<PAGE>

                                                                Exhibit 10.2

                  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>

Exhibits

Exhibit A             -    Operating Partnership 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 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

                                      -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 each of the Subsidiaries
(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 each of the subsidiaries of the LLC as set forth
on Schedule 2.1 (the "Subsidiaries").

     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. In addition to receiving the number of Operating Partnership Units as
set forth on Schedule 2.2, the LLC shall also receive a total cash payment of
$400,000.00.

     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 Subsidiaries shall distribute to the
               LLC all of the cash assets of the Subsidiaries except the
               Subsidiaries shall retain sufficient cash to satisfy all accrued
               expenses and accounts payable accruable through the Closing. To
               the extent that the Subsidiaries do 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 Subsidiaries have excess cash
               to satisfy all accrued expenses and accounts payable accruals,
               then the Subsidiaries shall refund such excess to the LLC. The
               deficit or excess, as the case may be, shall be referred to as
               the "Contribution Adjustment."

                                      -4-
<PAGE>

         (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 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 Subsidiaries are a party or by which it or the
               Subsidiaries' 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 case may be, enforceable
against such party in accordance with its terms, subject to applicable

                                      -8-
<PAGE>

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 Subsidiaries are limited liability
          ------------------------------
companies duly organized, validly existing and in good standing under the laws
of North Carolina.

     5.2  Power and Authority. The LLC and the Subsidiaries 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 Subsidiaries free and clear of any Liens or other encumbrances which would
prevent or

                                      -10-
<PAGE>

otherwise 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 Subsidiaries.

          (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 Subsidiaries are a party or by which any of them or their
               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 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 Subsidiaries 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 Subsidiaries are a party or to which any of them or any of
               their properties are subject.

     5.5 Investments. Neither the LLC nor the Subsidiaries have granted any
         -----------
Option with respect to any Membership Interest in any of the Subsidiaries to any
Person. The Subsidiaries do 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 Subsidiaries has taken any actions
         ----------
in violation in any material respect of any provision of its respective Articles
of Organization and Operating Agreement. Each of the Subsidiaries has complied
in all material respects with all Applicable Law. Neither the LLC nor the
Subsidiaries has received any written notice that they are 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 Subsidiaries.

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

          (a)  Attached as Schedule 5.7(a) hereto is a true and complete copy of
                           ---------------
               the balance sheet of each of the Subsidiaries 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

                                      -11-
<PAGE>

               prepared on an income tax basis (the "Financial Statements"). The
               Financial 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 Subsidiaries 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
               Subsidiaries, taken as a whole).

     5.8 Operations Since Balance Sheet Date. Since the Balance Sheet Date, the
         -----------------------------------
LLC and the Subsidiaries 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
Subsidiaries 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 Subsidiaries which, if decided adversely,
would have a Material Adverse Effect on the any of the Subsidiaries.

     5.10 Intellectual Property. Each 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 any 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 Subsidiaries to use such listed Intellectual Property after
the Acquisition. There are no claims pending against any 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 any Subsidiary in such Intellectual Property.

     5.11 Leases. The Subsidiaries are the lessees of equipment used by the
          ------
Subsidiaries (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
               -------------
               Subsidiaries are parties or by which the Subsidiaries are bound
               (collectively, "Material Contracts"):

               (i)    each purchase order, agreement or commitment obligating
                      the Subsidiaries to purchase any products or services and
                      providing for

                                      -12-
<PAGE>

                      an aggregate payment of $1,000 or not cancelable on 60
                      days notice;

               (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 Subsidiaries;

               (v)    any agreement limiting, in any manner, the ability of the
                      Subsidiaries 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 Subsidiaries.

          (b)  Each Material Contract is the valid and binding obligation of the
               Subsidiaries, 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). None of the Subsidiaries, or to the Knowledge of the LLC
               any of the other parties thereto, is 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 waived any material
               provision of any such Material Contract or agreed to do so.
               Neither the LLC nor the Subsidiaries 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.

                                      -13-
<PAGE>

          (c)  A true, complete and correct copy of each Material Contract,
               including each agreement and instrument listed on Schedule 11.3,
                                                                 -------------
               has been provided to Cornerstone on or before the Closing Date.

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

          (a)  Schedule 5.13 sets forth a list of all real property owned,
               -------------
               leased, occupied or used by the Subsidiaries (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
               Subsidiaries, 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 Subsidiaries, 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
               Subsidiaries, 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 any
               of the Subsidiaries.

          (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,

                                      -14-
<PAGE>

               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
               Subsidiaries for construction of or repairs to the improvements
               located on the Real 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 any of the
               Subsidiaries. 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 Subsidiaries and
               tenants under the leases listed on Schedule 5.13.

          (g)  Neither the LLC nor the Subsidiaries 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.
               (S)(S)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

                                      -15-
<PAGE>

               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 the Resource Conservation
               and Recovery Act, 42 U.S.C. (S)6901 et. seq., as amended), or
               "toxic substance" (as defined in the Toxic Substance Control Act,
               15 U.S.C. (S)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)  Each 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)  Each 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
               Subsidiaries is in good operating condition and repair (ordinary
               wear and tear excepted), is free from significant defects of
               workmanship or material and

                                      -16-
<PAGE>

               is usable and adequate for the operations of the business of the
               Subsidiaries, 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 Subsidiaries, as applicable, in accordance with their
               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 Subsidiaries, 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 Subsidiaries, 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 Subsidiaries in connection with the operation of its business. Each
Governmental Permit held by the Subsidiaries has been duly and validly issued
and is in full force and effect, and neither the LLC or the Subsidiaries 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 Subsidiaries 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 Subsidiaries 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 Subsidiaries 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
               Subsidiaries, or (iii) the owner of the LLC if such item is
               related to the LLC or the Subsidiaries. None of the owner of the
               LLC, the LLC or the Subsidiaries has waived any statute of
               limitations in respect of any

                                      -17-
<PAGE>

               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
               Subsidiaries' financial statements.

          (d)  There are no Liens for taxes on any properties or assets of the
               Subsidiaries (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 Subsidiaries 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 Subsidiaries have no
                                      -------------
               employees and are not a party to any written or oral employment
               contract, agreement, commitment or arrangement.

          (b)  None of the Subsidiaries is 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 any of the
               Subsidiaries' employees or to the Knowledge of the LLC and the
               Subsidiaries, has applied or indicated an intention to apply to
               be elected, recognized or certified as the bargaining agent of
               any of their employees.

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

          (a)  Neither the LLC nor the Subsidiaries maintain or contribute to or
               have 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 its
               Subsidiaries being referred to as the "Employee Plans").

                                      -18-
<PAGE>

          (b)  Neither the LLC nor the Subsidiaries are 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 Subsidiaries
covering the Subsidiaries 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 such
date. The LLC and the Subsidiaries have complied in all material respects with
each of such insurance policies and binders. Neither the LLC nor the
Subsidiaries have 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 Subsidiaries and the names of all persons authorized to draw
thereon or to have access thereto. None of the Subsidiaries has 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 Subsidiaries' 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 Subsidiaries are a party
relating to any property or facility currently or previously owned, leased or
operated by the Subsidiaries; (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 Subsidiaries as it is currently conducted in
compliance with Environmental Laws; (iii) the Subsidiaries have 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
Subsidiaries' past or present operations pending or, to the Knowledge of the LLC
and the Subsidiaries, threatened against any of the Subsidiaries, their assets,
properties, facilities or businesses and the LLC and the Subsidiaries have not
received a request for information under the Environmental Laws.

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

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

          (b)  The Subsidiaries have 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 Subsidiaries with respect to
               improvements located on the Real Property or tangible personal
               property of the Subsidiaries, all of which warranties are in full
               force and effect.

                                      -19-
<PAGE>

     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
Subsidiaries 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 Subsidiaries, 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 Subsidiaries will promptly advise 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
         ---------------------------------------------
Subsidiaries 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 Subsidiaries shall be conducted
               in the ordinary course;

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

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

                                      -20-
<PAGE>

          (d)  neither the LLC nor the Subsidiaries 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 Subsidiaries contained herein
               to be or become untrue in any material respect or which would
               result in a Material Adverse Effect to any of the Subsidiaries;
               and

          (e)  Except for the indebtedness set forth on Schedule 6.4(e), the
               Subsidiaries 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 Subsidiaries
         --------
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 Subsidiaries 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 Subsidiaries 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 Subsidiaries 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 timing
               and content of such press release or public disclosure, which
               consent shall not be unreasonably withheld.

                                      -21-
<PAGE>

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

          (a)  The LLC and the Subsidiaries will include the income of the LLC
               and the Subsidiaries 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 Subsidiaries 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 Subsidiaries (including tax owed by
               Subsidiaries 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 Subsidiaries shall be
               apportioned to the period up to and including the Closing Date by
               closing the books of the Subsidiaries as of the Closing Date.

     6.8 Resignations of Managers and Officers. At the Closing, the Subsidiaries
         -------------------------------------
shall cause the resignations of all Managers and Officers of the Subsidiaries 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 Subsidiaries, 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 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

                                      -22-
<PAGE>

               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 (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

                                      -23-
<PAGE>

               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.

          (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 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,

                                      -24-
<PAGE>

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

                                      -25-
<PAGE>

          (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
               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

                                      -26-
<PAGE>

               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 Subsidiaries so that a report can be generated that
is in compliance with accounting Regulation S-X of the Securities and Exchange
Commission.

                                  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
               Subsidiaries 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 Subsidiaries 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.

                                      -27-
<PAGE>

          (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 Subsidiaries shall have tendered to the Operating
               Partnership all documents which the LLC and the Subsidiaries is
               required by Section 6.8 to deliver to the Operating Partnership.

          (g)  The LLC and the Subsidiaries 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 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

                                      -28-
<PAGE>

               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.

     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
                     Subsidiaries 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

                                      -29-
<PAGE>

               (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 Operating Partnership Subsidiaries 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 Subsidiaries pursuant to this Agreement;

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

          (c)  all liabilities of the Subsidiaries that relate to or arise out
               of the assets, business, operations, conduct or employees of the
               Subsidiaries 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;

                                      -30-
<PAGE>

          (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.

          (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

                                      -31-
<PAGE>

               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
               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 $100,000 (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 $11,576,526 ("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

                                      -32-
<PAGE>

               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.

                                   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

                                      -33-
<PAGE>

          (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
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.

                                      -34-
<PAGE>

     "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.

     "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.

                                      -35-
<PAGE>

     "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.

     "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 Subsidiaries, but only to the extent
that any 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.

                                      -36-
<PAGE>

     "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 Subsidiaries 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 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.

                                      -37-
<PAGE>

     "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 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.

     "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 4.1 of this
Agreement.

     "SEC Documents" shall have the meaning assigned thereto in Section 4.1 of
this Agreement.

                                      -38-
<PAGE>

     "Securities Act" shall mean the Securities Act of 1933, as amended.

     "Subsidiaries" 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 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.

                                      -39-
<PAGE>

                    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

                    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.

                                      -40-
<PAGE>

     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 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.

                                      -41-
<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:

                                      -42-
<PAGE>

                                                               STATE STREET, LLC

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


                        Trinity Commons Apartments, LLC
                        St. Andrews Place Apartments, LLC
                        Timber Crest Apartments, LLC

                                       43
<PAGE>

                                                               STATE STREET, LLC

                                 Schedule 2.2
                          Operating Partnership Units
                          ---------------------------


                                                              Non-Preferred
                                       Preferred Operating      Operating
           Subsidiary                   Partnership Units   Partnership Units
           ----------                   -----------------   -----------------

  Trinity Commons Apartments, LLC             341,268               --
  St. Andrews Place Apartments, LLC           322,176               --
  Timber Crest Apartments, LLC                305,303               --
                                              -------               --
                                              968,747               --
                                              =======               ==

                                       44
<PAGE>

                                                               STATE STREET, LLC

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


          None.

                                       45
<PAGE>

                                                               STATE STREET, LLC

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


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

                                       46
<PAGE>

                                                               STATE STREET, LLC

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

          See Schedule 11.3, which is incorporated herein by reference.

                                       47
<PAGE>

                                                               STATE STREET, LLC

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

<TABLE>
<CAPTION>
                                           St. Andrews Place       Timber Crest        Trinity Commons
                                            Apartments, LLC       Apartments, LLC      Apartments, LLC         Total
                                            ---------------       ---------------      ---------------         -----
<S>                                        <C>                    <C>                  <C>                <C>
Assets:
    Cash, including security deposits      $        164,736               182,954              192,232          539,922
    Cash - insurance escrow - FNMA                   64,268                27,219               35,568          127,056
    Cash - property tax escrow - FNMA               106,933               133,328              105,856          346,117
    Rents receivable                                  1,558                 6,315                   81            7,953
    Due from affiliates                                   -                     -                   73               73
    Prepaid expenses                                 26,346                     -                    -           26,346
                                            ---------------        --------------      ---------------    -------------
         Total cash and cash equivalents            363,841               349,815              333,810        1,047,466
                                            ---------------        --------------      ---------------    -------------
    Real estate owned, net                        8,769,891            11,781,916           13,759,309       34,311,116
    Deferred financing costs, net                    82,730                86,762               92,856          262,348
    Organizational costs, net                            46                   167                    -              213
                                            ---------------        --------------      ---------------    -------------
         Total assets                      $      9,216,508            12,218,660           14,185,975       35,621,143
                                            ===============        ==============      ===============    =============

Liabilities:
    Accounts payable                       $          2,054                 7,380                  396            9,830
    Accrued property taxes                           90,000               125,640              129,768          345,408
    Accrued interest payable                         76,487                89,293              104,243          270,024
    Security deposits                                 9,729                20,718                7,435           37,882
                                            ---------------        --------------      ---------------    -------------
         Total current liabilities                  178,270               243,032              241,842          663,143
                                            ---------------        --------------      ---------------    -------------
    Escrow/rental refunds in transit                    251                   100                  400              751
    Prepaid rents                                    20,180                20,535               32,829           73,545
    Prepaid rents - prior years*                    (39,629)               (8,458              (34,260)         (82,347)
    Mortgage loan                                13,159,125            15,362,282           17,934,292       46,455,699
                                            ---------------        --------------      ---------------    -------------
         Total liabilities                       13,318,197            15,617,490           18,175,103       47,110,791
                                            ---------------        --------------      ---------------    -------------
Capital                                          (4,101,689)           (3,398,830)          (3,989,128)     (11,489,648)
                                            ---------------        --------------      ---------------    -------------
         Total liabilities and capital     $      9,216,508            12,218,660           14,185,975       35,621,143
                                            ===============        ==============      ===============    =============

         Net working capital**             $        185,571               106,784               91,968          384,323
                                            ===============        ==============      ===============    =============
</TABLE>

*   Adjustment due to income tax basis accounting.
**  Net working capital is defined as total cash and cash equivalents minus
    total current liabilities.

                                       48
<PAGE>

                                                               STATE STREET, LLC

                                Schedule 5.7(a)
August 31, 2001 Financial Statements - St. Andrews Place Apartments, LLC
------------------------------------------------------------------------

Summary YTD Statement of Income for the Period ending August 31, 2001

     Income:

        GROSS RENT POTENTIAL                              1,532,860.00
        LOSS TO LEASE                                       (67,830.47)
        GAIN TO LEASE                                            81.00

                                                          ------------
     GROSS RENTAL INCOME                                  1,465,110.53

        VACANT APARTMENTS                                   (92,109.99)
        MODEL/GUEST SUITE APT                                (6,215.00)
        STAFF CONCESSIONS                                    (9,546.73)
        RENT CONCESSIONS                                    (23,452.70)
        UNCOLLECTIBLE RENTS                                 (11,501.31)
        CORPORATE APT., net                                     (90.69)

                                                          ------------
          RENTAL OFFSETS                                   (142,916.42)

                                                          ------------
          TOTAL RENTAL INCOME                             1,322,194.11

          OTHER INCOME                                       96,594.27

          UNCOLLECTIBLE RENTAL INCOME                           230.78

                                                          ------------
     TOTAL GROSS INCOME                                   1,419,019.16

     Operating Expenses - Controllable:

       PAYROLL & EMPLOYEE EXPENSES                          168,267.25
       MAINTENANCE & REPAIRS - BUILDINGS                     13,997.35
       MAINTENANCE & REPAIRS - RENTAL UN                     58,456.29
       MAINTENANCE & REPAIRS - SITE                          43,364.92
       UTILITIES                                             76,736.24
       ADMINISTRATIVE EXPENSES                               12,879.34
       ADVERTISING & PROMOTION                               17,205.46

                                                          ------------
          TOTAL OPERATING EXPENSES - CONTROLLABLE           390,906.85

     Operating Expenses - Noncontrollable:

       PROFESSIONAL FEES & SERVICES                           3,156.94
       INSURANCE                                             35,254.48
       TAXES                                                 90,000.00

                                                        --------------
          TOTAL OPERATING EXPENSES - NONCONTROLLABLE        128,411.42

                                                        --------------
     TOTAL OPERATING EXPENSES                               519,318.27

                                                        --------------
     NET OPERATING EXPENSES (LOSS)                          899,700.89
                                                        ==============

                                      49
<PAGE>

                                                               STATE STREET, LLC

                                Schedule 5.7(a)

      August 31, 2001 Financial Statements - Timber Crest Apartments, LLC
      -------------------------------------------------------------------



     Summary YTD Statement of Income for the Period ending August 31, 2001

          Income:

               GROSS RENT POTENTIAL                                1,861,360.00
               LOSS TO LEASE                                        (147,175.31)
               GAIN TO LEASE                                              98.00

                                                                  -------------
          GROSS RENTAL INCOME                                      1,714,282.69

               VACANT APARTMENTS                                    (214,058.51)
               RENT CONCESSIONS                                      (18,722.93)
               UNCOLLECTIBLE RENTS                                   (19,326.55)
               MODEL/GUEST SUITE APT                                  (7,030.00)
               STAFF CONCESSIONS                                      (5,274.69)

                                                                  -------------
              RENTAL OFFSETS                                        (264,412.68)

                                                                  -------------
              TOTAL RENTAL INCOME                                  1,449,870.01

                OTHER INCOME                                          77,676.58

                                                                  -------------
          TOTAL GROSS INCOME                                       1,527,546.59


          Operating Expenses - Controllable:

               PAYROLL & EMPLOYEE EXPENSES                           164,900.19
               MAINTENANCE & REPAIRS - BUILDINGS                       7,336.58
               MAINTENANCE & REPAIRS - RENTAL UNITS                   39,734.92
               MAINTENANCE & REPAIRS - SITE                           43,328.74
               UTILITIES                                              82,030.81
               ADMINISTRATIVE EXPENSES                                11,011.21
               ADVERTISING & PROMOTION                                33,460.12

                                                                  -------------
              TOTAL OPERATING EXPENSES - CONTROLLABLE                381,802.57

          Operating Expenses - Noncontrollable:

               PROFESSIONAL FEES & SERVICES                               61.00
               INSURANCE                                              14,640.18
               TAXES                                                 125,640.00

                                                                  -------------
              TOTAL OPERATING EXPENSES - NONCONTROLLABLE             140,341.18

                                                                  -------------
          TOTAL OPERATING EXPENSES                                   522,143.75

                                                                  -------------
          NET OPERATING INCOME (LOSS)                              1,005,402.84
                                                                  =============

                                      50
<PAGE>

                                                               STATE STREET, LLC

                                Schedule 5.7(a)
    August 31, 2001 Financial Statements - Trinity Commons Apartments, LLC
    ----------------------------------------------------------------------

     Summary YTD Statement of Income for the Period ending August 31, 2001

Income:

     GROSS RENT POTENTIAL                               1,992,600.00
     LOSS TO LEASE                                       (109,303.02)
     GAIN TO LEASE                                            231.26

                                                        ------------
GROSS RENTAL INCOME                                     1,883,528.24

     VACANT APARTMENTS                                   (161,497.20)
     MODEL/GUEST SUITE APT                                 (7,680.00)
     STAFF CONCESSIONS                                     (9,027.71)
     RENT CONCESSIONS                                     (16,551.93)
     UNCOLLECTIBLE RENTS                                  (19,111.50)
     CORPORATE APT., net                                      239.01

                                                        ------------
   RENTAL OFFSETS                                        (213,629.33)

                                                        ------------
   TOTAL RENTAL INCOME                                  1,669,898.91

     OTHER INCOME                                          92,390.70

     UNCOLLECTIBLE RENTAL INCOME                            5,773.39

                                                        ------------
TOTAL GROSS INCOME                                      1,768,063.00

Operating Expenses - Controllable:

     PAYROLL & EMPLOYEE EXPENSES                          171,383.86
     MAINTENANCE & REPAIRS - BUILDINGS                     11,309.51
     MAINTENANCE & REPAIRS - RENTAL UNITS                  54,319.84
     MAINTENANCE & REPAIRS - SITE                          45,442.11
     UTILITIES                                             66,573.09
     ADMINISTRATIVE EXPENSES                               12,442.16
     ADVERTISING & PROMOTION                               44,830.70

                                                        ------------
   TOTAL OPERATING EXPENSES - CONTROLLABLE                406,301.27

Operating Expenses - Noncontrollable:

     PROFESSIONAL FEES & SERVICES                           3,081.41
     INSURANCE                                             17,336.87
     TAXES                                                129,768.00

                                                        ------------
   TOTAL OPERATING EXPENSES - NONCONTROLLABLE             150,186.28

                                                        ------------
TOTAL OPERATING EXPENSES                                  556,487.55

                                                        ------------
NET OPERATING INCOME (LOSS)                             1,211,575.45
                                                        ============

                                      51
<PAGE>

                                                               STATE STREET, LLC

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


        None, except for accrued expenses since the Balance Sheet date.

                                       52
<PAGE>

                                                               STATE STREET, LLC

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


          None, except (i) as disclosed on Schedule 5.7(b), which is
          incorporated herein by reference, and (ii) cash in the amounts of
          $120,000.00, $110,000.00 and $160,000.00 distributed from St. Andrews
          Place Apartments, LLC, Timber Crest Apartments, LLC, and Trinity
          Commons Apartments, LLC, respectively to State Street, LLC on
          September 25, 2001 to adjust working capital balances to appropriate
          levels.

                                       53
<PAGE>

                                                               STATE STREET, LLC

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


          Trinity Commons, LLC has been named in that certain action styled
          State of North Carolina, County of New Hanover, Rodin Javier Mejia,
          Plaintiff, vs. JJJ Contractor Services, Inc., State Street
          Construction Company I, Inc., State Street I, LLC, and Trinity Commons
          Apartment, LLC, Defendants in the General Court of Justice, Superior
          Court Division File Number: 00 CVS 1477.

                                       54
<PAGE>

                                                               STATE STREET, LLC

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


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

                                       55
<PAGE>

                                                               STATE STREET, LLC

                                 Schedule 5.11
                                    Leases
                                    ------

          One 42-month copier lease for Timber Crest Apartments, LLC and Trinity
          Commons Apartments executed on June 24, 1999 (a copy of which is
          attached).  This lease was amended in August 2001 to remove Greystone
          Crossings Apartments, LLC, which was sold to Cornerstone Reality
          Income Trust.  The leasing company, IKON, has not yet provided the
          assignment of assets documentation.

                                       56
<PAGE>

                                                               STATE STREET, LLC

                                 Schedule 5.11
                                    Leases
                                    ------

================================================================================
     Lease Agreement                                   Lease Number 807961

     Thank you for choosing IKON! This lease agreement has been written in
     clear, easy to understand language. Please take time to review the terms.
     When we use "you" or "your", we are referring to you, our customer. When we
     use "IKON", we are referring to IKON Office Solutions, Inc. one of the
     largest distributors of office solutions in the world. When we use "we",
     "us" and "our" we are referring to IOS Capital, Inc. a subsidiary of IKON
     Office Solutions, Inc. created exclusively to support IKON. We are
     committed to providing you quality service!
================================================================================
CUSTOMER INFORMATION                  Customer Billing Contact: DEANNA JONES
                                                               -----------------

        STATE STREET, LLC             (704) 372-3703  212    (704) 370-6436
-----------------------------------   -------------------    -------------------
Full Legal Name                       Phone           (ext)  Fax

         211 EAST BLVD
-----------------------------------   ------------------------------------------
Customer Location Address             Customer Billing Address (if different)

CHARLOTTE MECK.      NC      28203                  Same
----------------------------------    ------------------------------------------
City      County     State    Zip     City       County      State      Zip

================================================================================
EQUIPMENT DESCRIPTION

<TABLE>
<CAPTION>
Quantity    Description, Make, Model & Serial Number    Quantity    Description, Make, Model & Serial Number
--------------------------------------------------------------------------------------------------------------
<S>         <C>                                         <C>        <C>
 3          Afizio 200 COPIERS
--------------------------------------------------------------------------------------------------------------
 3          DF 43 DOC FEEDER                                       Breystone Crossing
--------------------------------------------------------------------------------------------------------------
 3          CABINET                                                Trinity, Commons
--------------------------------------------------------------------------------------------------------------
 3          SURGE PROTECTOR                                        Timber Crest
--------------------------------------------------------------------------------------------------------------
</TABLE>

[_] Check if Additional Equipment Schedule attached
================================================================================
PAYMENT SCHEDULE

<TABLE>
<S>                  <C>                  <C>                 <C>                                       <C>
     Lease Term:     Payment Due:         Monthly Payment     Advance Payment: $                        Document
                     (check one)          Without Sales,      (Tax incld) by Check# 1270.41             and Filing Fee:
     42 STRETCH       X  Monthly          Use, and Property                         -------
     ----------      ---                  Tax
      (months)       ___ Quarterly                            [_] Apply to 1st month's Lease Payment.   $  0
                     ___ Other                                                                          --------
                     ___ Step (see        $ 599.25            [X] Apply Other 1/st/ & last
                              attached)                                       ------------
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S>                                                                <C>
ADDITIONAL PROVISIONS:
------------------------------------------------------------------------------------------------------------------------------------
Sales Tax Exempt [_] YES (Attached Exemption Certificate)          Addendum(s) attached: [_] YES (Total number of addendums)________
Customer Billing Reference Number (P.O. #, etc.)_________________
====================================================================================================================================
</TABLE>

TERMS AND CONDITIONS 1. Lease Agreement: You agree to lease from us the
Equipment listed above. THIS LEASE IS NON-CANCELABLE, You agree to all of the
terms and conditions contained in this Lease. You agree this Lease is for the
entire lease term indicated above. You also agree that the Equipment will be
used solely for business purpose and not for personal, family or household
purpose and the "Customer Location" is a business address. Our acceptance of
this Lease is indicated by our signature. (See reverse side for more terms and
conditions.)
================================================================================
AUTHORIZED SIGNER THE PERSON SIGNING THIS LEASE ON BEHALF OF THE CUSTOMER
REPRESENTS THEY HAVE THE AUTHORITY TO DO SO.

<TABLE>
<S>                                <C>                                           <C>
X  Tiffany N. Gay                  Date      Tiffany N. Gay                           Vice President
  ------------------------------          ----------------------------------     ---------------------------
  (Authorized Signer Signature)             (Authorized Signer Printed Name)      (Authorized Signer Title)
</TABLE>

================================================================================
PERSONAL GUARANTY I guaranty that the Customer will make all lease payments and
pay all other charges required under the Lease when they are due, and that the
Customer will perform all other obligations under the lease fully and promptly.
I also agree that IOS Capital may modify the Lease or make other arrangements
with the Customer and I will still be responsible for those payments and other
obligations under the Lease. I agree that IOS Capital does not need to notify me
of any modification or default under the Lease. I will pay all amounts due under
the terms of the Lease. In addition, I will reimburse IOS Capital for any cost
or attorney fees incurred in enforcing their rights.

<TABLE>
<S>                                 <C>                 <C>
X                                   Date                Home Address        _________________________________________________
  (Authorized Signer Signature)                         City __________________________________State_____________Zip_________
                                    Date                Home Phone (   )_______________________________SSN____-______- ______
------------------------------------------------------
    (Printed Name of Guarantor
</TABLE>

================================================================================
DELIVERY AND ACCEPTANCE You certify that all the Equipment described above has
been delivered and is accepted. You acknowledge that such Equipment is in good
condition and is performing satisfactorily.

X                                   Date       __________________   ____________
                                               Printed Name             Title

================================================================================

                                      57
<PAGE>

                                 Schedule 5.11

                               Leases, continued
                               -----------------

2.   Ownership of Equipment/Assignment: We are the sole owner and titleholder to
     the Equipment. YOU HAVE NO RIGHT TO SELL, TRANSFER, ENCUMBER, SUBLET OR
     ASSIGN THE EQUIPMENT OR THIS LEASE WITHOUT OUR PRIOR WRITTEN CONSENT. You
     agree that we may sell or assign any of our interests without notice to
     you. In that event, the assignee will have such rights as we assign to them
     but none of our obligations (we will keep those obligations) and the rights
     of the assignee will not be subject to any claims, defenses or set-offs
     that you may have against us.

3.   Taxes and Filing Costs: In addition to lease payments, you agree to pay all
     taxes, fees, and filing costs related to the possession and use of the
     Equipment during the lease term. If we are required to file and pay
     property tax, you agree to reimburse us. We will bill you the property tax
     as soon as an invoice is received from the local jurisdiction. At our
     request, you agree to file and pay taxes directly to the taxing
     jurisdiction or pay to us taxes in advance of the time that the taxes are
     due to the taxing authority based on our reasonable estimates of the tax.

4.   UCC Filing: You authorize us or our designee to sign, on your behalf, any
     documents in connection with the Uniform Commerical Code filing and to
     insert the serial number(s) of the Equipment in this Lease (including any
     schedules) and in any filings. At our request, you will sign and provide
     such documents for filing purposes.

5.   Warranties: Since we are a leasing company and neither the manufacturer or
     the distributor of the Equipment, WE MAKE NO WARRANTIES, EXPRESS, OR
     IMPLIED, INCLUDING WARRANTIES OR MERCHANTABILITY OR FITNESS FOR USE OR FOR
     A PARTICULAR PURPOSE.

6.   Maintenance and Care of Our Equipment and Agency: You agree to install (if
     required), use and maintain the Equipment in accordance with manufacturers'
     or IKON's specifications and to use only those supplies which meet such
     specifications. If you have contracted for maintenance and support
     activities regarding the Equipment, IKON is responsible for all those
     services. IKON and IOS Capital are not agents for each other.

7.   Liability, Insurance and Indemnity: Because you have possession and control
     of this Equipment you are fully responsible for damage, injury or loss
     caused by or to the Equipment or property resulting from any misuse,
     accident, or other casualty. You agree to maintain insurance to cover the
     Equipment for your and our benefit and you agree to indemnify us. We will
     be responsible for damage or injury to third persons when the damage or
     injury is caused exclusively by our negligent acts or omissions. We should
     be named additional insured and loss payee on your insurance policy. If you
     fail to provide evidence of insurance, you authorize us to obtain coverage
     on your behalf and you agree to pay for this coverage. In the event of loss
     or damage to the Equipment, you agree to remain responsible for the payment
     obligations under this Lease until the payment obligations are fully
     satisfied.

8.   Renewal and Return of Equipment: After the minimum term or any extension,
     this Lease will renew on a month-to-month basis unless you notify us in
     writing at least 30 days prior to the expiration of the minimum term or
     extension. You must pay any additional lease payments due until the
     Equipment is returned by you and is received in good condition and working
     order by us or our designees. IKON will bear shipping charges so long as
     replacement Equipment is selected from IKON.

9.   Lease Payments: Payments will begin on the agreement date or delivery date,
     whichever is later. You agree to pay us each lease payment when it is due,
     and if any payment is more that 10 days late, you agree to pay a late
     charge of 5% or $5 (whichever is greater but not to exceed the maximum
     amount allowed by applicable law) on the overdue amount. You also agree to
     pay $25 for each check returned for insufficient funds or any other reason.
     You agree to pay a one time documentation fee if it appears on the front of
     this agreement.

10.  Location of Equipment: You will keep the Equipment at the customer location
     specified in this Lease. You must obtain our written permission, which will
     not be unreasonably withheld, to move the Equipment. With reasonable
     notice, you will allow us or our designee to conduct inspections of the
     Equipment.

11.  Default: IF YOU DO NOT PAY ANY AMOUNT WHEN IT IS DUE, OR BREACH ANY OTHER
     TERM OF THIS LEASE, YOU ARE IN DEFAULT. IF YOU DEFAULT, WE HAVE THE RIGHT
     TO EXERCISE ANY AND ALL LEGAL REMEDIES AVAILABLE TO US BY APPLICABLE LAWS,
     INCLUDING ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE. YOU ACKNOWLEDGE THIS
     IS A FINANCE LEASE AS DEFINED IN ARTICLE 2A AND YOU WAIVE ANY AND ALL
     RIGHTS AND REMEDIES YOU HAVE THEREUNDER. In addition, we are entitled to
     all past due payments and we may accelerate and require you to immediately
     pay us the future payments due under the Lease present valued at the
     discount rate of 6% to the date of default plus the residual value placed
     on the Equipment by us. We may repossess of the Equipment and pursue you
     for any deficiency balance after we dispose of the Equipment, all to the
     extent permitted by law. You waive the rights you may have to notice before
     we seize any of the Equipment. You agree that all rights and remedies are
     cumulative and not exclusive. You promise to pay reasonable attorney fees
     and any cost associated with any action to enforce the Lease. This action
     will not avoid your responsibility to maintain and care for the Equipment
     nor will IKON be liable for any action taken on our behalf. Default shall
     also include your becoming insolvent, your assignment of assets for the
     benefit of creditors, your filing for bankruptcy protection or the failure
     of the guarantor to honor its commitments.

12.  Business Agreement and Choice of Law: YOU AGREE THAT THIS AGREEMENT WILL BE
     GOVERNED UNDER THE APPLICABLE LAW OF THE STATE OF GEORGIA. YOU ALSO AGREE
     TO SUBMIT TO THE JURISDICTION OF THE COURTS OF GEORGIA, OR AT OUR OPTION,
     THE COURTS OF THE STATE WHERE IKON IS LOCATED TO RESOLVE ANY ACTION UNDER
     THIS LEASE. WE BOTH WAIVE THE RIGHT TO A TRIAL BY JURY IN THE EVENT OF A
     LAWSUIT.

13.  No Waiver or Set Off: You agree that our delay, or failure to exercise any
     rights, does not prevent us from exercising them at a later time. If any
     part of this Lease is found to be invalid, then it shall not invalidate any
     of the other parts and the Lease shall be modified to the minimum extent as
     permitted by law. All lease payments to us are "net" and are not subject to
     set off or reduction without our consent.

14.  Entire Agreement: This agreement represents the entire agreement (including
     addendums referenced on the face of the Agreement, signed and attached)
     between us and you. Neither of us will be bound by any amendment, waiver,
     or other change unless agreed to in writing and signed by both. Any
     purchase order, or other ordering documents will not modify or affect this
     agreement, nor have any other legal effect and shall serve only the purpose
     of identifying the Equipment ordered.

================================================================================
                         Accepted by IOS Capital, Inc:

                                      58
<PAGE>

                                                               STATE STREET, LLC

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

          See attached, and incorporate by reference 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.

                                       59
<PAGE>

                                                               STATE STREET, LLC

                                 Schedule 5.12
            Material Contracts - St. Andrews Place Apartments, LLC
            ------------------------------------------------------

                               Service Contracts
                           As of September 25, 2001

<TABLE>
<CAPTION>
Type                            Provider                                      Term
------------------------------------------------------------------------------------------------------------
<S>                             <C>                                           <C>
Laundry Machines                Mac-Gray                                      10 years (4/1/98 - 4/1/08)
Lawn & Grounds                  Paradise Lawn & Landscape                     2 years (9/7/00 - 9/6/02)
Copier Maintenance              IKON                                          1 year (2/27/01 - 2/26/02)
Cable Television                Time Warner Cable                             20 years (1/23/98 - 1/23/18)
Pest Control                    Dodson Pest Control                           Month to Month
Trash Removal                   Waste Management                              2.5 years (5/27/01 - 12/31/03)
Telephone Revenue Sharing       VoiceTel                                      Month to Month
Online Advertising              Springstreet.com (Homestore.com)              Month to Month
                                Apartments.com                                Month to Month
                                Apartmentguide.com                            8/1/01 - 7/31/02
Pager                           Premiere Tech (for Service Staff)             Month to Month
Credit Information              NTN                                           Month to Month
Magazine Advertising            Apartment Bluebook                            1 year (1/1/01 - 12/31/01)
Fitness Equipment               Fitness Concepts                              Month to Month
Alarm Services                  Apartment Protection Systems (Multifamily)    5 years (3/1/98 - 3/1/03)
Washer/Dryer Rentals            Coastal Appliance                             5 years (10/27/99 - 10/27/04)
Vending Machines                Vending Solutions USA, LLC                    3 years (10/15/99 - 10/14/02)
Electric Service                CP&L                                          Month to Month (No contract)
Uniforms                        Unifirst                                      5 years (9/17/99 - 9/16/04)
Water submetering               Viterra Energy Service (Envirotech)           1 year (12/27/00 - 12/26/01)
Helium                          National Welders                              Month to Month (No contract)
Corporate Furniture             Furniture Rental and Sales                    Month to Month
Electronic Draft Payments       CHEXpedite-Automated Payments                 Month to Month
After Hours Answering Service   Voicetel                                      Quarterly
Internet Service                Earthlink - 3 accounts                        Month to Month (No contract)
</TABLE>

                                       60
<PAGE>

                                                               STATE STREET, LLC

                                 Schedule 5.12
            Material Contracts - St. Andrews Place Apartments, LLC
            ------------------------------------------------------

                         Corporate Apartment Contracts
                           As of September 25, 2001

Unit     Type                Provider                   Term
-----    ----------------    ------------------------   ------------------------
806-G    Furniture Rental    Furniture Rental & Sales    30 day notice to cancel
818-M    Utility Electric    CP& L                       4/1/99 - 3/31/02
804-H    Furniture Rental    Furniture Rental & Sales    10/1/01 - 12/31/01
804-H    Housewares          Furniture Rental & Sales    10/1/01 - 12/31/01
804-H    Utility Electric    CP& L                       10/1/01 - 12/31/01
804-H    Cable               Time Warner                 10/1/01 - 12/31/01
804-H    Water               City of Wilmington          10/1/01 - 12/31/01

                                       61
<PAGE>

                                                               STATE STREET, LLC

                                 Schedule 5.12
               Material Contracts - Timber Crest Apartments, LLC
               -------------------------------------------------

                               Service Contracts
                           As of September 25, 2001

<TABLE>
<CAPTION>
Type                                Provider                                 Term
------------------------------------------------------------------------------------------------------------
<S>                                 <C>                                      <C>
Laundry Machines                    Mac-Gray                                 10 years (4/1/99 - 3/31/09)
Lawn & Grounds                      Greenlawn                                2 years (1/1/01 - 12/31/02)
Copier Maintenance                  IKON                                     3 years (6/24/99 - 6/23/02)
Fax Maintenance                     Charlotte Copy Data                      3 years (1/12/01 - 1/12/04)
Cable Television                    Time Warner Cable                        20 years (10/5/98 - 10/5/18)
Pest Control                        Action Pest                              1 year (10/5/00 - 10/4/01)
Trash Removal                       Waste Management                         Month to Month
Telephone Revenue Sharing           One Point                                5 years (10/1/99 - 10/1/04)
Online Advertising                  Apartments.com                           Month to Month
                                    Springstreet.com (Homestore.com)         Month to Month
Outdoor Advertising (Billboard)     Adams Outdoor Advertising                6 months (10/8/01 - 4/7/02)
Pager                               Weblink Wireless                         Month to Month
Credit Information                  NTN                                      Month to Month
                                    Equifax                                  Month to Month
Magazine Advertising                Apartment Guide                          11 months (7/1/01 - 5/31/02)
                                    Apartment BlueBook                       Month to Month
                                    Rental Guide                             1 year (10/1/00 - 9/31/01)
Fitness Equipment                   Fitness Concepts                         Month to Month
Coffee Machine                      Filterfresh Coffee                       Month to Month
Alarm Services                      APS                                      Month to Month
Washer/Dryer Rentals                Appliance Warehouse                      Month to Month
Pool Maintenance                    Caribbean Pool Management System         1 year (1/1/01 - 12/31/01)
Vending Machines                    Vending Solutions USA, LLC               3 years (10/15/99 - 10/14/02)
Electric Service                    Duke Power                               Month to Month (No contract)
After-Hours Maintenance
    Answering Service               A and A Communications                   Month to Month
Referral Locator Service            All About Locating Apartments            Month to Month
                                    Apartment Finders                        Month to Month
                                    Re/Max                                   1 year (6/27/01 - 6/26/02)
Electronic Draft Payments           CHEXpedite - Automated Payments          Month to Month
Uniforms                            Unifirst                                 5 years (9/17/99 - 9/16/04)
Helium                              Little Balloon Company                   1 year (5/11/01 - 5/10/02)
Internet Service                    Road Runner                              Month to Month
</TABLE>

                                       62
<PAGE>

                                                               STATE STREET, LLC

                                 Schedule 5.12
              Material Contracts- Trinity Commons Apartments, LLC
              ---------------------------------------------------

                               Service Contracts
                           As of September 25, 2001

<TABLE>
<CAPTION>
Type                            Provider                                Term
----------------------------------------------------------------------------------------------------------
<S>                             <C>                                     <C>
Laundry Machines                Mac-Gray                                10 years (4/1/99 - 4/1/09)
Lawn & Grounds                  Sunbelt Scenic Landscaping              2 years (1/1/01 - 12/31/02)
Copier Maintenance              IKON                                    3 years (6/24/99 - 6/23/02)
Cable Television                Time Warner Cable                       20 years (8/11/98 - 8/11/18)
Pest Control                    Frye Exterminating Co.                  Month to Month
Trash Removal                   BFI                                     Month to Month
Telephone Revenue Sharing       One Point                               5 years (10/5/99 - 10/4/04)
Online Advertising              Apartments.com                          Month to Month
                                Springstreet.com (Homestore.com)        Month to Month
Pager                           Arch Paging (for Service Staff)         Month to Month
Credit Information              NTN                                     Month to Month
Magazine Advertising            Apartment Guide                         11 months (2/1/01 - 1/1/02)
                                Triangle Apartment Finder               11 months (2/1/01 - 1/1/02)
                                Apartment Book                                           9/1/01 - 11/30/02
                                Apartment Shoppers Guide                11 months (8/1/01 - 7/1/02)
Fitness Equipment               Fitness Concepts                        Month to Month
Coffee Machine                  Filterfresh Coffee                      Month to Month
Alarm Services                  APS                                     Month to Month
Washer/Dryer Rentals            Appliance Warehouse                     Month to Month
Vending Machines                Vending Solutions USA, LLC              3 years (10/15/99 - 10/14/02)
Electric Service                CP&L                                    Month to Month (No contract)
After-Hours Maintenance
    Answering Service           Signius                                 Month to Month
Referral Locator Service        A Rental Solution                       Month to Month
                                Apartment Book Locator                  Month to Month
                                Prudential RentFast                     Month to Month
Electronic Draft Payments       CHEXpedite-Automated Payments           Month to Month
Uniforms                        Unifirst                                5 years (9/17/99 - 9/16/04)
Internet Service                Road Runner                             Month to Month
</TABLE>

                                       63
<PAGE>

                                                               STATE STREET, LLC

                                 Schedule 5.12
             Material Contracts - Trinity Commons Apartments, LLC
             ----------------------------------------------------

                         Corporate Apartment Contracts
                           As of September 25, 2001

Unit           Type                 Provider                  Term
-----          ----------------     -------------------       ------------------
1000-205       Furniture Rental     AFR                        6/1/01 - 11/30/01
1000-206       Washer/Dryer         Appliance Warehouse        6/1/01 - 11/30/02
5220-203       Furniture Rental     Cort Furniture             10/1/01 - 3/31/02
5220-204       Washer/Dryer         Appliance Warehouse        10/1/01 - 3/31/02

                                       64
<PAGE>

                                                               STATE STREET, LLC

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

          See attached legal descriptions.

                                       65
<PAGE>

                                                               STATE STREET, LLC


                                 Schedule 5.13
       Owned and Leased Real Property - St. Andrews Place Apartments, LLC
       ------------------------------------------------------------------

Commencing at a concrete monument, said point being located in the centerline of
Tynemouth Drive near its terminus at the Eastern Right of Way of St. Andrews
Drive, thence South 15(degrees) 27' 42" West 29.59' to a point in the Eastern
Right of Way of Saint Andrews Drive, said point being the Southeast corner of
the intersection of St. Andrews Drive and Tynemouth Drive, the true point and
place of BEGINNING. Thence with the southern right of way at Tynemouth Drive
South 74(degrees) 10' 00" East 813.11 feet to a point in the Southern right of
way of Tynemouth Drive, said point also being in the western line of now or
formerly Alex M. Trask, et. al. (Deed Book 803, page 22), thence leaving the
southern margin of Tynemouth Drive along the western line of said Trask et. al.
South 23(degrees) 39' 30" West 655.03 feet to an existing iron pipe (bent);
thence continuing along the Western line of said Trask et. al. North 41(degrees)
16' 00" west 110.41 feet to an existing iron pipe; thence continuing along the
western line of said Trask et. al South 22(degrees) 43' 00" West 225.65 feet to
an existing iron pipe, corner with (now or formerly) Alma V. McGowan (deed book
268, page 107); thence along the northern line of said McGowan South 55(degrees)
59' 30" West 233.66 feet to a point; thence along the northern boundary of tract
3-B (Mb 39, Page 169) "St. Andrews Place Apartments, LLC (DB 2305, Pg 901)" the
following three (3) courses and distances; North 34(degrees) 00' 30' West
165.40; North 87(degrees) 19' 28" West 330.46 feet; North 32(degrees) 53' 26"
West 167.59 feet to a point in the eastern margin of a 100 foot public right of
way St. Andrews Drive, thence along the eastern margin of said right of way
along a curve to the left having a radius of 1453.55' and a chord bearing and
distance of North 28(degrees) 15' 35" East 495.30 feet to an existing iron pipe;
thence continuing along the eastern margin of said right of way North
18(degrees) 27' 00" East 222.73 feet to a "X" cut in walk; thence continuing
along the eastern margin of said right of way along a curve to the left, having
a radius of 3840.48' and a chord bearing and distance of North 17(degrees) 22'
48" East 143.44 feet to the true point and place of BEGINNING. Above property
being further described as being all of Tract 3-A as recorded in Map Book 39,
Page 169 and containing 15.976 + acres.
                               _

                                       66
<PAGE>

                                                               STATE STREET, LLC


                                 Schedule 5.13
         Owned and Leased Real Property - Timber Crest Apartments, LLC
         -------------------------------------------------------------

Beginning at an iron pipe located in the northerly right-of-way margin of the
cul-de-sac of Timber Springs Drive, said iron pipe being a common corner between
the property described herein and the property of Monroe-Oxford Associates
Limited Partnership as described in Deed Book 4843 at Page 435, in the
Mecklenburg County, North Carolina Public Registry, thence with the easterly and
southerly boundary lines of said Monroe-Oxford Associates Limited Partnership
property the following ten (10) courses and distances: (1) N 69-40-00 E - 103.00
feet to an iron pipe, (2) N 43-20-00 E - 396.56 feet to an iron pipe, (3) S 80-
00-00 E  -  491.69 feet to an iron pipe, (4) N 09-50-00 E - 150.00 feet to an
iron pipe, (5) N 61-10-00 E - 102.50 feet to an iron pipe, (6) N 15-50-00 W -
172.50 feet to an iron pipe, (7) N 89-30-00 W - 134.00 feet to an iron pipe, (8)
N 19-00-00 W - 281.00 feet to an iron pipe, (9) N 35-45-00 E - 105.00 feet to an
iron pipe and (10) N 11-10-00 W - 180.50 feet to an iron pipe located in the
boundary line of the property conveyed to Monroe II - Oxford Associates Limited
Partnership by Deed of John M. Belk, et al, of record in Book 4843, at Page 426,
in said Registry, thence with said boundary line as described in the
aforementioned deed as follows:  S 84-30-38 E - 77.00 feet to an iron pipe in a
creek bank; thence S 02-36-50 E - 119.02 feet to a point in the center of said
creek, thence with the centerline of said creek the following eleven (11)
courses and distances:  (1) S 18-52-50 W 105.65 feet to a point, (2) S 10-10-50
E - 81.79 feet to a point, (3) S 00-55-20 W - 64.01 feet to a point, (4) S 11-
41-40 E - 120.66 feet to a point, (5) S 72-13-30 E -111.10 feet to point, (6) N
72-35-00 E - 41.68 feet to a point, (7) S 54-39-00 E - 32.88 feet to a point,
(8) S 12-59-00 E - 41.60 feet to a point, (9) S 31-16-00 W 38.59 feet to a
point, (10) S 22-10-00 E - 32.00 feet to a point and (11) S 72-32-30 E - 15.77
feet to a point, thence leaving said creek, S 20-45-57 W - 335.73 feet to a iron
pipe in the easterly right-of-way margin of Creekridge Road (55' R/W); thence
following said margin with the arc of a circular curve to the left having a
radius of 166.42 feet, an arc distance of 128.24 feet (chord = S 01-19-47 E -
125.09 feet) to a new iron pipe, said iron pipe also being the northwesterly
corner of the property of TCA-II, LLC as described in Deed of record in Book
12035 at Page 391 in said Registry, thence leaving said right-of-way margin of
Creekridge Road and with the westerly boundary line of said TCA-II, LLC property
the following five (5) courses and distances:  (1) S 28-23-39 W - 354.47 feet to
a new iron pipe, (2) S 20-45-57 W - 315.12 feet to a new iron pipe, (3) S 08-04-
03 E - 127.73 feet to a new iron pipe, (4) N 80-09-57 W - 152.21 feet to a new
iron pipe and (5) S 09-50-03 W - 200.92 feet to a new iron pipe in the northerly
boundary line of the property of Mecklenburg County (now or formerly) and also
being the southwesterly corner of said TCA-II, LLC property (now or formerly),
said new iron pipe being further located N 08-09-57 W - 49.48 feet from a
concrete monument in said property line of Mecklenburg County, thence with said
northerly boundary line of said Mecklenburg County property, N 80-09-57 W -
338.29 feet to a concrete monument located  at the northeasterly corner of the
property of Charleston Place Mcguire Partners as described in Deed of record in
Book 5050 at Page 278 in said Registry, thence with an easterly boundary line of
said Charleston Place Mcguire Partners property N 10-33-53 W - 604.43 feet to a
concrete monument in the right-of-way margin of the cul-de-sac of Timber Springs
Drive; thence with the right-of-way margin of the cul-de-sac of Timber Springs
Drive the following three (3) courses and distances:  (1) with the arc of a

                                       67
<PAGE>

circular curve to the left having a radius of 80.00 feet, an arc distance of
148.12 feet (chord = N 59-42-30 E - 127.85 feet to a point, (2) N 06-40-00 E
49.25 feet to a point and (3) with the arc of a circular curve to the left
having a radius of 80.00 feet, an arc distance of 163.36 feet (chord = N 51-50-
00 W - 136.42 feet) to a point, the point and place of Beginning containing
approximately 16.65 acres, as shown on the revised as-built survey prepared by
CPT Engineering and Surveying, Inc., dated March 22, 2001.

                                       68
<PAGE>

                                                               STATE STREET, LLC


                                 Schedule 5.13
        Owned and Leased Real Property - Trinity Commons Apartments, LLC
        ----------------------------------------------------------------


Being all of Tract 1 containing 17.104 acres as shown on the subdivision plat
for Carolina Residential Income Properties, LLC on a map recorded in Book of
Maps 1988, Page 1325, Wake County Registry.  Together with all rights,
easements, duties and obligations contained in that Declaration of Covenants,
Restrictions and Easements recorded in Book 8113, Page 1878, Wake County
Registry.

BEGINNING at a point in the west right of way line of Sunday Drive, said point
being 1234.23 south of the point where Sunday Drive begins to curve into Trinity
Road; thence with the right of way of Sunday Drive along a curve, curving to the
left, having a radius of 57.0 and a chord S 32 21'21" E a distance of 73.26' and
an arc of 79.56'; thence along a division line between tract 1 and tract 2,
recombination plat for Carolina Residential Income Properties, LLC., Book of
Maps 1998 Page 1325 the following calls: S 00 09' 55" E a distance of 165.04',
along a curve curving to the right having a radius of 579.0', a chord of S 20
47' 53" W 110.98' and an arc of 111.13', S 23 16' 13" W a distance of 40.15',
along a curve curving to the right having a radius of 147.0' a chord of S 32 05'
47" W 45.11' and an arc of 45.29', along a curve curving to the right having a
radius of 235.0' a chord of S 66 45' 43" W 204.85', N 87 23' 56" W a distance
35.43', along a curve curving to the right, having a radius of 335.0', a chord
of N 81 15' 21" W 71.70' and an arc of 71.84', S 23 07' 27" W a distance of
244.41', along a curve curving to the right having a radius of 227.08', a chord
of S 44 01' 26" W 162.02' and an arc of 165.57' S 44 36' 29" E a distance of
42.30', S 04 54' 51" E a distance of 107.09' to a point in the north line of
State of North Carolina Property, Book of Maps 1978 Page 696, thence with the
north line of the State of North Carolina Property S 89 01' 45" W a distance of
404.33' to new iron pipe, the southeast corner of now or formerly David A
Barnes, Deed Book 6730 Page 643; thence with the east line of David A Barnes,
Southern Bell Telephone, Deed Book 4361 Page 750, David E. Rogers, Deed Book
8109 Page 779 and Richard L. Ussery, Deed Book 4469 Page 90 N 03 37' 44" E a
distance of 1196.50' to an existing iron pipe, the north east corner of Richard
L. Ussery; thence with the north line of Richard L. Ussery N 62 18' 04" W a
distance of 94.66' to new iron pipe in the east right of way line of Nowell
Road, a public road; thence with the east right of way line of Nowell Road N 27
37' 14" E a distance of 50.0' to an existing iron pipe, the southwest corner of
Edward L. Kelly, Deed Book 3041 Page 192; thence with the south line of Edward
L. Kelly the following calls S 62 18' 04" E a distance of 206.66' and S 86 22'
18" E a distance of 282.37' to an existing pipe, a point in the west line of Lot
2, Trowell Partners Book of Maps 1998 Page 490; thence the west and south line
of Lot 2 Trowell Partners the following calls S 16 54' 55" E a distance of
165.75' and S 82 22' 09" E a distance of 383.30 to the point and place of
beginning containing 17.104 acres and being Tract 1, Recombination Plat for
Carolina Residential Properties, LLC, as recorded in Book of Maps 1998 Page
1325.

                                       69
<PAGE>

                                                               STATE STREET, LLC

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


          All indebtedness of the Subsidiaries scheduled on
          Schedule 11.3, which is incorporated herein by
          reference. All residential apartment tenant leases
          by Subsidiaries to residential tenants. Amendment
          to Easement Agreement by and between St. Andrews
          Place Apartments, LLC and St. Andrews Place II,
          LLC, to be approved and subordinated by Greystone
          Servicing Corporation.

Trinity
-------

Restrictions, reservations of easements and conditions contained in instrument
recorded in Book 7782, Page 775 and Book 8113, Page 1878, as duly amended, Wake
County Registry.

Building restriction line(s), easement(s) and other matters as shown on plat
recorded in Book of Maps 1998, Pages 490 and 1325, Wake County Registry.

Conditions contained in Deed recorded in Book 7540, Page 397, Wake County
Registry.

Dedication of Access Rights to the City of Raleigh recorded in Book 8113, Page
1874, Wake County Registry.

Easement(s) to Carolina Power and Light Company recorded in Book 2231, Page 486
and Book 8163, Page 1859, Wake County Registry.

Exclusive Cable Agreement with Time Warner Entertainment recorded in Book 8189,
Page 1626, Wake County Registry.

Easement to Time Warner Entertainment recorded in Book 8205, Page 2430, Wake
County Registry.

Temporary Sign Easement recorded in Book 8327, Page 2249, Wake County Registry.

St. Andrews
-----------

Building restriction line(s), easement(s) and other matters as shown on plat
recorded in Book of Maps 30, Page 160 and Book of Maps 30, Page 169, New Hanover
County Registry.

Twenty (20) foot wide utility easement(s) to City of Wilmington recorded in Book
2663, Page 173, New Hanover County Registry as shown on survey dated February
16, 2001, last revised March 19, 2001, prepared by Charles P. Truby, R.L.S.

                                       70
<PAGE>

Right(s) of Way to Carolina Power and Light Company recorded in Book 956, Page
406, New Hanover County Registry as shown on survey dated February 16, 2001,
last revised March 19, 2001, prepared by Charles P. Truby, R.L.S.

Easement(s) to Allen Trask for sixty (60) foot wide access recorded in Book
1479, Page 1302, New Hanover County Registry.

Thirty (30) and forty (40) foot wide drainage and utility easement recorded in
Book 1479, Page 1644, New Hanover County Registry as shown on survey dated
February 16, 2001, last revised March 19, 2001, prepared by Charles P. Truby,
R.L.S.

Easement(s) to Time Warner Entertainment recorded in Book 2301, Page 202, New
Hanover County Registry.

Easement(s) to BellSouth Telecommunications, Inc. recorded in Book 2314, Page
361, New Hanover County Registry as shown on survey dated February 16, 2001,
last revised March 19, 2001, prepared by Charles P. Truby, R.L.S.

Easement(s) to BellSouth Telecommunications, Inc. recorded in Book 2991, Page
901, New Hanover County Registry.

Easement Agreement for Use of Amenities recorded in Book 2324, Page 34, New
Hanover County Registry.

TimberCrest
-----------

Declaration of Covenants, Restrictions and Easements by Timber Crest Apartment,
LLC and Timber Crest II, LLC, dated March 9, 2001 recorded in Book 12035, Page
395, Mecklenburg County Registry.

Easement(s) to Duke Power Company recorded in Book 1544, Page 177 and Book
10469, Page 760, Mecklenburg County Registry.

Easement(s) to Southern Bell Telephone and Telegraph Company recorded in Book
1082, Page 360 and Book 1092, Page 152, Mecklenburg County Registry.

Ten foot sewer easement recorded in Book 3983, Page 133, Mecklenburg County
Registry.

Sewer Easement Agreements recorded in Book 4844, Page 276, as assigned to
Monroe-Oxford Associates, Limited Partnership in Book 4844, Page 249; and in
Book 4844, Page 252, Mecklenburg County Registry.

Jogging Trail Easement recorded in Book 5051, Page 524, Mecklenburg County
Registry.

Easement(s) to Time Warner Entertainment-Advance/Newhouse Partnership recorded
in Book 10103, Page 785, Mecklenburg County Registry.

                                       71
<PAGE>

Easement(s) to BellSouth Telecommunications, Inc. recorded in Book 10532, Page
119, Mecklenburg County Registry.

Rights of others in and to sanitary sewer easement recorded in Book 10143, Page
1, Mecklenburg County Registry.  See also that Subordination recorded in Book
10143, Page 11, Mecklenburg County Registry.

Contract Encroachment Right of Way to City of Charlotte recorded in Book 11339,
Page 462, Mecklenburg County Registry.

                                       72
<PAGE>

                                                               STATE STREET, LLC

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

<TABLE>
<CAPTION>
                Subsidiary                                              Permits and Licenses
--------------------------------------------- -----------------------------------------------------------------------
<S>                                            <C>
St. Andrews Place Apartments, LLC              N.C. Department of Environment, Health, and Natural Resources Division

                                               of Environmental Health Public Swimming Pool Operation Permit issued
                                               5/18/01and expiring 5/18/02; copy attached.

Trinity Commons Apartments, LLC                Wake County Department of Environmental Services Swimming Pool
                                               Operation and Maintenance Permit issued 4/01 and expiring 10/31/01;
                                               copy attached.

Timber Crest Apartments, LLC                   N.C. Department of Environment, Health, and Natural Resources Division
                                               of Environmental Health Public Swimming Pool Operation Permit issued
                                               4/1/01 and expiring 10/31/01; copy attached.
</TABLE>

                                       73
<PAGE>

                                                               STATE STREET, LLC

                                 Schedule 5.15
     Governmental Permits and Licenses - St. Andrews Place Apartments, LLC
     ---------------------------------------------------------------------

                                                                   530023
N.C. Department of Environmental and Natural Resources     ---------------------
Division of Environmental Health                           Identification Number
                                                                   5-18-01
                                                           ---------------------
                                                                 Date Issued

                 PUBLIC SWIMMING POOL
                   OPERATION PERMIT                        Status Code:   I
                                                                       ---------

Permission is granted to     John Redford      of       St. Andrews Place
                         ---------------------    ------------------------------
                          Owner or Operator        Name of Public Swimming Pool

to operate a public swimming pool as defined in G.S. 130A-280 and 15A NCAC 18A
 .2500 at

814 St. Andrews Dr., Wilmington, N.C. 28412
--------------------------------------------------------------------------------
Street Address of Pool Location

New Hanover
-------------------------------
County

Type of Pool:(check one)      [X] Swimming Pool yr. round
                              [_] Wading pool
                              [_] Spa
                              [_] Other (describe)______________________________

                                  Signed:/s/ J. Leign Jackson R.S.         Agent
                                         ---------------------------------
                                         N.C. Department of Environment
                                         and Natural Resources Division of
                                         Environmental Health

Expiration Date:        5-18-02
                ------------------------

Remarks:________________________________________________________________________

 ................................................................................
                                 INSTRUCTIONS

Purposes:      General Statute 130A-281 states "No public swimming pool may be
               opened for use unless the owner or operator has obtained an
               operation permit issued by the Department", General Statute 130A-
               282 requires the Commission for Health Services to adopt rules
               including requirements for application review, expiration,
               renewal, and revocation or suspension of an operating permit.
               Those rules are contained in 15A NCAC 18A .2500.

               This form is to be used as the permit specified above.

Preparation:   Local environmental health specialists shall issue a permit every
               time a new or reissued permit is indicated. Prepare an original
               and two copies for:

               1. Original given to pool owner or operator.
               2. Copy for the local health department.
               3. Copy for the Environmental Health Services Section, Division
                  of Environmental Health.

               in the event the permit/transitional permit is suspended or
               revoked, complete the Suspension/Revocation form(DENR 4009).

Disposition:   This form may be destroyed in accordance with Standard 7,
               Inspection Records, of the Records Disposition Schedule published
               by the N.C. Division of Archives and History.

Additional forms may be ordered from:    Division of Environmental Health
                                         1630 Mail Service Center
                                         Raleigh, NC 27699-1630
                                         (Courier 52-01-00)

DENR3962 (Revised 05/00)
Environmental Health Services Section (Review 05/03)

                                      74
<PAGE>

                                                               STATE STREET, LLC

                                 Schedule 5.15
       Governmental Permits and Licenses - Timber Crest Apartments, LLC
       ----------------------------------------------------------------

N.C. DEPARTMENT OF ENVIRONMENT, HEALTH, AND NATURAL RESOURCES
                       DIVISION OF ENVIRONMENTAL HEALTH
                     PUBLIC SWIMMING POOL OPERATION PERMIT

Permission is hereby granted to State Street Company of Timber Crest Apartments
at 2025 Timber Oaks Dr., Charlotte, NC 28212 to operate a(n) Seasonal Swimming
Pool as defined in the Rules adopted by the Commission for Health Services
governing the sanitation of such places.

Permit Number: 02060.500864
Issued By: Mecklenburg County Health Department
Expiration Date: October 31, 2001
Effective Date: April 1, 2001


Signed:  /s/ Troy Purvis                                                  Agent
       -------------------------------------------------------------------
                DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES


See permit requirements in Rules. This permit is not transferable from one
person to another and may be revoked for failure to comply satisfactorily with
all requirements.

Remarks/Conditions:
 .    The pool shall be operated in compliance with the requirements contained in
15A North Carolina Administrative Code 18A "Rules Governing Public Swimming
Pools."
 .    The pool shall not be used when the circulation system is not operable,
when the bottom of the pool is not clearly visible, when any suction outlet
cover is loose, broken, or missing, or when electrical repairs are being made to
any component of the pool.
 .    Appropriate life saving equipment indicated in the rules shall be available
at all times that the pool is being used.
 .    The pool operator shall maintain written records of the operating
conditions of the pool. Records shall be maintained at the pool site for a
period of not less than six months and shall include, at a minimum, daily
recordings of the disinfectant residual in the pool, daily recordings of pool
water pH, daily recordings of water temperature in heated pools, and recordings
of all activities pertaining to pool water maintenance including chemical
additions and filter backwash cycles.
 .    The pool operator shall report any death, serious injury, or complaint of
illness attributed by a bather to use of the pool to the Mecklenburg County
Health Department within two working days of the incident or complaint.
 .    Work requiring disruption of the pool shell or deck, changes in the pool
profile or hydraulic system, and replacement of pumps or filters requires plans
and specifications to be submitted to and approved by the Mecklenburg County
Health Department prior to initiating the work.


DEHNR T616 (3/90) MCHD Substitue (3/99)
Environmental Health Services Section
T. Purvis

                                      75

<PAGE>


                                                               STATE STREET, LLC

                                 Schedule 5.15
       Governmental Permits and Licenses - Trinity Commons Apartments, LLC
       -------------------------------------------------------------------



                           WAKE COUNTY DEPARTMENT OF
                            ENVIRONMENTAL SERVICES
                    SWIMMING POOL OPERATION AND MAINTENANCE


                                    PERMIT


This facility, at time of inspection, is in compliance with the Wake County
Regulations Governing Swimming Pools. Permission is hereby granted to Trinity
                                                                      ----------
Common
--------------------------------------------------------------------------------
5201 Trinity Common, Raleigh NC
--------------------------------------------------------------------------------
to operate from  4-27-01         to 10-31-01
                -----------------   --------------------------------------------

See permit requirements in Rules. This permit may be suspended or revoked upon
finding that a violation of the applicable provision of the Regulations
Governing Public Swimming Pools in Wake County has occurred.

Permit valid for no more than 12 months from date issued.


                                             /s/ Lisa Johnson RS
                                             -----------------------------------
                                             WAKE COUNTY ENVIRONMENTAL
                                             SERVICES REPRESENTATIVE

                                      76
<PAGE>

                                                               STATE STREET, LLC

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


          None.

                                       77
<PAGE>

                                                               STATE STREET, LLC

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


<TABLE>
<CAPTION>
           Subsidiary                     Insurance Policy              Policy No.                     Carrier
--------------------------------      --------------------------       -------------      ----------------------------------
<S>                                   <C>                              <C>                <C>
St. Andrews Place Apartments, LLC     Property/General Liability       42-572-771-01      Auto Owners
                                      Windstorm and Hail               CW1537005          N.C. Insurance Underwriting Assoc.

Trinity Commons Apartments, LLC       Property/General Liability       42-572-771-01      Auto Owners

Timber Crest Apartments, LLC          Property/General Liability       42-572-771-01      Auto Owners
</TABLE>

                                       78
<PAGE>

                                                               STATE STREET, LLC

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


<TABLE>
<CAPTION>
             Subsidiary                  Account Name                 Bank                 Account No.
---------------------------------    -------------------    -------------------------     -------------
<S>                                  <C>                    <C>                           <C>
St. Andrews Place Apartments, LLC    Petty cash             First Union National Bank     2000007838082
St. Andrews Place Apartments, LLC    Operating              First Union National Bank        4001135413
St. Andrews Place Apartments, LLC    Security deposit       First Union National Bank        4001136502
St. Andrews Place Apartments, LLC    Property tax escrow    FNMA/Greystone Servicing             008123
St. Andrews Place Apartments, LLC    Insurance escrow       FNMA/Greystone Servicing             008123

Trinity Commons Apartments, LLC      Petty cash             First Union National Bank     2000007838105
Trinity Commons Apartments, LLC      Operating              First Union National Bank        4001135820
Trinity Commons Apartments, LLC      Security deposit       First Union National Bank     2020000363314
Trinity Commons Apartments, LLC      Property tax escrow    FNMA/Greystone Servicing             008125
Trinity Commons Apartments, LLC      Insurance escrow       FNMA/Greystone Servicing             008125

Timber Crest Apartments, LLC         Petty cash             First Union National Bank     2000007838095
Timber Crest Apartments, LLC         Operating              First Union National Bank        4001135809
Timber Crest Apartments, LLC         Security deposit       First Union National Bank     2020000363327
Timber Crest Apartments, LLC         Property tax escrow    FNMA/Greystone Servicing             008124
Timber Crest Apartments, LLC         Insurance escrow       FNMA/Greystone Servicing             008124
</TABLE>

                                       79
<PAGE>

                                                               STATE STREET, LLC

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


          None.

                                       80
<PAGE>

                                                               STATE STREET, LLC

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


          Subsidiaries have 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 Subsidiaries or (ii) any supplier who
          supplied tangible personal property to the Subsidiaries, provided that
          such warranty is still in full force and effect.  The Subsidiaries
          have complete warranty books.

                                       81
<PAGE>

                                                               STATE STREET, LLC

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


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

                                       82
<PAGE>

                                                               STATE STREET, LLC

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


          None.

                                       83
<PAGE>

                                                               STATE STREET, LLC

                                  Schedule 6.5
                                    Consents
                                    --------


          Consents from FNMA to be obtained to allow the Operating Partnership
          to become owner of the Subsidiaries and also to cause the key
          principal to be released and changed on the indebtedness shown on
          Schedule 11.3 from Jeffery W. Kentner to Cornerstone Realty Income
          Trust Inc.

                                       84
<PAGE>

                                                               STATE STREET, LLC

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


          None.

                                       85
<PAGE>

                                                               STATE STREET, LLC

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


<TABLE>
<CAPTION>
            Subsidiary                    Employee                 Position
---------------------------------     ----------------     ------------------------
<S>                                   <C>                  <C>
St. Andrews Place Apartments, LLC     Mechelle Herring     Community Manager
St. Andrews Place Apartments, LLC     Kim Bassano          Assistant Manager
St. Andrews Place Apartments, LLC     Sharon Tyndall       Relocation Specialist
St. Andrews Place Apartments, LLC     Sandi Burke          Relocation Specialist
St. Andrews Place Apartments, LLC     Amy Dugan            Relocation Specialist
St. Andrews Place Apartments, LLC     John Ledford         Service Supervisor
St. Andrews Place Apartments, LLC     William Fuller       Asst. Service Supervisor
St. Andrews Place Apartments, LLC     Dennis Farr          Service Technician
St. Andrews Place Apartments, LLC     Beverly Hall         Cleaning Technician

Trinity Commons Apartments, LLC       Kimberly Edwards     Community Director
Trinity Commons Apartments, LLC       Michelle Alarcon     Community Manager
Trinity Commons Apartments, LLC       Cody Hamilton        Assistant Manager
Trinity Commons Apartments, LLC       Ken Wigington        Relocation Specialist
Trinity Commons Apartments, LLC       Renee Knight         Relocation Specialist
Trinity Commons Apartments, LLC       Daniel Grier         Service Supervisor
Trinity Commons Apartments, LLC       Stanley Stancil      Asst. Service Supervisor
Trinity Commons Apartments, LLC       Jackie Ware          Service Technician

Timber Crest Apartments, LLC          Kim Mall             Community Manager
Timber Crest Apartments, LLC          Lynda Bell           Assistant Manager
Timber Crest Apartments, LLC          Heather Koppe        Relocation Specialist
Timber Crest Apartments, LLC          Erin Davis           Relocation Specialist
Timber Crest Apartments, LLC          Randy Balzer         Service Supervisor
Timber Crest Apartments, LLC          Steve Revette        Asst. Service Supervisor
Timber Crest Apartments, LLC          Matthew Hindle       Service Technician
Timber Crest Apartments, LLC          San Phang            Cleaning Technician
</TABLE>

                                       86
<PAGE>

                                                               STATE STREET, LLC

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


                                 J. Olander
                                 Gus Remppies

                                       87
<PAGE>

                                                               STATE STREET, LLC

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


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

                                       88
<PAGE>

                                                               STATE STREET, LLC

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

          See attached.

                                       89
<PAGE>

                                                               STATE STREET, LLC

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

                       St. Andrews Place Apartments, LLC
                     Federal National Mortgage Association
                     Greystone Servicing Corporation, Inc.
                                 Mortgage Loan

1.   Multifamily Note dated March 28, 2001 in the principal amount of
     $13,200,000.00 executed by St. Andrews Place Apartments, LLC and payable to
     Greystone Servicing Corporation, Inc.

2.   Multifamily Deed of Trust, Assignment of Rents and Security Agreement dated
     March 28, 2001 by and between St. Andrews Place Apartments, LLC, Michael E.
     Robbe, Trustee and Greystone Servicing Corporation, Inc. recorded March 29,
     2001 in Book 2902, Page 846, New Hanover County Registry.

3.   Master Cross-Default, Cross-Collateralization and Deed of Trust
     Modification Agreement dated March 28, 2001 by and between Greystone
     Servicing Corporation, Inc. and Borrower recorded March 29, 2001 in Book
     2902, Page 897, New Hanover County Registry.

4.   UCC-1 Financing Statements each having St. Andrews Place Apartments, LLC as
     debtor and Greystone Servicing Corporation, Inc. as secured party recorded
     with the following offices:

     (a)  New Hanover County Register of Deeds, Instrument # 200100931, recorded
          on March 29, 2001.

     (b)  North Carolina Secretary of State, Instrument # 20010030811, recorded
          on March 29, 2001.

5.   Replacement Reserve and Security Agreement dated March 28, 2001 by and
     between St. Andrews Place Apartments, LLC and Greystone Servicing
     Corporation, Inc.

6.   Principal Reserve and Security Agreement dated March 28, 2001 by and
     between Trinity Commons Apartments, LLC, Timber Crest Apartments, LLC, St.
     Andrews Place Apartments, LLC and Greystone Servicing Corporation, Inc.

7.   Agreement to Amend or Comply dated March 28, 2001 by and between St.
     Andrews Place Apartments, LLC and Jeffery W. Kentner.

                                       90
<PAGE>

                                                               STATE STREET, LLC

                                 Schedule 11.3
               Indebtedness and Collateral Agreements, continued
               -------------------------------------------------

                       St. Andrews Place Apartments, LLC
                     Federal National Mortgage Association
                     Greystone Servicing Corporation, Inc.
                                 Mortgage Loan

8.   Assignment of Deed of Trust dated March 28, 2001 by and between Greystone
     Servicing Corporation, Inc. and Fannie Mae recorded on March 29, 2001 in
     Book 2902, Page 921, New Hanover County Registry.

9.   Assignment of Management Agreement dated March 28, 2001 by and between St.
     Andrews Place Apartments, LLC, Greystone Servicing Corporation, Inc. and
     State Street Management Company, LLC.

10.  Subordination, Non-Disturbance and Attornment Agreement dated March 28,
     2001 by and between Greystone Servicing Corporation, Inc. and Mac-Gray
     Services, Inc.

                                       91
<PAGE>

                                                               STATE STREET, LLC

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

                          Timber Crest Apartments, LLC
                     Federal National Mortgage Association
                     Greystone Servicing Corporation, Inc.
                                 Mortgage Loan

1.   Multifamily Note dated March 28, 2001 in the principal amount of
     $15,410,000.00 executed by Timber Crest Apartments, LLC and payable to
     Greystone Servicing Corporation, Inc.

2.   Multifamily Deed of Trust, Assignment of Rents and Security Agreement dated
     March 28, 2001 by and between Timber Crest Apartments, LLC, Michael E.
     Robbe, Trustee and Greystone Servicing Corporation, Inc. recorded March 29,
     2001 in Book 12061, Page 229, Mecklenburg County Registry.

3.   Master Cross-Default, Cross-Collateralization and Deed of Trust
     Modification Agreement dated March 28, 2001 by and among Greystone
     Servicing Corporation, Inc. and Borrower recorded March 29, 2001 in Book
     12061, Page 281, Mecklenburg County Registry.

4.   UCC-1 Financing Statements each having Timber Crest Apartments, LLC as
     debtor and Greystone Servicing Corporation, Inc. as secured party recorded
     with the following offices:

     (a)  Mecklenburg County Register of Deeds, Instrument # 200114188, recorded
          on March 29, 2001.

     (b)  North Carolina Secretary of State, Instrument # 20010030812, recorded
          on March 29, 2001.

5.   Replacement Reserve and Security Agreement dated March 28, 2001 by and
     between Timber Crest Apartments, LLC and Greystone Servicing Corporation,
     Inc.

6.   Principal Reserve and Security Agreement dated March 28, 2001 by and
     between Trinity Commons Apartments, LLC, Timber Crest Apartments, LLC, St.
     Andrews Place Apartments, LLC and Greystone Servicing Corporation, Inc.

7.   Agreement to Amend or Comply dated March 28, 2001 by and between Timber
     Crest Apartments, LLC and Jeffery W. Kentner.

                                       92
<PAGE>

                                                               STATE STREET, LLC

                                 Schedule 11.3
               Indebtedness and Collateral Agreements, continued
               -------------------------------------------------

                          Timber Crest Apartments, LLC
                     Federal National Mortgage Association
                     Greystone Servicing Corporation, Inc.
                                 Mortgage Loan

8.   Assignment of Deed of Trust dated March 28, 2001 by and between Greystone
     Servicing Corporation, Inc. and Fannie Mae recorded on March 29, 2001 in
     Book 12061, Page 305, Mecklenburg County Registry.

9.   Assignment of Management Agreement dated March 28, 2001 by and between
     Timber Crest Apartments, LLC, Greystone Servicing Corporation, Inc. and
     State Street Management Company, LLC.

10.  Subordination, Non-Disturbance and Attornment Agreement dated March 28,
     2001 by and between Greystone Servicing Corporation, Inc. and Mac-Gray
     Services, Inc.

                                       93
<PAGE>

                                                               STATE STREET, LLC

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

                        Trinity Commons Apartments, LLC
                     Federal National Mortgage Association
                     Greystone Servicing Corporation, Inc.
                                 Mortgage Loan

1.   Multifamily Note dated March 29, 2001 in the principal amount of
     $17,990,000.00 executed by Trinity Commons Apartments, LLC and payable to
     Greystone Servicing Corporation, Inc.

2.   Multifamily Deed of Trust, Assignment of Rents and Security Agreement dated
     March 28, 2001 by and between Trinity Commons Apartments, LLC, Michael E.
     Robbe, Trustee and Greystone Servicing Corporation, Inc. recorded March 29,
     2001 in Book 008855, Page 02462, Wake County Registry.

3.   Master Cross-Default, Cross-Collateralization and Deed of Trust
     Modification Agreement dated March 28, 2001 by and among Greystone
     Servicing Corporation, Inc. and Borrower recorded March 29, 2001 in Book
     008855, Page 02515, Wake County Registry.

4.   UCC-1 Financing Statements each having Trinity Commons Apartments, LLC as
     debtor and Greystone Servicing Corporation, Inc. as secured party recorded
     with the following offices:

     (a)  Wake County Register of Deeds, Instrument # 01002195, recorded on
          March 29, 2001.

     (b)  North Carolina Secretary of State, Instrument # 20010030810, recorded
          on March 29, 2001.

5.   Replacement Reserve and Security Agreement dated March 28, 2001 by and
     between Trinity Commons Apartments, LLC and Greystone Servicing
     Corporation, Inc.

6.   Principal Reserve and Security Agreement dated March 28, 2001 by and
     between Trinity Commons Apartments, LLC, Timber Crest Apartments, LLC, St.
     Andrews Place Apartments, LLC and Greystone Servicing Corporation, Inc.

7.   Agreement to Amend or Comply dated March 28, 2001 by and between Trinity
     Commons Apartments, LLC and Jeffery W. Kentner.

                                       94
<PAGE>

                                                               STATE STREET, LLC

                                 Schedule 11.3
               Indebtedness and Collateral Agreements, continued
               -------------------------------------------------

                        Trinity Commons Apartments, LLC
                     Federal National Mortgage Association
                     Greystone Servicing Corporation, Inc.
                                 Mortgage Loan

8.   Assignment of Deed of Trust dated March 28, 2001 by and between Greystone
     Servicing Corporation, Inc. and Fannie Mae recorded on March 29, 2001 in
     Book 008855, Page 02539, Wake County Registry.

9.   Assignment of Management Agreement dated March 28, 2001 by and between
     Trinity Commons Apartments, LLC, Greystone Servicing Corporation, Inc. and
     State Street Management Company, LLC.

10.  Subordination, Non-Disturbance and Attornment Agreement dated March 28,
     2001 by and between Greystone Servicing Corporation, Inc. and Mac-Gray
     Services, Inc.

                                       95