UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2007

or

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

For the transition period from to

Commission File Number 000-51868

CORNERSTONE REALTY FUND, LLC
(Exact name of registrant as specified in its charter)

CALIFORNIA		33-0827161
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1920 MAIN STREET, SUITE 400, IRVINE, CA		92614
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)		(ZIP CODE)

949-852-1007

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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

x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

o Yes x No

CORNERSTONE REALTY FUND, LLC

(A California limited Liability Company)

CONDENSED BALANCE SHEETS

	September 30, 2007		December 31, 2006 (a)
	(unaudited)
ASSETS

Cash and cash equivalents	$	4,762,000	$	2,249,000
Investments in real estate
Land	11,779,000		11,779,000
Buildings and improvements, net	21,873,000		22,258,000
Intangible lease assets, net	435,000		466,000
Intangible in-place lease asset, net	229,000		337,000
Investment in real estate assets held for sale, net	—		2,619,000
	34,316,000		37,459,000
Other assets
Assets associated with property held for sale	—		112,000
Tenant and other receivables, net	245,000		233,000
Prepaid expenses and other assets	30,000		15,000
Leasing commissions, less accumulated amortization of $237,000 in September 30, 2007 and $131,000 in December 31, 2006	199,000		201,000

Total assets	$	39,552,000	$	40,269,000

LIABILITIES AND MEMBERS’ CAPITAL

Liabilities
Accounts payable, accrued liabilities and other liabilities	$	314,000	$	362,000
Real estate taxes payable	336,000		194,000
Tenant security deposits	315,000		302,000
Liabilities associated with property held for sale	—		166,000
Intangible lease liability, net	71,000		110,000
Total liabilities	1,036,000		1,134,000

Members’ capital (100,000 units authorized and outstanding at September 30, 2007 and December 31, 2006)	38,516,000		39,135,000

Total liabilities and members’ capital	$	39,552,000	$	40,269,000

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

(a) Derived from the audited financial statements as of December 31 2006.

CORNERSTONE REALTY FUND, LLC

(A California limited Liability Company)

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007		2006

Revenues
Rental revenues	$	841,000	$	748,000	$	2,409,000	$	1,862,000
Tenant reimbursements and other income	181,000		204,000		581,000		478,000
	1,022,000		952,000		2,990,000		2,340,000
Expenses
Property operating and maintenance	238,000		210,000		644,000		612,000
Property taxes	152,000		184,000		443,000		430,000
General and administrative	97,000		94,000		331,000		378,000
Depreciation and amortization	259,000		255,000		788,000		663,000
	746,000		743,000		2,206,000		2,083,000

Interest, dividends and other income	45,000		18,000		102,000		286,000

Income from continuing operations	321,000		227,000		886,000		543,000

Discontinued operations
Income from discontinued operations	—		31,000		45,000		28,000
Gain on sale of real estate	—		—		320,000		—

Net income	$	321,000	$	258,000	$	1,251,000	$	571,000

Net income allocable to managing member	$	32,000	$	26,000	$	125,000	$	57,000

Net income allocable to unit holders
Continuing operations	$	289,000	$	204,000	$	798,000	$	489,000
Discontinued operations	—		28,000		328,000		25,000
	$	289,000	$	232,000	$	1,126,000	$	514,000
Per unit amounts
Basic and diluted income from continuing operations allocable to unit holders	$	2.89	$	2.04	$	7.98	$	4.89
Basic and diluted income from discontinued operations allocable to unit holders	—		0.28		3.28		0.25
Basic and diluted income allocable to unit holders	$	2.89	$	2.32	$	11.26	$	5.14

Basic and diluted weighted average units outstanding	100,000		100,000		100,000		100,000

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

CORNERSTONE REALTY FUND, LLC

(A California limited Liability Company)

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine months Ended September 30,
	2007			2006
OPERATING ACTIVITIES
Net income	$	1,251,000		$	571,000
Adjustments to reconcile net income to net cash provided by operating activities
Gain on sale of real estate	(320,000		)	—
Depreciation and amortization	788,000			734,000
Amortization of intangible lease liabilities	(39,000		)	(27,000		)
Changes in operating assets and liabilities
Other assets	(19,000		)	(130,000		)
Accounts payable, accrued liabilities and other liabilities	(59,000		)	221,000
Net cash provided by operating activities	1,602,000			1,369,000

INVESTING ACTIVITIES
Real estate additions	(158,000		)	(10,341,000		)
Net proceeds received from sale of real estate	2,939,000			—
Net cash provided by (used in) investing activities	2,781,000			(10,341,000		)

FINANCING ACTIVITIES
Cash distributions to unit holders	(1,870,000		)	(1,870,000		)
Net cash used in financing activities	(1,870,000		)	(1,870,000		)

Net increase (decrease) in cash	2,513,000			(10,842,000		)

Cash and cash equivalents at beginning of period	2,249,000			13,489,000

Cash and cash equivalents at end of period	$	4,762,000		$	2,647,000

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

CORNERSTONE REALTY FUND, LLC

(A California Limited Liability Company)

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Business

Cornerstone Realty Fund, LLC is a California limited liability company that invests in multi-tenant industrial business parks catering to small business tenants. We purchase existing, leased properties located in major metropolitan areas in the United States on an all cash basis without debt financing. We own six properties as of the date of this report. As used in this report, “we,” “us” and “our” refer to Cornerstone Realty Fund, LLC except where the context otherwise requires.

Our managing member is Cornerstone Industrial Properties, LLC (CIP), a California limited liability company. Cornerstone Ventures, Inc manages CIP. Cornerstone Ventures, Inc. is an experienced real estate operating company specializing in the acquisition, operation and repositioning of multi-tenant industrial business parks catering to small business tenants.

On August 7, 2001, we commenced a public offering of units of our membership interests pursuant to a Registration Statement filed on Form S-11 under the Securities Act of 1933. On August 18, 2005, we completed our public offering of these units. As of that date, we had issued 100,000 units to unit holders for gross offering proceeds of $50,000,000, before discounts of $39,780.

Our interim unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission. As permitted by the Securities and Exchange Commission filing requirements for Form 10-Q, the condensed financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The condensed financial statements included herein should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2006.

The interim unaudited condensed financial statements have been prepared in accordance with our customary accounting practices. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a presentation in accordance with accounting principles generally accepted in the United States have been included. Operating results for the nine months ended September 30, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007.

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

The operating agreement, as amended and restated, provides, among other things, for the following:

• CIP generally has complete and exclusive discretion in the management and control of our operations; however, unit holders holding the majority of all outstanding and issued units have certain specified voting rights which include the removal and replacement of the Managing Member.

• Net Cash Flow from Operations, as defined, will be distributed 90% to the unit holders and 10% to the Managing Member until the unit holders have received either an 8% or 12% cumulative, non-compounded annual return on their Invested Capital Contributions, as defined. The 12% return applies to specified early investors for the twelve-month period subsequent to the date of their Invested Capital Contributions and is in lieu of the 8% return during that period. Distributions may be made only if the Managing Member determines in its reasonable judgement that we have sufficient cash exceeding those needed to fulfill our buiness purpose. To date, no distributions have been made to the Managing Member, based on the determination of our cash requirements. However, based on the current statabilzed status of our portfolio, we expect to begin making distributions to the Managing Member in the fourth quarter of 2007.

• Net Sales Proceeds, as defined, will be distributed first, 100% to the unit holders in an amount equal to their Invested Capital Contributions; then, 90% to the unit holders and 10% to the Managing Member until the unit holders have received an amount equal to the unpaid balance of their aggregate cumulative, non-compounded annual return on their Invested Capital Contributions; and thereafter, 50% to the unit holders and 50% to the Managing Member.

• Net Income, as defined, is allocated first, 10% to the Managing Member and 90% to the unit holders until Net Income allocated equals cumulative Net Losses, as defined, previously allocated in such proportions; second, in proportion to and to the extent of Net Cash Flow from Operations and Net Sales Proceeds previously distributed to the members, exclusive of distributions representing a return of Invested Capital Contributions; and then 50% to the Managing Member and 50% to the unit holders.

• Net Loss is allocated first, 50% to the Managing Member and 50% to the unit holders, until Net Loss allocated equals cumulative Net Income previously allocated in such proportions; then remaining Net Loss is allocated 10% to the Managing Member and 90% to the unit holders.

• All allocations and distributions to the unit holders are to be pro rata in proportion to their ownership shares.

Effective February 22, 2007, our Operating Agreement was amended to permit repurchase of units on such terms and conditions as the managing member may determine.

2. Summary of Significant Accounting Policies

Use of Estimates

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

Cash and Cash Equivalents

Cash and cash equivalents consist primarily of interest-bearing investments with original maturities of 90 days or less at the date of purchase. We place our cash with major financial institutions. At times, cash balances may be in excess of amounts insured by Federal agencies.

Investments in Real Estate

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

We evaluate the carrying value for investments in real estate in accordance with Financial Accounting Standards Board (“FASB”) Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“FAS 144”). FAS 144 requires that when events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable, companies should evaluate the need for an impairment write-down. When an impairment write-down is required, the related assets are adjusted to their estimated fair value. No assets were deemed to be impaired at September 30, 2007.

The Fund records acquisitions in accordance with FASB Statement of Financial Accounting Standard (“SFAS”) No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible Assets.

The fair value of the tangible assets of the acquired properties considers the value of the properties as if vacant as of the acquisition date. Management must make significant assumptions in determining the value of assets and liabilities acquired. Amounts allocated to land are derived from comparable sales of land within the same region. Amounts allocated to buildings and improvements, tenant improvements and unamortized leasing commissions are based on current market replacement costs and other market rate information.

Acquired above and below market leases are valued based on the present value of the difference between prevailing market rates and the in-place rates over the remaining lease term. The value of acquired above and below market leases is amortized over the remaining non-cancelable terms of the respective leases as an adjustment to rental revenues on our statement of operations.

The amount allocated to acquired in-place leases is determined based on management’s assessment of lost revenues and costs incurred for the period required to lease the “assumed vacant” property to the occupancy level when purchased. The amount allocated to acquired in-place leases is included in intangible assets — in-place leases in the balance sheet and amortized to expense over the remaining non-cancelable term of the respective leases.

Anticipated amortization of in-place and below market lease intangibles is as follows:

	Lease Intangibles
October 1, 2007 to December 31, 2007	$	24,000
2008	81,000
2009	49,000
2010	4,000
2011	—

As of September 30, 2007, accumulated depreciation and amortization related to investments in real estate and related lease intangibles were as follows:

	Land		Buildings and Improvements			Intangible Lease Asset			In-Place Lease Asset			Intangible Lease Liability
Investments in Real Estate	$	11,779,000	$	23,537,000		$	550,000		$	894,000		$	(154,000	)
Less: accumulated depreciation and amortization	—		(1,664,000		)	(115,000		)	(665,000		)	83,000
Net investments in Real Estate	$	11,779,000	$	21,873,000		$	435,000		$	229,000		$	(71,000	)

Depreciation and amortization related to investment in real estate and related lease intangibles for the three and nine months ended September 30, 2007 were $218,000 and $643,000 respectively. Depreciation and amortization related to investment in real estate and related lease intangibles for the three and nine months ended September 30, 2006 were $233,000 and $596,000 respectively.

Discontinued Operation

Sky Harbor Business Park - Northbrook, IL

On April 16, 2007, we sold our 41,422 square foot property located in Northbrook, IL commonly known as “Sky Harbor Business Park”, for $3.2 million to an unaffiliated third party. Net cash proceeds were $2.9 million after payment of related closing costs and other transaction expenses. A property disposition fee of $32,000 or 1% of the sales price was paid to CIP, in accordance with the terms of operating agreement.

We classified the assets and liabilities for this property at December 31, 2006 in our consolidated balance sheet as held for sale. In addition, we have classified its results of operations, for all periods presented, and gains from its sale, as discontinued operations on our consolidated statements of income.

Leasing Commissions

Leasing commissions are stated at cost and amortized on a straight-line basis over the related lease term. Included in depreciation and amortization on the statement of operations is amortization of leasing commissions for the three and nine months ended September 30, 2007 was $30,000 and $106,000, respectively. Amortization of leasing commissions for the three and nine months ended September 30, 2006 was $18,000 and $59,000, respectively.

Revenue Recognition

Rental revenues are recorded on an accrual basis as they are earned over the lives of the respective tenant leases on a straight-line basis. Included in this calculation are contractual rent increases and amounts paid to tenants as tenant improvement allowances. Rental receivables are periodically evaluated for collectibility.

Fair Value of Financial Instruments

We believe that the recorded values of all financial instruments approximate their current values.

Income Tax Matters

It is our intent we be treated as a partnership for income tax purposes. As a limited liability company, we are subject to certain minimal taxes and fees, including state income taxes on limited liability companies; however, income taxes on the income or losses we realize are generally the obligation of the members.

Concentration of Credit Risk

We maintain some of our cash in money market accounts. No losses have been experienced related to such amounts.

Impact of New Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, (“FIN 48”), which clarifies the relevant criteria and approach for the recognition, derecognition, and measurement of uncertain tax positions. FIN 48 is effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48 did not have a material impact on our consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. In February 2007, the FASB issued SFAS No. 159, “The Fair Value Options for Financial Assets and Financial Liabilities”. SFAS 157 and 159 are effective for financial statements issued for fiscal periods beginning after November 15, 2007 (our fiscal year beginning January 1, 2008), and interim periods within those fiscal years. Management is currently evaluating the impact of adopting SFAS No. 157 on the consolidated financial statements.

Reclassification

Certain previously reported amounts have been reclassified to conform to the current period presentation.

3. Real Estate Assets and Liabilities from discontinued operations

SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less costs to sell. At December 31, 2006, one of our properties was classified as held-for-sale. In addition to classifying the property as held-for-sale, the financial results are reported as discontinued operations in our Statements of Operations. The table below provides information on our held-for-sale assets and liabilities.

As of September 30, 2007 and December 31, 2006, the assets related to the properties held for sale and related liabilities were as follows:

	September 30, 2007		December 31, 2006
Real estate assets from discontinued operations:
Land	$	—	$		419,000
Building and improvements, net of accumulated depreciation	—		2,200,000
	$	—	$		2,619,000

Other assets held for sale	$	—	$		112,000
Liabilities associated with discontinued operation	$	—	$	166,000

4. Discontinued Operations

In accordance with SFAS No. 144, we report results of operations from real estate assets that meet the definition of a component of an entity that have been sold, or meet the criteria to be classified as held for sale, as discontinued operations. As of September 30, 2006, we determined that the potential sale of Sky Harbor Business Park to a third party was probable and classified it as held for sale in accordance with SFAS No. 144. Depreciation and amortization of Sky Harbor Business Park was not recorded for the period of October 1, 2006 to April 16, 2007, the disposition date, in accordance with SFAS No. 144. We included all results of these discontinued operations in a separate component of income on the statements of operations under the heading Discontinued Operations. This treatment resulted in certain reclassifications of 2006 financial statement amounts.

The following is a summary of the components of income from discontinued operations for the nine month periods ended September 30, 2007 and 2006.

	September 30, 2007		September 30, 2006
Total revenues	$	120,000	$	242,000
Property operating and maintenance, general administrative and property taxes	75,000		149,000
Depreciation and amortization	—		65,000

Income from discontinued operations	$	45,000	$	28,000

Gain on sale of real estate	$	320,000	—

Income from discontinued operations allocable to managing member	$	5,000	$	3,000
Income from discontinued operations allocable to unit holders	40,000		25,000
	$	45,000	$	28,000

5. Commitments and Contingencies

Our managing member has informed us that the Financial Industry Regulatory Authority (“FINRA”, formerly, NASD) is conducting a non-public investigation of Pacific Cornerstone Capital, Inc. (“PCC”), an affiliate of our managing member, that is, we understand, focused on the private placements conducted by PCC during the period from January 1, 2004 through October 31, 2007. The investigation is in the preliminary stage. FINRA’s correspondence requesting document production states, “This inquiry should not be construed as an indication that the Enforcement Department or its staff has determined that any violations of federal securities laws or NASD, NYSE or MSRB rules have occurred.” We have been advised that PCC is responding to FINRA’s request for information and will continue to cooperate in the investigation. We cannot, at this time, assess the duration or likely outcome or consequences of this investigation. Although the FINRA investigation will be a distraction, specific resources of PCC and its affiliates are being assigned to the response effort that will allow our organization to move forward with our business plans.

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

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

Results of Operations

Three months ended September 30, 2007 and 2006

As of September 30, 2007, we owned six multi-tenant industrial properties in three major metropolitan markets. Five of these properties were purchased before 2006, and one property was purchased in June 2006. In the fourth quarter of 2006, we determined that the sale of Sky Harbor Business Park was probable, and we reported operating results for this property as discontinued operations in accordance with SFAS No. 144. The sale was completed in April 2007. The results of continuing operations reflect a full three months of operations for six properties in 2007 and 2006.

Total revenues for the third quarter of 2007 increased to $1,022,000 from $952,000 for the comparable period of 2006. The increase was primarily due to overall higher occupancy rates and rent escalations.

Property operating and maintenance expenses increased to $238,000 in the third quarter of 2007 from $210,000 in the comparable quarter of 2006 primarily due to higher repair and maintenance costs. The third quarter 2007 property taxes decreased to $152,000 from $184,000 in the third quarter of 2006 as the result of a successful property tax appeal on one property, partially offset by higher assessments for other properties.

General and administrative costs increased to $97,000 in the third quarter of 2007 from $94,000 in the comparable quarter of 2006 due to higher Sarbanes-Oxley Act 2002 compliance expenses.

Interest and other income increased to $45,000 in the third quarter of 2007 from $18,000 for the same period of 2006 due to higher invested cash resulting from the sale of Sky Harbor Business Park in the second quarter of 2007.

Nine months ended September 30, 2007 and 2006

Total revenues for the first nine months of 2007 increased to $2,990,000 from $2,340,000 for the comparable period of 2006. The increase was due to higher overall occupancy rates and rent escalations and a full nine months of revenues in 2007 from the property acquired in June 2006 compared to three months of revenue from this property in 2006. In addition to higher overall occupancy rates and rent escalations.

Property operating and maintenance expenses increased to $644,000 in the first nine months of 2007 from $612,000 in the first nine months of 2006 due to higher maintenance and repair costs in the 2007 period. Property taxes increased to $443,000 in the first nine months of 2007 from $430,000 in the first nine months of 2006. The increase was due to the property purchased in 2006 and increases to tax rates on other properties in 2007.

General and administrative costs decreased to $331,000 in the first nine months of 2007 from $378,000 in the comparable period of 2006. The decrease was due primarily to non-recurring consulting fees incurred in 2006. Depreciation and amortization increased to $788,000 in the first nine months of 2007 from $663,000 in the comparable period of 2006 as a result of the addition of one property during 2006.

Liquidity and Capital Resources

Our planned $50,000,000 equity offering is complete and we do not expect to raise any additional funds. On April 16, 2007, we sold Sky Harbor Business Park for a gross sale price of $3.2 million. We intend to use the existing cash balance for capital improvements to the properties and for operating expenses and reserves. Cash in excess of these needs will be available for our recently approved unit repurchase program and for distribution to unit holders.

We expect to meet our short-term liquidity requirements from net cash generated by operations, which we believe will be adequate to meet operating costs, and allow for cash distributions to the unit holders. However, current net cash generated by operations is not expected to be sufficient to fund distributions to unit holders at an annual rate of 5%.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We invest our cash and cash equivalents in government backed securities and money market accounts, which, by their nature, are subject to interest rate fluctuations.

Item 4. Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management, as appropriate, to allow timely decisions regarding required disclosure. The Chief Executive Officer and the Chief Financial Officer of Cornerstone Ventures, Inc., the manager of our Managing Member, have reviewed the effectiveness of our disclosure controls and procedures and have concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report.

We are in the process of developing and implementing a formal set of internal controls and procedures for financial reporting as required by the Sarbanes-Oxley Act of 2002, the efficacy of the steps we have taken to date and steps we are still in the process of completing is subject to continued management review supported by confirmation and testing by management and by our auditors. We anticipate that additional changes may be made to our internal controls and procedures. Other than the foregoing initiatives, no change in our internal control over financial reporting occurred during the period covered by this report that has materially affected, or is reasonably likely to affect, our internal control over financial reporting.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

PART II - OTHER INFORMATION

Item 5. Other Information

Item 6. Exhibits

		31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
		31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
		32		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized this 12^th day of November, 2007.

CORNERSTONE REALTY FUND, LLC

By:	CORNERSTONE INDUSTRIAL PROPERTIES, LLC
	its Managing Member

	By:	CORNERSTONE VENTURES, INC. its Manager

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

		By:	/s/ SHARON C. KAISER
			Sharon C. Kaiser,
			Chief Financial Officer
			(Principal Financial Officer and
			Principal Accounting Officer)

PART I.		FINANCIAL INFORMATION

Item 1.		Financial Statements:
		Condensed Balance Sheets as of September 30, 2007 (unaudited) and December 31, 2006

		Condensed Statements of Operations for the Three and Nine months ended September 30, 2007 (unaudited) and September 30, 2006 (unaudited)

		Condensed Statements of Members’ Capital for the Nine months ended September 30, 2007 (unaudited)

		Condensed Statements of Cash Flows for the Nine months ended September 30, 2007 (unaudited)and September 30, 2006 (unaudited)

		Notes to Condensed Financial Statements (unaudited)

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 3.		Quantitative and Qualitative Disclosure About Market Risk
Item 4.		Controls and Procedures

PART II.		OTHER INFORMATION

Item 6.		Exhibits

SIGNATURES

Balance, December 31, 2006	$	39,135,000

Cash distributions to unit holders	(1,870,000)
Net income	1,251,000

Balance, September 30, 2007	$	38,516,000