UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ___________
Commission File Number 0-23954
CORNERSTONE REALTY INCOME TRUST, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 54-1589139
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
306 EAST MAIN STREET
RICHMOND, VIRGINIA 23219
(Address of principal executive offices) (Zip Code)
(804) 643-1761
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
At August 1, 1997, there were outstanding 34,232,523 shares of common
stock, no par value, of the registrant.
<PAGE>
CORNERSTONE REALTY INCOME TRUST, INC.
FORM 10-Q
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets - June 30, 1997 3
and December 31, 1996
Statements of Operations - 4
Three months ended June 30, 1997
and June 30, 1996
Six months ended June 30, 1997
and June 30, 1996
Statements of Shareholders' Equity- 5
Six months ended June 30, 1997
Statements of Cash Flows - 6
Six months ended June 30, 1997
and June 30, 1996
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis 11
of Financial Condition and Results of
Operations
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings (not applicable).
Item 2. Changes in Securities (not applicable).
Item 3. Defaults Upon Senior Securities
(not applicable).
Item 4. Submission of Matters to a Vote of
Security Holders . 14
Item 5. Other Information (not applicable)
Item 6. Exhibits and Reports on Form 8-K 15
<PAGE>
BALANCE SHEETS (UNAUDITED)
CORNERSTONE REALTY INCOME TRUST, INC.
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
<S> <C>
ASSETS
Investment in Rental Property
Land $ 61,878,788 $ 46,980,280
Building 310,333,437 250,705,667
Property improvements 36,095,652 26,640,085
Furniture and fixtures 7,915,483 5,389,821
--------- ---------
416,223,360 329,715,853
Less accumulated depreciation (19,315,189) (12,323,037)
----------- -----------
396,908,171 317,392,816
----------- -----------
Cash and cash equivalents 5,263,185 3,182,651
Prepaid expenses 602,766 557,544
Other assets 6,691,358 1,737,563
--------- ---------
12,557,309 5,477,758
---------- ---------
$409,465,480 $322,870,574
============ ============
LIABILITIES and SHAREHOLDERS' EQUITY
Liabilities
Notes payable $ 87,650,147 $ 55,403,000
Accrued payable-related party 7,558,246 7,297,093
Accounts payable 1,172,932 2,087,673
Accrued expenses 2,793,708 1,366,853
Rents received in advance 209,189 491,928
Tenant security deposits 1,870,562 1,654,322
--------- ---------
101,254,784 68,300,869
Shareholders' equity
Common stock, no par value, authorized 50,000,000
shares; issued and outstanding 34,232,523 shares
and 28,141,509 shares, respectively 335,509,830 276,269,539
Deferred compensation (44,000) (55,000)
Distributions greater than net income (27,255,134) (21,644,834)
----------- -----------
308,210,696 254,569,705
----------- -----------
$409,465,480 $322,870,574
============ ============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
CORNERSTONE REALTY INCOME TRUST, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C>
REVENUE:
Rental income $ 16,853,615 $ 8,666,887 $ 31,876,837 $ 15,219,575
Other income 522,735 -- 902,706 --
EXPENSES:
Utilities 1,424,358 816,512 2,847,570 1,457,683
Repairs and maintenance 1,758,094 976,477 3,233,953 1,697,353
Taxes and insurance 1,437,700 810,823 2,834,559 1,391,073
Property management fee -- 451,571 -- 801,236
Property management 1,445,512 540,210 2,572,591 939,860
Advertising 474,216 244,766 914,638 389,585
General and administrative 435,394 315,319 848,229 533,231
Amortization and other depreciation 25,824 7,641 33,465 15,282
Depreciation of rental property 3,773,187 1,465,823 6,957,190 2,704,072
Other operating 460,741 106,975 945,020 217,001
Management contract termination 135,999 -- 271,998 --
------- --------- ------- ---------
Total expenses 11,371,025 5,736,117 21,459,213 10,146,376
---------- --------- ---------- ----------
Income before interest income (expense) 6,005,325 2,930,770 11,320,330 5,073,199
Interest and investment income 100,641 114,875 103,840 191,213
Interest expense (1,576,662) (296,209) (2,893,126 (343,089)
---------- -------- ---------- --------
Net income $ 4,529,304 $ 2,749,436 $ 8,531,044 $ 4,921,323
============ ============ ============ ============
Net income per share $ 0.14 $ 0.16 $ 0.28 $ 0.32
============ ============ ============ ============
Weighted average number of shares outstanding 32,139,535 16,926,758 30,210,173 15,435,615
============ ============ ========== ==========
Distributions declared per share $ 0.25 $ 0.248 $ 0.50 $ 0.496
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
CORNERSTONE REALTY INCOME TRUST, INC.
<TABLE>
<CAPTION>
Distributions
(Greater) Total
Number Deferred Less than Shareholders'
of Shares Amount Compensation Net Income Equity
--------- ------ ------------ ---------- ------
<S> <C>
Balance at December 31, 1996 28,141,509 $ 276,269,539 ($55,000) ($ 21,644,834) $ 254,569,705
Net proceeds from the sale of shares 5,175,000 49,575,277 -- -- 49,575,277
Net income -- -- -- 8,531,044 8,531,044
Cash distributions declared to shareholders
($.50 per share) -- -- -- (14,141,344) (14,141,344)
Shares issued for purchase of Apple Realty
Group, Inc. contracts 150,000 1,650,000 -- -- 1,650,000
Amortization of deferred compensation -- -- 11,000 -- 11,000
Shares issued through dividend reinvestment plan 766,014 8,015,014 -- -- 8,015,014
------- --------- ------ ------------ ------------
Balance at June 30, 1997 34,232,523 $ 335,509,830 ($44,000) ($ 27,255,134) $308,210,696
========== ============= ======== ============ ============
</TABLE>
See accompanying notes to financial statements.
5
CORNERSTONE REALTY INCOME TRUST, INC.
STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30
1997 1996
---- ----
<S> <C>
Cash flow from operating activities:
Net income $ 8,531,044 $ 4,921,323
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 6,990,655 2,719,354
Amortization of deferred compensation 11,000 11,000
Amortization of Apple Realty Group contract purchase 456,000
Management contract termination 271,998
Changes in operating assets and liabilities:
Prepaid expenses (45,222) (393,914)
Other assets 335,356 (393,690)
Accounts payable (914,741) (51,185)
Accrued expenses 1,426,855 458,563
Rent received in advance (282,739) (52,135)
Tenant security deposits 216,240 321,469
------- -------
Net cash provided by operating activities 16,996,446 7,540,785
Cash flow from investing activities:
Acquisitions of rental property (74,526,278) (80,652,200)
Capital improvements (11,981,229) (7,706,157)
Purchase of Apple Realty Group contract (350,000)
Purchasee of Apple Residential Income Trust, Inc. common stock (3,760,000)
---------- -----------
Net cash used in investing activities (90,617,507) (88,358,357)
Cash flow from financing activities:
Proceeds from short-term borrowings 164,624,294 49,005,000
Repayments of short-term borrowings (132,377,147) (38,100,000)
Net proceeds from issuance of shares 57,595,792 74,528,641
Increase in commissions payable to underwriters -- 2,394,759
Cash distributions paid to shareholders (14,141,344) (6,122,213)
----------- ----------
Net cash provided by financing activities 75,701,595 81,706,187
Increase in cash and cash equivalents 2,080,534 888,615
Cash and cash equivalents, beginning of year 3,182,651 7,073,147
--------- ---------
Cash and cash equivalents,
end of period $ 5,263,185 $ 7,961,762
============= =============
</TABLE>
See accompanying notes to financial statements
6
<PAGE>
CORNERSTONE REALTY INCOME TRUST, INC
Notes to Financial Statements (Unaudited)
June 30, 1997
(1) 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 six months ended
June 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 Form 10-K.
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 six
month period ended June 30, 1997, according to the new statement,
would not change materially from the reported amounts.
(2) Notes Payable
In January 1997, the Company increased its unsecured line of credit to
$85 million. In February 1997, the Company obtained a $100 million
unsecured line of credit from a consortium of three banks to fund
property acquisitions. The unsecured line of credit was used to repay
the outstanding balance of approximately $75 million on the existing
line of credit. The new line of credit bears interest at the one-month
LIBOR plus 160 basis points. In addition, the Company is obligated to
pay the lenders a quarterly commitment fee equal to .25% per annum of
the unused portion of the line. The entire balance is due on March 31,
1998. The Company also obtained a $7.5 million unsecured line of
credit for general corporate purposes. This line of credit also bears
interest at LIBOR plus 160 basis points and is due on March 31, 1998.
The Company repaid approximately $50 million on the line during the
second quarter using the proceeds of an equity offering that was
completed in May 1997. (see Note 3). In addition, the Company borrowed
approximately $44.2 million in conjunction with property acquisitions
and improvements and operating purposes (exclusive of the pay off of
the original $85 million line of credit) against the lines of credit
during the quarter ended June 30, 1997. As of June 30, 1997, the
interest rate on the $100 million unsecured line of credit was 7.29%
and the outstanding balance was approximately $80.8 million. The
outstanding balance at June 30, 1997 on the $7.5 million unsecured
line of credit was approximately $1.3 million.
On June 25, 1996, in conjunction with the acquisition of rental
property, an unsecured note was executed by the Company in the amount
of $5,500,000. The note bears an effective interest rate of 6.65% per
annum. Annual interest payments are due on January 1, 1997, 1998, and
1999 and the principal balance is due on June 1, 1999 if not prepaid.
The note is prepayable at any time, without penalty.
(3) Common Stock
During the quarter ended June 30, 1997, the Company issued 5,175,000
shares in a public market offering which resulted in $49,575,277 net
proceeds to the Company, after underwriting discounts and commissions.
The Company used the proceeds to pay down its line of credit.
During the six months ended June 30, 1997, the Company paid
distributions of $14,141,344 (50 cents per share) to shareholders. The
Company provides a plan which allows shareholders to reinvest
distributions in the purchase of additional shares of the Company.
During the six months ended June 30, 1997, approximately $7,994,724
was invested in additional shares of the Company through the
reinvestment of distributions.
(4) Related Parties
Prior to September 30, 1996, the Company operated as an externally
advised and externally-managed REIT. Cornerstone Advisors, Inc.,
served as the advisor, Cornerstone Management Group, Inc. served as
the property manager, and property acquisition services were provided
by Cornerstone Realty Group, Inc. Glade M. Knight, Chairman and Chief
Executive Officer of the Company, held all of the stock of Cornerstone
Advisors, Inc., Cornerstone Management Group, Inc. and Cornerstone
Realty Group, Inc. (collectively, the External Companies). By
agreement Mr. Knight held part of the stock of the External Companies
for the account and interest of each of Stanley J. Olander, Jr. (the
Company's Chief Financial Officer) and Debra A. Jones (the Company's
Chief Operating Officer).
As of October 1, 1996, the Company entered into a series of related
party transactions with the External Companies, the effect of which
was to convert the Company into a self-administered and self-managed
REIT. The transactions were unanimously approved by the independent
members of the Board of Directors.
The Company during the six months ended June 30, 1996 paid Cornerstone
Management Group $ 865,880, Cornerstone Realty Group, Inc.,
$1,595,513, and Cornerstone Advisors, Inc. $208,922. Due to the
Company's conversion from "externally advised" and "externally
managed" REIT, these expenses do not exist for the quarter ended June
30, 1997. As a result of this conversion, officers are now employees
of the Company and their salaries are included in property management
and general and administrative expenses.
In August 1996, Mr. Knight organized Apple Residential Income Trust,
Inc. (Apple) for the purpose of acquiring apartment communities in
Texas. On March 1, 1997, the Company, with Apple's approval, entered
into subcontract agreements with the entities that provide advisory
and property management services whereby the Company will provide
advisory and property management services to Apple in exchange for
fees and expense reimbursement. The Company is entitled to a property
management fee of 5% of the monthly gross revenues of the Apple
properties and an advisory fee equal to .1% to .25% of total
contributions received by Apple.
<PAGE>
During March 1997, the Company acquired all the assets of Apple Realty
Group, Inc. which provided the service of acquiring and disposing of
real estate assets held by Apple . The sole asset of the company was
the acquisition\disposition agreement with Apple. The Company paid
$350,000 in cash and issued common shares valued at $1,650,000. The
Company is entitled to a real estate commission equal to 2% of the
gross purchase price of Apple's properties. The purchase price of the
contract is being amortized over the remaining term of the contract as
fees are collected.
As of June 30, 1997, the Company had earned approximately $902,706 for
all of the subcontracted and acquisition related services.
Apple granted the Company a continuing right to own up to 9.8% of the
common shares of Apple at the market price, net of selling
commissions. The Company committed to purchase shares of Apple for
approximately $3.76 million which represented approximately 9.5% or
417,778 of the total common shares of Apple outstanding as of March 1,
1997. In April 1997, the Company purchased the common shares of Apple.
The Company may with the approval of the board of directors, if the
board of directors determine it is in the best interests of the
Company and its shareholders, purchase additional common shares of
Apple as of the end of each calendar quarter in order to maintain its
ownership of approximately 9.5% of the outstanding common shares of
Apple. The Board has tentatively resolved to evaluate the feasibility
of offering to purchase Apple by the year-end of 1997.
(5) Subsequent Events
In July, 1997, the Company distributed to its shareholders
approximately $8,558,131 (25 cents per share) of which approximately
$3,234,139 was reinvested in the purchase of additional shares of the
Company.
During July 1997, the Company purchased Dunwoody Springs Apartments, a
350- unit apartment community located in Fulton County, GA for
$15,200,000 .
.
(6) Acquisitions (unaudited)
<PAGE>
The following unaudited pro forma information for the six months ended
June 30, 1997 and 1996 assumes the property acquisitions made during
1996 and 1997 were made by the Company on January 1, 1996, and is
presented as if (a) the Company had qualified as a REIT, distributed
all of its taxable income and, therefore incurred no federal income
tax expense during the period, and (b) the Company had used proceeds
from its best efforts offering for properties acquired before the
completion of the offering in July 1996. Properties acquired after the
completion of the offering were assumed to be acquired using the
Company's line of credit or from proceeds of an equity offering
completed in April 1997. 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, 1996
nor does it purport to represent the results of operations for future
periods.
Six Months Six Months
Months Months
Ended Ended
6/30/97 6/30/96
-------- --------
Rental income $33,881,850 $28,982,910
Net income $ 9,241,426 $ 6,753,371
Net income per share $.29 $.25
The pro forma information reflects adjustments for the actual rental
income and rental expenses of 20 of 21 1996 acquisitions and 5 of 7
1997 acquisitions for the respective periods in 1997 and 1996 prior to
acquisition by the Company. Net income has been adjusted as follows:
(1) property management expenses equal to 5% of rental income plus
$2.50 per apartment per unit per month have been adjusted based on the
Company's contractual arrangements until such arrangements were
terminated in October 1996; (2) advisory fee equal to .25% of
accumulated capital contributions has been adjusted based on
contractual arrangements until such time the arrangement was
terminated in October 1996; (3) depreciation expense has been adjusted
based on the Company's basis in depreciable assets for the period not
owned by the Company using a 27.5 year useful life. Interest expense
has been adjusted based on market rates at the time of acquisition
available to the Company for properties purchased after completion
after August 1, 1996 for the periods not owned by the Company.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
GENERAL There was a significant change in the Company's liquidity
during the quarter ended June 30, 1997 as the Company continued to
acquire properties. During the quarter ended June 30, 1997, the
Company issued 5,175,000 shares in a public market offering which
resulted in $49,575,277 net proceeds to the Company, after
underwriting discounts and commissions. The Company used the proceeds
to pay down its line of credit . Using the proceeds from its line of
credit, the Company acquired 805 apartment units in three residential
rental communities during the quarter ended June 30, 1997. These
acquisitions brought the total number of residential communities to 47
and the total apartment units owned at June 30, 1997 to 10,636.
The following is a summary of the properties acquired during the
quarter:
Property Name Date Acquired Units Purchase Price Location
- ------------- ------------- ----- -------------- ---------
Ashley Run Apartments April 1997 348 $18,000,000 Norcross, GA
Carlyle Apartments April 1997 243 $11,580,000 Lawrence, GA
The Summit Apartments May 1997 214 $9,475,000 Charlotte, NC
NOTES PAYABLE The Company continued to acquire property and finance
improvements during the quarter using its unsecured lines of credit
with First Union National Bank. The balance on the line of credit as
of March 31, 1997 was $87.9 million. During the quarter ended June 30,
1997 the Company borrowed an additional $44.2 million against the
lines of credit in conjunction with property acquisitions and
improvements and operating purposes and repaid $50 million of the
balance. As of June 30, 1997, the outstanding debt balance included
approximately $82.1 million on the lines of credit and the $5,500,000
unsecured note as discussed in Note 2 to the financial statements.
CAPITAL REQUIREMENTS The Company has an ongoing commitment to fund its
renovation program for recently acquired property. In addition, the
Company is always assessing potential acquisitions and intends to
acquire additional properties during 1997. However, no material
commitments existed on August 1, 1997 for the purchase of additional
properties. The source to fund the improvements and acquisitions is
from a variety of sources including additional equity generated from
the reinvestment of shareholder dividends, cash reserves and debt
provided by its line of credit.
The Company capitalized $11.9 million of improvements to its various
properties during the quarter. It is anticipated that some $11 million
additional capital improvements will be completed during the next year
on the current portfolio
Cash and cash equivalents totaled $5,263,185 at June 30, 1997. During
April 1997, the Company distributed $7,127,854 (25 cents per share) to
its shareholders of which $3,953,172 was reinvested in additional
shares per the terms of the Company's dividend reinvestment plan.
The Company has a continuing right to own up to 9.8% of the common
shares of Apple at the market price, net of selling commissions.
The Company purchased 417,778 shares of Apple for approximately
$3.76 million which represents 6% of the total common shares
of Apple outstanding as of June 30, 1997.
During the quarter ended June 30, 1997, the Company issued 5,175,000
shares in a public market offering which represented net proceeds to
the Company after underwriting discounts and commissions of
$49,580,778. Concurrent with the offering, the Company became listed
on the New York Stock Exchange.
The Company has short-term cash flow needs in order 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 and distributions.
Capital resources are expected to grow with the future sale of its
shares and from cash flow from operations. In general, the Company's
liquidity and capital resources are expected to be adequate to meet
its cash requirements in 1997.
Results of Operations
INCOME AND OCCCUPANCY The Company's property operations for the six
months ended June 30, 1997 reflect the operations from the 40
properties acquired before 1997 and from the 7 properties acquired in
1997 from their respective acquisition dates. The increase in rental
income and operating expenses from second quarter 1996 to second
quarter 1997 is primarily due to a full quarter of operation of the
1996 acquisitions as well as the incremental effect of the 1997
acquisitions.
Substantially all of the Company's income is from the rental operation
of apartment communities. Rental income for the first six months
increased to $31,876,837 in 1997 from $15,219,575 in 1996. The
increase is due to a combination of rental increases and property
acquisitions with the latter having the most significant impact.
Rental income is expected to increase further as a result of planned
improvements, higher occupancies and increased rental rates. The
Company's other source of income is the investment of its cash and
cash reserves. Interest and investment income for the six months ended
June 30, 1997 and 1996 was $103,840 and $191,213, respectively. As of
June 30, 1997, the Company received approximately $902,706 for all of
the subcontracted and acquisition related services from Apple
Residential Income Trust, Inc. (see Note 4).
The economic occupancy levels for the Company's properties averaged
92% and 91% at the end of the six months ended June 30, 1997 and 1996,
respectively. Overall, average rental rates for the portfolio
increased from $511 to $560 per month.
COMPARABLE PROPERTY OPERATIONS
On a comparative basis, the nineteen properties acquired prior to 1996
provided rental and operating income of $6,834,990 and $4,173,379,
respectively during the quarter ended June 30, 1997 and $6,258,438 and
$3,431,767 in 1996 for the same period. This represents an increase
from the quarter ended June 30, 1996 to the quarter ended June 30,
1997 of 9% and 22%, respectively. The conversion to "self-management"
took place in October 1996. Therefore, the actual results for property
operations contained two full quarters of management expense in 1996.
In order to make a meaningful comparison of operating income for these
properties between the quarter ended June 30, 1997 and 1996 property
management expenses need to be eliminated from 1996. This adjustment
allows for a comparison on a "self-administered" and "self-managed"
basis. As adjusted, the properties provided operating income of
$4,173,379 and $3,780,240 for the quarter ended June 30, 1997 and
1996, respectively. This represents an operating increase of 10.4 %.
The eliminated expenses included property management fees of $348,473
for the quarter June 30, 1996.
EXPENSES Total expenses for the first six months increased to
$20,881,049 in 1997 from $10,146,376 in 1996 due largely to the
acquisition of properties. The operating expense ratio (the ratio of
rental expenses, excluding general and administrative, amortization
and depreciation expense, to rental income) was 40% and 45% for the
six months ended June 30, 1997 and 1996. In addition, the Company
incurred interest expense of $2,893,126 and $343,089 during the first
six months of 1997 and 1996, respectively, which related to borrowings
for property acquisitions and improvements.
Depreciation expense for the first six months has increased to
$6,957,190 in 1997 from $2,704,072 in 1996. The increase is due to the
1997 acquisitions and a full six months of depreciation for 1996
acquisitions.
<PAGE>
General and administrative expenses totaled 3% of the total rental
income for the quarter ended June 30, 1997 and 1996. This percentage
is expected to decrease as the Company's asset base and rental income
grow. These expenses represent the administrative expenses of the
Company as distinguished from the operations of the Company's
properties
INFLATION The Company does not believe that inflation had any
significant impact on the operation of the Company during the six
months ended June 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.
<PAGE>
Part II, Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 6, 1997, the Company held its 1997 Annual Meeting
of Shareholders in Richmond, Virginia. The sole matter voted
upon was the re-election of Stanley J. Olander, Jr. and Martin
Zuckerbrod as directors. Messrs. Olander and Zuckerbrod were
re-elected as directors. The terms of Glade M. Knight, Glenn
W. Bunting, Jr., Leslie A. Grandis, Penelope W. Kyle and
Harry S. Taubenfeld as directors continued after the meeting.
<PAGE>
Part II, Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K
The following table lists the reports on Form 8-K filed by the Company
during the quarter ended June 30, 1997, the items reported and the financial
statements included in such filings.
Type and Date
of Reports Items Reported Financial Statements Filed
-------------- -------------- ---------------------------
Form 8-K dated 2 None
March 27, 1997
Form 8-K/A (date of 7(a),(b), (c), (d) Historical Statement of Income
Original Report: and Direct Operating Expenses
March 27, 1997) of Paces Arbor Apartments for
the twelve months ended
February 28, 1997.
Historical Statement of Income
and Direct Operating Expenses
of Paces Forest Apartments for
the twelve months ended
February 28, 1997.
Historical Statement of Income
and Direct Operating Expenses
of Carlyle Club Apartments for
the twelve months ended March
31, 1997.
Historical Statement of Income
and Direct Operating Expenses
of Ashley Run Apartments for
the twelve months ended March
31, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Cornerstone Realty Income Trust, Inc.
(Registrant)
DATE: 8/14/97 BY: /s/ Stanley J. Olander
----------------------------
Stanley J. Olander
Vice President and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 5,263,185
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 416,223,360
<DEPRECIATION> 19,315,189
<TOTAL-ASSETS> 409,465,480
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 335,509,830
<OTHER-SE> (27,299,134)
<TOTAL-LIABILITY-AND-EQUITY> 409,465,480
<SALES> 0
<TOTAL-REVENUES> 31,876,837
<CGS> 0
<TOTAL-COSTS> 21,459,213
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,893,126
<INCOME-PRETAX> 8,531,044
<INCOME-TAX> 0<F2>
<INCOME-CONTINUING> 8,531,044
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,531,044
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0
<FN>
<F1>Current Assets and Current Liabilities are not separated to conform
with industry standards.
<F2>Income is from rental income. There are no Sales or Cost of Goods
Sold.
</FN>
</TABLE>
