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                    U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934

For the fiscal year ended December 31, 1999.

[ ] 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 001-13183

                         ROBERTS REALTY INVESTORS, INC.
                 ----------------------------------------------
                 (Name of small business issuer in its charter)

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                       GEORGIA                                                   58-2122873
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   (State or Other Jurisdiction of Incorporation or Organization)      (I.R.S. Employer Identification No.)
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      8010 ROSWELL ROAD, SUITE 120
      ATLANTA, GA                                               30350
---------------------------------------------------            ----------------
         (Address of Principal Executive Offices)              (Zip Code)

Issuer's telephone number: (770) 394-6000

Securities registered under Section 12(b) of the Act:  NONE

   Title of each class:              Name of each exchange on which registered:
   -------------------               -----------------------------------------
          N/A                                         N/A

Securities registered under Section 12(g) of the Exchange Act:

                                  Common Stock
                                ----------------
                                (Title of Class)

         Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

         State the aggregate market value of the voting held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the common equity was sold, or the average bid and asked
prices of such common equity, as of a specified date within 60 days prior to
the date of this filing. (See definition of affiliate in Rule 405.)

                                  $24,727,024

         Note: If a determination as to whether a particular person or entity
is an affiliate cannot be made without involving unreasonable effort and
expense, the aggregate market value of the common stock held by non-affiliates
may be calculated on the basis of assumptions reasonable under the
circumstances, provided that the assumptions are set forth in this Form.

         Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. 4,840,075 shares of
common stock (as of March 1, 2000)

         Documents Incorporated by Reference.
         Portions of the proxy statement for the registrant's 2000 annual
meeting of shareholders are incorporated by reference in Part III of this Form
10-K.


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                               TABLE OF CONTENTS

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PART I...............................................................................................        2

         ITEM 1.      BUSINESS.......................................................................        2

         ITEM 2.      PROPERTIES.....................................................................        9

         ITEM 3.      LEGAL PROCEEDINGS..............................................................       22

         ITEM 4       SUBMISSION OF MATTERS TO A VOTE OF
                      SECURITY HOLDERS...............................................................       22

PART II..............................................................................................       23

         ITEM 5.      MARKET FOR REGISTRANTS COMMON EQUITY AND
                      RELATED STOCKHOLDER MATTERS....................................................       23

         ITEM 6.      SELECTED FINANCIAL DATA........................................................       24

         ITEM 7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                      FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................................       27

         ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES
                      ABOUT MARKET RISK..............................................................       39

         ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................................       40

         ITEM 9.      CHANGES IN AND DISAGREEMENTS WITH
                      ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                      DISCLOSURE.....................................................................       40

PART III.............................................................................................       40

         ITEM 10.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
                      AND CONTROL PERSONS; COMPLIANCE WITH
                      SECTION 16(a) OF THE EXCHANGE ACT .............................................       40

         ITEM 11.     EXECUTIVE COMPENSATION.........................................................       40

         ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                      OWNERS AND MANAGEMENT..........................................................       40

         ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED
                      TRANSACTIONS...................................................................       40

         ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES
                      AND REPORTS ON FORM 8-K........................................................       41
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                                     PART I


ITEM 1.   DESCRIPTION OF BUSINESS.

GENERAL

         Roberts Realty Investors, Inc. owns and operates multifamily
residential properties as a self-administered, self-managed equity real estate
investment trust, or REIT. We conduct our business through Roberts Properties
Residential, L.P., which we refer to as the operating partnership. The
operating partnership owns all our properties. As of March 1, 2000, Roberts
Realty owns a 65.4% interest in the operating partnership and is its sole
general partner. We expect to continue to conduct our business in this
organizational structure, which is sometimes called an "umbrella partnership"
or "UPREIT."

         As of March 24, 2000 we own nine existing multifamily apartment
communities containing a total of 1,779 apartment homes, and three communities
under development or construction that will contain approximately 853 apartment
homes. Eight of our communities - River Oaks, Rosewood Plantation, Plantation
Trace, Preston Oaks, Highland Park, Crestmark, Ivey Brook, and Bradford Creek -
containing a total of 1,661 apartment units, are stabilized. Our 118-unit first
phase of Addison Place, formerly referred to as Abbotts Bridge, is now in its
initial lease-up phase. Addison Place's second phase, anticipated to total 285
apartment homes, and Ballantyne, anticipated to total 319 apartment homes, are
under construction. Our Old Norcross community, anticipated to total 249
apartment homes, is in the development stage. All of our communities are
located in metropolitan Atlanta, Georgia, except the Ballantyne community,
which is located in Charlotte, North Carolina.

         We consider a community to have achieved stabilized occupancy on the
earlier of (a) attainment of 95% occupancy as of the first day of any month, or
(b) one year after completion of construction. As of December 31, 1999, we
owned eight stabilized communities containing a total of 1,661 apartment homes
that had a physical occupancy rate of 92.6%.

         Roberts Realty is a Georgia corporation formed in July 1994. We expect
to continue to qualify as a REIT for federal income tax purposes. A REIT is a
legal entity that holds real estate interests and, through its payment of
distributions, is able to reduce or avoid incurring federal income tax at the
corporate level. This structure allows shareholders to participate in real
estate investments without the "double taxation" of income i.e., at both the
corporate and shareholder levels - that generally results from an investment in
shares of a corporation. To maintain our qualification as a REIT, we must,
among other things, distribute annually to our shareholders at least 95% of our
taxable income. Our common stock is traded on the American Stock Exchange under
the symbol "RPI."

         We have engaged two entities owned by Mr. Charles S. Roberts, our
Chairman of the Board, Chief Executive Officer and President, to perform
services for the operating partnership. These entities are Roberts Properties,
Inc. and Roberts Properties Construction, Inc., which we sometimes refer to as
the Roberts Companies. The Roberts Companies developed and constructed each of
our nine existing communities, except the 24-unit second phase of Preston Oaks,
which was constructed by an independent contractor. We expect that affiliates
of Mr. Roberts will continue to develop future properties and construct
properties where feasible. Roberts Construction started construction of the
Ballantyne Community and intends to hire an independent general contractor
to complete construction of the community. Roberts Construction will continue
to oversee the project.

         Our executive offices are located at 8010 Roswell Road, Suite 120,
Atlanta, Georgia 30350, and our telephone number is (770) 394-6000. As of March
20, 2000, we have 47 full-time employees.

THE OPERATING PARTNERSHIP

         We conduct our business and own all of our real estate assets through
the operating partnership. We control the operating partnership as its sole
general partner. Our ownership interest in the operating partnership entitles
us to share in cash distributions from, and in the profits and losses of, the
operating partnership generally in proportion to our ownership percentage. In
this report we refer to units of limited partnership interest in the operating
partnership as "units." The holders of units are: former limited partners in
the limited partnerships that were merged into the operating partnership; Mr.
Roberts; and the former owner of one of the retail centers we formerly owned.


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         Except as described in the following paragraph, holders of units in
the operating partnership, sometimes referred to in this report as unitholders,
generally have the right to require the operating partnership to redeem their
units. A unitholder who submits units for redemption will receive, at our
election, either an equal number of shares or cash in the amount of the average
of the daily market prices of the common stock for the 10 consecutive trading
days before the date of submission multiplied by the number of units submitted.
We have adopted a policy of acquiring units in exchange for shares. We also
have the right, at our election, to issue shares in exchange for all
outstanding units. Our articles of incorporation limit ownership by any one
holder to 6% of the outstanding shares of our common stock, par value $0.01 per
share, other than by Mr. Roberts, who is limited to 25%. As a result,
unitholders cannot redeem their units if doing so would violate those ownership
limits.

         On February 1, 1999, we began a six-month period in which units could
not be redeemed. At the end of the six-month period, we registered new shares
with the SEC that simplified the process for unitholders who elect to exchange
their units for shares. We completed the registration of these new shares with
the SEC on August 2, 1999. Unlike the shares issued in exchange for units
before February 1, 1999 in reliance upon the "intrastate" offering exemption,
shares issued under the new registration (a) are freely tradeable, other than
by affiliates, and (b) can be issued both to persons who reside in Georgia and
in other states. Before February 1, 1999, we paid cash to redeeming unitholders
who resided outside the state of Georgia.

         Whenever we issue shares, we are obligated to contribute the net
proceeds from that issuance to the operating partnership, and the operating
partnership is obligated to issue the same number of units to us. The operating
partnership agreement permits the operating partnership, without the consent of
the unitholders, to sell additional units and add limited partners.

GROWTH STRATEGIES

         Our business plan and growth strategy are focused on creating cash
flow and capital appreciation by building and managing new apartment homes of
the highest quality and value in excellent high-growth neighborhoods. Our
business objectives are:

         -        to maximize the current return to our shareholders in the
                  form of quarterly dividends through increases in cash flow,
                  and

         -        to increase long-term total returns to our shareholders
                  through appreciation in the value of the common stock.

         To achieve these objectives, we intend to pursue the following growth
strategies:

         (a)      maximize cash flow from operations by seeking through
                  intensive management to maintain high occupancy levels,
                  obtain regular rent increases, manage resident turnover
                  efficiently and control operating expenses; and

         (b)      develop new multifamily apartment communities in metropolitan
                  Atlanta, North Carolina, Florida and other parts of the
                  Southeast.

We will engage others, including the Roberts Companies, to help us pursue these
strategies, which are described in more detail below.

         Property Management Strategy. We believe that managing our communities
intensively is a fundamental element of our growth strategy. As of March 20,
2000, we employ 46 property management personnel, including property managers,
leasing managers, leasing consultants, maintenance supervisors and technicians,
and accounting personnel. We believe our property management expertise will
enable us to continue to deliver quality services, thereby promoting resident
satisfaction, maintaining high resident retention, and enhancing the value of
each of the communities. Our property management strategy will continue to be:


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         -        to increase the average occupancy and rental rates as market
                  conditions permit,

         -        to minimize resident turnover and delinquent rental
                  payments through strict review of each applicant's
                  creditworthiness, and

         -        to control operating expenses to increase net operating
                  income at each of the communities.

         Development Strategy. We intend to continue to develop high quality
apartment communities for long-term ownership. During the past 15 years, the
Roberts Companies have developed, constructed and/or managed over 4,200
residential units. We believe that the number and quality of the apartment
units developed by the Roberts Companies, the relationships Mr. Roberts and
employees of the Roberts Companies have developed with local permitting and
governmental authorities, and the Roberts Companies' experience with the
development, construction and financing process will minimize the barriers to
new development often faced by less experienced developers and national
developers attempting to enter the Atlanta market. These barriers include
governmental growth control; a difficult rezoning and permitting process; and
the limited availability of well-located sites. We believe that these
restraints on construction, coupled with the predicted continued growth in
population, job growth and household formations, present an excellent
opportunity for us to achieve favorable returns on the development of
well-located, high quality apartment home communities.

         Roberts Properties is developing the Addison Place, Ballantyne and Old
Norcross communities. We expect that Roberts Properties will continue to
develop communities for us in the future. Although the experience of the
Roberts Companies will be most helpful to us in the Atlanta area, we believe
that experience will enable us to develop multifamily apartment communities in
other areas in the Southeast, including Charlotte.

         Although we presently intend to engage the Roberts Companies in our
development and construction activities, we may hire other development or
construction companies in Atlanta and elsewhere if we deem it to be in our best
interests to do so. The most likely development scenario for the operating
partnership is for it to acquire properties already under development from
Roberts Properties and/or an entity formed by Mr. Roberts or his affiliates. We
may engage the Roberts Companies to develop properties on a fee basis; we may
enter into joint venture agreements with the Roberts Companies; or we may
acquire communities developed by the Roberts Companies and owned by other
affiliates of Mr. Roberts. We may also enter into similar arrangements with
others who are independent of Mr. Roberts.

         In analyzing the potential development of a particular community, we
will evaluate geographic, demographic, economic and financial data, including:

         -        household, population and employment growth;

         -        prevailing rental and occupancy rates in the immediate market
                  area and the perceived potential for growth in those rates;

         -        costs that affect profitability of the investment, including
                  construction, financing, operating and maintenance costs;

         -        income levels in the area;

         -        existing employment bases;

         -        traffic volume, transportation access, proximity to
                  commercial centers and regional malls; and

         -        proximity to and quality of the area's schools.


We will also consider physical elements regarding a particular site, including
the probability of zoning approval (if required), availability of utilities and
infrastructure, and other physical characteristics of the site.

         For information regarding the development and construction of Addison
Place, Ballantyne, and Old Norcross, see Part I, Item 2, Description of
Property.


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ENVIRONMENTAL AND OTHER REGULATORY MATTERS

         Under various federal, state and local laws and regulations, an owner
of real estate is liable for the costs of removal or remediation of hazardous
or toxic substances on the property. Those laws often impose liability without
regard to whether the owner knew of, or was responsible for, the presence of
the hazardous or toxic substances. The costs of remediation or removal of the
substances may be substantial, and the presence of the substances, or the
failure to promptly remediate the substances, may adversely affect the owner's
ability to sell the real estate or to borrow using the real estate as
collateral. In connection with its ownership and operation of the communities
and its other real estate assets, the operating partnership may be potentially
liable for:

         (a)      those remediation and removal costs, and

         (b)      damages to persons or property arising from the existence or
                  maintenance of those hazardous or toxic substances.

         We have conducted preliminary evaluations of the environmental
condition of our communities and surrounding properties.

         In April 1998, Wallace Enterprises, Inc., an adjacent land owner,
notified us that a petroleum product release had been discovered on property
adjacent to our Crestmark community. Wallace repaired the source of the release
and its corrective action plan has been approved by the Georgia Environmental
Protection Division, or EPD. Our environmental attorneys and consultants have
advised us that Wallace is responsible for cleaning up the release to the
extent required by the EPD regulations. Our environmental consultants have
informed us that despite a possible groundwater impact at Crestmark, no threat
to human health or safety is suggested. We and our environmental consultants
are monitoring the EPD files to ensure Wallace's compliance with the EPD
regulations.

         The preliminary environmental assessments of our other communities and
other real estate assets have not revealed any environmental liability that we
believe would have a material adverse effect on our business, assets, or
results of operations, nor are we aware of any liability of that type.
Nevertheless, these assessments may not have revealed all environmental
liabilities, and we may have material environmental liabilities that we do not
know about. Future uses or conditions - including changes in applicable
environmental laws and regulations - may cause us to have environmental
liability.

COSTS OF COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT AND SIMILAR LAWS

         Under the American with Disabilities Act of 1990, or the ADA, all
places of public accommodation are required to meet federal requirements
related to access and use by disabled persons. These requirements became
effective in 1992. Although we believe that the communities are substantially
in compliance with present requirements of the ADA, we may incur additional
costs of complying with the ADA. A number of additional federal, state and
local laws may also require modifications to the communities, or restrict
further renovations to them, with respect to access by disabled persons. For
example, the Fair Housing Amendments Act of 1988 requires apartment communities
first occupied after March 13, 1990 to be accessible to the handicapped.
Noncompliance with this Act could result in the imposition of fines or an award
of damages to private litigants. We believe that the communities that are
subject to the Act comply with that law.

      Additional legislation may impose further burdens or restrictions on
owners with respect to access by disabled persons. We cannot estimate the
ultimate amount of the cost of compliance with the ADA or that legislation,
and, while those costs are not expected to have a material adverse effect on
us, those costs could be substantial. Limitations or restrictions on the
completion of renovations may limit application of our investment strategy in
some instances or reduce overall returns on our investments.

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INSURANCE

         We carry comprehensive general liability, fire, extended coverage and
rental loss insurance on all of our existing communities, with policy
specifications, insured limits and deductibles customarily carried for similar
properties. We carry similar insurance with respect to our properties under
development or properties under construction, but with appropriate exceptions
given the nature of these properties. We believe that our communities are
adequately covered by insurance. There are, however, some types of losses (such
as losses arising from acts of war) that are not generally insured because they
are either uninsurable or not economically insurable. If an uninsured loss or a
loss in excess of insured limits occurs, we could lose our capital invested in
a property, as well as the anticipated future revenues from the property, and
would continue to be obligated on any mortgage indebtedness or other
obligations related to the property. Any loss of that kind would adversely
affect us.

INVESTMENT, FINANCING AND CONFLICT OF INTEREST POLICIES

         The investment policies, financing policies and conflict of interest
policies set by our board of directors are summarized below. Our board may
amend or revise them from time to time without a vote of our shareholders or
any vote of the partners of the operating partnership, except that:

         (a)      we cannot change our policy of holding our assets and
                  conducting our business exclusively through the operating
                  partnership without amending the operating partnership
                  agreement, which will generally require the consent of the
                  holders of a majority in interest of the limited partners in
                  the operating partnership including, if applicable, Roberts
                  Realty, and

         (b)      changes in our conflicts of interest policies must be
                  approved by a majority of the independent directors and
                  otherwise be consistent with legal requirements.

INVESTMENT POLICIES

         Investments in Real Estate or Interests in Real Estate. We conduct all
of our investment activities through the operating partnership and will do so
for so long as the operating partnership exists. (The agreement of limited
partnership of the operating partnership provides that it is not required to be
dissolved until 2093.) Our investment objectives are to achieve stable cash
flow available for distributions and, over time, to increase cash flow and
portfolio value by continuing to develop multifamily apartment communities for
long-term ownership.

Our policy is to develop assets where we believe that favorable investment
opportunities exist based on market conditions at the time of the investment.

         We expect to pursue our investment objectives primarily through the
direct ownership of properties by the operating partnership, although, as
discussed below, we may also pursue indirect property ownership opportunities.
We intend to develop multifamily apartment communities primarily in the Atlanta
and Charlotte metropolitan areas, Florida, and other parts of the Southeast.
Future development or investment activities will not be limited by our
governing documents to any geographic area, product type or specified
percentage of our assets.


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         Possible Acquisition of Communities Developed by Mr. Roberts or his
Affiliates. Mr. Roberts and Roberts Properties have been engaged in the
development of residential and commercial real estate since the early 1970s,
and Mr. Roberts expects that he and Roberts Properties will continue to engage
in real estate development. Provided that any transaction or agreement must
comply with the policies discussed under "Conflict of Interest Policies," we
and/or the operating partnership may engage in transactions of various types
with Mr. Roberts, Roberts Properties and/or other affiliates of Mr. Roberts to
develop or acquire real estate. Those transactions may include:

         -        hiring Mr. Roberts or Roberts Properties to develop real
                  estate under a fee arrangement,

         -        acquiring undeveloped property from Mr. Roberts or his
                  affiliates for future development, or

         -        acquiring from Mr. Roberts or his affiliates partially or
                  completely constructed properties, whether in their lease-up
                  phase or already leased-up.

No particular arrangements have been determined, other than the communities now
under construction and development as described elsewhere in this report.

         Securities of or Interest in Persons Primarily Engaged in Real Estate
Activities and Other Issuers. We and the operating partnership also may invest
in securities of other entities engaged in real estate activities or invest in
securities of other issuers, including investments by us and the operating
partnership for the purpose of exercising control over those entities. We or
the operating partnership may acquire all or substantially all of the
securities or assets of other REITs or similar entities where those investments
would be consistent with our investment policies. We do not currently intend to
invest in the securities of other issuers. In making any of the investments
described in this paragraph we intend to comply with the percentage of
ownership limitations and gross income tests necessary for REIT qualification
under the Internal Revenue Code. Also, we will not make any investments if the
proposed investment would cause us or the operating partnership to be an
"investment company" under the Investment Company Act of 1940.

         No Investments in Mortgages. We do not own any mortgages and do not
currently intend to invest in mortgages or to engage in originating, servicing,
or warehousing mortgages.

FINANCING POLICIES

         Our organizational documents do not limit the amount of indebtedness
we may incur. We have an informal policy that we will not incur indebtedness in
excess of 75% of what the board of directors believes is the fair market value
of our assets at any given time. We may, however, from time to time re-evaluate
our borrowing policies in light of then current economic conditions, relative
costs of debt and equity capital, market value of the operating partnership's
real estate assets, growth and acquisition opportunities and other factors.
Modification of this policy may adversely affect the interests of our
shareholders.

         To the extent that the board of directors determines to seek
additional capital, we may raise capital through additional equity offerings,
debt financing or retention of cash flow, or a combination of these methods.
Our retention of cash flow is subject to provisions in the Internal Revenue
Code requiring a REIT to distribute a specified percentage of taxable income,
and we must also take into account taxes that would be imposed on undistributed
taxable income. As long as the operating partnership is in existence, we will
contribute the net proceeds of all equity capital we raise to the operating
partnership in exchange for units or other interests in the operating
partnership.

         We have not established any limit on the number or amount of mortgages
on any single property or on the operating partnership's portfolio as a whole.

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CONFLICT OF INTEREST POLICIES

         The board of directors is subject to provisions of Georgia law that
are designed to eliminate or minimize potential conflicts of interest. We can
give no assurances, however, that these policies will always eliminate the
influence of those conflicts. If these policies are not successful, the board
could make decisions that might fail to reflect fully the interests of all
shareholders.

         Under Georgia law, a director may not misappropriate corporate
opportunities that he learns of solely by serving as a member of the board of
directors. In addition, under Georgia law, a transaction effected by us or any
entity we control (including the operating partnership) in which a director, or
specified related persons and entities of the director, have a conflicting
interest of such financial significance that it would reasonably be expected to
exert an influence on the director's judgment may not be enjoined, set aside or
give rise to damages on the grounds of that interest if either:

         -        the transaction is approved, after disclosure of the
                  interest, by the affirmative vote of a majority of the
                  disinterested directors, or by the affirmative vote of a
                  majority of the votes cast by disinterested shareholders, or

         -        the transaction is established to have been fair to us.

The board of directors has adopted a policy that all conflicting interest
transactions must be authorized by a majority of the disinterested directors,
but only if there are at least two directors who are disinterested with respect
to the matter at issue.

OTHER POLICIES

         We and the operating partnership have authority to offer our
securities and to repurchase and otherwise reacquire our securities, and we may
engage in those activities in the future. We have adopted a policy that we will
issue shares to unitholders who exercise their rights of redemption. In the
future, we may make loans to joint ventures in which we participate to meet
working capital needs. We have not engaged in trading, underwriting, agency
distribution, or sale of securities of other issuers, and we do not intend to
do so. We intend to make investments in a manner so that we will not be treated
as an investment company under the Investment Company Act of 1940.

         We announced our intention to repurchase up to 300,000 shares of our
outstanding common stock on September 3, 1998. We repurchased 121,200 shares in
1999 for $909,000 and 19,300 shares in 1998 for $145,000. During 1999, we paid
$28,000 to redeem 3,917 units from unitholders who resided outside the state of
Georgia.

         At all times, we intend to make investments in a manner to be
consistent with the requirements of the Internal Revenue Code for us to qualify
as a REIT unless, because of changing circumstances or changes in the Internal
Revenue Code or in applicable regulations, the board of directors decides that
it is no longer in our best interests to qualify as a REIT.

         For a description of the competition we face, see Part 1, Item 2,
Description of Property - Competition.


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ITEM 2.  DESCRIPTION OF PROPERTY.

GENERAL

         As of March 24, 2000 we own nine existing multifamily apartment
communities containing a total of 1,779 apartment homes, and three communities
under development or construction that will contain approximately 853 apartment
homes. Eight of our existing communities - River Oaks, Rosewood Plantation,
Plantation Trace, Preston Oaks, Highland Park, Crestmark, Ivey Brook, and
Bradford Creek - containing a total of 1,661 apartment units, are stabilized.
Our 118-unit first phase of Addison Place, formerly referred to as Abbotts
Bridge, is now in its initial lease-up phase. Addison Place's second phase,
totaling 285 apartment homes and Ballantyne, totaling 319 apartment homes, are
under construction. Our Old Norcross community, anticipated to total 249
apartment homes, is in the development stage. All of our communities are
located in metropolitan Atlanta, Georgia, except the Ballantyne community,
which is located in Charlotte, North Carolina.

         As of December 31, 1999, we owned eight stabilized communities
containing a total of 1,661 apartment homes that had a physical occupancy rate
of 92.6%. We sold the 118-unit Bentley Place community on August 23, 1999.

         We believe that the demand for multifamily housing in Atlanta will
increase due to Atlanta's growing population. According to the Atlanta Regional
Commission, which we refer to as the ARC, both population and job growth in
Atlanta are projected to be above the national average for the foreseeable
future. The ARC is the regional planning and governmental coordination agency
for the 10-county Atlanta Region, which is comprised of Fulton, Dekalb,
Gwinnett, Cobb, Clayton, Rockdale, Henry, Douglas, Cherokee, and Fayette
counties.

         The following information is based on statistical estimates published
by the ARC. The population of the Atlanta Region is projected to grow 40.9% for
the period from 1990 to 2010, from 2,557,800 persons in 1990 to 3,603,800
persons in 2010. The estimated population of the Atlanta Region increased by
25.3% from 2,557,800 persons in 1990 to 3,204,900 persons in 1999, making it
one of the largest metropolitan areas in the country and the largest in the
Southeast.

         Employment of the Atlanta Region is projected to grow 52.5% for the
period from 1990 to 2010, from 1,426,000 jobs in 1990 to 2,175,000 jobs in
2010. Estimated employment of the Atlanta Region increased by 29.0% from
1,426,000 jobs in 1990 to 1,840,000 jobs in 1998. According to the Georgia
Department of Labor, the estimated December 1999 unemployment rate of the
Atlanta Region was 2.6%, which was below the estimated December 1999 Georgia
unemployment rate of 3.2% and the estimated December 1999 U.S. unemployment
rate of 3.7%.

         Housing units in the Atlanta Region increased an estimated 25.9%, from
1,052,430 units in 1990 to 1,324,511 units in 1999. Multifamily homes in the
Atlanta Region increased 17.1% from 342,441 units in 1990 to 400,973 units in
1999.


                                       9
<PAGE>   11

         The following table summarizes basic information about our
communities.

                                THE COMMUNITIES

<TABLE>
<CAPTION>
                                                                                              December 1999
                                       Year                                               Average Rental Rates    Average Physical
                                     Completed     Number     Approximate      Average    --------------------   Occupancy for the
                                     or to be       of       Rentable Area    Unit Size              Per Square   12 Months Ended
       Community         Location    Completed     Units     (Square Feet)  (Square Feet)  Per Unit     Foot       Dec. 31, 1999
       ---------         --------    ---------     ------    -------------  -------------  --------     ----     ---------------

<S>                      <C>         <C>          <C>        <C>            <C>            <C>       <C>         <C>
Existing Communities:
--------------------
  Plantation Trace(1)     Atlanta    1990/1998      232          310,956        1,340      $  974       $ 0.73          89.7%

  River Oaks              Atlanta       1992        216          276,046        1,278         940         0.74          92.7

  Crestmark(2)            Atlanta    1993/1997      334          360,284        1,079         830         0.77          94.9

  Rosewood Plantation     Atlanta       1994        152          192,352        1,265         960         0.76          97.1

  Preston Oaks(3)         Atlanta    1995/1998      213          257,180        1,207       1,021         0.85          97.8

  Highland Park           Atlanta       1995        188          231,634        1,232         967         0.79          97.0

  Ivey Brook              Atlanta       1997        146          197,028        1,350       1,032         0.76          96.6

  Bradford Creek          Atlanta       1998        180          243,941        1,355         968         0.71          92.5

  Addison Place
     Phase I              Atlanta       1999        118          200,194        1,697      $1,313       $ 0.77         N/A (4)
                                                  -----        ---------

    Subtotal/Average                              1,779        2,269,615       1,276
                                                  =====        =========       =====

Communities Under
-----------------
Construction:
-------------

Addison Place
     Phase II             Atlanta       2001        285          403,312        1,415         N/A          N/A           N/A

Ballantyne                Charlotte     2001        319          413,528        1,296         N/A          N/A           N/A


    Subtotal/Average                                604
                                                  =====

Communities Under
-----------------
Development (5):
----------------

Old Norcross              Atlanta       2001        249             (5)          (5)         N/A          N/A           N/A
</TABLE>

(1)  Plantation Trace was completed in 2 phases. The 182-unit first phase was
     completed in 1990 and the 50-unit second phase was completed in 1998.

(2)  Crestmark was completed in 2 phases. The 248-unit first phase was
     completed in 1993 and the 86-unit second phase was completed in 1997.

(3)  Preston Oaks was completed in 2 phases. The 189-unit first phase was
     completed in 1995 and the 24-unit second phase was completed in 1998.

(4)  The 118-unit first phase of Addison Place was in its lease-up phase at
     December 31, 1999, and its 12-month historical occupancy percentage is not
     comparable.

(5)  Because this community is still in the development stage, the date of
     completion and exact number of units are estimates and are subject to
     change, and the square footage information is not available.


                                      10
<PAGE>   12
         Annual operating data regarding our stabilized communities at December
31, 1999 are summarized in the following table (with the second phases of
Crestmark, Preston Oaks and Plantation Trace described separately for this
purpose and Windsong and Bentley Place omitted due to their sales in January
1998 and August 1999, respectively). Except for those figures noted with an
asterisk, the occupancy rates shown represent the average physical occupancy of
the applicable community calculated by dividing the total number of vacant days
by the total possible number of vacant days for each year and then subtracting
the resulting number from 100%. The figures noted with asterisks reflect the
applicable data on December 31 of the specified year and are not annualized,
because the applicable community was under construction and in its initial
lease-up period during at least a portion of that year. During lease-up, units
are leased as they are constructed and made ready for occupancy building by
building, thus annualization of data is not possible during that period.
Throughout this table, "N/A" means "not applicable," i.e., no unit in the
community was available to be occupied during the relevant year. Footnotes are
on the following page.

<TABLE>
<CAPTION>
                                        Physical Occupancy Rate
                                        -----------------------
                      Month
                    Completed
                     Initial
    Community        Leaseup     1995       1996     1997       1998         1999
    ---------       ---------   ------     ------   ------     ------       ------

<S>                 <C>         <C>        <C>      <C>        <C>          <C>
Plantation            9/90        98%        99%       93%        94%         90%
Trace

Plantation           11/98       N/A        N/A       N/A         92%*       N/A
Trace
Phase II(1)

River Oaks            2/93        99%        98%       96%        98%         93%

Rosewood              5/94        99%        99%       97%        97%         97%
Plantation

Preston Oaks          8/95       100%*       99%       97%        98%         98%

Highland Park         3/96        68%        96%*      96%        97%         97%

Crestmark             4/94        99%        98%       87%        91%         95%

Crestmark             9/97       N/A        N/A        96%*      N/A         N/A
Phase II(2)

Ivey Brook            8/97       N/A         27%*      98%*       97%         97%

Preston Oaks          7/98       N/A        N/A       N/A        100%*       N/A
Phase II(1)

Bradford              8/98       N/A        N/A       N/A         94%*        93%
Creek(3)

<CAPTION>
                                                Average Effective Annual Rental Rates
                                                -------------------------------------
                         1995                1996                  1997                   1998                   1999
                        ------              ------                ------                 ------                 ------
                     Per      Per         Per      Per        Per         Per         Per         Per       Per        Per
                     Unit    Sq. Ft.      Unit    Sq. Ft.     Unit       Sq. Ft.      Unit      Sq. Ft.     Unit      Sq. Ft.
                    ------   -------     ------   -------     ------     -------     ------     -------    ------     -------

  <S>               <C>      <C>         <C>      <C>         <C>        <C>         <C>        <C>        <C>        <C>
  Plantation        $  786    $ 0.62     $  821    $ 0.65     $  867      $ 0.69     $  867      $ 0.69     $  956     $0.71
  Trace

  Plantation           N/A       N/A        N/A       N/A     $1,171*     $ 0.72*    $1,171*     $ 0.72*       N/A       N/A
  Trace
  Phase II(1)

  River Oaks        $  820    $ 0.64     $  859    $ 0.67     $  910      $ 0.71     $  910      $ 0.71     $  930     $0.73

  Rosewood          $  814    $ 0.64     $  858    $ 0.68     $  917      $ 0.72     $  917      $ 0.72     $  946     $0.75
  Plantation

  Preston Oaks      $  885    $ 0.71*    $  892    $ 0.72     $  981      $ 0.79     $  981      $ 0.79     $  994     $0.82

  Highland Park     $  819*   $ 0.67*    $  805    $ 0.65     $  920      $ 0.75     $  920      $ 0.75     $  950     $0.77

  Crestmark         $  688    $ 0.67     $  736    $ 0.72     $  787      $ 0.73     $  787      $ 0.73     $  807     $0.75

  Crestmark            N/A       N/A        N/A       N/A        N/A         N/A        N/A         N/A        N/A       N/A
  Phase II(2)

  Ivey Brook           N/A       N/A     $  925*   $ 0.69*    $  979      $ 0.73     $  979      $ 0.73     $1,014     $0.75

  Preston Oaks         N/A       N/A        N/A       N/A     $  799*     $ 0.83*    $  799*     $ 0.83*       N/A       N/A
  Phase II(1)

  Bradford             N/A       N/A        N/A       N/A     $  926*     $ 0.68*    $  926*     $ 0.68*    $  949     $0.70
  Creek(3)
</TABLE>

---------------
(1)  Plantation Trace Phase II completed its lease-up phase in November 1998
     and Preston Oaks Phase II completed its lease-up in August 1998. Beginning
     with 1999, both phases of Plantation Trace and Preston Oaks are combined.
(2)  We acquired Crestmark in June 1996. Phase II of Crestmark completed its
     lease-up in September 1997. Beginning with 1998, both phases of Crestmark
     are combined.
(3)  Bradford Creek completed its lease-up in August 1998.


                                      11
<PAGE>   13
         As described below, our Atlanta communities are located in Gwinnett,
Fulton and Douglas Counties and six submarkets, or geographic areas, within
these counties. We also have one community in Charlotte. The Ballantyne
community now under construction in Charlotte is described after the Georgia
properties. Each heading identifies the community or communities within the
specified county and submarket. We obtained population and employment data for
each Atlanta submarket from the ARC. Multiple communities are located in each
of the Duluth, Peachtree Corners and Perimeter Center/North Springs submarkets;
thus those communities compete not only with unaffiliated apartment communities
but also with each other. Please see "Summary of Debt Secured by the
Communities," which follows the description of the individual communities, for
an explanation of the terms of our secured indebtedness.

GWINNETT COUNTY

          Gwinnett County was one of the fastest growing counties in the U.S.
in the 1980's, and from 1985 until 1990 it ranked first in the nation in growth
among counties with a population of more than 100,000. Since 1990, Gwinnett's
population has increased 47% to a current level of 523,900. Gwinnett's strong
employment base, transportation networks, excellent public education system and
affordable home prices contribute to the county's remarkable growth. Gwinnett
is home to approximately 250 international firms, over 700 manufacturing and
480 high technology firms that generate many of its 254,600 jobs. Since 1990,
Gwinnett has added 102,600 jobs, which is second only to Fulton county in the
Atlanta region. The average household income of the county is approximately
$67,000. Gwinnett County is home to communities located in the City of Duluth,
Peachtree Corners and unincorporated Gwinnett.

     Duluth Area - Plantation Trace, River Oaks, and Bradford Creek Communities

         Duluth. The City of Duluth is located in central Gwinnett County and
is home to the Plantation Trace, River Oaks, and Bradford Creek communities.
Duluth has exceeded even Gwinnett County as a whole in percentage of population
growth; its population has increased more than 200% since 1980. Duluth is
located near I-85 and Gwinnett Place Mall, a 1,100,000 square foot regional
mall.

         Plantation Trace. Plantation Trace is a 232-unit garden apartment
community that was completed in two phases: a 182-unit first phase in 1990 and
a 50-unit second phase in 1998, sometimes referred to below as Phase II.
Plantation Trace consists of 31 two and three story Nantucket-style stone and
wood sided buildings located on a 29.2-acre site on Pleasant Hill Road
approximately one-half mile west of its intersection with Peachtree Industrial
Boulevard. In 1990, the 182-unit first phase received the Aurora Award from the
Southeast Builders' Conference for "Best Rental Apartment Community in the
Southeast."

         The Plantation Trace community, with its award-winning traditional
architecture and landscaped grounds, features a clubhouse, a modern fitness and
exercise facility, two lighted tennis courts, sand volleyball court,
multi-station playground, two free-form swimming pools, a small wading pool, a
stone paver pool deck and a covered whirlpool spa. In addition to upscale
amenities, Plantation Trace offers such interior features as nine foot
ceilings, crown molding, pickled wood cabinetry in the kitchen and bath, marble
vanity tops, fireplaces, vaulted ceilings and Palladian windows in select
units, designer wallcoverings and full laundry rooms with washer and dryer
connections. Phase II provides the Plantation Trace community direct access to
the Chattahoochee River, as well as to jogging trails around the existing lake
and nature areas along the river.

         Plantation Trace has a variety of floor plans, including 28 one
bedroom units ranging from 901 to 929 square feet, 48 two bedroom standard and
66 two bedroom roommate units ranging from 1,228 to 1,298 square feet, and 40
three bedroom units ranging from 1,471 to 1,494 square feet. Phase II contains
7 one bedroom units of approximately 966 square feet each, 6 two bedroom units
of approximately 1,433 square feet each, 18 two bedroom townhouses of
approximately 1,490 square feet each, 12 three bedroom townhouses of
approximately 1,948 square feet each, 7 four bedroom townhouses of
approximately 2,314 square feet each, and 33 garages of 200 square feet each.
The weighted average unit size is 1,340 square feet. As of December 31, 1999,
rental rates ranged from $730 to $1,750 per month, with a weighted average
monthly rent of $974 per unit and $0.73 per square foot. Local real estate
taxes were $228,000 in 1999. The physical occupancy rate for the entire
Plantation Trace community as of December 31, 1999 was 85.3%.


                                      12
<PAGE>   14
         River Oaks. River Oaks, which was completed in 1992, consists of 22
two and three story Charleston-style brick and wood sided buildings located on
a 31.6 acre site on Pleasant Hill Road adjacent to the Chattahoochee River to
the west and the Plantation Trace community to the east. The River Oaks
community, with its traditional architecture and landscaped grounds, features a
large clubhouse with a fitness center, two lighted tennis courts, sand
volleyball court, multi-station playground, free-form swimming pool, stone
paver pool deck, and whirlpool spa. In addition to upscale amenities, River
Oaks offers such interior features as nine foot ceilings, crown molding, garden
tubs, pickled pine cabinetry in the kitchen and bath, marble vanity tops,
fireplaces and vaulted ceilings in select units, designer wallcoverings, and
full laundry rooms with washer and dryer connections.

         River Oaks has a variety of floor plans, including 40 one bedroom
units at approximately 907 square feet, 32 two bedroom roommate units, 24 two
bedroom deluxe units and 48 two bedroom standard units ranging from 1,276 to
1,309 square feet, and 72 three bedroom units with approximately 1,457 square
feet. The weighted average unit size is 1,278 square feet. As of December 31,
1999, the community was 92% occupied, and rental rates ranged from $790 to
$1,085 per month, with a weighted average monthly rent of $940 per unit and
$0.74 per square foot. Local real estate taxes were $205,000 in 1999.

         Bradford Creek. Bradford Creek, which was completed in 1998, consists
of 9 two and three story buildings located on an approximately 22.5 acre
property near the southeast corner of Peachtree Industrial Boulevard and Howell
Ferry Road in Duluth, approximately one-mile southeast of Plantation Trace and
River Oaks. The Bradford Creek community, with its unique mountain lodge
architecture and traditional landscaping, features a large clubhouse with a
fitness center, clubroom, laundry room, two lighted tennis courts, free-form
swimming pool, stone paver pool deck, a 12-acre nature area, a courtyard
highlighted by a water fountain, and a gated entrance. In addition to the
upscale amenities, Bradford Creek offers such interior features as nine foot
ceilings and a computer room in select units, crown moldings, garden tubs,
white raised-panel cabinetry in the kitchen and bath, marble vanity tops,
breakfast bars, designer wallcoverings, and full laundry rooms with washer and
dryer connections. Each building was constructed using cobblestone and vinyl
siding and offers private patios or balconies along with gables and varying
paint colors.

         Bradford Creek contains 28 one bedroom units of approximately 1,001
square feet each, 46 two bedroom standard units of approximately 1,302 square
feet each, 47 two bedroom roommate units of approximately 1,344 square feet
each, and 59 three bedroom units of approximately 1,589 square feet each. The
weighted average unit size is 1,355 square feet. As of December 31, 1999, the
community was 88% occupied, and rental rates ranged from $815 to $1,170 per
month, resulting in a weighted average monthly rent of $968 per unit and $0.71
per square foot. Local real estate taxes were $180,000 in 1999.

     Peachtree Corners Area - Rosewood Plantation and Ivey Brook Communities

         Peachtree Corners. Located in west Gwinnett County, Peachtree Corners
benefits from the existing transportation networks, employment
resources and consumer conveniences in the area. Over 400 companies are located
in the Peachtree Corners area, occupying more than 4,500,000 square feet of
office and distribution space and providing Gwinnett County with approximately
35% of its total jobs. Peachtree Corners' most prominent office/institutional
development is Technology Park/Atlanta, which has become the premier location
in Georgia for national and international high tech companies. With over
2,100,000 square feet of space occupied by more than 70 firms, approximately
4,500 people are employed at Technology Park/Atlanta. The area is within eight
miles of three regional shopping malls, each containing over 1,000,000 square
feet of retail space.

         Rosewood Plantation. This community, which was completed in May 1994,
targets the upper tier of the apartment resident market. The 152-unit community
is located on Spalding Drive just southwest of Holcomb Bridge Road on a 21-acre
site. Since 1989, each of the elementary, middle and high schools serving the
community has been designated as the Gwinnett County School of Excellence by
the Gwinnett County Board of Education for at least one year, and the middle
school has been designated as a Georgia School of Excellence by the Georgia
Department of Education and a National Blue Ribbon School of Excellence by the
U.S. Department of Education. Due partly to the highly regarded public school
system in the area, Rosewood Plantation is an attractive choice for
white-collar


                                      13
<PAGE>   15
professionals and families who choose the rental lifestyle. Rosewood Plantation
is composed of 7 two and three story buildings with brick accents and wood
siding.

         Rosewood Plantation has 29 one-bedroom units with 914 square feet, 45
two bedroom standard units with 1,247 to 1,276 square feet, 43 two-bedroom
roommate units with 1,310 square feet, and 35 three-bedroom units with 1,510
square feet. The weighted average unit size is 1,265 square feet. As of
December 31, 1999, the community was 98% occupied, and rental rates ranged from
$830 to $1,180, resulting in a weighted average monthly rent of $960 per unit
and $0.76 per square foot. Local real estate taxes were $128,000 in 1999.

         Rosewood Plantation's amenities include a clubhouse offering an
exercise room with weight equipment, and a clubroom with a big screen
television and bar with kitchen facilities. The recreational area includes a
free-form swimming pool with stone paver deck, lighted tennis court, children's
playground, walking trails through the nature area, and a two-acre lake.

         Each building is patterned after the architecture of Charleston,
featuring columned porches, transom windows, and distinctive gables. The
interior of each apartment home offers high-end finishes such as crown molding,
garden tubs, marble vanity tops, bay windows, and large walk-in closets.

         Ivey Brook. The Ivey Brook community consists of 146 upscale apartment
units in 12 buildings located on an 11.8 acre site at the intersection of
Holcomb Bridge Road and Peachtree Corners Circle in the Peachtree Corners area.
Ivey Brook benefits from its excellent location at a major intersection amidst
an established multifamily market area in close proximity to Gwinnett County's
largest employment base.

         Ivey Brook has 13 one-bedroom units with approximately 956 square
feet, 36 two bedroom standard units with approximately 1,231 square feet, 50
two-bedroom roommate units with approximately 1,321 square feet, and 47
three-bedroom units with approximately 1,546 square feet. The weighted average
unit size is approximately 1,350 square feet. As of December 31, 1999, Ivey
Brook was 95% occupied, and its rental rates ranged from $875 to $1,230,
resulting in a weighted average monthly rent of $1,032 per unit and $0.76 per
square foot. Local real estate taxes were $128,000 in 1999.

         The buildings are of traditional design with brick accents and vinyl
siding with the facades varying from building to building. Exterior features
include gables, bay windows, varying paint colors with white trim, and private
patios or balconies. Extensive landscaping includes mature trees, flowers, and
shrubbery. The interior features include crown molding in the living/dining
rooms, designer wallcoverings, separate laundry rooms, breakfast bars, garden
tubs, and private balconies, and the three bedroom units feature a separate
computer room with a built-in desk, cabinetry, and wiring. Recreational
amenities include a swimming pool and fitness center.

     Unincorporated Gwinnett - Old Norcross

         The Old Norcross community will be located on a 35.3 acre site at the
intersection of Old Norcross Road and Herrington Road in unincorporated
Gwinnett County near the western Lawrenceville area. This community will have
approximately 249 garden-style apartments. We have not determined the unit mix
or developed an estimate of the construction costs. The site for the community
is located near I-85, GA-316 and Gwinnett Place Mall, an 1,100,000 square foot
regional mall.


                                      14
<PAGE>   16
FULTON COUNTY

         Fulton County is the largest county in the Atlanta Region in terms of
population, employment, housing units and land area. Between 1990 and 1998,
Fulton's net population increase, 102,500 persons, ranked second in the region
behind Gwinnett County. Fulton County added 96,600 jobs between 1990 and 1998,
which led the region.

     Perimeter Center/North Springs Area - Preston Oaks and Highland Park
     Communities

         Perimeter Center/North Springs. The Perimeter Center/North Springs
area offers convenient proximity and access to both urban and suburban
employment bases and retail conveniences. Georgia 400 and I-285 provide direct
access within minutes to major regional malls such as North Point Mall and
Perimeter Center Mall. The Phipps Plaza/Lenox Mall/Buckhead area and downtown
Atlanta's Central Business District are readily accessible via the Georgia 400
extension, which connects to I-85 South near downtown Atlanta.

         Within this corridor is a large base of residential, commercial and
office developments. The south quadrant of the area includes medical facilities
such as Northside Hospital, St. Joseph's Hospital and Egleston Scottish Rite
Children's Hospital. Perimeter Center encompasses office developments that
exceed 18,500,000 square feet of space, with such upscale facilities as
Ravinia, Northpark Town Center, Concourse and Perimeter Center Office Park.
Several prominent companies such as Holiday Inn, UPS, and Hewlett-Packard have
located their worldwide or regional headquarters within the Perimeter Center
area.

         This area, which includes portions of Fulton and DeKalb Counties, has
an average household income of approximately $73,000, which is considerably
higher than the metropolitan Atlanta average of $44,913. The median value of a
single-family home in this area exceeds $200,000.

         Preston Oaks. Preston Oaks is a 213-unit garden apartment community
that was completed in two phases: a 189-unit first phase in August 1995, and a
50-unit second phase in 1998. Preston Oaks consists of nine two and three story
buildings located on Mt. Vernon Highway in the Perimeter Center area. The
traditional architecture consists of stacked stone and vinyl siding
incorporating details of gabled roofs, Palladian windows, columns, and bay
windows.

         The community is located on a 11.5-acre site and features extensive
landscaping. The amenities are similar to those of the other existing
communities, with custom swimming pool, lighted tennis court, fitness center
with individual workout stations, and a large clubhouse. Interior features
include garden tubs, oversized walk-in closets, pickled pine cabinetry in the
kitchen and bath, crown molding, mirrored walls, and chair railing in the
dining rooms. Phase one consists of 36 one-bedroom units, 92 two-bedroom units,
and 61 three-bedroom units. Phase two consists of 24 one bedroom apartment
units with 959 square feet each.

         Preston Oaks is conveniently located less than one mile from Perimeter
Mall, a 1,200,000 square foot regional mall, and in close proximity to the
area's numerous office developments. Several stand-alone restaurants and major
retail centers either exist or are being developed near the community.

         As of December 31, 1999, Preston Oaks was 96% occupied, and its rental
rates ranged from $860 to $1,260 per month, resulting in a weighted average
monthly rent of $1,021 per unit and $0.85 per square foot. Local real estate
taxes were $231,000 in 1999.

         Highland Park. This community consists of 188 upscale apartment units
in a total of eight buildings on a 10.9-acre site. Located on Dunwoody Place in
the North Springs area of Sandy Springs, Highland Park benefits from its close
proximity to Georgia 400, which provides direct access within minutes to major
retail and employment areas to the north such as North Point Mall and the
Windward mixed use project, and to the south such as Perimeter Mall and
Perimeter Center.


                                      15
<PAGE>   17
         Highland Park has 42 one-bedroom units with 902 square feet, 32 two
bedroom standard units with 1,225 square feet, 62 two-bedroom roommate units
with 1,285 square feet, and 52 three bedroom units with 1,440 square feet. The
weighted average unit size is 1,232 square feet.

         The buildings are of a traditional design with stacked stone accents
and vinyl siding with the facades varying from building to building. Exterior
features include gables, bay windows, various paint colors with white trim, and
private patios or balconies. Extensive landscaping includes mature trees,
flowers and shrubbery. The interiors feature crown molding in the living/dining
rooms, designer wallcoverings, separate laundry rooms, breakfast bars, garden
tubs and private balconies. Recreational amenities include a swimming pool,
tennis court, and fitness center.

         As of December 31, 1999, Highland Park was 95% occupied and its
monthly rental rates ranged from $815 to $1,180 per month, resulting in a
weighted average monthly rent of $967 per unit and $0.79 per square foot. Local
real estate taxes were $180,000 in 1999.

     Alpharetta Area - Addison Place Community

         Alpharetta. The Alpharetta area offers convenient proximity and access
to both urban and suburban employment bases and retail conveniences. Georgia
400 provides direct access within minutes to major regional malls such as North
Point Mall and Perimeter Center Mall. The Phipps Plaza/Lenox Mall/Buckhead area
and downtown Atlanta's Central Business District are readily accessible via the
Georgia 400 extension, which connects to I-85 South near downtown Atlanta.

         Within this corridor is a large base of residential, commercial and
office developments. North Point Mall's success accelerated the already high
rate of residential development, which caters to the upscale consumer. North
Fulton's prestigious neighborhoods have been a major factor in the emergence of
the Georgia 400 corridor as a center for corporate headquarters. Between 1990
and 1999, North Fulton added 92,314 residents, and 41,401 housing units.
Between 1990 and 1997, North Fulton added 59,469 jobs. The Windward project,
which straddles Georgia 400, is the region's largest mixed-use development.

         Addison Place Phase I. The 118-unit first phase of Addison Place is
located on 19.2 acres on Abbotts Bridge Road near the intersection of Abbotts
Bridge and Jones Bridge roads. This first phase contains 60 two bedroom
townhouses of approximately 1,497 square feet each and 58 three bedroom
townhouses of approximately 1,903 square feet each. As of December 31, 1999,
the first phase of Addison Place was 56% occupied and rental rates ranged from
$1,140 to $1,495 per month, with a weighted average monthly rent of $1,313 per
unit and $0.77 per square foot. The architectural style, land planning,
landscaping and amenities of this first phase are similar to those of our other
communities.

         The construction of this first phase was completed under a cost-plus
10% construction contract with Roberts Properties Construction providing for 5%
profit and 5% overhead. The total cost of construction, including the fee to
Roberts Properties Construction, was approximately $9,611,000. We anticipate
that there was approximately $874,000 in net profit to Roberts Properties
Construction on the construction contract. We funded the development and
construction of this first phase from our working capital and a $9,500,000
construction loan.

         Addison Place Phase II. The second phase of Addison Place will contain
285 garden-style apartment homes. It will include 11 different floor plans,
including 60 one bedroom ranging from 765 to 1,034 square feet, 147 two bedroom
units ranging from 1,150 to 1,550 square feet, 58 three bedroom units at
approximately 1,706 square feet, and 20 four bedroom units at approximately
2,074 square feet, along with 40 direct-entry garages. The weighted average unit
size will be 1,415 square feet. The architectural style, land planning, and
landscaping of Phase II will be similar to Phase I. The amenities in Phase II
will feature a free-from swimming pool, 2 tennis courts, a modern fitness and
exercise facility, a business center, mens and womens saunas, and a playground.

DOUGLAS COUNTY

         Douglas County, one of the 10 counties in the Atlanta Region, is
located west of Atlanta and encompasses 202 square miles. The county is
surrounded by Fulton, Cobb, Carroll and Paulding Counties, with the
Chattahoochee River as its southeastern border. Its population was estimated at
93,500 in 1999, an increase of 30% since 1990. Between 1990 and 1998, Douglas
County added 9,150 jobs and between 1990 and 1999, the county added 21,800


                                      16
<PAGE>   18
persons and 8,300 housing units. Douglas County benefits from its accessibility
to downtown Atlanta to the east via I-20 and to Hartsfield International
Airport to the southeast via Thornton Road/Camp Creek Parkway. Just across the
county line to the east lies the Fulton Industrial District, the Southeast's
largest contiguous industrial park. The Fulton Industrial District consists of
more than 50,000,000 square feet of both manufacturing and warehouse space and
stretches six miles north and south along Fulton Industrial Boulevard. It
represents 20% of Atlanta's total inventory of warehouse/industrial space, and
an additional 1,000,000 square feet is under construction. Numerous Fortune 500
companies are represented in the Fulton Industrial District, employing more
than 100,000 people.

     Thornton Road/I-20 Area - Crestmark Community

         Thornton Road/I-20 Area. Thornton Road is the third exit west of I-285
on I-20 and connects I-20 with Hartsfield International Airport to the
southeast and the significant residential base of Douglas, West Cobb and
Paulding counties to the north and east. Several office and business parks that
total more than 2,000,000 square feet of space and house corporations such as
BellSouth, Mitsubishi, Robert Bosch Corporation, TDK Electronics, and
Saab-Scania contribute to a large employment base of approximately 20,000
people within the Thornton Road area. Restaurant, hospitality and retail
conveniences support the existing employment and residential base in the
Thornton Road corridor. The area also benefits from its close proximity to the
Fulton Industrial District as well as the Six Flags Over Georgia amusement
park, both of which are less than three miles away. At the northwest corner of
the Thornton Road/I-20 interchange is the Columbia/HCA Parkway Medical Center,
a 320-bed acute care medical facility that employs approximately 600 people.

         Crestmark. Crestmark is a 334-unit garden apartment community that was
completed in two phases: a 248-unit first phase in 1993 and an 86-unit second
phase in 1997. Crestmark consists of 16 three and four story stacked stone and
wood sided buildings, 17 garages and 24 storage units located on a 32.2 acre
site on Thornton Road, approximately one-half mile north of its intersection
with I-20 in Douglas County. In 1993, Crestmark received two Aurora Awards from
the Southeast Builders' Conference, one for "Best Landscape Design in the
Southeast" and another for "Best Recreational Facility in the Southeast."

         The Crestmark community, with its award-winning traditional
architecture and landscaped grounds, features a large 14,000 square foot
clubhouse with a club room, full kitchen, fitness center and aerobics room, a
business center and conference room, two lighted tennis courts, multi-station
playground, walking and jogging trail, two free-form swimming pools, stone
paver pool decks and a whirlpool spa. In addition to the upscale amenities,
Crestmark offers such interior features as nine foot ceilings, crown and
chair-rail molding, pickled wood cabinetry in the kitchen and baths, marble
vanity tops, fireplaces, vaulted and trey ceilings, Palladian and bay windows
in select units, designer wallcoverings and full laundry rooms with washer and
dryer connections.

         Crestmark has a variety of floor plans including 29 one bedroom
standard units with 704 square feet, 50 one bedroom deluxe units with 816
square feet, 19 one bedroom units of 901 square feet in the second phase, 33
two bedroom standard units with 1,005 square feet, 86 two bedroom deluxe units
with 1,110 square feet, 21 two bedroom standard units of 1,223 square feet in
the second phase, 22 two bedroom roommate units of 1,285 square feet in the
second phase, 50 three bedroom units with 1,295 square feet and 24 three
bedroom units of 1,437 square feet in the second phase. The weighted average
unit size is 1,079 square feet. As of December 31, 1999, the community was 93%
occupied, and rental rates ranged from $675 to $1,025 per month, with a
weighted average monthly rent of $830 per unit and $0.77 per square foot. Local
real estate taxes were $202,000 in 1999.

CHARLOTTE, NORTH CAROLINA - BALLANTYNE

         The following information is based on statistics and estimates
published by the Charlotte Chamber of Commerce. During the last ten years,
Charlotte's population grew by 24%, which was well above the national growth
rate of 9%. Since 1986, employment in Charlotte has grown 29%, compared to the
U.S. growth of 14%. Nine of the nation's top 200 banks operate in Charlotte,
including Bank of America, N.A. (which is the nation's largest bank) and First
Union Corporation. Other major employers include Carolinas Healthcare System,
Charlotte-Mecklenburg School System, Duke Energy Corporation and USAirways.
Additionally, nearly 300 of the nation's largest industrial


                                      17
<PAGE>   19
and service corporations listed by FORTUNE magazine have facilities in the
area. Education is a top priority in the area as evidenced by The
Charlotte-Mecklenburg School System recently receiving a national Community
Award for Excellence in Education.

         The Ballantyne community will be located on a 23.8 acre site at the
intersection of Lancaster Highway (old NC-521) and John J. Delaney Drive. The
Ballantyne area is the largest mixed-use development in Mecklenburg County. This
community will have 319 garden-style apartments. The Ballantyne community will
consist of 110 one-bedroom units ranging from 765 square feet to 1,034 square
feet, 143 two-bedroom units ranging from 1,150 square feet to 1,550 square feet,
48 three-bedroom units at 1,706 square feet, and 18 four-bedroom units at 2,074
square feet, along with 36 direct-entry garages. We have not developed a final
estimate of the construction cost. The community is located near I-485 and I-77,
which offers convenient access to downtown Charlotte and I-85.

         The table on the following page summarizes the amenities of each of
the existing communities and Addison Place Phase II, which is now under
construction. We have not yet fully determined the specific amenities of the
Ballantyne and Old Norcross communities.


                                      18
<PAGE>   20

                                      SUMMARY OF AMENITIES OF THE COMMUNITIES

<TABLE>
<CAPTION>

                                                                                         CLUB-
                            PATIO,   WASHER                                              HOUSE
                            PORCH    & DRYER   GARDEN      FIRE-    VAULTED   SWIMMING   FITNESS
    COMMUNITY              BALCONY  HOOK-UPS    TUBS      PLACES*  CEILINGS*    POOL     CENTER
    ---------              -------  --------    ----      ------   ---------    ----     ------

Existing Communities:

<S>                        <C>      <C>        <C>        <C>      <C>        <C>        <C>
Plantation                   Yes       Yes     Yes(1)     Yes(2)      Yes        Yes       Yes
Trace


River Oaks                   Yes       Yes       Yes       Yes        Yes        Yes       Yes


Rosewood                     Yes       Yes       Yes        No         No        Yes       Yes
Plantation

Preston Oaks                 Yes       Yes       Yes        No        Yes        Yes       Yes

Highland                     Yes       Yes       Yes        No        Yes        Yes       Yes
Park

Crestmark                    Yes       Yes       Yes       Yes        Yes        Yes       Yes


Ivey Brook                   Yes       Yes       Yes        No        Yes        Yes       Yes

Bradford Creek               Yes       Yes       Yes        No        Yes        Yes       Yes

Addison Place                Yes       Yes       Yes        No         No        Yes       No
Phase I

Communities Under Construction:

Addison Place                Yes      Yes       Yes        Yes         No        Yes       Yes
Phase II


<CAPTION>

                                                    SAND
                            WHIRL-  CAR   TENNIS   VOLLEY-  PLAY-   LAUNDRY
    COMMUNITY               POOL    WASH  COURT(S)   BALL   GROUND    ROOM     OTHER
    ---------               ----    ----  --------   ----   ------    ----     -----

Existing Communities:

<S>                         <C>     <C>   <C>      <C>      <C>     <C>       <C>
Plantation                  Yes(2)   Yes    Yes-2     Yes     Yes     Yes     Riverfront.
Trace                                                                         Lake, Nature
                                                                              Preserve

River Oaks                  Yes      Yes    Yes-2     Yes     Yes     Yes     Riverfront,
                                                                              Nature Preserve

Rosewood                     No      Yes    Yes-1      No     Yes     Yes     Lake,
Plantation                                                                    Nature Preserve

Preston Oaks                 No      Yes    Yes-1      No      No     Yes

Highland                     No      Yes    Yes-1      No     Yes     Yes
Park

Crestmark                   Yes      Yes    Yes-2      No     Yes     Yes     Nature Preserve,
                                                                              Jogging Trail

Ivey Brook                   No      Yes     No        No      No     Yes

Bradford Creek               No      Yes    Yes-2      No     Yes     Yes     Nature Preserve

Addison Place                No      Yes    Yes-1      No      No     Yes     Lake,
Phase I                                                                       Nature Trail

Communities Under Construction:

Addison Place                No      Yes    Yes-2      No     Yes     Yes     Lake,
Phase II                                                                      Nature Trail
</TABLE>

-------------------
* In select units
(1)      Phase II only.

(2)      Phase I only.


                                      19
<PAGE>   21
COMPETITION

         All of the communities are located in developed areas, and numerous
other apartment projects are located within the market area of each community.
The number of competitive apartment communities in the area could have a
material adverse effect on our ability to lease our apartments at the rental
rates anticipated, and we can give no assurances regarding the development of
additional competing multifamily communities in the future. The remainder of
this section summarizes the competition for each of the communities. The
following information reflects our study of apartment communities in each
submarket that we believe to be closely competitive with our community or
communities within that submarket. This section includes summary information we
obtained from various sources - including developers and real estate brokers,
as well as on-site visits - regarding those apartment communities. Although we
have attempted to verify the information and believe that it is substantially
accurate on the whole, information regarding a particular community may be
incorrect due to the sources relied upon or erroneous information supplied by
competitors.

         Plantation Trace, River Oaks, and Bradford Creek. The Duluth
submarket, which we consider to include the area within a two mile radius from
these communities, currently consists of 17 multifamily communities, including
River Oaks, Plantation Trace, and Bradford Creek. Although the Bridgewater
apartment community - which was previously developed and sold by an affiliate
of Mr. Roberts - is located more than two miles from Plantation Trace, it is
also included in the Duluth market area because it offers units with attached
garages and its architecture and amenities are similar to Plantation Trace. Of
the 17 existing communities in the area, five were completed in the last two
years, including Bradford Creek and the second phase of Plantation Trace. Due
to the quality of construction, age of the communities, type of amenities,
resident profiles and rental rates, we believe that only nine of the other 14
communities are in direct competition with Plantation Trace, River Oaks and
Bradford Creek.

         Rosewood Plantation and Ivey Brook. The Peachtree Corners multifamily
submarket, which we believe includes the area within a three mile radius from
these two communities, currently consists of 27 multifamily communities,
including Rosewood Plantation and Ivey Brook. Of the 27 existing communities in
the market area, only eight have been built since 1988. The remaining
communities range from approximately 13 to over 20 years old. We believe that
Rosewood Plantation and Ivey Brook draw residents from all of the other 25
communities located in the market area but that only six of the 25 communities
compete closely with Rosewood Plantation and Ivey Brook.

         Preston Oaks. We believe that the north central Perimeter multifamily
submarket includes the area within a two-mile radius around this community. It
is generally bounded by Roswell Road to the west, Ashford Dunwoody Road to the
east, Spalding Drive to the north and Glenridge Drive to the south, and it
currently consists of 25 multifamily communities, including Preston Oaks. Of
the 24 other existing communities in the market area, only six were built
before 1983. The remaining 18 communities range from approximately one to eight
years of age. We believe that Preston Oaks competes with all 24 of these
communities.

         Highland Park. We believe the North Springs multifamily submarket
includes the area within an approximately two-mile radius around this community.
It is generally bounded by the Chattahoochee River to the north and west,
Georgia 400 to the east and Dalrymple Road to the south, and currently consists
of 34 communities, including Highland Park. Of the 34 existing communities in
the market area, only five have been built since 1989. The remaining communities
range in age from 12 years to over 20 years. We believe that Highland Park will
draw residents from all of the other 33 communities located in the market area,
but that only 11 of the 33 communities will compete closely with Highland Park.

         Crestmark. We consider the Thornton Road multifamily submarket to be
the area within an approximately two-mile radius around the Crestmark
community. It is generally bounded by I-20 to the south, Blairs Bridge Road to
the east, and Georgia Highway 78 to the north and west, and it currently
consists of eight communities, including Crestmark. Of the eight existing
communities in the market area, four have been built since 1990. We believe
that Crestmark will draw residents from all of the seven other communities
located in the market area, but due to their amenities, quality of construction
and resident profile, only five of the seven other communities will compete
closely with Crestmark.

         Addison Place. We believe the Alpharetta multifamily submarket
includes the area within an approximately two-mile radius around the Abbotts
Bridge community. It is generally bounded by the Chattahoochee River to the
east,


                                      20
<PAGE>   22
Old Alabama to the south, Georgia 400 to the west, and Windward Parkway to the
north, and it currently consists of 15 communities, including Addison Place. We
believe that Addison Place will draw residents from all of the 14 other
communities located in the market area, but due to their amenities, quality of
construction and resident profile, only 13 of the 14 other communities will
compete closely with Addison Place.

         Ballantyne. We consider the Ballantyne multifamily submarket to
include the area within an approximately two-mile radius around the community.
It is generally bounded by the Princeton Road to the east, Providence Road West
to the south, Lancaster Highway (old NC-521) to the west, and I-485 to the
north, and it currently consists of nine communities, including Ballantyne. We
believe that once construction of Ballantyne is complete, it will draw
residents from all of the eight other existing communities located in the
market area and will compete with the four communities under construction in
the market area.

         Old Norcross. We believe the Old Norcross multifamily submarket
includes the area within an approximately two-mile radius around the Old
Norcross community. It is generally bounded by Herrington Road to the east,
Club Drive to the south, Steve Reynolds Boulevard to the west, and Sugarloaf to
the north and east, and it currently consists of 24 communities, including Old
Norcross. We believe that Old Norcross will draw residents from all of the 23
other communities located in the market area, but due to their amenities,
quality of construction and resident profile, only 15 of the 23 other
communities will compete closely with Old Norcross.

SUMMARY OF DEBT SECURED BY THE COMMUNITIES

         Information regarding our indebtedness secured by the communities is
as follows:


<TABLE>
<CAPTION>
                         Principal                           Principal         Fixed                            Monthly
                         Balance at           Maturity       Balance at       Interest    Amortization       Principal and
   Community           Dec. 31, 1999            Date          Maturity          Rate        Schedule        Interest Payment
   ---------           -------------         ----------     ------------     ----------  ---------------    ----------------

<S>                    <C>                    <C>          <C>                <C>         <C>               <C>
Plantation Trace        $ 11,760,000          10-15-08     $ 10,313,000(1)      7.09%        30-year         $   79,892
River Oaks                 8,946,000          11-15-03        8,513,000(2)      7.15         30-year             62,475
Rosewood Plantation        7,973,000          07-15-08        6,939,000(1)      6.62         30-year             51,838
Preston Oaks               8,313,000          10-15-02        8,025,000(2)      7.21         30-year             59,188
Highland Park              7,844,000          02-15-03        7,544,000(2)      7.30         30-year             56,066
Ivey Brook                 6,228,000          02-15-07        5,570,000(2)      7.14         30-year             43,318
Crestmark                 15,778,000          10-01-08       13,690,000(3)      6.57         30-year            101,869
Bradford Creek             8,273,000          06-15-08        7,290,000(2)      7.15         30-year             56,734
Addison Place Ph. I        9,500,000          11-15-09        8,387,000(1)      6.95         30-year             55,021(4)
</TABLE>

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

(1)      Each of the loans secured by the Plantation Trace, Rosewood Plantation
         and Addison Place Phase I communities may be prepaid upon payment of a
         premium equal to the greater of (a) 1% multiplied by a fraction having
         as its numerator the number of months to maturity and its denominator
         the number of months in the full term of the loan, or (b) the present
         value of the loan less the amount of principal and accrued interest
         being repaid. Each loan may be prepaid in full during the last 30 days
         before its maturity date without any prepayment premium.

(2)      Each of the loans secured by the River Oaks, Preston Oaks, Highland
         Park, Ivey Brook and Bradford Creek communities may be prepaid in full
         upon payment of a premium equal to the greater of (a) 1% of the
         outstanding principal balance of the loan, or (b) the sum of the
         present value of the scheduled monthly payments to the maturity date
         and the present value of the balloon payment due on the maturity date,
         less the outstanding principal balance of the loan on the date of
         prepayment. Each loan may be prepaid in full during the last 90 days
         before its maturity date without any prepayment premium.


                                      21
<PAGE>   23
(3)      The loan secured by the Crestmark community may be prepaid upon the
         payment of a premium equal to the greater of (a) 1% of the outstanding
         principal balance, or (b) the product obtained by multiplying the
         amount of principal being prepaid by the excess (if any) of the
         monthly note rate over the assumed reinvestment rate by the present
         value factor. If the loan is prepaid after expiration of the yield
         maintenance period, but more than 90 days before the maturity date,
         the prepayment premium shall be 1% of the unpaid principal balance of
         the note. The loan may be prepaid in full during the last 90 days
         before its maturity date without any prepayment premium.

(4)      The loan secured by Addison Place Phase I includes interest only
         payments for the first year of $55,021 per month. Beginning with the
         December 2000 payment, the principal and interest payments will be
         $62,885 per month.

POSSIBLE ADDITIONAL COMMUNITIES TO BE DEVELOPED

         From time to time Roberts Properties plans the development of other
apartment communities to be located on property owned by Roberts Properties or
other affiliates of Mr. Roberts, or on property that one of those entities is
interested in acquiring. Mr. Roberts may elect to raise the required equity by
syndicating a limited partnership. Alternatively, we may seek to raise the
equity required to purchase and develop the community by selling shares. If Mr.
Roberts elects to raise equity through a limited partnership, Mr. Roberts may
seek to cause the partnership to be merged into the operating partnership at a
later date. A transaction of that nature would require the consent of a
majority in interest of the limited partners of the partnership and of a
majority of the disinterested members of our board of directors, and we can
give no assurances regarding whether Mr. Roberts will ultimately determine to
seek a merger in that manner, or whether such a merger would in fact be
approved by the requisite majority in interest of limited partners in the
partnership and by a majority of the disinterested members of the Board.

         As described above in "Part I, Item 1, Description of Business -
Growth Strategies - Development Strategy," three other multifamily apartment
communities that are anticipated to total 853 apartment homes are in the
development or construction stage.

OTHER REAL ESTATE ASSETS

         The operating partnership sold its two retail centers totaling 15,698
square feet on July 17, 1998 for $2,400,000 in cash resulting in a gain, net of
minority interest, of $300,000. Net sales proceeds were $2,182,000, after
deducting for closing costs and prorations of $218,000. We reinvested the net
proceeds in new apartment communities. The purchaser was unaffiliated with us,
and the transaction was negotiated at arms-length. The net book value of the
property was $1,715,000 at June 30, 1998. We paid Roberts Properties $92,500
for consulting fees in connection with the sale. The retail centers together
composed less than 1% of our assets and generated less than 2% of our gross
revenues for 1998.

ITEM 3.  LEGAL PROCEEDINGS.

         Neither Roberts Realty, the operating partnership, nor the communities
are presently subject to any material litigation nor, to our knowledge, is any
material litigation threatened against any of them. Routine litigation arising
in the ordinary course of business is not expected to result in any material
losses to us or the operating partnership.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         No matter was submitted to a vote of security holders during the
fourth quarter of 1999.


                                      22
<PAGE>   24


                                    PART II

ITEM 5.       MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.


         The common stock began trading on the American Stock Exchange, or
AMEX, on December 9, 1997 under the symbol "RPI." Before that date there was no
established public trading market for the common stock. The following table
sets forth the quarterly high and low closing sales prices per share reported
on the AMEX, as well as the quarterly dividends declared per share:

<TABLE>
<CAPTION>
                                                                                             Dividends
                           Quarter Ended                      High              Low          Declared
                           -------------                     -------          -------        ---------
                           <S>                               <C>              <C>            <C>
                           1998

                           First Quarter                     $9.4375          $8.2500        $0.1425
                           Second Quarter                     9.0000           8.2500         0.1450
                           Third Quarter                      8.9375           7.3750         0.1450
                           Fourth Quarter                     7.8750           7.0625         0.1450

                           1999

                           First Quarter                     $7.6250          $7.1250        $0.1500
                           Second Quarter                     7.7500           7.2500         0.1500
                           Third Quarter                      8.5000           7.5000         0.6500 *
                           Fourth Quarter                     7.8125           7.3125         0.1350
</TABLE>

         * Includes a special dividend of $0.50 per share.

         On March 1, 2000 there were approximately 900 holders of record of the
common stock.

         As of March 1, 2000, we had 4,840,075 shares outstanding. In addition,
2,563,691 shares are reserved for issuance to unitholders from time to time
upon their exercise of redemption rights as explained in "Part I, Item 1,
Description of Business The Operating Partnership." There is no established
public trading market for the units. As of March 1, 2000, the operating
partnership had 319 unitholders of record.

         We depend upon distributions from the operating partnership to fund
our distributions to shareholders. Distributions by the operating partnership,
and thus distributions by us, will continue to be at the discretion of the
board of directors and will be equal in amount for each unit and share. We and
the operating partnership declared quarterly distributions for 1999 that
totaled $1.085 per share/unit per annum (including a special distribution of
$0.50 per share/unit in August 1999 as a result of the sale of our Bentley
Place community) and for 1998 that totaled $0.5775 per share/unit per annum.
Approximately 11.39% of those 1999 distributions represented ordinary income,
19.70% represented capital gain and the remaining 68.91% represented a return
of capital.

         We elected to become a REIT beginning with the partial year ended
December 31, 1994. To maintain our qualification as a REIT under the Internal
Revenue Code, we must make annual distributions to shareholders of at least 95%
of our taxable income, which does not include net capital gains. Under some
circumstances, we may be required to make distributions in excess of cash
available for distribution to meet those distribution requirements.

         During the fourth quarter of 1999, we issued a total of 7,571 shares
of restricted common stock to seven employees as incentive compensation. The
restrictions on transfer lapse at specified dates ranging between three and
four years after the respective grant date. The grants were exempt from
registration as private placements under section 4(2) of the Securities Act. We
affixed appropriate legends to the share certificates we issued in these
transactions. All recipients of these securities had adequate access, through
their relationships with us, to information about us. All of these securities
are deemed to be restricted securities for purposes of the Securities Act.

                                      23
<PAGE>   25

ITEM 6.  SELECTED FINANCIAL DATA.

OPERATING DATA:
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                           YEARS ENDED DECEMBER 31,
                                                                                           ------------------------
                                                                           1999       1998         1997         1996      1995
                                                                         --------    -------     --------     --------    -------
<S>                                                                      <C>         <C>         <C>         <C>          <C>
OPERATING DATA:
Revenues:
   Rental operations                                                     $ 18,163    $ 16,521    $ 16,831    $  14,651    $ 6,677
   Other operating income                                                   1,221         833         741          546        289
                                                                         --------    --------    --------     --------    -------

     Total revenues                                                        19,384      17,354      17,572       15,197      6,966
                                                                         --------    --------    --------     --------    -------

Expenses:
   Property operating and maintenance expense (exclusive of
     depreciation and amortization) (1)                                     6,688       6,192       5,504        5,091      2,207
   Depreciation of real estate assets                                       5,529       5,017       5,708        4,974      2,326
   Management fees to related party (2)                                         0           0         211          760        347
   Interest expense                                                         5,244       4,555       4,670        3,724      2,006
   Interest income                                                           (159)       (384)       (395)        (353)      (277)
   Amortization of deferred financing costs                                   219         139         122          141        178
   Other amortization expense                                                  11          52          65           67         69
   General and administrative                                               1,964       1,727       1,714          926        430
   Acquisition of Roberts Properties Management, LLC (3)                        0           0       5,900            0          0
   Loss on disposal of assets                                                  81          94         156            0          0
                                                                         --------    --------    --------     --------    -------

     Total expenses                                                        19,577      17,392      23,655       15,330      7,286
                                                                         --------    --------    --------     --------    -------

   LOSS BEFORE MINORITY INTEREST, GAINS ON SALE OF
     REAL ESTATE ASSETS, AND EXTRAORDINARY ITEMS                             (193)        (38)     (6,083)        (133)      (320)
   MINORITY INTEREST OF UNITHOLDERS
     IN THE OPERATING PARTNERSHIP                                              70          15       2,646           52        141
                                                                         --------    --------    --------     --------    -------

   LOSS BEFORE GAINS ON SALE OF REAL ESTATE
     ASSETS AND EXTRAORDINARY ITEMS                                          (123)        (23)     (3,437)         (81)      (179)
   GAINS ON SALE OF REAL ESTATE ASSETS, net of minority interest
     of unitholders in the operating partnership                            1,023       1,218       1,012            0          9
                                                                         --------    --------    --------     --------    -------

   INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS                                   900       1,195      (2,425)         (81)      (170)
   EXTRAORDINARY ITEMS, loss on early extinguishment of debt, net
     of minority interest of unitholders in the operating partnership (4)    (184)       (487)       (184)         (99)      (102)
                                                                         --------    --------    --------     --------    -------

   Net income (loss)                                                     $    716    $    708    $ (2,609)   $    (180)   $  (272)
                                                                         ========    ========    ========     ========    =======

   INCOME (LOSS) PER COMMON SHARE - BASIC AND DILUTED:
     Income (loss) before extraordinary items                            $   0.19    $   0.26    $  (0.58)   $   (0.02)   $ (0.08)
     Extraordinary items                                                    (0.04)      (0.11)      (0.04)       (0.03      (0.05)
                                                                         --------    --------    --------     --------    -------
     Net income (loss)                                                   $   0.15    $   0.15    $  (0.62)   $   (0.05    $ (0.13)
                                                                         ========    ========    ========     ========    =======

   Dividends declared (5)                                                $ 1.0850    $ 0.5775    $ 0.5760    $  0.4813        N/A
                                                                         ========    ========    ========     ========    =======
</TABLE>

                                      24
<PAGE>   26

<TABLE>
<CAPTION>
                                                                      1999        1998        1997         1996         1995
                                                                   ---------   ---------   ---------     --------    ---------
   <S>                                                             <C>         <C>         <C>           <C>         <C>
   BALANCE SHEET DATA:
     Real estate assets, before accumulated depreciation           $ 128,898   $ 122,830   $ 111,778     $110,800    $  74,243
     Real estate assets, net of accumulated depreciation             107,869     105,916      98,337      101,885       70,303
     Total assets                                                    127,078     125,090     118,350      116,815       77,324
     Total debt                                                       88,850      79,973      67,951       63,342       44,019
     Minority interest of unitholders in the operating partnership    12,013      15,579      18,861       19,322       13,873
     Shareholders' equity                                             22,310      26,526      26,697       29,226       17,728


   OTHER DATA:
     Cash flow provided from (used in):
       Operating activities                                        $   5,917   $   5,295   $   5,469     $  5,567    $   1,799
       Investing activities                                           (7,003)    (18,235)     (1,537)     (16,309)     (21,119)
       Financing activities                                           (1,347)      9,929          23       12,500       19,716
                                                                   ---------   ---------   ---------     --------    ---------
     Net increase (decrease) in cash and cash equivalents             (2,433)     (3,011)      3,955        1,758          396
     Cash and cash equivalents, beginning of year                      4,106       7,117       3,162        1,404        1,008
     Cash and cash equivalents, end of year                            1,673       4,106       7,117        3,162        1,404

     Funds from operations (6)                                         5,417       5,114       5,746        4,908        2,075

     Weighted average common shares outstanding - basic            4,737,008   4,638,265   4,187,013    3,799,567    2,023,358
     Weighted average common shares outstanding - diluted          7,448,757   7,547,978   7,404,323    6,244,513    3,617,320

     Total stabilized communities (at end of year)                         9           9           9            9            7
     Total stabilized apartments (at end of year)                      1,779       1,778       1,756        1,731        1,366
     Average physical occupancy (stabilized communities) (7)           93.7%       96.3%       95.4%        97.2%        99.0%
</TABLE>


(1)          Property operating expenses include personnel, utilities, real
             estate taxes, insurance, maintenance, landscaping, marketing, and
             property administration expenses (real estate taxes include an
             adjustment of $588,000 in 1997 to reduce estimated property tax
             accruals for two properties that received favorable tax
             assessments).
(2)          Because we acquired Roberts Properties Management, LLC on April 1,
             1997, we paid no management fees to a related party after April 1,
             1997; however, we incurred additional general and administrative
             expenses as a result of managing our properties internally.
(3)          On April 1, 1997, we acquired Roberts Management,  the property
             management company that managed our multifamily apartment
             communities since our inception. The operating partnership issued
             590,000 units valued at $10.00 per unit or $5,900,000 to purchase
             Roberts Management. We manage our own properties using Roberts
             Management's property management systems and the property
             management personnel formerly employed by Roberts Management.
             Although we no longer pay 5% of gross property revenues to Roberts
             Management for property management services, we do bear the actual
             overhead cost of managing the properties internally. Because
             Roberts Management, a related party, managed only properties we
             owned, the transaction was accounted for as the settlement of a
             contract and expensed for the year ended December 31, 1997.
(4)          The extraordinary items resulted from costs associated with the
             early extinguishment of indebtedness. The extraordinary items have
             been reduced by the portion related to the minority interest of the
             unitholders.
(5)          We began paying dividends and distributions on our common stock and
             units beginning on April 15, 1996.
(6)          Funds from Operations, or FFO, is defined by the National
             Association of Real Estate Investment Trusts as net income (loss),
             computed in accordance with generally accepted accounting
             principles, excluding gains (or losses) from debt restructuring and
             sales of property and non-recurring items, plus real estate
             related depreciation and amortization. We use the NAREIT definition
             of FFO, which was adopted for periods beginning after January 1,
             1996. We consider FFO to be an important measure of our operating
             performance; however, FFO does not represent amounts available for
             management's discretionary use because of needed capital
             replacement or expansion, debt service obligations, property
             acquisitions, development and distributions, or other commitments
             and uncertainties. FFO should not be considered as an alternative
             to net income (determined in accordance with GAAP) as an
             indication of our financial performance or cash flows from
             operating activities (determined in accordance with GAAP) as a
             measure of our liquidity, nor is it indicative of funds available
             to fund our cash needs, including our ability to make
             distributions. We consider FFO to be an important measure of our
             operating

                                      25
<PAGE>   27

             performance. While FFO does not represent cash flows from
             operating, investing or financing activities as defined by GAAP,
             FFO does provide investors with additional information with which
             to evaluate the ability of a REIT to pay dividends, meet required
             debt service payments and fund capital expenditures. We believe
             that to gain a clear understanding of our operating results, FFO
             should be evaluated in conjunction with net income (determined in
             accordance with GAAP). FFO represents funds from operations
             available for shareholders and unitholders.
(7)          Represents the average physical occupancy of the stabilized
             communities calculated by dividing the total number of vacant days
             by the total possible number of vacant days for each period and
             subtracting the resulting number from 100%.

                                      26
<PAGE>   28


ITEM 7.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.

         This report contains "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, and Section 21E of the Securities
Exchange Act of 1934. These statements relate to future economic performance,
plans and objectives of management for future operations and projections of
revenues and other financial items that are based on the beliefs of our
management, as well as assumptions made by, and information currently available
to, our management. The words "expect," "estimate," "anticipate," "believe" and
similar expressions are intended to identify forward-looking statements. Those
statements involve risks, uncertainties and assumptions, including industry and
economic conditions, competition and other factors discussed in this and our
other filings with the SEC, including the "Risk Factors" section of the
prospectus included in our Registration Statement on Form S-3 (Registration
number 333-82453), as declared effective by the SEC on August 2, 1999. If one
or more of these risks or uncertainties materialize or underlying assumptions
prove incorrect, actual outcomes may vary materially from those indicated. See
"Disclosure Regarding Forward-Looking Statements" at the end of this Item for a
description of some of the important factors that may affect actual outcomes.

OVERVIEW

         We own multifamily residential properties as a self-administered and
self-managed equity real estate investment trust. At December 31, 1999, we
owned nine completed multifamily apartment communities, of which eight were
stabilized, consisting of 1,779 apartment homes.

         As part of our business plan and growth strategy, we sold our 117-unit
Bentley Place community in August 1999, our 232-unit Windsong community in
January 1998, and our 207-unit Autumn Ridge community in August 1997. Our
decision to sell these three communities was based on their age and locations
in markets that are not included in our long-term growth strategy. In July
1998, we sold our two small retail centers because we decided to exit all
businesses not related to the long-term ownership of high quality apartment
homes.

         In June 1998, we used the equity from the sale of Windsong and cash to
purchase three separate parcels of land for $11.3 million. We are developing and
building three new multifamily communities totaling 971 apartment homes, of
which 118 apartment homes were completed during the fourth quarter of 1999. The
853 apartment homes under development or construction will increase the size of
our portfolio 48% from 1,779 to 2,632 apartment homes. One of our new
communities under construction is located in Charlotte, North Carolina, and is
the first step in our diversification strategy. The other two communities are
located in north Atlanta. We began construction of the 285-unit second phase of
Addison Place Phase II during the third quarter of 1999, and we expect to
commence construction of a 249-unit apartment home community located in north
Atlanta during the second quarter of 2000.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

         For the year ended December 31, 1999, we recorded net income of
$716,000 or $0.15 per share compared to net income of $708,000 or $0.15 per
share for the year ended December 31, 1998 and a net loss of $2,609,000 or
$0.62 per share for the year ended December 31, 1997. The $8,000 increase in
net income from $708,000 in 1998 to $716,000 in 1999 is due primarily to the
following:

         (a)      the start of leasing operations at Addison Place Phase I in
                  April 1999;

         (b)      the completion of the initial lease-up phase at Bradford Creek
                  in August 1998 and the second phases of Preston Oaks in July
                  1998 and Plantation Trace in November 1998;

         (c)      a $307,000 increase in water revenue from $50,000 in 1998 to
                  $357,000 in 1999;

                  offset by:

                                      27
<PAGE>   29

         (d)      the gain on the sale of Bentley Place in August 1999 compared
                  to the gains on the sales of Windsong and the two retail
                  centers in 1998;

         (e)      higher interest expense due to:

                  -        the permanent financing of Bradford Creek in June
                           1998;
                  -        the refinancing of Rosewood Plantation for a higher
                           loan amount in June 1998;
                  -        the refinancing of Plantation Trace for a higher loan
                           amount in September 1998;
                  -        the refinancing of Crestmark for a higher loan amount
                           in September 1998;
                  -        construction loan interest on the Addison Place
                           Townhomes in 1999;
                  -        and the permanent financing of the Addison Place
                           Townhomes in October 1999;

         (f)      higher general and administrative costs;

         (g)      increased depreciation expense; and

         (h)      the decline in average stabilized occupancy from 96.3% in 1998
                  to 93.7% in 1999.

The increase in net income of $3,317,000 from a net loss of $2,609,000
in 1997 to net income of $708,000 in 1998 is due primarily to the following:

         (a)      the April 1, 1997 acquisition of Roberts Management, an
                  affiliate owned by Mr. Roberts;

                  offset by:

         (b)      the gains on the sales of Windsong and the two retail centers
                  compared to the gain on the sales of Autumn Ridge in August
                  1997; and

         (c)      the completion of the initial lease-up phase at Ivey Brook in
                  July 1997 and the second phase of Crestmark in August 1997,
                  versus the completion of the initial lease-up phase at
                  Bradford Creek in August 1998 and the second phases of
                  Preston Oaks in July 1998 and Plantation Trace in November
                  1998; and

         (d)      an increase in average stabilized occupancy from 95.4% to
                  96.3%.

Our operating performance for all communities is summarized in the following
table:
<TABLE>
<CAPTION>
                                               YEAR ENDED DECEMBER 31,           YEAR ENDED DECEMBER 31,
    (dollars in thousands)                  ------------------------------   ----------------------------
                                                                      %                               %
                                             1999        1998      CHANGE     1998       1997      CHANGE
                                            -------    -------    --------   -------   -------     ------
<S>                                         <C>        <C>        <C>        <C>       <C>        <C>
Total operating revenues                    $19,384    $17,354      11.7%    $17,354    $17,572     (1.2%)
Property operating expenses (1)             $ 6,688    $ 6,192       8.0%    $ 6,192    $ 6,092      1.6%
Management fees paid to related party (2)   $     0    $     0       0.0%    $     0    $   211   (100.0%)
General and administrative expenses         $ 1,964    $ 1,727      13.7%    $ 1,727    $ 1,714      0.8%
Net operating income (3)                    $12,696    $11,162      13.7%    $11,162    $11,480     (2.8%)
Depreciation of real estate assets          $ 5,529    $ 5,017      10.2%    $ 5,017    $ 5,708    (12.1%)
Average stabilized occupancy (4)               93.7%      96.3%     (2.6%)      96.3%      95.4%     0.9%
Operating expense ratio (5)                    34.5%      35.7%     (1.2%)      35.7%      34.7%     1.0%
</TABLE>

---------------
(1)        Property operating expenses include personnel, utilities, real
           estate taxes, insurance, maintenance, landscaping, marketing, and
           property administration expenses (real estate taxes excludes an
           adjustment of $588,000 in 1997 to reduce estimated property tax
           accruals for two properties that received favorable tax
           assessments).

                                      28
<PAGE>   30

(2)        Because we acquired Roberts Management on April 1, 1997, we paid no
           management fees to a related party after March 31, 1997; however, we
           incurred additional general and administrative expenses as a result
           of managing our properties internally.
(3)        Net operating income is equal to total operating revenues minus
           property operating expenses.
(4)        Represents the average physical occupancy of our stabilized
           properties calculated by dividing the total number of vacant days by
           the total possible number of vacant days for each period and
           subtracting the resulting number from 100%. The calculation includes
           the following: (a) Highland Park beginning March 1, 1996, Ivey Brook
           beginning August 1, 1997, the second phase of Crestmark beginning
           September 1, 1997, the second phase of Preston Oaks beginning August
           1, 1998, Bradford Creek beginning September 1, 1998 and the second
           phase of Plantation Trace beginning December 1, 1998, which are the
           dates each community achieved stabilized occupancy; (b) Autumn Ridge
           only through August 26, 1997, which is the date the property was
           sold, (c) Windsong only through January 9, 1998, which is the date
           the property was sold, and (d) Bentley Place only through August 23,
           1999, which is the date the property was sold.
(5)        Represents the total of property operating expenses divided by
           property operating revenues expressed as a percentage.

         Our 1999 same-property operating performance, when compared to 1998,
includes a 4.2% increase in operating revenues, a 5.6% increase in net
operating income, a 0.6% decrease in average occupancy from 95.5% to 94.9%, and
a 3.6% decline in our lease renewal percentage. Same-property results for the
seven communities that were fully stabilized during both years ended December
31, 1999 and 1998 (Crestmark, Highland Park, Ivey Brook, River Oaks, Rosewood
Plantation, and the first phases of Plantation Trace, and Preston Oaks) are
summarized in the table below.

         Our 1998 same-property operating performance, when compared to 1997,
includes a 4.6% increase in operating revenues, a 1.0% increase in net
operating income, a 2.0% increase in average occupancy from 94.2% to 96.2%, and
a 4.0% increase in our lease renewal percentage. Same-property results for the
seven communities that were fully stabilized during both years ended December
31, 1998 and 1997 (Bentley Place, Highland Park, River Oaks, Rosewood
Plantation, and the first phases of Crestmark, Plantation Trace, and Preston
Oaks) are summarized in the following table:

<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER 31,                 YEAR ENDED DECEMBER 31,
    (dollars in thousands)                        -----------------------------------      -------------------------------------
                                                                                 %                                          %
                                                   1999          1998          CHANGE       1998          1997           CHANGE
                                                  -------       -------        ------      -------       -------         ------
   <S>                                            <C>           <C>             <C>        <C>           <C>            <C>
   Rental income                                  $14,441       $14,149         2.1%       $12,817       $12,239           4.7%
   Total operating revenues                       $15,402       $14,785         4.2%       $13,267       $12,678           4.6%
   Property operating expenses (1)                $ 5,255       $ 5,180         1.4%       $ 4,702       $ 4,194          12.1%
   Management fees paid to related party (2)      $     0       $     0         0.0%       $     0       $   160        (100.0%)
   Net operating income (3)                       $10,147       $ 9,605         5.6%       $ 8,565       $ 8,484           1.0%
   Average stabilized occupancy (4)                  94.9%         95.5%       (0.6%)         96.2%         94.2%          2.0%
   Operating expense ratio (5)                       34.1%         35.0%       (0.9%)         35.4%         33.1%          2.3%
   Average monthly rent per apartment home        $   920       $   895         2.8%       $   879       $   856           2.7%
   Lease renewal percentage (6)                      55.7%         59.3%       (3.6%)         62.6%         58.6%          4.0%
</TABLE>

(1)        Property operating expenses include personnel, utilities, real
           estate taxes, insurance, maintenance, landscaping, marketing, and
           property administration expenses (real estate taxes excludes an
           adjustment of $588,000 in 1997 to reduce estimated property tax
           accruals for two properties that received favorable tax
           assessments).
(2)        Because we acquired Roberts Management on April 1, 1997, we paid no
           management fees to a related party after March 31, 1997; however, we
           incurred additional general and administrative expenses as a result
           of managing our properties internally.
(3)        Net operating income is equal to total operating revenues minus
           property operating expenses.
(4)        Represents the average physical occupancy of the stabilized
           communities calculated by dividing the total number of vacant days
           by the total possible number of vacant days for each period and
           subtracting the resulting number from 100%.
(5)        Represents the total of property operating expenses divided by
           property operating revenues expressed as a percentage.

                                      29
<PAGE>   31

6)         Represents the number of leases renewed divided by the number of
           leases expired during the period presented, expressed as a
           percentage.

           The following discussion compares our statements of operations for
the years ended December 31, 1999, 1998 and 1997.

           Property operating revenue increased $2,030,000 or 11.7% from
$17,354,000 for the year ended December 31, 1998 to $19,384,000 for the year
ended December 31, 1999. The increase in operating revenue is due primarily to
the following:

         (a)      the start of leasing operations at Addison Place Phase I in
                  April 1999;

         (b)      the completion of the initial lease-up phase at Bradford Creek
                  in August 1998 and the second phases of Preston Oaks in July
                  1998 and Plantation Trace in November 1998;

         (c)      a $617,000 or 4.2% increase in same-property operating
                  revenue; and

         (d)      a $307,000 increase in water revenue from $50,000 in 1998 to
                  $357,000 in 1999; $255,000 of the $307,000 increase is
                  attributable to the seven properties that were stabilized
                  during both 1998 and 1999;

                  offset by:

         (e)      the sale of the two retail centers in 1998 compared to the
                  sale of Bentley Place in 1999; and

         (f)      decreased average physical occupancy from 96.3% in 1998 to
                  93.7% in 1999.

         Property operating revenue decreased $218,000 or 1.2% from $17,572,000
for the year ended December 31, 1997 to $17,354,000 for the year ended December
31, 1998. The decrease in operating revenue is due primarily to the following:

         (a)      the sales of Autumn Ridge in August 1997, Windsong in January
                  1998, and the two retail centers in July 1998;

                  offset by:

         (b)      a 4.6% increase in same-property  revenue, which is due to an
                  increase in occupancy from 94.2% to 96.2% along with a 2.7%
                  increase in the average monthly rent per apartment home from
                  $856 to $879 per month; and

         (c)      the lease-up of Bradford Creek and the second phases of
                  Preston Oaks and Plantation Trace during 1998.

         During 1998, we implemented a program to bill residents for their
individual water consumption. We completed the installation of water-metering
equipment in the fourth quarter of 1998 at a total cost of $377,000. Water
revenues were $50,000 during 1998 and $357,000 during 1999. We expect to
install water-metering equipment in all new apartment homes we develop.

         Property operating expenses (excluding depreciation and general and
administrative expenses) increased $496,000 or 8.0% from $6,192,000 for the
year ended December 31, 1998 to $6,688,000 for the year ended December 31,
1999. The increase in property operating expenses is due primarily to the
following:

         (a)      the start of leasing operations at Addison Place Phase I in
                  April 1999;

         (b)      the completion of the initial lease-up phase at Bradford Creek
                  in August 1998 and the second phases of Preston Oaks in July
                  1998 and Plantation Trace in November 1998;

                                      30
<PAGE>   32

         (c)      a $75,000, or 1.4% increase in same-property operating
                  expenses;

                  offset by:

         (d)      the sales of Bentley Place in 1999 and the two retail centers
                  in 1998.

         Property operating expenses (excluding depreciation, general and
administrative expenses, management fees, and a $588,000 favorable real estate
tax adjustment) increased $100,000 or 1.6% from $6,092,000 for the year ended
December 31, 1997 to $6,192,000 for the year ended December 31, 1998. The
increase in property operating expenses is due primarily to the following:

         (a)      the sales of Autumn Ridge in August 1997, and Windsong in
                  January 1998 and the two retail centers in July 1998;

                  offset by:

         (b)      the start of property operations at Bradford Creek and the
                  second phases of Preston Oaks and Plantation Trace, all of
                  which were first leased-up in 1998; and

         (c)      a 12.1% increase in same-property expenses due primarily to
                  higher personnel and maintenance costs.

         General and administrative expenses increased $237,000 or 13.7% from
$1,727,000 for the year ended December 31, 1998 to $1,964,000 for the year
ended December 31, 1999 and include legal, accounting and tax fees, marketing
and printing fees, salaries, director fees and other costs. The increase is due
primarily to increased personnel costs including amortization of restricted
stock, accounting and tax fees related to the registration statement we filed
with the SEC that became effective in August 1999, expenses of SEC and other
shareholder reports, marketing, and directors fees. General and administrative
expenses as a percentage of operating revenues increased from 10.0% for the
year ended December 31, 1998 to 10.1% for the year ended December 31, 1999.

         General and administrative expenses increased $13,000 or 0.8% from
$1,714,000 for the year ended December 31, 1997 to $1,727,000 for the year
ended December 31, 1998. The increase is due primarily to increased personnel
costs due to the acquisition of Roberts Management, offset by a reduction in
accounting and tax fees, legal, and marketing fees, and the initial fee paid to
list our common stock on the American Stock Exchange. General and
administrative expenses as a percentage of operating revenues increased from
9.8% for the year ended December 31, 1997 to 10.0% for the year ended December
31, 1998.

         Depreciation expense increased $512,000 or 10.2% from $5,017,000 for
the year ended December 31, 1998 to $5,529,000 for the year ended December 31,
1999. The increase is due primarily to the completion of construction of
Bradford Creek and the second phases of Preston Oaks and Plantation Trace in
1998 and the completion of construction of the first phase of Addison Place in
1999, offset by the sale of the two retail centers in 1998 and the sale of
Bentley Place in 1999.

         Depreciation expense decreased $691,000 or 12.1% from $5,708,000 for
the year ended December 31, 1997 to $5,017,000 for the year ended December 31,
1998. The decrease is due primarily to the sales of Autumn Ridge in 1997 and
Windsong in 1998, offset by depreciation from the communities leased-up in 1998
(because depreciation expense is recorded as apartment homes are completed and
available for occupancy).

         On April 1, 1997, we acquired Roberts Management, the property
management company that had managed our multifamily apartment communities since
our inception. Because Roberts Management, a related party, managed only the
properties we owned, we accounted for the transaction as the settlement of a
contract and showed it as an expense for the year ended December 31, 1997.

         Interest expense increased $689,000 or 15.1% from $4,555,000 for the
year ended December 31, 1998 to $5,244,000 for the year ended December 31,
1999. The increase is due primarily to:

         (1)      the financing of Bradford Creek in June 1998 and the first
                  phase of Addison Place in October 1999,

                                      31
<PAGE>   33

         (2)      the refinancing of the mortgage loan secured by the Rosewood
                  Plantation community in June 1998 for a higher loan amount,
                  and

         (3)      the refinancing of the mortgage loans secured by the
                  Plantation Trace and Crestmark communities in September 1998,
                  each for higher loan amounts, offset by the mortgage note
                  that we repaid when we sold Bentley Place in 1999.

         Interest expense decreased $115,000 or 2.5% from $4,670,000 for the
year ended December 31, 1997 to $4,555,000 for the year ended December 31,
1998. The decrease is due primarily to the mortgage notes that we repaid when
we sold Autumn Ridge in 1997 and Windsong in 1998, offset by:

         (1)      the financing of Ivey Brook, the second phase of Crestmark,
                  and Bradford Creek in January 1997, July 1997, and June 1998,
                  respectively,

         (2)      the refinancing of the mortgage loan secured by the Rosewood
                  Plantation community in June 1998 for a higher loan amount,
                  and

         (3)      the refinancing of the mortgage loans secured by the
                  Plantation Trace and Crestmark communities in September 1998,
                  each for higher loan amounts.

         On August 26, 1997, we completed the sale of the 207-unit Autumn Ridge
community for $10,601,000 in cash. The sale resulted in a gain, net of minority
interest, of $1,012,000. Net sales proceeds were $5,045,000 after deduction for
loan repayment, closing costs and prorations. The purchaser, Benchmark Autumn
Ridge Associates, L.P., is not affiliated with us, and the transaction was
negotiated at arms-length. We paid Roberts Properties a consulting fee of
$150,000 at closing.

         On January 9, 1998, we completed the sale of the Windsong community
for $9,750,000 in cash resulting in a gain, net of minority interest, of
$918,000 on the sale of real estate assets. Net sales proceeds were $5,194,000
after deduction for loan repayment of $3,959,000, closing costs of $458,000,
and prorations of $139,000. We paid Roberts Properties a consulting fee of
$288,000 at closing. We reinvested the net cash proceeds from the sale of
Windsong in undeveloped land in June 1998 as part of a Section 1031
tax-deferred exchange.

         On July 17, 1998, we completed the sale of two retail centers for
$2,400,000 in cash resulting in a gain, net of minority interest, of $300,000.
Net sales proceeds were $2,182,000, after deducting for closing costs of
$183,000 and prorations of $35,000. We paid Roberts Properties a consulting fee
of $92,500 at closing.

         On August 23, 1999, we sold the Bentley Place community for $8,273,000
in cash resulting in a gain, net of minority interest, of $1,023,000. Net sales
proceeds were $3,726,000 after deduction for loan repayment, including
prepayment fee, of $4,166,000, and closing costs, accrued interest, and
prorations totaling $381,000. Partnership profits interests of $242,000 were
paid to Roberts Properties under the amended partnership agreement of the
operating partnership. We used the remaining net sales proceeds of $3,484,000
to fund a special distribution to shareholders and unitholders on August 30,
1999. Unamortized loan cost of $93,000 and a prepayment fee of $198,000 payable
at closing were charged to expense as an extraordinary item. The extraordinary
item (early extinguishment of debt) for the year ended December 31, 1999 was
$291,000 (including the minority interests' share of $107,000).

         We refinanced the mortgage notes payable secured by the Rosewood
Plantation and Crestmark communities in June and September 1998, respectively,
before their contractual maturity. We charged the yield maintenance fee and the
unamortized loan costs related to the mortgage notes payable at the time of the
refinancing to expense as an extraordinary item. The extraordinary item (early
extinguishment of debt), including the extraordinary gain of $110,000 on the
buyer's assumption of debt related to the sale of Windsong, for the year ended
December 31, 1998 was $792,000 (including the minority interests' share of
$305,000).

         We repaid the mortgage note payable secured by Autumn Ridge in full at
the closing of the sale of Autumn Ridge in August 1997, before its contractual
maturity. We charged unamortized loan costs of $73,000 and a yield maintenance
fee of $252,000 payable at the closing of the sale to expense as an
extraordinary item. The extraordinary item (early extinguishment of debt) for
the year ended December 31, 1997 was $325,000 (including the minority
interests' share of $141,000).

                                      32
<PAGE>   34

LIQUIDITY AND CAPITAL RESOURCES

         Comparison of Years Ended December 31, 1999, 1998 and 1997. Cash and
cash equivalents decreased $2,433,000 from $4,106,000 as of December 31, 1998
to $1,673,000 as of December 31, 1999. The decrease was due to a decrease in
cash provided by financing activities, offset by an decrease in cash used in
investing activities and an increase in cash provided by operating activities.
Cash and cash equivalents decreased $3,011,000 from $7,117,000 as of December
31, 1997 to $4,106,000 as of December 31, 1998. The decrease was due to an
increase in cash used in investing activities and a decrease in cash provided
by operating activities, offset by an increase in cash provided by financing
activities.

         A primary source of liquidity for us is cash flow from operations.
Operating cash flows have historically been determined by the number of
apartment homes, rental rates and operating expenses with respect to those
apartment homes. Net cash provided by operating activities increased $622,000
from $5,295,000 during 1998 to $5,917,000 during 1999. The increase in cash
flow from operations is due primarily to additional cash flow from the
communities leased-up in 1998 and the commencement of leasing operations at the
first phase of Addison Place in 1999, offset by the sales of the two retail
centers in 1998, and Bentley Place in 1999. Net cash provided by operating
activities decreased $174,000 from $5,469,000 during 1997 to $5,295,000 during
1998. The decrease in cash flow from operations is due primarily to the sales
of Autumn Ridge and Windsong, offset by additional cash flow from the
communities leased-up in 1998. Generally, depreciation and amortization
expenses are the most significant adjustments to net income (loss) in arriving
at cash provided by operating activities.

         Net cash used in investing  activities  decreased  $11,232,000 from
$18,235,000 during 1998 to $7,003,000 during 1999. This decrease is due
primarily to the following:

         (a)      the purchase of three separate parcels of land for $11,359,000
                  in 1998; and

         (b)      construction costs of $12,915,000 in 1999 related to the
                  first and second phases of Addison Place, Bradford Creek, and
                  the second phase of Plantation Trace, compared to
                  construction costs of $13,913,000 in 1998 related to Bradford
                  Creek, the second phases of Preston Oaks and Plantation
                  Trace, and the first phase of Addison Place;

                  offset by:

         (c)      proceeds of $7,918,000 from the sale of Bentley Place in 1999
                  compared to proceeds of $7,521,000 in 1998 in from the sales
                  of Windsong and the two retail centers.

         Net cash used in investing activities increased $16,698,000 from
$1,537,000 during 1997 to $18,235,000 during 1998. This increase is due
primarily to the following:

         (a)      the purchase of three separate parcels of land for $11,359,000
                  in 1998; and

         (b)      construction costs of $13,913,000 in 1998 related to Bradford
                  Creek, the second phases of Preston Oaks and Plantation
                  Trace, and the first phase of Abbotts Bridge, compared to
                  construction costs totaling $10,519,000 in 1997 related to
                  Ivey Brook, the second phase of Crestmark, and the start of
                  construction at Bradford Creek;

                  offset by:

         (c)      proceeds totaling $7,521,000 in 1998 from the sales of
                  Windsong and the two retail centers compared to proceeds of
                  $10,330,000 from the sale of Autumn Ridge in 1997.

         Net cash provided by (used in) financing activities decreased
$11,276,000 from $9,929,000 of net cash provided in 1998 to $1,347,000 of net
cash used during 1999. This decrease is due primarily to the following:

                                      33
<PAGE>   35

         (a)      the closing of a $9,500,000 loan in October 1999 on Addison
                  Place Phase I with a fixed interest rate of 6.95% per annum
                  and a term of ten years, which provided net cash proceeds of
                  $1,321,000 after paying off the construction loan
                  ($8,019,000) and accrued interest ($38,000); the $1,321,000
                  net proceeds will be used to pay the balance of construction
                  costs; the lender required us to obtain a letter of credit in
                  the amount of $843,000 until the property obtains 95%
                  physical occupancy (at December 31, 1999, the physical
                  occupancy of the property was 55.9%.);

         (b)      the closing of a $3,000,000 land loan secured by Addison
                  Place Phase II with a variable interest rate of LIBOR plus
                  150 basis points, a one-year term, which provided net cash
                  proceeds of $2,977,000; the proceeds will be used to fund the
                  initial construction of the second phase of Addison Place;

         (c)      net borrowings of $1,235,000 from the $2,000,000 line of
                  credit;

                  offset by:

         (d)      the closing of an $8,400,000 loan in June 1998 on Bradford
                  Creek with a fixed interest rate of 7.15% per annum and a
                  term of ten years, which provided net cash proceeds of
                  $8,282,000;

         (e)      the refinancing of a $6,317,000 loan on Rosewood Plantation
                  in June 1998 for $8,100,000 with a fixed interest rate of
                  6.62% per annum (compared with 7.38% per annum on the old
                  loan), a term of ten years, which provided net cash proceeds
                  of $1,474,000;

         (f)      the refinancing of a $7,686,000 loan on Plantation Trace in
                  September 1998 for $11,900,000 (which included the 50-unit
                  second phase of Plantation Trace), with a fixed interest rate
                  of 7.09% per annum (compared with 7.75% per annum on the old
                  loan), a term of ten years, which provided net cash proceeds
                  of $3,092,000; an additional $150,000 was escrowed by lender
                  until completion of construction of the additional amenities,
                  which occurred during the second quarter of 1999;

         (g)      the refinancing of two loans totaling $13,520,000 on Crestmark
                  in September 1998; the new loan amount is $16,000,000 with a
                  fixed interest rate of 6.57% per annum (compared with 7.54%
                  per annum on the old loans), a term of ten years, and net
                  cash proceeds of $1,680,000; and

         (h)      an increase of $3,826,000 in dividends and distributions paid,
                  from $4,322,000 during 1998 to $8,148,000 during 1999.

         Net cash provided by financing activities increased $9,906,000 from
$23,000 during 1997 to $9,929,000 during 1998. This increase is due primarily
to the following:

         (a)      the closing of an $8,400,000 loan in June 1998 on Bradford
                  Creek with a fixed interest rate of 7.15% per annum and a
                  term of ten years, which provided net cash proceeds of
                  $8,282,000;

         (b)      the refinancing of an existing $6,317,000 loan on Rosewood
                  Plantation in June 1998 for $8,100,000 with a fixed interest
                  rate of 6.62% per annum (compared with 7.38% per annum on the
                  old loan) and a term of ten years, which provided net cash
                  proceeds of $1,474,000;

         (c)      the refinancing of an existing $7,686,000 loan on Plantation
                  Trace in September 1998 for $11,900,000 (which included the
                  50-unit second phase of Plantation Trace), with a fixed
                  interest rate of 7.09% per annum (compared with 7.75% per
                  annum on the old loan) and a term of ten years, which
                  provided net cash proceeds of $3,092,000; an additional
                  $150,000 was escrowed by lender until completion of
                  construction of the additional amenities, which occurred
                  during the second quarter of 1999;

         (d)      the refinancing of two existing loans totaling $13,520,000 on
                  Crestmark in September 1998; the new loan amount is
                  $16,000,000 with a fixed interest rate of 6.57% per annum
                  (compared with 7.54% per annum on the old loans) and a term
                  of ten years, which provided net cash proceeds of $1,680,000;
                  and

                                      34
<PAGE>   36

         (e)      an increase of $234,000 in dividends and distributions paid,
                  from $4,088,000 during 1997 to $4,322,000 during 1998;

                  offset by:

         (f)      the permanent financing of Ivey Brook in January 1997 that
                  resulted in net cash proceeds of $6,270,000;

         (g)      the permanent financing of the second phase of Crestmark in
                  July 1997 that resulted in net cash proceeds of $3,905,000;
                  and

         (h)      the payoff of a $4,899,000 mortgage loan in August 1997 from
                  the proceeds of the sale of Autumn Ridge.

         Existing Debt Structure.  The following facts highlight our existing
debt structure:

         (a)      each of our nine communities is financed with fixed-rate debt;

         (b)      the average interest rate for all nine communities is 6.98%
                  per annum as of December 31, 1999;

         (c)      no debt is scheduled to mature before October 2002;

         (d)      the average term to maturity is eight years; and

         (e)      debt principal will amortize at a rate of approximately
                  $927,000 per year.

         The following table summarizes the debt for each of our nine
communities:

<TABLE>
<CAPTION>
                                         FIXED INTEREST                             PRINCIPAL
                                           RATE AS OF                              OUTSTANDING
                                            12/31/99             MATURITY           12/31/99
                                         --------------          ---------         ------------
         <S>                             <C>                     <C>            <C>
         Addison Place Phase I                 6.95%              11/15/09       $    9,500,000
         Bradford Creek                        7.15%              06/15/08            8,273,000
         Crestmark                             6.57%              10/01/08           15,778,000
         Highland Park                         7.30%              02/15/03            7,844,000
         Ivey Brook                            7.14%              02/15/07            6,228,000
         Plantation Trace                      7.09%              10/15/08           11,760,000
         Preston Oaks                          7.21%              10/15/02            8,313,000
         River Oaks                            7.15%              11/15/03            8,946,000
         Rosewood Plantation                   6.62%              07/15/08            7,973,000
                                                                                      ---------

                                                                                 $   84,615,000
                                                                                 ==============
</TABLE>

                                      35
<PAGE>   37

         Each of our existing mortgage loans will require balloon payments (in
addition to monthly principal amortization) coming due over the years 2002 to
2009 as summarized below:

<TABLE>
<CAPTION>
                                <S>             <C>
                                2002            $    8,025,000
                                2003                16,057,000
                                2007                 5,570,000
                                2008                38,232,000
                                2009                 8,387,000
                                                     ---------

                               Total            $   76,271,000
                                                ==============
</TABLE>

         Because we anticipate that only a small portion of the principal of
that indebtedness will be repaid before maturity and that we will not have
funds on hand sufficient to repay that indebtedness, it will be necessary for
us to refinance that debt through (a) debt financing collateralized by
mortgages on individual communities or groups of communities and/or (b) equity
offerings.

         During the quarter ended December 31, 1999, we completed construction
on the 118-unit Addison Place Phase I, located in north Atlanta. We funded
Phase I with the proceeds from mortgage loan financings, operating cash, and a
$9,500,000 construction loan. We repaid the $8,019,000 outstanding on the
construction loan plus accrued interest of $38,000 upon closing a $9,500,000
permanent loan secured by Addison Place Phase I on October 25, 1999. We will
use the balance of the proceeds to pay the remaining construction costs.
Because the property was less than 95% occupied at closing, the lender required
us to obtain an $843,000 letter of credit secured by an equal amount of cash.
The permanent loan includes a 10-year term with a fixed interest rate of 6.95%
payable in monthly installments of $62,885 based on a 30-year amortization
schedule. The first 12 payments are interest-only payments of $55,021 per
month.

         During the quarter ended June 30, 1999, we started construction on
Addison Place Phase II. Phase II will consist of 285 apartment homes, and we
expect occupancy to begin in the third quarter of 2000. We began construction
on a 319-unit community in Charlotte during the fourth quarter of 1999 and
expect to start construction of a 249-unit community located in north Atlanta
in the second quarter of 2000. We paid cash for the land for these three new
communities, and we expect to fund the cost of construction with construction
loans. We are in the process of obtaining construction loans, and we do not
expect to begin substantial construction until construction loans are secured.

         We obtained a $2,000,000 revolving line of credit in June 1999 to
provide funds for short-term working capital purposes. The line has a one-year
term and bears an interest rate of LIBOR + 150 basis points. At December 31,
1999, $1,235,000 was outstanding under the line.

         We and some of our non-owned affiliates have a $35,000,000 advised
guidance line with Bank of America, N.A. for the purpose of providing financing
for the acquisition or development of multifamily communities. Financing under
the guidance line is available on a revolving basis and bears interest at LIBOR
plus 1.80% or the prime rate, at our option, payable monthly. The guidance line
is not a commitment to lend, and each loan under the guidance line will be made
at Bank of America's discretion in accordance with normal loan approval
procedures. At December 31, 1999, no amount was outstanding under the guidance
line.

         We anticipate that each community's rental and other operating
revenues will be adequate to provide short-term (less than 12 months) liquidity
for the payment of direct rental operating expenses, interest and amortization
of principal on related mortgage notes payable and capital expenditures. We
expect to meet our other short-term liquidity requirements generally through
our net cash provided by operations, which we believe will be adequate to meet
our operating requirements in both the short term and in the long term (greater
than 12 months). We also expect to fund improvements and renovations at
existing communities from property operations. We expect to meet our long-term
liquidity requirements, including future developments and debt maturities, from
the proceeds of construction and permanent loans.

                                      36
<PAGE>   38

STOCK REPURCHASE PLAN

         On September 3, 1998, we issued a press release announcing that our
board of directors had authorized the repurchase of up to 300,000 shares of our
outstanding common stock. We intend to repurchase our shares from time to time
by means of open market purchases depending on availability, our cash position
and price per share. We repurchased 121,200 shares in 1999 at a total cost of
$909,000. From October 1, 1998 through December 31, 1999, we repurchased
140,500 shares for $1,054,000.

REDEMPTIONS OF UNITS FOR CASH

         During the year ended December 31, 1999, we paid $28,000 to redeem
3,917 units from unitholders who resided outside the state of Georgia. From
June 1, 1998 through February 3, 1999, we paid $150,000 to redeem 18,258 units
from unitholders who resided outside the state of Georgia.

SUPPLEMENTAL DISCLOSURE OF FUNDS FROM OPERATIONS

         Funds from Operations, or FFO, is defined by the National Association
of Real Estate Investment Trusts as net income (loss), computed in accordance
with generally accepted accounting principles, excluding gains (or losses) from
debt restructuring and sales of property and non-recurring items, plus real
estate related depreciation and amortization. We compute FFO in accordance with
the current NAREIT definition, which may differ from the methodology for
calculating FFO utilized by other equity REITs and, accordingly, may not be
comparable to those other REITs. FFO does not represent amounts available for
management's discretionary use because of needed capital replacement or
expansion, debt service obligations, property acquisitions, development and
distributions, or other commitments and uncertainties. FFO should not be
considered as an alternative to net income (determined in accordance with GAAP)
as an indication of our financial performance or cash flows from operating
activities (determined in accordance with GAAP) as a measure of our liquidity,
nor is it indicative of funds available to fund our cash needs, including our
ability to make distributions. We consider FFO to be an important measure of
our operating performance. While FFO does not represent cash flows from
operating, investing or financing activities as defined by GAAP, FFO does
provide investors with additional information with which to evaluate the
ability of a REIT to pay dividends, meet required debt service payments and
fund capital expenditures. We believe that to gain a clear understanding of our
operating results, FFO should be evaluated in conjunction with net income
(determined in accordance with GAAP). FFO represents funds from operations
available for Shareholders and unitholders. The following table reconciles net
income (loss) to FFO (dollars in thousands).

<TABLE>
<CAPTION>
                                                                              TWELVE MONTHS ENDED DECEMBER 31,
                                                                              --------------------------------
                                                                          1999             1998              1997
                                                                       ---------        ---------         ---------
<S>                                                                    <C>              <C>               <C>
Net income (loss)                                                      $     716        $     708         $  (2,609)
Minority interest of unitholders in the operating partnership                (70)             (15)           (2,646)
Extraordinary item                                                           184              487               184
Amortization (real estate related)                                             0               41                65
Acquisition of Roberts Management                                              0                0             5,900
Loss on disposal of real estate - related assets                              81               94               156
Gain on sale of real estate assets                                        (1,023)          (1,218)           (1,012)
Depreciation expense                                                       5,529            5,017             5,708
                                                                       ---------        ---------         ---------
Funds From Operations                                                  $   5,417        $   5,114         $   5,746
                                                                       =========        =========         =========
Weighted average shares and units
         outstanding during the period                                 7,448,757        7,547,978         7,404,323
</TABLE>

                                      37
<PAGE>   39

NEW ACCOUNTING PRONOUNCEMENTS

         Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities," establishes
standards for reporting and display of derivative instruments, hedges and their
components. We will be required to adopt SFAS 133, amended by SFAS 137, on
January 1, 2001. As of December 31, 1999, we had no derivative instruments or
hedging activities and, therefore, we do not expect this statement to have a
material effect on our financial position and results of operations.

INFLATION

         Substantially all apartment leases are for an initial term of not more
than 12 months and thus may enable us to seek increases in rents after the
expiration of each lease. The short-term nature of these leases serves to
reduce the risk to us of the adverse effects of inflation.

YEAR 2000 COMPUTER ISSUES

         The "Year 2000 problem" is a general term used to identify those
computer programs or applications that are programmed to use a two-digit field,
instead of a four-digit field, for the year component of a date. Those programs
or applications which are programmed in this manner may recognize the year 2000
as the year 1900, thereby causing potential system failures or miscalculations,
which could result in disruptions of normal business operations. We have
experienced no problems in either our accounting or property management systems
as a result of the year 2000, and amounts expensed to remedy year 2000 issues
were not material.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This report contains "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, and Section 21E of the Securities Exchange
Act of 1934. These statements appear in a number of places in this report and
include all statements that are not historical facts. Some of the
forward-looking statements relate to our intent, belief or expectations
regarding our strategies and plans for operations and growth, including
development and construction of new multifamily apartment communities in our
existing markets and elsewhere in the Southeast. Other forward-looking
statements relate to trends affecting our financial condition and results of
operations, and our anticipated capital needs and expenditures. These
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and actual results may differ materially from those
that are anticipated in the forward-looking statements. These risks include the
following:

         -    Unfavorable changes in market and economic conditions in Atlanta
              and Charlotte could hurt our occupancy and rental rates.

         -    Increased competition in the Atlanta and Charlotte markets could
              limit our ability to lease our apartments homes or increase or
              maintain rents.

         -    Conflicts of interest inherent in business transactions between
              or among Roberts Realty and/or the operating partnership on one
              hand, and Mr. Roberts and/or his affiliates on the other hand,
              could result in our paying more for property or services than we
              would pay an independent seller or provider.

         -    Construction and lease-up risks inherent in our development of
              the Addison Place, Ballantyne and Old Norcross communities, and
              the other communities we may develop in the future, could
              adversely affect our financial performance.

         -    We might not be able to obtain replacement financing to make
              balloon payments on our fixed-rate debt, or we might have to
              refinance our debt on less favorable terms.

         -    Because our organizational documents do not limit the amount of
              debt we may incur, we could increase the amount of our debt as a
              percentage of the estimated value of our properties.

         -    Our operations could be adversely affected if we lost key
              personnel, particularly Mr. Roberts.

         -    We could incur costs from environmental problems even though we
              did not cause, contribute to or know about them.

                                      38
<PAGE>   40

         -    Compliance or failure to comply with the Americans with
              Disabilities Act and other similar laws could result in
              substantial costs.

      In addition, the market price of the common stock may from time to time
fluctuate widely as a result of, among other things:

         -    our operating results;

         -    the operating results of other REITs, particularly apartment
              REITs; and

         -    changes in the performance of the stock market in
              general.

      Investors should review the more detailed description of these and other
possible risks contained in the "Risk Factors" section of the prospectus
included in the S-3 Registration Statement filed on August 2, 1999.

ITEM 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

      We are exposed to market risk from changes in interest rates, which may
adversely affect our financial position, results of operations and cash flows.
In seeking to minimize the risks from interest rate fluctuations, we manage
exposures through our regular operating and financing activities. We do not use
financial instruments for trading or other speculative purposes. We are exposed
to interest rate risk primarily through our borrowing activities, which are
described in Note 4 to the Consolidated Financial Statements. All of our
long-term borrowings are under fixed rate instruments, and our line of credit
rate and land loan rates are 150 basis points over the three-month LIBOR. We
have determined that there is no material market risk exposure to our
consolidated financial position, results of operations or cash flows.

The table below presents principal reductions and related weighted average
interest rates by year of expected maturity for our debt obligations.

<TABLE>
<CAPTION>
                                                                                                                 FAIR VALUE
                                                                                                                DECEMBER 31,
(DOLLARS IN THOUSANDS)         2000        2001         2002         2003         2004       THEREAFTER      TOTAL         2000
---------------------------------------------------------------------------------------------------------------------------------
<S>                          <C>          <C>          <C>          <C>           <C>        <C>           <C>          <C>
Principal reductions in
mortgage notes               $  927       $1,084       $9,105       $16,922       $893       $55,684       $84,615       $84,615

Average interest rates         6.98%        6.98%        6.96%         6.88%      6.88%         6.85%         6.99%         6.99%

Principal reductions in      $1,235       $    0       $    0       $     0       $  0       $     0       $ 1,235       $ 1,235
line of credit

Principal reductions in      $3,000       $    0       $    0       $     0       $  0       $     0       $ 3,000       $ 3,000
land loan
</TABLE>

                                      39
<PAGE>   41


ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements are listed under Item 14(a) and are filed as part of
this annual report on the pages indicated.

<TABLE>
<CAPTION>
                    <S>                                                                                  <C>
                    Report of Independent Public Accountants (Arthur Andersen LLP).......................F-1

                    Consolidated Financial Statements and Schedule as of
                       December 31, 1999 and 1998 and for the Years Ended
                       December 31, 1999, 1998 and 1997:

                    Balance Sheets.......................................................................F-2

                    Statements of Operations.............................................................F-3

                    Statements of Shareholders' Equity...................................................F-4

                    Statements of Cash Flows.............................................................F-5

                    Notes to Financial Statements .......................................................F-6

                    Schedule III - Real Estate and Accumulated Depreciation..............................S-1
</TABLE>

ITEM 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

         None.


                                    PART III

         As permitted by applicable rules of the SEC, some information required
by Part III is omitted from this report because we will file a definitive proxy
statement for our 2000 annual shareholders meeting under Regulation 14A not
later than April 30, 2000.

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS.

          The information required by this item is incorporated by reference
from our definitive proxy statement.

ITEM 11.      EXECUTIVE COMPENSATION.

         The information required by this item is incorporated by reference
from our definitive proxy statement.

ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The information required by this item is incorporated by reference
from our definitive proxy statement.

ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

          The information required by this item is incorporated by reference
from our definitive proxy statement.

                                      40
<PAGE>   42


ITEM 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)      1. and 2. Financial Statements and Schedules.

         The financial statements and schedules listed below are filed as part
         of this annual report on the pages indicated.

INDEX TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                                       PAGE
<S>                                                                                                                    <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (Arthur Andersen LLP).........................................................F-1

CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE AS OF DECEMBER 31, 1999 AND 1998
AND FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996:

                  Balance Sheets.......................................................................................F-2

                  Statements of Operations.............................................................................F-3

                  Statements of Shareholders' Equity...................................................................F-4

                  Statements of Cash Flows.............................................................................F-5

                  Notes to Financial Statements........................................................................F-6

                  Schedule III - Real Estate and Accumulated Depreciation..............................................S-1
</TABLE>

                                      41
<PAGE>   43


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Roberts Realty Investors, Inc.:

We have audited the accompanying consolidated balance sheets of Roberts Realty
Investors, Inc. (a Georgia corporation) and its subsidiary as of December 31,
1999 and 1998 and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements and the schedule referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedule based on our
audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Roberts Realty Investors, Inc.
and its subsidiary as of December 31, 1999 and 1998 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.


/s/ ARTHUR ANDERSEN LLP

Atlanta, Georgia
February 25, 2000


                                      F-1
<PAGE>   44

ROBERTS REALTY INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)

<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,        DECEMBER 31,
ASSETS                                                                                     1999               1998
                                                                                        ---------           ---------
<S>                                                                                    <C>                 <C>
REAL ESTATE ASSETS - At cost:
   Land                                                                                 $  21,120           $  20,239
   Buildings and improvements                                                              96,124              91,407
   Furniture, fixtures and equipment                                                       11,654              11,184
                                                                                        ---------           ---------
                                                                                          128,898             122,830
   Less accumulated depreciation                                                          (21,029)            (16,914)
                                                                                        ---------           ---------

       Operating real estate assets                                                       107,869             105,916

   Land held for future development                                                         2,559               6,065
   Construction in progress and real estate under development                              12,393               7,035
                                                                                        ---------           ---------

       Net real estate assets                                                             122,821             119,016

CASH AND CASH EQUIVALENTS                                                                   1,673               4,106

RESTRICTED CASH                                                                             1,202                 470

DEFERRED FINANCING COSTS - Net of accumulated amortization of
   $425 and $246 at December 31, 1999 and, 1998, respectively                               1,031               1,095

OTHER ASSETS - Net                                                                            351                 403
                                                                                        ---------           ---------

                                                                                        $ 127,078           $ 125,090
                                                                                        =========           =========
LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:
   Mortgage notes payable                                                               $  84,615           $  79,973
   Land note payable                                                                        3,000                   0
   Line of credit                                                                           1,235                   0
   Accounts payable and accrued expenses                                                    1,238               1,187
   Dividends and distributions payable                                                      1,010               1,092
   Due to affiliates (including retainage payable of $216 and $0 at
       December 31, 1999 and 1998, respectively)                                            1,214                 398
   Security deposits and prepaid rents                                                        443                 335
                                                                                        ---------           ---------

       Total liabilities                                                                   92,755              82,985
                                                                                        ---------           ---------

COMMITMENTS AND CONTINGENCIES (Note 10)

MINORITY INTEREST OF UNITHOLDERS IN THE OPERATING PARTNERSHIP                              12,013              15,579
                                                                                        ---------           ---------

SHAREHOLDERS' EQUITY:
   Preferred shares, $.01 par value, 20,000,000 shares authorized, no shares
       issued and outstanding                                                                  --                  --
   Common shares, $.01 par value, 100,000,000 shares authorized, 4,959,697 and
       4,764,037 shares issued at December 31, 1999 and 1998, respectively                     49                  47
   Additional paid-in capital                                                              25,354              29,335
   Less treasury shares, at cost (140,500 shares and 19,300 shares at
       December 31, 1999 and 1998, respectively)                                           (1,054)               (145)
   Unamortized deferred compensation                                                         (136)                (92)
   Accumulated deficit                                                                     (1,903)             (2,619)
                                                                                        ---------           ---------
         Total shareholders' equity                                                        22,310              26,526
                                                                                        ---------           ---------

                                                                                        $ 127,078           $ 125,090
                                                                                        =========           =========
</TABLE>


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


                                      F-2
<PAGE>   45


ROBERTS REALTY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)

<TABLE>
<CAPTION>
                                                                                    YEARS ENDED DECEMBER 31,
                                                                                    ------------------------
                                                                            1999              1998              1997
                                                                            ----              ----              ----

<S>                                                                     <C>               <C>               <C>
OPERATING REVENUES:
  Rental operations                                                     $    18,163       $    16,521       $    16,831
  Other operating income                                                      1,221               833               741
                                                                        -----------       -----------       -----------

       Total operating revenues                                              19,384            17,354            17,572
                                                                        -----------       -----------       -----------

OPERATING EXPENSES:
  Personnel                                                                   1,785             1,777             1,661
  Utilities                                                                   1,301             1,178             1,194
  Repairs, maintenance and landscaping                                        1,180             1,090             1,124
  Real estate taxes                                                           1,574             1,393               724
  Management fees to related party                                                0                 0               211
  Marketing, insurance and other                                                848               754               801
  General and administrative expenses                                         1,964             1,727             1,714
  Depreciation expense                                                        5,529             5,017             5,708
                                                                        -----------       -----------       -----------

       Total operating expenses                                              14,181            12,936            13,137
                                                                        -----------       -----------       -----------

INCOME FROM OPERATIONS                                                        5,203             4,418             4,435
                                                                        -----------       -----------       -----------

OTHER INCOME (EXPENSE):
  Acquisition of Roberts Properties Management, L.L.C                             0                 0            (5,900)
  Interest income                                                               159               384               395
  Interest expense                                                           (5,244)           (4,555)           (4,670)
  Loss on disposal of assets                                                    (81)              (94)             (156)
  Amortization of deferred financing costs                                     (219)             (139)             (122)
  Other amortization expense                                                    (11)              (52)              (65)
                                                                        -----------       -----------       -----------

        Total other expense                                                  (5,396)           (4,456)          (10,518)
                                                                        -----------       -----------       -----------

LOSS BEFORE MINORITY INTEREST, GAINS ON SALE OF
  REAL ESTATE ASSETS AND EXTRAORDINARY ITEMS                                   (193)              (38)           (6,083)

MINORITY INTEREST OF UNITHOLDERS IN THE OPERATING PARTNERSHIP                    70                15             2,646
                                                                        -----------       -----------       -----------

LOSS BEFORE GAINS ON SALE OF REAL ESTATE ASSETS
  AND EXTRAORDINARY ITEMS                                                      (123)              (23)           (3,437)

GAINS ON SALE OF REAL ESTATE ASSETS, net of minority interest
  of unitholders in the operating partnership                                 1,023             1,218             1,012
                                                                        -----------       -----------       -----------

INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS                                        900             1,195            (2,425)

EXTRAORDINARY ITEMS - Loss on early extinguishment of debt, net of
  minority interest of unitholders in the operating partnership                (184)             (487)             (184)
                                                                        -----------       -----------       -----------

NET INCOME (LOSS)                                                       $       716       $       708       $    (2,609)
                                                                        ===========       ===========       ===========

INCOME (LOSS) PER COMMON SHARE - BASIC AND DILUTED:

  Income (loss) before extraordinary items                              $      0.19       $      0.26       $     (0.58)

  Extraordinary items                                                         (0.04)            (0.11)            (0.04)
                                                                        -----------       -----------       -----------

  Net income (loss)                                                     $      0.15       $      0.15       $     (0.62)
                                                                        ===========       ===========       ===========

  Weighted average common shares - basic                                  4,737,008         4,638,265         4,187,013

  Weighted average common shares - diluted                                7,448,757         7,547,978         7,404,323
</TABLE>


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


                                      F-3
<PAGE>   46


ROBERTS REALTY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in Thousands, Except Share and Per Share Amounts)




<TABLE>
<CAPTION>
                                                 COMMON SHARES
                                                --------------     ADDITIONAL                                            TOTAL
                                               NUMBER OF             PAID-IN    TREASURY    DEFERRED     ACCUMULATED  SHAREHOLDERS'
                                             SHARES ISSUED  AMOUNT   CAPITAL     SHARES   COMPENSATION     DEFICIT      EQUITY
                                             ------------------------------------------------------------------------------------
<S>                                          <C>            <C>     <C>         <C>       <C>            <C>          <C>
BALANCE AS OF DECEMBER 31, 1996                4,186,329      $42    $29,902    $    0     $   0           $  (718)     $29,226
    Conversion of units to shares                234,179        2      1,410                                              1,412
    Dividends declared ($0.576 per share)                             (2,444)                                            (2,444)
    Adjustment for minority interest in
         the operating partnership                                     1,112                                              1,112
    Net loss                                                                                                (2,609)      (2,609)
                                               ----------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 1997                4,420,508       44     29,980         0         0            (3,327)      26,697
    Conversion of units to shares                330,468        3      2,002                                              2,005
    Dividends declared ($0.5775 per share)                            (2,702)                                            (2,702)
    Adjustment for minority interest in
         the operating partnership                                        66                                                 66
    Repurchase of units                                                 (122)                                              (122)
    Restricted shares issued to employees         13,061                 111                (111)                             0
    Amortization of deferred compensation                                                     19                             19
    Treasury shares (19,300 shares at cost)                                       (145)                                    (145)
    Net income                                                                                                 708          708
                                              -----------------------------------------------------------------------------------

BALANCE AS OF DECEMBER 31, 1998                4,764,037       47     29,335      (145)      (92)           (2,619)      26,526
    Conversion of units to shares                185,858        2        955                                                957
    Dividends declared ($1.085 per share)                             (5,134)                                            (5,134)
    Adjustment for minority interest in
         the operating partnership                                       147                                                147
    Repurchase of units                                                  (28)                                               (28)
    Restricted shares issued to employees          9,802                  79                 (79)                             0
    Amortization of deferred compensation                                                     35                             35
    Treasury shares (121,200 shares at cost)                                      (909)                                    (909)
    Net income                                                                                                 716          716
                                               ----------------------------------------------------------------------------------

BALANCE AS OF DECEMBER 31, 1999                4,959,697      $49    $25,354   ($1,054)    $(136)          $(1,903)     $22,310
                                               ==================================================================================
</TABLE>

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


                                      F-4
<PAGE>   47


ROBERTS REALTY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                                             YEARS ENDED DECEMBER 31,
                                                                                             ------------------------
                                                                                         1999          1998          1997
                                                                                       --------      --------      --------
<S>                                                                                    <C>           <C>           <C>
OPERATING ACTIVITIES:
  Net income (loss)                                                                   $    716      $    708      $ (2,609)
  Adjustments to reconcile net income (loss) to net cash provided by
    operating activities:
       Minority interest of unitholders in the operating partnership                        (70)          (15)       (2,646)
       Gain on sale of real estate assets                                                (1,023)       (1,218)       (1,012)
       Loss on disposal of assets                                                            81            94           156
       Depreciation and amortization                                                      5,759         5,208         5,895
       Non-cash interest                                                                      0             0           (55)
       Acquisition of Roberts Properties Management, L.L.C                                    0             0         5,900
       Extraordinary items, net of minority interest of unitholders in the
         operating partnership                                                              184           487           184
       Amortization of deferred compensation                                                 35            19             0
  Changes in assets and liabilities:
       (Increase) Decrease in restricted cash                                               (39)          148            64
       (Increase) Decrease in other assets                                                   52           (34)          (15)
       Increase (decrease) in accounts payable and accrued expenses
        relating to operations                                                              114           (23)          (94)
       Decrease in due to affiliates relating to operations                                   0             0          (251)
       Increase (decrease) in security deposits and prepaid rent                            108           (79)          (48)
                                                                                       --------      --------      --------

       Net cash provided by operating activities                                          5,917         5,295         5,469
                                                                                       --------      --------      --------

INVESTING ACTIVITIES:
  Proceeds from sale of real estate assets                                                7,918         7,521        10,330
  Acquisition and construction of real estate assets                                    (14,921)      (25,756)      (11,867)
                                                                                       --------      --------      --------

        Net cash used in investing activities                                            (7,003)      (18,235)       (1,537)
                                                                                       --------      --------      --------

FINANCING ACTIVITIES:
  Proceeds from mortgage notes payable                                                    9,500        44,400        10,420
  Proceeds from land note payable                                                         3,000             0             0
  Proceeds from mortgage notes payable held in escrow                                      (693)         (150)            0
  Payoff of mortgage notes, including prepayment penalty                                 (4,166)      (28,291)       (5,151)
  Principal repayments on mortgage notes payable                                           (890)         (788)         (913)
  Payment of loan costs                                                                    (248)         (653)         (245)
  Proceeds from short-term loan                                                           3,085           350             0
  Payoff of short-term loan                                                              (1,850)         (350)            0
  Proceeds from construction loan                                                         8,019             0             0
  Payoff of construction loan                                                            (8,019)            0             0
  Repurchase of units                                                                       (28)         (122)            0
  Repurchase of treasury stock                                                             (909)         (145)            0
  Payment of dividends and distributions                                                 (8,148)       (4,322)       (4,088)
                                                                                       --------      --------      --------

        Net cash (used in) provided by financing activities                              (1,347)        9,929            23
                                                                                       --------      --------      --------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                     (2,433)       (3,011)        3,955

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                              4,106         7,117         3,162
                                                                                       --------      --------      --------

CASH AND CASH EQUIVALENTS, END OF YEAR                                                 $  1,673      $  4,106      $  7,117
                                                                                       ========      ========      ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

  Cash paid for interest                                                               $  5,852      $  5,079      $  4,722
                                                                                       ========      ========      ========
</TABLE>

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


                                      F-5
<PAGE>   48
ROBERTS REALTY INVESTORS, INC.

NOTES TO FINANCIAL STATEMENTS

1.       BUSINESS AND ORGANIZATION OF THE COMPANY

         Roberts Realty Investors, Inc. (the "Company"), a Georgia corporation,
         was formed July 22, 1994 to serve as a vehicle for investments in, and
         ownership of, a professionally managed real estate portfolio of
         multifamily apartment communities. The Company owns and operates
         multifamily residential properties as a self-administered, self-managed
         equity real estate investment trust (a "REIT"). All of the Company's
         completed apartment homes are located in the Atlanta metropolitan area.

         The Company conducts all of its operations and owns all of its assets
         in and through Roberts Properties Residential, L.P., a Georgia limited
         partnership (the "Operating Partnership"), of which the Company is the
         sole general partner and had a 65.0% and 63.0% ownership interest at
         December 31, 1999 and 1998, respectively. As the sole general partner
         and owner of a majority interest of the Operating Partnership, the
         Company controls the Operating Partnership.

         The Company, as the general partner of the Operating Partnership, does
         not hold any limited partner interests in the Operating Partnership.
         Units of limited partnership interest ("Units") in the Operating
         Partnership outstanding at December 31, 1999 and 1998 were 2,594,836
         and 2,784,611, respectively. Units held by the minority interest as a
         percentage of total Units and shares of common stock ("Shares") of the
         Company outstanding were 35.0% and 37.0% at December 31, 1999 and 1998,
         respectively. The minority interest percentage reflects the number of
         Shares and Units outstanding and will change as additional Shares and
         Units are issued.

         Effective October 1, 1994, the Company began operations through a
         business combination (the "Consolidation") of four limited partnerships
         (the "Predecessors") sponsored by Charles S. Roberts, the Chairman,
         President and Chief Executive Officer of the Company ("Mr. Roberts").
         The Consolidation was accounted for as a reorganization of entities
         under common ownership and control. As a result of the Consolidation,
         the partners of the Predecessors received Shares and/or Units. Purchase
         accounting has been applied to all acquisitions after the
         Consolidation.

         At December 31, 1999, the Company owned nine completed multifamily
         apartment communities totaling 1,779 apartment homes in Atlanta, and an
         additional 604 apartment homes were under construction (285 in Atlanta
         and 319 in Charlotte). On August 23, 1999, the Company sold a 117-unit
         apartment community located in Atlanta, Georgia. The Company also held
         land under development on which it expects to develop 249 apartment
         homes in Atlanta in 2000.


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         BASIS OF PRESENTATION. The accompanying consolidated financial
         statements include the consolidated accounts of the Company and the
         Operating Partnership. All significant intercompany accounts and
         transactions have been eliminated in consolidation. The financial
         statements of the Company have been adjusted for the minority interest
         of the unitholders in the Operating Partnership.

         The minority interest of the Unitholders in the Operating Partnership
         on the accompanying balance sheets is calculated based on the minority
         interest ownership percentage multiplied by the Operating Partnership's
         net assets (total assets less total liabilities). The minority interest
         percentage reflects the number of Shares and Units outstanding and will
         change as additional Shares and Units are issued. The minority interest
         of the Unitholders in the earnings or loss of the Operating Partnership
         on the accompanying statements of operations is calculated based on the
         weighted average number of Units outstanding during the period, which
         was 36.4%, 38.5% and


                                      F-6

<PAGE>   49

         43.5% for the years ended December 31, 1999, 1998 and 1997,
         respectively. The minority interest of the Unitholders was $12,013,000
         and $15,579,000 at December 31, 1999 and 1998, respectively.

         Holders of Units generally have the right to require the Operating
         Partnership to redeem their Units for Shares. Upon submittal of Units
         for redemption, the Operating Partnership has the option either (a) to
         acquire those Units in exchange for Shares, on a one-for-one basis, or
         (b) to pay cash for those Units at their fair market value, based upon
         the then current trading price of the Shares. The Operating Partnership
         has adopted a policy that it will issue Shares in exchange for all
         future Units submitted.

         USE OF 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
         assets and liabilities and disclosure of contingent assets and
         liabilities at the date of the financial statements and the reported
         amounts of revenues and expenses during the reporting period. Actual
         results could differ from those estimates.

         REAL ESTATE ASSETS AND DEPRECIATION. All real estate assets are to be
         held and used and are recorded at depreciated cost less reductions for
         impairment, if any. In identifying potential impairment, management
         considers such factors as declines in a property's operating
         performance or market value, a change in use, or adverse changes in
         general market conditions. In determining whether an asset is impaired,
         management estimates the future cash flows expected to be generated
         from the asset's use and its eventual disposition. If the sum of these
         estimated future cash flows on an undiscounted basis is less than the
         asset's carrying cost, the asset is written down to its fair value.
         None of the Company's real estate assets have required write-downs.

         Expenditures directly related to the development, acquisition and
         improvement of real estate assets are capitalized at cost as land,
         buildings and improvements. Ordinary repairs and maintenance are
         expensed as incurred. Major replacements and betterments are
         capitalized and depreciated over their estimated useful lives.
         Buildings are generally depreciated over 27.5 years. Land improvements
         are depreciated over 15 years, and furniture, fixtures and equipment
         are depreciated over 5 to 7 years.

         REVENUE RECOGNITION. The Company leases its residential properties
         under operating leases with terms generally one year or less. Rental
         income is recognized when earned, which is not materially different
         than revenue recognition on a straight-line basis.

         CASH AND CASH EQUIVALENTS. All investments purchased with an original
         maturity of three months or less are considered to be cash equivalents.

         RESTRICTED CASH. Restricted cash consists of resident security deposits
         ($359,000) and monies restricted by lenders from proceeds on mortgage
         financings ($843,000). Because the physical occupancy of Addison Place
         phase I was less than 95%, the lender required the Company to obtain a
         letter of credit in the amount of $843,000. The 1998 restricted cash
         consists of resident security deposits ($320,000) and monies restricted
         by lenders from proceeds on mortgage financings. See Note 4 - Notes
         Payable.

         DEFERRED FINANCING COSTS. Deferred financing costs include fees and
         costs incurred to obtain financings and are amortized on the
         straight-line method over the terms of the related debt.

         INTEREST AND REAL ESTATE TAXES. Interest and real estate taxes incurred
         during the construction period are capitalized and depreciated over the
         estimated useful lives of the constructed assets. Interest capitalized
         was $621,000, $580,000 and $388,000 for the years ended December 31,
         1999, 1998, and 1997, respectively.

         INCOME TAXES. The Company elected to be taxed as a REIT under the
         Internal Revenue Code of 1986, as amended (the "Code"), commencing with
         the taxable year ended December 31, 1994. As a result, the Company
         generally will not be subject to federal and state income taxation at
         the corporate level to the extent it distributes annually at least 95%
         of its taxable income, as defined in the Code, to its shareholders and
         satisfies certain other requirements. Accordingly, no provision has
         been made for federal and state income taxes in the accompanying
         consolidated financial statements.


                                      F-7
<PAGE>   50

         EARNINGS PER SHARE. Basic earnings per share is computed based upon the
         weighted average number of common Shares outstanding during the period.
         Diluted earnings per share is computed to reflect the potential
         dilution of all instruments or securities which are convertible into
         Shares of common stock.

         NEW ACCOUNTING PRONOUNCEMENTS. Statement of Financial Accounting
         Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and
         Hedging Activities," establishes standards for reporting and display of
         derivative instruments, hedges and their components. The Company will
         be required to adopt SFAS 133, amended by SFAS 137, on January 1, 2001.
         As of December 31, 1999, the Company had no derivative instruments or
         hedging activities and, therefore, does not expect this statement to
         have a material effect on its financial position and results of
         operations.

         RECLASSIFICATIONS. Certain prior years amounts have been reclassified
         to conform with the 1999 presentation.


3.       ACQUISITIONS AND DISPOSITIONS

         On April 1, 1997, the Company acquired Roberts Properties Management,
         L.L.C. ("Roberts Management"), the property management company that
         managed the Company's multifamily apartment communities since the
         Company's inception, from Mr. Roberts. The Operating Partnership issued
         a total of 590,000 Units valued at $10.00 per Unit or $5,900,000 to
         purchase Roberts Management. Because Roberts Management, a related
         party, managed only the properties owned by the Company, the
         transaction has been accounted for as the settlement of a contract and
         has been expensed in the year ended December 31, 1997.

         On August 26, 1997, the Company completed the sale of the Autumn Ridge
         community for $10,601,000 in cash. The sale resulted in a gain of
         $1,012,000, net of minority interest of Unitholders in the Operating
         Partnership. The Company acquired Autumn Ridge in December 1995. Autumn
         Ridge is a 207-unit apartment home community located in Cobb County in
         the Atlanta metropolitan area. Net sale proceeds were $5,045,000 after
         deduction for loan repayment of $5,162,000 and closing costs and
         prorations of $394,000. The purchaser, Benchmark Autumn Ridge
         Associates, L.P., is not affiliated with the Company. See Note 9 -
         Related Party Transactions.

         On January 9, 1998, the Company completed the sale of the Windsong
         community for $9,750,000 in cash resulting in a gain, net of minority
         interest, of $918,000 on the sale of real estate assets and an
         extraordinary gain, net of minority interest, of $68,000 on the buyer's
         assumption of related mortgage indebtedness. Net sales proceeds were
         $5,194,000 after deduction for loan repayment of $3,959,000 and closing
         costs and prorations totaling $597,000. Partnership profits interests
         of $288,000 were paid to Roberts Properties. The Company reinvested the
         net sales proceeds in replacement properties in connection with a
         Section 1031 tax-deferred exchange as described below. The purchaser is
         not affiliated with the Company. See Note 9 - Related Party
         Transactions.

         On June 22, 1998, the Company purchased approximately 23.8 acres of
         undeveloped land in the Ballantyne area of Charlotte, North Carolina
         for $3,540,000 from a local Charlotte investment group. The Company
         began construction of a 319-unit multifamily apartment community on the
         property during the fourth quarter of 1999. See Note 9 Related Party
         Transactions.

         On June 24, 1998, the Company purchased approximately 49.1 acres of
         undeveloped land located in north Fulton County, Georgia for $5,294,000
         from Roberts Properties, Inc. ("Roberts Properties"), an affiliate
         owned by Mr. Roberts. The Company intends to construct a 403-unit
         multifamily apartment community on the property. Construction of the
         118-unit first phase began in the third quarter of 1998 and was
         completed in the fourth quarter of 1999. Construction on the 285-unit
         second phase began in the second quarter of 1999. See Note 9 Related
         Party Transactions.

         On June 25, 1998, the Company purchased approximately 35.3 acres of
         undeveloped land located in Gwinnett County, Georgia for $2,525,000
         from Roberts Properties Old Norcross, Ltd. The Company intends to
         construct a


                                      F-8
<PAGE>   51

         249-unit multifamily apartment community on the property, which is
         anticipated to begin in the second quarter of 2000. See Note 9 -
         Related Party Transactions.

         On July 17, 1998, the Company completed the sale of its two retail
         centers for $2,400,000 in cash resulting in a gain, net of minority
         interest, of $300,000. Net sales proceeds were $2,182,000, after
         deducting for closing costs and prorations of $218,000. Partnership
         profits interests of $60,000 were paid to Roberts Properties. The
         purchaser is unaffiliated with the Company. See Note 9 - Related Party
         Transactions.

         On August 23, 1999, the Company sold the Bentley Place community for
         $8,273,000 in cash resulting in a gain, net of minority interest, of
         $1,023,000. Net sales proceeds were $3,726,000 after deduction for loan
         repayment, including prepayment fee, of $4,166,000, and closing costs,
         accrued interest, and prorations totaling $381,000. Partnership profits
         interests of $242,000 were paid to Roberts Properties under the amended
         partnership agreement of the Operating Partnership. The Company used
         the remaining net sales proceeds of $3,484,000 to fund a special
         distribution to shareholders and unitholders on August 30, 1999 as
         described in Note 7. The purchaser is not affiliated with the Company.
         See Note 9 - Related Party Transactions.

         Unaudited pro forma amounts for the years ended December 31, 1999 and
         1998, assuming the sales of Bentley Place, Windsong, and the two retail
         centers had taken place as of January 1 for the periods presented, are
         presented below (dollars in thousands, except per share amounts). The
         unaudited pro forma information is not necessarily indicative of the
         results of operations of the Company had the acquisition and sales
         occurred at the beginning of the periods presented, nor is it
         indicative of future results.

<TABLE>
<CAPTION>
                                                          1999        1998
                                                          ----        ----

         <S>                                           <C>          <C>
         Total operating revenues                      $18,682      $16,122
         Loss before extraordinary items                  (164)        (164)
         Net loss                                         (164)        (719)

         Per Share Data - Basic and Diluted
                  Loss before extraordinary items      $ (0.04)     $ (0.04)
                  Net loss                               (0.04)       (0.16)
</TABLE>

4.       NOTES PAYABLE

         LINE OF CREDIT. The Company obtained a $2,000,000 revolving unsecured
         line of credit (the "Line") in June 1999 to provide funds for
         short-term working capital purposes. The Line has a one-year term and
         bears an interest rate of LIBOR + 150 basis points. At December 31,
         1999, $1,235,000 was outstanding under the Line.


                                      F-9
<PAGE>   52


         MORTGAGE NOTES. Mortgage notes payable were secured by the following
         communities at December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                        FIXED INTEREST          PRINCIPAL OUTSTANDING
                                                          RATE AS OF
         PROPERTY SECURING MORTGAGE      MATURITY          12/31/99          12/31/99             12/31/98
         --------------------------      --------          --------          --------             --------

         <S>                             <C>             <C>                <C>                 <C>
         Addison Place - phase I         11/15/09            6.95%          $ 9,500,000         $         0
         Bentley Place                   08/15/06            7.10                     0           4,000,000
         Bradford Creek                  06/15/08            7.15             8,273,000           8,359,000
         Crestmark                       10/01/08            6.57            15,778,000          15,957,000
         Highland Park                   02/15/03            7.30             7,844,000           7,940,000
         Ivey Brook                      02/15/07            7.14             6,228,000           6,300,000
         Plantation Trace                10/15/08            7.09            11,760,000          11,881,000
         Preston Oaks                    10/15/02            7.21             8,313,000           8,420,000
         River Oaks                      11/15/03            7.15             8,946,000           9,052,000
         Rosewood Plantation             07/15/08            6.62             7,973,000           8,064,000
                                                                            -----------         -----------

                                                                            $84,615,000         $79,973,000
                                                                            ===========         ===========
</TABLE>


         The Company and certain non-owned affiliates of the Company have a
         $35,000,000 Advised Guidance Line with Bank of America, N.A. for the
         purpose of providing financing for the acquisition or development of
         multifamily communities. Financing under the guidance line is available
         on a revolving basis and bears interest at LIBOR plus 1.80% or the
         prime rate, at the option of the borrower, payable monthly. The
         guidance line is not a commitment to lend, and each loan under the
         guidance line will be made at Bank of America's discretion in
         accordance with normal loan approval procedures. At December 31, 1999,
         there was no balance outstanding under the guidance line.

         On April 13, 1999, the Company closed a $9,500,000 construction loan to
         complete phase one of Addison Place (formerly referred to as Abbotts
         Bridge). The loan had a nine-month term and bore an interest rate of
         LIBOR plus 160 basis points. In October 1999, the Company closed a
         $9,500,000 permanent loan secured by the first phase of Addison Place.
         The Company used $8,057,000 of the proceeds of the permanent loan to
         repay the construction loan ($8,019,000) and accrued interest ($38,000)
         and will use the balance of the proceeds to pay the remaining
         construction costs. The permanent loan has a 10-year term with a fixed
         interest rate of 6.95% payable in monthly installments of $62,885 based
         on a 30-year amortization schedule. The first 12 payments, however, are
         interest-only payments of $55,021 per month. Because the property was
         less than 95% occupied at closing, the lender required the Company to
         obtain an $843,000 letter of credit secured by an equal amount of cash.

         In October 1999, the Company closed a $3,000,000 land loan to fund the
         initial construction of the second phase of Addison Place. The loan is
         secured by the second phase land, has a six-month term, and bears an
         interest rate of LIBOR plus 150 basis points.

         The scheduled principal payments of all debt outstanding at December
         31, 1999 for each of the years ending December 31 are as follows:

<TABLE>
                         <S>                            <C>
                         2000                           $   927,000
                         2001                             1,084,000
                         2002                             9,105,000
                         2003                            16,922,000
                         2004                               893,000
                         Thereafter                      55,684,000
                                                        -----------

                         Mortgage notes payable         $84,615,000
                                                        ===========
</TABLE>


                                      F-10
<PAGE>   53

         Real estate assets having a combined depreciated cost of approximately
         $105,978,000 serve as collateral for the outstanding mortgage debt at
         December 31, 1999.


5.       EXTRAORDINARY ITEMS

         The 1999 extraordinary item relates to the write-off of unamortized
         loan costs and prepayment fee to the lender for the extinguishment of
         the mortgage loan secured by the Bentley Place community, which Roberts
         Realty sold on August 23, 1999. This extraordinary item is net of
         $107,000, which was allocated to the minority interest of the
         unitholders in the Operating Partnership, and calculated based on the
         weighted average number of partnership Units outstanding during the
         period.

         The 1998 extraordinary items are comprised of (1) the write-off of
         unamortized debt premium associated with the January 9, 1998 buyer's
         assumption of the mortgage note secured by the Windsong community upon
         sale of the property, (2) the write-off of unamortized loan costs and
         prepayment fee to the lender for the refinancing of the mortgage note
         secured by the Rosewood Plantation community on June 23, 1998, and (3)
         the write-off of unamortized loan costs and prepayment fee to the
         lender for the refinancing of the mortgage notes secured by the
         Crestmark community on September 30, 1998. These extraordinary items
         are net of $306,000, which was allocated to the minority interest of
         the unitholders in the Operating Partnership, based on the weighted
         average number of Units outstanding during the period.

         The 1997 extraordinary item resulted from the write-off of unamortized
         deferred financing costs and debt prepayment associated with the August
         26, 1997 repayment of the mortgage note secured by the Autumn Ridge
         community upon sale of the property. The extraordinary item is net of
         $140,000, which was allocated to the minority interest of the
         unitholders in the Operating Partnership, based on the weighted average
         number of Units outstanding during the period.


6.       FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS

         The following disclosures of estimated fair value were determined by
         management using available market information and appropriate valuation
         methodologies. Because considerable judgment is necessary to interpret
         market data and develop the related estimates of fair value, the
         estimates presented herein are not necessarily indicative of the
         amounts that could be realized upon disposition of the financial
         instruments. The use of different market assumptions and/or estimation
         methodologies may have a material effect on the estimated fair value
         amounts.

         Cash and cash equivalents, accounts payable, accrued expenses, security
         deposits and other liabilities, due to their short-term nature, are
         carried at amounts which reasonably approximate their fair values at
         December 31, 1999 and 1998. Fixed rate mortgage debt, the variable rate
         line of credit, and the variable rate land loan with carrying values of
         $88,850,000 and $79,973,000 at December 31, 1999 and 1998,
         respectively, are estimated by management to approximate fair value
         based upon interest rates available to the Company for debt with
         similar terms and maturities.


7.       SHAREHOLDERS' EQUITY

         EXCHANGES OF UNITS FOR SHARES. During the years ended December 31,
         1999, 1998, and 1997, a total of 185,858, 330,468, and 234,179 Units,
         respectively, were exchanged for the same number of Shares. Each
         conversion was reflected in the accompanying consolidated financial
         statements at book value.

         REDEMPTIONS OF UNITS FOR CASH. During the years ended December 31, 1999
         and 1998, a total of 3,917 and 14,341 Units were redeemed for cash of
         $28,000 and $122,000, respectively. No Units were redeemed for cash in
         1997.


                                      F-11
<PAGE>   54

         RESTRICTED SHARE AWARDS. During the years ended December 31, 1999 and
         1998, the Company granted 9,802 and 13,061 Shares of restricted stock
         to certain employees. The market value of these restricted stock grants
         totaled $79,000 and $111,000, respectively, which was recorded as
         unamortized deferred compensation and is shown as a separate component
         of shareholders' equity. These restricted Shares vest 100% at the end
         of a three or four-year vesting period and are being amortized to
         compensation expense ratably over the vesting period. The Company
         issued no restricted Shares in 1997.

         TREASURY SHARE REPURCHASES. The Company repurchased 121,200 and 19,300
         Shares in 1999 and 1998 at a total cost of $909,000 and $145,000,
         respectively. The Company did not repurchase any Shares in 1997.

         DIVIDENDS. On November 16, 1999, the Company's board of directors
         declared a quarterly distribution in the amount of $0.135 per common
         Share and Unit payable on January 14, 2000 to shareholders and
         unitholders of record on December 30, 1999. Of the total dividends
         declared for 1999 totaling $1.085 per share, approximately $0.12 per
         share represents ordinary income, $0.21 per share represents capital
         gain and $0.75 per share represents a return of capital to the
         shareholders. On December 15, 1998, the board of directors declared a
         quarterly distribution in the amount of $0.145 per common Share and
         Unit payable on January 15, 1999 to shareholders and unitholders of
         record on December 31, 1998. Of the total dividends declared for 1998
         totaling $0.5775 per share, approximately $0.16 per share represents
         ordinary income, $0.05 per share represents capital gain and $0.37 per
         share represents a return of capital to the shareholders. Of the total
         dividends declared for 1997 totaling $0.576 per share, approximately
         $0.19 per share represented ordinary income, $0.21 per share
         represented capital gain, and $0.18 per share represented a return of
         capital to the shareholders.

         EARNINGS PER SHARE. Reconciliations of income available to common
         shareholders and weighted average Shares and Units used in the
         Company's basic and diluted earnings per share computations are
         detailed below (dollars in thousands).


<TABLE>
<CAPTION>
                                                                                  1999              1998            1997
                                                                                  ----              ----            ----

         <S>                                                                 <C>               <C>             <C>
         Income (loss) before extraordinary items - basic                    $     900         $   1,195       $  (2,425)
         Minority interest of Unitholders in the Operating
            Partnership in income (loss) before extraordinary items                520               748          (1,866)
                                                                             ---------         ---------       ---------

         Income (loss) before extraordinary items - diluted                  $   1,420         $   1,943       $  (4,291)
                                                                             =========         =========       =========


         Net income (loss) - basic                                           $     716         $     708       $  (2,609)
         Minority interest of Unitholders in Operating
          Partnership in net income (loss)                                         413               442          (2,006)
                                                                             ---------         ---------       ----------

         Net income (loss) - diluted                                         $   1,129         $   1,150       $  (4,615)
                                                                             =========         =========       =========


         Weighted average Shares - basic                                     4,737,008         4,638,265       4,187,013
         Dilutive Securities - weighted average Units                        2,711,749         2,909,713       3,217,310
                                                                             ---------         ---------       ---------

         Weighted average Shares - diluted                                   7,448,757         7,547,978       7,404,323
                                                                             =========         =========       =========
</TABLE>


8.       SEGMENT REPORTING

         SFAS No. 131 established standards for reporting financial and
         descriptive information about operating segments in annual financial
         statements. Operating segments are defined as components of an
         enterprise about which separate financial information is available that
         is evaluated regularly by the chief operating decision maker in


                                      F-12
<PAGE>   55

         deciding how to allocate resources and in assessing performance. The
         Company's chief operating decision maker is its chief executive
         officer.

         The Company owns, operates, and develops multifamily apartment
         communities in two major markets located in Georgia and North Carolina.
         These apartment communities generate rental revenue and other income
         through leasing of apartment homes to a diverse group of residents. The
         Company evaluates the performance of each of its apartment communities
         on an individual basis. However, because each of the apartment
         communities have similar economic characteristics, residents, and
         products and services, the apartment communities have been aggregated
         into one reportable segment. This segment comprises 100%, 99% and 99%,
         respectively, of the Company's total revenues for each of the three
         years ended December 31, 1999, 1998, and 1997.

         The primary financial measure for the Company's reportable business
         segment is net operating income ("NOI"), which represents total
         property revenues less total property operating expenses, excluding
         general and administrative and depreciation expenses. Current year NOI
         is compared to prior year NOI and current year budgeted NOI as a
         measure of financial performance. NOI from apartment communities
         totaled $12,696,000, $11,162,000, and $11,857,000 for the years ended
         December 31, 1999, 1998 and 1997, respectively. All other segment
         measurements are disclosed in the Company's consolidated financial
         statements.


9.       RELATED PARTY TRANSACTIONS

         LAND ACQUISITIONS. On June 22, 1998, the Company purchased the
         Ballantyne land for $3,540,000 from a local Charlotte investment group
         unrelated to the Company. As part of the closing costs, the Operating
         Partnership paid Roberts Properties an acquisition fee of $166,000 for
         finding the property, negotiating the sales contract, conducting due
         diligence and closing the transaction. In addition, the Operating
         Partnership will pay Roberts Properties a fee of $1,595,000, or $5,000
         per unit, for designing, developing, and overseeing construction of the
         Ballantyne project. Through December 31, 1999, the Company had incurred
         $1,063,000 of the $1,595,000 development fees. The independent members
         of the board of directors approved the foregoing arrangements with
         Roberts Properties.

         On June 24, 1998, the Company purchased the Addison Place land for
         $5,294,000 from Roberts Properties. As part of the closing costs, the
         Operating Partnership paid Roberts Properties an acquisition fee of
         $250,000 for finding the property, negotiating the sales contract,
         conducting due diligence and closing the transaction. In addition, the
         Operating Partnership will pay Roberts Properties a fee of $2,015,000,
         or $5,000 per unit, for designing, developing, and overseeing
         construction of the Addison Place project. Through December 31, 1999,
         the Company had incurred $1,540,000 of the $2,015,000 development fees.
         The independent members of the board of directors approved the
         foregoing arrangements with Roberts Properties after reviewing two
         independent appraisals. Roberts Properties acquired the property for
         $4,343,000 on March 6, 1997.

         On June 25, 1998, the Company purchased the Old Norcross land for
         $2,525,000 from Roberts Properties Old Norcross, Ltd.. Mr. Roberts, who
         is the general partner of Roberts Properties Old Norcross, Ltd.,
         received none of the sale proceeds as general partner or otherwise. As
         part of the closing costs, the Operating Partnership paid Roberts
         Properties an acquisition fee of $119,250 for finding the property,
         negotiating the sales contract, conducting due diligence and closing
         the transaction. In addition, the Operating Partnership will pay
         Roberts Properties a fee of $1,245,000, or $5,000 per unit, for
         designing, developing, and overseeing construction of the Old Norcross
         project. The independent members of the board of directors approved the
         foregoing arrangements with Roberts Properties after reviewing two
         independent appraisals.

         CONSTRUCTION CONTRACTS. The Company enters into contractual
         commitments in the normal course of business related to the
         construction of real estate assets with Roberts Properties
         Construction, Inc. ("Roberts Construction"), an affiliate of the
         Company owned by Mr. Roberts. Roberts Construction constructed the
         first phase of Addison Place under a cost plus 10% contract. Roberts
         Construction is currently constructing the second phase of Addison
         Place, consisting of 285 apartment homes, under a cost plus 10%
         arrangement. Roberts Construction started construction of the
         Ballantyne community and intends to hire a third-party general
         contractor to complete construction of the community. Roberts
         Construction will continue to oversee the project.



                                      F-13
<PAGE>   56

         In 2000, the Company expects to enter into a contract with Roberts
         Construction related to construction of the Old Norcross project in
         Atlanta. During 1999, the Company incurred $116,000 and $64,000 of
         costs related to the Ballantyne and Old Norcross projects,
         respectively, to Roberts Construction. The contractual amounts for
         projects started and/or completed with Roberts Construction during the
         last three years, from inception through December 31, 1999, are
         summarized in the following table:

<TABLE>
<CAPTION>
                                                       ACTUAL/
                                                      ESTIMATED                         ESTIMATED
                                                        TOTAL                           REMAINING
                                                      CONTRACT          AMOUNT         CONTRACTUAL
                                                       AMOUNT          INCURRED        COMMITMENT
                                                       ------          --------        ----------

                  <S>                                <C>              <C>              <C>
                  Ivey Brook                         $ 7,774,000      $ 7,774,000      $         0
                  Crestmark Club - Phase II            4,817,000        4,817,000                0
                  Bradford Creek                      10,394,000       10,394,000                0
                  Plantation Trace - Phase II          4,908,000        4,908,000                0
                  Addison Place - Phase I              9,647,000        9,305,000          342,000
                  Addison Place - Phase II            20,605,000        2,014,000       18,591,000
                                                     -----------      -----------      -----------

                                                     $58,145,000      $39,212,000      $18,933,000
                                                     ===========      ===========      ===========
</TABLE>

         The Company paid Roberts Construction for labor and materials to
         perform repairs and maintenance for the communities in the amount of
         $420,000, $52,000, and $513,000 in 1999, 1998 and 1997, respectively.

         DEVELOPMENT FEES. Roberts Properties received fees for various
         development services including market studies, business plans, design,
         finish selection, interior design and construction administration. Fees
         incurred totaled $2,603,000, $0, and $990,000 for the years ended
         December 31, 1999, 1998 and 1997, respectively.

         MANAGEMENT FEES. Roberts Management provided property management
         services to the Company through March 31, 1997 for a fee of 5% of gross
         income. On April 1, 1997, the Company acquired Roberts Management and,
         as a result, no longer pays 5% of gross property revenues to Roberts
         Management, although it does bear the actual overhead cost of managing
         the properties internally. Property management fees incurred totaled
         $0, $0, and $211,000 for the years ended December 31, 1999, 1998 and
         1997, respectively. In addition, the Company reimbursed Roberts
         Management for the salaries of the on-site property management
         personnel through March 31, 1997.

         PARTNERSHIP PROFITS INTEREST. Between 1994 and 1996, the Operating
         Partnership acquired nine limited partnerships of which Mr. Roberts was
         the sole general partner. As a part of each acquisition, the Operating
         Partnership assumed an existing financial obligation to an affiliate of
         Mr. Roberts. That financial obligation has been formalized as a profits
         interest in the Operating Partnership ("Profits Interests").

         As the holder of the Profits Interests, Roberts Properties may receive
         distributions in certain circumstances. Upon a sale of any of the
         acquired properties, Roberts Properties will receive a distribution of
         a specified percentage of the gross sales proceeds, or, in the case of
         the Crestmark Phase II land, a specified amount. Upon a change in
         control of the Company, or the Operating Partnership, Roberts
         Properties will receive a distribution of the applicable percentages of
         the fair market values of all of the properties and the specified
         amount with respect to the Crestmark Phase II land. The amount to be
         distributed to Roberts Properties with respect to each affected
         property will, however, be limited to the amount by which the gross
         proceeds from the sale of that property, or, in connection with a
         change in control, its fair market value, exceeds the sum of:

         --       the debt assumed, or taken subject to, by the Operating
                  Partnership in connection with its acquisition of the
                  property;

         --       the equity issued by the Operating Partnership in acquiring
                  the property; and

         --       all subsequent capital improvements to the property made by
                  the Operating Partnership.


                                      F-14
<PAGE>   57

        The percentages which apply to the sales prices, or fair market values,
        of the affected properties are shown in the following table:

                           River Oaks                              5%
                           Rosewood Plantation                     5%
                           Preston Oaks Phase I                    5%
                           Highland Park                           5%
                           Ivey Brook                              5%
                           Crestmark Phase I                       5%
                           Plantation Trace Phase I                6%

         In the case of the Crestmark Phase II land, the specified amount is
         $86,775.

         If the Company exercises its option to acquire all of the outstanding
         Units for Shares, it must simultaneously purchase the Profits Interests
         for cash in the amount the holder of that interest would receive if a
         change in control occurred at that time.

         Except for Units and the partnership profits interest related to the
         original nine limited partnerships acquired between 1994 and 1996, no
         partnership interests have been, or are presently expected to be,
         issued or assumed by the Operating Partnership.

         During 1999, 1998, and 1997, Profits Interests of $242,000, $348,000,
         and $0, respectively, were paid to Roberts Properties.

         OTHER FEES. During 1999, 1998 and 1997, affiliates of Mr. Roberts
         received fees and cost reimbursements for services related to (1)
         leasing administration services at the Shoppes of River Oaks and
         Shoppes of Plantation Trace ($21,000), (2) the acquisition and rezoning
         of a 1.1 acre parcel of undeveloped land located adjacent to the
         existing Preston Oaks community ($25,000), (3) the sale of Autumn Ridge
         in August 1997 ($150,000), (4) the sale of the Shoppes of River Oaks
         ($33,000), and (5) miscellaneous fees and cost reimbursements
         ($669,000). These fees and costs incurred totaled $242,000, $373,000,
         and $283,000 for the years ended December 31, 1999, 1998 and 1997,
         respectively.

         LOAN ORIGINATION FEES. A director of the Company is executive vice
         president of a commercial mortgage banking firm that has originated
         loans for the Company. Loan origination fees incurred totaled $0,
         $63,000, and $48,150 for the years ended December 31, 1999, 1998 and
         1997, respectively.


10.      COMMITMENTS AND CONTINGENCIES

         The Company and the Operating Partnership are subject to various legal
         proceedings and claims that arise in the ordinary course of business.
         While the resolution of these matters cannot be predicted with
         certainty, the Company believes that the final outcome of those matters
         will not have a material adverse effect on the Company's financial
         position or results of operations.

         As a result of the mergers of various limited partnerships into the
         Operating Partnership, the former partners of these limited
         partnerships received Units. Holders of Units have the right to require
         the Operating Partnership to redeem their Units for Shares, subject to
         certain conditions. Upon submittal of Units for redemption, the
         Operating Partnership will have the option either (a) to pay cash for
         those Units at their fair market value, which will be based upon the
         then current trading price of the Shares, or (b) to acquire those Units
         in exchange for Shares (on a one-for-one basis). The Company has
         adopted a policy that it will issue Shares in exchange for all future
         Units submitted. There were 2,594,836 Units outstanding at December 31,
         1999 that could be exchanged for Shares, subject to the conditions
         described above.


                                      F-15
<PAGE>   58

         The Company enters into contractual commitments in the normal course of
         business related to the development of real estate assets. Management
         does not believe that the completion of these commitments will result
         in a material adverse effect on the Company's financial position or
         results of operations.


11.      SUPPLEMENTAL CASH FLOW INFORMATION

         Non-cash investing and financing activities for the years ended
         December 31, 1999, 1998, and 1997 were as follows:

         A.       On April 1, 1997, the Operating Partnership issued 590,000
                  Units in exchange for the assets and liabilities of Roberts
                  Management valued at $5,900,000.

         B.       On January 9, 1998, the Company sold the Windsong community.
                  As a condition of the sale, the purchaser assumed the mortgage
                  note payable associated with the property in the amount of
                  $3,959,000.

12.      SUBSEQUENT EVENTS

         On February 1, 2000, the Company closed a $2,000,000 land loan secured
         by the Old Norcross land to fund initial construction of the second
         phase of Addison Place. The loan is secured by the Old Norcross land,
         has a one-year term, and bears an interest rate of LIBOR plus 150 basis
         points.


                                      F-16
<PAGE>   59

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

ROBERTS REALTY INVESTORS, INC.

REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                         Initial Cost to Trust                                 Carried at Close of Period
                                                                         Improvements
                                                                         Capitalized
                                                          Buildings and     After                   Buildings and
Description                      Encumbrance     Land      Improvements   Acquisition     Land       Improvements     Total
-----------                      -----------     ----      ------------   -----------     ----       ------------     -----
<S>                              <C>           <C>        <C>            <C>             <C>        <C>               <C>
River Oaks                       $  8,946      $  1,837      $  9,718      $    758      $  1,837      $ 10,476      $ 12,313
Rosewood Plantation                 7,973         1,310         7,120           171         1,310         7,291         8,601
Preston Oaks                        8,313         2,570        11,278           170         2,570        11,448        14,018
Highland Park                       7,844         1,827        10,003            80         1,827        10,082        11,909
Ivey Brook                          6,228         3,073         8,929            45         3,073         8,974        12,047
Plantation Trace                   11,760         2,385        15,802           593         2,385        16,395        18,780
Bentley Place                           0             0             0             0             0             0             0
Bradford Creek                      8,273         1,672        12,174            30         1,672        12,204        13,876
Crestmark                          15,778         4,366        20,397            71         4,366        20,468        24,834
Addison Place Townhomes             9,500         2,080        10,440             0         2,080        10,440        12,520
                                 --------      --------      --------      --------      --------      --------      --------
Total                            $ 84,615      $ 21,120      $105,861      $  1,918        21,120      $107,778      $128,898
                                 ========      ========      ========      ========      ========      ========      ========
</TABLE>

<TABLE>
<CAPTION>
                                                             Life on which                               Date of
                                 Accumulated                 Depreciation             Date              Original
Description                     Depreciation                  is Computed            Acquired          Construction
-----------                     ------------                  -----------            --------          ------------
<S>                             <C>                        <C>                       <C>               <C>
River Oaks                          $  3,340               3 - 27.5 Years            Oct - 94                  1992
Rosewood Plantation                    2,269               3 - 27.5 Years            Oct - 94                  1994
Preston Oaks                           2,649               3 - 27.5 Years            Oct - 94                  1995
Highland Park                          2,448               3 - 27.5 Years            Oct - 94                  1995
Ivey Brook                             1,763               3 - 27.5 Years            Mar - 95                  1997
Plantation Trace                       3,037               3 - 27.5 Years            May - 95                  1990
Bentley Place                              0               3 - 27.5 Years            Mar - 96                  1993
Bradford Creek                         1,265               3 - 27.5 Years            Mar - 96                  1998
Crestmark                              3,948               3 - 27.5 Years            Jun - 96                  1996
Addison Place Townhomes                  310               3 - 27.5 Years            Sep - 99                  1999
                                    --------
Total                               $ 21,029
                                    ========
</TABLE>

The accompanying notes are an integral part of this schedule.

(A)  The Company enters into contractual commitments in the normal course of
     business related to the construction of real estate assets with Roberts
     Construction - see Note 9 to the Consolidated Financial Statements.



                                      S-1
<PAGE>   60

(B)      Gross capitalized costs of real estate assets are summarized as
         follows:

<TABLE>
<CAPTION>
                                                    1999                 1998               1997
                                                  ---------           ---------           ---------

<S>                                               <C>                 <C>                 <C>
Balance at beginning of period                    $ 122,830           $ 111,778           $ 110,800

     Additions during period:
         Acquisitions                                     0                   0                   0
         Other additions                             12,915              21,323              10,276
         Improvements                                   950                 792                 613
                                                  ---------           ---------           ---------
             Total Additions                         13,865              22,115              10,889
                                                  ---------           ---------           ---------

     Deductions during period:
         Sales                                       (7,459)            (10,781)             (9,619)
         Other disposals                               (338)               (282)               (292)
                                                  ---------           ---------           ---------
             Total disposals                         (7,797)            (11,063)             (9,911)
                                                  ---------           ---------           ---------

Balance at close of period                        $ 128,898           $ 122,830           $ 111,778
                                                  =========           =========           =========
</TABLE>

(C)      Accumulated depreciation on real estate assets is as follows:

<TABLE>
<CAPTION>
                                                     1999               1998                1997
                                                  ---------           ---------           ---------

<S>                                               <C>                 <C>                 <C>
Balance at beginning of period                    $  16,914           $  13,401           $   8,915

     Additions during period:
         Depreciation expense                         5,529               5,017               5,708
                                                  ---------           ---------           ---------

     Deductions during period
         Sales                                       (1,154)             (1,304)             (1,096)
         Other disposals:                              (260)               (200)               (126)
                                                  ---------           ---------           ---------
             Total disposals                         (1,414)             (1,504)             (1,222)
                                                  ---------           ---------           ---------

Balance at close of period                        $  21,029           $  16,914           $  13,401
                                                  =========           =========           =========
</TABLE>



                                      S-2
<PAGE>   61

3.       Exhibits.

         We have filed some of the exhibits required by Item 601 of Regulation
S-K with previous registration statements or reports. As specifically noted in
the following Index to Exhibits, those previously filed exhibits are
incorporated into this annual report on Form 10-K by reference. All exhibits
contained in the following Index to Exhibits that are designated with an
asterisk are incorporated into this annual report by reference from our initial
Registration Statement on Form 10-SB filed with the SEC on March 22, 1996; the
applicable exhibit number in that Registration Statement is provided beside the
asterisk.

<TABLE>
<CAPTION>
EXHIBIT
  NO.                                                DESCRIPTION
-------                                              -----------

<S>                  <C>
    3.1              Articles of Incorporation of Roberts Realty Investors, Inc. filed with the Georgia Secretary of State on
                     July 22, 1994.  [* 2.1]

    3.2              Bylaws of Roberts Realty Investors, Inc.  [* 2.2]

    4.1              Agreement of Limited Partnership of Roberts Properties Residential, L.P., dated as of July 22, 1994.  [* 3.1]

    4.1.1            First Amended and Restated Agreement of Limited Partnership of Roberts Properties Residential, L.P.,
                     dated as of October 1, 1994.  [* 3.1.1]

    4.1.2            Amendment #1 to First Amended and Restated Agreement of Limited Partnership of Roberts
                     Properties Residential, L.P., dated as of October 13, 1994. [* 3.1.2]

    4.1.3            Amendment #2 to First Amended and Restated Agreement of Limited Partnership of Roberts
                     Properties Residential, L.P. [Incorporated by reference to Exhibit 10.1 from our
                     Registration Statement on Form S-3 filed July 8, 1999, registration number 333-82453.]

    4.2              Certificate of Limited Partnership of Roberts Properties Residential, L.P. filed with the Georgia
                     Secretary of State on July 22, 1994.  [* 3.2]

    4.2.1            Certificate of Merger filed with the Georgia Secretary of State on October 13, 1994, merging
                     Roberts Properties River Oaks, L.P.; Roberts Properties Rosewood Plantation, L.P.; Roberts
                     Properties Preston Oaks, L.P.; and Roberts Properties Highland Park, L.P. with and into Roberts
                     Properties Residential, L.P. (1994 Consolidation). [*3.2.1]

    4.2.2            Certificate of Merger filed with the Georgia Secretary of State on March 24, 1995, merging Roberts
                     Properties Holcomb Bridge, L.P. with and into Roberts Properties Residential, L.P. (Holcomb Bridge Merger).
                     [* 3.2.2]

    4.2.3            Certificate of Merger filed with the Georgia Secretary of State on May 16, 1995, merging
                     Roberts Properties Plantation Trace, L.P. with and into Roberts Properties Residential, L.P.
                     (Plantation Trace Merger). [* 3.2.3]

    4.2.4            Certificate of Merger filed with the Georgia Secretary of State on September 27, 1995, merging
                     Roberts Properties-St. Simons, L.P. with and into Roberts Properties Residential, L.P. (Windsong
                     Merger).  [* 3.2.4]
</TABLE>



                                       42
<PAGE>   62

<TABLE>
    <S>              <C>
    4.2.5            Certificate of Merger filed with the Georgia Secretary of State on March 21, 1996, merging Roberts
                     Properties Bentley Place, L.P. with and into Roberts Properties Residential, L.P. (Bentley Place
                     Merger). [Incorporated by reference to Exhibit 4.2.5 from our quarterly report on Form 10-QSB for
                     the quarter ended June 30, 1996.]

    4.2.6            Certificate of Merger filed with the Georgia Secretary of State on June 26, 1996, merging The
                     Crestmark Club, L.P. with and into Roberts Properties Residential, L.P. (Crestmark Merger).
                     [Incorporated by reference to Exhibit 4.2.6 from our quarterly report on Form 10-QSB for the quarter
                     ended June 30, 1996.]

    4.2.7            Certificate and Articles of Merger filed with the Georgia Secretary of State on April 1, 1997 merging
                     Roberts Properties Management, L.L.C. with and into Roberts Properties Residential, L.P.
                     [Incorporated by reference to Exhibit 4.2.7 from our current report on Form 8-K dated April 1, 1997.]

   10.1.2            Real Estate Note executed by Roberts Properties Residential, L.P. in favor of Nationwide Life
                     Insurance Company, dated September 20, 1995, in the original principal amount of $8,711,000.00
                     (Preston Oaks). [*6.11.1]

   10.1.3            Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor
                     of Nationwide Life Insurance Company, dated September 20, 1995, and related collateral documents
                     (Preston Oaks). [* 6.11.2]

   10.2.1            Real Estate Note A executed by Roberts Properties Residential, L.P. in favor of Nationwide Life
                     Insurance Company, dated January 31, 1996, in the original principal amount of $6,678,000.00
                     (Highland Park).  [* 6.18.1]

   10.2.2            Real Estate Note B executed by Roberts Properties Residential, L.P. in favor of Employers Life
                     Insurance Company of Wausau, dated January 31, 1996, in the original principal amount of
                     $1,500,000.00 (Highland Park). [* 6.18.2]

   10.2.3            Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor
                     of Nationwide Life Insurance Company and Employers Life Insurance Company of Wausau, dated
                     January 31, 1996, and related collateral documents (Highland Park). [* 6.18.3]

   10.3.1            Real Estate Note A executed by Roberts Properties Residential, L.P. in favor of Nationwide Life
                     Insurance Company, dated October 17, 1996, in the original principal amount of
                     $7,250,000.00 (River Oaks). [Incorporated by reference to Exhibit 10.3.3 from our annual report on
                     Form 10-KSB for the year ended December 31, 1996.]

   10.3.2            Real Estate Note B executed by Roberts Properties Residential, L.P. in favor of Nationwide Life &
                     Annuity Insurance Company, dated October 17, 1996, in the original principal amount of $2,000,000.00
                     (River Oaks). [Incorporated by reference  to Exhibit 10.3.4 from our annual report on Form 10-KSB for
                     the year ended December 31, 1996.]

   10.3.3            Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor
                     of Nationwide Life Insurance Company and Nationwide Life & Annuity Insurance Company, dated
                     October 17, 1996, and related collateral documents (River Oaks). [Incorporated by reference to
                     Exhibit 10.3.5 from our annual report on Form  10-KSB for the year ended December 31, 1996.]
</TABLE>



                                       43
<PAGE>   63

<TABLE>
   <S>               <C>
   10.4.1            Promissory Note executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance
                     Company of America, dated June 23, 1998, in the original principal amount of $8,100,000.00
                     (Rosewood). [Incorporated by reference to Exhibit 10.4.5 from our quarterly report on Form 10-Q for
                     the quarter ended June 30, 1998.]

   10.4.2            Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor
                     of The Prudential Insurance Company of America, dated June 23, 1998, and related collateral
                     documents (Rosewood). [Incorporated by reference to Exhibit 10.4.6 from our quarterly report on
                     Form 10-Q for the quarter ended June 30, 1998.]

   10.4.3            Limited Guaranty between Roberts Realty Investors, Inc. and The Prudential Insurance Company of America,
                     dated June 23, 1998 (Rosewood).  [Incorporated  by reference to Exhibit 10.4.7 from our quarterly report on
                     Form 10-Q for the quarter ended June 30, 1998.]

   10.5.1            Real Estate Note A executed by Roberts Properties  Residential, L.P. in favor of Nationwide Life
                     Insurance Company, dated January 30, 1997, in the original principal  amount of $5,670,000.00 (Ivey Brook -
                     formerly Holcomb Bridge). [Incorporated by reference to Exhibit 10.5.12 from our annual report on Form 10-KSB
                     for the year ended  December 31, 1996.]

   10.5.2            Real Estate Note B executed by Roberts Properties Residential, L.P. in favor of West Coast Life Insurance
                     Company, dated January 30, 1997, in the original principal amount of $750,000.00 (Ivey Brook). [Incorporated
                     by reference to Exhibit 10.5.13 from our annual report on Form  10-KSB for the year ended December 31, 1996.]

   10.5.3            Deed to Secure Debt and Security Agreement executed by  Roberts Properties Residential, L.P. in favor of
                     Nationwide Life Insurance Company and West Coast Life Insurance Company, dated January 30, 1997, and related
                     collateral documents (Ivey Brook). [Incorporated by reference to Exhibit 10.5.14 from our annual report on
                     Form 10-KSB for the year ended December 31, 1996.]

   10.7.1            Promissory Note executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance
                     Company of America, dated September 29, 1998, in the original principal amount of $11,900,000
                     (Plantation Trace). [Incorporated by reference to Exhibit 10.07.04 from our quarterly report on Form 10-Q for
                     the quarter ended September 30, 1998.]

   10.7.2            Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of The
                     Prudential Insurance Company of America, dated September 29, 1998, and related collateral documents
                     (Plantation Trace). [Incorporated by reference to Exhibit 10.07.05 from our quarterly report on Form 10-Q for
                     the quarter ended September 30, 1998.]

   10.7.3            Limited Guaranty executed by Roberts Realty Investors, Inc. in favor of The Prudential  Insurance Company
                     of America, dated September 29, 1998 (Plantation  Trace).  [Incorporated by reference to Exhibit 10.07.06
                     from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]

   10.8.1            Real Estate Note executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance
                     Company, dated June 1, 1998, in the original principal amount of $8,400,000.00 (Bradford Creek).
                     [Incorporated by reference to Exhibit 10.8.6 from our quarterly report on Form 10-Q for the quarter ended
                     June 30, 1998.]

   10.8.2            Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of
                     Nationwide Life Insurance Company of America, dated June 1, 1998, and related collateral documents
                     (Bradford Creek). [Incorporated by reference to Exhibit 10.8.7 from our quarterly report on Form 10-Q for the
                     quarter ended June 30, 1998.]

   10.8.3            Guaranty between Roberts Realty Investors, Inc. and Nationwide Life Insurance Company of America,
</TABLE>



                                       44
<PAGE>   64

<TABLE>
   <S>               <C>

                     dated June 1, 1998 (Bradford  Creek).  [Incorporated by reference to Exhibit 10.8.8 from our quarterly report
                     on Form 10-Q for the quarter ended June 30, 1998.]

   10.10.1           Real Estate Note executed by Roberts Properties  Residential, L.P. in favor of Freddie Mac, dated September
                     30, 1998, in the original principal amount of $16,000,000 (Crestmark). [Incorporated by reference to
                     Exhibit 10.10.06 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]

   10.10.2           Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Freddie
                     Mac, dated September 30, 1998, and related collateral documents (Crestmark). [Incorporated by reference to
                     Exhibit 10.10.07 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]

   10.10.3           Guaranty executed by Roberts Realty Investors, Inc. in favor of Freddie Mac, dated September 30,
                     1998 (Crestmark). [Incorporated by reference to Exhibit 10.10.08 from our quarterly report on Form 10-Q
                     for the quarter ended September 30, 1998.]

   10.11.1           Amended and Restated Consulting Agreement between Roberts Properties Residential, L.P. and Roberts
                     Properties, Inc., dated June 26, 1996. [Incorporated by reference to Exhibit 10.23.1 from our quarterly
                     report on Form 10-QSB for the quarter ended June 30, 1996.]

   10.11.2           Amended and Restated Consulting Agreement between Roberts Properties Residential, L.P. and Roberts
                     Properties Group, Inc., dated June 26, 1996. [Incorporated by reference to Exhibit 10.23.2 from our
                     quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]

   10.12             Letter Agreement between NationsBank, N.A., Charles S. Roberts, Roberts Properties Residential, L.P., Roberts
                     Properties, Inc., and Roberts Realty Investors, Inc. dated March 6, 1997 regarding the establishment of an
                     Advised Guidance Line in the amount of up to $35,000.000. [Incorporated by reference to Exhibit 10.17 from our
                     quarterly report on Form 10-QSB for the quarter ended March 31, 1997.]

   10.13             Agreement and Plan of Merger by and between Roberts Properties Residential,  L.P.  and  Roberts
                     Properties Management, L.L.C., dated April 1, 1997 [Incorporated by reference to Exhibit 2.1 from our
                     current report on Form 8-K dated April 1, 1997.]

   10.14.01          Promissory Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated April 12,
                     1999, in the original principal amount of $9,500,000 (Addison Place Phase I). [Incorporated by reference to
                     Exhibit 10.14.01 from our quarterly report on Form 10-Q dated August 13,  1999.]

   10.14.02          Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Compass
                     Bank, dated April 12, 1999, and related collateral documents (Addison Place Phase I). [Incorporated by
                     reference to Exhibit 10.14.02 from our quarterly report on  Form 10-Q dated August 13, 1999.]

   10.14.03          Guaranty executed by Roberts Realty Investors, Inc. in favor of Compass Bank, dated April 12, 1999 (Addison
                     Place Phase I). [Incorporated by reference to Exhibit 10.14.03 from our quarterly report on Form 10-Q dated
                     August 13, 1999.]

   10.14.04          Promissory Note executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance Company
                     of America, dated October 25, 1999, in the original principal amount of $9,500,000 (Addison Place Phase I).

   10.14.05          Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of The
                     Prudential Insurance Company of America, dated October 25, 1999, and related collateral documents
                     (Addison Place Phase I).
</TABLE>



                                       45
<PAGE>   65

<TABLE>
   <S>               <C>
   10.14.06          Guaranty executed by Roberts Realty Investors, Inc. in favor of The Prudential Insurance Company of America,
                     dated October 25, 1999 (Addison Place Phase I).

   10.14.07          Promissory Note executed by Roberts Properties Residential, L.P. in favor of First Union National Bank, dated
                     October 25, 1999, in the original principal amount of $3,000,000 (Addison Place Phase II).

   10.14.08          Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of First
                     Union National Bank, dated October 25, 1999, and related collateral documents (Addison Place Phase II).

   10.15.01          Line of Credit Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1,
                     1999, in the original principal amount of $2,000,000. [Incorporated by reference to Exhibit 10.15.01 from our
                     quarterly report on Form 10-Q dated August 13, 1999.]

   10.15.02          Loan Agreement executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated
                     June 1, 1999. [Incorporated by reference to Exhibit 10.15.02 from our quarterly report on Form 10-Q dated
                     August 13, 1999.]

   10.15.03          Continuing Guaranty executed by Roberts Realty  Investors, Inc. in favor of Compass Bank, dated June 1,
                     1999. [Incorporated by reference to Exhibit 10.15.03 from our quarterly report on Form 10-Q dated August 13,
                     1999.]

   23.1              Consent of Arthur Andersen LLP.

   27                Financial Data Schedule (for SEC use only).
</TABLE>


(b) Current Reports on Form 8-K during the quarter ended December 31, 1999.

We filed no Current Reports on Form 8-K during the quarter ended December 31,
1999.



                                       46
<PAGE>   66

                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

ROBERTS REALTY INVESTORS, INC.


By:           /s/  Charles S. Roberts
   ----------------------------------------------
       Charles S. Roberts, Chairman of the Board,
       Chief Executive Officer and President

Date:  March 24, 2000

              In accordance with the Exchange Act, this report has been signed
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.

<TABLE>
<CAPTION>
         Signature                                            Title                                       Date
         ---------                                            -----                                       ----



<S>                                                  <C>                                                  <C>
/s/  Charles S. Roberts                              Chairman of the Board, Chief
--------------------------------------------         Executive Officer and President                      March 24, 2000
Charles S. Roberts


/s/  Charles R. Elliott                              Secretary, Treasurer and Chief                       March 24, 2000
--------------------------------------------         Financial Officer (Principal Financial
Charles R. Elliott                                   Officer and Principal Accounting Officer)



/s/  James M. Goodrich                               Director                                             March 24, 2000
--------------------------------------------
James M. Goodrich


/s/  Dennis H. James                                 Director                                             March 24, 2000
--------------------------------------------
Dennis H. James


/s/  Wm. Jarell Jones                                Director                                             March 24, 2000
--------------------------------------------
Wm. Jarell Jones


/s/  Ben A. Spalding                                 Director                                             March 24, 2000
--------------------------------------------
Ben A. Spalding


/s/  George W. Wray, Jr.                             Director                                             March 24, 2000
--------------------------------------------
George W. Wray, Jr.


/s/  Weldon R. Humphries                             Director                                             March 24, 2000
--------------------------------------------
Weldon R. Humphries
</TABLE>



                                       47
<PAGE>   67


                                  EXHIBIT INDEX

         We have filed some of the exhibits required by Item 601 of Regulation
S-K with previous registration statements or reports. As specifically noted in
the following Index to Exhibits, those previously filed exhibits are
incorporated into this annual report on Form 10-K by reference. All exhibits
contained in the following Index to Exhibits that are designated with an
asterisk are incorporated into this annual report by reference from our initial
Registration Statement on Form 10-SB filed with the SEC on March 22, 1996; the
applicable exhibit number in that Registration Statement is provided beside the
asterisk.

<TABLE>
<CAPTION>
EXHIBIT
  NO.                                                DESCRIPTION
-------                                              -----------
    <S>              <C>

    3.1              Articles of Incorporation of Roberts Realty  Investors, Inc. filed with the Georgia Secretary of State on
                     July 22, 1994.  [* 2.1]

    3.2              Bylaws of Roberts Realty Investors, Inc.  [* 2.2]

    4.1              Agreement of Limited  Partnership of Roberts  Properties  Residential,  L.P., dated as of July 22, 1994.
                     [* 3.1]

    4.1.1            First Amended and Restated Agreement of Limited Partnership of Roberts Properties Residential, L.P., dated
                     as of October 1, 1994.  [* 3.1.1]

    4.1.2            Amendment #1 to First Amended and Restated Agreement of Limited Partnership of Roberts Properties Residential,
                     L.P., dated as of October 13, 1994. [* 3.1.2]

    4.1.3            Amendment #2 to First Amended and Restated Agreement of Limited Partnership of Roberts Properties Residential,
                     L.P. [Incorporated by reference to Exhibit 10.1 from our Registration Statement on Form S-3 filed July 8, 1999,
                     registration number 333-82453.]

    4.2              Certificate of Limited  Partnership of Roberts Properties Residential, L.P. filed  with the Georgia Secretary
                     of State on July 22, 1994. [* 3.2]

    4.2.1            Certificate of Merger filed with the Georgia Secretary of State on October 13, 1994, merging Roberts
                     Properties River Oaks, L.P.; Roberts Properties Rosewood Plantation, L.P.;  Roberts Properties Preston Oaks,
                     L.P.; and Roberts Properties Highland Park, L.P. with and into Roberts Properties Residential, L.P.
                     (1994 Consolidation).  [* 3.2.1]

    4.2.2            Certificate of Merger filed with the Georgia Secretary of State on March 24, 1995, merging Roberts Properties
                     Holcomb Bridge, L.P. with and into Roberts Properties Residential, L.P. (Holcomb  Bridge Merger). [* 3.2.2]

    4.2.3            Certificate of Merger filed with the Georgia Secretary of State on May 16,  1995, merging Roberts Properties
                     Plantation Trace, L.P. with and into Roberts Properties Residential, L.P. (Plantation Trace Merger). [* 3.2.3]

    4.2.4            Certificate of Merger filed with the Georgia Secretary of State on September 27, 1995, merging Roberts
                     Properties-St. Simons, L.P. with and into Roberts Properties Residential, L.P. (Windsong Merger). [* 3.2.4]
</TABLE>



                                       48
<PAGE>   68

<TABLE>

    <S>               <C>
    4.2.5            Certificate of Merger filed with the Georgia Secretary of State on March 21, 1996, merging Roberts Properties
                     Bentley Place, L.P. with and into Roberts Properties Residential, L.P. (Bentley Place Merger). [Incorporated by
                     reference to Exhibit 4.2.5 from our quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]

    4.2.6            Certificate of Merger filed with the Georgia Secretary of State on June 26, 1996, merging The Crestmark Club,
                     L.P. with and into Roberts Properties Residential, L.P.(Crestmark Merger). [Incorporated by reference to
                     Exhibit 4.2.6 from our quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]

    4.2.7            Certificate and Articles of Merger filed with the Georgia  Secretary of State on April 1, 1997 merging Roberts
                     Properties Management, L.L.C. with and into Roberts Properties Residential, L.P. [Incorporated by reference to
                     Exhibit 4.2.7 from our current report on Form 8-K dated April 1, 1997.]

   10.1.2            Real Estate Note executed by Roberts Properties Residential, L.P. in favor of  Nationwide  Life
                     Insurance Company, dated September 20, 1995, in the original principal amount of $8,711,000.00
                     (Preston Oaks).  [*6.11.1]

   10.1.3            Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor
                     of Nationwide Life Insurance Company, dated September 20, 1995, and related collateral documents
                     (Preston Oaks). [* 6.11.2]

   10.2.1            Real Estate Note A executed by Roberts Properties Residential, L.P. in favor of Nationwide Life
                     Insurance Company, dated January 31, 1996, in the original principal amount of $6,678,000.00 (Highland Park).
                     [* 6.18.1]

   10.2.2            Real Estate Note B executed by Roberts Properties Residential, L.P. in favor of Employers Life Insurance
                     Company of Wausau, dated January 31, 1996, in the original principal amount of $1,500,000.00 (Highland Park).
                     [* 6.18.2]

   10.2.3            Deed to Secure Debt and Security Agreement executed by  Roberts Properties Residential, L.P. in favor of
                     Nationwide Life Insurance Company and Employers Life Insurance Company of Wausau, dated January 31, 1996, and
                     related collateral documents (Highland Park). [* 6.18.3]

   10.3.1            Real Estate Note A executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance
                     Company, dated October 17, 1996, in the original principal amount of $7,250,000.00 (River Oaks).
                     [Incorporated by reference to Exhibit 10.3.3 from our annual report on Form 10-KSB for the year ended
                     December 31, 1996.]

   10.3.2            Real Estate Note B executed by Roberts Properties Residential, L.P. in favor of Nationwide Life & Annuity
                     Insurance Company, dated October 17, 1996, in the original  principal amount of $2,000,000.00 (River Oaks).
                     [Incorporated by reference to Exhibit 10.3.4 from our annual report on Form 10-KSB for the year ended December
                     31, 1996.]

   10.3.3            Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of
                     Nationwide Life Insurance Company and Nationwide Life & Annuity Insurance Company, dated October 17, 1996,
                     and related collateral documents (River Oaks). [Incorporated by reference to Exhibit 10.3.5 from our annual
                     report on Form 10-KSB for the year ended December 31, 1996.]
</TABLE>



                                       49
<PAGE>   69

<TABLE>

   <S>               <C>
   10.4.1            Promissory Note executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance
                     Company of America, dated June 23, 1998, in the original principal amount of $8,100,000.00 (Rosewood).
                     [Incorporated by reference to Exhibit 10.4.5 from our quarterly report on Form 10-Q for the quarter ended June
                     30, 1998.]

   10.4.2            Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of The
                     Prudential Insurance Company of America, dated June 23, 1998, and related collateral documents (Rosewood).
                     [Incorporated by reference to Exhibit 10.4.6 from our quarterly report on Form 10-Q for the quarter ended June
                     30, 1998.]

   10.4.3            Limited Guaranty between Roberts Realty Investors, Inc. and The Prudential Insurance Company of America,
                     dated June 23, 1998 (Rosewood). [Incorporated by reference to Exhibit 10.4.7 from our quarterly report on
                     Form 10-Q for the quarter ended June 30, 1998.]

   10.5.1            Real Estate Note A executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance
                     Company, dated January 30, 1997, in the original principal amount of $5,670,000.00 (Ivey Brook - formerly
                     Holcomb Bridge). [Incorporated by reference to Exhibit 10.5.12 from our annual report on Form 10-KSB for the
                     year ended  December 31, 1996.]

   10.5.2            Real Estate Note B executed by Roberts Properties Residential, L.P. in favor of West Coast Life Insurance
                     Company, dated January 30, 1997, in the original principal amount of $750,000.00 (Ivey Brook). [Incorporated by
                     reference to Exhibit 10.5.13 from our annual report on Form 10-KSB for the year ended December 31, 1996.]

   10.5.3            Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of
                     Nationwide Life Insurance Company and West Coast Life Insurance Company, dated January 30, 1997, and related
                     collateral documents (Ivey Brook). [Incorporated by reference to Exhibit 10.5.14 from our annual report on
                     Form 10-KSB for the year ended December 31, 1996.]

   10.7.1            Promissory Note executed by Roberts Properties Residential,L.P. in favor of The Prudential Insurance Company
                     of America, dated September 29, 1998, in the original principal amount of $11,900,000 (Plantation Trace).
                     [Incorporated by reference to Exhibit 10.07.04 from our quarterly report on Form 10-Q for the quarter ended
                     September 30, 1998.]

   10.7.2            Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of The
                     Prudential Insurance Company of America, dated September 29, 1998, and related collateral documents
                     (Plantation Trace). [Incorporated by reference to Exhibit 10.07.05 from our quarterly report on Form 10-Q for
                     the quarter ended September 30, 1998.]

   10.7.3            Limited Guaranty executed by Roberts Realty Investors, Inc. in favor of The Prudential Insurance
                     Company of America, dated September 29, 1998 (Plantation Trace). [Incorporated by reference to Exhibit
                     10.07.06 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]

   10.8.1            Real Estate Note executed by Roberts Properties  Residential, L.P. in favor of Nationwide Life Insurance
                     Company, dated June 1, 1998, in the original principal amount of $8,400,000.00 (Bradford Creek).
                     [Incorporated by reference to Exhibit 10.8.6 from our quarterly report on Form 10-Q for the quarter ended
                     June 30, 1998.]
</TABLE>



                                       50
<PAGE>   70

<TABLE>
   <S>               <C>
   10.8.2            Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of
                     Nationwide Life Insurance Company of America, dated June 1, 1998, and related collateral documents
                     (Bradford Creek). [Incorporated by reference to Exhibit 10.8.7 from our quarterly report on Form 10-Q for the
                     quarter ended June 30, 1998.]

   10.8.3            Guaranty between Roberts Realty Investors, Inc. and Nationwide Life Insurance Company of America, dated
                     June 1, 1998 (Bradford  Creek). [Incorporated by reference to Exhibit 10.8.8 from our quarterly report on
                     Form 10-Q for the quarter ended June 30, 1998.]

   10.10.1           Real Estate Note executed by Roberts Properties Residential, L.P. in favor of Freddie Mac, dated September
                     30, 1998, in the original principal amount of $16,000,000 (Crestmark). [Incorporated by reference to Exhibit
                     10.10.06 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]

   10.10.2           Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Freddie
                     Mac, dated September 30, 1998, and related collateral documents (Crestmark). [Incorporated by reference to
                     Exhibit 10.10.07 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]

   10.10.3           Guaranty executed by Roberts Realty Investors, Inc. in favor of Freddie Mac, dated September 30,
                     1998 (Crestmark). [Incorporated  by reference to Exhibit 10.10.08 from our quarterly report on Form 10-Q
                     for the quarter ended September 30, 1998.]

   10.11.1           Amended and Restated Consulting Agreement between Roberts Properties Residential, L.P. and Roberts
                     Properties, Inc., dated June 26, 1996. [Incorporated  by reference to Exhibit 10.23.1 from our quarterly
                     report on Form 10-QSB for the quarter ended June 30, 1996.]

   10.11.2           Amended and Restated Consulting Agreement between Roberts Properties Residential, L.P. and Roberts
                     Properties Group, Inc., dated June 26, 1996. [Incorporated by reference to Exhibit 10.23.2 from our
                     quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]

   10.12             Letter Agreement between NationsBank, N.A., Charles S. Roberts, Roberts Properties Residential, L.P., Roberts
                     Properties, Inc., and Roberts Realty Investors, Inc. dated  March 6, 1997 regarding the establishment of an
                     Advised Guidance Line in the amount of up to $35,000.000. [Incorporated by reference to Exhibit 10.17 from our
                     quarterly report on Form 10-QSB for the quarter ended March 31, 1997.]

   10.13             Agreement and Plan of Merger by and between Roberts Properties Residential, L.P. and  Roberts
                     Properties Management, L.L.C., dated April 1, 1997 [Incorporated  by reference to Exhibit 2.1 from our
                     current report on Form 8-K dated April 1, 1997.]

   10.14.01          Promissory Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated
                     April 12, 1999, in the original principal amount of $9,500,000 (Addison Place Phase I). [Incorporated by
                     reference to Exhibit 10.14.01 from our quarterly report on Form 10-Q dated August 13, 1999.]

   10.14.02          Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Compass
                     Bank, dated April 12, 1999, and related collateral documents (Addison Place Phase I). [Incorporated by
                     reference to Exhibit 10.14.02 from our quarterly report on  Form 10-Q dated August 13, 1999.]
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<TABLE>
   <S>               <C>                                                                                                 <C> <C>
   10.14.03          Guaranty executed by Roberts Realty Investors, Inc. in favor of Compass Bank, dated April 12, 1999 (Addison
                     Place Phase I). [Incorporated by reference to Exhibit 10.14.03 from our quarterly report on Form 10-Q dated
                     August 13, 1999.]

   10.14.04          Promissory Note executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance Company
                     of America, dated October 25, 1999, in the original principal amount of $9,500,000 (Addison Place Phase I).

   10.14.05          Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of The
                     Prudential Insurance Company of America, dated October 25, 1999, and related collateral documents
                     (Addison Place Phase I).

   10.14.06          Guaranty executed by Roberts Realty Investors, Inc. in favor of The Prudential Insurance Company of America,
                     dated October 25, 1999 (Addison Place Phase I).

   10.14.07          Promissory Note executed by Roberts Properties Residential, L.P. in favor of First Union National Bank, dated
                     October 25, 1999, in the original principal amount of $3,000,000 (Addison Place Phase II).

   10.14.08          Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of First
                     Union National Bank, dated October 25, 1999, and related collateral documents (Addison Place Phase II).


   10.15.01          Line of Credit Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1,
                     1999, in the original principal amount of $2,000,000. [Incorporated by reference to Exhibit 10.15.01 from our
                     quarterly report on Form 10-Q dated August 13, 1999.]

   10.15.02          Loan Agreement executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated
                     June 1, 1999. [Incorporated by reference to Exhibit 10.15.02 from our quarterly report on Form 10-Q dated
                     August 13, 1999.]

   10.15.03          Continuing Guaranty executed by Roberts Realty Investors, Inc. in favor of Compass Bank, dated
                     June 1, 1999. [Incorporated by reference to Exhibit 10.15.03 from our quarterly report on Form 10-Q dated
                     August 13, 1999.]

   23.1              Consent of Arthur Andersen LLP.

   27                Financial Data Schedule (for SEC use only).
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