SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT

     Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report: October 16, 1998


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


  VIRGINIA                       1-12875                       54-1589139
  (State of                    (Commission                   (IRS Employer
  incorporation)               File Number)                Identification No.)


  306 EAST MAIN STREET
  RICHMOND, VIRGINIA                                              23219
  (Address of principal                                         (Zip Code)
   executive offices)


               Registrant's telephone number, including area code:
                                 (804) 643-1761



<PAGE>
                      CORNERSTONE REALTY INCOME TRUST, INC.

                                    FORM 8-K

                                      Index

                                                                     Page Number
                                                                     -----------

Item 2. Acquisition or Disposition of Assets                                   4

Item 5. Other Events                                                           8

Item 7. Financial Statements, Pro Forma Financial
        Information and Exhibits

        a.     Independent Auditors' Report                                   10
               (Cape Landing Apartments)

               Historical Statement of Income and                             11
               Direct Operating Expenses
               (Cape Landing Apartments)

               Note to Historical Statement of                                12
               Income and Direct Operating
               Expenses (Cape Landing Apartments)

        b.     Pro Forma Statement of Operations for                          13
               the Nine Months ended September 30, 1998
               (unaudited)

               Pro Forma Balance Sheet as of                                  14
               September 30, 1998 (unaudited)

               Pro Forma Statement of Operations                              15
               for the Year ended December 31, 1997
               (unaudited)

        c.     Exhibits

               10.1 Purchase Contract for Cape Landing Apartments


                                       2

<PAGE>

      10.2  Agreement of Limited Partnership of Cornerstone Partners, L.P.
               
      10.3  Credit  Agreement  among  Cornerstone  Realty  Income  Trust,  Inc.,
            CRIT-NC, LLC and First Union National Bank

      10.4  Revolving Credit Note made by Cornerstone  Realty Income Trust, Inc.
            and CRIT-NC, LLC

      10.5  Termination of Advisory Agreement Subcontract

      10.6  Termination of Property Management Agreement Subcontract

      10.7  Bill of Sale and Note Pertaining to Property Acquisition/Disposition
            Agreement

      10.8  Assignment   and  Assumption   Agreement   (Pertaining  to  Advisory
            Agreement for Apple Residential Income Trust, Inc.)

      10.9  Amended and Restated Property Acquisition/Disposition Agreement

      23.1  Consent of Independent Auditors



                                       3

<PAGE>



ITEM 2.  ACQUISITION OR DISPOSITION OF ASSETS


                             CAPE LANDING APARTMENTS
                          Myrtle Beach, South Carolina

     On October 16, 1998,  Cornerstone Realty Income Trust, Inc. (the "Company")
acquired an approximately 88 percent interest in Cornerstone  Partners,  L.P., a
Virginia limited partnership (the "Limited Partnership"), which was organized by
the Company to acquire Cape Landing  Apartments,  a 288-unit  apartment  complex
located  at  3851  Cape  Landing  Drive,   Myrtle  Beach,  South  Carolina  (the
"Property"). The Company is the general partner of the Limited Partnership.

     The  Company  entered  into  an  agreement  of  limited   partnership  (the
"Agreement")  with  Cape  Landing  Apartments,  LLC,  a North  Carolina  limited
liability  company (the "Limited  Partner"),  which is not  affiliated  with the
Company or its  affiliates.  Pursuant  to the  Agreement,  the  Limited  Partner
contributed an  approximately 12 percent interest in the Property to the Limited
Partnership in exchange for 185,887  partnership units with an agreed upon value
of $2 million.  The Limited Partner sold its remaining  interest in the Property
to  the  Limited   Partnership  for  $15.1  million.   The  Company  contributed
$15,100,000  to the  Limited  Partnership,  $11.05  million of which the Company
borrowed  under its  unsecured  line of credit  and $4.05  million  of which was
funded with cash from operations,  in exchange for 1,403,445  partnership  units
representing an approximately  88 percent  interest in the Limited  Partnership.
The Limited Partnership's sole asset is the Property.  Title to the Property was
conveyed to the Limited Partnership by limited warranty deed.

     Each  partnership unit held by the Limited Partner is exchangeable any time
after  a  one-year  holding  period  for a  Common  Share  of the  Company  on a
one-for-one basis. Each partnership unit held by the Limited Partner is entitled
to a preferred  return  equal to the  dividend  paid on one Common  Share of the
Company.  Except for certain  limited  matters,  all management  powers over the
affairs of the Limited  Partnership  are exclusively  vested in the Company,  as
general partner.

     Location.  The Property is in Myrtle Beach,  Horry County,  South Carolina.
The  following  information  is based in part upon  information  provided by the
greater Myrtle Beach Chamber of Commerce.

     The Myrtle Beach MSA is comprised of Horry and  Georgetown  Counties.  This
area covers 1,956 square miles and has an approximate population of 215,000. The
Myrtle Beach area,  also known as South  Carolina's  Grand Strand,  is a 60-mile
stretch of coastline.  Highways providing direct access to the Myrtle Beach area
include  U.S.  Routes  17,  501 and South  Carolina  Highways  9 and 544.  These
connections  can be  made  from  Interstates  95 and 20.  Considered  one of the
nation's  top  vacation  destinations,  the Grand  Strand  hosts an estimated 13
million visitors annually.  The increasing number of entertainment  attractions,
live  music  theaters,  shopping  centers  and golf  courses  attracts  visitors
throughout the year. In April 1995, American



                                       4
<PAGE>



Demographics  ranked  Myrtle Beach as the second  fastest  growing metro area in
both projected annual  population  growth and projected  employment  growth from
1995 to 2005.

     Money magazine rated the Grand Strand as one of the top 20 places to retire
in America. The number of persons over the age of 65 has grown from nearly 5,000
in 1970 to 20,840 in 1996.  This increase of 317 percent boosted this portion of
the population of Horry County to nearly 13 percent of the resident  population.
Similarly,  in Georgetown County the population of persons over the age of 65 is
6,650, which is 12.9 percent of the total county population.

     Myrtle Beach is rated as one of the fastest  growing  areas in the U.S. and
current  development  includes a wide range of new businesses.  These businesses
include entertainment centers,  restaurants,  motels, golf courses, business and
resort centers and general services.  Entertainment  center openings during 1997
included The All-American Music Theater and The Savoy Theater at Fantasy Harbor.
Construction  projects  planned for 1998 and 1999 include a $20 million baseball
stadium  for an  Atlanta  Braves  Carolina  League  Class A team.  Additionally,
Burroughs and Chapin plans to begin  development of the Grande Dunes project,  a
high-profile,  full-service  resort.  Further  development  will include a large
shopping center and several new residential  communities,  and Myrtle Beach city
government  will also  continue  with  plans to  redevelop  the  downtown  area,
including a large park.

     Tourism  continues to be the Grand Strand's  dominant  economic theme.  The
majority  of jobs in Horry  County are  related to the  services  necessary  for
tourism  businesses.  Sixty-five to 70 percent of Horry  County's  employment is
tourism  related.  Over the years,  as Horry County has  increased the number of
employment  opportunities and has seen a growth in population,  it has been able
to steadily  decrease the annual  unemployment  rate,  dropping this year to 4.9
percent  from the 1996 level of 5.3  percent.  Some of the largest  employers in
both Horry County and Georgetown  County  include Horry County School  District,
AVX, Horry County Government,  Sands Oceanfront Resort, Conway Hospital, Coastal
Carolina University and Santee Cooper Electric.

     Myrtle Beach is served by the Myrtle Beach International Airport.

     The  neighborhood  in which  the  Property  is  located  consists  of other
multi-family housing,  single-family housing, commercial and retail development.
The Property is located near businesses, major shopping, entertainment,  schools
and churches.  The Property is located on U.S. Highway 17 Bypass,  approximately
two miles from U.S. Highway 501.

     Description  of the  Property.  The Property  consists of 288  garden-style
apartment units in 14 three-story  buildings on  approximately 21 acres of land.
The Property was built in 1997 and 1998.

     The Property is newly constructed and thus is, in the opinion of management
of the Company, in excellent  condition.  Since the Property is new, the Company
has not budgeted any sums for  significant  improvements  or  renovations to the
Property for at least six months after its acquisition by the Company.



                                       5
<PAGE>



     The Property offers 11 unit types. The unit mix and rents being charged new
tenants as of August 1998 are as follows:

<TABLE>
<CAPTION>
                                                                       APPROXIMATE
                                                                        INTERIOR                MONTHLY RENTAL
     QUANTITY                         TYPE                           SQUARE FOOTAGE             --------------
     --------                         ----                           --------------

<S>                <C>                                                    <C>                       <C> 
        9             One Bedroom/One Bath W/D Connections                 695                       $549

        48          One Bedroom/One Bath W/D Connections, FP               695                        549

        15              One Bedroom/One Bath Handicapped                   695                        549

        20            One Bedroom/One Bath W/D Connections                 744                        570

        40          One Bedroom/One Bath W/D Connections, FP               744                        570

        16           Two Bedrooms/Two Baths W/D Connections                883                        670

        32          Two Bedrooms/Two Baths W/D Connections,                883                        670
                                       FP

        20               Two Bedrooms/Two Baths/Den W/D                   1108                        750
                                   Connections

        40               Two Bedrooms/Two Baths/Den W/D                   1108                        750
                                 Connections, FP

        16          Three Bedrooms/Two Baths W/D Connections              1356                        839

        32                Three Bedrooms/Two Baths W/D                    1356                        839
                                 Connections, FP
</TABLE>

     The  apartments  provide a combined total of  approximately  269,000 square
feet of net rentable area.

     Leases at the Property are generally for terms of one year or less. Average
rental  rates for the past year  have  generally  increased.  As an  example,  a
two-bedroom,  two-bathroom  apartment  unit (883 square feet) rented for $650 in
1997.  The average  effective  annual rental per square foot at the Property for
1997 was $8.28.



                                       6
<PAGE>



     The  buildings  are  wood-frame  construction  on concrete  slabs,  and the
exteriors  are covered  with vinyl  siding.  Roofs are pitched and covered  with
asphalt shingles.

     Each  apartment  unit has  wall-to-wall  carpeting  in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has smoke detectors, a
cable  television  hook-up  and  an  individually  controlled  heating  and  air
conditioning  unit. The owner of the property supplies cold water, sewer service
and trash removal.  Each resident is responsible  for his or her own electricity
usage, which includes air conditioning, lights, heat, hot water and cooking.

     Each unit (other than the smallest  one-bedroom  modified  units)  includes
washer/dryer connections for full-sized appliances,  miniblinds, walk-in closets
and a patio or balcony. A total of 192 units have a wood-burning fireplace. Each
kitchen is equipped with a  refrigerator/freezer  with icemaker,  electric range
and oven, dishwasher and garbage disposal.

     The Property has an outdoor  swimming pool,  two lighted  tennis courts,  a
fitness center with sauna and steam room, and a laundry  facility.  The Property
also includes a clubhouse with an  entertainment  area,  kitchenette and leasing
office. There is ample paved parking for tenants.

     There are at least five apartment  properties in the area that compete with
the  Property.  All offer similar  amenities  and have rents that  generally are
comparable to those of the Property.  Based on a recent  telephone  survey,  the
Company  estimates  that occupancy in nearby  competing  properties now averages
approximately 93%.

     According to  information  provided by the seller,  leasing at the Property
began in May 1997 and physical occupancy at the Property averaged  approximately
63% during the first nine months of 1998. On October 12, 1998,  the Property was
88% occupied.

     The  tenants at the  Property  are a mix of  white-collar  and  blue-collar
workers, students and retired persons.

     For 1998,  Horry County  specified an assessed value for the Property equal
to  $11,176,600.  The taxable  value is equal to 6% of the  assessed  value,  or
$670,596.  The tax rate was  $0.1919,  and the  total  real  estate  taxes  were
calculated as $128,687.37.

     The basis of the  depreciable  residential  real  property  portion  of the
Property  (currently  estimated at about  $15,826,975)  will be depreciated over
27.5 years on a straight-line  basis. The basis of the personal property portion
will be depreciated in accordance  with the modified  accelerated  cost recovery
system of the Internal Revenue Code of 1986, as amended (the "Code"). Amounts to
be spent by the  Property  on repairs and  improvements  will be treated for tax
purposes as permitted by the Code based on the nature of the expenditures.

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


                                       7
<PAGE>



     Material  Factors  Considered  in  Assessing  the  Property.   The  factors
considered  by the  Company  to be  relevant  in  evaluating  the  Property  for
acquisition by the Company included the following.

     1. The Company  believes  that the greater  Myrtle  Beach,  South  Carolina
metropolitan area will continue to enjoy steady  population  increase and steady
economic  development and that such increase and development will support stable
occupancy  rates  and  reasonable  increases  in  rents  at  the  Property.   In
particular,  the Company believes that the Property is located in a particularly
desirable part of the Myrtle Beach metropolitan area.

     2. The Property is newly-constructed  and was available for purchase by the
Company at an attractive price.

     3. The  Property  is  located  near  major  employment  centers,  including
Broadway at the Beach, Allied Signal, and Coca-Cola.

     The Company is not aware of any material  adverse  factors  relating to the
Property not set forth in this report that would cause the financial information
contained in this report not to be indicative of future operating results.

ITEM 5.  OTHER EVENTS

The Company's Unsecured Line of Credit

     On October 16,  1998,  the Company  closed a $25 million  extension  on its
unsecured  line of  credit,  bringing  to $200  million  the  maximum  permitted
borrowing under the Company's  unsecured line of credit.  The amount outstanding
under the unsecured line of credit on November 30, 1998  was approximately  $196
million.

     The  lender  with  respect  to the $25  million  extension  is First  Union
National Bank. The borrowing  under the $25 million  extension must be repaid by
February 28, 1999.

The Company's Providing of Services to Apple Residential Income Trust, Inc.

     The Company  has been  providing  property  management,  advisory  and real
estate brokerage services to Apple Residential Income Trust, Inc. ("Apple"). The
property  management  and advisory  services  have been  provided by the Company
under  subcontracts from Apple  Residential  Management Group, Inc. ("ARMG") and
Apple  Residential   Advisors,   Inc.  ("ARA"),  the  entities  that  originally
contracted with Apple for the providing of such services.  As to the real estate
brokerage services,  the Company previously purchased the assets of Apple Realty
Group,  Inc.  ("ARG") --  consisting  principally  of the real estate  brokerage
agreement -- and thereby succeeded to ARG in providing such services to Apple.



                                       8
<PAGE>



     Effective at the close of business on September 30, 1998,  the  subcontract
agreements described above were terminated,  and ARA assigned to ARMG its rights
and responsibilities under the advisory agreement.  Thus, as of October 1, 1998,
the property management and advisory services to Apple are now performed by ARMG
using employees leased from the Company.  The expenses of providing the services
to Apple will partly  offset the fees  payable by Apple to ARMG in exchange  for
such services. To the extent such fees exceed such expenses, the Company will be
entitled  to  almost  all of the  excess,  since  the  Company  owns  all of the
preferred shares of ARMG,  entitling the Company to 95% of any dividends payable
by ARMG.  The remaining 5% is payable to Glade M. Knight as the owner of all the
common shares of ARMG.

     Effective  October 1, 1998, the Company sold to ARMG its rights in the real
estate  brokerage  agreement.  Beginning  on such  date ARMG  will  provide  the
services  and be entitled to the  compensation  under the real estate  brokerage
agreement. ARMG will lease employees necessary to provide such services from the
Company and the leasing  expense will partly offset the fees payable to ARMG. As
discussed  above,  the Company will be entitled to 95% of any amounts  remaining
for  distribution by ARMG. The purchase price payable by ARMG to the Company for
the real estate brokerage  agreement is $311,111.  The purchase price is payable
in one  installment  of principal on September  30, 1999.  The  principal  bears
interest at the rate of 12% per annum and interest is payable at the end of each
calendar quarter commencing December 31, 1998 and ending September 30, 1999. The
obligation is prepayable at any time without penalty.  ARMG expects to make such
payment from brokerage fees received under the real estate brokerage  agreement.
As of October 1, 1998,  the Company and ARMG entered into a  restatement  of the
real  estate  brokerage  agreement.   Pursuant  to  an  amendment  made  in  the
restatement,  the real estate brokerage  agreement is terminable by either party
on two-weeks notice.

     For the reasons set forth above, it is not expected that the  restructuring
of the  service  relationship  with Apple will have any  material  effect on the
Company since in substance the Company will continue to provide such services to
Apple.


                                       9
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
        INFORMATION AND EXHIBITS



                       [L.P. MARTIN & COMPANY LETTERHEAD]


                          INDEPENDENT AUDITORS' REPORT

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

         We have  audited  the  accompanying  statement  of  income  and  direct
operating  expenses  exclusive of items not  comparable  to the proposed  future
operations  of the property  Cape Landing  Apartments  located in Myrtle  Beach,
South  Carolina  for the twelve  month period  ended  September  30, 1998.  This
statement is the  responsibility  of the management of Cape Landing  Apartments.
Our  responsibility  is to express an  opinion  on this  statement  based on our
audit.

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

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

         In our opinion, the statement referred to above presents fairly, in all
material  respects,  the income and direct  operating  expenses of Cape  Landing
Apartments  (as defined  above) for the twelve month period ended  September 30,
1998, in conformity with generally accepted accounting principles.


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


Richmond, Virginia
November 5, 1998


                                       10
<PAGE>
                             CAPE LANDING APARTMENTS

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

                  TWELVE MONTH PERIOD ENDED SEPTEMBER 30, 1998

INCOME
   Rental and Other Income                               $   1,298,167
                                                         -------------
DIRECT OPERATING EXPENSES
   Administrative and Other                                    188,467
   Insurance                                                    56,038
   Repairs and Maintenance                                     175,814
   Taxes, Property                                             106,738
   Utilities                                                   103,584
                                                         -------------

         TOTAL DIRECT OPERATING EXPENSES                       630,641
                                                         -------------

         Operating income exclusive of items not
         comparable to the proposed future operations
         of the property                                 $     667,526
                                                         =============



See accompanying notes to the financial statement.


                                       11
<PAGE>
                             CAPE LANDING APARTMENTS

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

                  TWELVE MONTH PERIOD ENDED SEPTEMBER 30, 1998

NOTE 1 - ORGANIZATION

Cape Landing  Apartments is a 288 unit garden style apartment complex located on
20.96 acres in Myrtle  Beach,  South  Carolina.  Construction  of the  apartment
buildings  began in 1997 and  continued  until  completion  in  February,  1998.
Accordingly, the number of occupied units and tenant income increased throughout
the twelve month period presented. The assets comprising the property were owned
by Cape Landing  Apartments,  L.L.C.,  an entity  unaffiliated  with Cornerstone
Realty Income Trust, Inc., during the financial statement period. On October 15,
1998, the apartment property was sold to Cornerstone  Partners,  L.P. A majority
interest in  Cornerstone  Partners,  L.P. is held by  Cornerstone  Realty Income
Trust, Inc. with Cape Landing Apartments, L.L.C. holding a minority interest.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICES

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

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

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

Advertising - Advertising costs are expensed in the period incurred.


                                       12
<PAGE>

ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
        INFORMATION AND EXHIBITS


PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 (UNAUDITED)

The Unaudited Pro Forma Consolidated  Statement of Operations for the nine month
period ended  September 30, 1998 is presented as if the 6 Property  acquisitions
made  during  1998 had  occurred  on January 1, 1998.  The  Unaudited  Pro Forma
Statement of Operations assumes the Company  qualifying as a REIT,  distributing
at least 95% of its taxable income, and,  therefore,  incurred no federal income
tax  liability  for the period  presented.  In the  opinion of  management,  all
adjustments  necessary  to reflect the effects of these  transactions  have been
made.

The  Unaudited Pro Forma  Consolidated  Statement of Operations is presented for
comparative  purposes only and is not necessarily  indicative of what the actual
results of the Company would have been for the nine month period ended September
30,  1998 if the  acquisitions  had  occurred  at the  beginning  of the  period
presented,  nor does it purport to be indicative of the results of operations in
future periods.  The Unaudited Pro Forma Statement of Operations  should be read
in  conjunction  with,  and is  qualified  in its  entirety  by,  the  Company's
respective historical financial statements and notes thereto.
<PAGE>


<TABLE>
<CAPTION>
                                                                                  Stone           Pinnacle         Hampton    
                                                           Historical             Point            Ridge           Pointe    
                                                          Statement of          Pro Forma        Pro Forma        Pro Forma  
                                                           Operations          Adjustments      Adjustments      Adjustments 
                                                      -----------------------------------------------------------------------
<S>                                                      <C>                  <C>                 <C>             <C>        
Date of Acquisitions                                          -                  1/15/98          3/31/98          3/31/98   

Rental and other income                                  $68,683,654          $   56,094          $214,941        $495,061   
 
Rental expenses:                                                                           
                Property and maintenance                  18,099,464              15,821            73,178         157,479   
                Taxes and insurance                        5,162,507               4,154            15,411          54,874   
                Property management                        1,567,707                   -                -                -   
                General and administrative                 1,347,816                   -                -                -   
                Amortization and other depreciation           38,460                   -                -                -   
                Depreciation of rental property           14,995,402                   -                -                -   
                Other                                      1,530,189                   -                -                -   
                                                      -----------------------------------------------------------------------
                                                          42,741,545              19,975            88,589         212,353   
Income before interest income (expense)                   25,942,109              36,119           126,352         282,708   
     and minority interest
Interest income                                              323,689                   -                -                -   
Interest expense                                         (9,227,446)                   -                -                -   
                                                      -----------------------------------------------------------------------
Net Income before minority interest                       17,038,352              36,119           126,352         282,708   
Minority interest                                                  -                                                         
                                                      -----------------------------------------------------------------------
Net income                                               $17,038,352             $36,119          $126,352        $282,708   
                                                      ===============                                                        
Net income per common share - Basic                            $0.46                                                         
                                                      ===============                                                        
Wgt. avg. number of shares outstanding                    37,148,312                                                         
                                                      ===============                                                        
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                                        Cape
                                                       The Timbers    The Gables       Landing           1998
                                                        Pro Forma      Pro Forma      Pro Forma        Pro Forma           Total
                                                       Adjustments    Adjustments    Adjustments      Adjustments        Pro Forma
                                                       ------------------------------------------------------------- --------------
<S>                                                    <C>           <C>             <C>                              <C>        
Date of Acquisitions                                      6/4/98        7/2/98         10/16/98                            -

Rental and other income                                $  494,369    $  752,765      $  973,625           -           $71,670,509
 
Rental expenses:                                       
                Property and maintenance                  169,870       221,388         350,899           -            19,088,099
                Taxes and insurance                        31,692        49,381         122,082           -             5,440,101
                Property management                            -              -              -            -             1,567,707
                General and administrative                     -              -              -            -             1,347,816
                Amortization and other depreciation            -              -              -            -                38,460
                Depreciation of rental property                -              -              -        848,674 (A)      15,844,076
                Other                                          -              -              -            -             1,530,189
                                                       --------------------------------------------------------     ---------------
                                                          201,562       270,769         472,981       848,674          44,856,448
Income before interest income (expense)                   292,807       481,996         500,644      (848,674)         26,814,061
     and minority interest
Interest income                                                -              -              -       (151,875)(D)         171,814
Interest expense                                               -              -              -     (1,359,971)(B)     (10,587,417)
                                                       --------------------------------------------------------     ---------------
Net Income before minority interest                       292,807       481,996         500,644    (2,360,520)         16,398,458
Minority interest                                                                                     (80,749)(E)         (80,749)
                                                       --------------------------------------------------------     ---------------
Net income                                               $292,807      $481,996        $500,644   ($2,441,269)        $16,317,709
                                                                                                                    ===============
Net income per common share - Basic                                                                                         $0.43
                                                                                                                    ===============
Wgt. avg. number of shares outstanding                                                                413,223 (C)      37,561,535
                                                                                                ===============     ===============

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

(B) Represents  the interest  expense for the 6 properties  purchased  using the
    line of credit for the period in which the properties were not owned for the
    nine month period ended  September 30, 1998.  Interest was computed based on
    interest  rates under the Company's  line of credit in effect at the time of
    the respective acquisition.

(C) Repesents  additional  common shares used to purchase Timbers based upon the
    purchase  price of  $8,100,000;  common  shares  issued in May 1997 with net
    proceeds per share of $10.89 to the  Company.

(D) Represents  reduction of interest  income  associated with $4.050 million of
    cash used to purchase Cape Landing at an interest rate of 5%.

(E) Represents  minority interest of 185,874 operating  partnership units in the
    Company's operating partnership.

                                       13
<PAGE>


PRO FORMA CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1998 (UNAUDITED)

The  Unaudited  Pro Forma  Consolidated  Balance  Sheet is  presented  as if the
Company had owned the property  included in the table below as of September  30,
1998. 

The Unaudited Pro Forma Consolidated  Balance Sheet is presented for comparative
purposes only and is not  necessarily  indicative  of what the actual  financial
position of the  Company  would have been at  September  30,  1998,  nor does it
purport  to  represent  the  future  financial  position  of the  Company.  This
Unaudited Pro Forma  Consolidated  Balance  Sheet should be read in  conjunction
with, and is qualified in its entirety by, the Company's  respective  historical
financial statements and notes thereto.


<TABLE>
<CAPTION>
                                                                    (A)
                                                                    Cape
                                           Historical              Landing
                                             Balance              Pro Forma               Total
                                              Sheet               Adjustments           Pro Forma
                                        --------------------------------------------------------------
<S>                                      <C>                      <C>                 <C>          
Date of acquisition                                                 10/16/98

ASSETS
Investment in rental property
   Land                                  $  86,076,966            $  1,026,000        $  87,102,966
   Building and improvements               466,514,341              16,074,000          482,588,341
   Furniture and fixtures                   11,187,945                                   11,187,945
                                        ------------------------------------------------------------
                                           563,779,252              17,100,000          580,879,252
   Less accumulated depreciation           (42,482,032)                                 (42,482,032)
                                        ------------------------------------------------------------
                                           521,297,220              17,100,000          538,397,220

   Cash and cash equivalents                 4,069,280              (4,050,000)              19,280
   Prepaid expenses                            446,202                      -               446,202
   Other assets                              9,063,522                      -             9,063,522
                                        ------------------------------------------------------------
                                            13,579,004              (4,050,000)           9,529,004
                                        ------------------------------------------------------------
   Total Assets                          $ 534,876,224            $ 13,050,000        $ 547,926,224
                                        ============================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
   Notes payable                         $ 185,499,999            $ 11,050,000        $ 196,549,999
   Accounts payable                          2,110,858                       -            2,110,858
   Accrued expenses                          4,697,340                       -            4,697,340
   Rents received in advance                   204,525                       -              204,525
   Tenant security deposits                  1,728,587                       -            1,728,587
                                        ------------------------------------------------------------
   Total  Liabilities                      194,241,309              11,050,000          205,291,309

Minority Interest                                    -               2,000,000         $  2,000,000

Shareholders'equity
   Common stock                            385,602,116                       -          385,602,116
   Deferred compensation                       (46,479)                      -              (46,479)
   Distributions greater than net income   (44,920,722)                      -          (44,920,722)
                                        ------------------------------------------------------------
   Total Shareholders' Equity              340,634,915                       -          340,634,915
                                        ------------------------------------------------------------
   Total Liabilities and Shareholders'
      Equity                              $534,876,224            $ 13,050,000        $ 547,926,224
                                        ================================================================
</TABLE>


(A) Represents purchase of Cape Landing for a purchase price of $17,100,000, and
    was  funded  using  cash of  $4,050,000,  the  Company's  line of credit for
    $11,050,000 and issuance of 185,874  operating  partnership  units valued at
    $10.76 per unit.


                                       14

<PAGE>

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED 
DECEMBER 31, 1997 (UNAUDITED)

The Unaudited Pro Forma Consolidated  Statement of Operations for the year ended
December 31, 1997 is presented as if 11 of the 13 Property  acquisitions  during
1997 and the 6 Property  acquisitions  during  1998 had  occurred  on January 1,
1997.  The  Unaudited  Pro Forma  Statement  of  Operations  assumes the Company
qualifying  as a REIT,  distributing  at least 95% of its taxable  income,  and,
therefore, incurred no federal income tax liability for the period presented. In
the opinion of management,  all adjustments  necessary to reflect the effects of
these transactions have been made.

The  Unaudited Pro Forma  Consolidated  Statement of Operations is presented for
comparative  purposes only and is not necessarily  indicative of what the actual
results of the Company  would have been for the year ended  December 31, 1997 if
the acquisitions had occurred at the beginning of the period presented, nor does
it purport to be indicative of the results of operations in future periods.  The
Unaudited Pro Forma Statement of Operations  should be read in conjunction with,
and is  qualified  in its  entirety  by,  the  Company's  respective  historical
financial statements and notes thereto.


<TABLE>
<CAPTION>
                                                                                                                                
                                                         Historical                                               Pro Forma     
                                                        Statement of          1997          Pro Forma            Before 1998    
                                                         Operations       Acquisitions     Adjustments           Acquisitions   
                                                       ----------------  ---------------  ---------------      ----------------
<S>                                                      <C>                <C>                                  <C>            
Date of Acquisitions                                                                                                          

Revenues from rental properties                          $71,970,624        $8,176,747                           $80,147,371    
Rental expenses:                                                                                                                
                Property and maintenance                  19,494,692         2,524,622                            22,019,314    
                Taxes and insurance                        6,075,991           608,815                             6,684,806    
                Property management                        1,769,272                                               1,769,272    
                General and administrative                 1,351,667                                               1,351,667    
                Amortization and other depreciation           56,075                                                  56,075    
                Depreciation of rental property           15,163,593                        $ 1,514,811 (A)       16,678,404    
                Other                                      1,200,669                                               1,200,669    
                Management contract termination              402,907                                                 402,907    
                                                       -----------------  --------------   ------------------   -------------
                                                          45,514,866         3,133,437        1,514,811           50,163,114    
Income before interest income (expense)                   26,455,758         5,043,310       (1,514,811)          29,984,257    
     and minority interest
Interest income                                              331,114                                -                331,114    
Interest expense                                         (7,561,319)                         (2,411,653)(B)       (9,972,972)   
                                                       -----------------  --------------   ------------------   -------------
Net income before minority interest                       19,225,553         5,043,310       (3,926,464)          20,342,399    
Minority interest                                                                                                               
                                                       -----------------  --------------   ------------------  ---------------
Net income                                               $19,225,553        $5,043,310      ($3,926,464)         $20,342,399    
                                                       ==============                                          ================ 
Net income per common share - Basic                            $0.59                                                   $0.59    
                                                       ==============                                          ================
Wgt. avg. number of shares outstanding                    32,617,823                          2,041,544(C)        34,659,367    
                                                       ==============                      =================   =================   
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
                                                                         Pinnacle        Hampton                      
                                                         Stone Point       Ridge          Point       The Timbers     
                                                          Pro Forma      Pro Forma      Pro Forma      Pro Forma      
                                                         Adjustments    Adjustments    Adjustments    Adjustments     
                                                         -------------------------------------------------------------
<S>                                                      <C>               <C>         <C>            <C>             
Date of Acquisitions                                        1/15/98        3/31/98        3/31/98         6/4/98      

Revenues from rental properties                          $ 1,346,251       $859,763    $1,980,245     $ 1,186,485     
Rental expenses:                                                      
                Property and maintenance                     379,698        292,713       629,914         407,687     
                Taxes and insurance                           99,704         61,642       219,495          76,060     
                Property management                                                                                   
                General and administrative                                                                            
                Amortization and other depreciation                                                                   
                Depreciation of rental property                                                                       
                Other                                                                                                 
                Management contract termination                                                                       
                                                         -------------------------------------------------------------
                                                             479,402        354,355       849,409         483,747     
Income before interest income (expense)                      866,849        505,408     1,130,836         702,738     
     and minority interest
Interest income                                                                                                       
Interest expense                                                                                                      
                                                         -------------------------------------------------------------
Net income before minority interest                          866,849        505,408     1,130,836         702,738     
Minority interest                                                                                                     
                                                         -------------------------------------------------------------
Net income                                                  $866,849       $505,408    $1,130,836        $702,738     
                                                                                                                      
Net income per common share - Basic                                                                                   
                                                         
Wgt. avg. number of shares outstanding                                                                                
                                                                                                                      
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                                               Cape
                                                          Gables              Landing
                                                        Pro Forma            Pro Forma             Pro Forma              Total
                                                       Adjustments          Adjustments           Adjustments           Pro Forma
                                                       -----------------------------------------------------      ---------------
<S>                                                    <C>                  <C>                                        <C>        
Date of Acquisitions                                       7/2/98              10/16/98                                     -

Revenues from rental properties                        $ 1,505,529          $ 1,298,167                                $88,323,811
Rental expenses:                                       
                Property and maintenance                   442,775              467,865                                 24,639,966
                Taxes and insurance                         98,762              162,776                                  7,403,245
                Property management                                                                                      1,769,272
                General and administrative                                                                               1,351,667
                Amortization and other depreciation                                                                         56,075
                Depreciation of rental property                                                 $  1,996,381 (A)        18,674,785
                Other                                                                                                    1,200,669
                Management contract termination                                                                            402,907
                                                       -------------------------------------------------------      ---------------
                                                           541,537              630,641            1,996,381            55,498,586
Income before interest income (expense)                    963,992              667,526           (1,996,381)           32,825,225
     and minority interest
Interest income                                                                                     (202,500)(D)           128,614
Interest expense                                                                                  (3,723,398)(B)       (13,696,370)
                                                       -------------------------------------------------------      ---------------
Net income before minority interest                        963,992              667,526           (5,922,279)           19,257,469
Minority interest                                                                                   (100,578)(E)          (100,578)
                                                       -------------------------------------------------------      ---------------
Net income                                                $963,992             $667,526          ($6,022,857)          $19,156,891
                                                                                                                    ===============
Net income per common share - Basic                                                                                          $0.54
                                                                                                                    ===============
Wgt. avg. number of shares outstanding                                                              743,802 (C)        35,403,168
                                                                                                ===============     ===============
</TABLE>
(A) Represents the depreciation  expense of the properties acquired based on the
    purchase price,  excluding amounts allocated to land, for the period of time
    not  owned  by the  Company.  The  weighted  average  life  of the  property
    depreciated was 27.5 years.

(B) Represents the interest expense for the portion of the properties  purchased
    with the Company's  unsecured line of credit or other  unsecured  financing.
    Total purchase price of $63,851,388 for 1997 acquisitions (8 properties) and
    the portion of the purchase price of $50,206,150  for 1998  acquisitions  (6
    properties)  for the period in which  properties were not owned for the year
    ended December 31, 1997. Interest was computed based on interest rates under
    the  Company's  line of  credit  in  effect  at the  time of the  respective
    acquisition.

(C) Represents  additional  common shares used to purchase Ashley Run,  Carlyle,
    Charleston  Place and a portion of Dunwoody  based upon  purchase  prices of
    $18,000,000 $11,580,000, $9,475,000 and $10,560,312 (total purchase price of
    Dunwoody was $15,200,000), respectively; common shares issued in April, 1997
    with net proceeds of $9.5875 per share to the  Company;  purchase of Timbers
    using the proceeds of a public offering  issuing shares with net proceeds of
    $10.89 per share.

(D) Represents  reduction of interest  income  associated with $4.050 million of
    cash used to purchase Cape Landing at an interest rate of 5%.

(E) Represents  minority interest of 185,874 operating  partnership units in the
    Company's operating partnership.

                                       15
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1997 (UNAUDITED)

The following schedule provides detail of 1997 acquisitions by property included
in the Pro  Forma  Consolidated  Statement  of  Operations  for the  year  ended
December 31, 1997.


<TABLE>
<CAPTION>
                                                                 Paces        Paces        Ashley        Carlyle      Charleston
                                                 Westchase       Arbor        Forest         Run          Club           Place     
                                                 Pro Forma     Pro Forma    Pro Forma     Pro Forma     Pro Forma      Pro Forma   
                                                Adjustments   Adjustments  Adjustments   Adjustments   Adjustments    Adjustments  
                                                -----------   -----------  -----------   -----------   -----------    -----------  
<S>                                               <C>           <C>           <C>         <C>            <C>           <C>         
Date of Acquisition                               1/15/97        3/1/97       3/1/97       4/30/97       4/30/97        5/13/97    

Property operations                                                                                                  
    Revenues from rental properties               $166,656      $128,993      $154,702    $916,820       $637,842      $536,210    
    Rental expenses:                                                                                                               
                Property management                 54,436        35,902        37,110     246,537        205,723       169,807    
                Taxes and insurance                 16,024         8,094         9,108      69,240         46,970        34,987    
                General and administrative            -             -            -            -             -              -       
                Amortization                          -             -            -            -             -              -       
                Depreciation of rental property       -             -            -            -             -              -       
                Other                                 -             -            -            -             -              -       
                                                -----------------------------------------------------------------------------------
                                                    70,460        43,996        46,218     315,777        252,693       204,794    
Income before interest income (expense)             96,196        84,997       108,484     601,043        385,149       331,416    
Interest income                                       -             -            -           -              -              -       
Interest expense                                      -             -            -           -              -              -       
                                                -----------------------------------------------------------------------------------
Net Income                                         $96,196       $84,997      $108,484    $601,043       $385,149      $331,416    
                                                ===================================================================================
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
                                                  Dunwoody       Clarion                    Remington        Stone
                                                  Springs        Crossing     St. Regis       Place         Brooke          1997
                                                 Pro Forma      Pro Forma     Pro Forma     Pro Forma      Pro Forma    Acquisition
                                                Adjustments    Adjustments   Adjustments   Adjustments    Adjustments   Adjustments
                                                -----------    -----------   -----------   -----------    -----------   -----------
<S>                                             <C>            <C>           <C>             <C>          <C>           <C>       
Date of Acquisition                               7/25/97        9/30/97       10/31/97      10/31/97      10/31/97

Property operations                            
    Revenues from rental properties             $1,437,230     $1,141,473    $1,100,453      $918,833     $1,037,535    $8,176,747
    Rental expenses:                                                                                           -
                Property management                451,935        442,582       294,153       262,938        323,499     2,524,622
                Taxes and insurance                144,766         59,664        64,195        60,505         95,262       608,815
                General and administrative            -              -             -             -             -             -
                Amortization                          -              -             -             -             -             -
                Depreciation of rental property       -              -             -             -             -             -
                Other                                 -              -             -             -             -             -
                                               ------------------------------------------------------------------------------------
                                                   596,701        502,246       358,348       323,443        418,761     3,133,437
Income before interest income (expense)            840,529        639,227       742,105       595,390        618,774     5,043,310
Interest income                                        -             -             -             -              -             -
Interest expense                                       -             -             -             -              -             -
                                               ------------------------------------------------------------------------------------
Net Income                                        $840,529       $639,227      $742,105      $595,390       $618,774    $5,043,310
                                               ====================================================================================
</TABLE>


                                       16
<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 hereunto duly authorized.

                                    Cornerstone Realty Income Trust, Inc.

Date: December 22, 1998              By:   /s/ Stanley J. Olander, Jr.
                                           ----------------------------
                                           Stanley J. Olander, Jr.,
                                           Chief Financial Officer of
                                           Cornerstone Realty Income Trust, Inc.






                                       17
<PAGE>



                                  EXHIBIT INDEX

                      Cornerstone Realty Income Trust, Inc.
                         Form 8-K dated October 16, 1998


Exhibit Number             Exhibit                                   Page Number

         10.1         Purchase Contract for
                      Cape Landing Apartments

         10.2         Agreement of Limited
                      Partnership of Cornerstone
                      Partners, L.P.

         10.3         Credit Agreement among
                      Cornerstone Realty Income
                      Trust, Inc., CRIT-NC, LLC
                      and First Union National Bank

         10.4         Revolving Credit Note made
                      by Cornerstone Realty Income
                      Trust, Inc. and CRIT-NC, LLC

         10.5         Termination of Advisory
                      Agreement Subcontract

         10.6         Termination of Property
                      Management Agreement Subcontract

         10.7         Bill of Sale and Note Pertaining
                      to Property Acquisition/
                      Disposition Agreement

         10.8         Assignment and Assumption Agreement
                      (Pertaining to Advisory Agreement for
                      Apple Residential Income Trust, Inc.)

         10.9         Amended and Restated Property
                      Acquisition/Disposition Agreement

         23.1         Consent of Independent Auditors





                                       18
[{"type": "8-K", "sequence": "1", "description": "FORM 8-K", "secsgml_size_bytes": 66303}]
{"company-data": {"conformed-name": "CORNERSTONE REALTY INCOME TRUST INC", "cik": "0000854875", "assigned-sic": "6798", "irs-number": "541589139", "state-of-incorporation": "VA", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "001-12875", "film-number": "98776153"}, "business-address": {"street1": "306 E MAIN ST", "city": "RICHMOND", "state": "VA", "zip": "23219", "phone": "8046431761"}, "mail-address": {"street1": "306 E MAIN ST", "city": "RICHMOND", "state": "VA", "zip": "23219"}}
SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT

     Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report: October 16, 1998

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

  VIRGINIA                       1-12875                       54-1589139
  (State of                    (Commission                   (IRS Employer
  incorporation)               File Number)                Identification No.)

  306 EAST MAIN STREET
  RICHMOND, VIRGINIA                                              23219
  (Address of principal                                         (Zip Code)
   executive offices)

               Registrant's telephone number, including area code:
                                 (804) 643-1761
CORNERSTONE REALTY INCOME TRUST, INC.

                                    FORM 8-K

                                      Index

                                                                     Page Number
                                                                     -----------

Item 2. Acquisition or Disposition of Assets                                   4

Item 5. Other Events                                                           8

Item 7. Financial Statements, Pro Forma Financial
        Information and Exhibits

        a.     Independent Auditors' Report                                   10
               (Cape Landing Apartments)

               Historical Statement of Income and                             11
               Direct Operating Expenses
               (Cape Landing Apartments)

               Note to Historical Statement of                                12
               Income and Direct Operating
               Expenses (Cape Landing Apartments)

        b.     Pro Forma Statement of Operations for                          13
               the Nine Months ended September 30, 1998
               (unaudited)

               Pro Forma Balance Sheet as of                                  14
               September 30, 1998 (unaudited)

               Pro Forma Statement of Operations                              15
               for the Year ended December 31, 1997
               (unaudited)

        c.     Exhibits

               10.1 Purchase Contract for Cape Landing Apartments

                                       2
10.2  Agreement of Limited Partnership of Cornerstone Partners, L.P.
               
      10.3  Credit  Agreement  among  Cornerstone  Realty  Income  Trust,  Inc.,
            CRIT-NC, LLC and First Union National Bank

      10.4  Revolving Credit Note made by Cornerstone  Realty Income Trust, Inc.
            and CRIT-NC, LLC

      10.5  Termination of Advisory Agreement Subcontract

      10.6  Termination of Property Management Agreement Subcontract

      10.7  Bill of Sale and Note Pertaining to Property Acquisition/Disposition
            Agreement

      10.8  Assignment   and  Assumption   Agreement   (Pertaining  to  Advisory
            Agreement for Apple Residential Income Trust, Inc.)

      10.9  Amended and Restated Property Acquisition/Disposition Agreement

      23.1  Consent of Independent Auditors

                                       3
ITEM 2.  ACQUISITION OR DISPOSITION OF ASSETS

                             CAPE LANDING APARTMENTS
                          Myrtle Beach, South Carolina

     On October 16, 1998,  Cornerstone Realty Income Trust, Inc. (the "Company")
acquired an approximately 88 percent interest in Cornerstone  Partners,  L.P., a
Virginia limited partnership (the "Limited Partnership"), which was organized by
the Company to acquire Cape Landing  Apartments,  a 288-unit  apartment  complex
located  at  3851  Cape  Landing  Drive,   Myrtle  Beach,  South  Carolina  (the
"Property"). The Company is the general partner of the Limited Partnership.

     The  Company  entered  into  an  agreement  of  limited   partnership  (the
"Agreement")  with  Cape  Landing  Apartments,  LLC,  a North  Carolina  limited
liability  company (the "Limited  Partner"),  which is not  affiliated  with the
Company or its  affiliates.  Pursuant  to the  Agreement,  the  Limited  Partner
contributed an  approximately 12 percent interest in the Property to the Limited
Partnership in exchange for 185,887  partnership units with an agreed upon value
of $2 million.  The Limited Partner sold its remaining  interest in the Property
to  the  Limited   Partnership  for  $15.1  million.   The  Company  contributed
$15,100,000  to the  Limited  Partnership,  $11.05  million of which the Company
borrowed  under its  unsecured  line of credit  and $4.05  million  of which was
funded with cash from operations,  in exchange for 1,403,445  partnership  units
representing an approximately  88 percent  interest in the Limited  Partnership.
The Limited Partnership's sole asset is the Property.  Title to the Property was
conveyed to the Limited Partnership by limited warranty deed.

     Each  partnership unit held by the Limited Partner is exchangeable any time
after  a  one-year  holding  period  for a  Common  Share  of the  Company  on a
one-for-one basis. Each partnership unit held by the Limited Partner is entitled
to a preferred  return  equal to the  dividend  paid on one Common  Share of the
Company.  Except for certain  limited  matters,  all management  powers over the
affairs of the Limited  Partnership  are exclusively  vested in the Company,  as
general partner.

     Location.  The Property is in Myrtle Beach,  Horry County,  South Carolina.
The  following  information  is based in part upon  information  provided by the
greater Myrtle Beach Chamber of Commerce.

     The Myrtle Beach MSA is comprised of Horry and  Georgetown  Counties.  This
area covers 1,956 square miles and has an approximate population of 215,000. The
Myrtle Beach area,  also known as South  Carolina's  Grand Strand,  is a 60-mile
stretch of coastline.  Highways providing direct access to the Myrtle Beach area
include  U.S.  Routes  17,  501 and South  Carolina  Highways  9 and 544.  These
connections  can be  made  from  Interstates  95 and 20.  Considered  one of the
nation's  top  vacation  destinations,  the Grand  Strand  hosts an estimated 13
million visitors annually.  The increasing number of entertainment  attractions,
live  music  theaters,  shopping  centers  and golf  courses  attracts  visitors
throughout the year. In April 1995, American

                                       4
Demographics  ranked  Myrtle Beach as the second  fastest  growing metro area in
both projected annual  population  growth and projected  employment  growth from
1995 to 2005.

     Money magazine rated the Grand Strand as one of the top 20 places to retire
in America. The number of persons over the age of 65 has grown from nearly 5,000
in 1970 to 20,840 in 1996.  This increase of 317 percent boosted this portion of
the population of Horry County to nearly 13 percent of the resident  population.
Similarly,  in Georgetown County the population of persons over the age of 65 is
6,650, which is 12.9 percent of the total county population.

     Myrtle Beach is rated as one of the fastest  growing  areas in the U.S. and
current  development  includes a wide range of new businesses.  These businesses
include entertainment centers,  restaurants,  motels, golf courses, business and
resort centers and general services.  Entertainment  center openings during 1997
included The All-American Music Theater and The Savoy Theater at Fantasy Harbor.
Construction  projects  planned for 1998 and 1999 include a $20 million baseball
stadium  for an  Atlanta  Braves  Carolina  League  Class A team.  Additionally,
Burroughs and Chapin plans to begin  development of the Grande Dunes project,  a
high-profile,  full-service  resort.  Further  development  will include a large
shopping center and several new residential  communities,  and Myrtle Beach city
government  will also  continue  with  plans to  redevelop  the  downtown  area,
including a large park.

     Tourism  continues to be the Grand Strand's  dominant  economic theme.  The
majority  of jobs in Horry  County are  related to the  services  necessary  for
tourism  businesses.  Sixty-five to 70 percent of Horry  County's  employment is
tourism  related.  Over the years,  as Horry County has  increased the number of
employment  opportunities and has seen a growth in population,  it has been able
to steadily  decrease the annual  unemployment  rate,  dropping this year to 4.9
percent  from the 1996 level of 5.3  percent.  Some of the largest  employers in
both Horry County and Georgetown  County  include Horry County School  District,
AVX, Horry County Government,  Sands Oceanfront Resort, Conway Hospital, Coastal
Carolina University and Santee Cooper Electric.

     Myrtle Beach is served by the Myrtle Beach International Airport.

     The  neighborhood  in which  the  Property  is  located  consists  of other
multi-family housing,  single-family housing, commercial and retail development.
The Property is located near businesses, major shopping, entertainment,  schools
and churches.  The Property is located on U.S. Highway 17 Bypass,  approximately
two miles from U.S. Highway 501.

     Description  of the  Property.  The Property  consists of 288  garden-style
apartment units in 14 three-story  buildings on  approximately 21 acres of land.
The Property was built in 1997 and 1998.

     The Property is newly constructed and thus is, in the opinion of management
of the Company, in excellent  condition.  Since the Property is new, the Company
has not budgeted any sums for  significant  improvements  or  renovations to the
Property for at least six months after its acquisition by the Company.

                                       5
The Property offers 11 unit types. The unit mix and rents being charged new
tenants as of August 1998 are as follows:
APPROXIMATE
                                                                        INTERIOR                MONTHLY RENTAL
     QUANTITY                         TYPE                           SQUARE FOOTAGE             --------------
     --------                         ----                           --------------
9             One Bedroom/One Bath W/D Connections                 695                       $549

        48          One Bedroom/One Bath W/D Connections, FP               695                        549

        15              One Bedroom/One Bath Handicapped                   695                        549

        20            One Bedroom/One Bath W/D Connections                 744                        570

        40          One Bedroom/One Bath W/D Connections, FP               744                        570

        16           Two Bedrooms/Two Baths W/D Connections                883                        670

        32          Two Bedrooms/Two Baths W/D Connections,                883                        670
                                       FP

        20               Two Bedrooms/Two Baths/Den W/D                   1108                        750
                                   Connections

        40               Two Bedrooms/Two Baths/Den W/D                   1108                        750
                                 Connections, FP

        16          Three Bedrooms/Two Baths W/D Connections              1356                        839

        32                Three Bedrooms/Two Baths W/D                    1356                        839
                                 Connections, FP
The  apartments  provide a combined total of  approximately  269,000 square
feet of net rentable area.

     Leases at the Property are generally for terms of one year or less. Average
rental  rates for the past year  have  generally  increased.  As an  example,  a
two-bedroom,  two-bathroom  apartment  unit (883 square feet) rented for $650 in
1997.  The average  effective  annual rental per square foot at the Property for
1997 was $8.28.

                                       6
The  buildings  are  wood-frame  construction  on concrete  slabs,  and the
exteriors  are covered  with vinyl  siding.  Roofs are pitched and covered  with
asphalt shingles.

     Each  apartment  unit has  wall-to-wall  carpeting  in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has smoke detectors, a
cable  television  hook-up  and  an  individually  controlled  heating  and  air
conditioning  unit. The owner of the property supplies cold water, sewer service
and trash removal.  Each resident is responsible  for his or her own electricity
usage, which includes air conditioning, lights, heat, hot water and cooking.

     Each unit (other than the smallest  one-bedroom  modified  units)  includes
washer/dryer connections for full-sized appliances,  miniblinds, walk-in closets
and a patio or balcony. A total of 192 units have a wood-burning fireplace. Each
kitchen is equipped with a  refrigerator/freezer  with icemaker,  electric range
and oven, dishwasher and garbage disposal.

     The Property has an outdoor  swimming pool,  two lighted  tennis courts,  a
fitness center with sauna and steam room, and a laundry  facility.  The Property
also includes a clubhouse with an  entertainment  area,  kitchenette and leasing
office. There is ample paved parking for tenants.

     There are at least five apartment  properties in the area that compete with
the  Property.  All offer similar  amenities  and have rents that  generally are
comparable to those of the Property.  Based on a recent  telephone  survey,  the
Company  estimates  that occupancy in nearby  competing  properties now averages
approximately 93%.

     According to  information  provided by the seller,  leasing at the Property
began in May 1997 and physical occupancy at the Property averaged  approximately
63% during the first nine months of 1998. On October 12, 1998,  the Property was
88% occupied.

     The  tenants at the  Property  are a mix of  white-collar  and  blue-collar
workers, students and retired persons.

     For 1998,  Horry County  specified an assessed value for the Property equal
to  $11,176,600.  The taxable  value is equal to 6% of the  assessed  value,  or
$670,596.  The tax rate was  $0.1919,  and the  total  real  estate  taxes  were
calculated as $128,687.37.

     The basis of the  depreciable  residential  real  property  portion  of the
Property  (currently  estimated at about  $15,826,975)  will be depreciated over
27.5 years on a straight-line  basis. The basis of the personal property portion
will be depreciated in accordance  with the modified  accelerated  cost recovery
system of the Internal Revenue Code of 1986, as amended (the "Code"). Amounts to
be spent by the  Property  on repairs and  improvements  will be treated for tax
purposes as permitted by the Code based on the nature of the expenditures.

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

                                       7
Material  Factors  Considered  in  Assessing  the  Property.   The  factors
considered  by the  Company  to be  relevant  in  evaluating  the  Property  for
acquisition by the Company included the following.

     1. The Company  believes  that the greater  Myrtle  Beach,  South  Carolina
metropolitan area will continue to enjoy steady  population  increase and steady
economic  development and that such increase and development will support stable
occupancy  rates  and  reasonable  increases  in  rents  at  the  Property.   In
particular,  the Company believes that the Property is located in a particularly
desirable part of the Myrtle Beach metropolitan area.

     2. The Property is newly-constructed  and was available for purchase by the
Company at an attractive price.

     3. The  Property  is  located  near  major  employment  centers,  including
Broadway at the Beach, Allied Signal, and Coca-Cola.

     The Company is not aware of any material  adverse  factors  relating to the
Property not set forth in this report that would cause the financial information
contained in this report not to be indicative of future operating results.

ITEM 5.  OTHER EVENTS

The Company's Unsecured Line of Credit

     On October 16,  1998,  the Company  closed a $25 million  extension  on its
unsecured  line of  credit,  bringing  to $200  million  the  maximum  permitted
borrowing under the Company's  unsecured line of credit.  The amount outstanding
under the unsecured line of credit on November 30, 1998  was approximately  $196
million.

     The  lender  with  respect  to the $25  million  extension  is First  Union
National Bank. The borrowing  under the $25 million  extension must be repaid by
February 28, 1999.

The Company's Providing of Services to Apple Residential Income Trust, Inc.

     The Company  has been  providing  property  management,  advisory  and real
estate brokerage services to Apple Residential Income Trust, Inc. ("Apple"). The
property  management  and advisory  services  have been  provided by the Company
under  subcontracts from Apple  Residential  Management Group, Inc. ("ARMG") and
Apple  Residential   Advisors,   Inc.  ("ARA"),  the  entities  that  originally
contracted with Apple for the providing of such services.  As to the real estate
brokerage services,  the Company previously purchased the assets of Apple Realty
Group,  Inc.  ("ARG") --  consisting  principally  of the real estate  brokerage
agreement -- and thereby succeeded to ARG in providing such services to Apple.

                                       8
Effective at the close of business on September 30, 1998,  the  subcontract
agreements described above were terminated,  and ARA assigned to ARMG its rights
and responsibilities under the advisory agreement.  Thus, as of October 1, 1998,
the property management and advisory services to Apple are now performed by ARMG
using employees leased from the Company.  The expenses of providing the services
to Apple will partly  offset the fees  payable by Apple to ARMG in exchange  for
such services. To the extent such fees exceed such expenses, the Company will be
entitled  to  almost  all of the  excess,  since  the  Company  owns  all of the
preferred shares of ARMG,  entitling the Company to 95% of any dividends payable
by ARMG.  The remaining 5% is payable to Glade M. Knight as the owner of all the
common shares of ARMG.

     Effective  October 1, 1998, the Company sold to ARMG its rights in the real
estate  brokerage  agreement.  Beginning  on such  date ARMG  will  provide  the
services  and be entitled to the  compensation  under the real estate  brokerage
agreement. ARMG will lease employees necessary to provide such services from the
Company and the leasing  expense will partly offset the fees payable to ARMG. As
discussed  above,  the Company will be entitled to 95% of any amounts  remaining
for  distribution by ARMG. The purchase price payable by ARMG to the Company for
the real estate brokerage  agreement is $311,111.  The purchase price is payable
in one  installment  of principal on September  30, 1999.  The  principal  bears
interest at the rate of 12% per annum and interest is payable at the end of each
calendar quarter commencing December 31, 1998 and ending September 30, 1999. The
obligation is prepayable at any time without penalty.  ARMG expects to make such
payment from brokerage fees received under the real estate brokerage  agreement.
As of October 1, 1998,  the Company and ARMG entered into a  restatement  of the
real  estate  brokerage  agreement.   Pursuant  to  an  amendment  made  in  the
restatement,  the real estate brokerage  agreement is terminable by either party
on two-weeks notice.

     For the reasons set forth above, it is not expected that the  restructuring
of the  service  relationship  with Apple will have any  material  effect on the
Company since in substance the Company will continue to provide such services to
Apple.

                                       9
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
        INFORMATION AND EXHIBITS

                       [L.P. MARTIN & COMPANY LETTERHEAD]

                          INDEPENDENT AUDITORS' REPORT

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

         We have  audited  the  accompanying  statement  of  income  and  direct
operating  expenses  exclusive of items not  comparable  to the proposed  future
operations  of the property  Cape Landing  Apartments  located in Myrtle  Beach,
South  Carolina  for the twelve  month period  ended  September  30, 1998.  This
statement is the  responsibility  of the management of Cape Landing  Apartments.
Our  responsibility  is to express an  opinion  on this  statement  based on our
audit.

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

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

         In our opinion, the statement referred to above presents fairly, in all
material  respects,  the income and direct  operating  expenses of Cape  Landing
Apartments  (as defined  above) for the twelve month period ended  September 30,
1998, in conformity with generally accepted accounting principles.

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

Richmond, Virginia
November 5, 1998

                                       10
CAPE LANDING APARTMENTS

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

                  TWELVE MONTH PERIOD ENDED SEPTEMBER 30, 1998

INCOME
   Rental and Other Income                               $   1,298,167
                                                         -------------
DIRECT OPERATING EXPENSES
   Administrative and Other                                    188,467
   Insurance                                                    56,038
   Repairs and Maintenance                                     175,814
   Taxes, Property                                             106,738
   Utilities                                                   103,584
                                                         -------------

         TOTAL DIRECT OPERATING EXPENSES                       630,641
                                                         -------------

         Operating income exclusive of items not
         comparable to the proposed future operations
         of the property                                 $     667,526
                                                         =============

See accompanying notes to the financial statement.

                                       11
CAPE LANDING APARTMENTS

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

                  TWELVE MONTH PERIOD ENDED SEPTEMBER 30, 1998

NOTE 1 - ORGANIZATION

Cape Landing  Apartments is a 288 unit garden style apartment complex located on
20.96 acres in Myrtle  Beach,  South  Carolina.  Construction  of the  apartment
buildings  began in 1997 and  continued  until  completion  in  February,  1998.
Accordingly, the number of occupied units and tenant income increased throughout
the twelve month period presented. The assets comprising the property were owned
by Cape Landing  Apartments,  L.L.C.,  an entity  unaffiliated  with Cornerstone
Realty Income Trust, Inc., during the financial statement period. On October 15,
1998, the apartment property was sold to Cornerstone  Partners,  L.P. A majority
interest in  Cornerstone  Partners,  L.P. is held by  Cornerstone  Realty Income
Trust, Inc. with Cape Landing Apartments, L.L.C. holding a minority interest.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICES

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

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

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

Advertising - Advertising costs are expensed in the period incurred.

                                       12
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
        INFORMATION AND EXHIBITS

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 (UNAUDITED)

The Unaudited Pro Forma Consolidated  Statement of Operations for the nine month
period ended  September 30, 1998 is presented as if the 6 Property  acquisitions
made  during  1998 had  occurred  on January 1, 1998.  The  Unaudited  Pro Forma
Statement of Operations assumes the Company  qualifying as a REIT,  distributing
at least 95% of its taxable income, and,  therefore,  incurred no federal income
tax  liability  for the period  presented.  In the  opinion of  management,  all
adjustments  necessary  to reflect the effects of these  transactions  have been
made.

The  Unaudited Pro Forma  Consolidated  Statement of Operations is presented for
comparative  purposes only and is not necessarily  indicative of what the actual
results of the Company would have been for the nine month period ended September
30,  1998 if the  acquisitions  had  occurred  at the  beginning  of the  period
presented,  nor does it purport to be indicative of the results of operations in
future periods.  The Unaudited Pro Forma Statement of Operations  should be read
in  conjunction  with,  and is  qualified  in its  entirety  by,  the  Company's
respective historical financial statements and notes thereto.
Stone           Pinnacle         Hampton    
                                                           Historical             Point            Ridge           Pointe    
                                                          Statement of          Pro Forma        Pro Forma        Pro Forma  
                                                           Operations          Adjustments      Adjustments      Adjustments 
                                                      -----------------------------------------------------------------------
Date of Acquisitions                                          -                  1/15/98          3/31/98          3/31/98   

Rental and other income                                  $68,683,654          $   56,094          $214,941        $495,061   
 
Rental expenses:                                                                           
                Property and maintenance                  18,099,464              15,821            73,178         157,479   
                Taxes and insurance                        5,162,507               4,154            15,411          54,874   
                Property management                        1,567,707                   -                -                -   
                General and administrative                 1,347,816                   -                -                -   
                Amortization and other depreciation           38,460                   -                -                -   
                Depreciation of rental property           14,995,402                   -                -                -   
                Other                                      1,530,189                   -                -                -   
                                                      -----------------------------------------------------------------------
                                                          42,741,545              19,975            88,589         212,353   
Income before interest income (expense)                   25,942,109              36,119           126,352         282,708   
     and minority interest
Interest income                                              323,689                   -                -                -   
Interest expense                                         (9,227,446)                   -                -                -   
                                                      -----------------------------------------------------------------------
Net Income before minority interest                       17,038,352              36,119           126,352         282,708   
Minority interest                                                  -                                                         
                                                      -----------------------------------------------------------------------
Net income                                               $17,038,352             $36,119          $126,352        $282,708   
                                                      ===============                                                        
Net income per common share - Basic                            $0.46                                                         
                                                      ===============                                                        
Wgt. avg. number of shares outstanding                    37,148,312                                                         
                                                      ===============
Cape
                                                       The Timbers    The Gables       Landing           1998
                                                        Pro Forma      Pro Forma      Pro Forma        Pro Forma           Total
                                                       Adjustments    Adjustments    Adjustments      Adjustments        Pro Forma
                                                       ------------------------------------------------------------- --------------
Date of Acquisitions                                      6/4/98        7/2/98         10/16/98                            -

Rental and other income                                $  494,369    $  752,765      $  973,625           -           $71,670,509
 
Rental expenses:                                       
                Property and maintenance                  169,870       221,388         350,899           -            19,088,099
                Taxes and insurance                        31,692        49,381         122,082           -             5,440,101
                Property management                            -              -              -            -             1,567,707
                General and administrative                     -              -              -            -             1,347,816
                Amortization and other depreciation            -              -              -            -                38,460
                Depreciation of rental property                -              -              -        848,674 (A)      15,844,076
                Other                                          -              -              -            -             1,530,189
                                                       --------------------------------------------------------     ---------------
                                                          201,562       270,769         472,981       848,674          44,856,448
Income before interest income (expense)                   292,807       481,996         500,644      (848,674)         26,814,061
     and minority interest
Interest income                                                -              -              -       (151,875)(D)         171,814
Interest expense                                               -              -              -     (1,359,971)(B)     (10,587,417)
                                                       --------------------------------------------------------     ---------------
Net Income before minority interest                       292,807       481,996         500,644    (2,360,520)         16,398,458
Minority interest                                                                                     (80,749)(E)         (80,749)
                                                       --------------------------------------------------------     ---------------
Net income                                               $292,807      $481,996        $500,644   ($2,441,269)        $16,317,709
                                                                                                                    ===============
Net income per common share - Basic                                                                                         $0.43
                                                                                                                    ===============
Wgt. avg. number of shares outstanding                                                                413,223 (C)      37,561,535
                                                                                                ===============     ===============
(A) Represents the depreciation  expense of the properties acquired based on the
    purchase  price,excluding  amounts allocated to land, for the period of time
    not  owned  by the  Company.  The  weighted  average  life  of the  property
    depreciated was 27.5 years.

(B) Represents  the interest  expense for the 6 properties  purchased  using the
    line of credit for the period in which the properties were not owned for the
    nine month period ended  September 30, 1998.  Interest was computed based on
    interest  rates under the Company's  line of credit in effect at the time of
    the respective acquisition.

(C) Repesents  additional  common shares used to purchase Timbers based upon the
    purchase  price of  $8,100,000;  common  shares  issued in May 1997 with net
    proceeds per share of $10.89 to the  Company.

(D) Represents  reduction of interest  income  associated with $4.050 million of
    cash used to purchase Cape Landing at an interest rate of 5%.

(E) Represents  minority interest of 185,874 operating  partnership units in the
    Company's operating partnership.

                                       13
PRO FORMA CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1998 (UNAUDITED)

The  Unaudited  Pro Forma  Consolidated  Balance  Sheet is  presented  as if the
Company had owned the property  included in the table below as of September  30,
1998. 

The Unaudited Pro Forma Consolidated  Balance Sheet is presented for comparative
purposes only and is not  necessarily  indicative  of what the actual  financial
position of the  Company  would have been at  September  30,  1998,  nor does it
purport  to  represent  the  future  financial  position  of the  Company.  This
Unaudited Pro Forma  Consolidated  Balance  Sheet should be read in  conjunction
with, and is qualified in its entirety by, the Company's  respective  historical
financial statements and notes thereto.
(A)
                                                                    Cape
                                           Historical              Landing
                                             Balance              Pro Forma               Total
                                              Sheet               Adjustments           Pro Forma
                                        --------------------------------------------------------------
Date of acquisition                                                 10/16/98

ASSETS
Investment in rental property
   Land                                  $  86,076,966            $  1,026,000        $  87,102,966
   Building and improvements               466,514,341              16,074,000          482,588,341
   Furniture and fixtures                   11,187,945                                   11,187,945
                                        ------------------------------------------------------------
                                           563,779,252              17,100,000          580,879,252
   Less accumulated depreciation           (42,482,032)                                 (42,482,032)
                                        ------------------------------------------------------------
                                           521,297,220              17,100,000          538,397,220

   Cash and cash equivalents                 4,069,280              (4,050,000)              19,280
   Prepaid expenses                            446,202                      -               446,202
   Other assets                              9,063,522                      -             9,063,522
                                        ------------------------------------------------------------
                                            13,579,004              (4,050,000)           9,529,004
                                        ------------------------------------------------------------
   Total Assets                          $ 534,876,224            $ 13,050,000        $ 547,926,224
                                        ============================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
   Notes payable                         $ 185,499,999            $ 11,050,000        $ 196,549,999
   Accounts payable                          2,110,858                       -            2,110,858
   Accrued expenses                          4,697,340                       -            4,697,340
   Rents received in advance                   204,525                       -              204,525
   Tenant security deposits                  1,728,587                       -            1,728,587
                                        ------------------------------------------------------------
   Total  Liabilities                      194,241,309              11,050,000          205,291,309

Minority Interest                                    -               2,000,000         $  2,000,000

Shareholders'equity
   Common stock                            385,602,116                       -          385,602,116
   Deferred compensation                       (46,479)                      -              (46,479)
   Distributions greater than net income   (44,920,722)                      -          (44,920,722)
                                        ------------------------------------------------------------
   Total Shareholders' Equity              340,634,915                       -          340,634,915
                                        ------------------------------------------------------------
   Total Liabilities and Shareholders'
      Equity                              $534,876,224            $ 13,050,000        $ 547,926,224
                                        ================================================================
(A) Represents purchase of Cape Landing for a purchase price of $17,100,000, and
    was  funded  using  cash of  $4,050,000,  the  Company's  line of credit for
    $11,050,000 and issuance of 185,874  operating  partnership  units valued at
    $10.76 per unit.

                                       14
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED 
DECEMBER 31, 1997 (UNAUDITED)

The Unaudited Pro Forma Consolidated  Statement of Operations for the year ended
December 31, 1997 is presented as if 11 of the 13 Property  acquisitions  during
1997 and the 6 Property  acquisitions  during  1998 had  occurred  on January 1,
1997.  The  Unaudited  Pro Forma  Statement  of  Operations  assumes the Company
qualifying  as a REIT,  distributing  at least 95% of its taxable  income,  and,
therefore, incurred no federal income tax liability for the period presented. In
the opinion of management,  all adjustments  necessary to reflect the effects of
these transactions have been made.

The  Unaudited Pro Forma  Consolidated  Statement of Operations is presented for
comparative  purposes only and is not necessarily  indicative of what the actual
results of the Company  would have been for the year ended  December 31, 1997 if
the acquisitions had occurred at the beginning of the period presented, nor does
it purport to be indicative of the results of operations in future periods.  The
Unaudited Pro Forma Statement of Operations  should be read in conjunction with,
and is  qualified  in its  entirety  by,  the  Company's  respective  historical
financial statements and notes thereto.
Historical                                               Pro Forma     
                                                        Statement of          1997          Pro Forma            Before 1998    
                                                         Operations       Acquisitions     Adjustments           Acquisitions   
                                                       ----------------  ---------------  ---------------      ----------------
Date of Acquisitions                                                                                                          

Revenues from rental properties                          $71,970,624        $8,176,747                           $80,147,371    
Rental expenses:                                                                                                                
                Property and maintenance                  19,494,692         2,524,622                            22,019,314    
                Taxes and insurance                        6,075,991           608,815                             6,684,806    
                Property management                        1,769,272                                               1,769,272    
                General and administrative                 1,351,667                                               1,351,667    
                Amortization and other depreciation           56,075                                                  56,075    
                Depreciation of rental property           15,163,593                        $ 1,514,811 (A)       16,678,404    
                Other                                      1,200,669                                               1,200,669    
                Management contract termination              402,907                                                 402,907    
                                                       -----------------  --------------   ------------------   -------------
                                                          45,514,866         3,133,437        1,514,811           50,163,114    
Income before interest income (expense)                   26,455,758         5,043,310       (1,514,811)          29,984,257    
     and minority interest
Interest income                                              331,114                                -                331,114    
Interest expense                                         (7,561,319)                         (2,411,653)(B)       (9,972,972)   
                                                       -----------------  --------------   ------------------   -------------
Net income before minority interest                       19,225,553         5,043,310       (3,926,464)          20,342,399    
Minority interest                                                                                                               
                                                       -----------------  --------------   ------------------  ---------------
Net income                                               $19,225,553        $5,043,310      ($3,926,464)         $20,342,399    
                                                       ==============                                          ================ 
Net income per common share - Basic                            $0.59                                                   $0.59    
                                                       ==============                                          ================
Wgt. avg. number of shares outstanding                    32,617,823                          2,041,544(C)        34,659,367    
                                                       ==============                      =================   =================
Pinnacle        Hampton                      
                                                         Stone Point       Ridge          Point       The Timbers     
                                                          Pro Forma      Pro Forma      Pro Forma      Pro Forma      
                                                         Adjustments    Adjustments    Adjustments    Adjustments     
                                                         -------------------------------------------------------------
Date of Acquisitions                                        1/15/98        3/31/98        3/31/98         6/4/98      

Revenues from rental properties                          $ 1,346,251       $859,763    $1,980,245     $ 1,186,485     
Rental expenses:                                                      
                Property and maintenance                     379,698        292,713       629,914         407,687     
                Taxes and insurance                           99,704         61,642       219,495          76,060     
                Property management                                                                                   
                General and administrative                                                                            
                Amortization and other depreciation                                                                   
                Depreciation of rental property                                                                       
                Other                                                                                                 
                Management contract termination                                                                       
                                                         -------------------------------------------------------------
                                                             479,402        354,355       849,409         483,747     
Income before interest income (expense)                      866,849        505,408     1,130,836         702,738     
     and minority interest
Interest income                                                                                                       
Interest expense                                                                                                      
                                                         -------------------------------------------------------------
Net income before minority interest                          866,849        505,408     1,130,836         702,738     
Minority interest                                                                                                     
                                                         -------------------------------------------------------------
Net income                                                  $866,849       $505,408    $1,130,836        $702,738     
                                                                                                                      
Net income per common share - Basic                                                                                   
                                                         
Wgt. avg. number of shares outstanding
Cape
                                                          Gables              Landing
                                                        Pro Forma            Pro Forma             Pro Forma              Total
                                                       Adjustments          Adjustments           Adjustments           Pro Forma
                                                       -----------------------------------------------------      ---------------
Date of Acquisitions                                       7/2/98              10/16/98                                     -

Revenues from rental properties                        $ 1,505,529          $ 1,298,167                                $88,323,811
Rental expenses:                                       
                Property and maintenance                   442,775              467,865                                 24,639,966
                Taxes and insurance                         98,762              162,776                                  7,403,245
                Property management                                                                                      1,769,272
                General and administrative                                                                               1,351,667
                Amortization and other depreciation                                                                         56,075
                Depreciation of rental property                                                 $  1,996,381 (A)        18,674,785
                Other                                                                                                    1,200,669
                Management contract termination                                                                            402,907
                                                       -------------------------------------------------------      ---------------
                                                           541,537              630,641            1,996,381            55,498,586
Income before interest income (expense)                    963,992              667,526           (1,996,381)           32,825,225
     and minority interest
Interest income                                                                                     (202,500)(D)           128,614
Interest expense                                                                                  (3,723,398)(B)       (13,696,370)
                                                       -------------------------------------------------------      ---------------
Net income before minority interest                        963,992              667,526           (5,922,279)           19,257,469
Minority interest                                                                                   (100,578)(E)          (100,578)
                                                       -------------------------------------------------------      ---------------
Net income                                                $963,992             $667,526          ($6,022,857)          $19,156,891
                                                                                                                    ===============
Net income per common share - Basic                                                                                          $0.54
                                                                                                                    ===============
Wgt. avg. number of shares outstanding                                                              743,802 (C)        35,403,168
                                                                                                ===============     ===============
(A) Represents the depreciation  expense of the properties acquired based on the
    purchase price,  excluding amounts allocated to land, for the period of time
    not  owned  by the  Company.  The  weighted  average  life  of the  property
    depreciated was 27.5 years.

(B) Represents the interest expense for the portion of the properties  purchased
    with the Company's  unsecured line of credit or other  unsecured  financing.
    Total purchase price of $63,851,388 for 1997 acquisitions (8 properties) and
    the portion of the purchase price of $50,206,150  for 1998  acquisitions  (6
    properties)  for the period in which  properties were not owned for the year
    ended December 31, 1997. Interest was computed based on interest rates under
    the  Company's  line of  credit  in  effect  at the  time of the  respective
    acquisition.

(C) Represents  additional  common shares used to purchase Ashley Run,  Carlyle,
    Charleston  Place and a portion of Dunwoody  based upon  purchase  prices of
    $18,000,000 $11,580,000, $9,475,000 and $10,560,312 (total purchase price of
    Dunwoody was $15,200,000), respectively; common shares issued in April, 1997
    with net proceeds of $9.5875 per share to the  Company;  purchase of Timbers
    using the proceeds of a public offering  issuing shares with net proceeds of
    $10.89 per share.

(D) Represents  reduction of interest  income  associated with $4.050 million of
    cash used to purchase Cape Landing at an interest rate of 5%.

(E) Represents  minority interest of 185,874 operating  partnership units in the
    Company's operating partnership.

                                       15
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1997 (UNAUDITED)

The following schedule provides detail of 1997 acquisitions by property included
in the Pro  Forma  Consolidated  Statement  of  Operations  for the  year  ended
December 31, 1997.
Paces        Paces        Ashley        Carlyle      Charleston
                                                 Westchase       Arbor        Forest         Run          Club           Place     
                                                 Pro Forma     Pro Forma    Pro Forma     Pro Forma     Pro Forma      Pro Forma   
                                                Adjustments   Adjustments  Adjustments   Adjustments   Adjustments    Adjustments  
                                                -----------   -----------  -----------   -----------   -----------    -----------
Date of Acquisition                               1/15/97        3/1/97       3/1/97       4/30/97       4/30/97        5/13/97    

Property operations                                                                                                  
    Revenues from rental properties               $166,656      $128,993      $154,702    $916,820       $637,842      $536,210    
    Rental expenses:                                                                                                               
                Property management                 54,436        35,902        37,110     246,537        205,723       169,807    
                Taxes and insurance                 16,024         8,094         9,108      69,240         46,970        34,987    
                General and administrative            -             -            -            -             -              -       
                Amortization                          -             -            -            -             -              -       
                Depreciation of rental property       -             -            -            -             -              -       
                Other                                 -             -            -            -             -              -       
                                                -----------------------------------------------------------------------------------
                                                    70,460        43,996        46,218     315,777        252,693       204,794    
Income before interest income (expense)             96,196        84,997       108,484     601,043        385,149       331,416    
Interest income                                       -             -            -           -              -              -       
Interest expense                                      -             -            -           -              -              -       
                                                -----------------------------------------------------------------------------------
Net Income                                         $96,196       $84,997      $108,484    $601,043       $385,149      $331,416    
                                                ===================================================================================
Dunwoody       Clarion                    Remington        Stone
                                                  Springs        Crossing     St. Regis       Place         Brooke          1997
                                                 Pro Forma      Pro Forma     Pro Forma     Pro Forma      Pro Forma    Acquisition
                                                Adjustments    Adjustments   Adjustments   Adjustments    Adjustments   Adjustments
                                                -----------    -----------   -----------   -----------    -----------   -----------
Date of Acquisition                               7/25/97        9/30/97       10/31/97      10/31/97      10/31/97

Property operations                            
    Revenues from rental properties             $1,437,230     $1,141,473    $1,100,453      $918,833     $1,037,535    $8,176,747
    Rental expenses:                                                                                           -
                Property management                451,935        442,582       294,153       262,938        323,499     2,524,622
                Taxes and insurance                144,766         59,664        64,195        60,505         95,262       608,815
                General and administrative            -              -             -             -             -             -
                Amortization                          -              -             -             -             -             -
                Depreciation of rental property       -              -             -             -             -             -
                Other                                 -              -             -             -             -             -
                                               ------------------------------------------------------------------------------------
                                                   596,701        502,246       358,348       323,443        418,761     3,133,437
Income before interest income (expense)            840,529        639,227       742,105       595,390        618,774     5,043,310
Interest income                                        -             -             -             -              -             -
Interest expense                                       -             -             -             -              -             -
                                               ------------------------------------------------------------------------------------
Net Income                                        $840,529       $639,227      $742,105      $595,390       $618,774    $5,043,310
                                               ====================================================================================
16
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 hereunto duly authorized.

                                    Cornerstone Realty Income Trust, Inc.

Date: December 22, 1998              By:   /s/ Stanley J. Olander, Jr.
                                           ----------------------------
                                           Stanley J. Olander, Jr.,
                                           Chief Financial Officer of
                                           Cornerstone Realty Income Trust, Inc.

                                       17
EXHIBIT INDEX

                      Cornerstone Realty Income Trust, Inc.
                         Form 8-K dated October 16, 1998

Exhibit Number             Exhibit                                   Page Number

         10.1         Purchase Contract for
                      Cape Landing Apartments

         10.2         Agreement of Limited
                      Partnership of Cornerstone
                      Partners, L.P.

         10.3         Credit Agreement among
                      Cornerstone Realty Income
                      Trust, Inc., CRIT-NC, LLC
                      and First Union National Bank

         10.4         Revolving Credit Note made
                      by Cornerstone Realty Income
                      Trust, Inc. and CRIT-NC, LLC

         10.5         Termination of Advisory
                      Agreement Subcontract

         10.6         Termination of Property
                      Management Agreement Subcontract

         10.7         Bill of Sale and Note Pertaining
                      to Property Acquisition/
                      Disposition Agreement

         10.8         Assignment and Assumption Agreement
                      (Pertaining to Advisory Agreement for
                      Apple Residential Income Trust, Inc.)

         10.9         Amended and Restated Property
                      Acquisition/Disposition Agreement

         23.1         Consent of Independent Auditors

                                       18