CORNERSTONE REALTY INCOME TRUST INC, S-8, 1997-04-09

CORNERSTONE REALTY INCOME TRUST INC
S-8, 1997-04-09
REAL ESTATE INVESTMENT TRUSTS

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As filed with the Securities and Exchange Commission on April 9, 1997

Registration No. 333-______________

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------

FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------

CORNERSTONE REALTY INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)

Virginia 54-1589139
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

306 East Main Street, Richmond, Virginia 23219
(Address of principal executive offices) (Zip Code)

CORNERSTONE REALTY INCOME TRUST, INC.
1992 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
AND
SPECIAL NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
AND
NON-EMPLOYEE DIRECTORS FEES PLAN
(Full titles of the plans)

Glade M. Knight Copy to: Leslie A. Grandis, Esq.
306 East Main Street McGuire, Woods, Battle & Boothe, L.L.P.
Richmond, Virginia 23219 One James Center
Telephone: (804) 643-1761 Richmond, Virginia 23219
(Name, address and telephone number, including Telephone: (804) 775-4322
area code, of agent for service)

CALCULATION OF REGISTRATION FEE

Title of Proposed Maximum Proposed Maximum
Securities to Amount to be Offering Aggregate Amount of
be Registered Registered Price Per Share (1) Offering Price (1) Registration Fee
<S> <C>
Common
Shares 993,919 shares $11.00 $10,933,109 $3,313.06
======================= ====================== ======================== ======================== =====================
</TABLE>

(1) Estimated solely for the purpose of determining the registration fee and
based, pursuant to Rule 457(a) under the Securities Act of 1933, on the most
recent price at which shares were sold to the public.

<PAGE>

Shares registered under this registration statement have been
authorized for issuance as follows:

1. An aggregate of up to 927,000 shares of Common Stock have been
authorized for issuance under the 1992 Non-Employee Directors
Stock Option Plan;

2. An aggregate of 23,169 shares of Common Stock have been
authorized for issuance under the Special Non-Employee
Directors Stock Option Plan; and

3. An aggregate of up to 43,750 shares of Common Stock have been
authorized for issuance under the NonEmployee Directors Fees
Plan.

<PAGE>

PROSPECTUS

CORNERSTONE REALTY INCOME TRUST, INC.
1992 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
AND
SPECIAL NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
AND
NON-EMPLOYEE DIRECTORS FEES PLAN

----------------

This document provides information about the 1992 Non-Employee
Directors Stock Option Plan of Cornerstone Realty Income Trust, Inc. (the
"Company"), pursuant to which up to 927,000 shares of the Company's common
stock, no par value (the "Common Stock"), may be issued to eligible directors of
the Company; the Company's Special Non-Employee Directors Stock Option Plan,
pursuant to which 23,169 shares of the Common Stock may be issued to eligible
directors of the Company; and the Company's Non-Employee Directors Fees Plan,
pursuant to which up to 43,750 shares of the Common Stock may be issued to
eligible directors of the Company.

----------------

THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS
COVERING SECURITIES THAT HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933

-----------------

No person is authorized to give any information or make any
representation in connection with the offer contained in this Prospectus, other
than those contained herein. Any information or representation not contained
herein must not be relied upon as having been so authorized. This Prospectus
does not constitute an offer to sell, or a solicitation of an offer to buy, the
securities covered by this Prospectus in any State or other jurisdiction in
which, or to any person to whom, it is unlawful to make such an offer or
solicitation. Neither the delivery of this Prospectus nor any sales or
solicitations hereunder shall under any circumstances create any implication
that there has been no change in the affairs of the Company since the date
hereof.

The date of this Prospectus is April 9, 1997.

<PAGE>

TABLE OF CONTENTS

PAGE

GENERAL INFORMATION..............................................3

SHARES AVAILABLE FOR ISSUANCE....................................3

ELIGIBILITY......................................................4

TERMS OF AWARDS..................................................4
Options ...............................................4
Stock ...............................................5

FEDERAL INCOME TAX CONSEQUENCES..................................5
For Participants........................................5
For the Company.........................................6

RESTRICTIONS ON RESALE...........................................6

ADDITIONAL INFORMATION...........................................6

<PAGE>

GENERAL INFORMATION

The Board of Directors (the "Board") of the Company has adopted the
1992 Non-Employee Directors Stock Option Plan, as amended and restated (the
"1992 Plan"), which became effective on December 18, 1992; the Special
Non-Employee Directors Stock Option Plan (the "Special Plan"), which became
effective on January 25, 1996; and the Non-Employee Directors Fees Plan (the
"Fees Plan"), which became effective on September 26, 1996 (collectively the
"Plans").

The 1992 Plan is intended to promote long-term shareholder value and to
provide non-employee members of the Board with an incentive to continue as
directors of the Company. The 1992 Plan will terminate on July 8, 2004 unless
earlier terminated upon the adoption of a resolution by the Board. The 1992 Plan
is administered by the Board. The Board may suspend or discontinue the 1992 Plan
or revise or amend the 1992 Plan in any manner, except that without approval of
the shareholders of the Company, no revision or amendment may increase the
number of shares subject to the 1992 Plan or materially increase the benefits
accruing to participants under the 1992 Plan.

The purpose of the Special Plan is to provide for a special one-time
grant of stock options to three former members of the Board who did not stand
for re-election at the Company's 1996 Annual Meeting of Shareholders (but who
were still members of the Board at the time of grant), in recognition of their
valuable service and their loyalty to the Company. Each optionee under the
Special Plan has received an option to purchase 7,723 shares of Company stock.
The Special Plan will terminate on January 25, 2006 unless earlier terminated
upon the adoption of a resolution of the Board. The Special Plan is administered
by the Board. The Board may suspend or discontinue the Special Plan or revise or
amend the Special Plan in any manner.

The purpose of the Fees Plan is to promote long-term shareholder value
by increasing Common Stock ownership by the non-employee members of the Board,
and thereby aligning their interests with those of other shareholders. The Fees
Plan will terminate on September 26, 2006, unless earlier terminated upon the
adoption of a resolution by the Board. The Fees Plan is administered by the
Board, which may suspend or discontinue the Fees Plan or revise or amend it in
any manner.

None of the Plans are subject to any provisions of the Employee
Retirement Income Security Act of 1974 nor is any Plan qualified under Section
401(a) of the Internal Revenue Code (the "Tax Code").

Statements contained in this Prospectus as to the provisions of the
1992 Plan and the Special Plan are intended to be general in nature and may not
in every instance be complete. Reference is made to those written Plans, copies
of which will be provided, without charge, upon written or oral request to the
Company's Chief Financial Officer. Statements in this Prospectus with respect to
the Fees Plan are similarly intended to be general in nature, and reference is
made to the Resolution of the Board of Directors of the Company, dated September
26, 1996 ("the "Authorizing Resolution") authorizing issuance of shares under
that Plan, copies of which are also available, without charge, upon written or
oral request to the Company's Chief Financial Officer. (See "Additional
Information.") The statements in this Prospectus are qualified in all respects
by reference to the written Plan and the Authorizing Resolution.

SHARES AVAILABLE FOR ISSUANCE

A total of up to 927,000 shares of Common Stock is reserved for
issuance under the 1992 Plan, a total of 23,169 shares of Common Stock is
reserved for issuance under the Special Plan, and a total of up to 43,750 shares
of Common Stock is reserved for issuance under the Fees Plan. Shares allocable
to options under the 1992 Plan that expire or otherwise terminate unexercised
may again be subjected to an award under the 1992 Plan. The number of shares
available for an award under the 1992 Plan will include the number of shares
surrendered by an optionee

<PAGE>

or retained by the Company in payment of applicable withholding taxes. In the
event of a stock dividend, stock split or combination of shares,
recapitalization, merger or other similar change, appropriate adjustments will
be made in the number and kind of shares issuable under the 1992 Plan and the
Special Plan, the number and kind of shares to be issued under outstanding stock
option awards, the exercise price and other relevant provisions.

ELIGIBILITY

The 1992 Plan defines "Eligible Directors," eligible to receive option
awards under the 1992 Plan, as including all directors who are not otherwise
employees of the Company or any of its subsidiaries and who were not employees
thereof for a period of at least one year before the date of grant (as defined
in the 1992 Plan). Options have been and will be awarded automatically to the
Eligible Directors under the 1992 Plan as follows: (i) as of the initial closing
of a 1992 offering, each Eligible Director automatically received an option to
purchase 500 shares of Common Stock plus 0.0125% of the number of shares of
Common Stock in excess of a minimum offering of 1,000,000 shares sold by such
initial closing; (ii) as of each subsequent closing of the 1992 offering before
June 1, 1994, each Eligible Director automatically received an option to
purchase 0.0125% of the number of shares of Common Stock sold since the last
closing of the offering; (iii) as of each June 1 during the years 1994 through
1998 (inclusive), each Eligible Director shall automatically receive an option
to purchase 0.02% of the total number of shares of Common Stock issued and
outstanding on that date; (iv) as of the effective date of the amendment and
restatement of the 1992 Plan in 1994, each Eligible Director automatically
received an option to purchase 5,000 shares of Company Stock; and (v) as of the
election as a director of any new person who qualifies as an Eligible Director,
such Eligible Director shall automatically receive an option to purchase 5,000
shares of Common Stock.

On January 25, 1996, options were granted under the Special Plan to
"Eligible Directors," defined in the Special Plan to include all directors (i)
who are not otherwise employees of the Company or any of its subsidiaries and
who were not employees thereof for a period of at least one year before the date
of grant (as defined in the Special Plan), and (ii) who were not expected to and
did not stand for reelection to the Board at the Company's 1996 Annual Meeting
of Shareholders. The Special Plan further provides that the directors eligible
under the Special Plan are Phillip H. Kirkpatrick, William P. Graham and Edward
L. Marcus.

The eligibility requirements for directors to receive shares under the
Fees Plan are the same as the eligibility requirements for the receipt of
options under the 1992 Plan. Pursuant to the Authorizing Resolution,
non-employee directors will receive an annual fee of $10,000, of which $5,000
will be paid in cash and $5,000 will be paid in shares of Common Stock. No
shares have yet been issued under the Fees Plan.

TERMS OF AWARDS

OPTIONS

No option issued under the 1992 Plan or the Special Plan may be
exercised earlier than six months after the date of grant, and no option issued
under either of those Plans may be exercised after the first to occur of (i) 10
years from the date of grant, (ii) three years following the optionee's ceasing
to be a director of the Company (other than by death), or (iii) one year
following the optionee's death.

The participant does not pay any monetary consideration for the
granting of the options. The 1992 Plan and the Special Plan provide that the
exercise price of shares covered by an option shall be the fair market value of
such shares on the date of grant. The Special Plan further provides that the
fair market value on the date of grant of options under the Special Plan is
deemed to be $11.00 per share. The exercise price of an option may be paid in
cash or by delivery to the Company of shares of Common Stock (valued at fair
market value on the date of exercise) in the amount necessary to pay the
exercise price. At the time of exercise, the Company has the right to retain
shares of the Common Stock otherwise remittable to the optionee under the option
to cover the Company's income tax

<PAGE>

withholding obligations, subject to the optionee's right to make other
arrangements satisfactory to the Company for the payment of all applicable
withholding taxes. No fees, commissions or other charges are incurred upon
exercise of an option.

Options are not transferable except by will or by the laws of descent and
distribution and generally are exercisable during the lifetime of the optionee
only by such optionee. The 1992 Plan and the Special Plan contain no provision
that permits participants to withdraw from those Plans and terminate their
interests therein, and those Plans prohibit participants from assigning,
pledging, or hypothecating their options or their interests therein.

If the Company is party to a consolidation or a merger in which the
Company is not the surviving corporation, a transaction that results in the
acquisition of substantially all of the Company's outstanding stock by a single
person or entity, or a sale or transfer of substantially all of the Company's
assets, the Board may take such actions as it deems appropriate with respect to
outstanding options.

STOCK

Shares issued pursuant to the Fees Plan are subject to no restrictions
under the terms set forth in the Authorizing Resolution. The Authorizing
Resolution for the Fees Plan contains no provision that permits participants to
withdraw from the Plan and terminate their interests therein.

FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the Federal income tax consequences to
the Company and participants under the Plans. It is general and does not purport
to be complete. There may also be applicable state and local taxes. In addition,
in some cases it may be important to consider the effect, if any, of gift,
estate and inheritance taxes.

NO REPRESENTATION RESPECTING THE TAX TREATMENT OF ANY OPTION AWARD HAS
BEEN MADE TO A PLAN PARTICIPANT. PLAN PARTICIPANTS ARE URGED TO CONSULT THEIR
COUNSEL, ACCOUNTANTS, OR OTHER TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF
OPTIONS GRANTED TO THEM IN RELATION TO THEIR OWN PARTICULAR TAX SITUATION.

FOR PARTICIPANTS

STOCK. In general, a director who has received shares of Common Stock
will include in gross income as compensation income an amount equal to the fair
market value of the shares of stock at the time of receipt of the stock. Such
amount will be included in the tax year in which the stock is received.

NONSTATUTORY STOCK OPTIONS. All options granted under the Plans shall
be nonstatutory in nature and shall not be entitled to special tax treatment
under Tax Code Section 422. Under present Federal income tax law and existing
and temporary regulations subject to change at any time:

(1) Generally, no taxable income will be realized by a
participant upon the grant of nonstatutory stock options under the
Plans.

(2) Upon the exercise of nonstatutory stock options, a
participant will incur ordinary income in the year of exercise to the
extent that the fair market value of the Common Stock on the date of
exercise exceeds the option price.

EXERCISE OF AN OPTION WITH COMMON STOCK. A participant may pay any or
all of the purchase price on the exercise of a stock option by the delivery of
Common Stock. Usually when a participant delivers shares of Common

<PAGE>

Stock in satisfaction of all, or any part, of the purchase price, no taxable
gain is recognized on any appreciation in value of the previously held Common
Stock. In other words, even though the delivered shares are valued at their fair
market value for purposes of paying all or part of the option price, the
participant is generally not taxed on the difference between the fair market
value and the tax basis of the shares.

TAX BASIS OF COMMON STOCK RECEIVED UPON EXERCISE. Ordinary income
recognized upon receipt of Common Stock under the Plans will increase the
participant's tax basis for the purpose of determining gain or loss on the
subsequent sale or exchange of the Common Stock. Special rules apply to
determine the basis of shares of Common Stock received upon the exercise of a
stock option by the delivery of shares of previously owned Common Stock.

FOR THE COMPANY

The Company usually will be entitled to a business expense deduction at
the time and in the amount that the participant recognizes ordinary income in
connection with an option award or the issuance of shares of Common Stock in
partial payment of directors' fees. With respect to nonstatutory options, this
usually occurs upon exercise of the options. With respect to Common Stock, it
usually occurs upon receipt of the shares.

RESTRICTIONS ON RESALE

The Plans contain no restrictions on the resale of Common Stock
received in partial payment of directors' fees or upon exercise of a stock
option. However, the securities laws impose certain limitations on sales by
persons who are affiliates of the Company, as defined in Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"). An affiliate may
resell such Common Stock only pursuant to an effective registration statement
under the Securities Act or an exemption from such registration, such as the
exemption provided by Rule 144 under the Securities Act. The Company has no
obligation to register for resale any shares of Common Stock acquired by
participants and this Prospectus is not available to a participant for reoffers
or resales.

In addition, under Section 16(b) of the Exchange Act, a director must
pay to the Company any profit made from a purchase and sale, or a sale and
purchase, of Common Stock within a six-month period. Transactions subject to
Section 16(b) may include the receipt, vesting and exercise of stock options,
the delivery or retention of Common Stock to pay the exercise price or to
satisfy tax withholding obligations and the resale of Common Stock received upon
exercise. Transactions between the director and the Company, in which no third
parties are involved, may be eligible for exemption pursuant to Rule 16b-3 under
the Exchange Act. Participants who have questions regarding the applicability of
Section 16 are encouraged to contact the Company's Chief Financial Officer.

ADDITIONAL INFORMATION

The Company hereby incorporates by reference the following documents
filed or to be filed with the Securities and Exchange Commission (the
"Commission");

(a) the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996;

(b) all other reports filed with the Commission pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), since December 31, 1996,
including: the Company's Current Report on Form 8-K dated
October 31, 1996 (including Amendment No. 1 thereto on Form
8-K/A);

<PAGE>

(d) from the date of filing such documents, all documents
subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act, prior to the filing
of a post-effective amendment which indicates that all
securities offered have been sold or which deregisters all
such securities then remaining unsold.

Upon oral or written request, the Company will provide to a
participant, without charge, copies of (i) any and all of the information that
has been incorporated by reference in this document, (ii) the Company's most
recent annual report to shareholders, and (iii) if the participant is not
otherwise receiving such material, all reports, proxy statements and other
communications distributed by the Company to its shareholders generally. Such
requests should be directed to the Company's Chief Financial Officer at the
Company's business address: 306 East Main Street, Richmond, Virginia, 23219,
telephone number (804) 643-1761.

Participants may contact the Company's Chief Financial Officer at the
address and telephone number listed above to obtain additional information about
the Plan and its administrators.

The Company may distribute from time to time to participants reports
showing the status of their grants under the Plans.

<PAGE>

PART II. INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE

Cornerstone Realty Income Trust, Inc. (the "Company") hereby
incorporates by reference into this Registration Statement the following
documents which have been filed with the Securities and Exchange Commission (the
"Commission"):

(a) the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996;

(b) all other reports filed with the Commission pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), since December 31, 1996, including: the Company's Current
Report on Form 8-K dated October 31, 1996 (including Amendment No. 1 thereto on
Form 8-K/A); and

(c) the description of the Company's Common Shares appearing in its
Registration Statement on Form 8-A filed with the Commission on April 28, 1994
(No. 0-23954).

All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment which indicates that all securities offered hereby have
been sold or which deregisters all such securities then remaining unsold, shall
be deemed to be incorporated by reference in this Registration Statement and to
be part hereof from the respective dates of filing of such documents.

ITEM 4. DESCRIPTION OF SECURITIES

Not applicable.

ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL

Not applicable.

ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Article 10 of the Virginia Stock Corporation Act (the "Act") allows, in
general, for indemnification, in certain circumstances, by a corporation of any
person threatened with or made a party to any action, suit or proceeding by
reason of the fact that he or she is, or was, a director, officer, employee or
agent of such corporation. Indemnification is also authorized with respect to a
criminal act or proceeding where the person had no reasonable cause to believe
that his or her conduct was unlawful. Article 9 of the Act provides limitations
on damages payable by officers and directors, except in cases of willful
misconduct or knowing violation of criminal law or any federal or state
securities laws.

Article VI of the Company's Amended and Restated Articles of
Incorporation (the "Articles") provides that in every instance in which the Act,
and any amendments thereto, permits the limitation or elimination of liability
of directors or officers of a corporation to the corporation or its
shareholders, the directors and officers of the Company shall not be liable to
the Company or its shareholders.

<PAGE>

The Articles provide for mandatory indemnification of any individual
who is, was or is threatened to be made a party to a proceeding (including a
proceeding by or in the right of the Company or by or on behalf of its
shareholders) because such individual is or was a director or officer of the
Company or of any legal entity controlled by the Company or because such
individual is or was a fiduciary of any employee benefit plan established at the
direction of the Company, against all liabilities and reasonable expenses
incurred on account of the proceeding, provided that the directors of the
Company (excluding the indemnified party) determine in good faith that the
director's or officer's course of conduct which caused the loss or liability was
undertaken in good faith within what he reasonably believed to be the scope of
his authority and for a purpose which he reasonably believed to be in the best
interests of the Company or its shareholders, except such liabilities and
expenses as are incurred because of such individual's misconduct, bad faith,
negligence, reckless disregard of duties or violation of the criminal law.

The Company maintains a standard policy of officers' and directors'
liability insurance. The Company is authorized to purchase and maintain
insurance against any liability it may have under the indemnification provisions
of the Articles or to protect any of the persons named above against any
liability arising from their service to the Company or any other legal entity at
the request of the Company, regardless of the Company's power to indemnify
against such liability.

ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED

Not applicable.

ITEM 8. EXHIBITS

Exhibit
Number Description

4.1 Amended and Restated Articles of Incorporation of Cornerstone
Realty Income Trust, Inc. as amended (Incorporated by
reference to Exhibit 3.1 included in the Registrant's Report
on Form 10-Q for the Quarter ended June 30, 1995; File No.
0-23954).

4.2 Bylaws of Cornerstone Realty Income Trust, Inc. (Amended
through April 26, 1995) (Incorporated by reference to Exhibit
3.2 included in the Registrant's Report on Form 10-Q for the
Quarter ended June 30, 1995; File No. 0-23954).

5 Opinion of McGuire, Woods, Battle & Boothe, L.L.P. as to the
legality of the securities being registered.

23.1 Consent of McGuire, Woods, Battle & Boothe, L.L.P. (included
as part of Exhibit 5).

23.2 Consent of Ernst & Young LLP.

23.3 Consent of L.P. Martin & Company, P.C.

24.1 Power of Attorney of Glade M. Knight.

24.2 Power of Attorney of Stanley J. Olander, Jr.

24.3 Power of Attorney of Glenn W. Bunting.

<PAGE>

24.4 Power of Attorney of Penelope W. Kyle.

24.5 Power of Attorney of Harry S. Taubenfeld.

24.6 Power of Attorney of Martin Zuckerbrod.

99.1 Cornerstone Realty Income Trust, Inc. 1992 Non-Employee
Directors Stock Option Plan.

99.2 Cornerstone Realty Income Trust, Inc. Special Non-Employee
Directors Stock Option Plan.

99.3 Resolution of the Board of Directors of the Company, dated
January 26, 1996, authorizing Non- Employee Directors Fees
Plan.

ITEM 9. UNDERTAKINGS

The undersigned registrant hereby undertakes:

(a) (1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933 (the "Securities Act");

(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement;

(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;

Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13 or Section
15(d) of the Exchange Act that are incorporated by reference in the registration
statement.

(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

(b) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person

<PAGE>

of the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Richmond, Commonwealth of Virginia, on
April 9, 1997.

CORNERSTONE REALTY INCOME TRUST, INC.

By: /s/ Stanley J. Olander, Jr., Chief Financial Officer
------------------------------------------------
Stanley J. Olander, Jr., Chief Financial Officer

Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.

Signature Capacities Date
<S> <C>

/s/*
- ---------------------------------------- Director, President, and April 9, 1997
Glade M. Knight Chief Executive Officer

/s/*
- ---------------------------------------- Director, Vice President, April 9, 1997
Stanley J. Olander, Jr. Secretary and Chief
Financial Officer

/s/*
- ---------------------------------------- Director April 9, 1997
Glenn W. Bunting, Jr.

- ---------------------------------------- Director April 9, 1997
Leslie A. Grandis

/s/*
- ---------------------------------------- Director April 9, 1997
Penelope W. Kyle

/s/*
- ---------------------------------------- Director April 9, 1997
Harry S. Taubenfeld

/s/*
- ---------------------------------------- Director April 9, 1997
Martin Zuckerbrod

*By: /s/ Stanley J. Olander, Jr.
----------------------------------------------
Stanley J. Olander, Jr.,
Attorney-in-Fact for the above-named persons

<PAGE>

EXHIBIT INDEX

Exhibit Sequentially
Number Description Numbered Page

5 Opinion of McGuire, Woods, Battle & Boothe, L.L.P. as to the
legality of the securities being registered.

23.1 Consent of McGuire, Woods, Battle & Boothe, L.L.P. (included
as part of Exhibit 5).

23.2 Consent of Ernst & Young LLP.

23.3 Consent of L.P. Martin & Company, P.C.

24.1 Power of Attorney of Glade M. Knight.

24.2 Power of Attorney of Stanley J. Olander, Jr.

24.3 Power of Attorney of Glenn W. Bunting.

24.4 Power of Attorney of Penelope W. Kyle.

24.5 Power of Attorney of Harry S. Taubenfeld.

24.6 Power of Attorney of Martin Zuckerbrod.

99.1 Cornerstone Realty Income Trust, Inc. 1992 Non-Employee
Directors Stock Option Plan.

99.2 Cornerstone Realty Income Trust, Inc. Special Non-Employee
Directors Stock Option Plan.

99.3 Resolution of the Board of Directors of the Company, dated
September 26, 1996, authorizing Non-Employee Directors Fees
Plan.

</TABLE>

EXHIBIT 5

April 9, 1997

Board of Directors
Cornerstone Realty Income Trust, Inc.
306 East Main Street
Richmond, Virginia 23219

Dear Sirs:

We have acted as counsel to Cornerstone Realty Income Trust, Inc. (the
"Company"), a Virginia corporation, in connection with the preparation of the
registration statement on Form S-8 pertaining to the Cornerstone Realty Income
Trust, Inc. 1992 NonEmployee Directors Stock Option Plan, the Cornerstone Realty
Income Trust Special Non-Employee Directors Stock Option Plan and the
Cornerstone Realty Income Trust, Inc. Non-Employee Directors Fees Plan, to which
this opinion is an exhibit (the "Registration Statement"), which is being filed
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act"), for the registration under the Act of the Common Shares of
the Company described in such Registration Statement. Terms not otherwise
defined herein shall have the meanings assigned to them in the Registration
Statement.

We have reviewed originals or copies of (i) the Amended and Restated
Articles of Incorporation (as amended), Bylaws and other corporate documents of
the Company, (ii) certain resolutions of the Board of Directors of the Company,
and (iii) the Registration Statement and the prospectus included therein. In
addition, we have reviewed such other documents and have made such legal and
factual inquiries as we have deemed necessary or advisable for purposes of
rendering the opinions set forth below.

Based upon and subject to the foregoing we are of the opinion that:

1. The Company is duly organized and validly existing under the laws of
the Commonwealth of Virginia; and

2. The Common Shares registered under the Registration Statement have
been duly authorized and, when issued and paid for as described in the
Registration Statement, will be validly issued, fully paid and nonassessable.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not admit that we are in
the category of persons whose consent is

<PAGE>

required by Section 7 of the Act, or the rules and regulations promulgated
thereunder by the Securities and Exchange Commission.

Very truly yours,

/s/ McGuire, Woods, Battle & Boothe, L.L.P.

EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-00000) pertaining to the 1992 Non-Employee Directors Stock Option
Plan, the Special Non-Employee Directors Stock Option Plan and the Non-Employee
Directors Fees Plan of Cornerstone Realty Income Trust, Inc. of our reports
dated January 24, 1997, with respect to the financial statements of Cornerstone
Realty Income Trust, Inc. incorporated by reference in its Annual Report (Form
10-K) for the year ended December 31, 1996 and the related financial statement
schedule included therein, filed with the Securities and Exchange Commission.

/s/ Ernst & Young LLP

Richmond, Virginia
April 7, 1997

EXHIBIT 23.3

L.P. MARTIN & COMPANY, P.C.
4132 INNSLAKE DRIVE
GLEN ALLEN, VIRGINIA 23060
PHONE: 804-346-2626
FAX: 804-346-9311

Consent of Independent Auditors
- -------------------------------

The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia

We hereby consent to the incorporation by reference of the following reports
prepared by us in two Registration Statements on Form S-8 to be filed with the
Securities and Exchange Commission by Cornerstone Realty Income Trust, Inc.:

(1) Our report dated March 7, 1997 with respect to the statement of income and
direct operating expenses exclusive of items not comparable to the proposed
future operations of the property Franklin Towers Apartments for the
twelve-month period ended December 31, 1996, and (2) our report dated March 24,
1997 with respect to the statement of income and direct operating expenses
exclusive of items not comparable to the proposed future operations of the
property Westchase Apartments for the twelve-month period ended December 31,
1996.

Richmond, Virginia /s/ L.P. Martin & Company, P.C.
April 8, 1997

Exhibit 24.1

POWER OF ATTORNEY

The undersigned hereby constitutes and appoints Glade M. Knight and
Stanley J. Olander, Jr., each acting singly, his attorney-in-fact, to execute on
his behalf, individually and in each capacity stated below, and to file, any
documents referred to below relating to the registration of all of the common
shares of Cornerstone Realty Income Trust, Inc. (the "Company") issuable under
or pursuant to the Company's 1992 Non-Employee Directors Stock Option Plan and
its Special Non-Employee Directors Stock Option Plan and options granted
thereunder, or issuable under or pursuant to the Company's Non-Employee
Directors Fees Plan, such documents being: a Registration Statement to be filed
with the Securities and Exchange Commission; such statements with, or
applications to, the regulatory authorities of any state in the United States as
may be necessary to permit such shares to be offered and sold in such states;
and any and all amendments to any of the foregoing, with all exhibits and
documents required to be filed in connection therewith. The undersigned further
grants unto said attorneys and each of them full power and authority to perform
each and every act necessary to be done in order to accomplish the foregoing
registrations as fully as he himself might do.

IN WITNESS WHEREOF, the undersigned has signed this power of attorney
as of the 22 day of January, 1997.

/s/ Glade M. Knight
-------------------------
Glade M. Knight, Director
of the Company

Exhibit 24.2

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has signed this power of attorney
as of the 22 day of January, 1997.

/s/ Stanley J. Olander, Jr.
---------------------------------
Stanley J. Olander, Jr., Director
of the Company

Exhibit 24.3

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has signed this power of attorney
as of the 22 day of January, 1997.

/s/ Glenn W. Bunting, Jr.
------------------------------
Glenn W. Bunting, Jr., Director
of the Company

Exhibit 24.4

POWER OF ATTORNEY

The undersigned hereby constitutes and appoints Glade M. Knight and
Stanley J. Olander, Jr., each acting singly, her attorney-in-fact, to execute on
her behalf, individually and in each capacity stated below, and to file, any
documents referred to below relating to the registration of all of the common
shares of Cornerstone Realty Income Trust, Inc. (the "Company") issuable under
or pursuant to the Company's 1992 Non-Employee Directors Stock Option Plan and
its Special Non-Employee Directors Stock Option Plan and options granted
thereunder, or issuable under or pursuant to the Company's Non-Employee
Directors Fees Plan, such documents being: a Registration Statement to be filed
with the Securities and Exchange Commission; such statements with, or
applications to, the regulatory authorities of any state in the United States as
may be necessary to permit such shares to be offered and sold in such states;
and any and all amendments to any of the foregoing, with all exhibits and
documents required to be filed in connection therewith. The undersigned further
grants unto said attorneys and each of them full power and authority to perform
each and every act necessary to be done in order to accomplish the foregoing
registrations as fully as she herself might do.

IN WITNESS WHEREOF, the undersigned has signed this power of attorney
as of the 23 day of January, 1997.

/s/ Penelope W. Kyle
--------------------------
Penelope W. Kyle, Director
of the Company

Exhibit 24.5

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has signed this power of attorney
as of the 23 day of January, 1997.

/s/ Harry S. Taubenfeld
-----------------------------
Harry S. Taubenfeld, Director
of the Company

Exhibit 24.6

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has signed this power of attorney
as of the 23 day of January, 1997.

/s/ Martin Zuckerbrod
---------------------------
Martin Zuckerbrod, Director
of the Company

Exhibit 99.1

CORNERSTONE REALTY INCOME TRUST, INC.
1992 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN

Amendment and Restatement

Effective July 8, 1994

<PAGE>

CORNERSTONE REALTY INCOME TRUST, INC.
1992 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
Amendment and Restatement

1. PURPOSE. The purpose of this Cornerstone Realty Income Trust, Inc.
1992 Non-Employee Directors Stock Option Plan (the "Plan") is to encourage
ownership in Cornerstone Realty Income Trust, Inc. (the "Company") by
non-employee members of the Board, in order to promote long-term stockholder
value and to provide non-employee members of the Board with an incentive to
continue as directors of the Company. The Plan has been amended and restated
effective July 8, 1994, subject to stockholder approval, to increase the number
of shares subject to the Plan and to increase the benefits accruing to
participants.

2. DEFINITIONS. As used in the Plan, the following terms have the
meanings indicated:

(a) "Act" means the Securities Exchange Act of 1934, as amended.

(b) "Board" means the board of directors of the Company.

(d) "Company" means Cornerstone Realty Income Trust, Inc., a
Virginia corporation.

(e) "Company Stock" means common stock, no par value, of the
Company. If the par value of the Company Stock is changed, or in
the event of a change in the capital structure of the Company (as
provided in Section 12), the shares resulting from such a change shall
be deemed to be Company Stock within the meaning of the Plan.

(f) "Date of Grant" means the date as of which an Eligible
Director is automatically awarded an Option pursuant to Section 7.

(g) "Disability" or "Disabled" means a physical or mental
condition that prevents the director from performing his
customary duties with the Company. The Board shall determine whether a
Disability exists on the basis of competent medical evidence,
and such determination shall be conclusive.

<PAGE>

(h) "Eligible Director" means a director described in Section 4.

(i) "Employer" means the Company, Cornerstone Realty Advisors,
Inc., Cornerstone Management Group, Inc., and Cornerstone Realty Group,
Inc.

(j) "Fair Market Value" means, on any given date, (i) if the
Company Stock is traded on an exchange, the closing registered sales
prices of the Company Stock on such day on the exchange on which it
generally has the greatest trading volume, (ii) if the Company Stock is
traded on the over-the-counter market, the average between the closing
bid and asked prices on such day as reported by NASDAQ, or (iii) if the
Company Stock is not traded on any exchange or over-the-counter market,
the fair market value shall be determined by the Board using any
reasonable method in good faith.

(k) "Initial Closing" means the first closing of the Offering that
will occur after the Minimum Offering is achieved.

(l) "Insider" means a person subject to Section 16(b) of the Act.

(m) "Minimum Offering" means the sale of 1,000,000 shares of
Company Stock pursuant to the Offering.

(n) "Offering" means, collectively, (1) the sale of up to
$50,000,000 in shares of Company Stock to the public and the
registration of such shares with the Securities and Exchange
Commission, as authorized by resolutions of the Board dated August 3,
1992 (the "Initial Offering"), and (2) the sale of any additional
shares of Company Stock to the public and the registration of such
shares with the Securities and Exchange Commission, as authorized by
resolutions of the Board from time to time, which sales occur before
the expiration of five years from the effective date of the amendment
and restatement of this Plan (the "Additional Offerings").

(o) "Option" means a right to acquire Company Stock granted under
the Plan, at a price determined in accordance with the Plan.

<PAGE>

limitation, the authority (within the limitations described herein) to prescribe
the form of the agreement embodying the grant of Options, to construe the Plan,
to determine all questions arising under the Plan, and to adopt and amend rules
and regulations for the administration of the Plan as it may deem desirable. Any
decision of the Board in the administration of the Plan, as described herein,
shall be final and conclusive. The Board may act only by a majority of its
members in office, except that members thereof may authorize any one or more of
their number or any officer of the Company to execute and deliver documents on
behalf of the Board. No member of the Board shall be liable for anything done or
omitted to be done by him or any other member of the Board in connection with
the Plan, except for his own willful misconduct or as expressly provided by
statute.

4. PARTICIPATION IN THE PLAN. Each director of the Company who is not
otherwise an employee of the Employer or any subsidiary of the Company and was
not an employee of the Employer or subsidiary for a period of at least one year
before the Date of Grant shall be eligible to participate in the Plan.

5. STOCK SUBJECT TO THE PLAN. Subject to Section 12 of the Plan, there
shall be reserved for issuance under the Plan an aggregate of 45,000 shares of
Company Stock plus 1.8% of the total number of shares of Company Stock sold in
the Offering in excess of the Minimum Offering, which shall be authorized, but
unissued shares. Shares allocable to Options or portions thereof granted under
the Plan that expire or otherwise terminate unexercised may again be subjected
to an Option under the Plan.

6. NON-STATUTORY STOCK OPTIONS. All options granted under the Plan
shall be non-statutory in nature and shall not be entitled to special tax
treatment under Code section 422.

7. AWARD, TERMS, CONDITIONS AND FORM OF OPTIONS. Each Option shall be
evidenced by a written agreement in such form as the Board shall from time to
time approve, which agreement shall comply with and be subject to the following
terms and conditions:

(a) Automatic Award of Option.

(i) As of the Initial Closing, each Eligible Director shall
automatically receive an Option to purchase 500 shares of Company

<PAGE>

Stock plus 0.0125% of the number of shares of Company Stock in
excess of the Minimum Offering sold by the Initial Closing.

(ii) As of each subsequent closing of the Offering before
June 1, 1994, each Eligible Director shall automatically receive
an Option to purchase 0.0125% of the number of shares of Company
Stock in excess of the Minimum Offering sold since the last
closing of the Offering.

(iii) As of each June 1 during the years 1994 through 1998
(inclusive), each Eligible Director shall automatically receive an
Option to purchase 0.02% of the total number of shares of Company
Stock issued and outstanding on that date.

(iv) As of the effective date of the amendment and
restatement of this Plan, each Eligible Director shall
automatically receive an Option to purchase 5,000 shares of
Company Stock.

(v) As of the election as a director of any new person who
qualifies as an Eligible Director, such Eligible Director shall
automatically receive an Option to purchase 5,000 shares of
Company Stock.

(vi) If at any time under the Plan there are not sufficient
shares available to fully permit the automatic Option grants
described in this paragraph, the Option grants shall be reduced
pro rata (to zero if necessary) so as not to exceed the number of
shares available.

(b) Option Exercise Price. The Option exercise price shall be the Fair
Market Value of the shares of Company Stock subject to the Option on the Date of
Grant.

(c) Options Not Transferable. An Option shall not be transferable by
the optionee otherwise than by will, or by the laws of descent and distribution,
and shall be exercised during the lifetime of the optionee only by him. An
Option transferred by will or by the laws of descent and distribution may be
exercised by the optionee's personal representative within one year of the date
of the optionee's death to the extent the optionee could have exercised the
Option on the date of his death. No Option or interest therein may be
transferred, assigned, pledged or hypothecated by the optionee

<PAGE>

during his lifetime, whether by operation of law or otherwise, or be made
subject to execution, attachment or similar process.

(d) Exercise of Options. In no event shall an Option be exercisable
earlier than six months from the later of the Date of Grant or the date of
approval of the Plan by stockholders of the Company. Furthermore, no Option may
be exercised:

(i) before any amendment or restatement that requires
shareholder approval pursuant to Section 13 of the Plan, is approved by
stockholders of the Company;

(ii) unless at such time the optionee is a director of the
Company, except that he may exercise the Option within three years of the date
he ceases to be a director of the Company if he ceased to be a director more
than six months after the Date of Grant of the Option;

(iii) after the expiration of ten years from the Date of Grant; and

(iv) except by written notice to the Company at its principal
office, stating the number of shares the optionee has elected to purchase,
accompanied by payment in cash and/or by delivery to the Company of shares of
Company Stock (valued at Fair Market Value on the date of exercise) in the
amount of the full Option exercise price for the shares of Company Stock being
acquired thereunder.

8. WITHHOLDING. If the Company is required by law to withhold federal
or state income taxes when an Option is exercised, the Company shall have the
right to retain or sell without notice shares of Company Stock having a Fair
Market Value sufficient on such date or dates as may be determined by the Board
(but not more than five business days prior to the date on which such shares
would otherwise have been delivered) to cover the amount of any federal or state
income tax required to be withheld or otherwise deducted and paid with respect
to such payment and the exercise of the Option, remitting any balance to the
optionee; provided, however, that the optionee shall have the right to make
other arrangements satisfactory to the Company or to provide the Company with
the funds to enable it to pay such tax. Notwithstanding the foregoing, the
Company shall not sell shares of Company Stock if the Optionee

<PAGE>

is an Insider and such sale will cause the Optionee to incur a liability under
Section 16(b) of the Exchange Act.

9. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. The Board shall have
the power to modify, extend or renew outstanding Options and to authorize the
grant of new Options in substitution therefor, provided that any such action may
not enhance the rights of the optionee without stockholder approval or have the
effect of altering, enhancing or impairing any rights or obligations of any
person under any Option previously granted without the consent of the optionee.

10. TERMINATION. The Plan shall terminate upon the earlier of:

(a) the adoption of a resolution of the Board terminating the
Plan; or

(b) July 8, 2004.

No termination of the Plan shall without his consent materially and adversely
affect any of the rights or obligations of any person under any Option
previously granted under the Plan.

11. LIMITATION OF RIGHTS.

(c) No Right to Continue as a Director. Neither the Plan nor the
granting of an Option nor any other action taken pursuant to the Plan shall
constitute or be evidence of any agreement or understanding, express or implied,
that the Company will retain any person as a director for any period of time.

(d) No Stockholders Rights Under Options. An optionee shall have
no rights as a stockholder with respect to shares covered by his Option until
the date of exercise of the Option, and, except as provided in Section 12, no
adjustment will be made for dividends or other rights for which the record date
is prior to the date of such exercise.

12. CHANGES IN CAPITAL STRUCTURE.

(e) In the event of a stock dividend, stock split or combination
of shares, recapitalization or merger in which the Company is the surviving
corporation or other change in the Company's capital stock (including, but not
limited to, the creation or issuance to shareholders generally of rights,
options or warrants for the purchase of common stock or preferred stock of the
Company), the number and kind of shares of stock or securities of the Company

<PAGE>

to be subject to the Plan and to Options then outstanding or to be granted
thereunder, the maximum number of shares or securities which may be delivered
under the Plan, the exercise price and other relevant provisions shall be
appropriately adjusted by the Board, whose determination shall be binding on all
persons. If the adjustment would produce fractional shares with respect to any
unexercised Option, the Board may adjust appropriately the number of shares
covered by the Option so as to eliminate the fractional shares.

(f) If the Company is a party to a consolidation or a merger in
which the Company is not the surviving corporation, a transaction that results
in the acquisition of substantially all of the Company's outstanding stock by a
single person or entity, or a sale or transfer of substantially all of the
Company's assets, the Board may take such actions with respect to outstanding
Options as the Board deems appropriate.

(g) Notwithstanding anything in the Plan to the contrary, the
Board may take the foregoing actions without the consent of any optionee and the
Board's determination shall be conclusive and binding on all persons for all
purposes.

13. AMENDMENT OF THE PLAN. The Board (except as provided below) may
suspend or discontinue the Plan or revise or amend the Plan in any respect;
provided, however, that without approval of the stockholders of the Company no
revision or amendment shall increase the number of shares subject to the Plan
(except as provided in Section 12) or materially increase the benefits accruing
to participants under the Plan. The Plan shall not be amended more than once
every six months other than an amendment required to comply with changes in the
Internal Revenue Code or the Employee Retirement Income Security Act of 1974 or
regulations thereunder. Notwithstanding the foregoing, the Board may
unilaterally amend the Plan and the terms of Options granted hereunder to ensure
compliance with Rule 16b-3 of the Securities and Exchange Commission promulgated
under the Securities Exchange Act of 1934, as amended.

<PAGE>

to the attention of the President; (b) if to any participant - at the last
address of the participant know to the sender at the time the notice or other
communication is sent.

15. GOVERNING LAW. The terms of this Plan shall be governed by the
laws of the Commonwealth of Virginia.

IN WITNESS WHEREOF, the Company has caused this Plan to be executed
this 8th day of July, 1994.

CORNERSTONE REALTY INCOME
TRUST, INC.

By /s/ Glade M. Knight
-------------------
Glade M. Knight,
Chairman of the Board

Exhibit 99.2

CORNERSTONE REALTY INCOME TRUST, INC.
SPECIAL NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN

Effective as of January 25, 1996

<PAGE>

CORNERSTONE REALTY INCOME TRUST, INC.
SPECIAL NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN

1. PURPOSE. The purpose of this Cornerstone Realty Income Trust, Inc.
Special Non-Employee Directors Stock Option Plan (the "Plan") is to provide for
a special one-time grant of stock options in Cornerstone Realty Income Trust,
Inc. (the "Company") to three (3) members of the Board of Directors of the
Company who will not stand for reelection to the Board at the Company's 1996
Annual Meeting of Shareholders. Such special one-time grant is in recognition of
the valuable service of such directors and their loyalty to the Company.

2. DEFINITIONS. As used in the Plan, the following terms have the
meanings indicated:

(a) "Act" means the Securities Exchange Act of 1934, as amended.

(b) "Board" means the board of directors of the Company.

(d) "Company" means Cornerstone Realty Income Trust, Inc., a
Virginia corporation.

(e) "Company Stock" means common stock, no par value, of the
Company. If the par value of the Company Stock is changed, or in the
event of a change in the capital structure of the Company (as provided
in Section 12), the shares resulting from such a change shall be deemed
to be Company Stock within the meaning of the Plan.

(f) "Date of Grant" means the date as of which an Eligible
Director is awarded an Option pursuant to Section 7.

(g) "Eligible Director" means a director described in Section 4.

(h) "Employer" means the Company, Cornerstone Advisors, Inc.,
Cornerstone Management Group, Inc., and Cornerstone Realty Group, Inc.

<PAGE>

(i) "Fair Market Value" means, on any given date, (i) if the
Company Stock is traded on an exchange, the closing registered sales
prices of the Company Stock on such day on the exchange on which it
generally has the greatest trading volume, (ii) if the Company Stock is
traded in the over-the-counter market, the average between the closing
bid and asked prices on such day as reported by NASDAQ, or (iii) if the
Company Stock is not traded on any exchange or over-the-counter market,
the fair market value shall be determined by the Board using any
reasonable method in good faith.

(j) "Insider" means a person subject to Section 16(b) of the Act.

(k) "Option" means a right to acquire Company Stock granted under
the Plan, at a price determined in accordance with the Plan.

3. ADMINISTRATION. The Plan shall be administered by the Board.
Options shall be granted as described in Section 7. However, the Board shall
have all powers vested in it by the terms of the Plan, including, without
limitation, the authority (within the limitations described herein) to prescribe
the form of the agreement embodying the grant of Options, to construe the Plan,
to determine all questions arising under the Plan, and to adopt and amend rules
and regulations for the administration of the Plan as it may deem desirable. Any
decision of the Board in the administration of the Plan, as described herein,
shall be final and conclusive. The Board may act only by a majority of its
members in office, except that members thereof may authorize any one or more of
their number or any officer of the Company to execute and deliver documents on
behalf of the Board. No member of the Board shall be liable for anything done or
omitted to be done by him or any other member of the Board in connection with
the Plan, except for his own willful misconduct or as expressly provided by
statute.

4. PARTICIPATION IN THE PLAN. Each director of the Company who (1) is
not otherwise an employee of the Employer or any subsidiary of the Company and
was not an employee of the Employer or subsidiary for a period of at least one

<PAGE>

year before the Date of Grant, and (2) who will not stand for reelection to the
Board at the Company's 1996 Annual Meeting of Shareholders, shall be eligible to
participate in the plan. The eligible directors are: Phillip H. Kirkpatrick,
William P. Graham and Edward L. Marcus.

5. STOCK SUBJECT TO THE PLAN. Subject to Section 12 of the Plan,
there shall be reserved for issuance under the Plan an aggregate of 23,169
shares of Company Stock.

6. NON-STATUTORY STOCK OPTIONS. All options granted under the Plan
shall be non-statutory in nature and shall not be entitled to special tax
treatment under Code section 422.

7. AWARD, TERMS, CONDITIONS AND FORM OF OPTIONS.

(a) Award. Each Option shall be evidenced by a written agreement in
such form as the Board shall from time to time approve. As of January 25, 1996,
each eligible director shall receive an Option to purchase 7,723 shares of
Company Stock.

(b) Option Exercise Price. The Option exercise price shall be the Fair
Market Value of the shares of Company Stock subject to the Option on the Date of
Grant, which is deemed to be $11.00 per share.

(d) Exercise of Options. In no event shall an Option be exercisable
earlier than six months from the Date of Grant. Furthermore, no Option may be
exercised:

<PAGE>

(i) more than three years after the date the director ceases
to be a director of the Company;

(ii) after the expiration of ten years from the Date of Grant;
and

(iii) except by written notice to the Company at its principal
office, stating the number of shares the optionee has elected to
purchase, accompanied by payment in cash and/or by delivery to the
Company of shares of Company Stock (valued at Fair Market Value on
the date of exercise) in the amount of the full Option exercise
price for the shares of Company Stock being acquired thereunder.

9. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. The Board shall have
the power to modify, extend or renew outstanding Options and to authorize the
grant of new Options in substitution therefor, provided that any such action may
not have the effect of altering, enhancing or impairing any rights or
obligations of any person under any Option previously granted without the
consent of the optionee.

10. TERMINATION. The Plan shall terminate upon the earlier of:

<PAGE>

(a) the adoption of a resolution of the Board terminating the
Plan; or

(b) January 25, 2006.

No termination of the Plan shall without his consent materially and adversely
affect any of the rights or obligations of any person under any
Option previously granted under the Plan.

11. LIMITATION OF RIGHTS.

(a) No Right to Continue as a Director. Neither the Plan nor the
granting of an Option nor any other action taken pursuant to the Plan shall
constitute or be evidence of any agreement or understanding, express or implied,
that the Company will retain any person as a director for any period of time.

(b) No Stockholders Rights Under Options. An optionee shall have
no rights as a stockholder with respect to shares covered by his Option until
the date of exercise of the Option, and, except as provided in Section 12, no
adjustment will be made for dividends or other rights for which the record date
is prior to the date of such exercise.

12. CHANGES IN CAPITAL STRUCTURE.

(a) In the event of a stock dividend, stock split or combination
of shares, recapitalization or merger in which the Company is the surviving
corporation, or other change in the Company's capital stock (including, but not
limited to, the creation or issuance to shareholders generally of rights,
options or warrants for the purchase of common stock or preferred stock of the
Company), the number and kind of shares of stock or securities of the Company to
be subject to the Plan and to Options then outstanding or to be granted
thereunder, the maximum number of shares or securities which may be delivered
under the Plan, the exercise price and other relevant provisions shall be
appropriately adjusted by the Board, whose determination shall be binding on all
persons. If the adjustment would produce fractional shares with respect to any
unexercised Option, the Board may adjust appropriately the number of shares
covered by the Option so as to eliminate the fractional shares.

<PAGE>

(b) If the Company is a party to a consolidation or a merger in
which the Company is not the surviving corporation, a transaction that results
in the acquisition of substantially all of the Company's outstanding stock by a
single person or entity, or a sale or transfer of substantially all of the
Company's assets, the Board may take such actions with respect to outstanding
Options as the Board deems appropriate.

(c) Notwithstanding anything in the Plan to the contrary, the
Board may take the foregoing actions without the consent of any optionee and the
Board's determination shall be conclusive and binding on all persons for all
purposes.

13. AMENDMENT OF THE PLAN. The Board (except as provided below) may
suspend or discontinue the Plan or revise or amend the Plan in any respect. The
Board may unilaterally amend the Plan and the terms of Options granted hereunder
to ensure compliance with Rule 16b-3 of the Securities and Exchange Commission
promulgated under the Securities Exchange Act of 1934, as amended.

14. NOTICE. All notices and other communications required or permitted
to be given under this Plan shall be in writing and shall be deemed to have been
duly given if delivered personally or mailed first class, postage prepaid, as
follows: (a) if to the Company - at its principal business address to the
attention of the President; (b) if to any participant - at the last address of
the participant known to the sender at the time the notice or other
communication is sent.

15. GOVERNING LAW. The terms of this Plan shall be governed by the
laws of the Commonwealth of Virginia.

IN WITNESS WHEREOF, the Company has caused this Plan to be executed as
of this 25th day of January, 1996.

CORNERSTONE REALTY INCOME
TRUST, INC.

By /s/ Glade M. Knight
-------------------
Glade M. Knight,
Chairman of the Board

Exhibit 99.3

Certified Copy of Resolution of Board of Directors

Cornerstone Realty Income Trust, Inc.

The undersigned is the duly elected and acting Secretary of Cornerstone
Realty Income Trust, Inc. (the "Company") and in such capacity does certify that
the following resolution was duly adopted by the Company's Board of Directors on
September 26, 1996, and that such resolution is in full force and effect and has
not been amended or repealed:

RESOLVED, that effective January 1, 1997, non-employee directors of the
Company receive an annual fee of $10,000, payable quarterly, with
$5,000 paid in cash and $5,000 paid in stock to be issued at the market
price at the time of the grant.

WITNESS, the following signature as of the 17th day of February, 1997

/s/ Stanley J. Olander, Jr.
---------------------------
Stanley J. Olander, Jr.
Secretary