2
CORNERSTONE REALTY FUND, LLC
(a California limited liability company)
CONDENSED BALANCE SHEETS
| | March 31, 2007 | | December 31, 2006 (a) | |
| | (unaudited) | | | |
ASSETS | | | | | |
| | | | | |
Cash and cash equivalents | | $ | 1,950,000 | | $ | 2,249,000 | |
Investments in real estate | | | | | |
Land | | 11,779,000 | | 11,779,000 | |
Buildings and improvements, net | | 22,148,000 | | 22,258,000 | |
Intangible lease assets, net | | 456,000 | | 466,000 | |
Intangible in place lease asset, net | | 299,000 | | 337,000 | |
Investment in real estate assets held for sale, net | | 2,619,000 | | 2,619,000 | |
| | 37,301,000 | | 37,459,000 | |
Other assets | | | | | |
Non-real estate assets associated with property held for sale | | 95,000 | | 112,000 | |
Utility deposits | | 8,000 | | 8,000 | |
Tenant and other receivables | | 237,000 | | 233,000 | |
Prepaid expenses | | 63,000 | | 7,000 | |
Leasing commissions, less accumulated amortization of $162,000 in 2007 and $131,000 in 2006 | | 224,000 | | 201,000 | |
| | | | | |
Total assets | | $ | 39,878,000 | | $ | 40,269,000 | |
| | | | | |
LIABILITIES AND MEMBERS’ CAPITAL | | | | | |
| | | | | |
Liabilities | | | | | |
Accounts payable, accrued liabilities and other liabilities | | $ | 277,000 | | $ | 362,000 | |
Real estate taxes payable | | 217,000 | | 194,000 | |
Tenant security deposits | | 306,000 | | 302,000 | |
Liabilities associated with property held for sale | | 155,000 | | 166,000 | |
Intangible lease liability, net | | 94,000 | | 110,000 | |
Total liabilities | | 1,049,000 | | 1,134,000 | |
| | | | | |
Members’ capital (100,000 units authorized and outstanding at March 31, 2007 and December 31, 2006) | | 38,829,000 | | 39,135,000 | |
| | | | | |
Total liabilities and members’ capital | | $ | 39,878,000 | | $ | 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.
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CORNERSTONE REALTY FUND, LLC
(a California limited liability company)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| | Three Months Ended | |
| | March 31, | |
| | 2007 | | 2006 | |
| | | | | |
Revenues | | | | | |
Rental revenues | | $ | 802,000 | | $ | 537,000 | |
Tenant reimbursements and other income | | 160,000 | | 132,000 | |
| | 962,000 | | 669,000 | |
Expenses | | | | | |
Property operating and maintenance | | 173,000 | | 168,000 | |
Property taxes | | 136,000 | | 134,000 | |
General and administrative | | 116,000 | | 150,000 | |
Depreciation and amortization | | 258,000 | | 211,000 | |
| | 683,000 | | 663,000 | |
| | | | | |
Interest, dividends and other income | | 16,000 | | 131,000 | |
| | | | | |
Income from continuing operations | | 295,000 | | 137,000 | |
| | | | | |
Income (loss) from discontinued operation | | 29,000 | | (20,000 | ) |
| | | | | |
Net income | | $ | 324,000 | | $ | 117,000 | |
| | | | | |
Net income allocable to managing member | | $ | 32,000 | | $ | 12,000 | |
| | | | | |
Net income allocable to unitholders | | | | | |
From continuing operations | | 265,000 | | 123,000 | |
From discontinued operations | | 27,000 | | (18,000 | ) |
| | 292,000 | | 105,000 | |
Per unit amounts: | | | | | |
Basic and diluted income from continuing operations allocable to unit holders | | $ | 2.65 | | $ | 1.23 | |
Basic and diluted income from discontinued operations allocable to unit holders | | $ | 0.27 | | $ | (0.18 | ) |
Basic and dilulted income allocable to unit holders | | $ | 2.92 | | $ | 1.05 | |
| | | | | |
Basic and diluted weighted average units outstanding | | 100,000 | | 100,000 | |
The accompanying notes are an integral part of these interim financial statements.
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CORNERSTONE REALTY FUND, LLC
(a California limited liability company)
CONDENSED STATEMENT OF MEMBERS’ CAPITAL
(Unaudited)
Balance, December 31, 2006 | | $ | 39,135,000 | |
| | | |
Cash distributions to unit holders | | (630,000 | ) |
Net income | | 324,000 | |
| | | |
Balance, March 31, 2007 | | $ | 38,829,000 | |
The accompanying notes are an integral part of these interim financial statements.
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CORNERSTONE REALTY FUND, LLC
(a California limited liability company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| | Three Months Ended | |
| | March 31, | |
| | 2007 | | 2006 | |
OPERATING ACTIVITIES | | | | | |
Net income | | $ | 324,000 | | $ | 117,000 | |
Adjustments to reconcile net income to net cash provided by operating activities | | | | | |
Depreciation and amortization | | 258,000 | | 228,000 | |
Changes in operating assets and liabilities | | | | | |
Other assets | | (98,000 | ) | (26,000 | ) |
Accounts payable and accrued liabilities | | (85,000 | ) | (24,000 | ) |
| | | | | |
Net cash provided by operating activities | | 399,000 | | 295,000 | |
| | | | | |
INVESTING ACTIVITIES | | | | | |
Real estate improvements | | (68,000 | ) | (61,000 | ) |
| | | | | |
Net cash used in investing activities | | (68,000 | ) | (61,000 | ) |
| | | | | |
FINANCING ACTIVITIES | | | | | |
Distributions to members | | (630,000 | ) | (630,000 | ) |
| | | | | |
Net cash used in financing activities | | (630,000 | ) | (630,000 | ) |
| | | | | |
Net decrease in cash | | (299,000 | ) | (396,000 | ) |
| | | | | |
Cash and cash equivalents at beginning of period | | 2,249,000 | | 13,489,000 | |
| | | | | |
Cash and cash equivalents at end of period | | $ | 1,950,000 | | $ | 13,093,000 | |
The accompanying notes are an integral part of these interim financial statements.
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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 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 have purchased seven 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 unitholders 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 three months ended March 31, 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, unitholders 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 unitholders and 10% to the Managing Member until the unitholders 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.
· Net Sales Proceeds, as defined, will be distributed first, 100% to the unitholders in an amount equal to their Invested Capital Contributions; then, 90% to the unitholders and 10% to the Managing Member until the unitholders 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 unitholders and 50% to the Managing Member.
· Net Income, as defined, is allocated first, 10% to the Managing Member and 90% to the unitholders until Net Income allocated equals cumulative Net Losses, as defined, previously allocated in such proportions;
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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 unitholders.
· Net Loss is allocated first, 50% to the Managing Member and 50% to the unitholders, 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 unitholders.
· All allocations and distributions to the unitholders 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 revenue 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 March 31, 2007.
In June 2001 the FASB issued Statement of Financial Accounting Standard (“SFAS”) No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 and No. 142 require the Fund to record at acquisition an intangible asset or liability for the value attributable to in-place leases. The requirements are applicable to all acquisitions subsequent to July 1, 2001.
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 revenue on our statement of operations.
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The amount allocated to acquired in-place leases is determined based on management’s assessment of lost revenue 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 | |
April 1, 2007 to December 31, 2007 | | $ | 70,000 | |
2008 | | 82,000 | |
2009 | | 49,000 | |
2010 | | 4,000 | |
2011 | | — | |
| | | | |
As of March 31, 2007, accumulated depreciation and amortization related to investments in real estate, investments in real estate assets held-for-sale, and related lease intangibles were as follows:
| | Land | | Buildings and
Improvements | | Intangible
Lease Value | | In-Place Lease
Value | | Acquired
Below-Market
Leases | |
Investments in Real Estate | | $ | 11,779,000 | | $ | 23,446,000 | | $ | 550,000 | | $ | 894,000 | | $ | (154,000 | ) |
| | | | | | | | | | | |
Less: accumulated depreciation and amortization from continuing operations | | — | | (1,298,000 | ) | (94,000 | ) | (595,000 | ) | 60,000 | |
| | 11,799,000 | | 22,148,000 | | 456,000 | | 299,000 | | (94,000 | ) |
| | | | | | | | | | | |
Investments in Real estate assets held for sale | | 419,000 | | 2,448,000 | | — | | — | | — | |
Less: accumulated depreciation from assets held for sale | | — | | (248,000 | ) | — | | — | | — | |
| | 419,000 | | 2,200,000 | | — | | — | | — | |
Net Investments in Real Estate, Real estate assets held-for sale, and related lease intangibles | | $ | 12,198,000 | | $ | 24,348,000 | | $ | 456,000 | | $ | 299,000 | | $ | (94,000 | ) |
Depreciation and amortization related to investment in real estate, investments in real estate held for sale and related lease intangibles for the three months ended March 31, 2007 and 2006 were $258,000 and $228,000 respectively.
Investments in Real Estate Assets Held-for- Sale
We evaluate the held-for-sale classification of our owned real estate each quarter. Assets that are classified as held-for-sale are recorded at the lower of their carrying amount or fair value less cost to sell. Assets are generally classified as held-for-sale once management commits to a plan to sell the Properties and has initiated an active program to market them for sale. The results of operations of these real estate properties are reflected as discontinued operations in all periods reported. As of December 31, 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. On April 16, 2007, we sold Sky Habor Business Park for $3.2 million to Lizzadro Properties, Inc., an unaffiliated party.
Leasing Commissions
Leasing commissions are stated at cost and amortized on a straight-line basis over the related lease term. As of March 31, 2007, we had recorded approximately $385,000 in leasing commissions. The unamortized portion of this asset was $224,000 at March 31, 2007.
9
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 Held-for-Sale
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 were 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 March 31, 2007 and December 31, 2006, the assets related to the properties held for sale and related liabilities were as follows:
| | March 31,
2007 | | December 31,
2006 | |
Real estate assets held-for-sale | | | | | |
Land | | $ | 419,000 | | $ | 419,000 | |
Building and improvements, net of accumulated depreciation | | 2,200,000 | | 2,200,000 | |
| | $ | 2,619,000 | | $ | 2,619,000 | |
| | | | | |
Other assets held for sale | | $ | 95,000 | | $ | 112,000 | |
Liabilities associated with property held for sale | | 155,000 | | 166,000 | |
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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 March 31, 2007 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 Income from 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 period ending March 31, 2007 and year ended December 31, 2006.
| | March 31, 2007 | | March 31, 2006 | |
Total revenues | | $ | 95,000 | | $ | 62,000 | |
Property operating and maintenance and property taxes | | 66,000 | | 66,000 | |
Depreciation and amortization | | — | | 16,000 | |
| | | | | |
Income (loss) from discontinued operations | | $ | 29,000 | | $ | (20,000 | ) |
| | | | | |
Income (loss) from discontinued operations allocable to managing member | | $ | 2,000 | | $ | (2,000 | ) |
Income (loss)from discontinued operations allocable to unit holders | | 27,000 | | (18,000 | ) |
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
As of March 31, 2007, we had purchased seven multi-tenant industrial business park properties in three major metropolitan areas and one of which was held for sale. Six of these properties were purchased before 2006 and one property was purchased in June 2006. The results of continuing operations reflect a full three months of operations for six properties in 2007 and five properties in 2006. The results of continuing operations for the three months ended March 31, 2007 and 2006 are discussed below.
Revenue for the first quarter of 2007 increased to $962,000 from $669,000 for the comparable period of 2006. The increase was due to the property purchased during 2006 and higher overall occupancy during the first three months in 2007.
Property operating and maintenance expenses increased to $173,000 in 2007 from $168,000 in 2006 due to the property purchased during 2006, offset by lower maintenance costs during the first three months of 2007. During 2006, we incurred move out costs that did not recur this year. Property taxes increased to $136,000 in 2007 from $134,000 in 2006. This increase is due to the property we purchased during 2006, offset by adjustments to property rates on existing properties .
General and administrative costs decreased to $116,000 in the first quarter of 2007 from $150,000 in the comparable quarter of 2006. The decrease was due primarily to lower consulting fees in 2007. Depreciation and amortization increased to $258,000 in the the first quarter of 2007 from $211,000 in the comparable quarter of 2006 as a result of the addition of one property during 2006.
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Interest and other income decreased to $16,000 for the three months ended March 31, 2007 from $131,000 for the same period of 2006 due to lower cash available for investment after June 2006.
Liquidity and Capital Resources
Our planned $50,000,000 equity offering is now 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, before selling costs of approximately $170,000 (which are not completely determinable at this time). 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 unitholders. However, current net cash generated by operations is not expected to be sufficient to fund distributions to unitholders 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 4. Submission of Matters to a Vote of Security Holders
In January 2007, we commenced a solicition of written consent and approval from the holders of the our units to approve an amendment to our operating agreement, without the necessity of holding a special meeting of the members, to:
(i) eliminate the prohibition on repurchases of units by the company; and
(ii) add a provision to our operating agreement specifically permitting the managing member to cause us to repurchase units at any time, and from time to time, on such terms and conditions as the managing member may determine in its sole discretion; provided that such repurchases do not jeopardize our status as a partnership for federal income tax purposes or cause us to be treated as a publicly-traded partnership.
12
The affirmative consent of a majority of the outstanding percentage interests was required to approve the amendment to the operating agreement. As of February 22, 2007, we received affirmative consents from holders of a majority of the percentage interests represented by outstanding units and therefore concluded the consent process and caused our operating agreement to be amended as of such date.
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. |
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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 11 day of May.
| 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) |
| | | | | | | | |
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