CORNERSTONE REALTY FUND LLC - 10-Q Quarterly Report

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003

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

FOR THE TRANSITION PERIOD FROM TO

Commission File Number 333-63656

CORNERSTONE REALTY FUND, LLC

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

California		33-0827161
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

4590 MACARTHUR BLVD., SUITE 610, NEWPORT BEACH, CALIFORNIA 92660
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

949-852-1007
(ISSUER’S TELEPHONE NUMBER)

Not Applicable

(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT)

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

YES ý NO ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). o Yes ý No

As of April 25, 2003, the Fund had 21,962 units of membership interest issued and outstanding.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Cornerstone Realty Fund, LLC

Condensed Balance Sheets at March 31, 2003 and December 31, 2002

Condensed Statements of Operations for the Three Months ended March 31, 2003 and March 31, 2002

Condensed Statements of Members’ Capital for the Three Months ended March 31, 2003 and for the year ended December 31, 2002

Condensed Statements of Cash Flows for the Three Months ended March 31, 2003 and March 31, 2002

Notes to Condensed Financial Statements

CORNERSTONE REALTY FUND, LLC

(a California Limited Liability Company)

CONDENSED BALANCE SHEETS

ASSETS

	March 31, 2003		December 31, 2002
	(Unaudited)
Assets
Cash and cash equivalents	$	2,113,156	$	1,062,947

Investments in real estate
Land	2,201,930		2,201,930
Buildings, less accumulated depreciation of $43,136 in 2003 and $15,868 in 2002	4,210,626		4,237,894
	6,412,556		6,439,824
Other assets
Tenant and other receivables	14,875		11,197
Prepaid insurance	10,796		14,877
Leasing commissions, less accumulated amortization of $272 in 2003 and $136 in 2002	2,063		1,497
Office equipment, less accumulated depreciation of $2,608 in 2003 and $2,313 in 2002	246		541
Total assets	$	8,553,692	$	7,530,883

LIABILITIES AND MEMBERS’ CAPITAL

Liabilities
Accounts payable and accrued liabilities	$	57,734	$	101,038
Real estate taxes payable	99,020		113,657
Tenant security deposits	82,622		82,622
Advances payable to managing member	114,115		111,059
Total liabilities	353,491		408,376

Members’ capital (100,000 units authorized, 20,399 units issued and outstanding in 2003 and 18,061 units issued and outstanding in 2002)	8,200,201		7,122,507
Total liabilities and members’ capital	$	8,553,692	$	7,530,883

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

CORNERSTONE REALTY FUND, LLC

(a California Limited Liability Company)

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended March 31,
	2003		2002

Revenues
Rental revenues	$	194,367	$	—
Tenant reimbursements	29,804		—
Interest, dividends and other income	2,924		11,798
	227,095		11,798

Expenses
Property operating and maintenance	28,976		—
Property taxes	37,690		—
General and administrative expenses	45,327		32,169
Interest expense on advances payable to managing member	9,204		12,794
Depreciation and amortization	27,699		142
	148,896		45,105

Net income (loss)	$	78,199	$	(33,307	)

Net income (loss) allocable to managing member	$	7,820	$	(3,331	)

Net income (loss) allocable to unitholders	$	70,379	$	(29,976	)

Per unit amounts:
Basic and diluted income (loss) allocable to unitholders	$	3.68	$	(4.21	)

Basic and diluted weighted average units outstanding	19,135		7,121

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

CORNERSTONE REALTY FUND, LLC

(a California Limited Liability Company)

CONDENSED STATEMENTS OF MEMBERS’ CAPITAL

Balance, December 31, 2001	$	2,173,278

Net proceeds from offering	5,313,958
Deferred offering costs repaid to managing member	(237,500		)
Net loss	(127,229		)

Balance, December 31, 2002	7,122,507

Net proceeds from offering (unaudited)	1,046,255
Deferred offering costs repaid to managing member (unaudited)	(46,760		)
Net income (unaudited)	78,199

Balance, March 31, 2003 (unaudited)	$	8,200,201

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

CORNERSTONE REALTY FUND, LLC

(a California Limited Liability Company)

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended March 31,
	2003			2002

OPERATING ACTIVITIES
Net income (loss)	$	78,199		$	(33,307	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	27,699			142
Changes in operating assets and liabilities:
Other assets	(299		)	—
Accounts payable and accrued liabilities	(43,304		)	(13,467		)
Real estate taxes payable	(14,637		)	—

Net cash provided by (used in) operating activities	47,658			(46,632		)

FINANCING ACTIVITIES
Advances from managing member	3,056			21,909
Repayment of managing member advances	—			(168,751		)
Net proceeds from offering	1,046,255			1,021,639
Deferred offering costs repaid to managing member	(46,760		)	(45,660		)

Net cash provided by financing activities	1,002,551			829,137

Net increase in cash	1,050,209			782,505

Cash and cash equivalents at beginning of period	1,062,947			2,493,073

Cash and cash equivalents at end of period	$	2,113,156		$	3,275,578

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

CORNERSTONE REALTY FUND, LLC

(a California Limited Liability Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Business

Cornerstone Realty Fund, LLC, a California limited liability company (the “Fund”) (formerly Cornerstone Multi-Tenant Industrial Business Parks Fund, LLC and Cornerstone Industrial Properties Income and Growth Fund I, LLC), was formed on October 28, 1998. The members of the Fund are Cornerstone Industrial Properties, LLC, a California limited liability company, as the managing member (“Managing Member”), Terry G. Roussel, an individual, and other various unitholders as described below. The purpose of the Fund is to acquire, operate and sell multi-tenant industrial properties. The Fund currently is issuing and selling equity interests (“units”) in a public offering in the Fund, and is admitting the new unitholders as members of the Fund.

The Fund is generating sufficient net cash from operations to meet its obligations as they come due. The Fund is still in its offering and organizational stage, and is dependent on the Managing Member to provide advances for costs incurred in connection with the offering of units. The Managing Member must raise funds through the sale of debt or equity securities to obtain the cash necessary to provide these advances. There can be no assurance as to the amount or timing of the Managing Member’s receipt of funds. The Fund is to reimburse the Managing Member for the offering costs advanced by the Managing Member in the amount of 4% of the gross proceeds from the offering of units. During December 2001, the Fund raised the minimum offering requirement of 6,000 units. As of April 25, 2003, the Fund has issued 21,962 units primarily to new unitholders for gross offering proceeds of $10,981,000.

Each member’s liability is limited pursuant to the provisions of the Beverly-Killea Limited Liability Company Act. The term of the Fund shall continue until December 31, 2010, unless terminated sooner pursuant to the operating agreement.

2. Summary of Significant Accounting Policies

Interim Financial Information

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statement presentation. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation, have been included. Operating results for the three-month period ended March 31, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003.

For further information, refer to the audited financial statements and footnotes thereto included in the Fund’s Annual Report on Form 10-K for the year ended December 31, 2002.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amount of revenue and expenses during the reporting period. Actual results could differ materially from the estimates in the near term.

Cash and Cash Equivalents

Cash and cash equivalents consist primarily of interest-bearing investments with original maturities of 90 days or less at the date of purchase. Included in cash and cash equivalents is $82,622 that the Fund has designated as tenant security deposits.

Investments in Real Estate

Investments in real estate are stated at cost and include land, buildings and building improvements. Expenditures for ordinary maintenance and repairs are expensed to operations as incurred. Significant replacements, betterments and tenant improvements which improve or extend the useful lives of the buildings are capitalized. Depreciation of the buildings and building improvements is computed on a straight-line basis over their estimated useful lives of 39 years. Tenant improvements are depreciated over the respective tenant’s lease term.

The Fund evaluates the carrying value for investments in real estate in accordance with FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“FAS 144”). FAS 144 requires that when events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable, companies should evaluate the need for an impairment write-down. When an impairment write-down is required, the related assets are adjusted to their estimated fair value.

Office Equipment and Leasing Commissions

Office equipment is stated at cost. Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets. The estimated useful life of the office equipment is five years. Leasing commissions are stated at cost. Amortization is computed on a straight-line basis over the related lease term.

Revenue Recognition

Rental revenues are recorded on an accrual basis as they are earned over the lives of the respective tenant leases on a straight-line basis. Rental receivables are periodically evaluated for collectibility.

Fair Value of Financial Instruments

The Fund believes that the recorded value of all financial instruments approximates their current values.

Income Tax Matters

It is the intent of the Fund that the Fund be treated as a partnership for income tax purposes. As a limited liability company, the Fund is subject to certain minimal taxes and fees; however, income taxes on the income or losses realized by the Fund are generally reported on the separate returns of the members.

Concentration of Credit Risk

The Fund maintains some of its cash in money market accounts which, at times, exceeds federally insured limits. No losses have been experienced related to such amounts.

Reclassifications

Certain reclassifications have been made to the 2002 financial statement account balances to conform to the 2003 presentation.

Computation of Net Income (Loss) per Unit

The basic and diluted income (loss) allocable to unitholders is computed by dividing net income (loss) by the weighted average number of units outstanding for the period.

3. Investments in Real Estate

On September 27, 2002, the Fund acquired an existing multi-tenant industrial business park known as Normandie Business Center, located in Torrance, California for an investment of $3,901,696. Normandie Business Center consists of two single-story buildings containing a total of 48,979 leasable square feet.

On December 27, 2002, the Fund acquired an existing multi-tenant industrial business park known as the Sky Harbor Business Park, located in Northbrook, Illinois for an investment of $2,553,996. Sky Harbor Business Park consists of a single-story building containing a total of 41,422 leasable square feet.

Industrial space in the properties is generally leased to tenants under lease terms that provide for the tenants to pay a portion of operating expenses in addition to minimum rent.

4. Deferred Offering Costs Advanced by Managing Member

Deferred offering costs advanced by the Managing Member for the three months ended March 31, 2003 (unaudited) and for the year ended December 31, 2002 are as follows:

	Deferred Offering Costs
Balance, December 31, 2001	$	501,043
Costs advanced	200,071
Costs repaid	(237,500		)

Balance, December 31, 2002	463,614

Costs advanced	45,663
Costs repaid	(46,760		)

Balance, March 31, 2003	$	462,517

Specific incremental costs incurred in connection with the offering of membership units are advanced by the Managing Member. These advances bear simple interest at the prevailing prime commercial lending rate (4.25% at March 31, 2003) plus two percentage points.

Reimbursement of such offering costs is limited to 4% of the gross proceeds of the related offerings. Offering costs incurred by the Managing Member in excess of the 4% limitation are deferred, and will be reimbursed from future offering proceeds. Any offering costs incurred by the Managing Member on behalf of the Fund that are not reimbursed by the Fund will be reflected as a capital contribution to the Fund by the Managing Member, with an offsetting expense recognized in the Fund’s statement of operations. Through March 31, 2003, the Fund has received, from its Managing Member, cumulative unsecured advances for deferred offering costs in the amount of $870,497, and has repaid the Managing Member $407,980 of those deferred offering costs.

5. Related Party Transactions

The Fund is to reimburse its Managing Member for deferred offering costs advanced by its Managing Member to the Fund in the amount of 4% of the gross proceeds from the offering of units. The Fund is to reimburse its Managing Member for 100% of initial operating costs advanced to the Fund. Deferred offering and initial operating costs advanced to the Fund by its Managing Member bear interest at the prevailing prime commercial lending rate plus two percentage points.

In order to fund its initial operating costs, the Fund has received, from its Managing Member, unsecured advances and has incurred interest for a cumulative total of $479,283. Through March 31, 2003, the Fund has repaid the Managing Member $365,168 of initial operating costs and interest. The initial operating cost advances bear simple interest at the prevailing prime commercial lending rate (4.25% at March 31, 2003) plus two percentage points. Interest expense totaling $9,204 and $12,794 for the three months ended March 31, 2003 and 2002, respectively, was incurred on these advances. At March 31, 2003, the balance of initial operating cost advances payable to the Managing Member was $114,115.

An affiliate of the Managing Member, Pacific Cornerstone Capital, Inc., is entitled to receive various fees, compensation and reimbursements as specified in the Fund’s operating agreement, including commissions of 9% of the first $3,000,000 of gross proceeds from the offering of units and 7% thereafter, marketing fees of 2% of gross proceeds from the offering of units less $60,000, and expense allowances of 1.5% of gross proceeds from the offering of units. During the three months ended March 31, 2003 and 2002, the total fees, compensation and reimbursements were $122,745 and $119,861, respectively, of which a substantial portion is paid out to other broker-dealers.

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

The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the Fund’s unaudited condensed financial statements and notes thereto contained elsewhere in this report. Certain statements in this section and elsewhere contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may relate to risks and other factors that may cause the Fund’s future results of operations to be materially different than those expressed or implied herein. Some of these risks and other factors include, but are not limited to: (i) no assurance that Fund properties will continue to experience minimal or no vacancy; (ii) tenants may not be able to meet their financial obligations; (iii) rental revenues from the properties may not be sufficient to meet the Fund’s cash requirements for operations, capital requirements and distributions; (iv) suitable investment properties may not continue to be available; and (v) adverse changes to the general economy may disrupt operations.

Critical Accounting Policies

The Fund’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amount of revenue and expenses during the reporting period. Actual results could differ materially from the estimates in the near term.

Revenue Recognition

Investments in Real Estate

Impact of New Accounting Pronouncement

In November 2002, the Financial Accounting Standards Board issued Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (“Interpretation No. 45”). The disclosure

requirements of Interpretation No. 45 are effective as of December 31, 2002. The initial recognition and measurement requirements of Interpretation No. 45 are effective on a prospective basis to guarantees issued or modified after December 31, 2002. Management is currently evaluating the impact of the required accounting treatment under Interpretation No. 45 for guarantees issued or modified after December 31, 2002. Interpretation No. 45 could require the recording of a guarantee liability equal to its estimated fair value based on the expected present value of the estimated probability-weighted range of contingent payments under the guarantee arrangement.

Results of Operations

As of March 31, 2003, the Fund has purchased two multi-tenant industrial business park properties containing a total of 36 tenant spaces, in two different major metropolitan areas. The properties were purchased from the proceeds from the sale of membership units, without debt financing. The properties were purchased in the latter parts of September 2002 and December 2002, respectively.

The Fund generated net income for the three months ended March 31, 2003 of $78,199 compared to a net loss of $33,307 for the same period of 2002, for an overall increase in net income of $111,506. This increase was primarily due to rental revenues of $224,171 generated by the properties we purchased. This revenue increase was offset by reduced interest income on proceeds from unit sales of $8,874, property and related expenses of $94,223, increased general and administrative expenses of $13,158 and decreased interest expense on advances payable to managing member of $3,590.

The Fund is still in its offering and organizational stage. Additional general and administrative expenses are expected to continue until the capitalization and organization of the Fund is complete. Although the offering is scheduled to end on August 6, 2003, the managing member intends to take the steps necessary to continue offering units for sale for up to an additional two years to complete the capitalization of the Fund.

Liquidity and Capital Resources

During the three months ended March 31, 2003 the Fund’s cash and cash equivalents increased by $1,050,209. This is primarily the result of net proceeds from the sale of units during the quarter of $1,046,255.

As of April 25, 2003, the Fund has received $10,981,000 of gross proceeds from the sale of membership units, $109,979 as a capital contribution from the managing member, and paid out $1,591,983 for offering costs. Of the net proceeds of $9,498,996, the Fund purchased two properties for $6,455,693, used $285,457 in cumulative operating expenses of the Fund and $4,868 in distributions to unitholders. The Fund has $2,752,978 in cash and cash equivalents.

The Fund intends to continue offering membership units for sale and use the net proceeds from the sale of units for the acquisition of additional multi-tenant industrial business park properties, capital improvements to the properties, and for operating expenses and reserves.

The Fund expects to meet its short-term liquidity requirements from net cash

generated by operations, which we believe will be adequate to meet operating costs of the properties and the Fund, and allow for cash distributions to the unitholders.

The Fund’s offering and organizational activities have been financed through advances from the managing member. A portion of those advances have been reimbursed to the managing member at the rate of 4% of gross proceeds of the Fund’s unit sales pursuant to the prospectus for the offering. The Fund will continue to incur organizational and offering expenses and the managing member, although not obligated, intends to continue providing advances for offering and organizational expenses until the sale of membership units is completed. The managing member must raise funds through the sale of debt or equity securities to obtain the cash necessary to provide these advances. There can be no assurance as to the amount or timing of the managing member’s receipt of funds. The Fund will not reimburse the managing member for any amounts advanced by it for offering and organizational expenses which exceed the amounts and percentages set forth in the prospectus for the offering. Any such expenses incurred by the managing member on behalf of the Fund that are not reimbursed by the Fund will be reflected as a capital contribution to the Fund by the managing member with an offsetting expense recognized in the Fund’s statement of operations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Fund invests its cash and cash equivalents in FDIC insured savings accounts which, by their nature, are not subject to interest rate fluctuations.

As of March 31, 2003, the Fund had $114,115 in advances payable to its managing member. The advances are related to loans from affiliates which, by their nature, are not subject to interest rate fluctuations.

Item 4. Controls and Procedures

The Fund’s disclosure controls and procedures are designed to ensure that information required to be disclosed in reports that the Fund files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. The Chief Executive Officer and the Chief Financial Officer of Cornerstone Ventures, Inc., the manager of the managing member of the Fund, have reviewed the effectiveness of the Fund’s disclosure controls and procedures within the last ninety days and have concluded that the disclosure controls and procedures are effective. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the last day they were evaluated.

PART II - OTHER INFORMATION

Item 6.	Exhibits and Reports on Form 8-K.

	(a)	Exhibits

		99.1	Certification of Terry G. Roussel Pursuant to 18 U.S.C. § 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

		99.2	Certification of Tracy A. Thomson Pursuant to 18 U.S.C. § 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	(b)	Reports on Form 8-K

		The Registrant filed a Current Report on Form 8-K on January 9, 2003, to report, under Item 2., the acquisition of the Sky Harbor Business Park in Northbrook, Illinois on December 27, 2002.

		On March 7, 2003, the Registrant filed an amendment to the aforementioned Current Report on Form 8-K to include, under Item 7., the required financial statements and pro forma financial information.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized this 15^th day of May 2003.

CORNERSTONE REALTY FUND, LLC

By:	CORNERSTONE INDUSTRIAL PROPERTIES, LLC
	its Managing Member

	By:	CORNERSTONE VENTURES, INC.
		its Manager

		By:	/s/ Terry G. Roussel
			Terry G. Roussel, President
			(Principal Executive Officer)

		By:	/s/ Tracy A. Thomson
			Tracy A. Thomson,
			Chief Financial Officer
			(Principal Financial Officer and
			Principal Accounting Officer)

CERTIFICATIONS

I, Terry G. Roussel, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cornerstone Realty Fund, LLC;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on my evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of my most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

	/s/ Terry G. Roussel
Date: May 15, 2003	Terry G. Roussel Chief Executive Officer (Principal Executive Officer) of Cornerstone Ventures, Inc., the Manager of Cornerstone Industrial Properties, LLC, the Managing Member of Cornerstone Realty Fund, LLC

I, Tracy A. Thomson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cornerstone Realty Fund, LLC;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on my evaluation as of the Evaluation Date;

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

	/s/ Tracy A. Thomson
Date: May 15, 2003	Tracy A. Thomson Chief Financial Officer (Principal Financial Officer) of Cornerstone Ventures, Inc., the Manager of Cornerstone Industrial Properties, LLC, the Managing Member of Cornerstone Realty Fund, LLC