<PAGE>   1
                     U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   Form 10-KSB

               [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31,1997

             [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
             For the transition period from                to
                                            --------------    ------------

                          (Commission File No. 0-28048)

                         Roberts Realty Investors, Inc.
                 (Name of small business issuer in its charter)

              Georgia                                58-2122873
  (State or other jurisdiction of                (I.R.S. Employer
    incorporation or organization)            Identification Number)


 8010 Roswell Road, Suite 120, Atlanta, Georgia              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)

                                (Title of Class)

         Check whether the issuer: (1) filed all reports required to filed by
Section 13 or 15(d) of the Exchange Act during the past 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
                                                                      --     --


<PAGE>   2


         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will 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-KSB
or any amendment to this Form 10-KSB. [|X|]

         State issuer's revenues for its most recent fiscal year. $17,508,000

         State the aggregate market value of the voting common equity held by
non-affiliates 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 the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.) $33,453,205

             Note: If determining whether a person is an affiliate will involve
         an unreasonable effort and expense, the issuer may calculate the
         aggregate market value of the common equity held by non-affiliates on
         the basis of reasonable assumptions, if the assumptions are stated.

         State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date. 4,533,565 (as of March 20,
1998)

         Transitional Small Business Disclosure Format (Check One):

Yes      No  X
    ---     ---

         Documents Incorporated by Reference. Certain information required by
Part III is omitted from this report and will be incorporated by reference from
the registrant's definitive proxy statement to be filed not later than 120 days
after the end of the financial year covered by this report pursuant to
Regulation 14A promulgated under the Securities Exchange Act of 1934.




<PAGE>   3




                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                           PAGE
                                                                           ----
<S>                   <C>                                                  <C>
PART I.................................................................     1

         ITEM 1.      DESCRIPTION OF BUSINESS..........................     1

         ITEM 2.      DESCRIPTION OF PROPERTY..........................     6

         ITEM 3.      LEGAL PROCEEDINGS................................    24

         ITEM 4       SUBMISSION OF MATTERS TO A VOTE OF
                      SECURITY HOLDERS.................................    24

PART II................................................................    25

         ITEM 5.      MARKET FOR COMMON EQUITY AND RELATED
                      STOCKHOLDER MATTERS..............................    25

         ITEM 6.      MANAGEMENT'S DISCUSSION AND ANALYSIS OR
                      PLAN OF OPERATION................................    26

         ITEM 7.      FINANCIAL STATEMENTS.............................    34

         ITEM 8.      CHANGES IN AND DISAGREEMENTS WITH
                      ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                      DISCLOSURE.......................................    34

PART III...............................................................    34

         ITEM 9.      DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
                      AND CONTROL PERSONS; COMPLIANCE WITH
                      SECTION 16(a) OF THE EXCHANGE ACT ...............    34

         ITEM 10.     EXECUTIVE COMPENSATION...........................    34

         ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                      OWNERS AND MANAGEMENT............................    34

         ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED
                      TRANSACTIONS.....................................    35

         ITEM 13.     EXHIBITS AND REPORTS ON FORM 8-K.................    35
</TABLE>

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


<PAGE>   4


         This report contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. 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 the Company's management, as well as assumptions made by, and
information currently available to, the Company's management. The words
"expect," "estimate," "anticipate," "believe" and similar expressions are
intended to identify forward-looking statements. Such statements involve risks,
uncertainties and assumptions, including industry and economic conditions,
competition and other factors discussed in this and the Company's other filings
with the Securities and Exchange Commission, including the "Risk Factors"
section of the prospectus included in the Company's Registration Statement on
Form S-3 (Registration number 333-31117), as declared effective by the
Securities and Exchange Commission on December 8, 1997 (the "S-3 Registration
Statement"). If one or more of these risks or uncertainties materialize or
underlying assumptions prove incorrect, actual outcomes may vary materially from
those indicated. See "Part II, Item 6. Management's Discussion and Analysis or
Plan of Operation - Disclosure Regarding Forward-Looking Statements."


                                     PART I

ITEM 1.       DESCRIPTION OF BUSINESS.

General

         Roberts Realty Investors, Inc. (the "Company") owns and operates
multifamily residential properties as a self-administered, self-managed equity
real estate investment trust (a "REIT"). The Company conducts its business
through Roberts Properties Residential, L.P. (the "Operating Partnership"), a
Georgia limited partnership. The Company owns a 60.0% interest in the Operating
Partnership and is its sole general partner. References in this report to the
Company's strategies or intentions assume that the Company will continue to
conduct its business in this organizational structure, which is sometimes called
an "umbrella partnership" or "UPREIT."

         At March 25, 1998 the Company owns nine multifamily apartment
communities (the "Communities") containing a total of 1,778 apartment homes. The
eight existing Communities of River Oaks, Rosewood Plantation, Plantation Trace,
Preston Oaks, Highland Park, Bentley Place, Crestmark and Ivey Brook, containing
a total of 1,524 apartment units, are stabilized; and the 180-unit Bradford
Creek Community, a 24-unit second phase of Preston Oaks and a 50-unit second
phase of Plantation Trace are now under construction. (The Company considers 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.) Three additional multifamily apartment communities
anticipated to total 875 apartment homes are in the development stage.

         As of December 31, 1997, the Company owned nine stabilized Communities
containing a total of 1,756 apartment homes that had a physical occupancy rate
of 94.6%. The Company sold the 232-unit Windsong Community on January 9, 1998.

         All of the Communities are located in metropolitan Atlanta, and all
(other than the 24-unit second phase of Preston Oaks) were or are to be
developed and constructed by affiliates of Mr. Charles S. Roberts, the Chairman
of the Board, Chief Executive Officer and President of the Company. The
Operating Partnership also owns two retail centers totaling 15,698 square feet.

         The Company is a Georgia corporation formed in July 1994 and expects 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, allowing 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 investment in shares of a
corporation. To maintain its qualification as a REIT, the Company must, among
other things, distribute annually to its shareholders at least 95% of its
taxable income, subject to certain deductions, exclusions and additions. The
Company's Common Stock is traded on the American Stock Exchange under the symbol
"RPI."


<PAGE>   5

         The Company has engaged and expects to engage certain entities owned by
Mr. Roberts to perform services for the Operating Partnership. These entities
are Roberts Properties, Inc. ("Roberts Properties"), Roberts Properties Group,
L.L.C. ("Roberts Group"), and Roberts Properties Construction, Inc. ("Roberts
Construction"), which are sometimes hereinafter collectively referred to as the
"Roberts Companies."

         The Company's executive offices are located at 8010 Roswell Road, Suite
120, Atlanta, Georgia 30350, and its telephone number is (770) 394-6000. At
March 23, 1998, the Company had 44 employees, all of whom are full-time
employees.

History

         October 1994 Consolidation - River Oaks, Rosewood Plantation, Preston
Oaks and Highland Park Communities. The Company assembled its initial portfolio
of four Communities in October 1994 in the simultaneous mergers of four limited
partnerships into the Operating Partnership (the "October 1994 consolidation").
All four partnerships were originally sponsored by Mr. Charles S. Roberts. Upon
consummation of the October 1994 consolidation, which received the consent of at
least 92% in interest of the limited partners in each of the four partnerships,
the Company's assets consisted of a 53.8% general partner interest in the
Operating Partnership, which acquired the four Communities. The partners of the
four limited partnerships received a total of 1,043,647 shares of the Company's
Common Stock, par value $.01 per share (the "Shares" or the "Common Stock"), and
1,035,553 units of limited partnership interest in the Operating Partnership
("Units") valued at $8.50 per Share/Unit, or $17,673,200 in the aggregate.

         Ivey Brook Community. In March 1995 after receiving the consent of 98%
in interest of the limited partners of Roberts Properties Holcomb Bridge, L.P.,
the Operating Partnership acquired the assets of such partnership, which had
previously acquired 11.8 acres of undeveloped land and raised the equity to
develop and construct a 146-unit apartment community - now named Ivey Brook -in
Gwinnett County, Georgia. The Company issued 609,873 Shares valued at $8.50 per
Share, or $5,183,921 in the aggregate, to the partners of Roberts Properties
Holcomb Bridge, L.P.

         Plantation Trace Community. In May 1995 after receiving the consent of
96% in interest of the limited partners of Roberts Properties Plantation Trace,
L.P., the Operating Partnership acquired the 182-unit Plantation Trace
Community, along with a 7,350 square foot retail center located in front of it,
by issuing 597,741 Units valued at $9.00 per Unit, or $5,379,669 in the
aggregate, to the partners of Roberts Properties Plantation Trace, L.P.

         June-August 1995 Offering of Shares for Cash. In an offering conducted
from June 12, 1995 through August 25, 1995, the Company sold through Spalding &
Company an aggregate of 736,000 Shares at a price of $9.00 per Share. Aggregate
net proceeds of the offering were $5,988,080. On July 21, 1995 at the initial
closing of the offering, the Operating Partnership purchased 12.33 acres of land
adjacent to Plantation Trace from Roberts Properties. Construction of a 50-unit
second phase of Plantation Trace on such land is anticipated to be completed in
1998. The remaining offering proceeds were used in December 1995 to fund the
acquisition of the Autumn Ridge Community as described below.

         Windsong. In September 1995 after receiving the consent of 98% in
interest of the limited partners of Roberts Properties-St. Simons, Ltd., the
Operating Partnership acquired Windsong, a 232-unit apartment community located
on St. Simons Island, Georgia, in exchange for 476,931 Units valued at $9.25 per
Unit, or $4,411,612 in the aggregate, issued to the partners of Roberts
Properties-St. Simons, Ltd. The Company sold Windsong on January 9, 1998 for
$9,750,000, which resulted in net sales proceeds of $5,194,000.

         Autumn Ridge. On December 15, 1995, the Operating Partnership acquired
Laurelwood, a 207-unit apartment community that the Company renamed Autumn
Ridge, from an independent third party for $7,775,000 in cash. The Operating
Partnership funded the acquisition out of its available cash and did not assume
or obtain any debt in connection with the acquisition. The Company completed a
$1,668,000 redevelopment program at Autumn Ridge in 1997 that included new
carpet, appliances, HVAC units, kitchen flooring and other interior finishes, as
well as new roofs,



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landscaping and other exterior improvements. The Company sold Autumn Ridge on
August 26, 1997 for $10,601,000, which resulted in net sale proceeds of
$5,045,000.

         Offering of Shares for Cash. On May 7, 1996 the Company closed an
"intrastate" offering in which it sold 699,175 Shares for $9.50 per Share (the
"Cash Offering"). Upon the initial closing of the offering on March 29, 1996,
the Operating Partnership paid Roberts Properties, Inc. $1,628,000 to purchase
approximately 22.5 acres of land in northeast metropolitan Atlanta and to
develop and construct the 180-unit Bradford Creek Community (formerly referred
to as the Howell Ferry community) on such property. The Company used the
remaining net offering proceeds of approximately $4,426,000 for general
corporate purposes.

         Bentley Place Community. In March 1996 after receiving the consent of
87% in interest of the limited partners of Roberts Properties Bentley Place,
L.P. ("Bentley Place, L.P."), the Operating Partnership acquired the 117-unit
Bentley Place Community by merger in consideration of the issuance of 744,940
Shares valued by the Company at $9.50 per Share, or $7,076,930 in the aggregate,
to the partners of Bentley Place, L.P. No debt was assumed or obtained in
connection with the acquisition.

         Crestmark. In June 1996 after receiving the consent of 85% in interest
of the limited partners of The Crestmark Club, L.P. ("Crestmark, L.P."), the
Operating Partnership acquired the 248-unit Crestmark Community and 8.8 acres of
adjacent undeveloped property on which the Company subsequently constructed an
86-unit second phase of Crestmark. Crestmark, L.P. was merged into the Operating
Partnership in consideration of the issuance of 746,715 Units valued at $9.75
per Unit, or $7,280,471 in the aggregate, to the partners of Crestmark, L.P.

         Retail Centers. In addition to the 7,350 square foot Shoppes of
Plantation retail center acquired along with Plantation Trace as described
above, in December 1994 the Operating Partnership acquired a .86 acre parcel of
property located in front of the River Oaks Community for $296,693 in cash, and
the construction of an 8,348 square foot, one story office/retail building was
completed in August 1995. In December 1995 the Operating Partnership sold The
Shoppes of Crestmark, a 7,078 square foot retail shopping center in Douglas
County, Georgia, for $940,000. The Company used the net proceeds of
approximately $903,000 for general corporate purposes. The Operating Partnership
had exchanged 104,478 Units valued at $8.50 per Unit, or $888,063 in the
aggregate, for The Shoppes of Crestmark in January 1995.

         The October 1994 consolidation and the Ivey Brook, Plantation Trace,
Windsong, Bentley Place, and Crestmark acquisitions were all structured as
statutory mergers under Georgia law in which the applicable limited partnerships
were merged into the Operating Partnership in exchange for Shares or Units that
were disbursed to the partners of such partnerships pursuant to the terms of the
merger agreements. (Out-of-state limited partners received cash in lieu of
Shares or Units.)

The Operating Partnership

         The Company conducts its business and owns all of its real estate
assets through Roberts Properties Residential, L.P., referred to in this report
as the Operating Partnership. The Company controls the Operating Partnership as
its sole general partner. The Board of Directors of the Company manages the
affairs of the Operating Partnership by directing the affairs of the Company.
The Company's ownership interest in the Operating Partnership entitles it to
share in cash distributions from, and in the profits and losses of, the
Operating Partnership generally in proportion to its ownership percentage. The
holders of Units (other than the Company) are: the former limited partners in
the limited partnerships that were merged into the Operating Partnership; Mr.
Roberts; and the former owner of The Shoppes of Crestmark.

         Holders of Units in the Operating Partnership (sometimes referred to in
this report as "Unitholders") have the right to require the Operating
Partnership to redeem their Units, provided that the Company's articles of
incorporation limit ownership by any one holder to 6% of the outstanding Shares
(other than by Mr. Roberts, who is limited to 25%). Unitholders cannot redeem if
doing so would violate such ownership limits. A Unitholder who submits Units for
redemption will receive, at the election of the Company, either an equal number
of Units or cash in the amount of the



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average of the daily market prices of the Common Stock for the 10 consecutive
trading days prior to the date of submission multiplied by the number of Units
submitted. The Company has adopted a policy of acquiring Units in exchange for
Shares rather than cash except as required to comply with federal and state
securities laws. The Company also has the right at its election to purchase all
outstanding Units from Unitholders in exchange for Shares.

         Whenever the Company issues Shares of Common Stock (or Preferred
Stock), the Company is obligated to contribute the net proceeds from such
issuance to the Operating Partnership, and the Operating Partnership is
obligated to issue the same number of Units, or other interests, to the Company.
The Operating Partnership Agreement permits the Operating Partnership, without
the consent of the Unitholders, to sell additional Units or other partnership
interests and add limited partners.

Growth Strategies

         The Company's business objectives are to maximize the current return to
its shareholders through increases in cash flow and to increase long-term total
returns to its shareholders through appreciation in the value of the Common
Stock. The Company intends to manage its Communities intensively to seek to
maximize current and long-term income and to increase the value of its assets,
to develop high quality apartment communities for long-term ownership and to
acquire existing apartment communities where opportunities for favorable
investment returns exist. The Company is committed to achieving these objectives
by pursuing the following growth strategies and by engaging third parties,
including the Roberts Companies, for assistance as appropriate:

   -   Maximize cash flow from operations of the Communities - by seeking
       through intensive management to maintain high occupancy levels, obtain
       regular rent increases, manage resident turnover efficiently and control
       operating expenses.

   -   Develop new multifamily apartment communities in Georgia, North Carolina,
       Florida and other locations in the Southeast consistent with management's
       historical policies of constructing and effectively managing high quality
       multifamily communities for long-term income and value enhancement.

   -   Acquire additional multifamily communities in Georgia, North Carolina,
       Florida and other locations in the Southeast where, in the judgment of
       the Board of Directors, the Company's business strengths have the
       potential to increase property values and opportunities exist for
       enhanced investment returns.

   -   Pursue additional offerings of debt or equity securities to raise funds
       to pursue the foregoing management, development and acquisition growth
       strategies, each of which is discussed in more detail below.

         Property Management Strategy. The Company believes that managing its
Communities intensively is a fundamental element of its growth strategy. As of
March 23, 1998, Roberts Properties Management ("Roberts Management," the
Company's management division) employed 41 property management personnel,
including property managers, leasing managers, leasing consultants, maintenance
supervisors and technicians, and accounting personnel. In April 1995, the
predecessor of Roberts Management was selected as the Property Management
Company of the Year by the National Association of Home Builders' National
Council of the Multifamily Industry. The Company believes that Roberts
Management's depth will enable it to deliver quality services, thereby promoting
resident satisfaction, maintaining high resident retention, and enhancing the
value of each of the Communities. Roberts Management's strategy will continue to
be (i) to increase the average occupancy and rental rates as market conditions
permit, (ii) to minimize resident turnover through strict review of
creditworthiness and ability to meet lease obligations and (iii) to continue to
monitor operating expenses to increase net operating income at each of the
Communities.

         Development Strategy. The Company currently intends to continue to
develop high quality apartment communities for long-term ownership. The Company
believes that the barriers to new development in the Atlanta market will
continue to constrain the rate of apartment community construction in Atlanta.
These barriers include governmental growth control; a difficult rezoning and
permitting process; and the limited availability of well-located sites. The
Company believes that these restraints on construction, coupled with the
predicted continued growth in



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population and household formations, present an excellent opportunity for the
Company to achieve favorable returns on the development of well-located high
quality apartment communities.

         Roberts Properties has traditionally performed the development function
for limited partnerships sponsored by Mr. Roberts. Roberts Properties is
performing that function for the Operating Partnership with respect to the
Bradford Creek Community and the second phases of Plantation Trace and Preston
Oaks. Roberts Properties is also performing development work on three
multifamily apartment communities totaling 875 apartment homes to be constructed
in Fulton and Gwinnett Counties in north metropolitan Atlanta. The properties on
which those communities are to be constructed are currently owned by Roberts
Properties or an entity formed by Mr. Roberts or his affiliates, and the Company
has not yet purchased those properties. No assurances can be given that the
Company will ultimately acquire those properties and develop and construct the
three communities. The Company expects that Roberts Properties will continue to
perform development work for the Company for additional projects in the future.
The Company may seek to perform its own development activities by engaging its
own employees or by acquiring Roberts Properties.

         During the past 13 years, the Roberts Companies have developed,
constructed and/or managed over 3,300 residential units. The Company believes
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. Although the experience of the Roberts Companies will be most helpful to
the Company in the Atlanta area, the Company believes that such experience will
also enable the Company to develop multifamily apartment communities in other
areas in the Southeast. In such event the Company may, however, seek experienced
local real estate professionals to assist in developing communities with the
standards and features developed in the competitive Atlanta market.

         Although the Company presently intends to engage the Roberts Companies
in its development activities, the Company may hire other development or
construction companies in Atlanta and elsewhere if it deems it to be in the
Company's 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. As noted above, the Company expects to follow this procedure in
connection with the three apartment communities that are now in the development
stage. The Company may engage the Roberts Companies to develop properties on a
fee basis; the Company may enter into joint venture agreements with the Roberts
Companies; or the Company may acquire communities developed by the Roberts
Companies and owned by other affiliates of Mr. Roberts. The Company may also
enter into any such arrangements with independent third parties.

         In analyzing the potential development of a particular community, the
Company will evaluate certain 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. The Company will also consider certain 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 Bradford
Creek and second phases of Plantation Trace and Preston Oaks, see "Part I, Item
2, Description of Property."

         Acquisition Strategy. In addition to its management and development
strategies, the Company also intends to grow externally by selectively acquiring
existing apartment communities from third parties in Atlanta and the Southeast.
The Company will selectively seek to acquire well-located apartment communities
that can be improved, through capital improvement programs and intensive
management, to meet the quality and performance standards of the existing



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Communities. Such communities may fall into one or both of the following
categories: (i) communities that are in need of physical improvements, or (ii)
communities that, although well-located, have a history of poor management
and/or experience occupancy and financial problems that, in either event, the
Company believes it will be able to solve.

         The Company believes that a suitable acquisition target should furnish
the Company with significant opportunity for increasing property value through
rent increases, reduction of expenses, or a combination of both through
effective property management or repositioning. Prior to acquiring an existing
property from a third party, the Operating Partnership (or Roberts Properties on
its behalf) will conduct a detailed market survey consisting of a study of the
specific market area in which the apartment community is located, to assure that
local demographics and economics are within the parameters desired by the
Company. The Operating Partnership will also undertake a study of the
competitive rental market to ascertain the strength and depth of the market area
through rental rate, occupancy level, and unit mix analysis. Finally, the
Operating Partnership will perform a physical inspection, a review of resident
mix, an assessment of current vacancies, and a complete rental analysis for the
target property. Capital improvement alternatives will also be examined,
including the economic feasibility of leaving the property "as-is" compared to
the benefits of investing in site redevelopment such as landscaping, signage,
exterior architectural redesign and construction, and modernization of the unit
interior.

         Summary. Consistent with the Company's overall growth strategies, the
Company intends to continue to evaluate and initiate development and acquisition
opportunities. Although acquisition and development activities are presently
concentrated in the Atlanta metropolitan area, the Company intends to grow its
investment grade portfolio by developing, constructing and acquiring high
quality, well-located apartment communities in Georgia, North Carolina, Florida
and other locations in the Southeast.

ITEM 2.       DESCRIPTION OF PROPERTY.

General

         At March 25, 1998 the Company owns nine multifamily apartment
communities (the "Communities") containing a total of 1,778 apartment homes. The
eight existing Communities of River Oaks, Rosewood Plantation, Plantation Trace,
Preston Oaks, Highland Park, Bentley Place, Crestmark and Ivey Brook, containing
a total of 1,524 apartment units, are stabilized; and the 180-unit Bradford
Creek Community, a 24-unit second phase of Preston Oaks and a 50-unit second
phase of Plantation Trace are now under construction or development. (The
Company considers 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 described above in "Part I,
Item 1, Description of Business - Growth Strategies - Development Strategy,"
three additional multifamily apartment communities in north metropolitan Atlanta
that are anticipated to total 875 apartment homes are in the development stage.
The properties on which those communities are to be constructed are currently
owned by Roberts Properties or an entity formed by Mr. Roberts or his
affiliates, and the Company has not yet purchased those properties.

         As of December 31, 1997, the Company owned nine stabilized Communities
containing a total of 1,756 apartment homes that had a physical occupancy rate
of 94.6%. The Company sold the 232-unit Windsong Community on January 9, 1998.

         The Company believes that the demand for multifamily housing in Atlanta
will increase due to Atlanta's growing population. According to the Atlanta
Regional Commission (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.) Based upon information provided by the ARC and the U.S. Census
Bureau, the population of the Atlanta metropolitan area is projected to grow
40.9% for the period from 1990 to 2010. According to the Georgia Department of
Labor, as of January 1, 1998, the metropolitan Atlanta unemployment rate was
3.0%, which is below the Georgia unemployment rate of 3.7% and the U.S.
unemployment rate of 5.2%.



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         According to the ARC, the population of metropolitan Atlanta increased
by 50.14% from 1980 to 1995, and nine metropolitan Atlanta counties rank among
the nation's top 50 fastest growing counties. As reported by the ARC, the
Atlanta metropolitan area currently has a population of approximately 3,033,400,
making it one of the largest metropolitan areas in the country and the largest
in the Southeast.

         Certain basic information regarding the Communities and the retail
centers is summarized in the table on following page.


























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                                                          The Communities
<TABLE>
<CAPTION>
                                                                                                December 1997
                                       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, 1997
      ---------           --------   ---------    -----    -------------   -------------    --------     ----      ----------------
<S>                     <C>         <C>           <C>      <C>             <C>              <C>       <C>          <C>

Existing Communities:

  Plantation Trace      Atlanta, GA    1990        182        229,202          1,259          $861        $0.68           93.0%

  River Oaks            Atlanta, GA    1992        216        276,046          1,278          $899        $0.70           95.9%

  Bentley Place         Atlanta, GA    1993        117        108,328            926          $749        $0.81           96.9%

  Crestmark             Atlanta, GA    1993        334        360,284          1,079          $802        $0.74          N/A(1)

  Rosewood Plantation   Atlanta, GA    1994        152        192,352          1,265          $900        $0.71           97.3%

  Preston Oaks          Atlanta, GA    1995        189        235,532          1,246          $965        $0.77           97.5%

  Highland Park         Atlanta, GA    1995        188        231,634          1,232          $905        $0.73           95.7%

  Ivey Brook            Atlanta, GA    1997        146        197,067          1,350          $963        $0.71           N/A(2)

Communities Under Construction:

  Second Phase of
  Preston Oaks          Atlanta, GA    1998         24         23,016            959           N/A         N/A            N/A

  Second Phase of
  Plantation Trace      Atlanta, GA    1998         50         81,754          1,635           N/A         N/A            N/A

  Bradford Creek        Atlanta, GA    1998        180        244,889          1,360           N/A         N/A            N/A
                                                   ---      ---------          -----

  Total/Average                                  1,778      2,180,104          1,226
                                                 =====      =========          =====
</TABLE>

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

<TABLE>
<CAPTION>
                                                       Retail Centers                                   Average
                                                                                                       Occupancy
                                                        Approximate           December 1997            for the 12
                                          Year         Rentable Area      Average Rental Rates        Months Ended
      Retail Center      Location      Completed       (Square Feet)         Per Square Foot         Dec. 31, 1997
      -------------      --------      ---------       -------------         ---------------         -------------
      <S>               <C>            <C>             <C>                <C>                        <C>
        Shoppes of
        Plantation      Atlanta, GA       1992             7,350                 $16.61                  78.7%

        Shoppes of
        River Oaks      Atlanta, GA       1995             8,348                 $16.00                  76.3%
                                                          ------

      Total                                               15,698
                                                          ======

</TABLE>

(1)      The 86-unit second phase of Crestmark completed its lease-up phase in
         September 1997, and its 12 month historical occupancy percentage is not
         comparable. The physical occupancy rate for the entire Crestmark
         Community as of December 31, 1997 was 86.5%.
(2)      Ivey Brook completed its lease-up phase in August 1997, and its 12
         month historical occupancy percentage is not comparable. Its physical
         occupancy rate as of December 31, 1997 was 98.6%.





                                       8
<PAGE>   12


         Certain annual operating data regarding the Company's stabilized
Communities at December 31, 1997 are summarized in the following table (with the
second phase of Crestmark described separately for this purpose and Windsong
omitted due to its sale in January 1998). 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.

<TABLE>
<CAPTION>
                                      Physical Occupancy Rate                Average Effective Annual Rental Rates
                                                          1993             1994            1995           1996              1997
              Month                                       ----             ----            ----           ----              ----
            Completed                                  Per
             Initial                                   ---    Per      Per    Per     Per      Per    Per      Per      Per     Per
Community    Leaseup  1993  1994  1995  1996    1997   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>      <C>    <C>     <C>     <C>      <C>   <C>
Plantation     9/90    98%   98%   98%    99%    93%    $750   $0.59   $775   $0.61    $786    $0.62   $821    $0.65    $850  $0.67
Trace

River          2/93   100%*  98%   99%    98%    96%    $772*  $0.61*  $787*  $0.62    $820    $0.64   $859    $0.67    $886  $0.69
Oaks

Rosewood       5/94    22%  100%*  99%    99%    97%    N/A    $0.62*  $796*  $0.63*   $814    $0.64   $858    $0.68    $887  $0.70
Plantation

Preston        8/95   N/A   N/A   100%*   99%    97%    N/A    N/A      N/A   N/A      $885    $0.71*  $892    $0.72    $945  $0.76
Oaks

Highland       3/96   N/A   N/A    68%    96%*   96%    N/A    N/A      N/A   N/A      $819*   $0.67*  $805    $0.65    $887  $0.72
Park

Bentley        9/93   N/A   N/A    99%    99%    97%    N/A    N/A     $684   $0.74*   $675    $0.73   $709    $0.77    $740  $0.80
Place (1)

Crestmark(2)   4/94    75%   98%*  99%    98%    87%    N/A    N/A     $688   $0.67*   $688    $0.67   $736    $0.72    $782  $0.76


Ivey           8/97   N/A   N/A   N/A     27%*   98%*   N/A    N/A      N/A   N/A       N/A    N/A     $925*   $0.69*   $955  $0.71
Brook(3)

Second
Phase of       9/97   N/A   N/A   N/A     N/A    96%*   N/A    N/A      N/A   N/A       N/A    N/A      N/A    N/A      $845* $0.69*
Crestmark(4)
</TABLE>

------------------
(1)      The Company acquired Bentley Place in March 1996 as described elsewhere
         in this report.
(2)      The Company acquired Crestmark in June 1996 as described elsewhere in
         this report.
(3)      Ivey Brook completed its lease-up phase in August 1997, and its
         occupancy as of December 31, 1997 was 98%.
(4)      Phase II of Crestmark completed its lease-up phase in September 1997,
         and its occupancy as of December 31, 1997 was 96%.

                                       9
<PAGE>   13


         As described below, the Communities are located in five submarkets of
the Atlanta metropolitan area. Each heading identifies the Community or
Communities within the specified submarket. Population and employment data
provided for each submarket were in each case obtained 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 the Company's secured
indebtedness.

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

         Duluth. The City of Duluth is located in northwest Gwinnett County,
which from 1985 until 1990 ranked first in the nation in growth among counties
with a population of more than 100,000. Since 1980, Gwinnett's population has
increased 118% to a current level of 362,800. Gwinnett's strong employment base,
transportation networks, excellent public education system and affordable home
prices are factors that contribute to the county's remarkable growth. Home to
more than 247 international firms and over 700 manufacturing and high technology
firms that generate many of its 182,300 jobs, Gwinnett leads all metropolitan
Atlanta counties in percentage employment growth, increasing 181% since 1980.
Duluth has exceeded even Gwinnett County as a whole in percentage of population
growth; its population has increased 223% since 1980. Duluth is located near
I-85 and Gwinnett Place Mall, a 1,100,000 square foot regional mall.

         Plantation Trace. Plantation Trace, which was completed in 1990,
consists of 20 two and three story Nantucket-style stone and wood sided
buildings located on a 16.9 acre site on Pleasant Hill Road approximately
one-half mile west of its intersection with Peachtree Industrial Boulevard. In
1990, this 182-unit garden apartment community received the Aurora Award from
the Southeast Builders' Conference for "Best Rental Apartment Community in the
Southeast."

         The Plantation Trace Community, with its traditional award-winning
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, small wading pool, 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.

         Plantation Trace has a variety of floorplans, 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. The weighted average unit
size is 1,259 square feet. As of December 31, 1997, the Community was 94%
occupied and rental rates ranged from $690 to $1,010 per month, with a weighted
average monthly rent of $861 per unit and $0.68 per square foot. Local real
estate taxes were $161,000 in 1997.

         50-Unit Second Phase of Plantation Trace. A second phase of 50
apartment units ("Phase II") now under construction on 12.33 acres adjacent to
Plantation Trace is expected to be completed in 1998. Phase II will contain 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 anticipated monthly rental
rates are $775 for a one bedroom apartment, $950 for a two bedroom apartment,
$975 for a two bedroom townhouse, $1,250 for a three bedroom townhouse, and
$1,350 for a four bedroom townhouse, resulting in a weighted average monthly
rent of $1,063 per unit and $0.65 per square foot. Roberts Properties is
developing Phase II for the Operating Partnership and may, at its discretion,
change the unit mix or site plan, provided that any material change must be
approved by the Company's Board of Directors.

         The architectural style, land planning, landscaping and amenities of
Phase II are expected to be similar to those of the Company's other Communities.
A modern fitness and exercise facility and a second free-form swimming pool will
be added to the existing amenities at Plantation Trace. The fitness facility to
be located on the Phase II property will



                                       10
<PAGE>   14


be approximately 1,088 square feet in size, with individual aerobics equipment
and workout stations similar to the exercise facilities at the Company's other
Communities. Phase II will also provide the Plantation Trace Community direct
access to the Chattahoochee River, as well as to jogging trails and nature areas
to be developed around the existing lake and along the river.

         The construction of Phase II will be completed pursuant to a cost-plus
10% construction contract with Roberts Construction providing for 5% profit and
5% overhead. The total cost of construction including the fee to Roberts
Construction is estimated to be approximately $4,770,000. The Company
anticipates that there will be approximately $217,000 in net profit to Roberts
Construction on the construction contract.

         The land on which Phase II will be constructed is presently
unencumbered. The development and construction of Phase II will be funded from
the Company's working capital and from the proceeds of the $8,400,000 mortgage
loan to be secured by Bradford Creek that the Company expects to close in May
1998.

         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, 24 two bedroom deluxe
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, 1997, the Community
was 95% occupied and rental rates ranged from $720 to $1,030 per month, with a
weighted average monthly rent of $899 per unit and $0.70 per square foot. Local
real estate taxes were $193,000 in 1997.

         Bradford Creek. The 180-unit Bradford Creek Community is 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. Bradford Creek is nearing
completion of construction and will contain 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. Leasing started in January 1998, and the
Company anticipates that Bradford Creek will complete its lease-up phase in
August 1998. Anticipated monthly rental rates range from $765 to $1,040 per
month, resulting in a weighted average monthly rent of $898 per unit and $0.69
per square foot. The Company anticipates that local real estate taxes will be
approximately $173,000 in 1999, the first year the Community will be taxed as a
completed and stabilized property.

         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, 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



                                       11
<PAGE>   15

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.

         The total estimated acquisition, development, and construction cost for
the Bradford Creek Community is $13,800,000. The Company acquired the site for
Bradford Creek on March 29, 1996 from Roberts Properties for $1,628,000. The
Company is paying the costs of developing and constructing Bradford Creek out
of its working capital.

         The construction of Bradford Creek will be completed pursuant to a
fixed price construction contract with Roberts Construction in the amount of
$10,529,000 (as amended by approved change orders to date). Assuming that
Bradford Creek is built to the initial contract specifications, any excess
construction costs not approved by the Operating Partnership as a change order
will be borne by Roberts Construction, and if Roberts Construction's costs are
lower than anticipated, its savings will constitute additional profit. If,
during the construction of Bradford Creek, the Operating Partnership upgrades
the contract plans and specifications from those agreed to initially, such
change orders may increase the amount paid to Roberts Construction. The Company
anticipates that there will be approximately $950,000, or approximately 9% of
the contract price, in net profit to Roberts Construction on the construction
contract.

Peachtree Corners Area - Rosewood Plantation and Ivey Brook Communities

         Peachtree Corners. Located in west Gwinnett County, Peachtree Corners
benefits from the existing and improving transportation networks, employment
resources and consumer conveniences in the area. Over 400 firms 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. Almost equidistant within eight miles
of three regional shopping malls, each containing over 1,000,000 square feet of
retail space, the area is conveniently accessible to major retail activity
centers.

         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
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, 1997, the Community was 95% occupied and rental rates ranged from $740 to
$1,055, resulting in a weighted average monthly rent of $900 per unit and $0.71
per square foot. Local real estate taxes were $117,000 in 1997.

         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



                                       12
<PAGE>   16

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 comprising approximately 197,067 square feet in a total of 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, 1997, Ivey Brook was
99% occupied and its rental rates ranged from $765 to $1,155, resulting in a
weighted average monthly rent of $963 per unit and $0.71 per square foot. Local
real estate taxes were $114,000 in 1997.

         The buildings are of traditional design with either stacked stone or
brick accents and wood or 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 computer room. Recreational amenities include a swimming pool
and fitness center.

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 Scottish Rite Children's
Hospital. Perimeter Center encompasses office developments that exceed
18,500,000 square feet of space, with such Class A 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. This Community, which was completed in August 1995, is a
two and three story mid-density multifamily residential community consisting of
8 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 consists of 36 one bedroom units, 92 two



                                       13
<PAGE>   17

bedroom units, and 61 three bedroom units. The 189 units range in size from 902
to 1,440 square feet, with a weighted average unit size of 1,246 square feet.

         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.

         The Community is located on a 10.4 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 work-out 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.

         As of December 31, 1997, Preston Oaks was 99% occupied and its rental
rates ranged from $750 to $1,120 per month, resulting in a weighted average
monthly rent of $965 per unit and $0.77 per square foot. Local real estate taxes
were $8,000 in 1997 because the Community was assessed as undeveloped property.
The Company anticipates that local real estate taxes will be approximately
$166,000 in 1998.

         24-Unit Second Phase of Preston Oaks. A second phase of 24 apartment
units ("Phase II") now under construction on 1.1 acres next to Preston Oaks is
expected to be completed in 1998. Phase II will contain 24 one bedroom apartment
units with 959 square feet each. The anticipated monthly rental rate is $750.
The architectural style and landscaping of Phase II will be identical to Preston
Oaks.

         The construction of Phase II will be completed pursuant to a fixed
price construction contract with a third party construction company in the
amount of $1,300,000. The land on which Phase II will be constructed is
presently unencumbered. The development and construction of Phase II will be
funded from the Company's working capital.

         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 north Fulton County, 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
Windward, and to the south such as Perimeter Mall and Perimeter Center.

         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, 1997, Highland Park was 98% occupied and its monthly
rental rates ranged from $730 to $1,080 per month, resulting in a weighted
average monthly rent of $905 per unit and $0.73 per square foot. Local real
estate taxes were $18,000 in 1997 because the Community was assessed as
undeveloped property. The Company anticipates that local real estate taxes will
be approximately $166,000 in 1998.

Pleasantdale Area - Bentley Place Community

         DeKalb County. As one of Atlanta's core counties at the heart of the 18
county metropolitan statistical area, DeKalb County benefits not only from its
location but also from its mature infrastructure. DeKalb boasts an excellent
transportation network composed of three interstate highways: I-285, I-85 and
I-20. An established network of state and



                                       14
<PAGE>   18

local secondary roads, including the Stone Mountain Freeway, crosses the county,
providing convenient accessibility to all parts of the metropolitan area.

         As metropolitan Atlanta's population recently surpassed 2,800,000,
DeKalb County's population topped 585,400, increasing by more than 102,300 or
21% since 1990. An estimated 25% of the metropolitan Atlanta populace resides in
DeKalb County. The average household income in DeKalb County is $35,721. Home to
over 300 international companies and more than 240 Fortune 500 firms,
DeKalb-based businesses provide approximately 340,000 jobs.

         Pleasantdale Area. The area in which Bentley Place is located is
referred to as Pleasantdale, which is a developed area convenient to I-85 and
I-285 in northwest DeKalb County and southeast Gwinnett County. Pleasantdale is
home to major employers such as UPS, Scientific-Atlanta, Kraft Foodservice,
Rockwell International and Westinghouse. The Pleasantdale area also includes the
Norfolk-Southern Industrial District, which contains more than 5,000,000 square
feet of warehouse/distribution space, including Lucent Technology's 1,300,000
square foot cable and fiber-optics manufacturing facility, which employs
approximately 3,500 people.

         Bentley Place. Bentley Place, a 117-unit garden apartment community
that was completed in 1993, consists of 5 three story stacked stone and
wood-sided buildings located on a 4.6 acre site at the intersection of
Pleasantdale Road and Tucker-Norcross Road, approximately 1.7 miles southeast of
the intersection of Pleasantdale Road and I-85. The Company acquired Bentley
Place in March 1996.

         The Bentley Place Community, with its traditional award-winning
architecture and landscaped grounds, features a large clubroom with a fitness
center, free-form swimming pool, stone paver pool deck and a whirlpool spa. In
addition to upscale amenities, Bentley Place offers such interior features as
crown molding, pickled wood cabinetry in the kitchen and bath, marble vanity
tops, vaulted and trey ceilings in select units, Palladian windows, designer
wallcoverings, and full laundry room with washer and dryer connections.

         Bentley Place has a variety of floor plans, including 41 one bedroom
units of approximately 700 square feet, 40 two bedroom standard units of
approximately 1,016 square feet, and 36 two bedroom roommate units of
approximately 1,083 square feet. The weighted average unit size is 926 square
feet. As of December 31, 1997, Bentley Place was 97% occupied and rental rates
ranged from $630 to $840 per month, with a weighted average monthly rent of $749
per unit and $0.81 per square foot. Local real estate taxes were $90,000 in
1997.

Thornton Road/I-20 Area - Crestmark Community

         Douglas County. Douglas County, one of the 18 counties in the Atlanta
metropolitan statistical area, 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 85,000 in 1995, an increase of 20% since 1990.
Douglas County's economic base is diversified, having generated approximately
28,000 jobs in 1995. Employment has been growing at an annual rate of nearly 12%
over the last 10 years. 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
54,400,000 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. 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 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



                                       15
<PAGE>   19

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 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 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 traditional award-winning
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, free-form swimming pool, stone paver pool
deck 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. The
second phase added a second free-form swimming pool, 17 garages and 24 storage
units to Crestmark's amenities.

         Crestmark has a variety of floorplans 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, 1997, the Community was 87% occupied and rental
rates ranged from $610 to $1,000 per month, with a weighted average monthly rent
of $802 per unit and $0.74 per square foot. Local real estate taxes were
$188,000 in 1997.

         The 8.8 acre tract of undeveloped land for the second phase was
encumbered by the following secured loans that the Company repaid in full
shortly after the closing of the Crestmark, L.P. merger: a first priority
secured loan owed to NationsBank, N.A. (South) in the amount of $324,778; and a
second priority secured loan owed to Mr. Roberts in the amount of $1,410,092.
The Company also repaid, shortly after the closing, $121,423 owed to Roberts
Construction for change orders from the original construction and $28,077 owed
to another company affiliated with Mr. Roberts for management start-up costs.

         Construction of the second phase of Crestmark was completed pursuant to
a fixed price construction contract with Roberts Construction in the amount of
$4,816,764, as amended to include charge orders approved by the Company. Roberts
Construction received approximately $356,000, or approximately 8% of the
contract price, in net profit on the construction contract. The Company used its
working capital to fund the development and construction of the second phase.

         The table on the following page summarizes the amenities of each of the
Communities.






                                       16
<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
   ---------       -------     --------      ----      ------    ---------       ----       ------
<S>                <C>         <C>          <C>        <C>       <C>           <C>          <C>

Existing Communities:

Plantation           Yes          Yes         No        Yes         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

Bentley Place        Yes          Yes         Yes        No         Yes          Yes          Yes

Crestmark            Yes          Yes         Yes       Yes         Yes          Yes          Yes


Ivey Brook           Yes          Yes         Yes        No         Yes          Yes          Yes

Communities Under Construction:

Second Phase         Yes          Yes         Yes        No         Yes          Yes        Yes(1)
of Plantation
Trace

Bradford Creek       Yes          Yes         Yes        No         Yes          Yes          Yes
-------------------


<CAPTION>

                                                                    Sand
                                   Whirl-     Car       Tennis     Volley-     Play-     Laundry
   Community                        pool      Wash     Court(s)     ball      ground       Room            Other
   ---------                        ----      ----     --------     ----      ------       ----            -----
<S>                                <C>        <C>      <C>         <C>        <C>        <C>           <C>
Existing Communities:

Plantation                          Yes       Yes       Yes-2        Yes        Yes        Yes             lake
Trace

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

Bentley Place                       Yes        No         No         No         No         Yes

Crestmark                           Yes       Yes       Yes-2        No         Yes        Yes       nature preserve,
                                                                                                       jogging trail

Ivey Brook                           No       Yes         No         No         No         Yes

Communities Under Construction:

Second Phase                         No        No         No         No         No          No          riverfront,
of Plantation                                                                                              lake,
Trace                                                                                                 nature preserve

Bradford Creek                       No       Yes       Yes-2        No         Yes        Yes        nature preserve
</TABLE>

-------------------
* In select units
(1)  Activity/fitness center only.




                                       17
<PAGE>   21



Summary of Debt Secured by the Communities

         Certain information regarding the Company's indebtedness secured by the
Communities is as follows (excluding the Windsong Community because the property
was sold in January 1998 and the mortgage debt repaid):

<TABLE>
<CAPTION>
                                                                                                              Monthly
                            Principal                          Principal        Fixed                         Principal and
                            Balance at         Maturity        Balance at       Interest       Amortization   Interest
        Community           Dec. 31, 1997      Date            Maturity         Rate            Schedule      Payment
        ---------           -------------      ----------      ------------     --------       -----------    ---------
<S>                          <C>               <C>           <C>                <C>             <C>           <C>
Plantation Trace             $7,775,141        09-15-00      $7,481,501(1)      7.75%           28-year       $59,860
River Oaks                   $9,150,816        11-15-03      $8,513,092(2)      7.15%           30-year       $62,475
Rosewood Plantation          $6.356,757        06-01-01      $6,042,040(3)      7.38%           28-year       $46,849
Preston Oaks                 $8,518,869        10-15-02      $8,024,627(2)      7.21%           30-year       $59,188
Highland Park                $8,029,790        02-15-03      $7,544,223(2)      7.30%           30-year       $56,066
Ivey Brook                   $6,367,420        02-15-07      $5,570,481(2)      7.14%           30-year       $43,318
Bentley Place                $4,044,875        08-15-06      $3,554,094(2)      7.10%           30-year       $27,553
Crestmark - Phase I          $9,652,145        05-01-01      $9,195,508(4)      7.50%           28-year       $72,000
Crestmark - Phase II         $3,985,413        05-01-01      $3,878,801(2)      7.65%           30-year       $28,381
</TABLE>

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

(1)      The loan secured by the Plantation Trace Community 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.

(2)      Each of the loans secured by the River Oaks, Preston Oaks, Highland
         Park, Bentley Place and Ivey Brook Communities and Phase II of the
         Crestmark Community 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 such loan may be
         prepaid in full during the last 90 days prior to its maturity date
         without any prepayment premium.

(3)      The loan secured by the Rosewood Plantation Community may be prepaid
         upon the payment of a premium of 4% of the amount prepaid in the loan
         year June 1, 1997 through May 31, 1998; such prepayment premium will be
         reduced by 1% each loan year until March 2, 2001, after which date no
         prepayment premium will be due.

(4)      The loan secured by the first phase of the Crestmark Community may be
         prepaid upon the payment of a premium of 4% of the amount prepaid in
         the loan year May 1, 1997 through April 30, 1998; such prepayment
         premium will be reduced by 1% each loan year until January 31, 2001,
         after which date no prepayment premium will be due.





                                       18
<PAGE>   22



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 such entities is
interested in acquiring. Mr. Roberts may elect to raise the required equity for
any such community by syndicating a limited partnership. Alternatively, the
Company 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 such partnership to be merged
into the Operating Partnership at a later date. Such a transaction would require
the consent of a majority in interest of the limited partners of such
partnership and of a majority of the disinterested members of the Company's
Board of Directors, and no assurances can be given 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 such 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 in north metropolitan Atlanta that are anticipated to total 875
apartment homes are in the development stage. The properties on which those
communities are to be constructed are currently owned by Roberts Properties or
an entity formed by Mr. Roberts or his affiliates, and the Company has not yet
purchased those properties and develop and construct the communities.

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 the Company's ability to lease its apartments at the
rental rates anticipated, and no assurances can be given 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 the study by Roberts Properties
of apartment communities in each submarket that are believed by the Company to
be closely competitive with the Community or Communities within such submarket.
This section includes certain summary information obtained from various sources
- including developers and real estate brokers, as well as on-site visits -
regarding those apartment communities. Although Roberts Properties has attempted
to verify such information and believes 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 market
area, which the Company considers to be a two mile radius from these
Communities, currently consists of 17 multifamily communities (including River
Oaks and Plantation Trace) containing approximately 5,100 existing apartment
units. (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
described herein because it offers units with attached garages and its
architecture and amenities are similar to Plantation Trace and its Phase II.) Of
the 17 existing communities in the area, six were built between 1983 and 1988.
The remaining eleven communities - including Plantation Trace and River Oaks -
have been built since 1988. Due to the quality of construction, age of the
communities, type of amenities, resident profiles and rental rates, the Company
believes that only the other nine communities built since 1988 - Wesley
Plantation (both Highlands and Meadows), Tree Summit, Bridgewater, Bristol Park,
Aylesbury Farm, AMLI at Pleasant Hill, Summit on the River, and Jefferson on the
River - are in direct competition with Plantation Trace and River Oaks and will
be in direct competition with Bradford Creek.

         In addition, two multifamily communities totaling approximately 650
units are either planned or currently under construction in the Duluth market
area. The Company believes that as these 650 new units are completed, they will



                                       19
<PAGE>   23

compete directly with Plantation Trace, River Oaks, and Bradford Creek, which
could adversely affect the operating results for those Communities.

         Rosewood Plantation and Ivey Brook. The Peachtree Corners multifamily
market area, which is a three mile radius from these two Communities, currently
consists of 23 multifamily communities (including Rosewood Plantation and Ivey
Brook) totaling approximately 6,600 apartment units. Of the 23 existing
communities in the market area, only four - Rosewood Plantation, Wynfield Trace,
Ivey Brook, and AMLI at River Park - have been built since 1988. The remaining
communities range from approximately eight to 23 years old. The Company believes
that Rosewood Plantation and Ivey Brook draw residents from all of the other 21
communities located in the market area but that only six of the 21 communities
compete closely with Rosewood Plantation and Ivey Brook.

         Preston Oaks. The Company believes that the north central Perimeter
multifamily market area is 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 24 multifamily communities (excluding Preston Oaks)
totaling approximately 6,500 apartment units. Of the 24 existing communities in
the market area, only four were built prior to 1983, totaling 756 apartment
units. The remaining 20 communities range from approximately two to six years of
age. The Company believes that Preston Oaks competes with all 24 existing
communities. In addition to the approximately 6,500 existing apartment units, a
200-unit apartment community that will compete with Preston Oaks is now under
development.

         Highland Park. The North Springs multifamily market area is 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 (excluding
Highland Park) totaling 10,550 apartment units. Of the 34 existing communities
in the market area, only five have been built since 1989. The remaining
communities range in age from six years to over 20 years. The Company believes
that Highland Park will draw residents from all of the 34 communities located in
the market area, but that only 11 of the 34 communities will compete closely
with Highland Park.

         Bentley Place. The Pleasantdale multifamily market area, which is a two
mile radius around Bentley Place, currently consists of 27 multifamily
communities (including Bentley Place) totaling 7,097 apartment units. Of the 27
existing communities in the market area, only four (Bentley Place, Arbor Mill,
Shadow Lake, and Gwinnett Station) have been built since 1989, totaling 799
apartment units. The remaining properties range from approximately five to 21
years old. The Company believes that Bentley Place draws residents from all of
the other 26 properties located in the market area. However, based upon a
comparison of factors such as quality of features, architecture, number and type
of amenities, construction quality and age of community, the Company believes
that only eight of the 26 communities compete closely with Bentley Place. Each
of these eight properties was constructed between 1986 and 1995.

         Crestmark. The Thornton Road multifamily market area is 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 six communities
(including Crestmark) totaling 2,032 apartment units. Of the six existing
communities in the market area, only three have been built since 1990. The
remaining communities range in age from seven years to 10 years. The Company
believes that Crestmark will draw residents from all of the five other
communities located in the market area, but due to their amenities, quality of
construction and resident profile, only three of the five other communities will
compete closely with Crestmark.

Other Real Estate Assets

         In addition to the Communities, the Operating Partnership owns two
retail centers totaling 15,698 square feet. The Shoppes of Plantation is a 7,350
square foot retail center located on Pleasant Hill Road in front of Plantation
Trace on a .85 acre parcel. The Shoppes of River Oaks is a 8,348 square foot,
one story office/retail building located on a .86



                                       20
<PAGE>   24

acre parcel on Pleasant Hill Road in front of River Oaks. The retail centers
together compose less than 2% of the Company's assets and generated less than 2%
of its gross revenues for 1997.

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 certain
hazardous or toxic substances on such property. Such laws often impose such
liability without regard to whether the owner knew of, or was responsible for,
the presence of such hazardous or toxic substances. The costs of remediation or
removal of such substances may be substantial, and the presence of such
substances, or the failure to promptly remediate such substances, may adversely
affect the owner's ability to sell such real estate or to borrow using such 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) such remediation and removal costs, and (b) damages
to persons or property arising from the existence or maintenance of such
hazardous or toxic substances.

         All of the Communities and the other real estate assets have been
subject to Phase I or similar environmental assessments that are intended to
discover information regarding, and to make a preliminary evaluation of the
environmental condition of, the surveyed properties and surrounding properties.
The Phase I assessment of Bentley Place revealed an adjacent site that was
listed on the regulatory lists of the Georgia Environmental Protection Division
("EPD"). The Phase I assessment recommended, and the Company performed,
additional environmental investigation which determined that a petroleum product
release was discovered in 1990 on property adjacent to Bentley Place. Fina Oil &
Chemical Company ("Fina"), the adjacent property owner, repaired the source of
the release in 1990. Since that time, Fina has submitted a proposed corrective
action plan to the EPD. The corrective action plan, together with other
submittals by Fina to the EPD, indicate that Fina has begun to remove the
released product. The semi-annual monitoring reports on file at the EPD reveal
the possibility that petroleum constituents have migrated via groundwater onto
Bentley Place. The Company has been advised by its attorneys and environmental
consultants that Fina is responsible for cleaning up the release to the extent
required by the EPD regulations. Also, the Company's environmental consultants
have informed the Company that despite a possible groundwater impact at Bentley
Place, no threat to human health or safety is suggested. The Company and its
environmental consultants are monitoring the EPD files to ensure compliance by
Fina with the EPD regulations.

         The Phase I assessments of the other Communities and other real estate
assets have not revealed any environmental liability that the Company believes
would have material adverse effect on the Operating Partnership's business,
assets or results of operations, nor is the Company aware of any such liability.
Nevertheless, it is possible that these assessments did not reveal all
environmental liabilities or that there are material environmental liabilities
of which the Company is unaware. No assurance can be given that environmental
assessments will reveal all potential environmental liabilities, or that future
uses or conditions (including, without limitation, changes in applicable
environmental laws and regulations) will not result in imposition of
environmental liability.

Costs of Compliance with Americans with Disabilities Act and Similar Laws

         Under the American with Disabilities Act of 1990 (the "ADA"), all
places of public accommodation are required to meet certain federal requirements
related to access and use by disabled persons. These requirements became
effective in 1992. Although management of the Company believes that the
Communities are substantially in compliance with present requirements of the
ADA, final regulations under the ADA have not yet been promulgated and the
Company may incur additional costs of complying with the ADA. A number of
additional federal, state and local laws exist which also may require
modifications to the Communities, or restrict certain further renovations to
them, with respect to access by disabled persons. For example, the Fair Housing
Amendments Act of 1988 (the "FHAA") requires apartment communities first
occupied after March 13, 1990 to be accessible to the handicapped. Noncompliance
with the FHAA could result in the imposition of fines or an award of damages to
private litigants. The Company believes that the Communities that are subject to
the FHAA are in compliance with such law.



                                       21
<PAGE>   25

         Additional legislation may impose further burdens or restrictions on
owners with respect to access by disabled persons. The ultimate amount of the
cost of compliance with the ADA or such legislation is not currently
ascertainable, and, while such costs are not expected to have a material adverse
effect on the Company, such costs could be substantial. Limitations or
restrictions on the completion of certain renovations may limit application of
the Company's investment strategy in certain instances or reduce overall returns
on the Company's investments.

Insurance

         The Company carries comprehensive liability, fire, extended coverage
and rental loss insurance with respect to all of its existing Communities, with
policy specifications, insured limits and deductibles customarily carried for
similar properties. The Company carries similar insurance with respect to its
other properties, but with such exceptions as are appropriate given the
undeveloped nature of certain of these properties. In the opinion of management,
the Communities and the Company's other properties are adequately covered by
insurance. There are, however, certain 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. Should an uninsured loss or a loss in
excess of insured limits occur, the Company could lose its capital invested in a
property, as well as the anticipated future revenues from such property, and
would continue to be obligated on any mortgage indebtedness or other obligations
related to the property. Any such loss would adversely affect the Company.

Policies With Respect to Certain Activities

         The following is a discussion of investment policies, financing
policies, conflict of interest policies and policies with respect to certain
other activities of the Company and the Operating Partnership. The policies with
respect to these activities have been determined by the Company's Board of
Directors and may be amended or revised from time to time at the discretion of
the Board without a vote of the shareholders of the Company or any vote of the
partners of the Operating Partnership, except that (i) the Company cannot change
its policy of holding its assets and conducting its 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, the Company), and (ii) changes in certain policies with respect to
conflicts of interest 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. The Company
conducts all of its 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.) The Company's investment objectives are to
achieve stable cash flow available for distributions and, over time, to increase
cash flow and portfolio value by (i) continuing to develop multifamily apartment
communities for long-term ownership; (ii) acquiring additional multifamily
apartment communities that will produce additional cash flow; and (iii) to a
significantly lesser degree, acquiring and/or developing retail centers and
other income-producing real estate. The Company's policy is to acquire or
develop assets where the Company believes that favorable investment
opportunities exist based on market conditions at the time of the investment.

         The Company expects to pursue its investment objectives primarily
through the direct ownership of properties by the Operating Partnership,
although, as discussed below, the Company may also pursue indirect property
ownership opportunities. The Company intends to acquire or develop multifamily
apartment communities primarily in the Atlanta metropolitan area and the
Southeast. Future development or investment activities will not be limited by
the governing documents of the Company and the Operating Partnership to any
geographic area, product type or specified percentage of the Company's assets.



                                       22
<PAGE>   26

         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," the Company
and/or the Operating Partnership may engage in transactions of various types
with Mr. Roberts, Roberts Properties and/or other affiliates of Mr. Roberts in
connection with the development or acquisition of real estate. Such 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. The particular terms of any arrangement
have not been determined, other than the Communities now under construction and
development as described above. See "Part I, Item 1, Description of Business -
Growth Strategies - Development Strategy" and "Part I, Item 2, Description of
Property."

         Securities of or Interest in Persons Primarily Engaged in Real Estate
Activities and Other Issuers. Subject to the percentage of ownership limitations
and gross income tests necessary for REIT qualification under the Internal
Revenue Code, the Company 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 the Company and the
Operating Partnership for the purpose of exercising control over such entities.
No such investments will be made, however, unless the Board of Directors
determines that the proposed investment would not cause the Company or the
Operating Partnership to be an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. The Company or the Operating
Partnership may acquire all or substantially all of the securities or assets of
other REITs or similar entities where such investments would be consistent with
the Company's investment policies. The Company does not currently intend to
invest in the securities of other issuers except in connection with acquisitions
of indirect interests in properties, such as the acquisition of limited
partnership interests in a single asset limited partnership.

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

Financing Policies

         The organizational documents of the Company and the Operating
Partnership impose no limits on the amount of indebtedness they may incur. The
Company has an informal policy that the Company and the Operating Partnership
will not incur indebtedness in excess of 75% of what the Board of Directors
believes is the fair market value of the Operating Partnership's assets at any
given time. The Company may, however, from time to time re-evaluate its
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 such policy may adversely affect the interests of the
shareholders of the Company.

         To the extent that the Board of Directors determines to seek additional
capital, the Company may raise such capital through additional equity offerings,
debt financing or retention of cash flow (subject to provisions in the Internal
Revenue Code requiring the distribution by a REIT of a certain percentage of
taxable income and taking into account taxes that would be imposed on
undistributed taxable income), or a combination of these methods. As long as the
Operating Partnership is in existence, the net proceeds of all equity capital
raised by the Company will be contributed to the Operating Partnership in
exchange for Units or other interests in the Operating Partnership.

         The Company has not established any limit on the number or amount of
mortgages that may be placed on any single property or on the Operating
Partnership's portfolio as a whole.

Conflict of Interest Policies

         The Board of Directors is subject to certain provisions of Georgia law
that are designed to eliminate or minimize certain potential conflicts of
interest. The Company cannot assure, however, that these policies will always be
successful



                                       23
<PAGE>   27

in eliminating the influence of such conflicts. If these policies are not
successful, the Board could make decisions that might fail to reflect fully the
interests of all shareholders.

         Pursuant to Georgia law, each director will be subject to restrictions
on misappropriation of corporate opportunities to himself or his affiliates
learned of solely as a result of his service as a member of the Board of
Directors. In addition, under Georgia law, a transaction effected by the Company
or any entity controlled by the Company (including the Operating Partnership) in
which a director or certain related persons and entities of the director has 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 such interest if (a) 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 (b) the
transaction is established to have been fair to the Company. The Board of
Directors has adopted a policy that all such 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.

Certain Policies With Respect to Other Activities

         The Company and the Operating Partnership have authority to offer their
securities and to repurchase and otherwise reacquire their securities, and they
may engage in such activities in the future. The Company has adopted a policy
that it will issue Shares to holders of Units in the Operating Partnership upon
the exercise of the Unitholders' rights of redemption (except in instances in
which it is required to acquire Units for cash to comply with federal and state
securities laws). In the future, the Company and the Operating Partnership may
make loans to joint ventures in which they participate in order to meet working
capital needs. The Company and the Operating Partnership have not engaged in
trading, underwriting, agency distribution or sale of securities of other
issuers and do not intend to do so. The Company and the Operating Partnership
intend to make investments in a manner such that they will not be treated as an
investment company under the Investment Company Act of 1940, as amended.

         At all times, the Company intends to make investments in a manner so as
to be consistent with the requirements of the Internal Revenue Code for the
Company to qualify as a REIT unless, because of changing circumstances or
changes in the Internal Revenue Code (or in Treasury Regulations), the Board of
Directors decides that it is no longer in the best interests of the Company to
qualify as a REIT.

ITEM 3.       LEGAL PROCEEDINGS.

         Neither the Company, the Operating Partnership, nor the Communities are
presently subject to any material litigation nor, to the Company's 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 the Company and 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 1997.






                                       24
<PAGE>   28


                                     PART II

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

Market Information and Holders of Record

         The Common Stock began trading on the American Stock Exchange on
December 9, 1997 under the symbol "RPI." From such date through December 31,
1997, the high and low sales prices of the Common Stock were $9.50 and $8.125,
respectively. On March 20, 1998 there were 757 holders of record of the Common
Stock.

         As of March 20, 1998, the Company has 4,533,565 Shares outstanding. In
addition, 3,016,363 Shares are reserved for issuance to Unitholders from time to
time upon their exercise of certain redemption rights as explained in "Part I,
Item 1, Description of Business - The Operating Partnership."

Distributions

         The Company depends upon distributions from the Operating Partnership
to fund its distributions to shareholders. Distributions by the Operating
Partnership, and thus distributions by the Company, will continue to be at the
discretion of the Board of Directors and will be equal in amount for each Unit
or Share. Until 1996 the Company had paid no distributions on the Common Stock
since its inception in 1994. The Company and the Operating Partnership declared
quarterly distributions for 1996 that totaled $0.48125 per Share/Unit per annum
and for 1997 that totaled $0.576 per Share/Unit per annum (including a special
distribution of $0.051 per Share/Unit in October 1997 as a result of the sale of
Autumn Ridge). Approximately 32.7% of such 1997 distributions represents
ordinary income, 37.0% represents capital gain and the remaining 30.3%
represents a return of capital.

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

Sales of Unregistered Securities in 1997

         Unitholders have the right to require the Operating Partnership to
redeem their Units subject to certain limits in the Company's articles of
incorporation. A Unitholder who submits Units for redemption will receive, at
the election of the Company, either an equal number of Units or cash in the
amount of the average of the daily market prices of the Common Stock for the 10
consecutive trading days prior to the date of submission multiplied by the
number of Units submitted. The Company has adopted a policy of acquiring Units
in exchange for Shares rather than cash except as required to comply with
federal and state securities laws. In 1997 the Company issued a total of 234,179
Shares in exchange for Units submitted for redemption by a total of 24
Unitholders. In each sale the Company relied upon the "intrastate" exemption
from securities registration provided under Section 3(a)(11) of the Securities
Act of 1933 and Rule 147 promulgated by the Securities and Exchange Commission
regarding intrastate offerings. The Company believes that it has satisfied the
conditions of Rule 147 for each sale. Because Unitholders who no longer reside
in the State of Georgia will receive cash in lieu of Shares, no security was or
will be offered or sold to such persons. The certificates evidencing the Shares
issued in exchange for Units have a Rule 147 "legend" describing the applicable
restrictions on transfer printed on them, and the Company has issued stop
transfer instructions to its transfer agent with respect to such Shares.
Further, the offerees were notified that the applicable restrictions on transfer
and procedures will apply in connection with the issuance of new certificates
for any of the Shares that are presented for transfer during the nine month
period from the end of the offering during which transfer of the Shares is
restricted to residents of the State of Georgia (provided that such Shares may
be resold in ordinary transactions on the American Stock Exchange pursuant to
the S-3 Registration Statement).





                                       25
<PAGE>   29


ITEM 6.       MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

         This Item 6 contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. 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 the Company's management, as well as assumptions made by, and
information currently available to, the Company's management. 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

         The following discussion should be read in conjunction with the
Consolidated Financial Statements of the Company and the Notes thereto appearing
elsewhere herein.

         The Company owns multifamily residential properties as a
self-administered and self-managed equity real estate investment trust. In
addition to its development and construction activities, the Company's 1997
accomplishments were highlighted by the following: (1) the acquisition of
Roberts Properties Management, L.L.C. ("Roberts Management") on April 1, 1997
which means the Company now manages its own properties, (2) the sale of the
207-unit Autumn Ridge Community on August 26, 1997 for $10,601,000 resulting in
a gain of $1,792,000, and (3) the listing of the Company's stock on the American
Stock Exchange ("AMEX") on December 9, 1997.

Results of Operations

         Comparison of Year Ended December 31, 1997 to Year Ended December 31,
1996. For the year ended December 31, 1997, the Company recorded a net loss of
$2,609,000 or $0.62 per share (after minority interest and extraordinary item)
compared to a net loss of $180,000 or $0.05 per share (after minority interest
and extraordinary item) for the year ended December 31, 1996. The change in
operating results is due primarily to (1) the acquisition of Roberts Management
on April 1, 1997, (2) the decrease in average stabilized occupancy from 97.2% to
95.4%, and (3) higher interest expense due to the financing of Bentley Place,
Ivey Brook and the second phase of Crestmark in August 1996, January 1997 and
July 1997, respectively, and the assumption of mortgage debt included with the
acquisition of Crestmark in June 1996, which were counterbalanced in part by (1)
the gain from the sale of Autumn Ridge, (2) the acquisition of Bentley Place and
Crestmark in March 1996 and June 1996, respectively, and (3) the completion of
leasing at Ivey Brook and the second phase of Crestmark in July 1997 and August
1997, respectively. The Company's operating performance for all Communities is
summarized in the following table:

<TABLE>
<CAPTION>
                                                         Percentage             Year Ended December 31,
                                                         Change from            -----------------------
                                                        1996 to 1997             1997             1996
                                                        ------------             ----             ----

       <S>                                              <C>                    <C>             <C>
       Total operating revenues                              15.2%             $17,508,000     $15,197,000
       Property operating expenses (1)                       18.4%             $ 6,028,000     $ 5,091,000
       Management fees paid to related party (2)            (72.2%)            $   211,000     $   760,000
       General and administrative expenses                   85.1%             $ 1,714,000     $   926,000
       Depreciation of real estate assets                    14.8%             $ 5,708,000     $ 4,974,000
       Average stabilized occupancy (3)                      (1.8%)                   95.4%           97.2%
       Operating expense ratio (4)                            0.9%                    34.4%           33.5%
</TABLE>

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

(Footnotes begin on following page)



                                       26
<PAGE>   30


(1)      Property operating expenses include personnel, utilities, real estate
         taxes, insurance, maintenance, landscaping, marketing, and property
         administration expenses (real estate taxes exclude an adjustment of
         $588,000 in 1997 to reduce estimated property tax accruals for two
         properties that received favorable tax assessments).
(2)      Because the Company acquired Roberts Management on April 1, 1997, no
         management fees were paid to a related party subsequent to April 1,
         1997.
(3)      Represents the average physical occupancy of the Company's stabilized
         properties calculated by dividing the total number of vacant days by
         the total possible number of vacant days for each year and subtracting
         the resulting number from 100%. The calculation includes the following:
         (1) Highland Park beginning March 1, 1996, Ivey Brook beginning August
         1, 1997 and the second phase of Crestmark beginning September 1, 1997,
         which are the dates each Community achieved stabilized occupancy; (2)
         Bentley Place beginning March 1, 1996 and Crestmark beginning June 1,
         1996, which are the dates each Community was acquired by the Company;
         and (3) Autumn Ridge only through August 26, 1997, which is the date
         the property was sold. (4) Represents the total of property operating
         expenses divided by property operating revenues expressed as a
         percentage.

         Operating results for the five Communities that were fully stabilized
during both 1997 and 1996 (the Plantation Trace, Preston Oaks, River Oaks,
Rosewood Plantation and Windsong Communities) are summarized as follows:

<TABLE>
<CAPTION>
                                                         Percentage               Year Ended December 31,
                                                         Change from             ------------------------
                                                        1996 to 1997              1997            1996
                                                        ------------              ----            ----
       <S>                                              <C>                     <C>           <C>
       Rental income                                        (0.3%)              $9,084,000    $9,114,000
       Total operating revenues                             (0.5%)              $9,364,000    $9,412,000
       Property operating expenses (1)                       1.2%               $3,019,000    $2,983,000
       Management fees paid to related party               (75.2%)              $  117,000    $  471,000
       Net operating income (2)                             (1.3%)              $6,345,000    $6,429,000
       Average stabilized occupancy (3)                     (2.7%)                    96.2%         98.9%
       Operating expense ratio (4)                           0.5%                     32.2%         31.7%
       Average monthly rent per apartment home               4.2%               $      828    $      795
</TABLE>

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


(1)      Property operating expenses include personnel, utilities, real estate
         taxes, insurance, maintenance, landscaping, marketing, and property
         administration expenses (real estate taxes exclude an adjustment of
         $306,000 in 1997 to reduce estimated property tax accruals for a
         property that received favorable tax assessments for the 1996 and 1997
         tax years).
(2)      Net operating income is equal to total operating revenues minus
         property operating expenses.
(3)      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%.
(4)      Represents the total of property operating expenses divided by property
         operating revenues expressed as a percentage.






                                       27
<PAGE>   31


         The following discussion compares the Company's statements of
operations for the years ended December 31, 1997 and 1996.

         Rental income increased $2,180,000 or 14.9% from $14,651,000 for the
year ended December 31, 1996 to $16,831,000 for the year ended December 31,
1997. The increase in rental income is due primarily to the acquisition of
Bentley Place and Crestmark in March 1996 and June 1996, respectively, and the
lease-up of Ivey Brook and the second phase of Crestmark in July 1997 and August
1997, respectively. Rental income from the five Communities that were fully
stabilized during both 1997 and 1996 decreased $30,000 due to a 2.7% decline in
occupancy. The effect of the lower occupancy was partially offset by a 4.2%
increase in the average monthly rent per apartment home from $795 during 1996 to
$828 during 1997.

         Property operating expenses (excluding depreciation, general and
administrative expenses and management fees) increased $937,000 or 18.4% from
$5,091,000 for the year ended December 31, 1996 to $6,028,000 for the year ended
December 31, 1997. The increase is due primarily to the following: (1) the
acquisition of Bentley Place and Crestmark in March 1996 and June 1996,
respectively, and (2) the commencement of property operations at Ivey Brook and
the second phase of Crestmark beginning in the fourth quarter of 1996 and the
first quarter of 1997, respectively. Property operating expenses as a percentage
of operating revenues increased from 33.5% for the year ended December 31, 1996
to 34.4% for the year ended December 31, 1997.

         General and administrative expenses increased $788,000 or 85.1% from
$926,000 for the year ended December 31, 1996 to $1,714,000 for the year ended
December 31, 1997 and include legal, accounting and tax fees, marketing and
printing fees, salaries, director fees and other costs. The increase is due
primarily to the following: (1) the overhead cost of managing the Company's
properties internally as a result of acquiring Roberts Management on April 1,
1997, (2) legal, accounting and listing fees associated with the listing of the
Company's stock on the AMEX, (3) the directors and officers liability insurance
policy obtained by the Company in September 1996, and (4) the reclassification
of certain expenses (including payroll processing fees, uniforms, professional
service fees, and legal and recruiting fees) from the property level to general
and administrative. General and administrative expenses as a percentage of
operating revenues increased from 6.1% for the year ended December 31, 1996 to
9.8% for the year ended December 31, 1997. The Company expects that as it
continues to grow, such expenses will decline as a percentage of operating
revenues, even though general and administrative expenses will increase in
absolute terms.

         Depreciation expense increased $734,000 or 14.8% from $4,974,000 for
the year ended December 31, 1996 to $5,708,000 for the year ended December 31,
1997. The increase is due primarily to the following: (1) the acquisition of
Bentley Place and Crestmark in March 1996 and June 1996, respectively, and (2)
the completion of construction of Ivey Brook and the second phase of Crestmark
(because depreciation expense is recorded as apartment homes are completed and
available for occupancy).

         On April 1, 1997, the Company acquired Roberts Management, the property
management company that managed the Company's multifamily apartment Communities
since the Company's inception. The Operating Partnership issued a total of
590,000 Units valued at $10.00 per Unit or $5,900,000 to purchase Roberts
Management. The Company manages its own properties using Roberts Management's
property management systems and the property management personnel formerly
employed by Roberts Management. Although the Company no longer pays 5% of gross
property revenues to Roberts Management for property management services, it
does bear the actual overhead cost of managing the properties internally.
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 shown as an expense for the year ended December 31, 1997.

         Interest expense increased $946,000 or 25.4% from $3,724,000 for the
year ended December 31, 1996 to $4,670,000 for the year ended December 31, 1997.
The increase is due primarily to the following: (1) the financing of



                                       28
<PAGE>   32

Bentley Place, Ivey Brook and the second phase of Crestmark in August 1996,
January 1997 and July 1997, respectively, and (2) the mortgage debt assumed by
the Company with the acquisition of Crestmark in June 1996.

         On August 26, 1997, the Company completed the sale of the 207-unit
Autumn Ridge Community for $10,601,000 in cash. The sale resulted in a gain of
$1,792,000. Net sale proceeds were $5,045,000 after deduction for loan payment,
closing costs and prorations. The purchaser, Benchmark Autumn Ridge Associates,
L.P., is not affiliated with the Company and the transaction was negotiated at
arms-length. The Company paid Roberts Properties a consulting fee of $150,000 at
closing.

         The mortgage note payable secured by Autumn Ridge was paid in full at
the closing of the sale of Autumn Ridge in August 1997, prior to its contractual
maturity. Unamortized loan costs of $73,000 and a yield maintenance fee of
$252,000 payable at the closing of the sale were charged to expense as an
extraordinary item. The extraordinary item (early extinguishment of a debt) for
the year ended December 31, 1997 was $325,000 (including the minority interests'
share of $141,000). The mortgage note payable secured by the Highland Park
Community was refinanced in January 1996, prior to its contractual maturity. The
unamortized loan costs related to the mortgage note payable at the time of the
refinancing were charged to expense as an extraordinary item. The extraordinary
item (early extinguishment of a debt) for the year ended December 31, 1996 was
$163,000 (including the minority interests' share of $64,000).

Liquidity and Capital Resources

         Comparison of Year Ended December 31, 1997 to Year Ended December 31,
1996. Cash and cash equivalents increased $3,955,000 during 1997 compared to an
increase of $1,758,000 during 1996. The increase is due to the excess of cash
flow provided by operating and financing activities over cash used in investing
activities.

         A primary source of liquidity to the Company 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 such
apartment homes. Net cash provided by operating activities decreased $98,000
from $5,567,000 during 1996 to $5,469,000 during 1997. The additional cash flow
from the operations of Bentley Place and Crestmark, which were acquired in March
1996 and June 1996, respectively, and from the recently completed Ivey Brook and
Crestmark phase II Communities, was offset by lower occupancy rates and rent
concessions from the Company's stabilized Communities. The highly competitive
Atlanta apartment market experienced weaker market conditions during 1997
compared to 1996 due to overbuilding. The Company expects the current softness
in the Atlanta apartment market to continue through 1998. The Company's average
stabilized occupancy during 1997 decreased 1.8% from 97.2% during 1996 to 95.4%
during 1997. The effects of revenue and expense accruals are not material in
understanding the Company's cash flow from operations. 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 $14,772,000 from
$16,309,000 during 1996 to $1,537,000 during 1997. This decrease is due
primarily to the $10,330,000 in gross sales proceeds from the sale of Autumn
Ridge in August 1997. The Company invested $11,867,000 in the construction of
new Communities and the purchase of furniture and equipment during 1997 compared
to $16,473,000 during 1996. The Company made no acquisitions for cash of
existing apartment communities during these periods.

         Net cash provided by financing activities decreased $12,477,000 from
$12,500,000 during 1996 to $23,000 during 1997. This decrease is due primarily
to: (1) the payoff of the mortgage note secured by Autumn Ridge in August 1997,
(2) net proceeds of approximately $6,000,000 from the sale of 443,675 Shares in
March 1996 and an additional 255,500 Shares in May 1996, (3) the payment of four
quarterly distributions plus a special distribution on Shares and Units in 1997
compared to the payment of three quarterly distributions in 1996, offset by: (4)
the payment of $1,403,000 to an affiliate of a note payable assumed in the
acquisition of Crestmark in June 1996, and (5) an increase in net borrowings
during 1997 associated with the financing of Ivey Brook for $6,420,000 in
January 1997 and the second phase of Crestmark for $4,000,000 in July 1997
compared to the financing of Autumn Ridge for $5,000,000 in March



                                       29
<PAGE>   33
1996 and the financing of Bentley Place for $4,100,000 in August 1996.

         The Operating Partnership acquired (1) the fully operating Bentley
Place Community in March 1996 by issuing Shares, and (2) the fully operating
Crestmark Community and its 8.8 acres of adjacent undeveloped land in June 1996
by issuing Units. Similarly, the Company issued Shares in March 1996 in an
offering of Shares for cash to acquire the land for and fund the development and
construction of the 180-unit Bradford Creek Community which began in April 1997.
The total estimated acquisition, development and construction cost for Bradford
Creek is $13,800,000, including the land acquisition cost of $1,628,000. The
Company is paying the costs of constructing Bradford Creek out of its working
capital.

         In addition to Bradford Creek, the Operating Partnership is
constructing a 50-unit second phase to Plantation Trace and a 24-unit second
phase to Preston Oaks. Construction of the second phase of both Plantation Trace
($4,770,000) and Preston Oaks ($1,300,000) will be funded from the Company's
working capital and the proceeds from an $8,400,000 mortgage loan on Bradford
Creek that is expected to close in May 1998.

         The Company anticipates 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. The Company expects to meet its other short-term liquidity
requirements generally through its net cash provided by operations, which it
believes will be adequate to meet its operating requirements in both the
short-term and in the long-term (greater than 12 months). Improvements and
renovations at existing Communities are also expected to be funded from property
operations. The Company expects to meet its long-term liquidity requirements
including future developments, debt maturities and possible acquisitions through
the issuance of additional equity securities of the Company and the proceeds
from future mortgage financings and property sales.

         In January 1996, the Company received a commitment from Nationwide Life
Insurance Company for a permanent loan to refinance the debt on the River Oaks
Community, which was scheduled to mature with a principal balance of $8,827,000
in November 1996. The refinancing was completed on October 17, 1996. The
principal amount of the note is $9,250,000 at a fixed interest rate of 7.15% per
annum for a seven-year term. Based on a 30-year amortization schedule, the
monthly payment of principal and interest on the loan is $62,475.

         In February 1996, the Company received a commitment from Nationwide
Life Insurance Company for a permanent loan secured by the Ivey Brook Community.
The financing was completed on January 30, 1997. The principal amount of the
note is $6,420,000 at a fixed interest rate of 7.14% per annum for a ten-year
term. Based on a 30-year amortization schedule, the monthly payment of principal
and interest on the loan is $43,318.

         In April 1996, the Company received a commitment from Nationwide Life
Insurance Company for a permanent loan secured by the Bentley Place Community.
The financing was completed on August 14, 1996. The principal amount of the note
is $4,100,000 at a fixed interest rate of 7.10% per annum for a ten-year term.
Based on a 30-year amortization schedule, the monthly payment of principal and
interest on the loan is $27,553.

         On May 7, 1996 the Company closed an "intrastate" offering (the "Cash
Offering") in which it sold 699,175 Shares in the aggregate for $9.50 per Share.
Upon the initial closing of the offering on March 29, 1996 at which 443,675
Shares were issued, the Operating Partnership paid Roberts Properties, Inc.
$1,628,000 to purchase approximately 22.5 acres of land for the development and
construction of the 180-unit Bradford Creek Community on such property. Upon the
final closing of the Cash Offering on May 7, 1996, the Company issued 255,500
Shares and received additional net proceeds of $2,257,000 which were used to
fund current renovation and rehabilitation projects at Autumn Ridge and
Windsong.



                                       30
<PAGE>   34

         In March 1997, the Company received a commitment from Canada Life
Assurance Company for a permanent loan secured by the second phase of Crestmark.
The financing was completed on July 17, 1997. The principal amount of the note
is $4,000,000 at a fixed interest rate of 7.65% per annum and a maturity date of
May 1, 2001. Based on a 30-year amortization schedule, the monthly payment of
principal and interest on the loan is $28,381.

         In March 1997, the Company and certain non-owned affiliates of the
Company established a $35,000,000 Advised Guidance Line (the "Guidance Line")
with NationsBank N.A. (South) (the "Bank") 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 Prime plus 0%, at the option of the Company,
payable monthly. The Guidance Line is not a commitment to lend, and each loan
under the Guidance Line will be made at the Bank's discretion in accordance with
normal loan approval procedures.

         The Company's existing mortgage indebtedness will require balloon
payments (in addition to monthly principal amortization) coming due over the
years 2000 to 2007 as summarized below (excludes the Windsong Community because
the property was sold on January 9, 1998 and the mortgage debt was repaid):

<TABLE>
                                <S>                <C>
                                2000               $ 7,482,000
                                2001                19,116,000
                                2002                 8,025,000
                                2003                16,057,000
                                2006                 3,554,000
                                2007                 5,570,000
                                                   -----------

                               Total               $59,804,000
                                                   ===========
</TABLE>

         Because the Company anticipates that only a small portion of the
principal of such indebtedness will be repaid prior to maturity and that the
Company may not have funds on hand sufficient to repay such indebtedness, it
will be necessary for the Company to refinance such debt through (a) debt
financing collateralized by mortgages on individual Communities or groups of
Communities or uncollateralized private or public debt offerings, and/or (b)
additional equity offerings.

         Management believes that these sources of debt financing, equity
capital, operating cash flow and working capital of the Company will provide the
liquidity and adequate capital resources to begin and complete its planned
development and construction activities. The Company expects liquidity and
capital resources for additional acquisition and development activities to be
provided by a combination of secured long-term borrowing and issuance of equity
securities.

Supplemental Disclosure of Funds From Operations

         Funds from Operations ("FFO") is defined by the National Association of
Real Estate Investment Trusts ("NAREIT") as net income (loss), computed in
accordance with generally accepted accounting principles ("GAAP"), excluding
gains (or losses) from debt restructuring and sales of property and
non-recurring items, plus real estate related depreciation and amortization. The
Company computes 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 such 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 the Company's financial
performance or cash flows from operating activities (determined in accordance
with GAAP) as a measure of the Company's liquidity, nor is it indicative of
funds available to fund the Company's cash needs, including its ability to make
distributions. The Company considers FFO to be an important measure of its
operating performance. While FFO does not represent cash flows from operating,


                                       31
<PAGE>   35

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.
The Company believes that in order to gain a clear understanding of its
operating results, FFO should be evaluated in conjunction with net income
(determined in accordance with GAAP). The following table reconciles net loss to
FFO.


<TABLE>
<CAPTION>
                                                                           Twelve Months Ended December 31,
                                                                           --------------------------------
                                                                               1997                1996
                                                                               ----                ----
<S>                                                                         <C>                 <C>
Net loss                                                                    $  (2,609)          $    (180)
Minority interest of Unitholders in the Operating Partnership                  (1,866)                (52)
Extraordinary item                                                                184                  99
Amortization (real estate related)                                                 65                  67
Acquisition of Roberts Properties Management, L.L.C.                            5,900                   0
Loss on disposal of assets                                                        156                   0
Gain on sale of real estate asset                                              (1,792)                  0
Depreciation expense                                                            5,708               4,974
                                                                            ---------           ---------

Funds From Operations                                                       $   5,746              $4,908
                                                                            =========           =========

Weighted average Shares and Units
         outstanding during the period                                      7,404,323           6,244,513
</TABLE>

Impact of Recently Issued Accounting Standards

         Effective for the quarter and year ended December 31, 1997, the Company
computes earnings per share under the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share." As prescribed by
SFAS No. 128, all prior period earnings per share data has been restated to
conform with the provisions of SFAS No. 128. Under SFAS No. 128, 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. Previously reported earnings per share under prior
accounting standards were equal to basic and diluted earnings per share under
SFAS No. 128.

Inflation

     Substantially all apartment leases are for an initial term of not more than
12 months and thus may enable the Company to seek increases in rents after the
expiration of each lease. Additionally, the construction contracts for Bradford
Creek and the second phase of Preston Oaks are or will be at fixed prices and
equal substantially all of the anticipated construction costs. The short-term
nature of these leases and the fixed price construction contracts serve to
reduce the risk to the Company of the adverse effects of inflation.

Year 2000 Computer Issues

         Year 2000 computer issues are not expected to have a material adverse
impact on the Company's financial position, results of operations or cash flows
in future periods. The Company's software systems are either currently year 2000
compliant or will be compliant well in advance of January 1, 2000.





                                       32
<PAGE>   36

Disclosure Regarding Forward-Looking Statements

         This report contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. 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 the intent, belief or
expectations of the Company and its management regarding the Company's
strategies and plans for operations and growth, including construction and
development of new multifamily apartment communities in its existing markets and
elsewhere in the Southeast. Other forward-looking statements relate to trends
affecting the Company's financial condition and results of operations, and the
Company's anticipated capital needs and expenditures.

         Investors are cautioned that such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those that are anticipated in the
forward-looking statements as a result of:

     -    conflicts of interest involving Mr. Charles S. Roberts and his
          affiliates, including conflicts arising out of the purchase of
          properties from Mr. Charles S. Roberts and his affiliates; the
          development and construction of Communities by the Roberts Companies;
          and consulting fees payable to the Roberts Companies upon the sale of
          certain Communities;
     -    tax risks including the possible effects of changes in tax law and
          regulation;
     -    risks related to the national and local economic climate;
     -    competition and overbuilding in the Company's markets;
     -    increasing operating cost that cannot be passed along to residents
          through rental rate increases;
     -    construction risks due to factors that include unexpected weather
          problems, shortages in materials and supplies, and labor strikes;
     -    acquisition risks, particularly if acquisitions are made in new
          markets;
     -    the Company's dependence upon the Atlanta market;
     -    possible environmental liability;
     -    costs of compliance with the Americans with Disabilities Act and
          similar laws; and
     -    financing risks, including risks of substantial indebtedness of not
          being able to obtain debt or equity financing to fund the Company's
          growth strategy.

         In addition, the market price of the Common Stock may from time to time
be significantly volatile as a result of, among other things:

     -    the Company's 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.





                                       33
<PAGE>   37

ITEM 7.       FINANCIAL STATEMENTS.

         The financial statements listed below are filed as part of this annual
report on Form 10-KSB on the pages indicated.

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

Independent Auditor's Report (Deloitte & Touche L.L.P.)          F-2

Consolidated Financial Statements as of and for
         the Years Ended December 31, 1997 and 1996:

         Balance Sheets                                          F-3

         Statements of Operations                                F-4

         Statements of Shareholders' Equity                      F-5

         Statements of Cash Flows                                F-6

         Notes to Financial Statements                           F-7
</TABLE>

ITEM 8.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
              FINANCIAL DISCLOSURE.

         Effective December 19, 1997, the Company dismissed Deloitte & Touche
L.L.P., the independent accounting firm which had previously been engaged as the
principal accountant to audit the Company's financial statements. Effective that
same day, the Company retained the services of Arthur Andersen LLP as the
principal accountant to audit the Company's financial statements. See the
Company's current report on Form 8-K dated December 19, 1997 for additional
information regarding this change.


                                    PART III

         As permitted by applicable rules of the Securities and Exchange
Commission, certain information required by Part III is omitted from this report
because the Company will file a definitive proxy statement for the Company's
1998 annual shareholders meeting pursuant to Regulation 14A (the "Proxy
Statement") not later than April 30, 1998.

ITEM 9.       DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
              COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

         The information required by this item is incorporated by reference from
the Proxy Statement.

ITEM 10.      EXECUTIVE COMPENSATION.

         The information required by this item is incorporated by reference from
the Proxy Statement.

ITEM 11.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The information required by this item is incorporated by reference from
the Proxy Statement.





                                       34
<PAGE>   38


ITEM 12.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information required by this item is incorporated by reference from
the Proxy Statement.

ITEM 13.      EXHIBITS AND REPORTS ON FORM 8-K.

         (a)       Exhibits.

         The Company has filed certain of the exhibits required by Item 601 of
Regulation S-B with previous registration statements or reports. As specifically
noted in the following Index to Exhibits, such previously filed exhibits are
incorporated into this annual report on Form 10-KSB by reference thereto. All
exhibits contained in the following Index to Exhibits that are designated with
an asterisk are incorporated into this annual report by reference from the
Company's initial Registration Statement on Form 10-SB filed with the Securities
and Exchange Commission on March 22, 1996; the applicable exhibit number in such
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]

    4.2           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>



                                       35
<PAGE>   39

<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 the Company's 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 the
                  Company's 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 __, 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 the Company's 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 the Company's 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 the Company's 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 the Company's annual report on Form 10-KSB for the
                  year ended December 31, 1996.]
</TABLE>




                                       36
<PAGE>   40

<TABLE>
   <S>              <C>
   10.4.1           Real Estate Note executed by Roberts Properties Rosewood
                    Plantation, L.P. in favor of Commonwealth of Pennsylvania
                    State Employes' [sic] Retirement Board, dated May 25, 1994,
                    in the original principal amount of $6,650,000.00, as
                    assigned to Legg Mason Real Estate Services South, Inc., as
                    further assigned to Federal Home Loan Mortgage Corporation
                    (Rosewood). [* 6.3.12]

   10.4.2           Deed to Secure Debt and Security Agreement executed by
                    Roberts Properties Rosewood Plantation, L.P. in favor of
                    Commonwealth of Pennsylvania State Employes' [sic]
                    Retirement Board, dated May 25, 1994, and related collateral
                    documents, as assigned to Legg Mason Real Estate Services
                    South, Inc. by instruments dated August 23, 1995, as further
                    assigned to Federal Home Loan Mortgage Corporation by
                    instruments dated August 24, 1995 (Rosewood).
                    [* 6.3.13]

   10.4.3           First Amendment to Deed to Secure Debt and Security
                    Agreement between Roberts Properties Rosewood Plantation,
                    L.P. and Commonwealth of Pennsylvania State Employes' [sic]
                    Retirement Board, dated August 1, 1994, as assigned to Legg
                    Mason Real Estate Services South, Inc. by instruments dated
                    August 23, 1995, as further assigned to Federal Home Loan
                    Mortgage Corporation by instruments dated August 24, 1995
                    (Rosewood). [* 6.3.14]

   10.4.4           A ssumption Agreement between Roberts Properties
                    Residential, L.P. and Commonwealth of Pennsylvania State
                    Employes' [sic] Retirement Board, dated October 13, 1994
                    (1994 Consolidation/ Rosewood). [* 6.3.15]

   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
                    the Company's 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 the Company's 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 the Company's annual report on Form
                    10-KSB for the year ended December 31, 1996.]

   10.6             Design and Development Agreement between Roberts Properties
                    Residential, L.P. and Roberts Properties, Inc. dated July
                    21, 1995 (Summer 1995 Cash Offering, for Phase II of
                    Plantation Trace). [* 6.10.3]

   10.7.1           Promissory Note executed by Roberts Properties-Plantation
                    Trace, L.P. in favor of The Prudential Insurance Company of
                    America, dated August 12, 1993, in the original principal
                    amount of $8,200,000.00 (Plantation Trace). [* 6.9.5]

   10.7.2           Deed to Secure Debt and Security Agreement from Roberts
                    Properties-Plantation Trace, L.P. to The Prudential
                    Insurance Company of America, dated August 12, 1993
                    (Plantation Trace). [* 6.9.6]

   10.7.3           Assumption of Liability Agreement among The Prudential
                    Insurance Company of America, Roberts Properties-Plantation
                    Trace, L.P. and Roberts Properties Residential, L.P., dated
                    May 16, 1995 (Plantation Trace Merger). [* 6.9.7]
</TABLE>


                                       37
<PAGE>   41

<TABLE>
   <S>              <C>
   10.8.1           Design Agreement between Roberts Properties Residential,
                    L.P. and Roberts Properties, Inc., dated March 29, 1996
                    (Bradford Creek - formerly Howell Ferry). [Incorporated by
                    reference to Exhibit 10.14.4 from the Company's quarterly
                    report on Form 10-QSB for the quarter ended June 30, 1996.]

   10.8.2           Development Agreement between Roberts Properties
                    Residential, L.P. and Roberts Properties, Inc., dated March
                    29, 1996 (Bradford Creek). [Incorporated by reference to
                    Exhibit 10.14.5 from the Company's quarterly report on Form
                    10-QSB for the quarter ended June 30, 1996.]

   10.8.3           Finish Selection and Interior Design Agreement between
                    Roberts Properties Residential, L.P. and Roberts Properties,
                    Inc., dated March 29, 1996 (Bradford Creek). [Incorporated
                    by reference to Exhibit 10.14.6 from the Company's quarterly
                    report on Form 10-QSB for the quarter ended June 30, 1996.]

   10.8.4           Construction Administration Agreement between Roberts
                    Properties Residential, L.P. and Roberts Properties, Inc.,
                    dated March 29, 1996 (Bradford Creek). [Incorporated by
                    reference to Exhibit 10.14.7 from the Company's quarterly
                    report on Form 10-QSB for the quarter ended June 30, 1996.]

   10.8.5           Application/Contract for Mortgage Loan between Roberts
                    Properties Residential, L.P. and Nationwide Life Insurance
                    Company, dated December 19, 1997 (Bradford Creek).

   10.9.1           Real Estate Note A executed by Roberts Properties
                    Residential, L.P. in favor of Nationwide Life Insurance
                    Company, dated August 14, 1996, in the original principal
                    amount of $3,350,000.00 (Bentley Place). [Incorporated by
                    reference to Exhibit 10.17.4.1 from the Company's quarterly
                    report on Form 10-QSB for the quarter ended September 30,
                    1996.]

   10.9.2           Real Estate Note B executed by Roberts Properties
                    Residential, L.P. in favor of West Coast Life Insurance
                    Company, dated August 14, 1996, in the original principal
                    amount of $750,000.00 (Bentley Place). [Incorporated by
                    reference to Exhibit 10.17.4.2 from the Company's quarterly
                    report on Form 10-QSB for the quarter ended September 30,
                    1996.]

   10.9.3           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 August 14, 1996, and related collateral
                    documents (Bentley Place). [Incorporated by reference to
                    Exhibit 10.17.4.3 from the Company's quarterly report on
                    Form 10-QSB for the quarter ended September 30, 1996.]

   10.10.1          Assumption and Modification Agreement by and among The
                    Crestmark Club, L.P., Roberts Properties Residential, L.P.,
                    and Federal Home Loan Mortgage Corporation dated as of June
                    26, 1996 (Crestmark Merger). [Incorporated by reference to
                    Exhibit 10.22.5 from the Company's quarterly report on Form
                    10-QSB for the quarter ended June 30, 1996.]

   10.10.2          Real Estate Note executed by The Crestmark Club, L.P. in
                    favor of Commonwealth of Pennsylvania State Employes' [sic]
                    Retirement Board, dated April 27, 1994, in the original
                    principal amount of $10,100,000.00, along with a replacement
                    Real Estate Note having identical terms (the original having
                    been lost), and related collateral documents, as assigned to
                    Legg Mason Real Estate Services South, Inc. by instrument
                    dated August 23, 1995, as further assigned to Federal Home
                    Loan Mortgage Corporation by instrument dated August 24,
                    1995, as amended by that certain Amendment to Assignment of
                    Assignment of Occupancy Agreement and Rents dated September
                    1, 1995 (Crestmark). [Incorporated by reference to Exhibit
                    10.15.7 from the Company's annual report on Form 10-KSB for
                    the year ended December 31, 1996.]
</TABLE>


                                       38
<PAGE>   42

<TABLE>
   <S>              <C>
   10.10.3          First Amendment to Deed to Secure Debt and Security
                    Agreement between The Crestmark Club, L.P. and Commonwealth
                    of Pennsylvania State Employes' [sic] Retirement Board,
                    dated August 1, 1994 (Crestmark). [Incorporated by reference
                    to Exhibit 10.15.7.1 from the Company's annual report on
                    Form 10-KSB for the year ended December 31, 1996.]

   10.10.4          Real Estate Note in the amount of $4,000,000 dated July 17,
                    1997 (Crestmark Phase II). [Incorporated by reference to
                    Exhibit 10.3 from the Company's quarterly report on Form
                    10-QSB for the quarter ended September 30, 1997.]

   10.10.5          Deed to Secure Debt, Assignment of Leases and Rent and
                    Security Agreement dated July 17, 1997 by and between
                    Roberts Properties Residential, L.P. and The Canada Life
                    Assurance Company (Crestmark Phase II). [Incorporated by
                    reference to Exhibit 10.2 from the Company's quarterly
                    report on Form 10-QSB for the quarter ended September 30,
                    1997.]

   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 the Company's 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 the Company's quarterly report on Form
                    10-QSB for the quarter ended June 30, 1996.]

   10.12            Letter Agreement between NationsBank, N.A. (South), 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 the
                    Company's 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 the Company's current report
                    on Form 8-K dated April 1, 1997.]

   21               Subsidiaries of the Small Business Issuer. [Incorporated by
                    reference to Exhibit 21 from the Company's annual report on
                    Form 10-KSB for the year ended December 31, 1996.]

   23.1             Consent of Arthur Andersen LLP

   23.2             Consent of Deloitte & Touche L.L.P.

   27               Financial Data Schedule.
</TABLE>


          (b)       Current Reports on Form 8-K during the quarter ended
December 31, 1997.

         On October 8, 1997, the Company filed a current report on Form 8-K
reporting an event under Item 2, Acquisition or Disposition of Assets, relating
to its sale on August 26, 1997 of its Autumn Ridge apartment community.
Financial statements under Item 7, Financial Statements and Exhibits, included a
pro forma condensed consolidated balance sheet dated June 30, 1997 (unaudited)
and pro forma consolidated statements of operations for the year ended December
31, 1996 (unaudited) and the six months ended June 30, 1997 (unaudited). The
report was subsequently amended by filings made on October 24, 1997 and November
4, 1997 that included revised versions of those financial



                                       39
<PAGE>   43

statements. On November 24, 1997 the Company filed its final amendment (number
3) to such report. That amendment included a pro forma condensed consolidated
balance sheet as of September 30, 1997 (unaudited) and pro forma consolidated
statements of operations for the year ended December 31, 1996 (unaudited) and
for the nine months ended September 30, 1997 (unaudited).

         On December 23, 1997, the Company filed a current report on Form 8-K
dated December 19, 1997 in which it reported an event under Item 4, Change in
Registrant's Certifying Accountant. No financial statements were filed with such
report.
















                                       40
<PAGE>   44




ROBERTS REALTY INVESTORS, INC.


INDEX TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                          Page

<S>                                                                       <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (ARTHUR ANDERSEN LLP)             F-1

INDEPENDENT AUDITOR'S REPORT (DELOITTE & TOUCHE L.L.P.)                    F-2

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

         Balance Sheets                                                    F-3

         Statements of Operations                                          F-4

         Statements of Shareholders' Equity                                F-5

         Statements of Cash Flows                                          F-6

         Notes to Financial Statements                                     F-7
</TABLE>
















                                      F-i
<PAGE>   45


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Roberts Realty Investors, Inc.:

We have audited the accompanying consolidated balance sheet of Roberts Realty
Investors, Inc. (the "Company," a Georgia corporation) and its subsidiary as of
December 31, 1997 and the related consolidated statements of operations,
shareholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the 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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated 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, 1997 and the results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.


/s/ ARTHUR ANDERSEN LLP

Atlanta, Georgia
February 27, 1998










                                      F-1
<PAGE>   46








INDEPENDENT AUDITORS' REPORT


Board of Directors and Shareholders
Roberts Realty Investors, Inc.:

We have audited the accompanying consolidated balance sheet of Roberts Realty
Investors, Inc. (the "Company") as of December 31, 1996 and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 audit provides reasonable basis for
our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Roberts Realty Investors, Inc. as
of December 31, 1996 and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.

/s/ DELOITTE & TOUCHE LLP

Atlanta, Georgia
February 28, 1997


                                      F-2
<PAGE>   47


ROBERTS REALTY INVESTORS, INC.

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

<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                                              ------------

                                                                                         1997            1996
                                                                                       --------        -------
<S>                                                                                   <C>             <C>
ASSETS

REAL ESTATE ASSETS - At cost:
     Land                                                                             $  20,151       $  19,937
     Buildings and improvements                                                          81,485          80,441
     Furniture, fixtures and equipment                                                   10,150          10,429
                                                                                      ---------       ---------
                                                                                        111,786         110,807
     Less accumulated depreciation                                                      (13,405)         (8,915)
                                                                                      ---------       ---------

         Operating real estate assets                                                    98,381         101,892

     Construction-in-progress and real estate under development                          11,320          10,230
                                                                                      ---------       ---------

         Net real estate assets                                                         109,701         112,122

CASH AND CASH EQUIVALENTS                                                                 7,117           3,162

RESTRICTED CASH AND CASH EQUIVALENTS                                                        468             532

DEFERRED FINANCING COSTS - Net of accumulated amortization of
     $221 and $111 at December 31, 1997 and 1996, respectively                              708             658

OTHER ASSETS - Net                                                                          356             341
                                                                                      ---------       ---------

                                                                                      $ 118,350       $ 116,815
                                                                                      =========       =========

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:
     Mortgage notes payable                                                           $  67,951       $  63,342
     Accounts payable and accrued expenses                                                  959           1,053
     Dividends and distributions payable                                                  1,057             870
     Due to affiliates (including retainage payable of $226 and $316 at
         December 31, 1997 and 1996, respectively)                                        2,411           2,540
     Security deposits and prepaid rents                                                    414             462
                                                                                      ---------       ---------

         Total liabilities                                                               72,792          68,267
                                                                                      ---------       ---------

COMMITMENTS AND CONTINGENCIES

MINORITY INTEREST OF UNITHOLDERS IN THE OPERATING PARTNERSHIP                            18,861          19,322
                                                                                      ---------       ---------

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, 4,420,508 and
         4,186,329 shares issued and outstanding at December 31, 1997 and 1996,
         respectively                                                                        44              42
     Additional paid-in-capital                                                          29,980          29,902
     Accumulated deficit                                                                 (3,327)           (718)
                                                                                      ---------       ---------

         Total shareholders' equity                                                      26,697          29,226
                                                                                      ---------       ---------

                                                                                      $ 118,350       $ 116,815
                                                                                      =========       =========
</TABLE>

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



                                      F-3
<PAGE>   48

ROBERTS REALTY INVESTORS, INC.

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


<TABLE>
<CAPTION>
                                                                           Years Ended December 31,
                                                                           ------------------------
                                                                           1997               1996
                                                                           ----               ----
<S>                                                                     <C>               <C>
OPERATING REVENUES:
     Rental operations                                                  $    16,831       $    14,651
     Other operating income                                                     677               546
                                                                        -----------       -----------

          Total operating revenues                                           17,508            15,197
                                                                        -----------       -----------

OPERATING EXPENSES:
     Personnel                                                                1,694             1,365
     Utilities                                                                1,131               932
     Repairs, maintenance and landscaping                                     1,090               956
     Real estate taxes                                                          724             1,149
     Management fees to related party                                           211               760
     Marketing, insurance and other                                             801               689
     General and administrative expenses                                      1,714               926
     Depreciation of real estate assets                                       5,708             4,974
                                                                        -----------       -----------

          Total operating expenses                                           13,073            11,751
                                                                        -----------       -----------

INCOME FROM OPERATIONS                                                        4,435             3,446
                                                                        -----------       -----------

OTHER INCOME (EXPENSE):
     Acquisition of Roberts Properties Management, L.L.C                     (5,900)                0
     Interest income                                                            395               353
     Interest expense                                                        (4,670)           (3,724)
     Loss on disposal of assets                                                (156)                0
     Amortization of deferred financing costs                                  (122)             (141)
     Other amortization expense                                                 (65)              (67)
                                                                        -----------       -----------

          Total other income (expense)                                      (10,518)           (3,579)
                                                                        -----------       -----------

LOSS BEFORE GAIN ON SALE OF REAL ESTATE ASSET, MINORITY INTEREST
     AND EXTRAORDINARY ITEM                                                  (6,083)             (133)

GAIN ON SALE OF REAL ESTATE ASSET                                             1,792                 0
                                                                        -----------       -----------

LOSS BEFORE MINORITY INTEREST AND EXTRAORDINARY ITEM                         (4,291)             (133)

MINORITY INTEREST OF UNITHOLDERS IN THE OPERATING PARTNERSHIP                 1,866                52
                                                                        -----------       -----------

LOSS BEFORE EXTRAORDINARY ITEM                                               (2,425)              (81)

EXTRAORDINARY ITEM - Loss on early extinguishment of debt, net of
     minority interest of unitholders in the Operating Partnership             (184)              (99)
                                                                        -----------       -----------

NET LOSS                                                                $    (2,609)      $      (180)
                                                                        ===========       ===========

LOSS PER COMMON SHARE - BASIC AND DILUTED:

     Loss before extraordinary item                                     $     (0.58)      $     (0.02)

     Extraordinary item                                                       (0.04)            (0.03)
                                                                        -----------       -----------

     Net loss                                                           $     (0.62)      $     (0.05)
                                                                        ===========       ===========

     Weighted average common shares - basic                               4,187,013         3,799,567

     Weighted average common shares - diluted                             7,404,323         6,244,513
</TABLE>


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

                                      F-4
<PAGE>   49



ROBERTS REALTY INVESTORS, INC.

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




<TABLE>
<CAPTION>
                                                     Common Shares
                                                     -------------          Additional                          Total
                                                Number                       Paid-in        Accumulated      Shareholders'
                                              Of Shares           Amount     Capital          Deficit            Equity
                                             -----------------------------------------------------------------------------

<S>                                           <C>                <C>        <C>             <C>              <C>
BALANCE AS OF DECEMBER 31, 1995               2,676,381            $26       $18,240          $ (538)           $17,728
          Proceeds of share offering, net       699,175              7         6,045                              6,052
          Conversion of units to shares          65,833              1           447                                448
          Issuance of common shares in the
               acquisition of partnerships      744,940              8         7,068                              7,076
          Dividends declared ($0.48125
               per share)                                                     (1,834)                           (1,834)
          Adjustment for minority interest
               in the Operating Partnership                                      (64)                              (64)
          Net loss                                                                              (180)             (180)
                                             -------------------------------------------------------------------------

 BALANCE AS OF  DECEMBER 31, 1996             4,186,329             42        29,902            (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         $(3,327)           $26,697
                                             ==========================================================================
</TABLE>




























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



                                      F-5
<PAGE>   50

ROBERTS REALTY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                               Years Ended December 31,
                                                                               ------------------------

                                                                                 1997          1996
                                                                               --------       -------
<S>                                                                            <C>            <C>
OPERATING ACTIVITIES:
     Net loss                                                                  $ (2,609)      $   (180)
     Adjustments to reconcile net loss to net cash provided
       operating activities:
          Minority interest of unitholders in the Operating Partnership          (1,866)           (52)
          Gain on sale of real estate asset                                      (1,792)             0
          Loss on disposal of assets                                                156              0
          Depreciation and amortization                                           5,895          5,182
          Non-cash interest                                                         (55)           (55)
          Acquisition of Roberts Properties Management, L.L.C                     5,900              0
          Extraordinary item                                                        184             99
     Change in assets and liabilities net of amounts acquired:
          Decrease (increase) in restricted cash and cash equivalents                64             85
          Decrease (increase) in other assets                                       (15)           247
          Increase (decrease) in accounts payable and
            accrued expenses relating to operations                                 (94)           471
          Increase (decrease) in due to affiliates relating to operations          (251)          (225)
          Increase (decrease) in security deposits and prepaid rent                 (48)            (5)
                                                                               --------       --------

               Net cash provided by operating activities                          5,469          5,567
                                                                               --------       --------

INVESTING ACTIVITIES:
     Proceeds from sale of real estate asset                                     10,330              0
     Acquisition and construction of real estate assets                         (11,867)       (16,473)
     Cash acquired in mergers                                                         0            164
                                                                               --------       --------

               Net cash used in investing activities                             (1,537)       (16,309)
                                                                               --------       --------

FINANCING ACTIVITIES:
     Proceeds from mortgage notes payable                                        10,420         26,528
     Payoff of mortgage note on sale of property including prepayment fee        (5,151)             0
     Principal reductions on mortgage notes payable                                (913)       (17,334)
     Payment of loan costs                                                         (245)          (451)
     Proceeds from issuance of shares                                                 0          6,589
     Payment of share and unit issuance costs                                         0           (613)
     Payment of dividends and distributions                                      (4,088)        (2,219)
                                                                               --------       --------

               Net cash provided by financing activities                             23         12,500
                                                                               --------       --------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                         3,955          1,758

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                    3,162          1,404
                                                                               --------       --------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                       $  7,117       $  3,162
                                                                               ========       ========


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

     Cash paid for interest, net of capitalized interest                       $  4,722       $  4,347
</TABLE>


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



                                      F-6
<PAGE>   51


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"). As of December 31,
         1997, approximately 88% of the Company's total apartment homes are
         located in the Atlanta metropolitan area (100% as of January 9, 1998 -
         see Note 10).

         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 has a 58.6% ownership interest at December 31,
         1997. 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.
         The Company's general partner interest was 58.6% and 60.2% at December
         31, 1997 and 1996, respectively. Units of limited partnership interest
         ("Units") in the Operating Partnership outstanding at December 31, 1997
         and 1996 were 3,129,420 and 2,773,430, respectively. Units held by the
         minority interest as a percentage of total Units and shares of common
         stock ("Shares") of the Company outstanding was 41.4% and 39.8% at
         December 31, 1997 and 1996, 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 subsequent to the
         Consolidation.

         At December 31, 1997, the Company owned nine completed multifamily
         apartment communities totaling 1,756 apartment homes and an additional
         254 apartment homes were under construction. On January 9, 1998, the
         Company sold a 232-unit apartment community located on St. Simons
         Island, Georgia. In addition, the Company owns two retail centers
         totaling 15,698 square feet located at the entrance to two of its
         multifamily apartment communities.

         On April 1, 1997, the Company acquired Roberts Properties Management,
         L.L.C. ("Roberts Management") from Mr. Roberts and certain of its key
         employees. Roberts Management is the property management company that
         managed the Company's multifamily apartment communities since the
         Company's inception. The Company now manages its own properties using
         Roberts Management's property management systems and the property
         management personnel formerly employed by Roberts Management. Although
         the Company no longer pays 5% of gross property revenues to Roberts
         Management for property management services, it does bear the actual
         overhead cost of managing the properties internally.



                                      F-7
<PAGE>   52



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. Subject to certain
         conditions, Units are exchangeable for Shares on a one-for-one basis,
         or at the option of the Company, redeemable for cash. 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
         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 Shares and Units outstanding during the
         period.

         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
         and monies held by lenders for the payment of real estate taxes and
         insurance.

         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.




                                      F-8
<PAGE>   53


         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 $388,000 and $527,000 for the years ended December 31, 1997 and
         1996, 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.

         EARNINGS PER SHARE Effective for the quarter and year ended December
         31, 1997, the Company computes earnings per share under the provisions
         of Statement of Financial Accounting Standards ("SFAS") No. 128,
         "Earnings per Share". As prescribed by SFAS No. 128, all prior period
         earnings per share data has been restated to conform with the
         provisions of SFAS No. 128. Under SFAS No. 128, 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.
         Previously reported earnings per share under prior accounting standards
         were equal to basic and diluted earnings per share under SFAS No.
         128.

         RECLASSIFICATIONS Certain prior period amounts have been reclassified
         to conform with the 1997 presentation.


3.       MORTGAGE NOTES PAYABLE

         Mortgage notes payable were secured by the following communities at
         December 31, as follows:

<TABLE>
<CAPTION>
                                                           FIXED INTEREST          PRINCIPAL OUTSTANDING
                                                             RATE AS OF                 DECEMBER 31,
                                            MATURITY          12/31/97            1997                1996
                                            --------          --------            ----                ----
         <S>                                <C>            <C>                 <C>                <C>
         Autumn Ridge                       04/15/06           7.13%           $         0        $ 4,950,000
         Bentley Place                      08/15/06           7.10%             4,045,000          4,087,000
         Crestmark Club - phase I           05/01/01           7.50%             9,652,000          9,787,000
         Crestmark Club - phase II          05/01/01           7.65%             3,985,000                  0
         Highland Park                      02/15/03           7.30%             8,030,000          8,113,000
         Ivey Brook                         02/15/07           7.14%             6,367,000                  0
         Plantation Trace                   09/15/00           7.75%             7,775,000          7,886,000
         Preston Oaks                       10/15/02           7.21%             8,519,000          8,611,000
         River Oaks                         11/15/03           7.15%             9,151,000          9,243,000
         Rosewood Plantation                06/01/01           7.38%             6,357,000          6,446,000
         Windsong                           02/01/00           9.00%             4,070,000          4,219,000
                                                                               -----------        -----------

                                                                               $67,951,000        $63,342,000
                                                                               ===========        ===========
</TABLE>


         Fixed interest rates on mortgage debt outstanding at December 31, 1996
ranged from 7.10% to 9.00%.



                                      F-9
<PAGE>   54

         The December 31, 1997 and 1996 principal balances of the Windsong
         mortgage include unamortized premiums of $110,436 and $165,656,
         respectively. Amortization of this premium of $55,220 in 1997 and
         $55,220 in 1996 is included as a reduction of interest expense. On
         January 9, 1998, the Company sold the Windsong community and the
         mortgage note was repaid in full. The Company will recognize an
         extraordinary gain of $110,000 in the first quarter of 1998 in
         connection with the early extinguishment of this debt.

         On January 31, 1996, the Company completed the refinancing of the
         mortgage note secured by the Highland Park community. The new mortgage
         note is in the amount of $8,178,000 at a fixed interest rate of 7.30%
         payable in monthly installments of $56,066 based on a 30-year
         amortization schedule. The note matures on February 15, 2003. The
         previous note had an interest rate of 8.50%.

         On March 28, 1996, the Company completed the financing of the Autumn
         Ridge community. The new mortgage note was in the amount of $5,000,000
         at a fixed interest rate of 7.13% payable in monthly installments of
         $35,739 based on a 25-year amortization schedule. On August 26, 1997,
         the Company completed the sale of Autumn Ridge at which time the
         mortgage note balance of $4,899,000 was repaid in full.

         In June 1996, in connection with the acquisition of The Crestmark Club,
         L.P., the Operating Partnership assumed a mortgage note in the amount
         of $9,850,000 secured by the Crestmark community. The mortgage note
         includes a fixed interest rate of 7.50% payable in monthly installments
         of $72,000 based on a 28-year amortization schedule. The note matures
         on May 1, 2001.

         On August 14, 1996, the Company completed the financing of the Bentley
         Place community. The new mortgage note is in the amount of $4,100,000
         at a fixed interest rate of 7.10% payable in monthly installments of
         $27,553 based on a 30-year amortization schedule. The note matures on
         August 15, 2006.

         On October 17, 1996, the Company completed the refinancing of the
         mortgage note secured by the River Oaks community. The new mortgage
         note is in the amount of $9,250,000 at a fixed interest rate of 7.15%
         payable in monthly installments of $62,475 based on a 30-year
         amortization schedule. The note matures on November 15, 2003.

         On January 30, 1997, the Company completed the financing of the Ivey
         Brook community. The new mortgage note is in the amount of $6,420,000
         at a fixed interest rate of 7.14% payable in monthly installments of
         $43,318 based on a 30-year amortization schedule. The note matures on
         February 15, 2007. In connection with the financing, a letter of credit
         was issued to the lender in the amount of $1,140,000. The letter of
         credit expired on January 30, 1998 and it was not renewed.

         In March 1997, the Company and certain non-owned affiliates of the
         Company established a $35,000,000 Advised Guidance Line (the "Guidance
         Line") with NationsBank N.A. (South) (the "Bank") 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 Prime plus
         0%, 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 the Bank's discretion in accordance with normal loan
         approval procedures. At December 31, 1997, there was no balance
         outstanding under the Guidance Line.

         On July 17, 1997, the Company completed the financing of the second
         phase of the Crestmark community. The new mortgage note is in the
         amount of $4,000,000 at a fixed interest rate of 7.65%




                                      F-10
<PAGE>   55

         payable in monthly installments of $28,381 based on a 30-year
         amortization schedule. The note matures on May 1, 2001.

         On December 19, 1997, the Company received a commitment to provide
         financing in the amount of $8,400,000 secured by the Bradford Creek
         community. The terms of the commitment include a 10-year term with a
         fixed interest rate of 7.15% payable in monthly installments of $56,734
         based on a 30-year amortization schedule. Bradford Creek is under
         construction and was unencumbered at December 31, 1997. The financing
         is expected to close in May 1998.

         The scheduled principal maturities of all debt outstanding at December
         31, 1997 for each of the years ending December 31, are as follows:


<TABLE>
                         <S>                              <C>
                         1998                             $   956,000
                         1999                               1,027,000
                         2000                              12,054,000
                         2001                              19,588,000
                         2002                               8,475,000
                         Thereafter                        25,851,000
                                                          -----------

                         Mortgage notes payable           $67,951,000
                                                          ===========
</TABLE>

         Real estate assets having a combined depreciated cost of approximately
         $97,307,000 serve as collateral for the outstanding debt at December
         31, 1997.

         EXTRAORDINARY ITEMS The 1997 extraordinary item resulted from the
         write-off of unamortized deferred financing costs and debt prepayment
         associated with the August 26, 1997 pay-off of the mortgage note
         secured by the Autumn Ridge community upon the 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,
         calculated on the weighted average number of Units outstanding during
         1997. The 1996 extraordinary item resulted from the write-off of
         unamortized deferred financing costs associated with the January 31,
         1996 refinancing of the mortgage note secured by the Highland Park
         community. The extraordinary item is net of $64,000 which was allocated
         to the minority interest of the unitholders in the Operating
         Partnership, calculated on the weighted average number of Units
         outstanding during 1996.


4.       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, 1997 and 1996. Fixed rate mortgage debt with carrying
         values of $67,951,000 and $63,342,000 at December 31, 1997 and 1996,
         respectively, is estimated by management to approximate fair value
         based upon interest rates available to the Company for debt with
         similar terms and maturities.



                                      F-11
<PAGE>   56



5.       RELATED PARTY TRANSACTIONS

         LAND ACQUISITION On March 29, 1996, the Operating Partnership acquired
         a 22.5 acre tract of land for the development of a 180-unit apartment
         community located in Gwinnett County, Georgia from Roberts Properties,
         Inc., an affiliate of Mr. Roberts, for $1,628,000.

         CONSTRUCTION CONTRACTS The Company enters into contractual commitments
         in the normal course of business related to the development and
         construction of real estate assets with Roberts Properties
         Construction, Inc., an affiliate of Mr. Roberts. These contract amounts
         from inception through December 31, 1997 are summarized in the
         following table:


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

                  <S>                                 <C>                   <C>                    <C>
                  River Oaks                          $  8,532,000          $  8,532,000
                  Rosewood Plantation                    6,083,000             6,083,000
                  Preston Oaks                           7,806,000             7,806,000
                  Highland Park                          8,021,000             8,021,000
                  Ivey Brook                             6,420,000             6,420,000
                  Crestmark Club - Phase II              3,795,000             3,795,000
                  Bradford Creek                         8,829,000             5,779,000            $3,050,000
                  --------------------------------------------------------------------------------------------

                                                       $49,486,000           $46,436,000            $3,050,000
                  ============================================================================================
</TABLE>


         At December 31, 1997, the 50-unit second phase of Plantation Trace is
         under construction subject to a cost plus 10% contract with Roberts
         Properties Construction, Inc. The cost to construct the second phase of
         Plantation Trace is estimated to be $4,770,000. In addition, certain of
         the Predecessors and partnerships acquired subsequent to the
         Consolidation have paid or will pay Roberts Properties Construction,
         Inc. for change-orders which include purchases made on their behalf and
         for additional features added or built on their property that are not
         part of the original construction contracts. These amounts aggregated
         $1,695,000 and $2,250,000 during 1997 and 1996, respectively. The
         Predecessors and partnerships acquired subsequent to the Consolidation
         also paid Roberts Properties Construction, Inc. for labor and materials
         to perform repairs and maintenance for the communities in the amount of
         $513,000 and $2,174,000 in 1997 and 1996, respectively.

         DEVELOPMENT FEES Roberts Properties, Inc. received fees for various
         development services including market studies, business plans, design,
         finish selection, interior design and construction administration. Fees
         incurred totaled $990,000 and $430,000 for the years ended December 31,
         1997 and 1996, respectively.

         MANAGEMENT FEES Roberts Management, an affiliate of Mr. Roberts,
         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 $211,000 and $760,000 for the
         years ended December 31, 1997 and 1996, respectively. In addition, the
         Company reimbursed Roberts Management for the salaries of the on-site
         property management personnel through March 31, 1997.



                                      F-12
<PAGE>   57

         CONSULTING FEES Affiliates of Mr. Roberts have contracted with each of
         the Predecessors and partnerships acquired subsequent to the
         Consolidation to provide consulting services in the event of a sale of
         the community, with consulting fees ranging from 3% to 6% of the gross
         sales proceeds of the property sold. These consulting fees as of
         December 31, 1997 are summarized in the following table:

<TABLE>
                           <S>                                       <C>
                           Bentley Place                             3%
                           River Oaks                                5%
                           Rosewood Plantation                       5%
                           Preston Oaks                              5%
                           Highland Park                             5%
                           Ivey Brook                                5%
                           Windsong                                  3%
                           Crestmark                                 5%
                           Plantation Trace                          6%
                           Shoppes of Plantation Trace               6%
</TABLE>

         Although the consulting fee was waived at the time of the Consolidation
         and upon subsequent acquisitions of partnerships, the Company and the
         Operating Partnership have assumed these contracts as a term of each
         merger. The sale of the Windsong community closed on January 9, 1998 at
         which time a 3% consulting fee ($288,000) was paid to an affiliate of
         Mr. Roberts (See Note 10). Other than Windsong, there have been no
         sales of any of the apartment communities.

         OTHER FEES During 1997 and 1996, 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 ($31,000), (2) the merger of Bentley Place, L.P. into
         the Operating Partnership ($50,000), (3) the merger of Crestmark, L.P.
         into the Operating Partnership ($65,000), (4) the acquisition and
         rezoning of a 1.1 acre parcel of undeveloped land located adjacent to
         the existing Preston Oaks community ($46,000), (5) the sale of Autumn
         Ridge in August 1997 ($150,000), and (5) miscellaneous fees and cost
         reimbursements ($167,000). These fees and costs incurred totaled
         $283,000 and $226,000 for the years ended December 31, 1997 and 1996,
         respectively.

         BROKER-DEALER FEES A director of the Company owns all of the
         outstanding stock of an NASD member broker-dealer that has participated
         as the distributor or solicitation agent in numerous offerings by the
         Company and the Operating Partnership. Fees incurred for these services
         totaled $0 and $487,000 for the years ended December 31, 1997 and 1996,
         respectively.

         LOAN ORIGINATION FEES A director of the Company is president of a
         commercial mortgage banking firm that has originated loans for the
         Company and its Predecessors. Loan origination fees incurred totaled
         $48,150 and $184,000 for the years ended December 31, 1997 and 1996,
         respectively. Additional fees will be paid as additional communities
         are financed during 1998, as more fully described in Note 3.





                                      F-13
<PAGE>   58


6.       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, management believes the final outcome of such 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
         such Units at their fair market value, which will be based upon the
         then current trading price of the Shares, or (b) to acquire such 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 such
         Units submitted. There were 3,129,420 Units outstanding at December 31,
         1997 that could be exchanged for Shares, subject to the conditions
         described above.

         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. See Notes 5 and 10 where construction
         commitments are further discussed.


7.       SHAREHOLDERS' EQUITY

         ISSUANCE AND CONVERSION OF SHARES AND UNITS In May 1996, the Company
         completed an offering of 699,175 Shares at a price of $9.50 per Share
         and received net proceeds of $6,052,000. The Company used the proceeds
         to fund the development and construction of the 180-unit Bradford Creek
         apartment community. Additionally, in 1997 and 1996, a total of 234,179
         and 65,833 Units in the Operating Partnership, respectively, were
         converted into the same number of Shares of the Company. The conversion
         was reflected in the accompanying consolidated financial statements at
         book value.

         DIVIDENDS On December 16, 1997, the Company's Board of Directors
         declared a quarterly distribution in the amount of $0.14 per common
         Share and Unit payable on January 15, 1998 to shareholders and
         unitholders of record on December 31, 1997. Of the total dividends
         declared for 1997 totaling $0.576 per share, approximately $0.19 per
         share represents ordinary income, $0.21 per share represents capital
         gain and $0.18 per share represents a return of capital to the
         shareholders. On December 17, 1996, the Company's Board of Directors
         declared a quarterly distribution in the amount of $0.125 per common
         Share and Unit payable on January 15, 1997 to shareholders and
         unitholders of record on December 17, 1996. Of the total dividends
         declared for 1996 totaling $0.48125 per share, approximately $0.39 per
         share represents ordinary income and $0.09 per share represents a
         return of capital to the shareholders.



                                      F-14
<PAGE>   59



         EARNINGS PER SHARE The Company adopted the provisions of SFAS No. 128
         in the year ended December 31, 1997. 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>
                                                                              1997             1996
                                                                              ----             ----

         <S>                                                             <C>               <C>
         Loss before extraordinary item                                  $    (2,425)      $       (81)
         Minority interest in loss before extraordinary
                   item of the Operating Partnership                          (1,866)              (52)
                                                                         -----------       -----------

         Loss before extraordinary item - diluted                        $    (4,291)      $      (133)
                                                                         ===========       ===========


         Net loss - basic                                                $    (2,609)      $      (180)
         Minority interest in net loss of the Operating Partnership           (2,006)             (116)
                                                                         -----------       -----------

         Net loss - diluted                                              $    (4,615)      $      (296)
                                                                         ===========       ===========


         Weighted average Shares - basic                                   4,187,013         3,799,567
         Dilutive Securities - weighted average Units                      3,217,310         2,444,946
                                                                         -----------       -----------

         Weighted average Shares - diluted                                 7,404,323         6,244,513
                                                                         ===========       ===========
</TABLE>


8.       ACQUISITIONS AND DISPOSITIONS

         On March 29, 1996, the Operating Partnership purchased 22.5 acres of
         land for $1,628,000 from an affiliate of Mr. Roberts for the
         development and construction of the 180-unit Bradford Creek apartment
         community.

         In March 1996, the Company acquired the assets and liabilities of
         Roberts Properties Bentley Place, L.P. ("Bentley Place, L.P."), which
         included a 117-unit apartment community. In connection with the
         acquisition, the Company issued 744,940 Shares valued at $9.50 per
         Share (totaling $7,076,000, net of issuance costs) in exchange for the
         assets and liabilities of Bentley Place, L.P.

         In June 1996, the Company acquired the assets and liabilities of The
         Crestmark Club, L.P. ("Crestmark, L.P."), which included a 248-unit
         apartment community and 8.8 acres of adjoining land for the development
         of an 86-unit second phase to the Crestmark community. In connection
         with the acquisition, the Operating Partnership issued 746,715 Units
         valued at $9.75 per Unit (totaling $7,280,000 net of issuance costs) in
         exchange for the assets and liabilities of Crestmark, L.P.

         The Bentley Place, L.P. and Crestmark, L.P. acquisitions were accounted
         for as purchases and the related acquisition costs were allocated to
         the assets acquired and liabilities assumed based on their fair values.

         On April 1, 1997, the Company acquired Roberts Management, the property
         management company that managed the Company's multifamily apartment
         communities since the Company's inception. The Operating Partnership
         issued a total of 590,000 Units valued at $10.00 per Unit or



                                      F-15
<PAGE>   60

         $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
         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 net gain of
         $1,792,000. 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 and the
         transaction was negotiated at arms-length. Roberts Properties, Inc., an
         affiliate of Mr. Roberts, was paid a consulting fee of $150,000 upon
         the closing of the sale of Autumn Ridge.

         Unaudited pro forma amounts for the twelve months ended December 31,
         1997 and 1996, assuming the sale of Autumn Ridge and the acquisition of
         Roberts Management, Bentley Place, L.P. and Crestmark, L.P. 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 acquisitions and sale occurred at the
         beginning of the periods presented, nor is it indicative of future
         results.

<TABLE>
<CAPTION>
                                                                  1997      1996
                                                                  ----      ----

         <S>                                                  <C>        <C>
         Total operating revenues                             $16,420    $14,845
         Income (loss) before extraordinary items                 (93)         7
         Net income (loss)                                       (274)       (83)

         PER SHARE DATA - BASIC AND DILUTED
                  Income (loss) before extraordinary items     $(0.02)     $0.00
                  Net income (loss)                             (0.07)     (0.02)
</TABLE>


9.       SUPPLEMENTAL CASH FLOW INFORMATION

         Non-cash investing and financing activities for the years ended
         December 31, 1997 and 1996 were as follows:

         A.       On March 21, 1996, the Company issued 744,940 Shares in
                  exchange for the assets and liabilities of Bentley Place, L.P.
                  valued at $7,076,000 including cash of $165,000. No mortgage
                  debt was assumed in connection with this acquisition.

         B.       On June 26, 1996, the Operating Partnership issued 746,715
                  Units in exchange for the assets and liabilities of Crestmark,
                  L.P. valued at $7,280,000 including cash of $117,000. Mortgage
                  debt of $10,184,000 and a note payable to Mr. Roberts in the
                  amount of $1,403,000 were assumed in connection with this
                  acquisition. The note to Mr. Roberts was repaid in full
                  immediately following the Crestmark closing.

         C.       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.



                                      F-16
<PAGE>   61



10.      SUBSEQUENT EVENTS

         On January 9, 1998, the Company completed the sale of the Windsong
         community for $9,750,000 in cash resulting in a gain of $1,544,000 on
         the sale of the real estate assets and an extraordinary gain of
         $110,000 on the buyer's assumption of the 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. The Company intends to reinvest the net sales proceeds in a
         replacement property in connection with a Section 1031 tax-deferred
         exchange. The purchaser is unaffiliated with the Company and the
         transaction was negotiated at arms-length. The net book value of the
         property at December 31, 1997 is approximately $7,749,000.

         On January 27, 1998, the Company signed a contract for $1,300,000 with
         an independent general contractor, not affiliated with either the
         Company or Mr. Roberts, for construction of a 24-unit second phase on
         1.1 acres located adjacent to the existing Preston Oaks community.

         On February 12, 1998, the Company signed a mortgage loan commitment in
         the amount of $11,900,000 in connection with the refinancing of the
         Plantation Trace community. The loan commitment, which is being
         reviewed by the lender, includes a 10-year term with a fixed interest
         rate of 7.09% payable in monthly installments of $79,892 based on a
         30-year amortization schedule. The loan is expected to close in July
         1998 upon the completion of construction and leasing of the second
         phase of Plantation Trace. At December 31, 1997, Plantation Trace was
         encumbered with a mortgage loan in the amount of $7,775,000 at a fixed
         interest rate of 7.75%.


























                                      F-17
<PAGE>   62

                                   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 27, 1998

         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 27, 1998
Charles S. Roberts


/s/  Charles R. Elliott            Secretary, Treasurer and Chief               March 27, 1998
---------------------------        Financial Officer (Principal Financial
Charles R. Elliott                 Officer and Principal Accounting Officer)


/s/  James M. Goodrich             Director                                     March 30, 1998
---------------------------
James M. Goodrich


/s/  Dennis H. James               Director                                     March 26, 1998
---------------------------
Dennis H. James


/s/  Wm. Jarell Jones              Director                                     March 26, 1998
---------------------------
Wm. Jarell Jones


/s/  Ben A. Spalding               Director                                     March 27, 1998
---------------------------
Ben A. Spalding


/s/  George W. Wray, Jr.           Director                                     March 27, 1998
---------------------------
George W. Wray, Jr.


/s/  Weldon R. Humphries           Director                                     March 27, 1998
---------------------------
Weldon R. Humphries
</TABLE>





                                       41
<PAGE>   63



                                  EXHIBIT INDEX

         The Company has filed certain of the exhibits required by Item 601 of
Regulation S-B with previous registration statements or reports. As specifically
noted in the following Index to Exhibits, such previously filed exhibits are
incorporated into this annual report on Form 10-KSB by reference thereto. All
exhibits contained in the following Index to Exhibits that are designated with
an asterisk are incorporated into this annual report by reference from the
Company's initial Registration Statement on Form 10-SB filed with the Securities
and Exchange Commission on March 22, 1996; the applicable exhibit number in such
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]

    4.2             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]

    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 the Company's quarterly report on Form
                    10-QSB for the quarter ended June 30, 1996.]
</TABLE>



                                       42
<PAGE>   64

<TABLE>
    <S>             <C>
    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 the Company's 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 __, 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 the Company's 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 the Company's 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 the
                    Company's 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 the Company's annual report
                    on Form 10-KSB for the year ended December 31, 1996.]

   10.4.1           Real Estate Note executed by Roberts Properties Rosewood
                    Plantation, L.P. in favor of Commonwealth of Pennsylvania
                    State Employes' [sic] Retirement Board, dated May 25, 1994,
                    in the original principal amount of $6,650,000.00, as
                    assigned to Legg Mason Real Estate Services South, Inc., as
                    further assigned to Federal Home Loan Mortgage Corporation
                    (Rosewood). [* 6.3.12]
</TABLE>



                                       43
<PAGE>   65

<TABLE>
   <S>              <C>
   10.4.2           Deed to Secure Debt and Security Agreement executed by
                    Roberts Properties Rosewood Plantation, L.P. in favor of
                    Commonwealth of Pennsylvania State Employes' [sic]
                    Retirement Board, dated May 25, 1994, and related collateral
                    documents, as assigned to Legg Mason Real Estate Services
                    South, Inc. by instruments dated August 23, 1995, as further
                    assigned to Federal Home Loan Mortgage Corporation by
                    instruments dated August 24, 1995 (Rosewood).
                    [* 6.3.13]

   10.4.3           First Amendment to Deed to Secure Debt and Security
                    Agreement between Roberts Properties Rosewood Plantation,
                    L.P. and Commonwealth of Pennsylvania State Employes' [sic]
                    Retirement Board, dated August 1, 1994, as assigned to Legg
                    Mason Real Estate Services South, Inc. by instruments dated
                    August 23, 1995, as further assigned to Federal Home Loan
                    Mortgage Corporation by instruments dated August 24, 1995
                    (Rosewood). [* 6.3.14]

   10.4.4           Assumption Agreement between Roberts Properties Residential,
                    L.P. and Commonwealth of Pennsylvania State Employes' [sic]
                    Retirement Board, dated October 13, 1994 (1994
                    Consolidation/ Rosewood). [* 6.3.15]

   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
                    the Company's 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 the Company's 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 the Company's annual report on Form
                    10-KSB for the year ended December 31, 1996.]

   10.6             Design and Development Agreement between Roberts Properties
                    Residential, L.P. and Roberts Properties, Inc. dated July
                    21, 1995 (Summer 1995 Cash Offering, for Phase II of
                    Plantation Trace). [* 6.10.3]

   10.7.1           Promissory Note executed by Roberts Properties-Plantation
                    Trace, L.P. in favor of The Prudential Insurance Company of
                    America, dated August 12, 1993, in the original principal
                    amount of $8,200,000.00 (Plantation Trace). [* 6.9.5]

   10.7.2           Deed to Secure Debt and Security Agreement from Roberts
                    Properties-Plantation Trace, L.P. to The Prudential
                    Insurance Company of America, dated August 12, 1993
                    (Plantation Trace). [* 6.9.6]

   10.7.3           Assumption of Liability Agreement among The Prudential
                    Insurance Company of America, Roberts Properties-Plantation
                    Trace, L.P. and Roberts Properties Residential, L.P., dated
                    May 16, 1995 (Plantation Trace Merger). [* 6.9.7]

   10.8.1           Design Agreement between Roberts Properties Residential,
                    L.P. and Roberts Properties, Inc., dated March 29, 1996
                    (Bradford Creek - formerly Howell Ferry). [Incorporated by
                    reference to Exhibit 10.14.4 from the Company's quarterly
                    report on Form 10-QSB for the quarter ended June 30, 1996.]
</TABLE>



                                       44
<PAGE>   66

<TABLE>
   <S>              <C>
   10.8.2           Development Agreement between Roberts Properties
                    Residential, L.P. and Roberts Properties, Inc., dated March
                    29, 1996 (Bradford Creek). [Incorporated by reference to
                    Exhibit 10.14.5 from the Company's quarterly report on Form
                    10-QSB for the quarter ended June 30, 1996.]

   10.8.3           Finish Selection and Interior Design Agreement between
                    Roberts Properties Residential, L.P. and Roberts Properties,
                    Inc., dated March 29, 1996 (Bradford Creek). [Incorporated
                    by reference to Exhibit 10.14.6 from the Company's quarterly
                    report on Form 10-QSB for the quarter ended June 30, 1996.]

   10.8.4           Construction Administration Agreement between Roberts
                    Properties Residential, L.P. and Roberts Properties, Inc.,
                    dated March 29, 1996 (Bradford Creek). [Incorporated by
                    reference to Exhibit 10.14.7 from the Company's quarterly
                    report on Form 10-QSB for the quarter ended June 30, 1996.]

   10.8.5           Application/Contract for Mortgage Loan between Roberts
                    Properties Residential, L.P. and Nationwide Life Insurance
                    Company, dated December 19, 1997 (Bradford Creek).

   10.9.1           Real Estate Note A executed by Roberts Properties
                    Residential, L.P. in favor of Nationwide Life Insurance
                    Company, dated August 14, 1996, in the original principal
                    amount of $3,350,000.00 (Bentley Place). [Incorporated by
                    reference to Exhibit 10.17.4.1 from the Company's quarterly
                    report on Form 10-QSB for the quarter ended September 30,
                    1996.]

   10.9.2           Real Estate Note B executed by Roberts Properties
                    Residential, L.P. in favor of West Coast Life Insurance
                    Company, dated August 14, 1996, in the original principal
                    amount of $750,000.00 (Bentley Place). [Incorporated by
                    reference to Exhibit 10.17.4.2 from the Company's quarterly
                    report on Form 10-QSB for the quarter ended September 30,
                    1996.]

   10.9.3           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 August 14, 1996, and related collateral
                    documents (Bentley Place). [Incorporated by reference to
                    Exhibit 10.17.4.3 from the Company's quarterly report on
                    Form 10-QSB for the quarter ended September 30, 1996.]

   10.10.1          Assumption and Modification Agreement by and among The
                    Crestmark Club, L.P., Roberts Properties Residential, L.P.,
                    and Federal Home Loan Mortgage Corporation dated as of June
                    26, 1996 (Crestmark Merger). [Incorporated by reference to
                    Exhibit 10.22.5 from the Company's quarterly report on Form
                    10-QSB for the quarter ended June 30, 1996.]

   10.10.2          Real Estate Note executed by The Crestmark Club, L.P. in
                    favor of Commonwealth of Pennsylvania State Employes' [sic]
                    Retirement Board, dated April 27, 1994, in the original
                    principal amount of $10,100,000.00, along with a replacement
                    Real Estate Note having identical terms (the original having
                    been lost), and related collateral documents, as assigned to
                    Legg Mason Real Estate Services South, Inc. by instrument
                    dated August 23, 1995, as further assigned to Federal Home
                    Loan Mortgage Corporation by instrument dated August 24,
                    1995, as amended by that certain Amendment to Assignment of
                    Assignment of Occupancy Agreement and Rents dated September
                    1, 1995 (Crestmark). [Incorporated by reference to Exhibit
                    10.15.7 from the Company's annual report on Form 10-KSB for
                    the year ended December 31, 1996.]

   10.10.3          First Amendment to Deed to Secure Debt and Security
                    Agreement between The Crestmark Club, L.P. and Commonwealth
                    of Pennsylvania State Employes' [sic] Retirement Board,
                    dated August 1, 1994 (Crestmark). [Incorporated by reference
                    to Exhibit 10.15.7.1 from the Company's annual report on
                    Form 10-KSB for the year ended December 31, 1996.]
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   <S>              <C>
   10.10.4          Real Estate Note in the amount of $4,000,000 dated July 17,
                    1997 (Crestmark Phase II). [Incorporated by reference to
                    Exhibit 10.3 from the Company's quarterly report on Form
                    10-QSB for the quarter ended September 30, 1997.]

   10.10.5          Deed to Secure Debt, Assignment of Leases and Rent and
                    Security Agreement dated July 17, 1997 by and between
                    Roberts Properties Residential, L.P. and The Canada Life
                    Assurance Company (Crestmark Phase II). [Incorporated by
                    reference to Exhibit 10.2 from the Company's quarterly
                    report on Form 10-QSB for the quarter ended September 30,
                    1997.]

   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 the Company's 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 the Company's quarterly report on Form
                    10-QSB for the quarter ended June 30, 1996.]

   10.12            Letter Agreement between NationsBank, N.A. (South), 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 the
                    Company's 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 the Company's current report
                    on Form 8-K dated April 1, 1997.]

   21               Subsidiaries of the Small Business Issuer. [Incorporated by
                    reference to Exhibit 21 from the Company's annual report on
                    Form 10-KSB for the year ended December 31, 1996.]

   23.1             Consent of Arthur Andersen LLP

   23.2             Consent of Deloitte & Touche L.L.P.

   27               Financial Data Schedule.
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