modification, Amendment, Waiver. No modification or amendment of any
          -------------------------------
provision of this Agreement shall be effective unless approved in writing by the
parties to the Agreement. No party shall be deemed to have waived compliance by
any other party with any provision of this Agreement unless such waiver is in
writing, and the failure of any party at any time to enforce any of the
provisions of this Agreement shall in no way be construed as a waiver

                                     -41-

<PAGE>

of such provisions and shall not affect the rights of any party thereafter to
enforce such provisions in accordance with their terms. No waiver of any
provision of this Agreement shall be deemed to be a waiver of any other
provision of this Agreement. No waiver of any breach of any provision of this
Agreement shall be deemed the waiver of any subsequent breach thereof or of any
other provision of this Agreement.

     12.9 Counterparts; Facsimile. This Agreement may be executed in any number
          -----------------------
of counterparts and by different parties hereto in separate counterparts, with
the same effect as if all parties had signed the same document. All such
counterparts will be deemed to be an original, shall be construed together and
shall constitute one and the same instrument. Photostatic or facsimile
reproductions of this Agreement may be made and relied upon to the same extent
as originals.

                                     -42-

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.


                    CORNERSTONE REALTY
                    INCOME TRUST, INC.


                    By:  ________________________________
                         Name:
                         Title:



                    CORNERSTONE NC OPERATING
                    LIMITED PARTNERSHIP


                    By:  ________________________________
                         Name:
                         Title:



                    STATE STREET, LLC


                    By:  ________________________________
                         Name:
                         Title:

                                     -43-

<PAGE>

                                                         STATE STREET, LLC - SII

                                  Schedule 2.1
                              List of Subsidiaries
                              --------------------


                           St. Andrews Place, II, LLC

                                       i
<PAGE>

                                                         STATE STREET, LLC - SII

                                  Schedule 2.2
                           Operating Partnership Units


                                                                Non-Preferred
                                       Preferred Operating        Operating
             Subsidiary                 Partnership Units     Partnership Units
             ----------                 -----------------     -----------------
     St. Andrews Place II, LLC                    --             401,770
                                                 ===             ===========


                                       ii
<PAGE>

                                                         STATE STREET, LLC - SII

                                  Schedule 4.4
                Conflicts of Cornerstone or Operating Partnership
                -------------------------------------------------


     None.

                                       iii
<PAGE>

                                                         STATE STREET, LLC - SII

                                  Schedule 5.3
                          Liens on Membership Interests
                          -----------------------------


     None, except as created by items scheduled on Schedule 11.3, which is
     incorporated herein by reference.


                                       iv
<PAGE>

                                                         STATE STREET, LLC - SII

                                  Schedule 5.4
                                Conflicts of LLC
                                ----------------


     See Schedule 11.3, which is incorporated herein by reference.


                                        v
<PAGE>

                                                         STATE STREET, LLC - SII

                                 Schedule 5.7(a)
                      August 31, 2001 Financial Statements
                      ------------------------------------


                                               St. Andrews
                                              Place II, LLC
        Assets:
         Cash                                 $            -
         Real estate owned, net                      195,000
         Development in progress                   1,915,813
         Deferred financing costs, net                     -
         Organizational costs, net                         -
         Other assets                                      -
                                             ---------------

          Total assets                        $    2,110,813
                                             ===============


        Liabilities:
         Accounts payable                     $            -
         Accrued property taxes                            -
         Due to contractor                         1,915,813
         Construction loan                                 -
                                             ---------------
          Total liabilities                        1,915,813
                                             ---------------


        Capital                                      195,000
                                             ---------------

          Total liabilities and capital       $    2,110,813
                                             ===============

                                       vi
<PAGE>

                                                         STATE STREET, LLC - SII

                                 Schedule 5.7(b)
           Liabilities Not Disclosed on August 31, 2001 Balance Sheet
           ----------------------------------------------------------


     None, except for (i) accrued expenses since the Balance Sheet date, and
     (ii) St. Andrews Place II, LLC closed its construction financing described
     on Schedule 11.3 with First Union National Bank on September 10, 2001.


                                       vii
<PAGE>

                                                         STATE STREET, LLC - SII

                                  Schedule 5.8
                        Changes Since Balance Sheet Date
                        --------------------------------


     None, except (i) as disclosed on Schedules 5.7(b) and 11.3, which are
     incorporated herein by reference, and (ii) improvements being made to the
     real property secured by such indebtedness as disclosed on Schedules 5.7(b)
     and 11.3.


                                      viii
<PAGE>

                                                         STATE STREET, LLC - SII

                                  Schedule 5.9
                                   Litigation
                                   ----------


     None.


                                       ix
<PAGE>

                                                         STATE STREET, LLC - SII

                                  Schedule 5.10
                              Intellectual Property
                              ---------------------


     None, except as may be granted by "Common law" for the limited liability
     company name or derivations thereof.


                                        x
<PAGE>

                                                         STATE STREET, LLC - SII

                                  Schedule 5.11
                                     Leases
                                     ------

     None.


                                       xi
<PAGE>

                                                         STATE STREET, LLC - SII

                                  Schedule 5.12
                               Material Contracts
                               ------------------


     Incorporate by reference all items set forth in Schedule 11.3. Also, St.
     Andrews Place Apartments, LLC and St. Andrews Place II, LLC have entered
     into an Amendment to Easement Agreement and have requested that this
     Agreement be approved and subordinated by Greystone Servicing Corporation.
     This approval is pending.


                                       xii
<PAGE>

                                                         STATE STREET, LLC - SII

                                 Schedule 5.13
                        Owned and Leased Real Property
                        ------------------------------


     Lying and being in the County of New Hanover, State of North Carolina and
being more particularly described as follows:

BEGINNING at an old iron rod in the eastern margin of the 100' right-of-way of
St. Andrews Drive, said beginning point being located South 71 (degrees) 58'
37" East 50.00 feet from a point on the centerline of St. Andrews Drive, said
point on said centerline of St. Andrews Drive being located North 18 (degrees)
01' 23" East 453.84 feet from the point of intersection of Curve No. 1 as shown
on map of "Echo East" recorded in Map Book 18 at Page 107 of the New Hanover
County Registry, and North 56 (degrees) 01' 23" East 200.00 feet from an old
concrete monument at the intersection of said centerline with the northern
margin of the 160' right-of-way of US Highway No.421, also known as Carolina
Beach Road, and running thence from said BEGINNING point along the eastern
margin of the 100' right-of-way North 18 (degrees) 01' 23" East 123.47 feet to a
new iron pipe; thence continuing along the eastern margin of said right-of-way
along a curve to the right having a radius of 579.62 feet, and a chord bearing
and distance of North 31 (degrees) 25' 27" East 268.68 feet to a new iron pipe;
thence continuing along the eastern margin of said right-of-way North 44
(degrees) 49' 23" East 508.69 feet to a new iron pipe; thence continuing along
the eastern margin of said right-of way along a curve to the left having a
radius of 1453.55 feet and a chord bearing and distance of North 41 (degrees)
26' 46" East 171.24 feet to a new iron pipe. Thence with a new line South 32
(degrees) 53' 26" East 167.59 feet to a point; thence S. 87 (degrees) 19' 28"
East 330.46 feet to a point; thence South 34 (degrees) 00' 30" East 165.40 feet
to a point in the northern line of (now or formerly) Alma V. McGowan (see Deed
Book 268, Page 107); thence along the northern line of said McGowan South 55
(degrees) 59' 30" West 1150.48 feet to a new iron pipe, corner with (now or
formerly) F.O. Cline, et. al. (see Deed Book 318, Page 18); thence along the
eastern line of said Cline et. al. North 09 (degrees) 05' 45" East 275.44 feet
to an old iron pipe; thence along the northern line of said Cline et. al. South
55 (degrees) 59' 45" West 305.98 feet to the point of BEGINNING, containing
10.00 acres, and being further shown on a Map of Survey dated January 28, 1992,
revisions dated January 24, 1998 drawn by Sherwin D. Cribb, RLS.

                                     xiii
<PAGE>

                                                         STATE STREET, LLC - SII

                               Schedule 5.13(1)
                               Permitted Liens
                               ---------------


     All indebtedness of the Subsidiary scheduled on Schedule 11.3, which is
     incorporated herein by reference. All residential apartment tenant leases
     by Subsidiaries to residential tenants.


                                       xiv
<PAGE>

                                                         STATE STREET, LLC - SII

                                 Schedule 5.15
                       Governmental Permits and Licenses
                       ---------------------------------

     None.


                                      xv
<PAGE>

                                                         STATE STREET, LLC - SII


                                 Schedule 5.17
                    Employment Agreements and Arrangements
                    --------------------------------------


     None.


                                      xvi
<PAGE>

                                                         STATE STREET, LLC - SII

                                 Schedule 5.19
                                   Insurance
                                   ---------


<TABLE>
<CAPTION>
             Subsidiary             Insurance Policy         Policy No.                     Carrier
     -------------------------    --------------------   ------------------- ------------------------------------
<S>                               <C>                    <C>                 <C>
     St. Andrews Place II, LLC    Builders Risk          BRXI2043370A        Ace USA
                                  Windstorm and Hail     CW1549733           N.C. Insurance Underwriting Assoc.
</TABLE>



                                     xvii
<PAGE>

                                                         STATE STREET, LLC - SII

                                 Schedule 5.20
                                 Bank Accounts
                                 -------------


<TABLE>
<CAPTION>
                   Subsidiary             Account Name               Bank                 Account No.
           ---------------------------- ----------------- ---------------------------- ------------------
           <S>                        <C>               <C>                              <C>
           St. Andrews Place II, LLC    Operating         First Union National Bank        2000003965085
</TABLE>


                                     xviii
<PAGE>

                                                         STATE STREET, LLC - SII

                                 Schedule 5.21
                             Environmental Matters
                             ---------------------


     None.


                                      xix
<PAGE>

                                                         STATE STREET, LLC - SII

                               Schedule 5.22(c)
                                  Warranties
                                  ----------

     The Subsidiary has the general contractor's warranty from State Street
     Construction Company, LLC as provided under North Carolina statutory law,
     none of which have been waived, and have any warranty granted by (i) any
     subcontractor who improved the Real Property or tangible personal property
     of the Subsidiary or (ii) any supplier who supplied tangible personal
     property to the Subsidiary, provided that such warranty is still in full
     force and effect. LLC shall provide post-closing complete warranty books to
     the Operating Partnership.



                                      xx
<PAGE>

                                                         STATE STREET, LLC - SII

                                 Schedule 6.4
                 Exceptions to Conduct in the Ordinary Course
                 --------------------------------------------


     None, except as disclosed on Schedules 5.7(b), 5.8, and 11.3, which are
     incorporated herein by reference.


                                      xxi
<PAGE>

                                                         STATE STREET, LLC - SII

                                Schedule 6.4(e)
                             Additional Borrowings
                             ---------------------


     St. Andrews Place II, LLC shall make additional borrowings on the
     indebtedness set forth in Schedule 11.3, which is incorporated herein by
     reference, as the real property owned by the Company is improved and
     completed.


                                     xxii
<PAGE>

                                                         STATE STREET, LLC - SII

                                 Schedule 6.5
                                   Consents
                                   --------


     Consents to be obtained from First Union National Bank to allow the
     Operating Partnership to acquire the membership interests and also to cause
     the guarantor to be released and changed on the indebtedness shown on
     Schedule 11.3 from Jeffery W. Kentner to Cornerstone Realty Trust Inc.


                                     xxiii
<PAGE>

                                                         STATE STREET, LLC - SII

                                 Schedule 6.6
                           Exceptions for Disclosure
                           -------------------------


     None.


                                     xxiv
<PAGE>

                                                         STATE STREET, LLC - SII

                                 Schedule 6.8
                        On-Site Managers and Employees
                        ------------------------------


     None.


                                      xxv
<PAGE>

                                                         STATE STREET, LLC - SII

                                 Schedule 11.1
                    Officers of Cornerstone with Knowledge
                    --------------------------------------


                                  J. Olander
                                 Gus Remppies


                                     xxvi
<PAGE>

                                                         STATE STREET, LLC - SII

                                 Schedule 11.2
            Officers of the LLC or the Subsidiaries with Knowledge
            ------------------------------------------------------

                              Jeffery W. Kentner
                                Tiffany N. Gay
                               Lynda M. Johnson


                                     xxvii
<PAGE>

                                                         STATE STREET, LLC - SII

                                 Schedule 11.3
                    Indebtedness and Collateral Agreements
                    --------------------------------------


                           St. Andrews Place II, LLC
                           First Union National Bank
                                 Mortgage Loan

1.   Promissory Note dated September 10, 2001 in the principal amount of
     $5,500,000.00 executed by St. Andrews Place II, LLC and payable to First
     Union National Bank.

2.   Construction Loan Agreement dated September 10, 2001 by and between First
     Union National Bank and St. Andrews Place II, LLC.

3.   Deed of Trust and Security Agreement dated September 10, 2001 by and
     between St. Andrews Place II, LLC, TRSTE, Inc. and First Union National
     Bank, recorded September 18, 2001 in Book 3048, Page 18, New Hanover County
     Registry.

4.   Security Agreement dated September 10, 2001 by and between St. Andrews
     Place II, LLC and First Union National Bank.

5.   Absolute Assignment of Lessor's Interest in Leases and Rents dated
     September 10, 2001 by and between St. Andrews Place II, LLC and First Union
     National Bank recorded in Book 3048, Page 28 of the New Hanover County
     Registry.

6.   Assignment of Property Management Agreement dated September 10, 2001, by
     and between St. Andrews Place II, LLC, State Street Management Company and
     First Union National Bank.

7.   Subordination Agreement dated September 10, 2001 by and between State
     Street Management Company, LLC and First Union National Bank.

8.   Assignment of Construction Documents dated September 10, 2001 by and
     between St. Andrews Place II, LLC and First Union National Bank.

9.   Guaranty Agreement dated September 10, 2001 by and between Jeffery W.
     Kentner and First Union National Bank.

10.  Swap Agreement by and among St. Andrews Place II, LLC and First Union
     Capital Markets dated 5/6/98 and amended on 9/1/99 in the notional amount
     of $22,000,000.00 with a maturity date of 9/1/03 to convert floating-rate
     debt with an interest rate of one-month LIBOR plus 0.80% to 5.77% fixed
     rate debt.


                                    xxviii
<PAGE>

                                                         STATE STREET, LLC - SII

                                 Schedule 11.3
                    Indebtedness and Collateral Agreements
                    --------------------------------------

                           St. Andrews Place II, LLC
                           First Union National Bank
                                 Mortgage Loan

11.  UCC-1 Financing Statements each having St. Andrews Place II, LLC as debtor
     and First Union National Bank as secured party recorded with the following
     offices:

     (a)  New Hanover County Register of Deeds, Book 3048, Page 36, Instrument #
          2001041799, recorded on September 18, 2001.

     (b)  North Carolina Secretary of State, Instrument # 20010526160A, recorded
          on September 25, 2001.

12.  Agreement of General Contractor dated September 10, 2001 by and between
     State Street Construction Company, LLC and First Union National Bank.

13.  Assignment of Contracts, Licenses and Permits dated September 10, 2001 by
     and between St. Andrews Place II, LLC and First Union National Bank.


                                     xxix
<PAGE>

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09/30/2001 5:30 PM



                                      xxx