APPLE RESIDENTIAL INCOME TRUST INC, 424B3, 1998-02-11

APPLE RESIDENTIAL INCOME TRUST INC
424B3, 1998-02-11
REAL ESTATE INVESTMENT TRUSTS

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FILED PURSUANT TO RULE 424B3
REGISTRATION NO. 333-10635
================================================================================

SUMMARY OF SUPPLEMENT TO PROSPECTUS
(SEE THE SUPPLEMENT FOR ADDITIONAL INFORMATION):

Supplement No. 7 dated February 2, 1998 (incorporating Supplements No. 1, No. 2,
No. 3, No. 4, No. 5 and No. 6):

(1) Reports on the acquisition by the Company of twelve apartment complexes.

(2) Reports on the granting to Cornerstone Realty Income Trust, Inc. of a
right to acquire up to 9.8% of the Company's outstanding Shares, and on
certain other relationships with Cornerstone Realty Income Trust, Inc.

(3) Reports on the transfer of all of the Company's properties to a limited
partnership subsidiary indirectly wholly-owned by the Company (the
"Reorganization") and the adoption of certain amendments to the Company's
Bylaws related to the Reorganization.

(4) Reports on the Company obtaining an unsecured line of credit to
facilitate property acquisitions.

(5) Provides certain other updated information concerning the Company and its
properties.

As of December 31, 1997 the Company had closed the sale of 2,084,444 Shares
at $9 per Share, and 10,287,373 Shares at $10 per Share, representing aggregate
gross proceeds to the Company of $121,633,726, and proceeds net of selling
commissions and marketing expenses of $109,846,358. The Company endeavors
continually to invest proceeds in the acquisition of additional apartment
communities as promptly as practicable after the receipt of such proceeds. As of
December 31, 1997, substantially all of the proceeds of the offering available
for investment in properties had been so invested.

Cornerstone Realty Income Trust, Inc. will receive fees and expense
reimbursements in connection with the Company's acquisitions and the management
of the properties and the Company. In connection with the property acquisitions
described in the Supplement, Apply Realty Group, Inc., an Affiliate of the
Advisor, or Cornerstone Realty Income Trust, Inc., as successor-in-interest to
Apple Realty Group, Inc., received property acquisition fees totaling
$1,657,917.

<PAGE>

SUPPLEMENT NO. 7 DATED FEBRUARY 2, 1998
TO PROSPECTUS DATED NOVEMBER 19, 1996
(INCORPORATING SUPPLEMENTS NO. 1, NO. 2, NO. 3, NO. 4, NO. 5 AND NO. 6)

APPLE RESIDENTIAL INCOME TRUST, INC.

The following information supplements the Prospectus of Apple Residential
Income Trust, Inc. dated November 19, 1996 and is part of such Prospectus.
Prospective investors should carefully review the Prospectus and this
Supplement. THIS SUPPLEMENT NO. 7 INCORPORATES AND THEREBY REPLACES SUPPLEMENT
NO. 1 DATED FEBRUARY 10, 1997, SUPPLEMENT NO. 2 DATED APRIL 28, 1997,
SUPPLEMENT NO. 3 DATED JUNE 24, 1997, SUPPLEMENT NO. 4 DATED JULY 30, 1997,
SUPPLEMENT NO. 5 DATED OCTOBER 31, 1997 AND SUPPLEMENT NO. 6 DATED DECEMBER 11,
1997.

TABLE OF CONTENTS TO SUPPLEMENT NO. 7

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Status of the Offering ............................................................... S-2
Developments Involving Cornerstone Realty Income Trust, Inc ........................ S-2
Developments Affecting Directors; Committee Members. ................................. S-3
Unsecured Line of Credit ............................................................ S-3
Property Acquisitions ............................................................... S-4
Security Ownership of Certain Beneficial Owners and Management ..................... S-27
Management's Discussion and Analysis of Financial Condition and Results of Operations S-27
Transfer of Assets to Subsidiary Partnership ....................................... S-29
Experts .............................................................................. S-32
Update on Experience of Prior Programs ............................................. S-33
Index to Financial Statements ...................................................... F-1
</TABLE>

The Prospectus and Supplements thereto contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Such forward-looking statements include, without
limitation, statements as to anticipated renovations to Company properties and
anticipated improvements in property operations from completed and planned
property renovations, and the possible acquisition by Cornerstone Realty Income
Trust, Inc. of Shares in the Company or the business or assets of the Company.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of the Company to be materially different from the results of
operations or plans expressed or implied by such forward-looking statements.
Such factors include, among other things, unanticipated adverse business
developments affecting the Company, the properties or Cornerstone Realty Income
Trust, Inc., as the case may be, adverse changes in the real estate markets and
general and local economic and business conditions. Investors should review the
more detailed risks and uncertainties set forth under the caption "Risk Factors"
in the Prospectus. Although the Company believes that the assumptions underlying
the forward-looking statements contained in the Prospectus and the Supplements
are reasonable, any of the assumptions could be inaccurate, and therefore there
can be no assurance that the forward-looking statements included in the
Prospectus and Supplements will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included in
the Prospectus or the Supplements, the inclusion of such information should not
be regarded as a representation by the Company or any other person that the
results or conditions described in such forward-looking statements or the
objectives and plans of the Company will be achieved.

S-1
<PAGE>

STATUS OF THE OFFERING

As of December 31, 1997, the Company had closed the sale to investors of
2,084,444 Shares at $9 per Share, and 10,287,373 Shares at $10 per Share,
representing aggregate gross proceeds to the Company of $121,633,726, and
proceeds net of selling commissions and marketing expenses of $109,846,358.
These totals include 417,777 Shares purchased by Cornerstone Realty Income
Trust, Inc., as described below under "Developments Involving Cornerstone Realty
Income Trust, Inc. -- Authorization For Additional Share Issuance."

DEVELOPMENTS INVOLVING CORNERSTONE REALTY INCOME TRUST, INC.

AUTHORIZATION FOR ADDITIONAL SHARE ISSUANCE. On February 10, 1997, in
response to a request from Cornerstone Realty Income Trust, Inc.
("Cornerstone"), the Company's Board of Directors authorized the grant to
Cornerstone of a continuing right to purchase such number of Shares of the
Company as would, following any such purchase, be up to but not in excess of
9.8% of the total number of Shares of the Company then outstanding. This right
will continue for so long as the Company's Initial Offering continues, and the
purchase price for such Shares under such right will be the current public
offering price less the Selling Commissions and Marketing Expense Allowance
payable with respect thereto. Shares sold to Cornerstone pursuant to this right
would be in addition to, and not part of, the offering made by the Prospectus.

The Company elected to grant to Cornerstone this ongoing right because it
determined that the issuance of Shares in this manner would represent an
appropriate and financially prudent method of raising additional equity for the
Company. Glade M. Knight, who is a Director and the Chairman and President of
the Company, also serves as a Director, and the Chairman and Chief Executive
Officer of Cornerstone. To the extent that Cornerstone exercises its right to
acquire up to 9.8% of the outstanding Shares of the Company, Cornerstone may
become one of the largest, or perhaps the largest, shareholder of the Company,
with commensurate voting power.

On April 25, 1997, Cornerstone exercised the right described above and
purchased 417,777 Shares of the Company for approximately $3.76 million.
Cornerstone owns approximately 3.38% of the Shares of the Company outstanding on
December 31, 1997.

POSSIBLE ACQUISITION OF THE COMPANY BY CORNERSTONE. As described in the
Prospectus, under "Investment Objectives and Policies-Sale and Refinancing
Policies," the Company has granted to Cornerstone a right of first refusal to
purchase the properties and business of the Company. Cornerstone has, from time
to time, stated its intention to evaluate the acquisition of the Company and, if
the Board of Directors of Cornerstone determines it is in the best interests of
Cornerstone and its shareholders, to offer to acquire the Company or its assets.
Any decision to combine the Company and Cornerstone can only be made by the
respective Boards of Directors, and depending on the structure of the
transaction, the respective shareholders, of the two companies. Accordingly,
there can be no assurance that Cornerstone will seek to acquire the Company or
its assets or that any proposal by Cornerstone to acquire the Company or its
assets would be consummated. Nevertheless, prospective investors in the Company
should consider and evaluate the possibility of Cornerstone acquiring the
Company or its assets in making an investment decision relative to the Company.

Early in 1997, Cornerstone stated its intention to evaluate the possible
acquisition of the Company by the end of 1997. The Company has been informed (by
Cornerstone) that Cornerstone, with the assistance of certain professional
advisors, evaluated the desirability to Cornerstone and its shareholders of
acquiring the Company in 1997, and determined that it was not in the best
interest of Cornerstone and its shareholders to seek to acquire the Company at
that time. However, the Company has been informed (by Cornerstone) that
Cornerstone expects to reevaluate the desirability of seeking to acquire the
Company from time to time in the future.

PROVIDING OF CERTAIN SERVICES BY CORNERSTONE. As described in the
Prospectus under "The Advisor and Affiliates," the Company has entered into
contracts with Apple Residential Advisors, Inc. ("ARA"), Apple Residential
Management Group, Inc. ("ARMG"), and Apple Realty Group, Inc. ("ARG"), pursuant
to which ARA, ARMG and ARG, respectively, have agreed to provide certain
Company

S-2
<PAGE>

management, property management and property acquisition and disposition
services to the Company in exchange for certain compensation described therein.
ARA and ARMG have entered into subcontracts with Cornerstone, each of which
subcontracts has been approved by the Company, pursuant to which Cornerstone has
agreed to provide to the Company the services previously agreed to be provided
by ARA and ARMG in exchange for the compensation previously agreed to be paid by
the Company to ARA and ARMG. Further, Cornerstone has acquired all the assets of
ARG (consisting principally of ARG's contract with the Company) for
consideration totalling $2 million, and pursuant to such acquisition has assumed
the obligations of ARG to the Company in exchange for the compensation
previously agreed to be paid by the Company to ARG.

The effect of the foregoing transactions is that Cornerstone now renders to
the Company services previously agreed to be rendered by ARA, ARMG and ARG, in
exchange for the compensation previously agreed to be paid by the Company.

CORNERSTONE OPERATIONS. Through December 31, 1997, Cornerstone had sold
approximately $354 million in common shares to approximately 14,000 investors,
and had acquired 51 apartment communities in Virginia, North Carolina, South
Carolina and Georgia. The aggregate cost of the 51 properties (including capital
improvements thereto) was approximately $488 million. The purchase price of all
such properties was paid either using the proceeds from the sale of common
shares or using the proceeds from an unsecured line of credit which was
subsequently repaid using proceeds from the sale of common shares, except that
at December 31, 1997, approximately $146 million remained unpaid on such line of
credit. See also "Update on Experience of Prior Programs" herein.

DEVELOPMENTS AFFECTING DIRECTORS; COMMITTEE MEMBERS

In addition to those persons listed as Directors under "Management" in the
Prospectus, Lisa B. Kern has been added as a Director. Information on Ms. Kern
is set forth below.

LISA B. KERN. Ms. Kern, age 37, is a portfolio manager with Davenport &
Co. of Virginia, Inc., in Richmond, Virginia. Before joining Davenport as Vice
President in 1996, Ms. Kern advised clients in the areas of investments and
estate planning. She began her investment career in 1982 as a financial planner
and later District Manager with IDS/American Express Advisory. In 1985, Ms.
Kern received her CFP designation. In 1989, Ms. Kern joined Crestar Bank's
Trust and Investment Management Group as a Vice President. Ms. Kern is a
graduate of Randolph Macon College and received her MBA from Virginia
Commonwealth University in 1991.

Effective February 1, 1998, Ted W. Smith resigned as a Director of the
Company. Mr. Smith also resigned as an officer of ARMG. The Board thus currently
consists of four individuals, although the Board has the authority to fill the
position resulting from Mr. Smith's resignation if it so desires.

The current members of the Company's Executive Committee are Glade M.
Knight (age 53), Penelope W. Kyle (age 50), and Bruce H. Matson (age 40). The
current members of the Audit Committee are Penelope W. Kyle and Lisa B. Kern.
The current members of the Compensation Committee are Bruce H. Matson, Penelope
W. Kyle and Lisa B. Kern. For a description of the functions of the Executive,
Audit and Compensation Committees, see the Prospectus under the headings
"Management-Committees of Directors," and "Management-The Incentive Plan."

UNSECURED LINE OF CREDIT

As contemplated by the discussion in the Prospectus under the heading
"Business and Properties - Properties Owned by the Company" the Board of
Directors authorized, and the Company obtained, an unsecured line of credit,
which is designed to facilitate the timely acquisition of properties deemed
attractive by management. The unsecured line of credit the ("Unsecured Line of
Credit") is from First Union National Bank of Virginia. The borrowing is a
revolving loan for a principal amount not to exceed at any time $20 million. The
loan bears interest at a floating rate equal to the one month London interbank
offered rate ("LIBOR") plus 2%, requires monthly payments of interest and has a
due date

S-3
<PAGE>

of March 31, 1998. Although the Unsecured Line of Credit is currently unsecured,
the lender may require the securing of the loan with first mortgages on the
Company's properties if the principal amount of any advance is not repaid within
six months of the date of funding. As of December 31, 1997, there was no unpaid
balance on the Unsecured Line of Credit.

As of the date of this Supplement, the documents evidencing the Unsecured
Line of Credit have not yet been amended to reflect the reorganization
transactions described below in this Supplement under "Transfer of Assets to
Subsidiary Partnership." Unless and until such documents are so amended, with
the consent of the lender, the Unsecured Line of Credit will not be available
for use by the Company.

The Company has also obtained a line of credit from First Union National
Bank of Virginia in the amount of $1 million for general corporate purposes. The
terms of such borrowing are the same of those under the Unsecured Line of
Credit.

As the size of the Company grows, it is possible that the size of the
Unsecured Line of Credit will be increased or that the Company will obtain
another unsecured line of credit to facilitate the timely acquisition of
properties.

PROPERTY ACQUISITIONS

As of the date of this Supplement, the Company owns the following properties
(the "Properties"):

<TABLE>
<CAPTION>
NUMBER OF DATE OF
NAME LOCATION UNITS ACQUISITION
- ------------------------ ---------------- ----------- ------------
<S> <C> <C> <C>
Brookfield Dallas, TX 232 1-28-97
Eagle Crest Irving, TX 484 1-30-97
Tahoe Arlington, TX 240 1-31-97
Mill Crossing Arlington, TX 184 2-21-97
Polo Run Arlington, TX 224 3-31-97
Wildwood Euless, TX 120 3-31-97
Toscana Dallas, TX 192 3-31-97
Arbors on Forest Ridge Bedford, TX 210 4-25-97
Pace's Cove Dallas, TX 328 6-24-97
Remington Hills Irving, TX 362 8-6-97
Copper Crossing Fort Worth, TX 200 11-24-97
</TABLE>

Additional information on the Properties is provided below.

BROOKFIELD APARTMENTS
DALLAS, TEXAS

On January 28, 1997, the Company purchased the Brookfield Apartments, a
232-unit apartment complex having an address of 4060 Preferred Place, Dallas,
Texas (the "Property").

The seller was unaffiliated with the Company, the Advisor and their
Affiliates. The purchase price was $5,458,485, which was paid entirely in cash
using proceeds from the sale of Shares. Title to the Property was conveyed to
the Company by limited warranty deed.

LOCATION. The following information is based in part upon information
provided by the Dallas Chamber of Commerce.

The Property is located in south Dallas, within the Dallas/Fort Worth
Consolidated Metropolitan Statistical area, or as it is called locally, "The
Metroplex." The Dallas/Fort Worth Metroplex is in the north-central part of
Texas and is composed of nine counties. The 1996 population of The Metroplex was
approximately 4,400,000. Dallas is the second largest city in the state, behind
Houston.

S-4
<PAGE>

The economy of the Dallas/Fort Worth area is complex and diversified. Key
economic factors include a large manufacturing base (including as products
military hardware, electronics, automobiles, industrial equipment, oil-field
parts, food products and chemicals), banking, insurance services,
communications, oil and gas production and air transportation. Major employers
in the area include Texas Instruments, Southwestern Bell, General Motors, J. C.
Penney, NationsBank and Vought Aircraft Company.

The Metroplex is also an established transportation center for the nation.
The Dallas/Fort Worth International Airport occupies approximately 17,800 acres
of land between the two cities. It is the largest commercial airport in the
United States in terms of land area, and is the fourth busiest airport in the
world, with 1,700 daily arrivals and departures.

The area also has a well-established system of interstate highways and
supporting secondary routes. The Metroplex is located at the hub of Interstates
35, 45, 20 and 30. Two outer loops, Interstate 635 in Dallas and Interstate 820
in Fort Worth, surround the respective cities.

The many institutions of higher learning in the area include Southern
Methodist University, the University of Texas at Dallas, the University of Texas
at Arlington, the University of North Texas, and Texas Christian University.

The Property is located in a well-established area of Dallas near the Red
Bird Mall. The area is characterized by various retail centers, restaurants and
businesses. Downtown Dallas is an approximately 15-minute drive from the
Property. The Property is an approximately 25-minute drive from Dallas/Fort
Worth International Airport.

DESCRIPTION OF THE PROPERTY. The Property consists of 232 garden-style
apartments located in 15 two- and three-story buildings on approximately seven
acres of land. The Property was completed in 1984.

The Company believes that the Property has generally been well maintained
and is generally in good condition. However, the Company currently has budgeted
approximately $232,000 (and as of December 31, 1997 had expended approximately
$215,000) for repairs and improvements, including clubhouse renovation,
painting, wood replacement, parking lot repair, interior upgrades (including new
appliances) and pool improvements.

The Property offers seven different unit types. The unit mix and rents
being charged new tenants as of December, 1997 are as follows:

<TABLE>
<CAPTION>
APPROXIMATE
INTERIOR
SQUARE MONTHLY
QUANTITY TYPE FOOTAGE RENTAL
- ---------- ------------------------------------------ ------------ --------
<S> <C> <C> <C>
39 One bedroom, one bath 578 $445
9 One bedroom, one bath (view) 578 465
36 One bedroom, one bath w/sunroom 658 490
12 One bedroom, one bath w/sunroom (view) 658 500
24 One bedroom, one bath w/WD connections 669 510
48 One bedroom, one bath w/WD connections,
FP, bookshelves 661 525
64 Two bedrooms, two baths w/WD connections,
FP, bookshelves 913 650
</TABLE>

The apartments provide a combined total of approximately 165,000 square
feet of net rentable area.

Leases at the Property are generally for terms of one year or less. Average
rental rates for the past five years have generally increased gradually. As an
example, a two-bedroom, two-bath apartment rented for $520 in 1993, $530 in
1994, $545 in 1995, $565 in 1996, and $650 in 1997. The average effective annual
rental per square foot at the Property for 1993, 1994, 1995, 1996 and 1997 was
$7.11, $7.24, $7.45, $7.72 and $8.12, respectively.

S-5
<PAGE>

The buildings are wood frame construction with a combination of brick
veneer and masonite hardboard exteriors on reinforced concrete slab foundations.
Roofs are sloped fiberglass shingles on plywood.

The Property has an outdoor swimming pool with a large deck, a hot tub, a
controlled access entrance and exit gate, and covered parking for approximately
232 vehicles. The Property also includes a clubhouse with a leasing office.
There is also uncovered paved parking for residents.

Apartment units have wall-to-wall carpeting in the living areas and vinyl
floors in the kitchen and bath. Each apartment unit has a television hook-up,
miniblinds, drapes on sliding glass doors and individually controlled heating
and air-conditioning unit. Each kitchen is equipped with a refrigerator/freezer
with ice maker, electric range and oven, dishwasher and garbage disposal. Also,
as indicated in the table above, some units have a woodburning fireplace, a
utility area with washer/dryer connections, bookshelves, ceiling fans or a
sunroom. The owner of the Property pays for cold water, sewer service, gas usage
for hot water and trash removal. Tenants pay for their electricity service,
which includes cooking, lighting, heating and air-conditioning.

There are at least 10 apartment properties which compete with the Property.
All offer similar amenities and generally have rents that are higher when
compared with those of the Property. Based on a recent market survey, the
Advisor estimates that occupancy in nearby competing properties now averages
approximately 96%.

According to information provided by the seller, physical occupancy at the
Property averaged approximately 92% in 1992, 93% in 1993, 93% in 1994, 94% in
1995 and 97% in 1996. Based in part on information provided by the seller,
physical occupancy in 1997 averaged 99%. On December 31, 1997, the Property was
97% occupied. The residents are a mix of blue-collar and white-collar workers,
students and retired persons.

The following table sets forth the 1997 real estate tax information on the
Property:

<TABLE>
<CAPTION>
ASSESSED
JURISDICTION VALUE RATE TAX
- ------------------------ ------------ ----------- -------------
<S> <C> <C> <C>
County of Dallas ...... $5,605,190 $ 0.44307 $ 24,834.92
City of Dallas ......... 5,605,190 2.11213 118,388.90
------------
Total ............... $ 143,223.82
</TABLE>

The basis of the depreciable residential real property portion of the
Property (currently estimated at about $4,718,834) will generally be depreciated
over 27.5 years on a straight-line basis. The basis of the personal property
portion will be depreciated in accordance with the modified accelerated cost
recovery system of the Code. Amounts to be spent by the Company on repairs and
improvements will be treated for tax purposes as permitted by the Code based on
the nature of the expenditures.

The Advisor and the Company believe that the Property is and will be
continue to be adequately covered by property and liability insurance.

ACQUISITION AND MANAGEMENT SERVICES AND FEES. In consideration of services
rendered to the Company in connection with the selection and acquisition of the
Property, the Company paid Apple Realty Group, Inc. a property acquisition fee
equal to 2% of the purchase price of the Property, or $109,170. Cornerstone
Realty Income Trust, Inc. will serve as property manager for the Property and
for its services will be paid by the Company a monthly management fee equal to
5% of the gross revenues of the Property plus reimbursement of certain
expenses.

S-6
<PAGE>

EAGLE CREST I & II APARTMENTS
IRVING, TEXAS

On January 30, 1997, the Company purchased the Eagle Crest I & II
Apartments, a 484-unit apartment complex having an address of 4013 West
Northgate, Irving, Texas (the "Property").

The seller was unaffiliated with the Company, the Advisor and their
Affiliates. The purchase price was $15,650,000, which the Company paid entirely
in cash using proceeds from the sale of Shares. Title to the Property was
conveyed to the Company by limited warranty deed.

LOCATION. See above under "Brookfield Apartments" for a description of the
greater Dallas/Fort Worth Consolidated Metropolitan Statistical Area, which
includes Irving, Texas.

Irving is approximately eight miles west of the Dallas central business
district and approximately 25 miles east of downtown Fort Worth. Irving is a
relatively young city with a majority of its development occurring during the
latter half of this century. The location of Irving between Dallas and Fort
Worth, and near Dallas/Fort Worth International Airport, has enabled it to
garner a large portion of the area's recent commercial and industrial
development.

Irving is the site of Las Colinas, one of the nation's largest
master-planned real estate developments. The development occupies approximately
12,500 acres and includes residential developments, office space, research,
distribution and light industrial facilities, four golf courses, the Las Colinas
Sports Club and an equestrian center.

Las Colinas is targeted to large employers and is the home of numerous
regional and national businesses. The Irving employment sector is primarily
white-collar. Significant employers in Las Colinas include Exxon, GTE, Aetna,
Abbott Laboratories, Boeing, US Sprint, Computer Associates, Allstate Insurance,
Zale Jewelers and the Federal Home Loan Bank Board. In addition, Columbia/HCA
Health Care Corporation recently signed an agreement to buy approximately 28
acres in the development. The plans for the land include a community hospital
with medical office complex and a full-service acute-care facility.

Irving has a well-defined highway system. The city is connected to Dallas
by State Highway 114 on the northeast, State Highway 183 in its central portion
and Interstate 30 on the south.

The Property is located off of Belt Line Road in Irving. The immediate
neighborhood includes other multi-family communities, and residential,
commercial and retail development. The Property is conveniently located near
restaurants, businesses, schools, and churches, and is readily accessible from
Highways 161 and 183. The Property is an approximately 5-minute drive from
Dallas/Fort Worth International Airport.

DESCRIPTION OF THE PROPERTY. The Property consists of 484 apartment units
in 31 two- and three-story buildings on approximately 18 acres of land. There
are 296 apartment units in Phase I, which was built in 1983, and 188 apartment
units in Phase II, which was built in 1985.

The Company believes that the Property has generally been well maintained
and is generally in good condition. However, the Company currently has budgeted
approximately $968,000 (and as of December 31, 1997 had expended approximately
$774,000) for repairs and improvements, including clubhouse renovations,
structural repair of shrink/swell soil conditions, painting, wood replacement,
interior upgrades (including new appliances), parking lot resurfacing,
landscaping and pool improvements.

S-7
<PAGE>

The Property offers a wide range of units types. The unit mix and rents
being charged new tenants as of December, 1997 are as follows:

<TABLE>
<CAPTION>
APPROXIMATE
INTERIOR
SQUARE MONTHLY
QUANTITY TYPE FOOTAGE RENTAL
- ---------- --------------------------------------- ------------ ---------
<S> <C> <C> <C>
116 One bedroom, one bath 698 $ 550
120 One bedroom, one bath 796 575
4 One bedroom, one bath, sunroom, bar 798 610
48 One bedroom, one bath 896 620
24 Two bedrooms, one bath 912 620
63 Two bedrooms, two baths 1023 695
80 Two bedrooms, two baths 1089 725
1 Two bedrooms, two baths, sunroom 1123 745
4 Two bedrooms, two baths, sunroom, bar 1189 785
21 Two bedrooms, two baths 1124 780-790
3 Two bedrooms, two baths, sunroom 1224 850

</TABLE>

The apartments provide a combined total of approximately 429,000 square
feet of net rentable area.

Leases at the Property are generally for terms of one year or less. Average
rental rates for the past five years have generally increased gradually. As an
example, a one-bedroom, one-bath apartment rented for $445 in 1993, $445 in
1994, $469 in 1995, $485 in 1996, and $550 in 1997. The average effective annual
rental per square foot at the Property for 1993, 1994, 1995, 1996 and 1997 was
$7.17, $7.17, $7.56, $7.81 and $8.00, respectively.

The buildings are wood frame construction with a combination of brick
veneer and masonite hardboard siding on reinforced concrete slab foundations.
Roofs are sloped fiberglass shingles over plywood.

The Property has three outdoor swimming pools, two jacuzzis, three laundry
facilities, a fitness building, gas grills and ice machines. The Property also
has a clubhouse with a leasing office. There is ample paved parking for
residents.

Each apartment unit has wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and individually controlled heating and air-conditioning unit. Each
kitchen has a refrigerator/freezer, electric range and oven, double stainless
steel sink, a dishwasher and garbage disposal. All apartment units include
washer/dryer connections for full-sized appliances. Some apartment units feature
additional amenities, such as linen closets, a fireplace with mantle, ceiling
fans, a pantry closet, a dry bar, an entertainment center, vaulted ceilings, a
sunroom and greenhouse windows. The owner of the Property pays for cold water,
gas for hot water, sewer service, and trash removal. The tenants pay for their
electricity usage, which includes cooking, lighting, heating and
air-conditioning.

There are at least four apartment properties which compete with the
Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Advisor estimates that occupancy in nearby competing properties now averages
approximately 94%.

According to information provided by the seller, physical occupancy at the
Property averaged approximately 95% in 1992, 94% in 1993, 95% in 1994, 95% in
1995 and 97% in 1996. Based in part on information provided by the seller,
physical occupancy in 1997 averaged 94%. On December 31, 1997, the Property was
94% occupied. The tenants are a mix of white-collar and blue-collar workers.

S-8
<PAGE>

The following tables set forth the 1997 real estate tax information on the
Property:

PHASE I

<TABLE>
<CAPTION>
ASSESSED
JURISDICTION VALUE RATE TAX
- ------------------------------ ------------ ----------- -------------
<S> <C> <C> <C>
County of Dallas ............ $8,959,260 $ 0.44307 $ 39,195.79
City of Irving ............... 8,959,260 0.49300 44,169.15
Irving School District ...... 8,959,260 1.64840 147,684.44
-----------
Total ........................ $231,549.38
</TABLE>

PHASE II

<TABLE>
<CAPTION>
ASSESSED
JURISDICTION VALUE RATE TAX
- ------------------------------ ------------ ----------- -------------
<S> <C> <C> <C>
County of Dallas ............ $5,763,450 $ 0.44307 $ 25,536.12
City of Irving ............... 5,763,450 0.49300 28,413.81
Irving School District ...... 5,763,450 1.64840 95,004.71
-----------
Total ........................ $148,954.64
-----------
Grand Total .................. $380,504.02
</TABLE>

The basis of the depreciable residential real property portion of the
Property (currently estimated at about $13,744,466) will generally be
depreciated over 27.5 years on a straight-line basis. The basis of the personal
property portion will be depreciated in accordance with the modified accelerated
cost recovery system of the Code. Amounts to be spent by the Company on repairs
and improvements will be treated for tax purposes as permitted by the Code based
on the nature of the expenditures.

The Advisor and the Company believe that the Property is and will be
continue to be adequately covered by property and liability insurance.

ACQUISITION AND MANAGEMENT SERVICES AND FEES. In consideration of services
rendered to the Company in connection with the selection and acquisition of the
Property, the Company paid Apple Realty Group, Inc. a property acquisition fee
equal to 2% of the purchase price of the Property, or $313,000. Cornerstone
Realty Income Trust, Inc. will serve as property manager for the Property and
for its services will be paid by the Company a monthly management fee equal to
5% of the gross revenues of the Property plus reimbursement of certain expenses.

TAHOE APARTMENTS
ARLINGTON, TEXAS

On January 31, 1997, the Company purchased the Tahoe Apartments, a 240-unit
apartment complex having an address of 2308 Fair Oaks Drive, Arlington, Texas
(the "Property").

The seller was unaffiliated with the Company, the Advisor and their
Affiliates. The purchase price was $5,690,000, which was paid entirely in cash
using proceeds from the sale of Shares. Title to the Property was conveyed to
the Company by limited warranty deed.

LOCATION. See above under "Brookfield Apartments" for a description of the
greater Dallas/Fort Worth Consolidated Metropolitan Statistical Area, which
includes Arlington, Texas.

The Property is located in the city of Arlington, which is located between
Dallas and Fort Worth. Arlington is approximately 13 miles east of the Fort
Worth Central Business district and approximately 20 miles west of the Dallas
Central Business District.

Owing in large part to its location between Dallas and Fort Worth,
Arlington has become a focus of business development in the area. Major
employers include General Motors, National Semiconductor, Johnson & Johnson,
Doskocil Manufacturing Company and Arlington Memorial Hospital. The area is also
the site of several large warehousing and distribution companies whose primary
market is the Metroplex.

S-9
<PAGE>

The University of Texas at Arlington has an enrollment of approximately
23,000 students. Arlington also serves as a major medical center for its own
population and for residents of outlying communities as well. Arlington Memorial
Hospital has a staff of approximately 1,680 and HCA South Arlington Medical
Center has approximately 640 employees, making both of them among the largest
employers in the city.

The immediate area surrounding the Property consists of other multifamily
housing, residential, commercial and retail development. The Property is
conveniently located near restaurants, businesses, schools and churches, and is
readily accessible from Interstate 20 and Interstate 30.

DESCRIPTION OF THE PROPERTY. The Property consists of 240 garden-style
apartment units in 18 two- and three-story buildings on approximately 9.8 acres
of land. The Property was built in 1979.

The Company believes that the Property has generally been well maintained
and is generally in good condition. However, the Company currently has budgeted
approximately $900,000 (and as of December 31, 1997 had expended approximately
$705,000) for repairs and improvements including clubhouse renovation, retaining
wall repairs, landscaping, exterior painting and exterior siding replacement,
interior upgrades (including new appliances), parking lot resurfacing and
landscaping.

The Property offers five different unit types. The unit mix and rents being
charged new tenants as of December, 1997 are as follows:

<TABLE>
<CAPTION>
APPROXIMATE
INTERIOR
SQUARE MONTHLY
QUANTITY TYPE FOOTAGE RENTAL
- ---------- ------------------------- ------------ --------
<S> <C> <C> <C>
64 One bedroom, one bath 480 $400
64 One bedroom, one bath 575 430
48 One bedroom, one bath 634 465
32 Two bedrooms, two baths 941 640
32 Two bedrooms, two baths 1,027 695

</TABLE>

The apartments provide a combined total of approximately 161,000 square
feet of net rentable area.

Leases at the Property are generally for terms of one year or less. Average
rental rates for the past five years have generally increased. As an example, a
one bedroom, one bath apartment rented for $345 in 1993, $365 in 1994, $394 in
1995, $404 in 1996, and $430 in 1997. The average effective annual rental per
square foot at the Property for 1993, 1994, 1995, 1996 and 1997 was $6.91,
$7.31, $7.89, $8.09 and $8.44, respectively.

The buildings are wood frame construction with a combination of brick
veneer and masonite hardboard exteriors on reinforced concrete slab foundations.
Roofs are sloped fiberglass shingles over plywood.

The Property has an outdoor swimming pool, a hot tub, two laundry
facilities, a fitness center, a sand volleyball court and covered parking for
approximately 32 vehicles. The Property also has a clubhouse with a leasing
office. There is also uncovered paved parking for residents.

Each apartment unit has wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up, miniblinds, vertical blinds and an individually controlled heating and
air-conditioning unit. Each kitchen is equipped with a refrigerator/freezer with
icemaker, electric range and oven, dishwasher, microwave and garbage disposal.
Some units have a woodburning fireplace and washer/dryer connections. The owner
of the Property pays for cold water, sewer service, natural gas for hot water
and trash removal. Tenants pay for their electricity service, which includes
cooking, lighting, heating and air-conditioning.

There are at least four apartment properties which compete with the
Property. All offer similar amenities and generally have rents that are higher
when compared with those of the Property. Based on a recent telephone survey,
the Advisor estimates that occupancy in nearby competing properties now averages
approximately 94%.

S-10
<PAGE>

According to information provided by the seller, physical occupancy at the
Property averaged approximately 94% in 1992, 93% in 1993, 95% in 1994, 89% in
1995 and 94% in 1996. Based in part on information provided by the seller,
physical occupancy in 1997 averaged 91%. On December 31, 1997, the Property was
92% occupied. The tenants are a mix of white-collar and blue-collar workers.

The following table sets forth the 1997 real estate tax information on the
Property:

<TABLE>
<CAPTION>
ASSESSED
JURISDICTION VALUE RATE TAX
- ------------------------- ------------ ------------ -------------
<S> <C> <C> <C>
County of Tarrant ...... $5,451,821 $1.995196 $ 108,774.52
City of Arlington ...... 5,451,821 0.63800 34,782.62
------------
Total .................. $ 143,557.14
</TABLE>

The basis of the depreciable residential real property portion of the
Property (currently estimated at about $5,296,527) will generally be depreciated
over 27.5 years on a straight-line basis. The basis of the personal property
portion will be depreciated in accordance with the modified accelerated cost
recovery system of the Code. Amounts to be spent by the Company on repairs and
improvements will be treated for tax purposes as permitted by the Code based on
the nature of the expenditures.

The Advisor and the Company believe that the Property is and will continue
to be adequately covered by property and liability insurance.

ACQUISITION AND MANAGEMENT SERVICES AND FEES. In consideration of services
rendered to the Company in connection with the selection and acquisition of the
Property, the Company paid Apple Realty Group, Inc. a property acquisition fee
equal to 2% of the purchase price of the Property, or $113,800. Cornerstone
Realty Income Trust, Inc. will serve as property manager for the Property and
for its services will be paid by the Company a monthly management fee equal to
5% of the gross revenues of the Property plus reimbursement of certain expenses.

MILL CROSSING APARTMENTS
ARLINGTON, TEXAS

On February 21, 1997, the Company purchased the Mill Crossing Apartments, a
184-unit apartment complex having an address of 2713 North Collins, Arlington,
Texas (the "Property").

The seller was unaffiliated with the Company, the Advisor and their
Affiliates. The purchase price was $4,544,121, which was paid entirely in cash
using proceeds from the sale of Shares. Title to the Property was conveyed to
the Company by limited warranty deed.

LOCATION. The Property is located in the city of Arlington, Texas, which
is part of "The Metroplex." For information on The Metroplex, see "Brookfield
Apartments" herein. For information on Arlington, see "Tahoe Apartments"
herein.

DESCRIPTION OF THE PROPERTY. The Property consists of 184 garden-style
apartment units in 14 two-story buildings on approximately eight acres of land.
The Property was built in 1979.

The Company believes that the Property has generally been well maintained
and is generally in good condition. However, the Company currently has budgeted
approximately $400,000 (and as of December 31, 1997 had expended approximately
$333,000) for repairs and improvements, including painting, clubhouse
renovations, parking lot repair, interior upgrades (including new appliances),
landscaping and pool improvements.

S-11
<PAGE>

The Property offers several different unit types. The unit mix and rents
being charged new tenants as of December, 1997 are as follows:

<TABLE>
<CAPTION>
APPROXIMATE
INTERIOR
SQUARE MONTHLY
QUANTITY TYPE FOOTAGE RENTAL
- ---------- ----------------------------------- ------------ --------
<S> <C> <C> <C>
24 Efficiency 452 $400
48 One bedroom/one bath 553 425
24 One bedroom/one bath downstairs 652 460
24 One bedroom/one bath upstairs 652 470
24 Two bedrooms/two baths downstairs 860 600
24 Two bedrooms/two baths upstairs 860 610
8 Two bedrooms/two baths 1,075 750
8 Two bedrooms/two baths/view 1,075 760

</TABLE>

The apartments provide a combined total of approximately 127,000 square
feet of net rentable area.

Leases at the Property are generally for terms of one year or less. Average
rental rates of the past five years have generally increased. As an example, a
one bedroom, one bath apartment rented for $360 in 1993, $380 in 1994, $385 in
1995, $395 in 1996 and $425 in 1997. The average effective annual rental per
square foot at the Property for 1993, 1994, 1995, 1996 and 1997 was $6.95,
$7.33, $7.43 $7.62 and $8.34, respectively.

The Property has an outdoor swimming pool, clubhouse with leasing office,
and two laundry facilities. There is ample paved parking for the tenants.

Each apartment unit has wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up, miniblinds and an individually controlled heating and air conditioning
unit. Each kitchen is equipped with a refrigerator/freezer, electric range and
oven, dishwasher, microwave and garbage disposal. Certain units also feature a
woodburning fireplace, bookshelves or vaulted ceilings, and all two-bedroom
units have washer/dryer connections for full-sized appliances. The owner of the
Property pays for cold water, natural gas for hot water, sewer service and trash
removal. Tenants pay for their electricity usage, which includes cooking,
lighting, heating and air conditioning.

There are at least six apartment properties that compete with the Property.
All offer similar amenities and generally have rents that are higher when
compared with those at the Property. Based on a recent telephone survey, the
Advisor estimates that occupancy in nearby competing properties now averages
approximately 94%.

According to information provided by the seller, physical occupancy at the
Property averaged approximately 92% in 1992, 93% in 1993, 94% in 1994, 93% in
1995 and 94% in 1996. Based in part on information provided by the seller,
physical occupancy in 1997 averaged 93%. On December 31, 1997, the Property was
91% occupied. The tenants are a mix of white-collar and blue-collar workers.

The following table sets forth the 1997 real estate tax information on the
Property:

<TABLE>
<CAPTION>
ASSESSED
JURISDICTION VALUE TAX RATE TAX
- ------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
County of Tarrant ...... $4,200,000 $1.995196 $ 83,798.24
City of Arlington ...... 4,200,000 0.63800 26,796.00
-----------
Total .................. $110,594.24
</TABLE>

S-12
<PAGE>

The basis of the depreciable residential real property portion of the
Property (currently estimated at about $4,182,047) will generally be depreciated
over 27.5 years on a straight-line basis. The basis of the personal property
portion will be depreciated in accordance with the modified accelerated cost
recovery system of the Code. Amounts to be spent by the Company on repairs and
improvements will be treated for tax purposes as permitted by the Code based on
the nature of the expenditures.

The Advisor and the Company believe that the Property is and will continue
to be adequately covered by property and liability insurance.

ACQUISITION AND MANAGEMENT SERVICES AND FEES. In consideration of services
rendered to the Company in connection with the selection and acquisition of the
Property, the Company paid Apple Realty Group, Inc. a property acquisition fee
equal to 2% of the purchase price of the Property, or $90,882. Cornerstone
Realty Income Trust, Inc. will serve as property manager for the Property and
for its services will be paid by the Company a monthly management fee equal to
5% of the gross revenues of the Property plus reimbursement of certain
expenses.

POLO RUN APARTMENTS
ARLINGTON, TEXAS

On March 31, 1997, the Company purchased the Polo Run Apartments, a
224-unit apartment complex having an address of 901 Greenway Glen Drive,
Arlington, Texas (the "Property").

The seller was unaffiliated with the Company, the Advisor and their
Affiliates. The purchase price was $6,858,974, which was paid entirely using the
Unsecured Line of Credit. The Company subsequently repaid this borrowed amount
using proceeds from the sale of Shares. Title to the Property was conveyed to
the Company by limited warranty deed.

LOCATION. The Property is located off of Road to Six Flags in Arlington,
Texas, which is part of "The Metroplex." For information on The Metroplex, see
"Brookfield Apartments" herein. For information on Arlington, see "Tahoe
Apartments" herein.

The immediate area surrounding the Property consists of other multi-family
housing and residential, commercial and retail development. The Property is
located near restaurants, businesses, schools and churches, and is readily
accessible from Interstates 20 and 30. The Property is an approximately 20- to
25-minute drive from both downtown Dallas and downtown Fort Worth, as well as
the Dallas/Fort Worth International Airport.

DESCRIPTION OF THE PROPERTY. The Property consists of 224 garden-style
apartment units located in 23 two-story buildings on approximately 9.2 acres of
land. The Property was completed in 1984.

The Company believes that the Property has generally been well maintained
and is generally in very good condition. However, the Company currently has
budgeted approximately $400,000 (and as of December 31, 1997 had expended
approximately $350,000) for repairs and improvements, including painting, siding
repairs, pool renovations, clubhouse renovations and interior upgrades
(including new appliances).

The Property offers four units types. The unit mix and rents being charged
new tenants as of December, 1997 are as follows:

<TABLE>
<CAPTION>
APPROXIMATE
INTERIOR
SQUARE MONTHLY
QUANTITY TYPE FOOTAGE RENTAL
- ---------- --------------------------------------------------- ------------ --------
<S> <C> <C> <C>
56 One bedroom, one bathroom w/fireplace 656 $495
16 One bedroom, one bathroom w/fireplace and dining
room 720 535
88 Two bedrooms, two bathrooms w/fireplace and dining
room 913 620
64 Two bedrooms, two bathrooms w/fireplace, dining
room and vanity 981 650

</TABLE>

S-13
<PAGE>

The apartments provide a combined total of approximately 191,000 square
feet of net rentable area.

Leases at the Property are generally for terms of one year or less. Average
rental rates for the past five years have generally increased. As an example, a
two-bedroom, two-bath apartment rented for $495 in 1993, $510 in 1994, $530 in
1995, $560 in 1996, and $620 in 1997. The average effective annual rental per
square foot at the Property for 1993, 1994, 1995, 1996 and 1997 was $6.55,
$6.75, $7.01, $7.41 and $7.64, respectively.

The buildings are wood frame construction with combination brick veneer
and masonite hardboard exteriors on reinforced concrete slab foundations. Roofs
are sloped fiberglass shingled on plywood.

The Property has two outdoor swimming pools and a clubhouse with weight
room, party room (with full bar and kitchen), billiards, steam rooms and a
leasing office. There is ample paved parking for tenants.

Apartment units have wall-to-wall carpeting in the living areas and vinyl
floors in the kitchen and bath. Each apartment unit has a cable television
hook-up, miniblinds and an individually controlled heating and air conditioning
unit. Each kitchen is equipped with a refrigerator/freezer, electric range and
oven, microwave oven, dishwasher and garbage disposal. Each unit also includes a
wood-burning fireplace and a washer and dryer. The owner of the Property pays
for cold water, sewer service, gas usage for hot water and trash removal.
Tenants pay for their electricity service, which includes cooking, lighting,
heating and air conditioning.

There are at least six apartment properties which compete with the
Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Advisor estimates that occupancy in nearby competing properties now averages
approximately 94%.

According to information provided by the seller, physical occupancy at the
Property averaged approximately 94% in 1992, 95% in 1993, 93% in 1994, 94% in
1995 and 96% in 1996. Based in part on information provided by the seller,
physical occupancy in 1997 averaged 94%. On December 31, 1997, the Property was
92% occupied. The residents are a mix of white-collar and blue-collar workers,
students and retired persons.

The following table sets forth the 1997 real estate tax information on the
Property:

<TABLE>
<CAPTION>
JURISDICTION ASSESSED VALUE RATE TAX
- ------------------------- ---------------- ------------ -------------
<S> <C> <C> <C>
County of Tarrant ...... $5,173,615 $1.995196 $ 103,223.77
City of Arlington ...... 5,173,615 0.63800 33,007.66
------------
Total .................. $ 136,231.43
</TABLE>

The basis of the depreciable residential real property portion of the
Property (currently estimated at about $6,480,250) will generally be depreciated
over 27.5 years on a straight-line basis. The basis of the personal property
portion will be depreciated in accordance with the modified accelerated cost
recovery system of the Code. Amounts to be spent by the Company on repairs and
improvements will be treated for tax purposes as permitted by the Code based on
the nature of the expenditures.

The Advisor and the Company believe that the Property is and will continue
to be adequately covered by property and liability insurance.

ACQUISITION AND MANAGEMENT SERVICES AND FEES. In consideration of services
rendered to the Company in connection with the selection and acquisition of the
Property, the Company paid Cornerstone Realty Income Trust, Inc. a property
acquisition fee equal to 2% of the purchase price of the Property, or $137,179.
Cornerstone Realty Income Trust, Inc. will serve as property manager for the
Property and for its services will be paid by the Company a monthly management
fee equal to 5% of the gross revenues of the Property plus reimbursement of
certain expenses.

S-14
<PAGE>

WILDWOOD APARTMENTS
EULESS, TEXAS

On March 31, 1997, the Company purchased the Wildwood Apartments, a
120-unit apartment complex having an address of 200 West Bear Creek, Euless,
Texas (the "Property").

The seller was unaffiliated with the Company, the Advisor and their
Affiliates. The purchase price was $3,963,519, which was paid entirely using the
Unsecured Line of Credit. The Company subsequently repaid such borrowing on the
Unsecured Line of Credit using proceeds from the sale of Shares. Title to the
Property was conveyed to the Company by limited warranty deed.

LOCATION. The Property is located in Euless, within Tarrant County, which
is a part of "The Metroplex." For information on The Metroplex see "Brookfield
Apartments" herein.

The Property is located in the northern portion of Euless. Euless is
located between Dallas and Fort Worth, approximately 17 miles east of the Fort
Worth central business district and approximately 20 miles west of the Dallas
central business district.

DESCRIPTION OF THE PROPERTY. The Property consists of 120 garden-style
apartments located in 10 two-story buildings on approximately 10 acres of land.
The Property was built in 1984.

The Company believes that the Property has generally been well maintained
and is generally in very good condition. However, the Company currently has
budgeted approximately $225,000 (and as of December 31, 1997 had expended
approximately $198,000) for certain repairs and improvements, including
painting, siding repair, pool renovations and clubhouse renovations.

The Property offers eight different unit types. The unit mix and rents
being charged new tenants as of December, 1997 are as follows:

<TABLE>
<CAPTION>
APPROXIMATE
INTERIOR
SQUARE MONTHLY
QUANTITY TYPE FOOTAGE RENTAL
- ---------- -------------------------------------- ------------ --------
<S> <C> <C> <C>
17 One bedroom, one bathroom 525 $469
7 One bedroom, one bathroom (upgraded) 525 499
12 One bedroom, one bathroom 650 544
12 One bedroom, one bathroom (upgraded) 650 564
13 One bedroom, one bathroom 750 569
19 One bedroom, one bathroom (upgraded) 750 589
16 Two bedrooms, two bathrooms 900 780
24 Two bedrooms, two bathrooms 1,000 810

</TABLE>

The apartments provide a combined total of approximately 90,000 square feet
of net rentable area.

Leases at the Property are generally for terms of one year or less. Average
rental rates for the past five years have generally increased. As an example a
one-bedroom, one-bath apartment rented for $340 in 1993, $355 in 1994, $395 in
1995, $420 in 1996, and $469 in 1997. The average effective annual rental per
square foot at the Property for 1993, 1994, 1995, 1996 and 1997 was $6.96,
$7.27, $8.09, $8.60 and $9.32, respectively.

The buildings are wood frame construction with a combination of brick
veneer and wood siding on concrete slab foundations. Roofs are pitched and
covered with composition shingles.

The Property has an outdoor swimming pool with a waterfall, a jacuzzi,
covered picnic areas, a playground, a sand volleyball court, basketball courts,
a laundry room and a health club. The Property also has a clubhouse. There is
ample paved parking for tenants, and there are 124 covered parking spaces.

S-15
<PAGE>

Apartments units have wall-to-wall carpeting in the living areas and vinyl
floors in the kitchen and bath. Each apartment has a cable television hook-up,
miniblinds and an individually controlled heating and air conditioning unit.
Units also include ceiling fans, intrusion alarms, private balconies and
door-to-door trash and recycling service. Each kitchen is equipped with a
refrigerator-freezer, electric range and oven, dishwasher, microwave oven and
garbage disposal. All but 24 of the units have a fireplace and all of the
two-bedroom units include full-sized washer/dryer connections. The Property also
has valet laundry service with free delivery for tenants without washers and
dryers. The owner of the Property pays for gas usage for hot water and trash
removal. Tenants pay for their electricity service, which includes cooking,
lighting, heating and air conditioning. Historically, the owner of the Property
was responsible for water and sewer charges. However, in February, 1997, the
Property was converted to individually-metered water and sewer service. As
leases are renewed or replaced, the tenants will become responsible for these
charges.

There are at least six apartment properties which compete with the
Property. All offer similar amenities and generally have rents that are
comparable when compared with those of the Property. Based on a recent telephone
survey, the Advisor estimates that occupancy in nearby competing properties now
averages approximately 94%.

According to information provided by the seller, physical occupancy at the
Property averaged approximately 93% in 1992, 94% in 1993, 94% in 1994, 95% in
1995 and 96% in 1996. Based in part on information provided by the seller,
physical occupancy in 1997 averaged 94%. On December 31, 1997, the Property was
93% occupied. The residents are a mix of white-collar and blue-collar workers,
students and retired persons.

The following table sets forth the 1997 real estate tax information on the
Property:

<TABLE>
<CAPTION>
JURISDICTION ASSESSED VALUE RATE TAX
- --------------------------------- ---------------- ----------- ------------
<S> <C> <C> <C>
County of Tarrant ............... $3,680,000 $ 1.08135 $ 39,793.68
Grapevine School District ...... 3,680,000 1.53779 56,590.67
-----------
Total ........................ $ 96,384.35
</TABLE>

The basis of the depreciable residential real property portion of the
Property (currently estimated at about $3,402,216) will generally be depreciated
over 27.5 years on a straight-line basis. The basis of the personal property
portion will be depreciated in accordance with the modified accelerated cost
recovery system of the Code. Amounts to be spent by the Company on repairs and
improvements will be treated for tax purposes as permitted by the Code based on
the nature of the expenditures.

The Advisor and the Company believe that the Property is and will continue
to be adequately covered by property and liability insurance.

ACQUISITION AND MANAGEMENT SERVICES AND FEES. In consideration of services
rendered to the Company in connection with the selection and acquisition of the
Property, the Company paid Cornerstone Realty Income Trust, Inc. a property
acquisition fee equal to 2% of the purchase price of the Property, or $79,270.
Cornerstone Realty Income Trust, Inc. will serve as property manager for the
Property and for its services will be paid by the Company a monthly management
fee equal to 5% of the gross revenues of the Property plus reimbursement of
certain expenses.

TOSCANA APARTMENTS
DALLAS, TEXAS

On March 31, 1997, the Company purchased the Toscana Apartments, a 192-unit
apartment complex having an address of 17910 Kelly Boulevard, Dallas, Texas (the
"Property").

The seller was unaffiliated with the Company, the Advisor and their
Affiliates. The purchase price was $5,854,531. The Company paid all but $125,000
in cash using proceeds from the sale of Shares, and the balance was paid using
the Unsecured Line of Credit. The borrowed amount was subsequently repaid using
proceeds from the sale of Shares. Title to the Property was conveyed to the
Company by limited warranty deed.

S-16
<PAGE>

LOCATION. The Property is located near the intersection of Kelly and
Frankford in the north section of Dallas, Texas, which is part of "The
Metroplex." For information on The Metroplex, see "Brookfield Apartments,"
herein.

The area surrounding the Property consists principally of other
multi-family housing and residential, commercial and retail development. The
Property is approximately a 20-minute drive from downtown Dallas and an
approximately 20-minute drive from the Dallas/Fort Worth International Airport.

DESCRIPTION OF THE PROPERTY. The Property consists of 192 garden-style
apartment units in six two-story buildings on approximately four acres of land.
The Property was completed in 1986.

The Company believes that the Property has generally been well maintained
and is generally in good condition. However, the Company currently has budgeted
approximately $192,000 (and as of December 31, 1997 had expended approximately
$95,000) for repairs and improvements, including painting, clubhouse
renovations, parking area repair and interior upgrades.

The Property offers six different units types. The unit mix and rents being
charged new tenants as of December, 1997 are as follows:

<TABLE>
<CAPTION>
APPROXIMATE
INTERIOR
SQUARE MONTHLY
QUANTITY TYPE FOOTAGE RENTAL
- ---------- -------------------------------------- ------------ --------
<S> <C> <C> <C>
64 Efficiency 500 $450
52 One bedroom, one bathroom 600 530
12 One bedroom, one bathroom 650 540
8 One bedroom, one bathroom 650 550
42 One bedroom, one bathroom 700 560
14 One bedroom, one bathroom (upgraded) 700 575

</TABLE>

The apartments provide a combined total of approximately 115,000 square
feet of net rentable area.

Leases at the Property are generally for terms of one year or less. Average
rental rates for the past five years have generally increased. As an example, a
650 square-foot apartment rented for $395 in 1993, $425 in 1994, $470 in 1995,
$490 in 1996, and $540 in 1997. The average effective annual rental per square
foot at the Property for 1993, 1994, 1995, 1996 and 1997 was $7.68, $8.26,
$9.13, $9.52 and $9.82, respectively.

The buildings are wood frame construction with a combination of brick
veneer, stucco and painted wood siding on concrete slab foundations. Roofs are
sloped fiberglass shingles on plywood.

The Property has an outdoor swimming pool with a fountain, a jacuzzi and
cabana, a volleyball area, an exercise/weights room, a sauna, three tanning
beds, an aerobics room with aerobics classes offered, a billiard room, limited
access gates and covered parking. The Property also includes a clubhouse. There
is ample paved parking for tenants.

Each apartment unit has wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up, miniblinds and an individually controlled heating and air conditioning
unit. Each kitchen is equipped with a refrigerator/freezer with icemaker,
electric range and oven, microwave, dishwasher and garbage disposal. Each unit
also includes a wood burning fireplace, a stacked washer/dryer unit, ceiling
fans, alarm system and vaulted ceilings. The owner of the Property pays for cold
water, sewer service, gas usage for hot water and trash removal. Tenants pay for
their electricity usage, which includes cooking, lighting, heating and air
conditioning.

S-17
<PAGE>

According to information provided by the seller, physical occupancy at the
Property averaged approximately 95% in 1992, 95% in 1993, 94% in 1994, 96% in
1995 and 96% in 1996. Based in part on information provided by the seller,
physical occupancy in 1997 averaged 96%. On December 31, 1997, the Property was
94% occupied. The residents are primarily white-collar workers.

The following table sets forth the 1997 real estate tax information on the
Property:

<TABLE>
<CAPTION>
JURISDICTION ASSESSED VALUE RATE TAX
- ---------------------------------- ---------------- ----------- ------------
<S> <C> <C> <C>
County of Denton ............... $4,775,529 $ 0.25590 $ 12,220.58
City of Dallas .................. 5,972,590 0.65160 38,917.40
Carrollton-Farmers School District 5,972,590 1.49619 89,361.20
-----------
Total ........................... 140,499.18
</TABLE>

The basis of the depreciable residential real property portion of the
Property (currently estimated at about $5,332,335) will generally be depreciated
over 27.5 years on a straight-line basis. The basis of the personal property
portion will be depreciated in accordance with the modified accelerated cost
recovery system of the Code. Amounts to be spent by the Company on repairs and
improvements will be treated for tax purposes as permitted by the Code based on
the nature of the expenditures.

The Advisor and the Company believe that the Property is and will continue
to be adequately covered by property and liability insurance.

ACQUISITION AND MANAGEMENT SERVICES AND FEES. In consideration of services
rendered to the Company in connection with the selection and acquisition of the
Property, the Company paid Cornerstone Realty Income Trust, Inc. a property
acquisition fee equal to 2% of the purchase price of the Property, or $117,091.
Cornerstone Realty Income Trust, Inc. will serve as property manager for the
Property and for its services will be paid by the Company a monthly management
fee equal to 5% of the gross revenues of the Property plus reimbursement of
certain expenses.

THE ARBORS ON FOREST RIDGE APARTMENTS
BEDFORD, TEXAS

On April 25, 1997, the Company purchased The Arbors on Forest Ridge
Apartments, a 210-unit apartment complex having an address of 2200 Forest Ridge
Drive, Bedford, Texas (the "Property").

The seller was unaffiliated with the Company, the Advisor and their
Affiliates. The purchase price was $7,748,907. The Company borrowed the entire
purchase price under the Unsecured Line of Credit and subsequently repaid this
borrowed amount using proceeds from the sale of Shares. Title to the Property
was conveyed to the Company by limited warranty deed.

LOCATION. The Property is located in Bedford within Tarrant County, which
is part of "The Metroplex." For information on The Metroplex see "Brookfield
Apartments" herein.

Bedford is located between Dallas and Fort Worth, being approximately 15
miles east of the Fort Worth central business district and approximately 20
miles west of the Dallas central business district. The immediate area
surrounding the Property consists of other multi-family and single-family
housing and commercial and retail development. The Property is located near
restaurants, businesses, schools and churches, and is readily accessible from
Interstates 121 and 183. The Property is an approximately 10-minute drive from
the Dallas/Fort Worth International Airport.

DESCRIPTION OF THE PROPERTY. The Property consists of 210 garden-style
apartment units located in 19 two-story buildings on approximately 8.9 acres of
land. The Property was completed in 1986.

The Company believes that the Property has generally been well maintained
and is generally in good condition. However the Company currently has budgeted
$250,000 (and as of December 31, 1997 had expended approximately $230,000) for
repairs and improvements, including painting, siding repairs, pool renovations,
clubhouse renovations, interior upgrades and landscaping.

S-18
<PAGE>

The Property offers a variety of unit types. The unit mix and rents being
charged new tenants as of December, 1997 are as follows:

<TABLE>
<CAPTION>
APPROXIMATE
INTERIOR
SQUARE MONTHLY
QUANTITY TYPE FOOTAGE RENTAL
- ---------- ------------------------------------------------- ------------ --------
<S> <C> <C> <C>
8 Contemporary One Bedroom/One Bath Basic 581 $520
10 Contemporary One Bedroom/One Bath w/Fireplace 581 565
2 Contemporary One Bedroom/One Bath large 604 525
8 Contemporary One Bedroom/One Bath large 615 535
w/Fireplace
9 Luxury One Bedroom/One Bath Down 684 575
9 Luxury One Bedroom/One Bath Up 684 585
14 Luxury One Bedroom/One Bath Down w/Fireplace 684 615
14 Luxury One Bedroom/One Bath Up w/Fireplace 684 625
8 Luxury One Bedroom/One Bath w/View 684 635
12 Luxury One Bedroom/One Bath w/View w/Fireplace 684 640
8 Conventional One Bedroom/One Bath Lofted Study 716 585
11 Conventional One Bedroom/One Bath Lofted Study 716 600
w/Fireplace
9 Conventional One Bedroom/One Bath Lofted Study 750 620
Large w/Fireplace
12 Executive One Bedroom/One Bath Down 775 600
12 Executive One Bedroom/One Bath Up 775 610
12 Executive One Bedroom/One Bath Down w/Fireplace 775 610
12 Executive One Bedroom/One Bath Up w/Fireplace 775 620
10 Executive One Bedroom/One Bath Study Down 871 670
10 Executive One Bedroom/One Bath Study Up 893 685
4 Executive One Bedroom/One Bath Study Down 871 720
w/Fireplace
4 Executive One Bedroom/One Bath Study Up 893 735
w/Fireplace
6 Executive One Bedroom/One Bath Study 871 735
Down w/View
6 Executive One Bedroom/One Bath Study Up w/View 893 745

</TABLE>

The apartments provide a combined total of approximately 169,000 square
feet of net rentable area.

Leases at the Property are generally for terms of one year or less. Average
rental rates for the past five years have generally increased. As an example, a
one-bedroom, one-bath apartment ("executive-down") rented for $460 in 1993, $500
in 1994, $545 in 1995, $560 in 1996, and $600 in 1997. The average effective
annual rental per square foot at the Property for 1993, 1994, 1995, 1996 and
1997 was $6.65, $7.52, $7.88, $8.10 and $9.85, respectively.

The buildings are wood frame construction with a combination of brick
veneer and wood siding on concrete slab foundations. Roofs are pitched
composition shingles.

The Property includes a swimming pool and deck, hot tub/whirlpool, weight
room, sand volleyball court, basketball court, gas grills, picnic area, laundry
room, curb-side trash pick-up and access gates. The Property also has a
clubhouse. There is ample paved parking for tenants, each of whom is assigned
one covered parking space and one uncovered parking space.

Each apartment unit has wall-to-wall carpeting in the living area and vinyl
floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and an individually controlled heating and air conditioning unit. Each
apartment has ceiling fans and a private balcony or patio, and maid service is

S-19
<PAGE>

available for an extra charge. Each kitchen has a refrigerator/freezer with ice
maker, electric range and oven, dishwasher, microwave and garbage disposal. All
the apartment units except the junior one bedroom units have a fireplace. Some
units also feature decorator bookcases, pass through bar, vaulted ceilings and
washer/dryer connections. Currently, the owner of the Property pays for cold
water, sewer service and trash removal. The tenants pay for their electricity
service, which includes cooking, lighting, heating, hot water and air
conditioning. The apartment units have recently been separately metered for
water and sewer charges, and it is expected that tenants will bear these charges
as leases are renewed or new leases are entered into.

There are at least five apartment properties which compete with the
Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Advisor estimates that occupancy in nearby competing properties now averages
approximately 94%.

According to information provided by the seller, physical occupancy at the
Property averaged approximately 93% in 1992, 94% in 1993, 96% in 1994, 95% in
1995 and 96% in 1996. Based in part on information provided by the seller,
physical occupancy in 1997 averaged 96%. On December 31, 1997, the Property was
95% occupied. The residents are a mix of white-collar and blue-collar workers
and retired persons.

The following table sets forth the 1997 real estate tax information on the
Property:

<TABLE>
<CAPTION>
JURISDICTION ASSESSED VALUE RATE TAX
- ------------------------- ---------------- ----------- ------------
<S> <C> <C> <C>
County of Tarrant ...... $6,200,000 $2.531853 $156,978.88
</TABLE>

The basis of the depreciable residential real property portion of the
Property (currently estimated at about $7,477,108) will generally be depreciated
over 27.5 years on a straight-line basis. The basis of the personal property
portion will be depreciated in accordance with the modified accelerated cost
recovery system of the Code. Amounts to be spent by the Company on repairs and
improvements will be treated for tax purposes as permitted by the Code based on
the nature of the expenditures.

The Advisor and the Company believe that the Property is and will continue
to be adequately covered by property and liability insurance.

ACQUISITION AND MANAGEMENT SERVICES AND FEES. In consideration of services
rendered to the Company in connection with the selection and acquisition of the
Property, the Company paid Cornerstone Realty Income Trust, Inc. a property
acquisition fee equal to 2% of the purchase price of the Property, or $154,978.
Cornerstone Realty Income Trust, Inc. will serve as property manager for the
Property and for its services will be paid by the Company a monthly management
fee equal to 5% of the gross revenues of the Property plus reimbursement of
certain expenses.

PACE'S COVE APARTMENTS
DALLAS, TEXAS

On June 24, 1997, the Company purchased the Pace's Cove Apartments, a
328-unit apartment complex at 13100 Pandora Drive in Dallas, Texas (the
"Property"). The seller was unaffiliated with the Company, the Advisor, and
their Affiliates. The purchase price was $9,277,355. The Company borrowed the
entire purchase price under the Unsecured Line of Credit and subsequently repaid
this borrowed amount using proceeds from the sale of Shares. Title to the
Property was conveyed to the Company by limited warranty deed.

LOCATION. The Property is located in the northern portion of Dallas within
"The Metroplex." For information on The Metroplex see "Brookfield Apartments"
herein.

The neighborhood surrounding the Property consists of other multi-family
and single-family housing and commercial and retail development. The Property is
an approximately 20-minute drive from Dallas/Fort Worth International Airport
and an approximately 15-minute drive from downtown Dallas.

S-20
<PAGE>

DESCRIPTION OF THE PROPERTY. The Property consists of 328 garden-style
apartment units located in 19 two- and three-story buildings on approximately 13
acres of land. The Property was constructed in 1982.

The Company believes that the Property has generally been well maintained
and is generally in good condition. However, the Company initially budgeted
approximately $75,000 (and as of December 31, 1997 had expended approximately
that amount) for certain repairs and improvements, including clubhouse
renovations and interior upgrades.

The Property offers a variety of unit types. The unit mix and rents being
charged new tenants as of December, 1997 are as follows:

<TABLE>
<CAPTION>
APPROXIMATE
INTERIOR
SQUARE MONTHLY
QUANTITY TYPE FOOTAGE RENTAL
- ---------- ------------------------------------------- ------------ --------
<S> <C> <C> <C>
42 One bedroom/one bath 504 $440
42 One bedroom/one bath upstairs 504 450
40 One bedroom/one bath 572 460
40 One bedroom/one bath upstairs 572 470
42 One bedroom/one bath w/fireplace 690 530
42 One bedroom/one bath w/fireplace upstairs 690 540
20 One bedroom/one bath/den w/fireplace 757 605
30 Two bedrooms/two baths w/fireplace 925 660
30 Two bedrooms/two baths w/fireplace 1,026 695

</TABLE>

The apartments provide a combined total of approximately 220,000 square
feet of net rentable area.

Leases at the Property are generally for terms of one year or less. Average
rental rates for the past five years have generally increased. As an example, a
downstairs one-bedroom, one-bath apartment (504 square feet) rented for $330 in
1993, $370 in 1994, $390 in 1995, $420 in 1996, and $440 in 1997. The average
effective annual rental per square foot at the Property for 1993, 1994, 1995,
and 1996 was $7.14, $7.14, $8.01, $8.44, $9.09 and $9.80, respectively.

The buildings are wood-frame construction with a combination of brick
veneer and stucco with painted trim on concrete slab foundations. Roofs are
pitched and covered with asphalt shingles on plywood sheathing.

The Property has two outdoor swimming pools, a hot tub and jacuzzi,
volleyball area, fitness center, laundry facility and covered parking for
approximately 328 vehicles. The Property also includes a clubhouse with a
leasing office. There is also ample uncovered paved parking for residents.

Each apartment unit has wall-to-wall carpeting in the living area and vinyl
floors in the kitchen and bath. Each apartment unit has a cable television
hook-up, miniblinds, and an individual heating and air-conditioning unit. Each
kitchen has a refrigerator/freezer, electric range and oven, dishwasher and
garbage disposal. Each unit has full-sized washer/dryer connections and a
security alarm. The owner of the Property pays for cold water, sewer charges and
trash removal. The tenants pay for electricity service, which includes cooking,
lighting, heating, hot water and air-conditioning.

There are at least seven apartment properties that compete with the
Property. All offer similar amenities and generally have rents that are lower
when compared with those of the Property. Based on a recent telephone survey,
the Advisor estimates that occupancy at nearby competing properties now averages
approximately 94%.

According to information provided by the Seller, physical occupancy at the
Property averaged approximately 92% in 1992, 91% in 1993, 93% in 1994, 94% in
1995, and 93% in 1996. Based in part on information provided by seller, physical
occupancy in 1997 averaged 94%. As of December 31, 1997, the Property was 96%
occupied. The residents are a mix of white-collar and blue-collar workers.

S-21
<PAGE>

The following table sets forth the 1997 real estate tax information on the
Property.

<TABLE>
<CAPTION>
JURISDICTION ASSESSED VALUE RATE TAX
- --------------------------- ---------------- ------------ ------------
<S> <C> <C> <C>
City of Dallas ......... $9,448,220 $0.443070 $ 41,862.23
County of Dallas ...... 9,448,220 2.11213 199,558.69
-----------
Total .................. $241,420.92
</TABLE>

The basis of the depreciable residential real property portion of the
Property (currently estimated at about $8,631,504) will generally be depreciated
over 27.5 years on a straight-line basis. The basis of the personal property
portion will be depreciated in accordance with the modified accelerated cost
recovery system of the Code. Amounts to be spent by the Company on repairs and
improvements will be treated for tax purposes as permitted by the Code based on
the nature of the expenditures.

The Advisor and the Company believe that the Property will be adequately
covered by property and liability insurance.

ACQUISITION AND MANAGEMENT SERVICES AND FEES. The Company paid Cornerstone
Realty Income Trust, Inc. a property acquisition fee equal to 2% of the
purchase price of the Property, or $185,547. Cornerstone Realty Income Trust,
Inc. will also serve as property manager for the Property and for its services
will be paid by the Company a monthly management fee equal to 5% of the gross
revenues of the Property plus reimbursement of certain expenses.

REMINGTON HILLS AT LAS COLINAS
IRVING, TEXAS

On August 6, 1997, the Company purchased the Chaparosa and Riverhill
Apartments ("Chaparosa" and "Riverhill," respectively, and, collectively, the
"Property") located at 1201 Meadow Creek Drive and 1101 Meadow Creek Drive,
respectively, in Irving, Texas. Chaparosa and Riverhill are adjacent to each
other and the Company now operates them as a combined community under the new
name "Remington Hills at Las Colinas." The Property comprises 362 apartment
units. The purchase price for the Property was $13,100,000 (allocated $5,825,000
to Chaparosa and $7,275,000 to Riverhill), and the sellers were unaffiliated
with the Company, the Advisor and their Affiliates. The Company borrowed the
entire purchase price under the Unsecured Line of Credit and subsequently repaid
this borrowed amount using proceeds from the sale of Shares. Title to the
Property was conveyed to the Company by limited warranty deed.

LOCATION. The Property is located in the city of Irving, Texas, which is
part of "The Metroplex." For information on The Metroplex, see "Brookfield
Apartments" herein. For information on Irving, see "Eagle Crest I & II
Apartments" herein.

The Property is located in the area of Las Colinas. The immediate area
surrounding the Property consists of other multi-family and single-family
housing, and commercial and retail development. The Property is an approximately
15-minute drive from downtown Dallas.

DESCRIPTION OF THE PROPERTY. The Property consists of 362 garden- and
townhouse-style apartment units in 38 two- and three-story buildings on
approximately 16.8 acres of land. Chaparosa was built in 1984 and Riverhill was
built in 1985.

S-22
<PAGE>

The portion of the Property formerly known as Chaparosa offers five
different unit types. The unit mix and rents being charged new tenants as of
December, 1997 are as follows:

<TABLE>
<CAPTION>
APPROXIMATE
INTERIOR
SQUARE MONTHLY
QUANTITY TYPE FOOTAGE RENTAL
- ---------- --------------------------- ------------ --------
<S> <C> <C> <C>
42 One bedroom/one bath 713 $660
32 One bedroom/one bath 830 695
42 Two bedrooms/two baths 1,077 865
34 Two bedrooms/two baths 1,148 890
20 Two bedrooms/two baths TH 1,222 905

</TABLE>

The portion of the Property formerly known as Riverhill offers six
different unit types. The unit mix and rents being charged new tenants as of
December, 1997 are as follows:

<TABLE>
<CAPTION>
APPROXIMATE
INTERIOR
SQUARE MONTHLY
QUANTITY TYPE FOOTAGE RENTAL
- ---------- -------------------------------- ------------ --------
<S> <C> <C> <C>
32 One bedroom/one bath 665 $650
36 One bedroom/one bath 773 675
16 One bedroom/1.5 baths TH w/den 928 805
24 Two bedrooms/two baths 974 825
48 Two bedrooms/two baths 1,062 850
36 Two bedrooms/2.5 baths TH 1,176 890

</TABLE>

The apartments collectively provide a total of approximately 346,000 square
feet of net rentable area.

The Company believes that Chaparosa and Riverhill were generally well
maintained and are in good condition. However, the Company currently has
budgeted approximately $2,000,000 (and as of December 31, 1997 had expended
approximately $311,000) for repairs and improvements to the Property, including
foundation repairs, painting, wood replacement, clubhouse renovation and
appliance and carpet replacement.

Leases at the Property are generally for terms of one year or less. Average
rental rates for the past five years have generally increased. As an example, a
two-bedroom, two-bath apartment (1,222 square feet) at Chaparosa rented for $615
in 1993, $715 in 1994, $725 in 1995, $750 in 1996, and $905 in 1997. A
one-bedroom, one-bath apartment (665 square feet) at Riverhill rented for $465
in 1993, $485 in 1994, $505 in 1995, $525 in 1996, and $650 in 1997. The average
effective annual rental per square foot at Chaparosa for 1993, 1994, 1995, 1996
and 1997 was $6.53, $7.59, $7.70, $7.96 and $9.10, respectively. The average
effective annual rental per square foot at Riverhill for 1993, 1994, 1995, 1996
and 1997 was $7.29, $7.61, $7.92, $8.24 and $8.72, respectively.

Buildings are wood-frame construction with crawl spaces. Roofs are pitched
and covered with red tiles. Exteriors are stucco and brick veneer.

The portion of the Property formerly known as Chaparosa features an outdoor
swimming pool and hot tub, a lighted tennis court, a central laundry facility,
and a clubhouse with a rental office and lounge. The portion of the Property
formerly known as Riverhill features an outdoor swimming pool and enclosed
whirlpool spa, a lighted tennis court, and a clubhouse with a kitchen, lounge,
game room and rental office. The Property has access to Canal Park and ample
paved parking for tenants.

All apartment units have wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and baths, as well as cable television hook-ups and
individually controlled heating and air-conditioning units. Each apartment unit
has washer/dryer connections, a woodburning fireplace and outside storage. Each

S-23
<PAGE>

kitchen is equipped with a refrigerator/freezer with icemaker, electric range
and oven, microwave, dishwasher and garbage disposal. The owner of the property
pays for cold water, sewer service, cable television, alarm service and trash
removal. The tenants pay for their electricity service, which includes heat, hot
water, air-conditioning, cooking and lights.

There are at least five apartment properties that compete with the
Property. All offer similar amenities and generally have rents that are higher
when compared to those of the Property. Based on a recent telephone survey, the
Advisor estimates that occupancy in nearby competing properties now averages
approximately 95%.

According to information provided by the seller, physical occupancy at
Chaparosa averaged approximately 94% in 1992, 94% in 1993, 95% in 1994, 97% in
1995 and 97% in 1996. According to information provided by the seller, physical
occupancy at Riverhill averaged approximately 94% in 1992, 96% in 1993, 95% in
1994, 96% in 1995 and 96% in 1996. Based in part on information provided by the
seller, physical occupancy in 1997 averaged 95% at both Chaparosa and Riverhill.

As of December 31, 1997, occupancy at the Property was 91%. Tenants at the
Property are principally white-collar workers.

The following tables set forth the 1997 real estate tax information on the
Property:

CHAPAROSA

<TABLE>
<CAPTION>
JURISDICTION ASSESSED VALUE RATE TAX
- -------------------------------- ---------------- ----------- ------------
<S> <C> <C> <C>
County of Dallas ............... $6,053,350 $ 0.44307 $ 26,820.58
City of Irving ............... 6,053,350 0.49300 29,843.02
Carrollton Farmers Branch School
District ..................... 6,053,350 1.49619 90,569.62
-----------
Total ........................ $147,233.22
</TABLE>

RIVERHILL

<TABLE>
<CAPTION>
JURISDICTION ASSESSED VALUE RATE TAX
- -------------------------------- ---------------- ----------- ------------
<S> <C> <C> <C>
County of Dallas ............... $7,206,540 $ 0.44307 $ 31,930.02
City of Irving ............... 7,206,540 0.49300 35,528.24
Carrollton Farmers Branch School
District ..................... 7,206,540 1.49619 107,823.53
-----------
Total ........................ $175,281.79
-----------
GRAND TOTAL .................. $322,515.01
</TABLE>

The basis of the depreciable residential real property portion of the
Property (currently estimated at about $10,705,670) will generally be
depreciated over 27.5 years on a straight-line basis. The basis of the personal
property portion will be depreciated in accordance with the modified accelerated
cost recovery system of the Code. Amounts to be spent by the Company on repairs
and improvements will be treated for tax purposes as permitted by the Code based
on the nature of the expenditures.

The Advisor and the Company believe that the Property is and will continue
to be adequately covered by property and liability insurance.

ACQUISITION AND MANAGEMENT SERVICES AND FEES. In consideration of services
rendered to the Company in connection with the selection and acquisition of the
Property, the Company paid Cornerstone Realty Income Trust, Inc., a property
acquisition fee equal to 2% of the purchase price of the Property, or $116,500
for Chaparosa and $145,500 for Riverhill. Cornerstone Realty Income Trust, Inc.
will serve as property manager for the Property and for its services will be
paid by the Company a monthly management fee equal to 5% of the gross revenues
of the Property plus reimbursement of certain expenses.

S-24
<PAGE>

COPPER CROSSING
FORT WORTH, TEXAS

On November 24, 1997, the Company purchased the Copper Crossing Apartments
located at 5644 Riverwalk Drive in Fort Worth, Texas (The "Property").

The Property comprises 200 apartment units. The purchase price for the
Property was $4,750,000. The seller was Copper Crossing Investors, Ltd., a Texas
limited partnership which is not affiliated with the Company, Apple Residential
Advisors, Inc. or their Affiliates. The entire purchase price was paid using
proceeds from the sale of shares. Title to the Property was conveyed to the
Company by limited warranty deed.

LOCATION. The Property is located off of Bryant-Irvin in Fort Worth, Texas,
in Tarrant County, which is part of the greater Dallas/Fort Worth Consolidated
Metropolitan Statistical Area, or as it is called locally, "The Metroplex." For
information on The Metroplex, see "Brookfield Apartments" herein.

The immediate area surrounding the Property consists of other multi-family,
single-family, commercial and retail development. The Property is located near
restaurants, businesses, schools, and churches, and is readily accessible from
Interstate 20, Highway 183 and Interstate 820, which are the major highways in
the area.

The Property is close to Hulen Mall, a major regional mall. This regional
mall has spurred significant construction and corresponding retail growth in the
Hulen Mall/Benbrook area. The Property is an approximately 30-minute drive from
the Dallas/Fort Worth International Airport, an approximately 15-minutes drive
from the Fort Worth central business district and an approximately 30-minute
drive from the Dallas central business district.

DESCRIPTION OF THE PROPERTY. The Property consists of 200 garden-style
apartment units in 13 two-story buildings on approximately 6.9 acres of land.
The Property was constructed in 1981.

The Property offers four different unit types. The unit mix and rents
currently being charged new tenants as of December, 1997 are as follows:

<TABLE>
<CAPTION>
APPROXIMATE
INTERIOR
SQUARE MONTHLY
QUANTITY TYPE FOOTAGE RENTAL
- --------------- ---------------------------- ------------ --------
<S> <C> <C> <C>
56 One bedroom/one bathroom 563 $425
40 One bedroom/one bathroom 663 435
32 One bedroom/one bathroom 745 500
72 Two bedrooms/two bathrooms 915 590
</TABLE>

The apartments provide a total of approximately 148,000 square feet of net
rental area.

The Company believes that the Property has generally been well maintained
and is in good condition. According to the seller, in the past two years the
seller spent over $400,000 in capital improvements to the exterior of the
Property, including new roofs, exterior rehabilitation, and repair and
replacement of awnings.

The Company currently has budgeted approximately $100,000 for additional
capital improvements to the Property. These improvements will include clubhouse
renovations and upgrading the landscaping at the Property. In addition, at the
time that the Company acquired the Property there were 12 apartment units which
had been damaged by fire. These damaged apartment units are currently being
repaired and are all expected to be available for occupancy by April 1998. All
costs of the repair are being funded with the proceeds of Property casualty
insurance.

Leases at the Property are generally for terms of one year or less. Average
rental rates for the past five years have both increased and decreased. As an
example, a one-bedroom, one-bathroom apartment unit (563 square feet) rented for
$300 in 1993, $299 in 1994, $315 in 1995, $345 in 1996, and $425 in 1997. The
average effective annual rental per square foot at the Property for 1993, 1994,
1995, 1996 and 1997 was $5.74, $5.72, $6.03, $6.60 and $7.08, respectively.

S-25
<PAGE>

The buildings are wood-frame construction with a combination of brick
veneer and masonite hardboard on reinforced concrete slab foundations. Roofs
are sloped fiberglass shingled on plywood.

The Property has an outdoor swimming pool with a large deck, a fitness
center, a laundry facility, a sand volleyball court and picnic areas. There is
also a clubhouse which includes an entertainment area and a leasing office.
There is ample paved parking for the tenants.

All apartment units have wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and an individually controlled heating and air conditioning unit. Each
kitchen is equipped with a refrigerator/freezer, electric range and oven,
dishwasher and garbage disposal. Each apartment unit has a woodburning
fireplace, a screened porch or balcony, ceiling fans, mini blinds and vertical
blinds. The largest one-bedroom units and the two-bedroom units include
full-sized washer/dryer connections. The owner of the Property pays for cold
water, gas usage for hot water, sewer service and trash removal. Tenants pay for
their own electricity service, which includes cooking, lighting, heating and air
conditioning.

There are at least five apartment properties that compete with the
Property. All offer similar amenities and generally have rents that are
comparable to those of the Property. Based on a recent telephone survey, the
Advisor estimates that occupancy in the nearby competing properties now averages
approximately 94%.

According to information provided by the Seller, physical occupancy at the
Property averaged approximately 85% in 1992, 87% in 1993, 96% in 1994, 95% in
1995, 94% in 1996, and 95% during 1997. As of December 31, 1997, the Property
was 91% occupied, counting as vacant the 12 units recently damaged by fire. Of
the 188 units available for rental, 182, or 96% of 188, were rented as of
December 31, 1997. The tenants are a mix of white-collar workers, blue-collar
workers, students and retired persons.

The following table sets forth the 1997 real estate tax information of the
Property:

<TABLE>
<CAPTION>
ASSESSED
JURISDICTION VALUE RATE TAX
- ------------------------- ------------ ----------- ------------
<S> <C> <C> <C>
County of Tarrant ...... $3,300,000 $ 2.01160 $ 66,382.67
City of Benbrook ...... 3,300,000 0.78500 25,905.00
-----------
Total .................. $ 92,287.67
</TABLE>

The basis of the depreciable residential real property portion of the
Property (currently estimated at about $3,988,383) will generally be depreciated
over 27.5 years on a straight-line basis. The basis of the personal property
portion will be depreciated in accordance with the modified accelerated cost
recovery system of the Code. Amounts to be spent by the Company on repairs and
improvements will be treated for tax purposes as permitted by the Code based on
the nature of the expenditures.

The Advisor and the Company believe that the Property is and will continue
to be adequately covered by property and liability insurance.

ACQUISITION AND MANAGEMENT SERVICES AND FEES. In consideration of services
rendered to the Company in connection with the selection and acquisition of the
Property, the Company paid Cornerstone Realty Income Trust, Inc., a property
acquisition fee equal to 2% of the purchase price of the Property, or $95,000.
Cornerstone Realty Income Trust, Inc. will serve as property manager for the
Property and for its services will be paid by the Company a monthly management
fee equal to 5% of the gross revenues of the Property plus reimbursement of
certain expenses.

S-26
<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As described above under "Developments Involving Cornerstone Realty Income
Trust - Authorization for Additional Share Issuance," on December 31, 1997,
Cornerstone owned approximately 3.38% of the Company's outstanding Shares.
Cornerstone's address is 306 East Main Street, Richmond, Virginia 23219. As of
December 31, 1997, no person was the beneficial owner of more than five percent
of any class of the registrant's voting securities.

The following table shows the beneficial ownership of the Company's Shares
by the Company's directors and executive officers as of December 31, 1997.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- -------------------------------------- ---------------------- -----------------
<S> <C> <C>
Glade M. Knight ..................... 5,555.56 *
Penelope W. Kyle ..................... 500 *
Bruce H. Matson ..................... 0 0
Lisa B. Kern ........................ 0 0
All Directors and
Executive Officers as a Group ...... 6,055.56 *
</TABLE>

- ----------

* Less than 1% of outstanding Shares. Each of Ms. Kyle, Ms. Kern and Mr. Matson
also owns an option to purchase 6,850 Shares at $10 per Share.

In addition, at December 31, 1997, Glade M. Knight owned 170,000 Class B
Convertible Shares of the Company, and each of Debra A. Jones and Stanley J.
Olander, Jr. owned 15,000 Class B Convertible Shares, constituting collectively
all of the Company's issued and outstanding Class B Convertible Shares.
Information on the Class B Convertible Shares of the Company is set forth under
the caption "Principal and Management Stockholders" in the Prospectus. Ms.
Jones and Mr. Olander are officers of Cornerstone.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion is based upon the unaudited financial statements
of the Company as of September 30, 1997 and the financial statements of the
Company as of December 31, 1996. The information should be read in conjunction
with the Company's financial statements and notes thereto and the pro forma
financial statements and notes thereto of the Company included elsewhere in this
Supplement. The Company is operated and has elected to be treated as a REIT for
federal income tax purposes.

LIQUIDITY AND CAPITAL RESOURCES. There was a significant change in the
Company's liquidity during the nine months ended September 30, 1997. During the
nine months ended September 30, 1997, the Company closed the sale to investors
of 8,258,996 Shares representing gross proceeds to the Company of $80,923,281
and net proceeds after payment of Selling Commissions and other costs of
$72,245,821. The Company capitalized $2,173,200 of improvements to its various
properties as of September 30, 1997. It is anticipated that some $3,000,000 in
additional capital improvements will be completed during the next year on the
current portfolio. The source to fund these improvements is from equity raised
and set aside specifically for the improvements and from the expected sale of
additional Shares.

S-27
<PAGE>

During the nine months ended September 30, 1997, the Company made ten
acquisitions of residential rental properties as follows:

<TABLE>
<CAPTION>
PURCHASE
PROPERTY NAME DATE ACQUIRED UNITS PRICE LOCATION
- -------------------------------------- --------------- ------- ------------- --------------
<S> <C> <C> <C> <C>
Brookfield Apartments ............... January 1997 232 $ 5,458,485 Dallas, TX
Eagle Crest Apartments ............... January 1997 484 15,650,000 Irving, TX
Tahoe Apartments ..................... January 1997 240 5,690,560 Arlington, TX
Mill Crossing Apartments ............ February 1997 184 4,544,121 Arlington, TX
Polo Run Apartments .................. March 1997 224 6,858,974 Arlington, TX
Wildwood Apartments .................. March 1997 120 3,963,519 Euless, TX
Toscana Apartments .................. March 1997 192 5,854,531 Dallas, TX
The Arbors Apartments ............... April 1997 210 7,748,907 Bedford, TX
Pace's Cove Apartments ............... June 1997 328 9,277,355 Dallas, TX
Remington Hills at Las Colinas ...... August 1997 362 13,100,000 Irving, TX
</TABLE>

During the nine months ended September 30, 1997, the Company borrowed
$39,640,000 against its line of credit in conjunction with property acquisitions
and repaid $34,507,298 of the balance. The balance on the line of credit as of
September 30, 1997 was $5,132,702. In October 1997, the Company repaid the
outstanding balance. This is consistent with the Company's long term business
objective to hold its properties on an unleveraged basis.

Cash and cash equivalents totaled $1,350,305 at September 30, 1997.

While the Company is always assessing potential acquisitions, no material
commitments existed on November 1, 1997 for the purchase of additional
properties. The Company's only on-going commitment for capital expenditures is
to the renovation of its existing portfolio. Equity funds have been raised in
conjunction with the acquisition of properties to fund capital expenditures for
currently held properties. In addition, the Company will acquire new properties
as funds are available.

The Company has short-term cash flow needs to conduct the operation of its
properties. The rental income generated from the properties supplies sufficient
cash to provide for the payment of these operating expenses.

The Company's capital resources are expected to grow with the continued
sale of its Shares and through operations.

RESULTS OF OPERATIONS. As operations of the Company began in January 1997,
a comparison of the three months or nine months ended September 30, 1997 and
1996 is not possible. The Company's property operations for the nine months
ended September 30, 1997 reflect the operations of the Company's ten
acquisitions from their respective acquisition dates. Rental income for the
three and nine months ended September 30, 1997 was $3,789,266 and $7,771,744,
respectively.

The economic occupancy levels for the Company's properties averaged 92% at
the end of the three months and 93% for the nine months ended September 30,
1997. Overall, the average rental rate for the portfolio was $525 per month for
the nine months ended September 30, 1997 and $539 for the three months ended
September 30, 1997.

The Company's other source of income is the investment of its cash and cash
reserves. Interest income for the three and nine months ended September 30, 1997
was $19,043 and $107,584, respectively.

Total expenses for the nine months ended September 30, 1997 were $5,258,721
and $2,718,762 for the three months ended September 30, 1997. The operating
expense ratio (the ratio of rental expenses, excluding general and
administrative, amortization and depreciation expense, to rental income) was 48%
for the nine months ended September 30, 1997 versus 49% for the three months
ended September 30, 1997. General and administrative expenses totaled 5% of
total rental income for the three and nine months ended September 30, 1997. This
percentage is expected to decrease as the Company's asset base

S-28
<PAGE>

and rental income grow. These expenses represent the administrative expenses of
the Company as distinguished from the operations of the Company's properties.
Depreciation expense for the nine months ended September 30, 1997 was $1,086,111
and for the three months ended September 30, 1997 was $642,770.

The Company does not believe that inflation had any significant impact on
the operation of the Company during the nine months ended September 30, 1997.
Future inflation, if any, would likely cause increased operating expenses, but
the Company believes that increases in expenses would be offset by increases in
rental income. Inflation may also cause capital appreciation of the Company's
properties over time, as rental rates and replacement costs increase.

TRANSFER OF ASSETS TO SUBSIDIARY PARTNERSHIP

Originally, the Company's Properties were acquired and owned directly by
the Company without the interposition or use of any subsidiary companies.
Company management determined that the direct ownership of its Properties could
inhibit in certain respects the Company's flexibility in planning certain
transactions or acquisitions. For example, the direct-ownership structure makes
it difficult, if not impossible, for potential sellers of properties to exchange
their properties for equity interests in the Company in a manner that could
defer tax liabilities for the sellers. Company management felt that this lack of
flexibility could hinder the Company's acquisition of desirable properties from
sellers seeking such tax deferral. Furthermore, Company management believed that
the direct-ownership structure tended to maximize the Company's exposure to
certain franchise taxes.

Based upon the foregoing, Company management proposed to the Board of
Directors, and the Board of Directors adopted and submitted for approval by the
Shareholders, a proposal the effect of which would be to transfer the apartment
properties of the Company to a newly-organized limited partnership indirectly
wholly-owned by the Company.

The Board of Directors approved and submitted to the Shareholders (with its
recommendation for adoption) the following resolutions (collectively, the
"Reorganization Proposal");

RESOLVED, that the Company transfer any and all of the Company's
multifamily rental apartment communities (including all assets associated
therewith) to a partnership to be created by the Company, the partners of
which will be the Company or entities wholly-owned, directly or indirectly,
by the Company; and

RESOLVED, that the following be added as a new Article XIII to the
Company's Bylaws:

ARTICLE XIII
CONDUCT OF BUSINESS THROUGH SUBSIDIARIES

13.1 Subsidiaries. To the extent permitted by the Articles of
Incorporation, these Bylaws (excluding Section 9.1(i) hereof, which shall not
be construed to prohibit anything contemplated by this Article XIII) and
applicable law (including any required consent of the Directors and
Shareholders under applicable law), the Company may conduct its business
through subsidiary companies owned or controlled by the Company (or its
subsidiaries). Any such subsidiary company is referred to as a "Subsidiary
Company" and collectively such subsidiary companies are referred to as the
"Subsidiary Companies." It is specifically acknowledged that the conduct of
the Company's business through a Subsidiary Company or Subsidiary Companies
may be effected and undertaken by the transfer by the Company of properties
to, the acquisition of properties by, and the ownership and operation of
properties in, a partnership all of whose interests are initially owned by
the Company and/or a Subsidiary Company or Subsidiary Companies. However, the
transfer described in the preceding sentence shall not constitute an event
permitting conversion of the Company's Class B Convertible Shares.

13.2 Interpretation and Application of Bylaws. If and to the extent (i)
the Company conducts its business through Subsidiary Companies, or (ii) there
are properties which, in the absence of Subsidiary Companies, would be owned
and operated by the Company but such properties are instead

S-29
<PAGE>

owned and operated by Subsidiary Companies, restrictions on the power of the
Company to engage in certain transactions and restrictions on the authority
of Directors and officers of the Company in these Bylaws, and in particular
the restrictions contained in Articles VIII, IX and X of these Bylaws, shall
be interpreted and applied to Subsidiary Companies in the same manner as they
apply by their terms to the Company to the extent necessary to ensure that
the Bylaw provision is given the effect intended notwithstanding that the
Company's business is conducted through Subsidiary Companies instead of by
the Company directly. The Company shall exercise any rights and powers it has
as an owner or partner (directly or indirectly) of a Subsidiary Company
consistently with this provision.

13.3 Certain Shareholder Consents. If a transaction involving the
proposed sale or other transfer, whether by sale, exchange, merger,
consolidation, lease, share exchange or otherwise, by a Subsidiary Company
would require pursuant to applicable law the consent or approval of
Shareholders if the Company owned directly, and were proposing the sale or
other transfer of, the relevant assets, the Company shall not approve,
undertake or effectuate any such proposed sale or other transfer through such
Subsidiary Company without first obtaining the consent or approval of the
Shareholders of the Company.

Pursuant to notice duly given, to all Shareholders of record on October 31,
1997, in a Proxy Statement dated November 26, 1997, a Special Meeting of
Shareholders of the Company was held at 3:00 p.m. on Wednesday, December 17,
1997, at the offices of McGuire, Woods, Battle & Boothe, L.L.P., Richmond,
Virginia. At the Special Meeting, Shareholders were asked to consider and vote
on the Reorganization Proposal. There being insufficient votes to approve the
Reorganization Proposal at that time, the meeting was adjourned and then
reconvened after adjournment on December 19, 1997 at 2:00 p.m. A vote was then
taken on the Reorganization Proposal. As of the record date, there were
10,108,598 Common Shares outstanding and entitled to vote. A total of 6,845,381
Common Shares were present in person or by proxy. A total of 6,823,288 Common
Shares voted in favor of the Reorganization Proposal. A total of 11,785 Common
Shares voted against the Reorganization Proposal and a total of 10,308 Common
Shares abstained. The Reorganization Proposal was adopted, as 67.5%, or more
than two-thirds, of the Common Shares outstanding and entitled to vote approved
the Reorganization Proposal.

REORGANIZATION

In light of the foregoing and as further described herein, the Company
transferred the Properties to a Virginia limited partnership, the partners of
which are two newly created, wholly-owned subsidiaries of the Company.

The Company formed the two wholly-owned subsidiaries, Apple Limited, Inc.
and Apple General, Inc., as Virginia corporations. The Company then transferred
an undivided 99 percent interest in the Properties to Apple Limited, Inc. and
an undivided 1 percent interest in the Properties to Apple General, Inc. Apple
Limited, Inc. and Apple General, Inc. together formed the limited partnership,
Apple REIT Limited Partnership (the "Partnership"), as a Virginia limited
partnership. Apple Limited, Inc. contributed its 99% interest in the Properties
to the Partnership in exchange for a 99% limited partnership interest in the
Partnership. Apple General, Inc. contributed its 1% interest in the Properties
to the Partnership in exchange for a 1% general partnership interest in the
Partnership. The Properties were transferred to the Partnership on December 29,
1997. The Partnership now holds the Properties and conducts the business
activities of the Company associated with the Properties.

S-30
<PAGE>

The following diagrams set forth the original structure of the Company's
ownership of the Properties and the structure that is in effect following
implementation of the Reorganization:

<S> <C>
Current Company Structure Company Structure Following Reorganization
- ------------------------- ------------------------------------------

</TABLE>

EFFECT OF THE REORGANIZATION AND BYLAW AMENDMENTS

Shareholders effectively continue to hold the same ownership interest in
the Properties following the Reorganization, through the Company's 100%
ownership of Apple Limited, Inc. (which owns a 99% interest in the Partnership),
and 100% ownership of Apple General, Inc. (which owns a 1% interest in the
Partnership). Apple General, Inc., as general partner of the Partnership, will
manage the affairs of the Partnership. The Company, as sole shareholder of Apple
General, Inc., will be entitled to exercise the rights of a 100%-shareholder
with respect to Apple General, Inc., including the election and removal of
directors of that company. At the present time, Glade M. Knight, Chairman of the
Board and Chief Executive Officer of the Company, is the sole director and
President of Apple General, Inc. No substantive change in the rights of the
Shareholders is intended to occur as a result of the Reorganization. To give
effect to this intent, there are now in effect amendments to the Company's
Bylaws (set forth above) designed to retain existing Bylaw restrictions on the
Company and its directors and officers, and to retain certain existing
Shareholder rights, notwithstanding the technical changes in legal ownership
effected by the Reorganization. The transfers described in the Reorganization
are expected to be tax-free transfers at both the state and federal level.

S-31
<PAGE>

EXPERTS

The balance sheets of Apple Residential Income Trust, Inc. at December 31,
1996 and August 7, 1996 (date of inception), appearing in this Prospectus and
Post-Effective Amendment No. 5 to the Registration Statement have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.

Certain Statements of Income and Direct Operating Expenses of properties,
included herein, have been included herein in reliance on the reports of L.P.
Martin & Company, P.C., independent certified public accountants, also included
herein, and upon the authority of said firm as experts in accounting and
auditing.

S-32
<PAGE>

UPDATE ON EXPERIENCE OF PRIOR PROGRAMS

The following tables set forth updated information (through December 31,
1997) on Cornerstone Realty Income Trust, Inc. ("Cornerstone"), a real estate
investment trust which was organized by Affiliates of the Advisor of Apple
Residential Income Trust, Inc. Please refer to "Experience of Prior Programs" on
pages 66 through 70 of the Prospectus for additional information, including the
definition of terms used herein.

TABLE I: EXPERIENCE IN RAISING AND INVESTING FUNDS

Table I presents a summary of the funds raised and the use of those funds
by Cornerstone, whose investment objectives are similar to those of the Company
and whose offering closed within three years ending December 31, 1997.

<TABLE>
<S> <C>
Dollar Amount Offered ................................. 368,536,368
Dollar Amount Raised ................................. 368,536,368
Less Offering Expenses:
Selling Commissions and Discounts .................. 7.19%
Organizational Expenses .............................. 3.42%
Other ................................................ 0.00%
Reserves ............................................. 3.00%
Percent Available for Investment ..................... 86.39%
Acquisition Costs:
Prepaid items and fees to purchase property ......... 85.12%
Cash downpayment .................................... 0.00%
Acquisition fees .................................... 1.27%
Other ................................................ 0.00%
Total Acquisition Costs .............................. 86.39%
Percent Leverage (excluding unsecured debt) ............ 0.00%
Date offering began .................................... May 1993
Length of offering (in months) ........................ 54
Months to invest amount available for investment ...... 54
</TABLE>

S-33
<PAGE>

TABLE II: COMPENSATION TO SPONSOR AND ITS AFFILIATES

Table II summarizes the compensation paid to the Prior Program Sponsor and
its Affiliates (i) by programs organized by it and closed within three years
ended December 31, 1997, and (ii) by all other programs during the three years
ended December 31, 1997.

<TABLE>
<CAPTION>
OTHER
CORNERSTONE PROGRAM
-------------- -------------
<S> <C> <C>
Date offering commenced .............................. May 1993 Various
Dollar amount raised ................................. $368,536,368 $ 35,483,175
Amounts paid to Prior Program Sponsor form proceeds
of offering:
Acquisition fees
Real Estate commission .............................. $ 3,610,154 $ 0
Advisory fees ....................................... $ 0 $ 0
Other ............................................. $ 0 $ 0
Cash generated from operations before deducting pay-
ments to Prior Program Sponsor......................... $ 67,594,762 $ 9,069,403
Aggregate compensation to Prior Program Sponsor
Management fees ....................................... $ 3,657,580 $ 954,012
Accounting fees ....................................... $ 0 $ 183,922
Reimbursements ....................................... $ 2,717,655 $ 0
Leasing fees .......................................... $ 0 $ 0
Other fees .......................................... $ 515,689 $ 0
There have been no fees from property sales or refinanc-
ings
</TABLE>

S-34
<PAGE>

TABLE III: OPERATING RESULTS OF PRIOR PROGRAMS

Table III presents a summary of the annual operating results for
Cornerstone, the only offering closed in the five years ending December 31,
1997. Table III is shown on both an income tax basis as well as in accordance
with generally accepted accounting principles, the only significant difference
being the methods of calculating depreciation.

<TABLE>
<CAPTION>
1997 1996 1995 1994
----------------- --------------- ------------
<S> <C> <C> <C> <C>
Capital contributions by year ............... $ 63,485,868 $ 176,885,206 $71,771,027 $23,496,784
Gross revenue .............................. $ 71,970,624 $ 40,352,955 $16,300,821 $ 8,177,576
Operating expenses ........................... $ 29,948,366 $ 18,696,781 $ 8,180,016 $ 4,690,941
Interest income (expense) .................. $ (7,230,205) $ (1,140,667) $ (68,061) $ 110,486
Depreciation ................................. $ 15,163,593 $ 8,068,063 $ 2,788,818 $ 1,210,818
Net income (loss) GAAP basis ............... $ 19,225,553 $ (4,169,849) $ 5,229,715 $ 2,386,303
Taxable income .............................. $ 0 $ 0 $ 0 $ 0
Cash generated from operations ............... $ 30,863,533 $ 20,162,776 $ 9,618,956 $ 3,718,086

Less cash distributed to investors ......... $ 31,324,870 $ 15,934,901 $ 6,316,185 $ 2,977,136
Cash generated after cash distribution ...... $ (461,337) $ 4,227,875 $ 3,302,771 $ 740,950
Special items
Capital contributions, net .................. $ 63,485,868 $ 144,798,035 $71,771,027 $23,496,784
Fixed asset additions ..................... $ 157,859,343 $ 194,519,406 $75,589,089 $28,557,568
Line of credit .............................. $ 96,166,141 $ 41,603,000 $ 3,300,000 $ 5,000,000
Cash generated .............................. $ 1,331,335 $ (3,890,496) $ 2,784,709 $ 680,166
End of period cash ........................... $ 4,513,986 $ 3,182,651 $ 7,073,147 $ 4,288,438
Tax and distribution data per $1000 invested
Federal income tax results
Cornerstone Realty Income Trust is a
REIT and thus is not taxed at the cor-
porate level
Cash distributions to investors
Source (on GAAP basis)
Investment income ........................ $ 77 $ 78 $ 72 $ 64
Return of capital ........................ $ 23 $ 12 $ 15 $ 16
Source (on Cash basis)
Sales .................................... $ 0 $ 0 $ 0 $ 0
Refinancings .............................. $ 0 $ 0 $ 0 $ 0
Operations .............................. $ 1 $ 90 $ 87 $ 80
Other .................................... $ 0 $ 0 $ 0 $ 0
</TABLE>

S-35
<PAGE>

INDEX TO FINANCIAL STATEMENTS OF THE COMPANY

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
COMPANY FINANCIAL STATEMENTS
Report of Independent Auditors ......................................................... F-2
Balance Sheets at December 31, 1996 and August 7, 1996 (Date of Inception) ............ F-3
Notes to the Balance Sheets. ............................................................ F-4
COMPANY INTERIM FINANCIAL STATEMENTS (UNAUDITED):
Balance Sheets -- September 30, 1997 and December 31, 1996 .............................. F-7
Statement of Operations -- Three Months ended September 30, 1997 and Nine Months Ended
September 30, 1997 .................................................................. F-8
Statement of Shareholders' Equity -- Nine Months ended September 30, 1997 ............... F-9
Statement of Cash Flows -- Nine Months ended September 30, 1997 ........................ F-10
Notes to Financial Statements ......................................................... F-11
PROPERTY FINANCIAL STATEMENTS
Brookfield Apartments:
Independent Auditors' Report ......................................................... F-14
Historical Statement of Income and Direct Operating Expenses ........................ F-15
Eagle Crest I & II Apartments:
Independent Auditors' Report ......................................................... F-16
Historical Statement of Income and Direct Operating Expenses ........................ F-17
Tahoe Apartments:
Independent Auditors' Report ......................................................... F-18
Historical Statement of Income and Direct Operating Expenses ........................ F-19
Mill Crossing Apartments:
Independent Auditors' Report ......................................................... F-20
Historical Statement of Income and Direct Operating Expenses ........................ F-21
Polo Run Apartments:
Independent Auditors' Report ......................................................... F-22
Historical Statement of Income and Direct Operating Expenses ........................ F-23
Wildwood Apartments:
Independent Auditors' Report ......................................................... F-24
Historical Statement of Income and Direct Operating Expenses ........................ F-25
Toscana Apartments:
Independent Auditors' Report ......................................................... F-26
Historical Statement of Income and Direct Operating Expenses ........................ F-27
Arbors on Forest Ridge Apartments:
Independent Auditors' Report ......................................................... F-28
Historical Statement of Income and Direct Operating Expenses ........................ F-29
Pace's Cove Apartments:
Independent Auditors' Report ......................................................... F-30
Historical Statement of Income and Direct Operating Expenses ........................ F-31
Remington Hills at Las Colinas (formerly, Chaparosa and Riverhill Apartments):
Independent Auditors' Report (Chaparosa Apartments) ................................. F-32
Historical Statement of Income and Direct Operating Expenses (Chaparosa Apartments).... F-33
Independent Auditors' Report (Riverhill Apartments) ................................. F-34
Historical Statement of Income and Direct Operating Expenses (Riverhill Apartments) ... F-35
Copper Crossing Apartments:
Independent Auditors' Report ......................................................... F-36
Historical Statement of Income and Direct Operating Expenses ........................ F-37
PRO FORMA FINANCIAL STATEMENTS
Pro Forma Balance Sheet as of September 30, 1997 (Unaudited) ........................... F-38
Pro Forma Statement of Operations for the Twelve Months ended December 31, 1996
(Unaudited) ........................................................................... F-39
Pro Forma Statement of Operations for the Nine Months ended September 30, 1997
(Unaudited) ........................................................................... F-40
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders of
Apple Residential Income Trust, Inc.

We have audited the accompanying balance sheets of Apple Residential Income
Trust, Inc., as of December 31, 1996 and August 7, 1996 (date of inception). The
balance sheets are the responsibility of the Company's management. Our
responsibility is to express an opinion on these balance sheets based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheets are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheets. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the balance sheets referred to above present fairly, in all
material respects, the financial position of Apple Residential Income Trust
Inc., at December 31, 1996 and August 7, 1996 (date of inception), in conformity
with generally accepted accounting principles.

Ernst & Young LLP

Richmond, Virginia
March 26, 1997

F-2
<PAGE>

APPLE RESIDENTIAL INCOME TRUST, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
(DATE OF INCEPTION)
DECEMBER 31, 1996 AUGUST 7, 1996
------------------- --------------------
<S> <C> <C>
ASSETS
Cash .......................................... $ 100 $ 100
========= =====
LIABILITIES AND SHAREHOLDERS EQUITY
Shareholder's equity
Common stock, no par value
Authorized 50,000,000 shares; Issued and out-
standing 10 shares (Notes 2 and 5).......... $ 100 $ 100

Class B Convertible Stock, no par value. Autho-
rized 200,000 shares; Issued and outstanding
200,000 shares (Note 3) ..................... 20,000 --
Receivable from principal shareholder ......... (20,000) --
--------- -----
$ 100 $ 100
========= =====
</TABLE>

See accompanying notes to balance sheets.

F-3
<PAGE>

APPLE RESIDENTIAL INCOME TRUST, INC.
NOTES TO THE BALANCE SHEETS
DECEMBER 31, 1996

NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Apple Residential Income Trust, Inc. (the "Company") is a Virginia
corporation that intends to qualify as a real estate investment trust ("REIT")
for federal income tax purposes. The Company, which has no operating history,
was formed to invest primarily in existing residential apartment communities in
Texas and southwestern regions of the United States. Initial capitalization
occurred on August 7, 1996.

Apple Residential Advisors, Inc. (the "Advisor"), which owned 100% of the
outstanding common stock of Apple Residential Income Trust, Inc. as of December
31, 1996, is the advisor to the Company and will provide its day-to-day
management under a proposed agreement between the Company and the Advisor.

SIGNIFICANT ACCOUNTING POLICIES

INCOME TAXES

The Company intends to make an election to be treated, and expects to qualify,
as a REIT under the Internal Revenue Code of 1986, as amended. As a REIT, the
Company will be allowed a deduction for the amount of dividends paid to its
shareholders, thereby subjecting the distributed net income of the Company to
taxation only at the shareholder level. The Company's continued qualification as
a REIT will depend on its compliance with numerous requirements, including
requirements as to the nature of its income and distribution of dividends.

USE OF ESTIMATES

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

NOTE 2 -- OFFERING OF SHARES

The Company intends to raise capital through a "best-efforts" offering of shares
by David Lerner Associates, Inc. (the "Managing Dealer"), which will receive
selling commissions and a marketing expense allowance based on proceeds of the
shares sold.

A minimum offering of 1,666,667 shares ($15,000,000) must be sold no later than
November 19, 1997, or the offering will terminate and investors' subscription
payments, with interest, will be refunded to investors. Pending sale of such
minimum offering amount, investors' subscription payments will be placed in an
escrow account.

NOTE 3 -- CLASS B CONVERTIBLE SHARES

On November 14, 1996, the Company issued 200,000 shares of Class B Convertible
Shares to Mr. Glade Knight, President and Chairman of the Board of the Company,
for $.10 per share or $20,000 in aggregate.

There are no dividends payable on the Class B Convertible Shares. On liquidation
of the Company, the holder of the Class B Convertible Shares is entitled to a
liquidation payment of $.10 per Class B Convertible Share before any
distribution of liquidation proceeds to the holders of the Common Shares.
Holders of more than two-thirds of the Class B Convertible Shares must approve
any proposed amendment to the Articles of Incorporation that would adversely
affect the Class B Convertible Shares or create a new class of stock senior to
or on a parity with the Class B Convertible Shares. The Class B

F-4
<PAGE>

APPLE RESIDENTIAL INCOME TRUST, INC.
NOTES TO THE BALANCE SHEETS -(CONTINUED)

NOTE 3 -- CLASS B CONVERTIBLE SHARES -(CONTINUED)

Convertible Shares are convertible into Common Shares upon and for 180 days
following the occurrence of either of the following events: (1) substantially
all of the Company's assets, stock or business is sold or otherwise transferred,
whether through sale, exchange, merger, consolidation, lease, share exchange or
otherwise, or (2) the Advisory Agreement with the Advisor is terminated or not
renewed, and the Company ceases to use Apple Residential Management Group, Inc.
to provide substantially all of its property management services. Upon the
occurrence of either triggering event, each Class B Convertible Share is
convertible into a number of Common Shares based upon the gross proceeds raised
through the date of conversion in the "best efforts" offering according to the
following formula:

<TABLE>
<CAPTION>
GROSS PROCEEDS RAISED FROM SALES NUMBER OF COMMON SHARES
OF COMMON SHARES THROUGH THROUGH CONVERSION OF ONE
DATE OF CONVERSION CLASS B CONVERTIBLE SHARE
- ---------------------------------- --------------------------
<S> <C>
$ 50 million ............ 1.0
$100 million ............ 2.4
$150 million ............ 4.2
$200 million ............ 6.4
$250 million ............ 8.0
</TABLE>

No additional consideration is due upon the conversion of the Class B
Convertible Shares. Upon the probable occurrence of a triggering event, the
Company will record expense in the statement of operations based on
convertibility of the Class B Convertible Shares.

NOTE 4 -- ORGANIZATIONAL AND OFFERING COSTS

As of December 31, 1996, affiliates of the Company have incurred on behalf of
the Company organizational and offering costs amounting to approximately
$522,000. Upon the sale of 1,666,667 Common Shares, the Company will reimburse
the affiliates for these organizational and offering costs.

NOTE 5 -- RELATED PARTIES

The Company has negotiated a Property Management Agreement with Apple
Residential Management Group, Inc. ("ARMG") to manage each property to be
acquired by the Company for a management fee equal to 5% of gross rental
collections, plus reimbursement of certain expenses.

The Company has entered into a Property Acquisition and Disposition Agreement
with Apple Realty Group, Inc. ("ARG") to acquire and dispose of real estate
assets for the Company. A fee of 2% of the purchase or sale price of the
property will be payable for this service.

The Company has entered into an Advisory Agreement with the Apple Residential
Advisors, Inc. ("AA") to provide management for the Company and its assets. An
annual fee equal to .1% - .25% of total contributions received by the Company
will be payable for this service.

Mr. Knight owns 100% of the common stock of ARMG, ARG and AA.

Upon the completion of a public offering of common shares being pursued by
Cornerstone Realty Income Trust, Inc., for which Mr. Knight also serves as Chief
Executive Officer and Chairman of the Board, Cornerstone will enter into a
contract with the Company and subcontracts with Apple Residential Management
Group, Inc. and Apple Residential Advisors, Inc. whereby Cornerstone will
provide advisory, property management and brokerage services to the Company in
exchange for fees and expense reimbursements as described above.

Cornerstone Realty Income Trust, Inc. has a continuing right to own up to 9.8%
of the common shares of Apple. In addition, Cornerstone has a right of first
refusal to purchase the properties and business of Apple.

F-5
<PAGE>

APPLE RESIDENTIAL INCOME TRUST, INC.
NOTES TO THE BALANCE SHEETS -- (CONTINUED)

NOTE 6 -- STOCK INCENTIVE PLANS

The Company has adopted two stock incentive plans (the "Incentive Plan" and
"Directors' Plan") to provide incentives to attract and retain directors,
officers and key employees. The plans provide for the grant of options to
purchase a specified number of shares of common stock ("Options") or grants of
restricted shares of common stock ("Restricted Stock") to selected employees and
directors of the Company and certain affiliates. A Compensation Committee
("Committee") will be established to implement and administer the plans. The
Committee will be responsible for granting Options and shares of Restricted
Stock and for establishing the exercise price of Options and the terms and
conditions of Restricted Stock.

NOTE 7 - SUBSEQUENT EVENT

For the period January 1, 1997 through March 21, 1997, the Company closed the
sale to investors of 4,643,239 shares (1,666,667 at $9 per share and 2,976,572
at $10 per share) representing gross proceeds to the Company of $44,765,718 and
net proceeds after payment of selling commissions and other costs of
$40,289,146.

During January 1997, effective January 1, 1997, the Company acquired three
apartment communities. Brookfield Apartments, a 232-unit apartment community
located in Dallas, Texas, was purchased for $5,458,485. Eagle Crest Apartments,
a 484-unit apartment community located in Irving, Texas, was purchased for
$15,650,000. Tahoe Apartments, a 240-unit apartment community located in
Arlington, Texas, was purchased for $5,690,560. During February, 1997, the
Company acquired Mill Crossing Apartments, a 184-unit apartment community
located in Arlington, Texas for $4,544,121.

On March 1, 1997 the Company entered into an agreement with a commercial bank to
obtain an unsecured revolving line of credit of $10 million. The line of credit
expires on March 31, 1998. This agreement allows the Company to finance a
portion of the purchase price of property acquisitions. Borrowings under the
agreement are evidenced by an unsecured promissory note and bear interest at
one-month LIBOR plus 200 basis points. As of March 26, 1997, there have been no
borrowings under the agreement.

F-6
<PAGE>

APPLE RESIDENTIAL INCOME TRUST, INC.

BALANCE SHEETS (UNAUDITED)

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
--------------- -------------
<S> <C> <C>
ASSETS
Investment in Rental Property
Land ......................................................... $ 13,504,976 --
Building ................................................... 67,365,012 --
Property improvements ....................................... 1,683,878 --
Furniture and fixtures ....................................... 489,322 --
------------ ---------
83,043,188 --
Less accumulated depreciation .............................. (1,086,111) --
------------ ---------
81,957,077 --
------------ ---------
Cash and cash equivalents .................................... 1,350,305 $ 100
Prepaid expenses ............................................. 161,391 --
Other assets ................................................ 561,464 --
------------ ---------
2,073,160 100
------------ ---------
Total Assets ............................................. $ 84,030,237 $ 100
============ =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Notes payable ................................................ $ 5,132,702 --
Accounts payable ............................................. 411,069 --
Accrued expenses ............................................. 1,647,832 --
Rents received in advance .................................... 25,969 --
Tenant security deposits .................................... 371,794 --
------------ ---------
7,589,366 --
Shareholders' equity
Common stock, no par value, authorized 50,000,000 shares;
issued and outstanding 8,676,784 shares and 10 shares,
respectively................................................ 76,005,921 $ 100
Class B convertible stock, no par value, authorized 200,000
shares: issued and outstanding 200,000 ..................... 20,000 20,000
Receivable from principal shareholder ........................ (20,000) (20,000)
Net income greater than distributions ........................ 434,950 --
------------ ---------
76,440,871 100
------------ ---------
Total Liabilities and Shareholders' Equity ............... $ 84,030,237 $ 100
============ =========
</TABLE>

See accompanying notes to financial statements.

F-7
<PAGE>

APPLE RESIDENTIAL INCOME TRUST, INC

STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1997
-------------------- ------------------
<S> <C> <C>
REVENUE:
Rental income ................................. $3,789,266 $7,771,744
EXPENSES:
Utility expenses .............................. 385,718 796,570
Repairs and maintenance ........................ 317,500 581,796
Taxes and insurance ........................... 597,227 1,176,182
Property management ........................... 207,026 403,479
Advertising .................................... 88,782 194,785
General and administrative ..................... 192,520 391,837
Amortization .................................... 8,484 25,444
Depreciation of rental property ............... 642,770 1,086,111
Other operating expenses ........................ 278,735 602,517
---------- ----------
Total expenses .............................. 2,718,762 5,258,721
---------- ----------
Income before other income (expense) ............ 1,070,504 2,513,023
Interest and investment income .................. 19,043 107,584
Interest expense .............................. (232,818) (377,154)
---------- ----------
Net income ....................................... $ 856,729 $2,243,453
========== ==========
Net income per share ........................... $ 0.12 $ 0.44
========== ==========
Weighted average number of shares outstanding ... 7,135,536 5,053,423
========== ==========
</TABLE>

See accompanying notes to financial statements.

F-8
<PAGE>

APPLE RESIDENTIAL INCOME TRUST, INC.

STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)

<TABLE>
<CAPTION>
COMMON STOCK CONVERTIBLE CLASS B STOCK
------------------------- -----------------------------------------------------------
NET OF
RECEIVABLE NET INCOME TOTAL
NUMBER NUMBER FROM PRINCIPAL GREATER THAN SHAREHOLDERS'
OF SHARES AMOUNT OF SHARES SHAREHOLDER DISTRIBUTIONS EQUITY
----------- ------------- ----------- ---------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 ...... 10 $ 100 200,000 $ 0 $ 0 $ 100
Net proceeds from the sale of shares 8,147,064 71,238,441 -- -- -- 71,238,441
Net income ........................ -- -- -- -- 2,243,453 2,243,453
Cash distributions declared to share-
holders ($.401 per share) -- -- -- -- (1,808,503) (1,808,503)
Shares issued to Cornerstone Realty
Income Trust, Inc. ............... 417,778 3,760,000 -- -- -- 3,760,000
Shares issued through Additional
Share Option ..................... 111,932 1,007,380 -- -- -- 1,007,380
--------- ----------- ------- --- ---------- -----------
Balance at September 30, 1997 ...... 8,676,784 $76,005,921 $200,000 $ 0 $ 434,950 $76,440,871
========= =========== ======== === ========== ===========
</TABLE>

See accompanying notes to financial statements.

F-9
<PAGE>

APPLE RESIDENTIAL INCOME TRUST, INC.

STATEMENT OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1997
------------------
<S> <C>
Cash flow from operating activities:
Net income ......................................................... $ 2,243,453
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization .................................... 1,111,555
Changes in operating assets and liabilities:
Prepaid expenses ................................................ (161,391)
Other assets ................................................... (586,908)
Accounts payable ................................................ 411,069
Accrued expenses ................................................ 1,647,832
Rent received in advance ....................................... 25,969
Tenant security deposits ....................................... 371,794
-------------
Net cash provided by operating activities ..................... 5,063,373
Cash flow from investing activities:
Acquisitions of rental property .................................... (80,869,988)
Capital improvements ................................................ (2,173,200)
-------------
Net cash used in investing activities ........................ (83,043,188)
Cash flow from financing activities:
Proceeds from short-term borrowings ................................. 39,640,000
Repayments of short-term borrowings ................................. (34,507,298)
Net proceeds from issuance of shares .............................. 76,005,821
Increase (decrease) in commissions payable to underwriters ......... --
Cash distributions paid to shareholders ........................... (1,808,503)
-------------
Net cash provided by financing activities ..................... 79,330,020
Increase in cash and cash equivalents ........................ 1,350,205
Cash and cash equivalents, beginning of year ........................ 100
-------------
Cash and cash equivalents, end of period ........................... $ 1,350,305
=============
</TABLE>

See accompanying notes to financial statements

F-10
<PAGE>

APPLE RESIDENTIAL INCOME TRUST, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1997

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared in
accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information required by generally
accepted accounting principles. 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 and nine months
ended September 30, 1997 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1997. These financial statements
should be read in conjunction with the Company's December 31, 1996 Annual Report
on Form 10-K.

The Company was formed in August, 1996. Operations commenced in January,
1997.

During the first quarter of 1997, the Financial Accounting Standards Board
issued a new statement on the calculation of earnings per share which is
effective beginning in the 4th quarter of 1997 and early adoption is prohibited.
Under the new statement, primary and fully dilutive earnings per share are
replaced with basic and diluted earnings per share. The Company's basic earnings
per share for the nine month period ended September 30, 1997 according to the
new statement would not change from the reported amounts.

In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an
Enterprise and Related Information." The Company will adopt SFAS No. 131 in
1998. SFAS No. 131 will not have any impact on the financial results or
financial condition of the Company, but will result in certain in required
disclosures of segment reporting.

CASH AND CASH EQUIVALENTS:

Cash equivalents include highly liquid investments with original maturities
of three months or less. The fair market value of cash and cash equivalents
approximates their carrying value.

INVESTMENT IN RENTAL PROPERTY

The Company records impairment losses on rental property used in the
operations if indicators of impairment are present and the undiscounted cash
flows estimated to be generated by the respective properties are less than their
carrying amount. Impairment losses are measured as the difference between the
asset's fair value and its carrying value.

The investment in rental property is recorded at depreciated cost and
includes real estate brokerage commissions paid to an affiliated company Apple
Realty Group for purchase prior to March 1, 1997, and Cornerstone Realty Income
Trust, Inc. after March 1, 1997.

Repairs and maintenance costs are expensed as incurred while significant
improvements, renovations and replacements are capitalized. Depreciation is
computed on a straight-line basis over the estimated useful lives of the related
assets which are 27.5 years for buildings and major improvements and a range
from five to seven years for furniture and fixtures.

INCOME RECOGNITION

Rental, interest and other income are recorded on an accrual basis. The
Company's properties are leased under operating leases that, typically, have
terms that do not exceed one year.

ADVERTISING COSTS

Costs incurred for the production and distribution of advertising are
expensed as incurred.

F-11
<PAGE>

APPLE RESIDENTIAL INCOME TRUST, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -(CONTINUED)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-(CONTINUED)

INCOME PER SHARE

Net income per share is computed based upon the weighted average number of
shares outstanding during the year. Potentially dilutive securities are not
included since their inclusion would not materially dilute net income per share.

NOTE 2 -- NOTES PAYABLE

On March 1, 1997, the Company entered into an agreement with a commercial
bank for an unsecured revolving line of credit of $10 million. The line of
credit expires on March 31, 1998. During August, 1997, the Company increased its
unsecured line of credit to $20 million. Borrowings under the agreement are
evidenced by an unsecured promissory note and bear interest at one-month LIBOR
plus 200 basis points. As of September 30, 1997 the interest rate on the
unsecured line of credit was 7.6875% and the outstanding balance was
approximately $5.1 million. In October 1997, the Company repaid the full
outstanding balance of the line of credit with proceeds from the additional sale
of shares.

NOTE 3 -- RELATED PARTIES

Prior to March 1, 1997, the Company had contracted with Apple Residential
Management Group, Inc. (The "Management Company") to manage the acquired
properties, Apple Residential Advisors, Inc. (The "Advisor") to advise and
provide the Company with day to day management, and Apple Realty Group, Inc. to
acquire and dispose of real estate assets held by the Company. The Company paid
the Management Company a management fee equal to 5% of rental income plus
reimbursement of certain expenses in the amount of $61,135. The Company paid the
Advisor a fee equal to .1% to .25% of total contributions received by the
Company in the amount of $13,585. The Company paid Apple Realty Group, Inc. a
fee of 2% of the purchase price of the acquired properties in the amount of
$624,863.

Effective March 1, 1997, with the approval of the Company, Cornerstone
Realty Income Trust Inc. ("Cornerstone"), for which Glade M. Knight (Chief
Executive Officer and Chairman of the Board of the Company) entered into
subcontract agreements with the Management Company and Advisor whereby
Cornerstone will provide advisory and property management services to the
Company in exchange for fees and expense reimbursement per the same terms
described above.

Effective March 1, 1997, with the consent of the Company, Cornerstone
acquired all the assets of Apple Realty Group, Inc. The sole material asset of
the company was the acquisition/disposition agreement with the Company.
Cornerstone paid $350,000 in cash and issued 150,000 common shares in exchange
for the assignment of the rights to the acquisition/disposition agreement.
Cornerstone will be entitled to a real estate commission equal to 2% of the
gross purchase price of the Company's properties. As of September 30, 1997,
Cornerstone had earned approximately $1,476,041 for all of the subcontracted and
acquired services.

During the first quarter of 1997, the Company granted Cornerstone a
continuing right to acquire up to 9.8% of the common shares of the Company at
the market price, net of selling commissions. Cornerstone committed to purchase
shares of the Company at $9 per share for approximately $3.76 million which
represented approximately 9.5% of the total common shares of the Company
outstanding as of March 1, 1997. In April 1997, Cornerstone purchased 417,777
common shares of the Company. Cornerstone intends to make periodic evaluations
with the approval of its board of directors to purchase additional common shares
of the Company as of the end of each calendar quarter in order to maintain its
ownership of approximately 9.5% of the outstanding common shares of the Company,
if such additional purchases are deemed by the Cornerstone board of directors to
be in the best interests of Cornerstone and its shareholders.

F-12
<PAGE>

APPLE RESIDENTIAL INCOME TRUST, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

NOTE 4 -- SUBSEQUENT EVENTS

During October 1997, the Company distributed to its shareholders
approximately $1,356,204 (20.2 cents per share) of which approximately $855,613
was reinvested in the purchase of additional shares through the Additional Share
Option. The Company also closed the sale to investors of 1,346,262 shares at $10
per share representing net proceeds to the Company of $12,116,361.

NOTE 5 -- ACQUISITIONS

The following unaudited pro forma information for the nine months ended
September 30, 1997 is presented as if (a) the Company had owned the properties
referred to below on January 1, 1997, (b) the Company had qualified as a REIT,
distributed at least 95% of its taxable income and, therefore incurred no
federal income tax expense during the period, and (c) the Company had used
proceeds from its best efforts offering to acquire the properties. The Company
had no operations prior to December 31, 1996. The pro forma information does not
purport to represent what the Company's results of operations would actually
have been if such transactions, in fact, had occurred on January 1, 1997, nor
does it purport to represent the results of operations for future periods.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1997
-------------------
<S> <C>
Rental income ............ $12,259,452
Net income ............... $ 3,615,983
Net income per share ...... $ .45
</TABLE>

The pro forma information reflects adjustments for the actual rental income
and rental expenses of Brookfield, Eagle Crest, Tahoe, Mill Crossing, Toscana,
Polo Run, Wildwood, The Arbors , Paces Cove, Chaparosa and River Hill Apartments
for the periods in 1997 prior to their acquisitions by the Company. Net income
has been adjusted as follows: (1) property management and advisory expenses have
been adjusted based on the Company's contractual arrangements of 5% of revenues
from rental income plus reimbursement of certain monthly expenses estimated to
be $2.50 per unit; (2) advisory expenses have been adjusted based on the
Company's contractual arrangement of .25% annual gross proceeds of common stock
raised; and (3) depreciation has been adjusted based on the Company's allocation
of purchase price to buildings over an estimated useful life of 27.5 years.

F-13
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia

We have audited the accompanying statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property Brookfield Apartments located in Dallas, Texas for the twelve month
period ended December 31, 1996. This statement is the responsibility of the
management of Brookfield Apartments. Our responsibility is to express an opinion
on this statement based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the statement. We believe that our audit
provides a reasonable basis for our opinion.

The accompanying statement was prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission (for inclusion
in a filing by Apple Residential Income Trust, Inc.) and excludes material
expenses, described in Note 1 to the statement, that would not be comparable to
those resulting from the proposed future operations of the property.

In our opinion, the statement referred to above presents fairly, in all material
respects, the income and direct operating expenses of Brookfield Apartments (as
defined above) for the twelve month period ended December 31, 1996, in
conformity with generally accepted accounting principles.

L.P. Martin & Co., P.C.

Richmond, Virginia
March 19, 1997

F-14
<PAGE>

BROOKFIELD APARTMENTS

STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

TWELVE MONTHS ENDED DECEMBER 31, 1996

<TABLE>
<S> <C>
INCOME
Rental and Other Income ........................ $1,198,543
----------
DIRECT OPERATING EXPENSES
Administrative and Other ........................ 122,269
Insurance ....................................... 18,936
Repairs and Maintenance ........................ 174,233
Taxes, Property ................................. 133,700
Utilities ....................................... 92,664
----------
Total Direct Operating Expenses ............... 541,802
----------
Operating income exclusive of items not compara-
ble to the proposed future operations of the
property .................................... $ 656,741
==========
</TABLE>

NOTE TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

Brookfield Apartments is a 232 unit residential garden style apartment complex
located on 6.936 acres in Dallas, Texas. Living space totals 165,544 square
feet.

During the financial statement period, the assets comprising the property were
owned by Paragon Group, L.P., an entity non-affiliated with Apple Residential
Income Trust, Inc. Apple Residential Income Trust, Inc. purchased the property
in January, 1997.

In accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable to
those resulting from the proposed future operations of the property. Excluded
expenses are mortgage interest, property depreciation, amortization and
management fees.

F-15
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia

We have audited the accompanying statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property Eagle Crest Apartments located in Irving, Texas for the twelve
month period ended December 31, 1996. This statement is the responsibility of
the management of Eagle Crest Apartments. Our responsibility is to express an
opinion on this statement based on our audit.

In our opinion, the statement referred to above presents fairly, in all material
respects, the income and direct operating expenses of Eagle Crest Apartments (as
defined above) for the twelve month period ended December 31, 1996, in
conformity with generally accepted accounting principles.

L.P. Martin & Co., P.C.

Richmond, Virginia
March 27, 1997

F-16
<PAGE>

EAGLE CREST APARTMENTS

STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

TWELVE MONTHS ENDED DECEMBER 31, 1996

<TABLE>
<S> <C>
INCOME
Rental and Other Income ........................ $3,196,618
----------
DIRECT OPERATING EXPENSES
Administrative and Other ........................ 212,613
Insurance ....................................... 93,379
Repairs and Maintenance ........................ 379,120
Taxes, Property ................................. 345,167
Utilities ....................................... 305,101
----------
Total Direct Operating Expenses ............... 1,335,380
----------
Operating income exclusive of items not compara-
ble to the proposed future operations of the
property .................................... $1,861,238
==========
</TABLE>

NOTE TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

NOTE 1 -- ORGANIZATION AND BASIS OF PRESENTATION

Eagle Crest Apartments is a residential garden style apartment complex
consisting of two phases totaling 484 units located on 17.88 acres in Irving,
Texas. Living space totals 429,300 square feet.

During the financial statement period, the assets comprising the property were
owned by entities not affiliated with Apple Residential Income Trust, Inc.
Apple Residential Income Trust, Inc. purchased the property on January 30,
1997.

F-17
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia

We have audited the accompanying statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property Tahoe Apartments located in Arlington, Texas for the twelve month
period ended December 31, 1996. This statement is the responsibility of the
management of Tahoe Apartments. Our responsibility is to express an opinion on
this statement based on our audit.

In our opinion, the statement referred to above presents fairly, in all material
respects, the income and direct operating expenses of Tahoe Apartments (as
defined above) for the twelve month period ended December 31, 1996, in
conformity with generally accepted accounting principles.

L. P. Martin & Co., P.C.

Richmond, Virginia
April 11, 1997

F-18
<PAGE>

TAHOE APARTMENTS

STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

TWELVE MONTHS ENDED DECEMBER 31, 1996

<TABLE>
<S> <C>
INCOME
Rental and Other Income ........................ $1,200,270
----------
DIRECT OPERATING EXPENSES
Administrative and Other ........................ 118,781
Insurance ....................................... 30,606
Repairs and Maintenance ........................ 351,750
Taxes, Property ................................. 114,578
Utilities ....................................... 149,166
----------
Total Direct Operating Expenses ............... 764,881
----------
Operating income exclusive of items not compara-
ble to the proposed future operations of the
property .................................... $ 435,389
==========
</TABLE>

NOTE TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

NOTE 1 -- ORGANIZATION AND BASIS OF PRESENTATION

Tahoe Apartments is a 240 unit residential garden style apartment complex
located on 17.88 acres in Arlington, Texas. Living space totals 160,928 square
feet.

During the financial statement period, the assets comprising the property were
owned by two separate entities, neither of which was affiliated with Apple
Residential Income Trust, Inc. Apple Residential Income Trust, Inc. purchased
the property on January 31, 1997.

F-19
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia

We have audited the accompanying statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property Mill Crossing Apartments located in Arlington, Texas for the twelve
month period ended January 31, 1997. This statement is the responsibility of the
management of Mill Crossing Apartments. Our responsibility is to express an
opinion on this statement based on our audit.

In our opinion, the statement referred to above presents fairly, in all material
respects, the income and direct operating expenses of Mill Crossing Apartments
(as defined above) for the twelve month period ended January 31, 1997, in
conformity with generally accepted accounting principles.

L. P. Martin & Co., P.C.

Richmond, Virginia
April 29, 1997

F-20
<PAGE>

MILL CROSSING APARTMENTS

STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

TWELVE MONTH PERIOD ENDED JANUARY 31, 1997

<TABLE>
<S> <C>
INCOME
Rental and Other Income ........................ $ 908,336
---------
DIRECT OPERATING EXPENSES
Administrative and Other ........................ 102,522
Insurance ....................................... 23,714
Repairs and Maintenance ........................ 216,500
Taxes, Property ................................. 91,663
Utilities ....................................... 148,270
---------
Total Direct Operating Expenses ............... 582,669
---------
Operating income exclusive of items not compara-
ble to the proposed future operations of the
property .................................... $ 325,667
=========
</TABLE>

NOTE TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

NOTE 1 -- ORGANIZATION AND BASIS OF PRESENTATION

Mill Crossing Apartments is a 184 unit garden style apartment complex located on
8 acres in Arlington, Texas. Living space totals 127,168 square feet.

F-21
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia

We have audited the accompanying statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property Polo Run Apartments located in Arlington, Texas for the twelve
month period ended February 28, 1997. This statement is the responsibility of
the management of Polo Run Apartments. Our responsibility is to express an
opinion on this statement based on our audit.

In our opinion, the statement referred to above presents fairly, in all material
respects, the income and direct operating expenses of Polo Run Apartments (as
defined above) for the twelve month period ended February 28, 1997, in
conformity with generally accepted accounting principles.

L. P. Martin & Co., P.C.

Richmond, Virginia
May 21, 1997

F-22
<PAGE>

POLO RUN APARTMENTS

STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

TWELVE MONTHS ENDED FEBRUARY 28, 1997

<TABLE>
<S> <C>
INCOME
Rental and Other Income ........................ $1,304,547
----------
DIRECT OPERATING EXPENSES
Administrative and Other ........................ 101,400
Insurance ....................................... 28,521
Repairs and Maintenance ........................ 257,602
Taxes, Property ................................. 133,509
Utilities ....................................... 128,924
----------
Total Direct Operating Expenses ............... 649,956
----------
Operating income exclusive of items not compara-
ble to the proposed future operations of the
property .................................... $ 654,591
==========
</TABLE>

NOTE TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

NOTE 1 -- ORGANIZATION AND BASIS OF PRESENTATION

Polo Run Apartments is a 224 unit residential garden style apartment complex
located on 9.15 acres in Arlington, Texas.

During the financial statement period, the assets comprising the property were
owned by A V Polo Run Associates, Ltd. Apple Residential Income Trust, Inc.
subsequently purchased the property.

F-23
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia

We have audited the accompanying statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property Wildwood Apartments located in Euless, Texas for the twelve month
period ended February 28, 1997. This statement is the responsibility of the
management of Wildwood Apartments. Our responsibility is to express an opinion
on this statement based on our audit.

In our opinion, the statement referred to above presents fairly, in all material
respects, the income and direct operating expenses of Wildwood Apartments (as
defined above) for the twelve month period ended February 28, 1997, in
conformity with generally accepted accounting principles.

L. P. Martin & Co., P.C.

Richmond, Virginia
June 4, 1997

F-24
<PAGE>

WILDWOOD APARTMENTS

STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

TWELVE MONTH PERIOD ENDED FEBRUARY 28, 1997

<TABLE>
<S> <C>
INCOME
Rental and Other Income ........................ $ 809,555
---------
DIRECT OPERATING EXPENSES
Administrative and Other ........................ 110,035
Insurance ....................................... 15,246
Repairs and Maintenance ........................ 123,470
Taxes, Property ................................. 85,616
Utilities ....................................... 78,937
---------
Total Direct Operating Expenses ............... 413,304
---------
Operating income exclusive of items not compara-
ble to the proposed future operations of the
property .................................... $ 396,251
=========
</TABLE>

NOTE TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

NOTE 1 -- ORGANIZATION AND BASIS OF PRESENTATION

Wildwood Apartments is a 120 unit garden style apartment complex located on
10.01 acres in Euless, Texas.

The assets comprising the property were owned by Western Rim Investors 1991-4,
L.P., an entity unaffiliated with Apple Residential Income Trust, Inc., during
the financial statement period. Apple Residential Income Trust, Inc.
subsequently purchased the property.

In accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable to
those resulting from the proposed future operations of the property. Excluded
expenses are property depreciation, amortization, professional fees and
management fees.

F-25
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia

We have audited the accompanying statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property Toscana Apartments located in Dallas, Texas for the twelve month
period ended February 28, 1997. This statement is the responsibility of the
management of Toscana Apartments. Our responsibility is to express an opinion on
this statement based on our audit.

In our opinion, the statement referred to above presents fairly, in all material
respects, the income and direct operating expenses of Toscana Apartments (as
defined above) for the twelve month period ended February 28, 1997, in
conformity with generally accepted accounting principles.

L. P. Martin & Co., P.C.

Richmond, Virginia
June 4, 1997

F-26
<PAGE>

TOSCANA APARTMENTS

STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

TWELVE MONTH PERIOD ENDED FEBRUARY 28, 1997

<TABLE>
<S> <C>
INCOME
Rental and Other Income ........................ $1,083,249
----------
DIRECT OPERATING EXPENSES
Administrative and Other ........................ 128,884
Insurance ....................................... 18,985
Repairs and Maintenance ........................ 117,117
Taxes, Property ................................. 123,710
Utilities ....................................... 84,886
----------
Total Direct Operating Expenses ............... 473,582
----------
Operating income exclusive of items not compara-
ble to the proposed future operations of the
property .................................... $ 609,667
==========
</TABLE>

NOTE TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

NOTE 1 -- ORGANIZATION AND BASIS OF PRESENTATION

Toscana Apartments is a 192 unit garden style apartment complex located on 3.975
acres in Dallas, Texas.

The assets comprising the property were owned by Western Rim Investors 1993-2,
L.P., an entity unaffiliated with Apple Residential Income Trust, Inc., during
the financial statement period. Apple Residential Income Trust, Inc.
subsequently purchased the property.

In accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable to
those resulting from the proposed future operations of the property. Excluded
expenses are property depreciation, amortization, professional fees and
management fees.

F-27
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia

We have audited the accompanying statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property The Arbors on Forest Ridge Apartments located in Bedford, Texas for
the twelve month period ended February 28, 1997. This statement is the
responsibility of the management of The Arbors on Forest Ridge Apartments. Our
responsibility is to express an opinion on this statement based on our audit.

In our opinion, the statement referred to above presents fairly, in all material
respects, the income and direct operating expenses of The Arbors on Forest Ridge
Apartments (as defined above) for the twelve month period ended February 28,
1997, in conformity with generally accepted accounting principles.

L. P. Martin & Co., P.C.

Richmond, Virginia
June 4, 1997

F-28
<PAGE>

ARBORS ON FOREST RIDGE APARTMENTS

STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

<TABLE>
<S> <C>
INCOME
Rental and Other Income ........................ $1,381,014

DIRECT OPERATING EXPENSES
Administrative and Other ........................ 111,636
Insurance ....................................... 34,263
Repairs and Maintenance ........................ 109,577
Taxes, Property ................................. 147,923
Utilities ....................................... 85,182
----------
Total Direct Operating Expenses ............... 488,581
----------
Operating income exclusive of items not compara-
ble to the proposed future operations of the
property .................................... $ 892,433
==========
</TABLE>

NOTE TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

NOTE 1 -- ORGANIZATION AND BASIS OF PRESENTATION

The Arbors on Forest Ridge Apartments is a 210 unit garden style apartment
complex located on 8.913 acres in Bedford, Texas.

The assets comprising the property were owned by Western Rim Investors 1992-5,
L.P., an entity unaffiliated with Apple Residential Income Trust, Inc., during
the financial statement period. Apple Residential Income Trust, Inc.
subsequently purchased the property.

In accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable to
those resulting from the proposed future operations of the property. Excluded
expenses are property depreciation, amortization, professional fees and
management fees.

F-29
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia

We have audited the accompanying statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property Pace's Cove Apartments located in Dallas, Texas for the twelve
month period ended May 31, 1997. This statement is the responsibility of the
management of Pace's Cove Apartments. Our responsibility is to express an
opinion on this statement based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the statement. We believe that
our audit provides a reasonable basis for our opinion.

The accompanying statement was prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for
inclusion in a filing by Apple Residential Income Trust, Inc.) and excludes
material expenses, described in Note 2 to the statement, that would not be
comparable to those resulting from the proposed future operations of the
property.

In our opinion, the statement referred to above presents fairly, in all
material respects, the income and direct operating expenses of Pace's Cove
Apartments (as defined above) for the twelve month period ended May 31, 1997, in
conformity with generally accepted accounting principles.

Richmond, Virginia L.P. Martin & Co., P.C.
July 22, 1997

F-30
<PAGE>

PACE'S COVE APARTMENTS
STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

TWELVE MONTH PERIOD ENDED MAY 31, 1997

<TABLE>
<S> <C>
INCOME
Rental and Other Income ........................... $1,832,695

DIRECT OPERATING EXPENSES
Administrative and Other ........................... 237,030
Insurance .......................................... 42,627
Repairs and Maintenance ........................... 273,102
Taxes, Property .................................... 213,985
Utilities .......................................... 118,907
----------
TOTAL DIRECT OPERATING EXPENSES .................. 885,651
----------
Operating income exclusive of items not comparable
to the proposed future operations of the property. $ 947,044
==========
</TABLE>

NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

NOTE 1 -- ORGANIZATION

Pace's Cove Apartments is a 328 unit garden style apartment complex located on
12.97 acres in Dallas, Texas. The assets comprising the property were owned by
Intercapital Portfolio 944 I Limited Partnership, an entity unaffiliated with
Apple Residential Income Trust, Inc. during the financial statement period.
Apple Residential Income Trust, Inc. subsequently purchased the property.

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REVENUE AND EXPENSE RECOGNITION

The accompanying statement of rental operations has been prepared using the
accrual method of accounting. In accordance with Rule 3-14 of Regulation S-X of
the Securities and Exchange Commission, the statement of income and direct
operating expenses excludes interest and non rent related income and expenses
not considered comparable to those resulting from the proposed future operations
of the property. Excluded expenses are mortgage interest, property depreciation,
amortization, legal and professional fees and management fees.

ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

REPAIRS AND MAINTENANCE

Repairs and maintenance costs are expensed as incurred, while significant
improvements, renovations and replacements are capitalized.

ADVERTISING

Advertising costs are expensed in the period incurred.

F-31
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia

We have audited the accompanying statement of income and direct operating
expenses exclusive of items of items not comparable to the proposed future
operations of the property Chaparosa Apartments located in Irving, Texas for the
twelve month period ended June 30, 1997. This statement is the responsibility of
the management of Chaparosa Apartments, Our responsibility is to express an
opinion on this statement based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the statement. We believe that
our audit provides a reasonable basis for our opinion.

The accompanying statement was prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for
inclusion in a filing by Apple Residential Income Trust, Inc.) and excludes
material expenses, described in Note 2 to the statement, that would not be
comparable to those resulting from the proposed future operations of the
property.

In our opinion, the statement referred to above presents fairly, in all
material respects, the income and direct operating expenses of Chaparosa
Apartments (as defined above) for the twelve month period ended June 30, 1997,
in conformity with generally accepted accounting principles.

Richmond, Virginia L.P. Martin & Co., P.C.
September 24, 1997

F-32
<PAGE>

CHAPAROSA APARTMENTS

STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

TWELVE MONTHS ENDED JUNE 30, 1997

<TABLE>
<S> <C>
INCOME
Rental and Other Income .............................. $1,374,365
----------
DIRECT OPERATING EXPENSES
Administrative and Other .............................. 187,182
Insurance ............................................. 18,284
Repairs and Maintenance .............................. 226,512
Taxes, Property ....................................... 148,416
Utilities ............................................. 78,209
TOTAL DIRECT OPERATING EXPENSES 658,603
----------
Operating income exclusive of items not comparable to
the proposed future operations of the property ...... $ 715,762
==========
</TABLE>

NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

NOTE 1 -- ORGANIZATION

Chaparosa Apartments is a 170 unit garden and townhouse style apartment complex
located on 7.48 acres in Irving, Texas. The assets comprising the property were
owned by Hutton/Con Am Realty Pension Investors, an entity unaffiliated with
Apple Residential Income Trust, Inc., during the financial statement period.
Apple Residential Income Trust, Inc. purchased the property in August, 1997.

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue and Expense Recognition -- The accompanying statement of rental
operations has been prepared using the accrual method of accounting. In
accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable to
those resulting from the proposed future operations of the property. Excluded
expenses are property depreciation and management fees.

Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

Repairs and Maintenance -- Repairs and maintenance costs are expensed as
incurred, while significant improvements, renovations and replacements are
capitalized.

Advertising -- Advertising costs are expensed in the period incurred.

F-33
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia

We have audited the accompanying statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property Riverhill Apartments located in Irving, Texas for the twelve month
period ended June 30, 1997, This statement is the responsibility of the
management of Riverhill Apartments, Our responsibility is to express an opinion
on this statement based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards, Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the statement. We believe that
our audit provides a reasonable basis for our opinion.

The accompanying statement was prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission (for
inclusion in a filing by Apple Residential Income Trust, Inc.) and excludes
material expenses, described in Note 2 to the statement, that would not be
comparable to those resulting from the proposed future operations of the
property.

In our opinion, the statement referred to above presents fairly, in all
material respects, the income and direct operating expenses of Riverhill
Apartments (as defined above) for the twelve month period ended June 30, 1997,
in conformity with generally accepted accounting principles.

Richmond, Virginia L.P. Martin & Co., P.C.
September 24, 1997

F-34
<PAGE>

RIVERHILL APARTMENTS

STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

TWELVE MONTHS ENDED JUNE 30, 1997

<TABLE>
<S> <C>
INCOME
Rental and Other Income .............................. $1,529,649
----------
DIRECT OPERATING EXPENSES
Administrative and Other .............................. 210,774
Insurance ............................................. 20,274
Repairs and Maintenance .............................. 254,466
Taxes, Property ....................................... 192,345
Utilities ............................................. 115,741
TOTAL DIRECT OPERATING EXPENSES 793,600
Operating income exclusive of items not comparable to
the proposed future operations of the property ...... $ 736,049
==========
</TABLE>

NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

NOTE 1 -- ORGANIZATION

Riverhill Apartments is a 192 unit garden and townhouse style apartment complex
located on 9.33 acres in Irving, Texas. The assets comprising the property were
owned by Riverhill Apartments Limited Partnership, an entity unaffiliated with
Apple Residential Income Trust, Inc., during the financial statement period.
Apple Residential Income Trust, Inc. purchased the property in August, 1997.

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue and Expense Recognition -- The accompanying statement of rental
operations has been prepared using the accrual method of accounting. In
accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission, the statement of income and direct operating expenses excludes
interest and non rent related income and expenses not considered comparable to
those resulting from the proposed future operations of the property, Excluded
expenses are property depreciation and management fees.

Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenues and expenses during
the reporting period, Actual results could differ from those estimates.

Repairs and Maintenance -- Repairs and maintenance costs are expensed as
incurred, while significant improvements, renovations and replacements are
capitalized.

Advertising -- Advertising costs are expensed in the period incurred.

F-35
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Apple Residential Income Trust, Inc.
Richmond, Virginia

We have audited the accompanying statement of income and direct operating
expenses exclusive of items not comparable to the proposed future operations of
the property Copper Crossing Apartments located in Fort Worth, Texas for the
twelve month period ended October 31, 1997. This statement is the responsibility
of the management of Copper Crossing Apartments. Our responsibility is to
express an opinion on this statement based on our audit.

The accompanying statement was prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission (for inclusion
in a filing by Apple Residential Income Trust, Inc.) and excludes material
expenses, described in Note 2 to the statement, that would not be comparable to
those resulting from the proposed future operations of the property.

In our opinion, the statement referred to above presents fairly, in all material
respects, the income and direct operating expenses of Copper Crossing Apartments
(as defined above) for the twelve month period ended October 31, 1997, in
conformity with generally accepted accounting principles.

L.P. Martin & Co., P.C.

Richmond, Virginia
December 16, 1997

F-36
<PAGE>

COPPER CROSSING APARTMENTS

STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

TWELVE MONTH PERIOD ENDED OCTOBER 31, 1997

<TABLE>
<S> <C>
INCOME
Rental and Other Income .............................. $ 987,109
---------
DIRECT OPERATING EXPENSES
Administrative and Other .............................. 138,305
Insurance ............................................. 32,363
Repairs and Maintenance .............................. 210,279
Taxes, Property ....................................... 92,700
Utilities ............................................. 109,793
---------
Total Direct Operating Expenses ..................... 583,440
---------
Operating income exclusive of items not comparable to
the proposed future operations of the property ...... $ 403,669
=========
</TABLE>

NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
OPERATIONS OF THE PROPERTY

TWELVE MONTH PERIOD ENDED OCTOBER 31, 1997

NOTE 1 -- ORGANIZATION

Copper Crossing Apartments is a 200 unit garden style apartment complex located
on 6.91 acres in Fort Worth, Texas. The assets comprising the property were
owned by Cooper Crossing Investors, Ltd., an entity unaffiliated with Apple
Residential Income Trust, Inc., during the financial statement period. Apple
Residential Income Trust, Inc. subsequently purchased the property.

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REVENUE AND EXPENSE RECOGNITION

The accompanying statement of rental operations has been prepared using the
accrual method of accounting. In accordance with Rule 3-14 of Regulations S-X of
the Securities and Exchange Commission, the statement of income and direct
operating expenses excludes interest and non rent related income and expenses
not considered comparable to those resulting from the proposed future operations
of the property. Excluded expenses are mortgage interest, property depreciation,
amortization, management fees and entity expenses.

ESTIMATES

REPAIRS AND MAINTENANCE

Repairs and maintenance costs are expensed as incurred, while significant
improvements, renovations and replacements are capitalized.

ADVERTISING

Advertising costs are expensed in the period incurred.

F-37
<PAGE>

APPLE RESIDENTIAL INCOME TRUST, INC.
PRO FORMA BALANCE SHEET AS OF SEPTEMBER 30, 1997 (UNAUDITED)

The accompanying Unaudited Pro Forma Balance Sheet as of September 30, 1997 is
presented as if the Company had owned the properties included in the table below
as of September 30, 1997. In the opinion of management, all adjustments
necessary to reflect the effects of the Offering have been made.

The Unaudited Pro Forma Balance Sheet is presented for comparative purposes
only, and is not necessarily indicative of what the actual financial position of
the Company would have been at September 30, 1997, nor does it purport to
represent the future financial position of the Company. This Unaudited Pro Forma
Balance Sheet should be read in conjunction with, and is qualified in its
entirety by, the respective historical financial statements and notes thereto of
the Company. The Pro Forma column assumes the Company used the proceeds from its
"best efforts" offerings to acquire the properties.

<TABLE>
<CAPTION>
COPPER
HISTORICAL CROSSING
BALANCE PRO FORMA TOTAL
SHEET ADJUSTMENTS PRO FORMA
--------------- ------------- ---------------
<S> <C> <C> <C>
ASSETS
Investment in rental property
Land ....................................... $ 13,504,976 $ 872,100 $ 14,377,076
Building .................................... 67,365,012 3,972,900 71,337,912
Property improvements ........................ 1,683,878 -- 1,683,878
Furniture and fixtures ..................... 489,322 -- 489,322
------------ ---------- ------------
83,043,188 4,845,000 87,888,188
Less accumulated depreciation ............... (1,086,111) -- (1,086,111)
------------ ---------- ------------
81,957,077 4,845,000 86,802,077
Cash and cash equivalents .................. 1,350,305 -- 1,350,305
Prepaid expenses ........................... 161,391 -- 161,391
Other assets ................................. 561,464 -- 561,464
------------ ---------- ------------
Total Assets ................................. $ 84,030,237 $4,845,000 $ 88,875,237
============ ========== ============
LIABILITIES
Notes payable .............................. $ 5,132,702 -- $ 5,132,702
Accounts payable ........................... 411,069 -- 411,069
Accrued expenses ........................... 1,647,832 -- 1,647,832
Rents received in advance .................. 25,969 -- 25,969
Tenant security deposits ..................... 371,794 -- 371,794
------------ ---------- ------------
7,589,366 -- 7,589,366
SHAREHOLDERS' EQUITY
Common stock, no par value .................. 76,005,921 4,845,000 80,850,921
Class B Convertible Stock, no par value ...... 20,000 -- 20,000
Receivable from principal shareholder ...... (20,000) -- (20,000)
Net income greater than distributions ...... 434,950 -- 434,950
------------ ---------- ------------
76,440,871 4,845,000 81,285,871
Total Liabilities and Shareholders'
Equity ....................................... $ 84,030,237 $4,845,000 $ 88,875,237
============ ========== ============
</TABLE>

NOTES TO PRO FORMA BALANCE SHEET

Pro Forma adjustments represent the purchase price of the related property,
including the 2% acquisition fee to Cornerstone Realty Income Trust, Inc.
allocated between land and building. Adjustments to common stock reflect the net
proceeds from sales of common stock from the Company's continuous offering.

F-38
<PAGE>

APPLE RESIDENTIAL INCOME TRUST, INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)

The accompanying Unaudited Pro Forma Statement of Operations for the year ended
December 31, 1996 is presented as if (a) the Company had acquired the properties
shown below on January 1, 1996; (b) the Company had qualified as a REIT,
distributed at least 95% of its taxable income and, therefore, incurred no
federal income tax liability for the period presented; and (c) the Company had
used proceeds from its best efforts offering to acquire the properties. The
Company had no operations during the period ending December 31, 1996.
Accordingly, the Company had no revenue or operating profits or loss. In the
opinion of management, all adjustments necessary to reflect the effects of these
transactions have been made.

The Unaudited Pro Forma Statement of Operations is presented for comparative
purposes only and is not necessarily indicative of what the actual results of
the Company would have been for the year ended December 31, 1996 if the
acquisitions and Offering had occurred at the beginning of the period presented,
nor does it purport to be indicative of the results of operations in future
periods. The Unaudited Pro Forma Statement of Operations should be read in
conjunction with, and is qualified in its entirety by, the respective historical
financial statements and notes thereto of the Company.

<TABLE>
<CAPTION>
HISTORICAL BROOKFIELD EAGLE CREST TAHOE MILL CROSSING
STATEMENT OF PRO FORMA PRO FORMA PRO FORMA PRO FORMA
OPERATIONS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
-------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Dates of Acquisitions ... -- 1/31/97 1/31/97 1/31/97 2/28/97
Rental income ............ -- $1,198,543 $3,196,618 $1,200,270 $908,336
Expenses
Utilities ............... -- 92,664 305,101 149,166 148,270
Repairs and maintenance -- 174,233 379,120 351,750 216,500
Taxes and insurance ...... -- 152,636 438,546 145,184 115,377
Property management
fee ..................... -- -- -- -- --
Advertising ............... -- 30,567 53,153 29,695 25,631
Other operating ex-
penses -- -- -- -- --
General and administra-
tive -- -- -- -- --
-- -- -- -- --
Depreciation of real es-
tate -- -- -- -- --
Amortization ............ -- -- -- -- --
Other ..................... -- 91,702 159,460 89,086 76,891
-------------- ----------- ----------- ----------- --------
-- 541,802 1,335,380 764,881 582,669
Income before interest in-
come -- 656,741 1,861,238 435,389 325,667
Interest income ......... -- -- -- -- --
-------------- ----------- ----------- ----------- --------
Net income ............... -- $ 656,741 $1,861,238 $ 435,389 $325,667
==== =========== =========== =========== ========
Net income per share ...... --
====
Weighted average number
of shares outstanding ... --
====

<CAPTION>
POLO RUN WILDWOOD TOSCANA THE ARBORS PACES COVE
PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Dates of Acquisitions .... 3/31/97 3/31/97 3/31/97 4/25/97 6/30/97
Rental income ............. $1,304,547 $809,555 $1,083,249 $1,381,014 $1,832,695
Expenses
Utilities ............... 128,924 78,937 84,886 85,182 118,907
Repairs and maintenance 257,602 123,470 117,117 109,577 273,102
Taxes and insurance ...... 162,030 100,862 142,695 182,186 256,612
Property management
fee ..................... -- -- -- -- --
Advertising ............... 25,350 27,509 32,221 27,909 59,257
Other operating ex-
penses -- -- -- -- --
General and administra-
tive -- -- -- -- --
-- -- -- -- --
Depreciation of real es-
tate -- -- -- -- --
Amortization ............ -- -- -- -- --
Other ..................... 76,050 82,526 96,663 83,727 177,773
----------- -------- ----------- ----------- -----------
649,956 413,304 473,582 488,581 885,651
Income before interest in-
come 654,591 396,251 609,667 892,433 947,044
Interest income ......... -- -- -- -- --
----------- -------- ----------- ----------- -----------
Net income ................ $ 654,591 $396,251 $ 609,667 $ 892,433 $ 947,044
=========== ======== =========== =========== ===========
Net income per share .......

Weighted average number
of shares outstanding ...

<CAPTION>
COPPER
CHAPAROSA RIVERHILL CROSSING
PRO FORMA PRO FORMA PRO FORMA PRO FORMA TOTAL
ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS PRO FORMA
-------------------------- ------------- -------------------- ------------
<S> <C> <C> <C> <C> <C>
Dates of Acquisitions .... 8/6/97 8/6/97 11/25/97
Rental income ............. $1,374,365 $1,529,649 $ 987,109 -- $16,805,950
Expenses
Utilities ............... 78,209 115,741 109,793 -- 1,495,780
Repairs and maintenance 226,512 254,466 210,279 -- 2,693,728
Taxes and insurance ...... 166,700 212,619 125,063 -- 2,200,510
Property management
fee ..................... -- -- -- 923,578 (A) 923,578
Advertising ............... 46,796 52,694 34,576 -- 445,358
Other operating ex-
penses .................... -- -- -- -- --
General and administra-
tive .................... -- -- -- 211,386 (B) 521,386
-- -- -- 310,000 (D) --
Depreciation of real es-
tate .................... -- -- -- 2,512,341 (C) 2,512,341
Amortization ............ -- -- -- --
Other ..................... 140,387 158,081 103,729 -- 1,336,075
----------- ----------- --------- --------- -----------
658,604 793,601 583,440 3,975,305 12,128,755
Income before interest in-
come....................... 715,761 736,048 403,669 (3,957,305) 4,677,195
Interest income ......... -- -- -- -- --
----------- ----------- --------- ---------- -----------
Net income ................ $ 715,761 $ 736,048 $ 403,669 $ (3,957,305) $ 4,677,195
=========== =========== ========= ============= ===========
Net income per share ....... $ 0.47
===========
Weighted average number
of shares outstanding ... 9,885,561 (E) 9,885,561
============= ===========
</TABLE>

- ------

(A)Represents the property management fees of 5% of rental income and processing
costs equal to $2.50 per apartment per month charged by the external
management company for the period of time not owned by the company.

(B)Represents the advisory fee of .25% of accumulated capital contributions
under the "best efforts" offering for the period of time not owned by the
company.

(C)Represents the depreciation expense of the properties acquired based on the
purchase price, excluding amounts allocated to land, of the properties for
the period of time not owned by the company. The weighted average life of the
property depreciated was 27.5 years.

(D)Represents the expenses related to operations as a public REIT, which
consists of directors and officers insurance, investor relations, corporate
accounting, legal and director expenses.

(E)Represents additional common shares assuming the properties were acquired on
January 1, 1996 with the "best efforts" offering of $9 per share for the
first $15 million and $10 per share above $15 million.

F-39

<PAGE>

APPLE RESIDENTIAL INCOME TRUST, INC.
PRO FORMA STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)

The accompanying Unaudited Pro Forma Statement of Operations for the nine months
ended September 30, 1997 is presented as if (a) the Company had acquired the
properties shown below on January 1, 1997; (b) the Company had qualified as a
REIT, distributed at least 95% of its taxable income and, therefore, incurred no
federal income tax liability for the period presented; and (c) the Company had
used proceeds from its best efforts offering to acquire the properties. In the
opinion of management, all adjustments necessary to reflect the effects of these
transactions have been made.

The Unaudited Pro Forma Statement of Operations is presented for comparative
purposes only and is not necessarily indicative of what the actual results of
the Company would have been for the nine months ended September 30, 1997 if the
acquisitions and Offering had occurred at the beginning of the period presented,
nor does it purport to be indicative of the results of operations in future
periods. The Unaudited Pro Forma Statement of Operations should be read in
conjunction with, and is qualified in its entirety by, the respective historical
financial statements and notes thereto of the Company.

<TABLE>
<CAPTION>
HISTORICAL BROOKFIELD EAGLE CREST TAHOE MILL CROSSING
STATEMENT OF PRO FORMA PRO FORMA PRO FORMA PRO FORMA
OPERATIONS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
-------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Dates of Acquisitions ... -- 1/31/97 1/31/97 1/31/97 2/28/97
Rental income ............ $7,771,744 $ 99,879 $266,385 $100,023 $151,389
Expenses
Utilities .............. 796,570 7,722 25,425 12,431 24,712
Repairs and maintenance 581,796 14,519 31,593 29,313 36,083
Taxes and insurance ..... 1,176,182 12,720 36,546 12,099 19,230
Property management
fee .................... 403,479 -- -- -- --
Advertising .............. 194,785 2,547 4,429 2,475 4,272
General and administra-
tive .................... 391,837 -- -- -- --
Depreciation of real es-
tate .................... 25,444 -- -- -- --
Amortization ........... 1,086,111 -- -- -- --
Other operating ex-
penses .................. 602,517 7,642 13,288 7,424 12,815
---------- -------- -------- -------- --------
5,258,721 45,150 111,281 63,742 97,112
Income before interest in-
come ..................... 2,513,023 54,729 155,104 36,281 54,277
Interest income ........ 107,584 -- -- -- --
Interest expense ........ (377,154) -- -- -- --
---------- -------- -------- -------- --------
Net income ............... $2,243,453 $ 54,729 $155,104 $ 36,281 $ 54,277
========== ======== ======== ======== ========
Net income per share ...... $ 0.44
----------
Weighted average number
of shares outstanding .... 5,053,423
==========

<CAPTION>
PACES
POLO RUN WILDWOOD TOSCANA THE ARBORS COVE CHAPAROSA RIVERHILL
PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dates of Acquisitions ... 3/31/97 3/31/97 3/31/97 4/25/97 6/30/97 8/6/97 8/6/97
Rental income ............ $326,137 $202,389 $270,812 $460,338 $916,348 $801,713 $892,295
Expenses
Utilities .............. 32,231 19,734 21,222 28,394 59,454 45,622 67,516
Repairs and maintenance 64,401 30,868 29,279 36,526 136,551 132,132 148,439
Taxes and insurance ..... 40,508 25,216 35,674 60,729 128,306 97,242 124,028
Property management
fee .................... -- -- -- -- -- -- --
Advertising .............. 6,338 6,877 8,055 9,303 29,629 27,298 30,738
General and administra-
tive ................... -- -- -- -- -- -- --
Depreciation of real es-
tate .................... -- -- -- -- -- -- --
Amortization ........... -- -- -- -- -- -- --
Other operating ex-
penses ................. 19,013 20,632 24,166 27,909 88,887 81,892 92,214
-------- -------- -------- -------- -------- -------- --------
162,491 103,327 118,396 162,861 442,827 384,186 462,935
Income before interest in-
come .................... 163,646 99,062 152,416 297,477 473,521 417,527 429,360
Interest income ........ -- -- -- -- -- -- --
Interest expense ........ -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income ............... $163,646 $ 99,062 $152,416 $297,477 $473,521 $417,527 $429,360
======== ======== ======== ======== ======== ======== ========
Net income per share ......

Weighted average number
of shares outstanding ....

<CAPTION>
COPPER
CROSSING 1997
PRO FORMA PRO FORMA TOTAL
ADJUSTMENTS ADJUSTMENTS PRO FORMA
------------- ------------------- ---------------
<S> <C> <C> <C>
Dates of Acquisitions ... 11/25/97
Rental income ............ $ 740,332 -- $12,999,784
Expenses
Utilities .............. 82,345 -- 1,223,378
Repairs and maintenance 157,709 -- 1,429,210
Taxes and insurance ..... 93,797 -- 1,862,277
Property management
fee .................... -- 286,587 (A) 690,066
Advertising .............. 25,932 -- 352,678
General and administra-
tive .................... -- 65,243 (B) 457,080
Depreciation of real es-
tate .................... -- 767,996 (C) 793,440
Amortization ........... -- -- 1,086,111
Other operating ex-
penses .................. 77,797 -- 1,076,196
--------- -------- -----------
437,580 1,119,826 8,970,436
Income before interest in-
come ..................... 302,752 (1,119,826) 4,029,348
Interest income ........ -- -- 107,584
Interest expense ........ -- -- (377,154)
--------- ----------- -----------
Net income ............... $ 302,752 ($ 1,119,826) $ 3,759,778
========= ============= ===========
Net income per share ...... $ 0.41
-----------
Weighted average number
of shares outstanding .... 4,030,153 (D) 9,083,576
============= ===========
</TABLE>

- ------

(A)Represents the property management fees of 5% of rental income and
processing costs equal to $2.50 per apartment per month charged by the
external management company for the period of time not owned by the company.

(B)Represents the advisory fee of .25% of accumulated capital contributions
under the "best efforts" offering for the period of time not owned by the
company.

(D)Represents additional common shares assuming the properties were acquired on
January 1, 1997 with the "best efforts" offering of $9 per share for the
first $15 million and $10 per share above $15 million.

F-40