CORNERSTONE REALTY FUND, INC. FORM OF DEALER MANAGER AGREEMENT

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EXHIBIT 1.1

CORNERSTONE REALTY FUND, INC.

FORM OF DEALER MANAGER AGREEMENT

Up to 55,400,000 Shares of Common Stock

Pacific Cornerstone Capital, Incorporated

4590 MacArthur Blvd.

Suite 610

Newport Beach, California 92660

Dear Sirs:

Cornerstone Realty Fund, Inc., a Maryland corporation (the "Company"), is

registering for public sale a maximum of 55,400,000 shares of its common stock,

$0.001 par value per share, (the "Shares"), to be issued and sold for an

aggregate maximum purchase price of $438,800,000 (44,400,000 Shares to be

offered to the public and 11,000,000 Shares to be offered pursuant to the

Company's dividend reinvestment plan ("DRP")). The Shares are to be sold to

selected persons or entities acceptable to the Company, upon the terms and

subject to the conditions set forth in the enclosed Prospectus.

The Company hereby invites you, Pacific Cornerstone Capital, Inc., a

California corporation (the "Dealer Manager"), to become the dealer manager in

connection with the offer and sale of the Shares. By your acceptance hereof, you

agree to act in such capacity and to use commercially reasonable efforts to find

purchasers for the Shares in accordance with the terms and conditions of the

Prospectus and this Agreement, but with no obligation or understanding, express

or implied, that you are making a commitment to purchase or sell the Shares. You

agree to use commercially reasonable efforts to find purchasers of Shares both

directly and indirectly through a selling group consisting of participating

brokers ("Participating Brokers") with whom you shall contract pursuant to a

Participating Broker Agreement substantially in the form attached as Attachment

1 hereto or such other form as may be requested by a Participating Broker

provided the consent of the Company is obtained for the use of such form.

Accompanying this Agreement is a copy of the Prospectus and the

Supplemental Material (as hereinafter defined) prepared by the Company for use

in conjunction with the offer and sale of the Shares. You are not authorized to

use any solicitation material other than that referred to in this section, which

material has been furnished by the Company.

Except as described in the Prospectus or in Section 3(d) hereof, the

Shares are to be sold for a per Share cash price as follows:

<TABLE>

Distribution Channel Public Shares DRP Shares

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

Participating Brokers $8.00 $7.60

Participating Brokers Deferring

Commission $7.52 $7.14

Fee for Service Investment Advisers $7.44 $7.07

</TABLE>

1. Representations and Warranties of the Company.

The Company represents and warrants to Dealer Manager and

Participating Brokers that:

(a) The Company has prepared and filed with the Securities and

Exchange Commission (the "SEC") a registration statement (Registration No.

333-_________) which has become effective for the registration of the Shares

under the Securities Act of 1933, as amended (the "Securities Act"), and the

applicable rules and regulations (the "Rules and Regulations") of the SEC

promulgated thereunder. Copies of such registration statement

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as initially filed and each amendment thereto have been or will be delivered to

the Dealer Manager. The registration statement and the prospectus contained

therein, as finally amended at the effective date of the registration statement

(the "Effective Date"), are respectively hereinafter referred to as the

"Registration Statement" and the "Prospectus," except that if the Company files

a prospectus or prospectus supplement pursuant to Rule 424(b) under the

Securities Act, or if the Company files a post-effective amendment to the

Registration Statement, the term "Prospectus" includes the prospectus filed

pursuant to Rule 424(b) or the prospectus included in such post-effective

amendment. The term "Preliminary Prospectus" as used herein shall mean a

preliminary prospectus related to the Shares as contemplated by Rule 430 or Rule

430A of the Rules and Regulations included at any time as part of the

Registration Statement.

(b) On the date that any Preliminary Prospectus was filed with the

SEC, on the Effective Date, on the date of the Prospectus, on the date the

Minimum Offering (as hereinafter defined) is obtained and when any

post-effective amendment to the Registration Statement becomes effective or any

amendment or supplement to the Prospectus is filed with the SEC, the

Registration Statement, each Preliminary Prospectus and the Prospectus, as

applicable, including the financial statements contained therein, complied or

will comply with the Securities Act and the Rules and Regulations. On the

Effective Date, the Registration Statement did not or will not contain any

untrue statement of a material fact or omit to state any material fact required

to be stated therein or necessary in order to make the statements therein, in

light of the circumstances under which they were made, not misleading. On the

date of the Prospectus, as amended or supplemented, as applicable, and on the

date the Minimum Offering is obtained, the Prospectus did not or will not

contain any untrue statement of a material fact or omit to state any material

fact required to be stated therein or necessary in order to make the statements

therein, in light of the circumstances under which they were made, not

misleading; provided, however, that the foregoing provisions of this Section

1(b) will not extend to such statements contained in or omitted from the

Registration Statement or the Prospectus, as amended or supplemented, as are

primarily within the knowledge of the Dealer Manager or any of the Participating

Brokers and are based upon information furnished by the Dealer Manager in

writing to the Company specifically for inclusion therein.

(e) All additional written, audio or audio-visual material,

including an investment summary, audio tape, video tape and internet site

prepared by the Company for use in conjunction with the offer or sale of the

Shares ("Supplemental Material") will be distributed by the Company only in full

compliance with the requirements of the Act (including, without limitation, the

requirement that such Supplemental Material not be delivered to any prospective

purchaser unless accompanied or preceded by a Prospectus), and at the time the

Registration Statement is declared effective and at all times subsequent thereto

up to and including the Termination Date, such Supplemental Material has not

contained and will not contain any untrue statement of material fact or omit to

state a material fact required to be stated therein or necessary in order to

make the statements therein, in the light of the circumstances under which they

were made, not misleading.

(d) No order preventing or suspending the use of any Preliminary

Prospectus or the Prospectus has been issued and no proceedings for that purpose

are pending, threatened, or, to the knowledge of the Company, contemplated by

the SEC; and to the knowledge of the Company, no order suspending the offering

of the Shares in any jurisdiction has been issued and no proceedings for that

purpose have been instituted or threatened or are contemplated.

(e) The Company intends to use the funds received from the sale of

the Shares as set forth in the Prospectus.

(f) The Company will obtain an opinion of Preston Gates & Ellis LLP

confirming that based on the proposed method of operation of the Company, the

Company is in a position to qualify for taxation as a REIT for the taxable year

that will end December 31, 2005. The conditions on which the opinion will be

issued will be met at the time of such issuance and will continue to exist.

(g) The accounting firm which has certified or shall certify the

financial statements filed and to be filed with the SEC as part of the

Registration Statement and the Prospectus is a registered public accounting

firm, as required by the Act and the rules and regulations thereunder.

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(h) The Company is a corporation duly organized under the laws of

the State of Maryland, is validly existing as a corporation company under such

laws and has power and authority to conduct business as described in the

Prospectus under the laws of the State of Maryland and every other jurisdiction

in which it conducts business or owns or leases property.

(i) The Company has full legal right, power and authority to enter

into this Agreement and to perform the transactions contemplated hereby, and the

Company has duly authorized, executed and delivered this Agreement.

(j) This Agreement is a valid, legal, and binding agreement of the

Company enforceable in accordance with their respective terms, except as such

enforceability may be limited by bankruptcy, insolvency or similar laws

affecting the rights of creditors generally.

(k) The execution and delivery of this Agreement, the consummation

of the transactions herein contemplated and the compliance with the terms of

this Agreement by the Company will not conflict with or constitute a default or

violation under any charter, by-law, contract, indenture, mortgage, deed of

trust, lease, rule, regulation, writ, injunction or decree of any government,

governmental instrumentality or court, domestic or foreign, having jurisdiction

over the Company, except to the extent that the enforceability of the indemnity

and contribution provisions contained in Section 7 of this Agreement may be

limited under applicable securities laws.

(l) No consent, approval, authorization or other order of any

governmental authority is required in connection with the execution or delivery

by the Company of this Agreement or the issuance and sale by the Company of the

Shares, except such as may be required under the securities laws of certain

states, if any, which we have identified to you.

(m) The Shares have been duly authorized and, upon payment therefor

as provided in this Agreement, will be validly issued, fully paid and

nonassessable and will conform to the description thereof contained in the

Prospectus.

(n) No closing will take place unless and until funds in respect of

subscriptions for an aggregate of at least 125,000 Shares sold in the primary

offering, acceptable to the Company, have been received by the Company and

payment for such Shares has been deposited in the Escrow Account and classified

as "cleared funds" by the Escrow Agent.

(o) Prior to accepting any subscription for Shares, the Company will

review the file memoranda or other records maintained by Dealer Manager

substantiating the suitability of the subscribers to purchase Shares, and will

have reasonable grounds to believe and will in fact believe that the subscribers

meet the suitability standards as set forth in the Prospectus or as required by

law and will reject the subscriptions of any subscribers whom the Company does

not have reasonable grounds to believe or does not in fact believe meet said

suitability standards.

(p) At all times subsequent to the date of this Agreement and up to

and including the Termination Date, the representations and warranties made in

this Section l will be true and correct with the same effect as if they had been

made on and as of such time, except as may subsequently be disclosed in writing

to the Dealer Manager.

2. Representations and Warranties of the Dealer Manager.

As an inducement to the Company to enter into this Agreement, the

Dealer Manager represents and warrants to the Company that:

(a) The Dealer Manager is a member of the National Association of

Securities Dealers, Inc. (the "NASD") in good standing and a broker-dealer

registered as such under the Exchange Act and under the securities laws of the

states in which the Shares are to be offered and sold. The Dealer Manager and

its employees and representatives have all required licenses and registrations

to act under this Agreement.

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(b) The Dealer Manager has full legal right, power and authority to

enter into this Agreement and to perform the transactions contemplated hereby,

and the Dealer Manager has duly authorized, executed and delivered this

Agreement.

Dealer Manager enforceable in accordance with its terms, except as such

enforceability may be limited by bankruptcy, insolvency or similar laws

affecting the rights of creditors generally.

(d) The execution and delivery of this Agreement, the consummation

of the transactions herein contemplated and the compliance with the terms of

this Agreement by the Dealer Manager will not conflict with or constitute a

default or violation under any charter, by-law, contract, indenture, mortgage,

deed of trust, lease, rule, regulation, writ, injunction or decree of any

government, governmental instrumentality or court, domestic or foreign, having

jurisdiction over the Dealer Manager, except to the extent that the

enforceability of the indemnity and contribution provisions contained in Section

8 of this Agreement may be limited under applicable securities laws.

(e) No consent, approval, authorization or other order of any

governmental authority is required in connection with the execution, delivery or

performance by the Dealer Manager of this Agreement.

(e) The Dealer Manager represents and warrants to the Company and

each person that signs the Registration Statement that the information under the

caption "Plan of Distribution" in the Prospectus and all other information

furnished to the Company by the Dealer Manager in writing expressly for use in

the Registration Statement, any Preliminary Prospectus, or the Prospectus, does

not contain any untrue statement of a material fact or omit to state any

material fact required to be stated therein or necessary to make the statements

therein not misleading.

3. Obligations and Compensation of Dealer Manager.

(a) The Company hereby appoints the Dealer Manager as its agent and

principal distributor during the Offering Period (as defined in Section 3(c))

for the purpose of finding, on a best efforts basis, purchasers for the Shares

for cash through the Participating Brokers, all of whom shall be members of the

NASD. The Dealer Manager may also arrange for the sale of Shares for cash

directly to its own clients and customers at the public offering price and

subject to the terms and conditions stated in the Prospectus. The Dealer Manager

hereby accepts such agency and distributorship and agrees to use its best

efforts to find purchasers for the Shares on said terms and conditions,

commencing as soon as practicable.

(b) The Dealer Manager agrees to be bound by the terms of the Escrow

Agreement dated _____________, 2004 among U.S. Bank, N.A. as escrow agent, the

Dealer Manager and the Company.

may be offered for sale, commencing on the date the registration was filed with

the SEC, during which period offers and sales of the Shares shall occur

continuously unless and until the Offering is terminated as provided herein,

except that the Dea

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