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

                                   FORM 10-K

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

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

For the fiscal year ended December 31, 1998.

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES 
    EXCHANGE ACT OF 1934

For the transition period from _________ to _________.

                        Commission file number 001-13183

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

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        GEORGIA                                                                58-2122873
---------------------------------------------------------------     ------------------------------------
(State or Other Jurisdiction of Incorporation or Organization)      (I.R.S. Employer Identification No.)

        8010 ROSWELL ROAD, SUITE 120
        ATLANTA, GA                                                    30350
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         (Address of Principal Executive Offices)                   (Zip Code)
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Issuer's telephone number: (770) 394-6000

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

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

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

                                  COMMON STOCK
                                ----------------
                                (Title of Class)

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

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

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

                  $25,999,562

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

         Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. 4,719,544 shares of
Common Stock (as of March 1, 1999)

         Documents Incorporated by Reference.
         None
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                               TABLE OF CONTENTS


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

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

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

         ITEM 3.      LEGAL PROCEEDINGS..............................................................       25

         ITEM 4       SUBMISSION OF MATTERS TO A VOTE OF
                      SECURITY HOLDERS...............................................................       25

PART II..............................................................................................       26

         ITEM 5.      MARKET FOR REGISTRANTS COMMON EQUITY AND
                      RELATED STOCKHOLDER MATTERS....................................................       26

         ITEM 6.      SELECTED FINANCIAL DATA........................................................       28

         ITEM 7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                      FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................................       31

         ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES
                      ABOUT MARKET RISK..............................................................       44

         ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................................       45

         ITEM 9.      CHANGES IN AND DISAGREEMENTS WITH
                      ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                      DISCLOSURE.....................................................................       45

PART III.............................................................................................       46

         ITEM 10.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
                      AND CONTROL PERSONS; COMPLIANCE WITH
                      SECTION 16(a) OF THE EXCHANGE ACT .............................................       46

         ITEM 11.     EXECUTIVE COMPENSATION.........................................................       48

         ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                      OWNERS AND MANAGEMENT..........................................................       49

         ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED
                      TRANSACTIONS...................................................................       50

         ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES
                      AND REPORTS ON FORM 8-K........................................................       52
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         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 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Disclosure
Regarding Forward-Looking Statements."
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                                     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. As of March 1, 1999, the Company owns a 63.2%
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 24, 1999 the Company owns nine existing multifamily apartment
communities containing a total of 1,778 apartment homes; a first phase of an
apartment community under construction consisting of 118 townhomes; and three
communities under development that will contain approximately 868 apartment
homes. The nine existing Communities of River Oaks, Rosewood Plantation,
Plantation Trace, Preston Oaks, Highland Park, Bentley Place, Crestmark, Ivey
Brook, and Bradford Creek, containing a total of 1,778 apartment units, are
stabilized; the 118-unit first phase of Abbotts Bridge is now under
construction; the second phase of Abbotts Bridge, anticipated to total 287
apartment homes, and two additional multifamily apartment communities - Old
Norcross in Atlanta, anticipated to total 249 apartment homes, and Ballantyne
in Charlotte, anticipated to total 332 apartment homes, are in the development
stage. 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. The Company's existing
multifamily apartment communities and these it is constructing or developing
are sometimes referred to as the "Communities" in this report.

         As of December 31, 1998, the Company owned nine stabilized Communities
containing a total of 1,778 apartment homes that had a physical occupancy rate
of 95.5%.

         Except for one development stage community located in Charlotte, all
of the Company's Communities are located in metropolitan Atlanta. Each existing
Community (other than the 24-unit second phase of Preston Oaks) was developed
and constructed by affiliates of Mr. Charles S. Roberts, the Chairman of the
Board, Chief Executive Officer and President of the Company. The Company
expects that affiliates of Mr. Roberts will continue to develop all future
properties and construct properties where feasible.

         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."

         The Company has engaged and expects to engage two entities owned by
Mr. Roberts to perform services for the Operating Partnership. These entities
are Roberts Properties, Inc. ("Roberts Properties") and Roberts Properties
Construction, Inc. ("Roberts Construction"), which are sometimes referred to as
the "Roberts Companies." The Roberts Companies developed and constructed each
of the Company's nine existing Communities, except the 24-unit second phase of
Preston Oaks, which was constructed by an independent third party.

         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 24, 1999, the Company had 50 full-time employees, and one part-time
employee. 



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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. Units of limited partnership interest in the
Operating Partnership are referred to in this report as "Units". 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 are: former limited partners in
the limited partnerships that were merged into the Operating Partnership; Mr.
Roberts; and the former owner of one of the retail centers formerly owned by
the Company.

         Except as described in the following paragraph, holders of Units in
the Operating Partnership (sometimes referred to in this report as
"Unitholders") generally have the right to require the Operating Partnership to
redeem their Units. The Company's articles of incorporation limit ownership by
any one holder to 6% of the outstanding shares of the Company's Common Stock,
par value $0.01 per share ("Shares") (other than by Mr. Roberts, who is limited
to 25%). As a result, Unitholders cannot redeem their Units if doing so would
violate those ownership limits. A Unitholder who submits Units for redemption
will receive, at the election of the Company, either an equal number of Shares
or cash in the amount of the average of the daily market prices of the Common
Stock for the 10 consecutive trading days 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. The Company also has the right, at
its election, to issue Shares in exchange for all outstanding Units.

         On February 1, 1999, the Company began a six-month period in which
Units cannot be redeemed. At the end of the six-month period, the Company will
seek to register new shares with the SEC that will simplify the process for
Unitholders who elect to exchange their Units for Shares. The Company expects
to complete the registration of these new shares with the SEC on approximately
August 1, 1999. Unlike the Shares issued in exchange for Units before February
1, 1999 in reliance upon the "intrastate" offering exemption, Shares issued
under the new registration (a) will be freely tradeable, other than by
affiliates, and (b) can be issued both to persons who reside in Georgia and in
other states. Before February 1, 1999, the Company paid cash to redeeming
Unitholders who resided outside the state of Georgia.

         Whenever the Company issues Shares, 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 to
the Company. The Operating Partnership Agreement permits the Operating
Partnership, without the consent of the Unitholders, to sell additional Units
and add limited partners.

Growth Strategies

         The Company's business plan and growth strategy are focused on
creating cash flow and capital appreciation by building and managing new
apartment homes of the highest quality and value in excellent high-growth
neighborhoods. The Company's business objectives are (a) to maximize the
current return to its shareholders in the form of quarterly dividends through
increases in cash flow and (b) 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 outside parties, including the
Roberts Companies, for assistance as appropriate:

(a)      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.



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(b)      Develop new multifamily apartment communities in metropolitan Atlanta,
         North Carolina, Florida and other parts of the Southeast consistent
         with management's historical policies of constructing and effectively
         managing high quality apartment home communities for long-term income
         and value enhancement.

(c)      Acquire additional multifamily communities in those areas 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.

(d)      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 24, 1999, the Company employed 49 property management personnel,
including property managers, leasing managers, leasing consultants, maintenance
supervisors and technicians, and accounting personnel. The Company believes its
property management expertise will enable it to continue to deliver quality
services, thereby promoting resident satisfaction, maintaining high resident
retention, and enhancing the value of each of the Communities. The Company's
strategy will continue to be (a) to increase the average occupancy and rental
rates as market conditions permit, (b) to minimize resident turnover and
delinquent rental payments through strict review of each applicant's
creditworthiness, which the Company believes is one of the strictest in the
industry, and (c) to continue to monitor operating expenses to increase net
operating income at each of the Communities.

         Development Strategy. The Company 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 multifamily 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 population, job growth and household formations, present an
excellent opportunity for the Company to achieve favorable returns on the
development of well-located, high quality apartment home communities.

         Roberts Properties is developing the Abbotts Bridge, Ballantyne and
Old Norcross Communities. The Company expects that Roberts Properties will
continue to develop Communities for the Company in the future.

         During the past 14 years, the Roberts Companies have developed,
constructed and/or managed over 4,200 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, including Charlotte, where Roberts Properties is
currently developing the 332-unit Ballantyne Community for the Company.

         Although the Company presently intends to engage the Roberts Companies
in its development and construction 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. 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.



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         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 Abbotts
Bridge, Ballantyne, and Old Norcross, see "Part I, Item 2, Description of
Property."

         Acquisition Strategy. In addition to its management and development
strategies, the Company 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
Communities. Such communities may fall into one or both of the following
categories: (a) communities that are in need of physical improvements, or (b)
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 and Charlotte metropolitan areas, 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.

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.



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         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 is in the process of
removing 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. 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.

         In April 1998, Wallace Enterprises, Inc. ("Wallace"), an adjacent land
owner, notified the Company that a petroleum product release had been
discovered on property adjacent to the Company's Crestmark Community. Wallace
repaired the source of the release and has submitted a proposed corrective
action plan to the EPD. The Company has been advised by its attorneys and
environmental consultants that Wallace is responsible for cleaning up the
release to the extent required by the EPD regulations. The Company's
environmental consultants have informed the Company that despite a possible
groundwater impact at Crestmark, no threat to human health or safety is
suggested. The Company and its environmental consultants are monitoring the EPD
files to ensure compliance by Wallace 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 a 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.

         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. 



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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 (a) 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 (b) 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 (a) continuing to develop multifamily
apartment communities for long-term ownership; (b) acquiring additional
multifamily apartment communities that will produce additional cash flow; and
(c) 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 develop and/or acquire
multifamily apartment communities primarily in the Atlanta and Charlotte
metropolitan areas, Florida, and other parts of the Southeast. Future
development or investment activities will not be limited by the governing
documents of the Company and the Operating Partnership to any geographic area,
product type or specified percentage of the Company's assets.

         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



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<PAGE>   9

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 this 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 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



                                       8
<PAGE>   10

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 Unitholders who exercise their rights of
redemption (except for a six month period that began on February 1, 1999, when
no Shares will be issued in exchange for Units, as explained above). 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.

         The Company announced its intention to repurchase up to 300,000 shares
of its outstanding common stock on September 3, 1998. From September 3, 1998
through December 31, 1998, the Company repurchased 19,300 shares for $145,000.
From January 1, 1999 through February 26, 1999, the Company repurchased 52,100
shares for $387,000.

         During the year ended December 31, 1998, the Company paid $122,000 to
redeem 14,341 Units from Unitholders who resided outside the state of Georgia.
From January 1, 1999 through February 26, 1999, the Company paid $28,000 to
redeem 3,917 Units from Unitholders who resided outside the state of Georgia.

         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.

         For a description of the competition faced by the Company, see "Part 1,
Item 2 Description of Property - Competition."

ITEM 2.  DESCRIPTION OF PROPERTY.

General

         At March 24, 1999 the Company owns nine multifamily apartment
communities containing a total of 1,778 apartment homes. The nine existing
Communities of River Oaks, Rosewood Plantation, Plantation Trace, Preston Oaks,
Highland Park, Bentley Place, Crestmark, Ivey Brook and Bradford Creek,
containing a total of 1,778 apartment units, are stabilized; the 118-unit first
phase of the Abbotts Bridge is under construction; and the 287-unit second
phase of Abbotts Bridge, the 332-unit Ballantyne Community, and the 249-unit
Old Norcross Community are now under 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.)



                                       9
<PAGE>   11

         As of December 31, 1998, the Company owned nine stabilized Communities
containing a total of 1,778 apartment homes that had a physical occupancy rate
of 95.5%. The Company sold the 232-unit Windsong Community on January 9, 1998
and its two retail centers on July 17, 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, which is comprised of Fulton, Dekalb,
Gwinnett, Cobb, Clayton, Rockdale, Henry, Douglas, Cherokee, and Fayette
counties.)

         The following information is based on statistical estimates published
by the ARC. The population of the Atlanta Region is projected to grow 40.9% for
the period from 1990 to 2010, from 2,557,800 persons in 1990 to 3,603,800
persons in 2010. The estimated population of the Atlanta Region increased by
21.6% from 2,557,800 persons in 1990 to 3,110,600 persons in 1998, making it
one of the largest metropolitan areas in the country and the largest in the
Southeast.

         Employment of the Atlanta Region is projected to grow 52.5% for the
period from 1990 to 2010, from 1,426,000 jobs in 1990 to 2,175,000 jobs in
2010. Estimated employment of the Atlanta Region increased by 24.4% from
1,426,000 jobs in 1990 to 1,774,000 jobs in 1997. According to the Georgia
Department of Labor, as of January 1, 1999, the unemployment rate of the
Atlanta Region was 2.8%, which was below the Georgia unemployment rate of 3.6%
and the U.S. unemployment rate of 4.0%.

         Housing units in the Atlanta Region increased an estimated 21.7%, from
1,052,430 units in 1990 to 1,281,003 units in 1998. Multifamily homes in the
Atlanta Region increased 13.8% from 342,441 units in 1990 to 389,611 units in
1998.



                                      10
<PAGE>   12

Certain basic information regarding the Communities is summarized in the
following table.

                                THE COMMUNITIES

<TABLE>
<CAPTION>
                                                                                             December 1998
                                        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, 1998
       ---------            --------  ---------    -----    -------------   ------------- --------    ----         -------------

<S>                       <C>         <C>          <C>      <C>             <C>           <C>       <C>          <C>
Existing Communities:

  Plantation Trace        Atlanta     1990/1998     232        310,956          1,340      $  941     $0.70             N/A (1)

  River Oaks              Atlanta       1992        216        276,046          1,278         919      0.72            97.6%

  Bentley Place           Atlanta       1993        117        108,328            926         764      0.83            98.5

  Crestmark               Atlanta     1993/1997     334        360,284          1,079         806      0.75            91.0

  Rosewood Plantation     Atlanta       1994        152        192,352          1,265         931      0.74            97.4

  Preston Oaks            Atlanta     1995/1998     213        257,180          1,207         973      0.81             N/A (2)

  Highland Park           Atlanta       1995        188        231,634          1,232         928      0.75            97.4

  Ivey Brook              Atlanta       1997        146        195,707          1,340       1,000      0.75            97.2%

  Bradford Creek          Atlanta       1998        180        243,941          1,355      $  926     $0.68             N/A (3)

    Subtotal/Average                              1,778      2,176,428          1,224
                                                  =====      =========          =====

Communities Under
Construction:

Abbotts Bridge -                        
Phase I                   Atlanta       1999        118        200,194          1,697         N/A       N/A             N/A


Communities Under
Development (4):

Abbotts Bridge -          Atlanta       2000        287             (4)            (4)        N/A       N/A             N/A
    Phase II

Ballantyne                Charlotte     2000        332             (4)            (4)        N/A       N/A             N/A
                                                        

Old Norcross              Atlanta       2000        249             (4)            (4)        N/A       N/A             N/A
                                                  -----

    Subtotal/Average                                868
                                                  =====
</TABLE>

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

(1)      The 50-unit second phase of Plantation Trace completed its lease-up
         phase in November 1998, and its 12-month historical occupancy
         percentage is not comparable. The physical occupancy rate for the
         entire Plantation Trace Community as of December 31, 1998 was 87.1%.
(2)      The 24-unit second phase of Preston Oaks completed its lease-up phase
         in July 1998, and its 12-month historical occupancy percentage is not
         comparable. The physical occupancy rate for the entire Preston Oaks
         Community as of December 31, 1998 was 99.2%.
(3)      Bradford Creek completed its lease-up phase in August 1998, and its
         12-month historical occupancy percentage is not comparable. Its
         physical occupancy rate as of December 31, 1998 was 98.5%.
(4)      Because these Communities are still in the development stage, the
         dates of completion and exact number of units are estimates and are
         subject to change, and the square footage information is not
         available.



                                      11
<PAGE>   13

         Certain annual operating data regarding the Company's stabilized
Communities at December 31, 1998 are summarized in the following table (with
the second phases of Crestmark, Preston Oaks and Plantation Trace 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. Footnotes are on the
following page.

<TABLE>
<CAPTION>
                                         Physical Occupancy Rate           
                                         -----------------------           
                      Month                                               
    Community       Completed    1994     1995     1996    1997    1998  
    ---------       Initial      ----     ----     ----    ----    ----  
                    Leaseup
                    -------

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

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

  Rosewood            5/94       100%*     99%      99%     97%     97%   
  Plantation

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

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

  Bentley             9/93       N/A       99%      99%     97%     99%   
  Place (1)

  Crestmark (2)       4/94        98%*     99%      98%     87%     91%   

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

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

  Second Phase of     7/98       N/A      N/A      N/A     N/A     100%*  
  Preston Oaks (3)

  Bradford            8/98       N/A      N/A      N/A     N/A      94%*  
  Creek (4)

  Second Phase        11/98      N/A      N/A      N/A     N/A      92%*  
  of Plantation
  Trace (5)

<CAPTION>
                                                Average Effective Annual Rental Rates
                                                -------------------------------------
                               1994             1995             1996             1997              1998
                               ----             ----             ----             ----              ----
                          Per       Per      Per     Per     Per     Per      Per      Per      Per       Per
    Community            Unit     Sq. Ft.   Unit   Sq. Ft.  Unit   Sq. Ft.    Unit   Sq. Ft.   Unit     Sq. Ft.
    ---------            ----     ------    ----   -------  ----   -------    ----   -------   ----     -------
                    
  <S>                    <C>      <C>       <C>    <C>      <C>    <C>        <C>    <C>       <C>      <C>
  Plantation             $775     $0.61     $786    $0.62   $821    $0.65     $850    $0.67    $  867    $0.69
  Trace

  River Oaks             $787*    $0.62     $820    $0.64   $859    $0.67     $886    $0.69    $  910    $0.71

  Rosewood               $796*    $0.63*    $814    $0.64   $858    $0.68     $887    $0.70    $  917    $0.72
  Plantation

  Preston Oaks            N/A       N/A     $885    $0.71*  $892    $0.72     $945    $0.76    $  981    $0.79

  Highland Park           N/A       N/A     $819*   $0.67*  $805    $0.65     $887    $0.72    $  920    $0.75

  Bentley                $684     $0.74*    $675    $0.73   $709    $0.77     $740    $0.80    $  758    $0.82
  Place (1)

  Crestmark (2)          $688     $0.67*    $688    $0.67   $736    $0.72     $782    $0.76    $  787    $0.73

  Ivey Brook              N/A       N/A      N/A     N/A    $925*   $0.69*    $955    $0.71    $  979    $0.73

  Second Phase            N/A       N/A      N/A     N/A     N/A      N/A     $845*   $0.69*      N/A      N/A
  of Crestmark (2)  

  Second Phase of         N/A       N/A      N/A     N/A     N/A      N/A      N/A      N/A    $  799*   $0.83*
  Preston Oaks (3)

  Bradford                N/A       N/A      N/A     N/A     N/A      N/A      N/A      N/A    $  926*   $0.68*
  Creek (4)

  Second Phase            N/A       N/A      N/A     N/A     N/A      N/A      N/A      N/A    $1,171*   $0.72*
  of Plantation
  Trace (5)
</TABLE>


Footnotes are on the following page



                                      12
<PAGE>   14

(1)      The Company acquired Bentley Place in March 1996.
(2)      The Company acquired Crestmark in June 1996. Phase II of Crestmark
         completed its lease-up in September 1997. Beginning with 1998, both
         phases of Crestmark are combined.
(3)      Phase II of Preston Oaks completed its lease-up in August 1998 and its
         occupancy as of December 31, 1998 was 100%.
(4)      Bradford Creek completed its lease-up in August 1998 and its occupancy
         as of December 31, 1998 was 94%.
(5)      Phase II of Plantation Trace completed its lease-up phase in November
         1998 and its occupancy as of December 31, 1998 was 92%.

         As described below, the Communities are located in four counties, or
six submarkets of the Atlanta region and in Charlotte. The Ballantyne Community
now under development is in Charlotte, North Carolina and is described after
the Georgia properties. Each heading identifies the Community or Communities
within the specified county and submarket. Population and employment data
provided for each submarket was 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.

Gwinnett County  

          Gwinnett County was one of the fastest growing counties in the U.S.
in the 1980's and from 1985 until 1990 it ranked first in the nation in growth
among counties with a population of more than 100,000. Since 1990, Gwinnett's
population has increased 40% to a current level of 499,200. 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. Gwinnett is home to 250 international firms, 731 manufacturing and 550
high technology firms that generate many of its 240,700 jobs. Since 1990,
Gwinnett has added 192,186 jobs, which is second only to Fulton county in the
Atlanta Region. The average household income of the county is approximately
$67,000. Gwinnett County is home to Communities located in the City of Duluth,
Peachtree Corners and unincorporated Gwinnett.

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

         Duluth. The City of Duluth is located in central Gwinnett County and
is home to the Plantation Trace, River Oaks, and Bradford Creek Communities.
Duluth has exceeded even Gwinnett County as a whole in percentage of population
growth; its population has increased 223% since 1980. Duluth is located near
I-85 and Gwinnett Place Mall, a 1,100,000 square foot regional mall.

         Plantation Trace. The first phase of Plantation Trace, was completed
in 1990 and 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, the 182-unit first phase received the Aurora Award from the Southeast
Builders' Conference for "Best Rental Apartment Community in the Southeast."

         The Plantation Trace Community, with its traditional award-winning
architecture and landscaped grounds, features a clubhouse, 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.

         The first phase of 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,
1998, rental rates ranged from $700 to $1,035 per month, with a weighted
average monthly rent of $877 per unit and $0.70 per square foot. Local real
estate taxes were $161,000 in 1998.



                                      13
<PAGE>   15

         50-Unit Second Phase of Plantation Trace. A second phase of 50
apartment units ("Phase II") on 12.33 acres adjacent to Plantation Trace
completed its lease-up in November 1998. Phase II contains 7 one bedroom units
of approximately 966 square feet each, 6 two bedroom units of approximately
1,433 square feet each, 18 two bedroom townhouses of approximately 1,490 square
feet each, 12 three bedroom townhouses of approximately 1,948 square feet each,
7 four bedroom townhouses of approximately 2,314 square feet each, and 33
garages of 200 square feet each. The monthly rental rates are $735 for a one
bedroom apartment, $1,095 for a two bedroom apartment with garage, $995 for a
two bedroom townhouse, $1,295 for a three bedroom townhouse, and $1,495 for a
four bedroom townhouse, resulting in a weighted average monthly rent of $1,171
per unit and $0.72 per square foot. Roberts Properties developed Phase II for
the Operating Partnership.

         Although the 50 apartment units were completed in 1998, the Phase II
amenities will not be complete until the second quarter of 1999. The
architectural style, land planning, landscaping and amenities of Phase II are
similar to those of the Company's other Communities. Phase II will add a modern
fitness and exercise facility and a second free-form swimming pool to the
existing amenities at Plantation Trace. The fitness facility will 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 provides the Plantation Trace Community direct access to
the Chattahoochee River, as well as to jogging trails around the existing lake
and nature areas along the river.

         The physical occupancy rate for the entire Plantation Trace Community
as of December 31, 1998 was 87.1%.

         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, 1998, the
Community was 96% occupied and rental rates ranged from $730 to $1,050 per
month, with a weighted average monthly rent of $919 per unit and $0.72 per
square foot. Local real estate taxes were $193,000 in 1998.

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

         Bradford Creek contains 28 one bedroom units of approximately 1,001
square feet each, 46 two bedroom standard units of approximately 1,302 square
feet each, 47 two bedroom roommate units of approximately 1,344 square feet
each, and 59 three bedroom units of approximately 1,589 square feet each. The
weighted average unit size is 1,360 square feet. As of December 31, 1998, the
Community was 94% occupied and rental rates ranged from $765 to $1,090



                                      14
<PAGE>   16

per month, resulting in a weighted average monthly rent of $926 per unit and
$0.68 per square foot. Local real estate taxes were $123,000 in 1998, and 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.

     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, 1998, the Community was 96% occupied and rental rates ranged from
$750 to $1,140, resulting in a weighted average monthly rent of $931 per unit
and $0.74 per square foot. Local real estate taxes were $117,000 in 1998.

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

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

         Ivey Brook. The Ivey Brook Community consists of 146 upscale apartment
units 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, 1998, Ivey
Brook was 95% occupied and its rental rates ranged from $780 to $1,170,
resulting



                                      15
<PAGE>   17

in a weighted average monthly rent of $1,000 per unit and $0.74 per square
foot. Local real estate taxes were $114,000 in 1998.

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

     Unincorporated Gwinnett - Old Norcross

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

Fulton County

         Fulton County is the largest County in the Atlanta Region in terms of
population, employment, housing units and land area. Between 1990 and 1998,
Fulton's net population increase, 102,500 persons, ranked second in the region
behind Gwinnett County and Fulton County added 96,600 jobs between 1990 and
1998, which led the region. The average household income is approximately
$85,000 for the county. Fulton County is home to Communities in the Perimeter
Center and North Springs areas of Sandy Springs and the Alpharetta area of
North Fulton.

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

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

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

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

         Preston Oaks. This Community, which was completed in August 1995, is a
two and three story 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-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.



                                      16
<PAGE>   18

         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 workout stations, and a large clubhouse. Interior features
include garden tubs, oversized walk-in closets, pickled pine cabinetry in the
kitchen and bath, crown molding, mirrored walls, and chair railing in the
dining rooms.

         As of December 31, 1998, Preston Oaks was 99% occupied and its rental
rates ranged from $770 to $1,200 per month, resulting in a weighted average
monthly rent of $995 per unit and $0.80 per square foot.
Local real estate taxes were $208,000 in 1998.

         24-Unit Second Phase of Preston Oaks. A second phase of 24 apartment
units ("Phase II") located on 1.1 acres next to Preston Oaks was completed in
1998. Phase II contains 24 one bedroom apartment units with 959 square feet
each. The monthly rental rates range from $780 to $830, resulting in a weighted
average monthly rent of $800 per unit and $0.83 per square foot. Local real
estate taxes were $1,000 in 1998 because the Community was assessed as
undeveloped property. The architectural style and landscaping of Phase II is
identical to Preston Oaks.

         The construction of Phase II was 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 was constructed is presently
unencumbered. The development and construction of Phase II was funded from the
Company's working capital.

         The physical occupancy rate for the entire Preston Oaks Community as
of December 31, 1998 was 99.1%.

         Highland Park. This Community consists of 188 upscale apartment units
in a total of eight buildings on a 10. 9-acre site. Located on Dunwoody Place
in the North Springs area of Sandy Springs, Highland Park benefits from its
close proximity to Georgia 400, which provides direct access within minutes to
major retail and employment areas to the north such as North Point Mall and
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, 1998, Highland Park was 98% occupied and its
monthly rental rates ranged from $730 to $1,110 per month, resulting in a
weighted average monthly rent of $928 per unit and $0.75 per square foot.
Local real estate taxes were $180,000 in 1998.

     Alpharetta Area - Abbotts Bridge Community

         Alpharetta. The Alpharetta area offers convenient proximity and access
to both urban and suburban employment bases and retail conveniences. Georgia
400 provides direct access within minutes to major regional malls such as North
Point Mall and Perimeter Center Mall. The Phipps Plaza/Lenox Mall/Buckhead area
and downtown



                                      17
<PAGE>   19

Atlanta's Central Business District are readily accessible via the Georgia 400
extension, which connects to I-85 South near downtown Atlanta.

         Within this corridor is a large base of residential, commercial and
office developments. North Point Mall's success accelerated the already high
rate of residential development, which caters to the upscale consumer. North
Fulton's prestigious neighborhoods have been a major factor in the emergence of
the Georgia 400 corridor as a center for corporate headquarters. Between 1990
and 1998, North Fulton added 30,312 jobs, 48,780 persons, and 20,446 housing
units. The Windward project, which straddles Georgia 400, is the region's
largest mixed-use development.

         Abbotts Bridge - Phase I. The 118-unit first phase of Abbotts Bridge
is located on 49.14 acres at the intersection of Abbotts Bridge and Jones
Bridge roads. This first phase will contain 60 two bedroom townhouses of
approximately 1,497 square feet each and 58 three bedroom townhouses of
approximately 1,903 square feet each. The projected monthly rental rates are
$1,150 for a two bedroom townhouse and $1,450 for a three bedroom townhouse,
resulting in a projected weighted average monthly rent of $1,297 per unit and
$0.76 per square foot. The architectural style, land planning, landscaping and
amenities of this first phase are similar to those of the Company's other
Communities.

         The construction of this first phase 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 $9,611,000. The Company
anticipates that there will be approximately $874,000 in net profit to Roberts
Construction on the construction contract. The development and construction of
this first phase is being funded from the Company's working capital and a
$7,000,000 construction loan, for which the Company has received a written
commitment.

         Abbotts Bridge - Phase II. The second phase of Abbotts Bridge will
contain approximately 287 garden-style apartment homes. The Company has not
determined the unit mix or developed an estimate of the construction cost.

DeKalb County

         As one of Atlanta's core counties at the heart of the 10 county
Atlanta Region, 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 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 3,110,600,
DeKalb County's population topped 598,600, increasing by more than 44,800 or 8%
since 1990. An estimated 19% of the Atlanta Regions populace resides in DeKalb
County. The average household income in DeKalb County is approximately $65,500.
Home to over 300 international companies and more than 240 Fortune 500 firms,
DeKalb-based businesses provide approximately 342,600 jobs.

     Pleasantdale Area - Bentley Place Community

         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



                                      18
<PAGE>   20

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, 1998, Bentley Place was 97% occupied and rental rates
ranged from $640 to $870 per month, with a weighted average monthly rent of
$764 per unit and $0.83 per square foot. Local real estate taxes were $85,000
in 1998.

Douglas County

         Douglas County, one of the 10 counties in the Atlanta Region, is
located west of Atlanta and encompasses 202 square miles. The county is
surrounded by Fulton, Cobb, Carroll and Paulding Counties, with the
Chattahoochee River as its southeastern border. Its population was estimated at
91,500 in 1998, an increase of 28% since 1990. Between 1990 and 1997, Douglas
County added 7,900 jobs and between 1990 and 1998, the county added 19,800
persons and 7,366 housing units. Douglas County benefits from its accessibility
to downtown Atlanta to the east via I-20 and to Hartsfield International
Airport to the southeast via Thornton Road/Camp Creek Parkway. Just across the
county line to the east lies the Fulton Industrial District, the Southeast's
largest contiguous industrial park. The Fulton Industrial District consists of
more than 50,000,000 square feet of both manufacturing and warehouse space and
stretches six miles north and south along Fulton Industrial Boulevard. It
represents 20% of Atlanta's total inventory of warehouse/industrial space, and
an additional 1,000,000 square feet is under construction. Numerous Fortune 500
companies are represented in the Fulton Industrial District, employing more
than 100,000 people.

     Thornton Road/I-20 Area - Crestmark Community

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

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

         The Crestmark Community, with its 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



                                      19
<PAGE>   21

and conference room, two lighted tennis courts, multi-station playground,
walking and jogging trail, two free-form swimming pools, stone paver pool decks
and a whirlpool spa. In addition to the upscale amenities, Crestmark offers
such interior features as nine foot ceilings, crown and chair-rail molding,
pickled wood cabinetry in the kitchen and baths, marble vanity tops,
fireplaces, vaulted and trey ceilings, Palladian and bay windows in select
units, designer wallcoverings and full laundry rooms with washer and dryer
connections.

         Crestmark has a variety of 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, 1998, the Community was 95%
occupied and rental rates ranged from $610 to $1,000 per month, with a weighted
average monthly rent of $806 per unit and $0.75 per square foot. Local real
estate taxes were $207,000 in 1998.

Charlotte, NC - Ballantyne

         The following information is based on statistics and estimates
published by the Charlotte Chamber of Commerce. During the last ten years,
Charlotte's population grew by 24%, which was well above the national growth
rate of 9%. Since 1986, employment in Charlotte has grown 29%, compared to the
U.S. growth of 14%. Nine of the nation's top 200 banks operate in Charlotte,
including NationsBank (which is the nation's largest bank) and First Union
Corporation. Other major employers include Carolinas Healthcare System,
Charlotte-Mecklenburg School System, Duke Energy Corporation and USAirways.
Additionally, nearly 300 of the nation's largest industrial and service
corporations listed by FORTUNE magazine have facilities in the area. Education
is a top priority in the area as evidenced by The Charlotte-Mecklenburg School
System recently receiving a national Community Award for Excellence in
Education.

         The Ballantyne Community will be located on a 23.8 acre site at the
intersection of Lancaster Highway (old NC-521) and John J. Delaney Drive. The
Ballantyne area is the largest mixed-use development in Mecklenburg County.
This Community will have approximately 332 garden-style apartments. The Company
has not determined the unit mix or developed an estimate of the construction
cost. The Community is located near I-485 and I-77, which offers convenient
access to downtown Charlotte and I-85.

         The table on the following page summarizes the amenities of each of
the existing Communities and the first phase of the Abbotts Bridge Community
now under construction. The specific amenities of the development Communities
have not yet been fully determined.



                                      20
<PAGE>   22

                    SUMMARY OF AMENITIES OF THE COMMUNITIES


<TABLE>
<CAPTION>
                                                                                              CLUB-
                     PATIO,      WASHER                                                       HOUSE                              
                     PORCH       & DRYER     GARDEN      FIRE-    VAULTED      SWIMMING      FITNESS     WHIRL-     CAR   TENNIS 
    COMMUNITY       BALCONY     HOOK-UPS      TUBS      PLACES*  CEILINGS*       POOL         CENTER      POOL     WASH   COURT(S)
    ---------       -------     --------      ----      ------   ---------       ----         ------      ----     ----   -------

<S>                 <C>         <C>          <C>        <C>      <C>           <C>           <C>         <C>       <C>    <C>
Existing Communities:

Plantation            Yes          Yes       Yes(1)     Yes(2)      Yes           Yes           Yes      Yes(2)     Yes    Yes-2 
Trace                                                                                                                            
                                                                                                                                 

River Oaks            Yes          Yes         Yes       Yes        Yes           Yes           Yes       Yes       Yes    Yes-2 
                                                                                                                                 

Rosewood              Yes          Yes         Yes       No         No            Yes           Yes       No        Yes    Yes-1 
Plantation                                                                                                                       

Preston Oaks          Yes          Yes         Yes       No         Yes           Yes           Yes       No        Yes    Yes-1 

Highland              Yes          Yes         Yes       No         Yes           Yes           Yes       No        Yes    Yes-1 
Park

Bentley Place         Yes          Yes         Yes       No         Yes           Yes           Yes       Yes       No     No    

Crestmark             Yes          Yes         Yes       Yes        Yes           Yes           Yes       Yes       Yes    Yes-2 
                                                                                                                                 

Ivey Brook            Yes          Yes         Yes       No         Yes           Yes           Yes       No        Yes    No    

Bradford Creek        Yes          Yes         Yes       No         Yes           Yes           Yes       No        Yes    Yes-2 

Communities Under Construction:

Phase I               Yes          Yes         Yes       No         No            Yes           No        No        Yes    Yes-1 
of Abbotts                                                                                                                       
Bridge

<CAPTION>

                                    SAND
                                   VOLLEY-    PLAY-     LAUNDRY
    COMMUNITY                       BALL     GROUND      ROOM       OTHER
    ---------                       ----     ------      ----       -----
<S>                                <C>       <C>        <C>         <C>
Existing Communities:

Plantation                          Yes       Yes         Yes       Riverfront.
Trace                                                               Lake, Nature
                                                                    Preserve

River Oaks                          Yes       Yes         Yes       Riverfront,
                                                                    Nature Preserve

Rosewood                            No        Yes         Yes       Lake,
Plantation                                                          Nature Preserve

Preston Oaks                        No        No          Yes

Highland                            No        Yes         Yes
Park

Bentley Place                       No        No          Yes

Crestmark                           No        Yes         Yes       Nature Preserve,
                                                                    Jogging Trail

Ivey Brook                          No        No          Yes

Bradford Creek                      No        Yes         Yes       Nature Preserve

Communities Under Construction:

Phase I                             No        No          Yes       Lake,
of Abbotts                                                          Nature Trail
Bridge
</TABLE>

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

* In select units
(1) Phase II only
(2) Phase I only


                                      21
<PAGE>   23

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 the Company 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 the Company 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, Plantation Trace, and Bradford Creek. Although the Bridgewater apartment
community which was previously developed and sold by an affiliate of Mr.
Roberts - is located more than two miles from Plantation Trace, it is also
included in the Duluth market area because it offers units with attached
garages and its architecture and amenities are similar to Plantation Trace and
its Phase II. Of the 17 existing communities in the area, five were completed
in the last year, including Bradford Creek and the second phase of Plantation
Trace. Due to the quality of construction, age of the communities, type of
amenities, resident profiles and rental rates, the Company believes that only
nine of the other 14 communities are in direct competition with Plantation
Trace, River Oaks and Bradford Creek.

         Rosewood Plantation and Ivey Brook. The Peachtree Corners multifamily
market area, which is a three mile radius from these two Communities, currently
consists of 23 multifamily communities, including Rosewood Plantation and Ivey
Brook. Of the 23 existing communities in the market area, only four have been
built since 1988. The remaining communities range from approximately 12 to 27
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, including Preston Oaks. Of
the 23 other existing communities in the market area, only four were built
prior to 1983. The remaining 19 communities range from approximately three to
seven years of age. The Company believes that Preston Oaks competes with all 23
of these communities.

         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 35 communities,
including Highland Park. Of the 35 existing communities in the market area,
only five have been built since 1989. The remaining communities range in age
from 11 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 28 multifamily
communities, including Bentley Place. Of the 28 existing communities in the
market area, only five have been built since 1989. The remaining properties
range from approximately 11 to 21 years old. The Company believes that Bentley
Place draws residents from all of the other 27 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 nine of the 26 communities compete
closely with Bentley Place. Each of these nine properties was constructed
between 1986 and 1998.



                                      22
<PAGE>   24

         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 eight
communities, including Crestmark. Of the eight existing communities in the
market area, four have been built since 1990. The Company believes that
Crestmark will draw residents from all of the seven other communities located
in the market area, but due to their amenities, quality of construction and
resident profile, only five of the seven other communities will compete closely
with Crestmark.

         Abbotts Bridge. The Alpharetta multifamily market is an approximately
two-mile radius around the Abbotts Bridge Community. It is generally bounded by
the Chattahoochee River to the east, Old Alabama to the south, GA-400 to the
west, and Winward Parkway to the north, and it currently consists of 15
Communities, including Abbotts Bridge. The Company believes that Abbotts Bridge
will draw residents from all of the 14 other communities located in the market
area, but due to their amenities, quality of construction and resident profile,
only 13 of the 14 other communities will compete closely with Abbotts Bridge.

         Ballantyne. The Ballantyne multifamily market is an approximately
two-mile radius around the Community. It is generally bounded by the Princeton
Road to the east, Providence Road West to the south, Lancaster Highway (old
NC-521) to the west, and I-485 to the north, and it currently consists of nine
communities, including Ballantyne. The Company believes that Ballantyne will
draw residents from all of the eight other communities located in the market
area, but due to their amenities, quality of construction and resident profile,
only seven of the eight other communities will compete closely with Ballantyne.

         Old Norcross. The Old Norcross multifamily market is an approximately
two-mile radius around the Old Norcross Community. It is generally bounded by
Herrington Road to the east, Club Drive to the south, Steve Reynolds Boulevard
to the west, and Sugarloaf to the north and east, and it currently consists of
23 communities, including Old Norcross. The Company believes that Old Norcross
will draw residents from all of the 22 other communities located in the market
area, but due to their amenities, quality of construction and resident profile,
only 15 of the 22 other communities will compete closely with old Norcross.



                                      23
<PAGE>   25

Summary of Debt Secured by the Communities

         Certain information regarding the Company's indebtedness secured by
the Communities is as follows:

<TABLE>
<CAPTION>
                       Principal                     Principal        Fixed                           Monthly
                       Balance at       Maturity     Balance at       Interest   Amortization      Principal and
  Community            Dec. 31, 1998    Date         Maturity         Rate       Schedule        Interest Payment
  ---------            -------------    --------     ------------     --------   ------------    ----------------

<S>                    <C>              <C>          <C>              <C>        <C>             <C>
Plantation Trace       $11,880,779      10-15-08     $10,313,081(1)   7.09%        30-year          $ 79,892
River Oaks               9,052,208      11-15-03       8,513,092(2)   7.15         30-year            62,475
Rosewood Plantation      8,063,836      07-15-08       6,939,249(1)   6.62         30-year            51,838
Preston Oaks             8,419,582      10-15-02       8,024,627(2)   7.21         30-year            59,188
Highland Park            7,940,215      02-15-03       7,544,223(2)   7.30         30-year            56,066
Ivey Brook               6,300,065      02-15-07       5,570,481(2)   7.14         30-year            43,318
Bentley Place            3,999,979      08-15-06       3,554,094(2)   7.10         30-year            27,553
Crestmark               15,956,960      10-01-08      13,689,782(3)   6.57         30-year           101,869
Bradford Creek         $ 8,359,293      06-15-08     $ 7,290,206(2)   7.15%        30-year          $ 56,734
</TABLE>

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

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

(2)      Each of the loans secured by the River Oaks, Preston Oaks, Highland
         Park, Ivey Brook, Bentley Place and Bradford Creek Communities may be
         prepaid in full upon payment of a premium equal to the greater of (a)
         1% of the outstanding principal balance of the loan, or (b) the sum of
         the present value of the scheduled monthly payments to the maturity
         date and the present value of the balloon payment due on the maturity
         date, less the outstanding principal balance of the loan on the date
         of prepayment. Each 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 Crestmark Community may be prepaid upon the
         payment of a premium equal to the greater of (a) 1% of the outstanding
         principal balance, or (b) the product obtained by multiplying the
         amount of principal being prepaid by the excess (if any) of the
         monthly note rate over the assumed reinvestment rate by the present
         value factor. If the loan is prepaid after expiration of the yield
         maintenance period, but more than ninety days before the maturity
         date, the prepayment premium shall be 1% of the unpaid principal
         balance of the note. The loan may be prepaid in full during the last
         90 days prior to its maturity date without any prepayment premium.



                                      24
<PAGE>   26

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 that are anticipated to total 986 apartment homes are in the
development or construction stage.

Other Real Estate Assets

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

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 1998.



                                      25
<PAGE>   27

                                    PART II

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

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

<TABLE>
<CAPTION>
                                                                                                Dividends
                    Quarter Ended                               High             Low            Declared
                    -------------                               ----             ---            --------

                    <S>                                         <C>              <C>            <C>
                    1997

                    First Quarter                                   N/A              N/A        $0.1250
                    Second Quarter                                  N/A              N/A         0.1300
                    Third Quarter                                   N/A              N/A         0.1300
                    Third Quarter - Special Distribution            N/A              N/A         0.0510
                    December 9 through December 31              $9.5000          $8.1250         0.1400

                    1998

                    First Quarter                                 9.4375          8.2500         0.1425
                    Second Quarter                                9.0000          8.2500         0.1450
                    Third Quarter                                 8.9375          7.3750         0.1450
                    Fourth Quarter                               $7.8750         $7.0625        $0.1450
</TABLE>

         On March 22, 1999 there were approximately 1,092 holders of record of
the Common Stock.

         As of March 1, 1999, the Company has 4,719,544 Shares outstanding. In
addition, 2,753,787 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." There is no
established public trading market for the Units. As of March 1, 1999, the
Operating Partnership had 364 holders of record of Units.

         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
and Share. The Company and the Operating Partnership declared quarterly
distributions for 1998 that totaled $0.5775 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 the Company's Autumn Ridge Community). Approximately 26.65% of such 1998
distributions represented ordinary income, 8.85% represented capital gain and
the remaining 64.5% represented 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.

         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 Shares or cash in the
amount of the average of the daily market prices of the Common



                                      26
<PAGE>   28

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. During 1998 the Company
issued a total of 330,468 Shares in exchange for Units submitted for redemption
by 91 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 receive cash in lieu of Shares, no
security was offered or sold to such persons. The certificates evidencing the
Shares issued in exchange for Units in reliance on Rule 147 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.



                                      27


<PAGE>   29
ITEM 6.  SELECTED FINANCIAL DATA.

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

<TABLE>
<CAPTION>
                                                                                         YEARS ENDED DECEMBER 31,
                                                                            -------------------------------------------------
                                                                              1998      1997       1996       1995      1994
                                                                            -------    -------    -------    ------    ------
<S>                                                                         <C>        <C>        <C>        <C>       <C>
OPERATING DATA:
Revenues:
   Rental operations                                                        $16,521    $16,831    $14,651    $6,677    $3,202
   Other operating income                                                       710        677        546       289       138
                                                                            -------    -------    -------    ------    ------

     Total revenues                                                          17,231     17,508     15,197     6,966     3,340
                                                                            -------    -------    -------    ------    ------

Expenses:
   Property operating and maintenance expense (exclusive of
     depreciation and amortization) (1)                                       6,071      5,440      5,091     2,207     1,123
   Depreciation of real estate assets                                         5,017      5,708      4,974     2,326       892
   Management fees to related party (2)                                           0        211        760       347       202
   Interest Expense                                                           4,555      4,670      3,724     2,006     1,268
   Interest Income                                                             (384)      (395)      (353)     (277)      (71)
   Amortization of deferred financing costs                                     139        122        141       178       139
   Other amortization expense                                                    52         65         67        69       229
   General and administrative                                                 1,725      1,714        926       430        75
   Acquisition of Roberts Properties Management, LLC (3)                          0      5,900          0         0         0
   Loss on disposal of assets                                                    94        156          0         0         0
   REIT formation expense                                                         0          0          0         0       446
                                                                            -------    -------    -------    ------    ------

     Total expenses                                                          17,269     23,591     15,330     7,286     4,303

   LOSS BEFORE MINORITY INTEREST, GAIN ON SALE OF
     REAL ESTATE ASSETS, AND EXTRAORDINARY ITEMS                                (38)    (6,083)      (133)     (320)     (963)
   MINORITY INTEREST OF UNITHOLDERS
     IN THE OPERATING PARTNERSHIP                                                15      2,646         52       141       228
                                                                            -------    -------    -------    ------    ------

   LOSS BEFORE GAIN ON SALE OF REAL ESTATE
     ASSETS AND EXTRAORDINARY ITEMS                                             (23)    (3,437)       (81)     (179)     (735)
   GAIN ON SALE OF REAL ESTATE ASSETS, net of minority interest
     of Unitholders in the Operating Partnership                              1,218      1,012          0         9         0
                                                                            -------    -------    -------    ------    ------

   INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS                                   1,195     (2,425)       (81)     (170)     (735)
   EXTRAORDINARY ITEMS, loss on early extinguishment of debt, net
     of minority interest of Unitholders in the Operating Partnership (4)      (487)      (184)       (99)     (102)     (135)
                                                                            -------    -------    -------    ------    ------

   Net income (loss)                                                        $   708    $(2,609)   $  (180)   $ (272)   $ (870)
                                                                            =======    =======    =======    ======    ======

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

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



                                       28
<PAGE>   30


<TABLE>
<CAPTION>
                                            1998              1997              1996              1995              1994
                                         ----------        ----------        ----------        ----------        ----------
<S>                                      <C>               <C>               <C>               <C>               <C>
BALANCE SHEET DATA:
  Real estate assets, before
    accumulated depreciation             $  122,830        $  111,778        $  110,800        $   74,243        $   20,235
  Real estate assets, net of
    accumulated depreciation                105,916            98,377           101,885            70,303            18,607
  Total assets                              125,090           118,350           116,815            77,324            29,174
  Total debt                                 79,973            67,951            63,342            44,019            17,472
  Minority interest of unitholders
    in the operating partnership             15,579            18,861            19,322            13,873             4,838
  Shareholders' equity                       26,526            26,697            29,226            17,728             5,635



OTHER DATA:
  Cash flow provided from (used in):
    Operating activities                 $    5,295        $    5,469        $    5,567        $    1,799        $      117
    Investing activities                    (18,235)           (1,537)          (16,309)          (21,119)           (7,707)
    Financing activities                      9,929                23            12,500            19,716             7,706
                                         ----------        ----------        ----------        ----------        ----------
  Net increase (decrease) in cash
    and cash equivalents                     (3,011)            3,955             1,758               396               116
  Cash and cash equivalents,
    beginning of year                         7,117             3,162             1,404             1,008               892
  Cash and cash equivalents,
    end of year                               4,106             7,117             3,162             1,404             1,008

  Funds from operations (6)                   5,125             5,746             4,908             2,075               158

  Weighted average common shares
    outstanding - basic                   4,638,265         4,187,013         3,799,567         2,023,358         1,206,708
  Weighted average common shares
    outstanding - diluted                 7,547,978         7,404,323         6,244,513         3,617,320         2,243,906

  Total stabilized communities
    (at end of year)                              9                 9                 9                 7                 2
  Total stabilized apartments
    (at end of year)                          1,778             1,756             1,731             1,366               368
  Average physical occupancy
    (stabilized communities) (7)               96.3%             95.4%             97.2%             99.0%             99.5%
</TABLE>
----------
(1)      Property operating expenses include personnel, utilities, real estate
         taxes, insurance, maintenance, landscaping, marketing, and property
         administration expenses (real estate taxes include an adjustment of
         $588 in 1997 to reduce estimated property tax accruals for two
         properties that received favorable tax assessments).
(2)      Because the Company acquired Roberts Properties Management, LLC
         ("Roberts Management") on April 1, 1997, the Company paid no management
         fees to a related party subsequent to April 1, 1997; however, the
         Company incurred additional general and administrative expenses as a
         result of managing its properties internally.
(3)      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 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 properties owned by the
         Company, the transaction was accounted for as the settlement of a
         contract and expensed for the year ended December 31, 1997.
(4)      The extraordinary items resulted from costs associated with the early
         extinguishment of indebtedness. The extraordinary items have been
         reduced by the portion related to the minority interest of the
         Unitholders.
(5)      The Company began paying dividends and distributions on its Common
         Stock and Units beginning on April 15, 1996.
(6)      Funds from Operations ("FFO") is defined by the National Association of
         Real Estate Investment Trust as net income (loss), computed in
         accordance with generally accepted accounting principles, excluding
         gains (or losses) from debt restructuring and sales of property and
         non-recurring items, plus real estate related depreciation and
         amortization. The Company uses the NAREIT definition of FFO, which was
         adopted for periods beginning after January 1, 1996. The Company
         considers FFO to be an important measure of its operating performance;
         however, FFO does not represent amounts available for management's
         discretionary use because of needed capital replacement or expansion,
         debt service obligations, property acquisitions, development and
         distributions, or other commitments and uncertainties. FFO should not
         be considered as an alternative to net income (determined in accordance
         with GAAP)



                                       29
<PAGE>   31


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, 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).
FFO represents funds from operations available for Shareholders and Unitholders.
(7) Represents the average physical occupancy of the stabilized Communities
calculated by dividing the total number of vacant days by the total possible
number of vacant days for each period and subtracting the resulting number from
100%.



                                       30
<PAGE>   32


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

         This report contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, 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 "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 Company owns multifamily residential properties as a
self-administered and self-managed equity real estate investment trust. At
December 31, 1998, the Company owned nine completed and stabilized multifamily
apartment communities consisting of 1,778 apartment homes. As part of its
business plan and growth strategy, the Company sold its 207-unit Autumn Ridge
community in August 1997 and its 232-unit Windsong community in January 1998.
The Company's decision to sell these two communities was based on their age and
locations in markets that are not included in the Company's long-term growth
strategy. In July 1998, the Company sold its two small retail centers, which was
based on the Company's decision to exit all businesses not related to the
long-term ownership of high quality apartment homes. In June 1998, the Company
used the equity from its property sales to purchase three separate parcels of
land for $11.3 million on which it intends to develop and build three new
multifamily communities totaling 986 apartment homes. This development pipeline
will increase the size of the Company's portfolio 55% from 1,778 to 2,764
apartment homes. One of the three new communities under development is located
in Charlotte, North Carolina, and is the first step in the Company's
diversification strategy. The other two communities are located in north
Atlanta. Of the Company's 986 new apartment homes to be built, 118 are rental
townhomes that are under construction, and the remaining 868 apartment homes are
expected to be under construction beginning in the second quarter of 1999.

Results of Operations for the Years Ended December 31, 1998, 1997 and 1996

         For the year ended December 31, 1998, the Company recorded net income
of $708,000 or $0.15 per share compared to a net loss of $2,609,000 $0.62 per
share for the year ended December 31, 1997 and a net loss of $180,000 or $0.05
per share for the year ended December 31, 1996. The increase in net income of
$3,317,000 from 1997 to 1998 is due primarily to the following:

         (a)      the April 1, 1997 acquisition of Roberts Properties
                  Management, LLC ("Roberts Management"), an affiliate owned by
                  Mr. Charles S. Roberts, the President and Chairman of the
                  Board;

                  offset by:

         (b)      the sales of Autumn Ridge, Windsong, and the two retail
                  centers; and

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



                                       31
<PAGE>   33


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

The increase in net loss of $2,429,000 from 1996 to 1997 is due primarily to the
following:

         (a)      the acquisition of Roberts Management; and

         (b)      the decrease in average stabilized occupancy from 97.2% to
                  95.4%; and

         (c)      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 offset in part by:

         (d)      the gain from the sale of Autumn Ridge; and

         (e)      the acquisitions of Bentley Place and Crestmark in March 1996
                  and June 1996, respectively; and

         (f)      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 (dollars in thousands):

<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,              YEAR ENDED DECEMBER 31,
                                              ---------------------------------    ---------------------------------
                                                                           %                                     %
                                               1998         1997        CHANGE       1997        1996         CHANGE
                                              -------      -------     --------    -------      -------       ------
<S>                                           <C>          <C>         <C>         <C>          <C>           <C>
Total operating revenues                      $17,231      $17,508       (1.6)%    $17,508      $15,197        15.2%
Property operating expenses (1)               $ 6,071      $ 6,028        0.7%     $ 6,028      $ 5,091        18.4%
Management fees paid to related party (2)     $     0      $   211     (100.0)%    $   211      $   760       (72.2)%
General and administrative expenses           $ 1,725      $ 1,714        0.6%     $ 1,714      $   926        85.1%
Net operating income (3)                      $11,160      $11,480       (2.8)%    $11,480      $10,106        13.6%
Depreciation of real estate assets            $ 5,017      $ 5,708      (12.1)%    $ 5,708      $ 4,974        14.8%
Average stabilized occupancy (4)                 96.3%        95.4%       0.9%        95.4%        97.2%       (1.8)%
Operating expense ratio (5)                      35.2%        34.4%       0.8%        34.4%        33.5%        0.9%
</TABLE>
----------
(1)      Property operating expenses include personnel, utilities, real estate
         taxes, insurance, maintenance, landscaping, marketing, and property
         administration expenses (real estate taxes excludes an adjustment of
         $588,000 in 1997 to reduce estimated property tax accruals for two
         properties that received favorable tax assessments).
(2)      Because the Company acquired Roberts Management on April 1, 1997, the
         Company paid no management fees to a related party subsequent to March
         31, 1997; however, the Company incurred additional general and
         administrative expenses as a result of managing its properties
         internally.
(3)      Net operating income is equal to total operating revenues minus
         property operating expenses.
(4)      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 period and
         subtracting the resulting number from 100%. The calculation includes
         the following: (a) Highland Park beginning March 1, 1996, Ivey Brook
         beginning August 1, 1997, the second phase of Crestmark beginning
         September 1, 1997, the second phase of Preston Oaks beginning August 1,
         1998, Bradford Creek beginning September 1, 1998 and the second phase
         of Plantation Trace beginning December 1, 1998, which are the dates
         each Community achieved stabilized occupancy; (b) Bentley Place
         beginning March 1, 1996 and Crestmark beginning June 1, 1996, which are
         the dates each Community was acquired by the Company, (c) Autumn Ridge
         only through August 26, 1997,



                                       32
<PAGE>   34


         which is the date the property was sold, and (d) Windsong only through
         January 9, 1998, which is the date the property was sold.
(5)      Represents the total of property operating expenses divided by property
         operating revenues expressed as a percentage.

         The Company's 1998 same-property operating performance, when compared
to 1997, was highlighted by a 4.6% increase in operating revenues and a 2.0%
increase in average occupancy from 94.2% to 96.2%. The Company's property
management team focused on implementing rent increases, achieving high occupancy
levels, and providing quality customer service to residents, which contributed
to the Company's lease renewal rate of 62.6% during 1998. Same-property results
for the seven Communities that were fully stabilized during both years ended
December 31, 1998 and 1997 (Bentley Place, Highland Park, River Oaks, Rosewood
Plantation, and the first phases of Crestmark, Plantation Trace, and Preston
Oaks) are summarized in the following table (dollars in thousands):

<TABLE>
<CAPTION>
                                                  YEARS ENDED
                                                  DECEMBER 31,             %
                                              ----------------------------------
                                               1998         1997         CHANGE
                                               ----         ----         ------
<S>                                           <C>          <C>           <C>
Rental income                                 $12,817      $12,239          4.7%
Total operating revenues                      $13,267      $12,678          4.6%
Property operating expenses (1)               $ 4,702      $ 4,194         12.1%
Management fees paid to related party (2)     $     0      $   160       (100.0)%
Net operating income (3)                      $ 8,565      $ 8,484          1.0%
Average stabilized occupancy (4)                 96.2%        94.2%         2.0%
Operating expense ratio (5)                      35.4%        33.1%         2.3%
Average monthly rent per apartment home       $   879      $   856          2.7%
Lease renewal percentage (6)                     62.6%        58.6%         4.0%
</TABLE>
----------
(1)      Property operating expenses include personnel, utilities, real estate
         taxes, insurance, maintenance, landscaping, marketing, and property
         administration expenses (real estate taxes excludes an adjustment of
         $588,000 in 1997 to reduce estimated property tax accruals for two
         properties that received favorable tax assessments).
(2)      Because the Company acquired Roberts Management on April 1, 1997, the
         Company paid no management fees to a related party subsequent to March
         31, 1997; however, the Company incurred additional general and
         administrative expenses as a result of managing its properties
         internally.
(3)      Net operating income is equal to total operating revenues minus
         property operating expenses.
(4)      Represents the average physical occupancy of the stabilized Communities
         calculated by dividing the total number of vacant days by the total
         possible number of vacant days for each period and subtracting the
         resulting number from 100%.
(5)      Represents the total of property operating expenses divided by property
         operating revenues expressed as a percentage.
(6)      Represents the number of leases renewed divided by the number of leases
         expired during the period presented, expressed as a percentage.


                                       33
<PAGE>   35


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 (dollars in
thousands):

<TABLE>
<CAPTION>
                                                 YEAR ENDED
                                                 DECEMBER 31,            %
                                              --------------------------------
                                               1997        1996        CHANGE
                                               ----        ----        ------
<S>                                           <C>         <C>           <C>
Rental income                                 $9,084      $9,114        (0.3)%
Total operating revenues                      $9,364      $9,412        (0.5)%
Property operating expenses (1)               $3,019      $2,983         1.2%
Management fees paid to related party (2)     $  117      $  471       (75.2)%
Net operating income (3)                      $6,345      $6,429        (1.3)%
Average stabilized occupancy (4)                96.2%       98.9%       (2.7)%
Operating expense ratio (5)                     32.2%       31.7%        0.5%
Average monthly rent per apartment home       $  828      $  795         4.2%
</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 property
         that received favorable assessments for the 1996 and 1997 tax years).
(2)      Because the Company acquired Roberts Management on April 1, 1997, the
         Company paid no management fees to a related party subsequent to March
         31, 1997; however, the Company incurred additional general and
         administrative expenses as a result of managing its properties
         internally.
(3)      Net operating income is equal to total operating revenues minus
         property operating expenses.
(4)      Represents the average physical occupancy of the stabilized Communities
         calculated by dividing the total number of vacant days by the total
         possible number of vacant days for each period and subtracting the
         resulting number from 100%.
(5)      Represents the total of property operating expenses divided by property
         operating revenues expressed as a percentage.

         The following discussion compares the Company's statements of
operations for the years ended December 31, 1998, 1997 and 1996.

         Property operating revenue decreased $277,000 or 1.6% from $17,508,000
for the year ended December 31, 1997 to $17,231,000 for the year ended December
31, 1998. The decrease in operating revenue is due primarily to the following:

         (a)      The sales of Autumn Ridge, Windsong, and the two retail
                  centers;

                  offset by:

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

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


                                       34
<PAGE>   36


         During 1998, operating revenues steadily increased each quarter as
shown below:

<TABLE>
<CAPTION>
                       QUARTER                       OPERATING
                        ENDED                        REVENUES
                        -----                        --------
                  <S>                               <C>
                  March 31, 1998                    $3,920,000
                  June 30, 1998                     $4,127,000
                  September 30, 1998                $4,465,000
                  December 31, 1998                 $4,719,000
</TABLE>

         The Company implemented a program to bill residents for their
individual water consumption and completed the installation of water-metering
equipment in each of its 1,778 existing apartment homes in the fourth quarter of
1998. Billing residents for their water usage is expected to increase the
Company's operating revenues by approximately $425,000 per year. Based on a
total cost of $380,000 to install the equipment, the payback period will be less
than one year. All new apartment communities to be developed by the Company are
expected to have water-metering equipment installed in each apartment home
during construction.

         Property operating revenue increased $2,311,000 or 15.2% from
$15,197,000 for the year ended December 31, 1996 to $17,508,000 for the year
ended December 31, 1997. The increase in property operating revenue was 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. Property operating revenue
from the five Communities that were fully stabilized during both 1997 and 1996
decreased 0.5% due primarily to a 2.7% decline in occupancy from 98.9% to 96.2%.
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 $43,000 or 0.7% from
$6,028,000 for the year ended December 31, 1997 to $6,071,000 for the year ended
December 31, 1998. The increase in property operating expenses is due primarily
to the following:

         (a)      the sales of Autumn Ridge, Windsong, and the two retail
                  centers;

                  offset by:

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

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

         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.

         General and administrative expenses increased $11,000 or 0.6% from
$1,714,000 for the year ended December 31, 1997 to $1,725,000 for the year ended
December 31, 1998 and include legal, accounting and tax fees, marketing and
printing fees, salaries, director fees and other costs. The increase is due
primarily to increased personnel due to the acquisition of Roberts Management,
offset by a reduction in accounting and tax fees, legal, and marketing fees, and
the initial fee paid to list the Company's common stock on the American Stock
Exchange. General and administrative expenses as a percentage of operating
revenues increased from 9.8% for the year ended December 31, 1997 to 10.0% for
the year ended December 31, 1998. The Company expects that as it continues to
grow, such expenses will begin to decline as a percentage of operating revenues,
even though general and administrative expenses will increase in absolute terms.


                                       35
<PAGE>   37


         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. 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, (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, 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.

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

         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
in 1997.

         On April 1, 1997, the Company acquired Roberts Management, the property
management company that had managed the Company's multifamily apartment
Communities since the Company's inception. Because Roberts Management, a related
party, managed only the properties owned by the Company, the transaction was
accounted for as the settlement of a contract and shown as an expense for the
year ended December 31, 1997.

         Interest expense decreased $115,000 or 2.5% from $4,670,000 for the
year ended December 31, 1997 to $4,555,000 for the year ended December 31, 1998.
The decrease is due primarily to the mortgage notes that were repaid due to the
sales of Autumn Ridge and Windsong, offset by (1) the financing of Ivey Brook,
the second phase of Crestmark, and Bradford Creek in January 1997, July 1997,
and June 1998, respectively, (2) the refinancing of the mortgage loan secured by
the Rosewood Plantation Community in June 1998 for a higher loan amount, and (3)
the refinancing of the mortgage loans secured by the Plantation Trace and
Crestmark Communities in September 1998, each for higher loan amounts.

         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 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, offset by the repayment of the
loan on Autumn Ridge due to its sale in August 1997.

         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, net
of minority interest, of $1,012,000. Net sales proceeds were $5,045,000 after
deduction for loan repayment, closing costs and prorations. The purchaser,
Benchmark Autumn Ridge Associates, L.P., is not affiliated with the Company, and
the transaction was negotiated at arms-length. The Company paid Roberts
Properties a consulting fee of $150,000 at closing.

         On January 9, 1998, the Company completed the sale of the Windsong
Community for $9,750,000 in cash resulting in a gain, net of minority interest,
of $918,000 on the sale of real estate assets and an extraordinary gain, net of
minority interest, of $68,000 on the buyer's assumption of related mortgage
indebtedness. Net sales proceeds were $5,194,000 after deduction for loan
repayment of $3,959,000, closing costs of $458,000, and prorations of $139,000.
The Company paid Roberts Properties a consulting fee of $288,000 at closing. The
net cash proceeds from the sale of Windsong were reinvested in undeveloped land
in June 1998 as part of a Section 1031 tax-deferred exchange.



                                       36
<PAGE>   38


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

         The mortgage notes payable secured by the Rosewood Plantation and
Crestmark Communities were refinanced in June and September 1998, respectively,
prior to their contractual maturity. The yield maintenance fee and the
unamortized loan costs related to the mortgage notes payable at the time of the
refinancing were charged to expense as an extraordinary item. The extraordinary
item (early extinguishment of a debt), including the extraordinary gain of
$110,000 on the buyer's assumption of debt related to the sale of Windsong as
described above, for the year ended December 31, 1998 was $792,000 (including
the minority interests' share of $306,000).

         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 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 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 Years Ended December 31, 1998, 1997 and 1996. Cash and
cash equivalents decreased $3,011,000 from $7,117,000 during the year ended
December 31, 1997 to $4,106,000 during the year ended December 31, 1998. The
decrease is due to an increase in cash used in investing activities and a
decrease in cash provided by operating activities, offset by an increase in cash
provided by financing activities. Cash and cash equivalents increased $3,955,000
from $3,162,000 during the year ended December 31, 1996 to $7,117,000 during the
year ended December 31, 1997. The increase is due to a decrease in cash used in
investing activities, offset by a decrease in cash provided by operating and
financing activities.

         A primary source of liquidity for 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 $174,000
from $5,469,000 during 1997 to $5,295,000 during 1998. The decrease in cash flow
from operations is due primarily to the sales of Autumn Ridge and Windsong,
offset by additional cash flow from the Communities leased-up in 1998. 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 Ivey Brook and Crestmark Phase II Communities, was
offset by lower occupancy rates and rent concessions from the Company's
stabilized Communities. The effects of changes in assets and liabilities 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 increased $16,698,000 from
$1,537,000 during 1997 to $18,235,000 during 1998. This increase is due
primarily to the following:

         (a)      the purchase of three separate parcels of land for
                  $11,359,000, on which the Company intends to build three new
                  communities totaling 986 apartment homes; and


                                       37
<PAGE>   39


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

                  offset by:

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

         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 bought no existing apartment communities
for cash during these periods.

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

         (a)      the closing of an $8,400,000 loan in June 1998 on Bradford
                  Creek with a fixed interest rate of 7.15% per annum, a term of
                  ten years, and net cash proceeds of $8,282,000 (based on
                  projected first year stabilized net operating income, the
                  Company expects to earn a 13% leveraged return on its
                  investment in Bradford Creek);

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

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

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

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

                  offset by:

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

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

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

         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:


                                       38
<PAGE>   40


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

         (b)      net proceeds of approximately $6,600,000 from the sale of
                  443,675 Shares in March 1996 and an additional 255,500 Shares
                  in May 1996; and

         (c)      the payment of $4,088,000 for four quarterly distributions
                  plus a special distribution on Shares and Units in 1997
                  compared to the payment of $2,219,000 for three quarterly
                  distributions in 1996;

                  offset by:

         (d)      the payment of $1,403,000 to an affiliate of a note payable
                  assumed in the acquisition of Crestmark in June 1996, and

         (e)      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 1996
                  and the financing of Bentley Place for $4,100,000 in August
                  1996.

         Existing Debt Structure. The following facts highlight the Company's
existing debt structure:

(a) each of the Company's nine Communities is financed with fixed-rate debt;
(b) the average interest rate for all nine Communities is 6.99% per annum;
(c) no debt is scheduled to mature prior to October 2002;
(d) the average term to maturity is eight years; and
(e) debt principal will amortize at a rate of approximately $872,000 per year.

         The following table summarizes the debt for each of the Company's nine
Communities:

<TABLE>
<CAPTION>
                                          FIXED INTEREST                             PRINCIPAL
                                            RATE AS OF                              OUTSTANDING
                                             12/31/98             MATURITY           12/31/98
                                             --------             --------           --------
         <S>                              <C>                     <C>               <C>
         Bentley Place                         7.10%              08/15/06          $ 4,000,000
         Bradford Creek                        7.15%              06/15/08            8,359,000
         Crestmark                             6.57%              10/01/08           15,957,000
         Highland Park                         7.30%              02/15/03            7,940,000
         Ivey Brook                            7.14%              02/15/07            6,300,000
         Plantation Trace                      7.09%              10/15/08           11,881,000
         Preston Oaks                          7.21%              10/15/02            8,420,000
         River Oaks                            7.15%              11/15/03            9,052,000
         Rosewood Plantation                   6.62%              07/15/08            8,064,000
                                                                                      ---------
                                                                                    $79,973,000
                                                                                    ===========
</TABLE>



                                       39
<PAGE>   41


         Each of the Company's existing mortgage loans will require balloon
payments (in addition to monthly principal amortization) coming due over the
years 2002 to 2008 as summarized below:

<TABLE>
           <S>                           <C>
            2002                         $ 8,025,000
            2003                          16,057,000
            2006                           3,554,000
            2007                           5,570,000
            2008                          38,233,000
                                         -----------
           Total                         $71,439,000
                                         ===========
</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 will 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)
equity offerings.

         During the quarter ended September 30, 1998, the Company started
construction on the first phase of Abbotts Bridge, located in north Atlanta.
Abbotts Bridge will consist of 118 rental townhomes with occupancies expected to
begin in the second quarter of 1999. The Company is funding this first phase
with the proceeds from recent mortgage loan financings, operating cash, and a
$7,000,000 construction loan, for which the Company received a written
commitment on March 9, 1999. On March 5, 1999, the Company received a commitment
for a $9,500,000 permanent loan secured by Phase I of the Abbotts Bridge
Community. The loan commitment included a 10-year term with a fixed interest
rate of 6.95% payable in monthly installments of $62,885 based on a 30-year
amortization schedule. The loan is scheduled to close in August 1999.

         The Company expects to begin construction on an additional 868
apartment homes during the second quarter of 1999, which will include a 287-unit
second phase of Abbotts Bridge, a 332-unit community in Charlotte and a 249-unit
community located in north Atlanta. The Company paid cash for the land for these
three new communities, and it expects to fund the cost of construction with
construction loans and cash flow from operations. The Company is in the process
of obtaining construction loans, and the Company does not expect to begin
substantial construction until construction loans are secured.

         The Company obtained a $1,000,000 revolving line of credit in April
1998 to provide funds for short-term working capital purposes. The line has a
one-year term and bears an interest rate of LIBOR + 150 basis points. At
December 31, 1998, no amount was outstanding under the line.

         The Company and certain non-owned affiliates of the Company have a
$35,000,000 Advised Guidance Line with NationsBank N.A. for the purpose of
providing financing for the acquisition or development of multifamily
communities. Financing under the guidance line is available on a revolving basis
and bears interest at LIBOR plus 1.80% or the prime rate, at the option of the
Company, payable monthly. The guidance line is not a commitment to lend, and
each loan under the guidance line will be made at the NationsBank's discretion
in accordance with normal loan approval procedures. At December 31, 1998, no
amount was outstanding under the guidance line.

         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 and debt maturities, through the issuance of additional
equity securities and the proceeds from construction loans and future mortgage
financings.



                                       40
<PAGE>   42


Stock Repurchase Plan

         On September 3, 1998, the Company issued a press release announcing
that its board of directors had authorized the repurchase of up to 300,000
shares of the Company's outstanding common stock. The Company intends to
repurchase its shares from time to time by means of open market purchases
depending on availability, its cash position and price per share. The Company
repurchased 19,300 shares in 1998 at a total cost of $145,000. From January 1,
1999 through February 26, 1999, the Company repurchased 52,100 shares for
$387,000.

Redemptions of Units for Cash

         During the year ended December 31, 1998, the Company paid $122,000 to
redeem 14,341 Units from Unitholders who resided outside the state of Georgia.
From January 1, 1999 through February 26, 1999, the Company paid $28,000 to
redeem 3,917 Units from Unitholders who resided outside the state of Georgia.

Supplemental Disclosure of Funds From Operations

         Funds from Operations ("FFO") is defined by the National Association of
Real Estate Investment Trusts as net income (loss), computed in accordance with
generally accepted accounting principles, excluding gains (or losses) from debt
restructuring and sales of property and non-recurring items, plus real estate
related depreciation and amortization. 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, 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).
FFO represents funds from operations available for Shareholders and Unitholders.
The following table reconciles net income (loss) to FFO (dollars in thousands).

<TABLE>
<CAPTION>
                                                                        TWELVE MONTHS ENDED DECEMBER 31,
                                                                  --------------------------------------------
                                                                     1998             1997             1996
                                                                  ----------       ----------       ----------
<S>                                                               <C>              <C>              <C>
Net loss                                                          $      708       $   (2,609)      $     (180)
Minority interest of Unitholders in the Operating Partnership            748           (1,866)             (52)
Extraordinary item                                                       487              184               99
Amortization (real estate related)                                        52               65               67
Acquisition of Roberts Management                                          0            5,900                0
Loss on disposal of assets                                                94              156                0
Gain on sale of real estate asset                                     (1,981)          (1,792)               0
Depreciation expense                                                   5,017            5,708            4,974
                                                                  ----------       ----------       ----------

Funds From Operations                                             $    5,125       $    5,746       $    4,908
                                                                  ==========       ==========       ==========

Weighted average Shares and Units
         outstanding during the period                             7,547,978        7,404,323        6,244,513
</TABLE>



                                       41
<PAGE>   43


New Accounting Pronouncements

         Comprehensive Income. The Company adopted Statements of Financial
Accounting Standards ("SFAS") No. 130, "Reporting of Comprehensive Income,"
during 1998. SFAS 130 establishes standards for reporting and display of
comprehensive income and its components. Comprehensive income is the total of
net income and all other non-owner changes in shareholders' equity. As of
December 31, 1998, the Company had no items of other comprehensive income.

         Segments. The Company adopted SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information," during 1998. SFAS 131 establishes new
standards for disclosure of segment information on the so-called "management
approach." The management approach is based on the way that the chief operating
decision maker organizes segments within a company for making operating
decisions and assessing performance. Because the Company's real estate portfolio
has similar economic characteristics, customers and products and services, the
Company evaluates the operating performance of its real estate portfolio as one
reportable segment, on the same basis of presentation for internal and external
reporting. Therefore, no additional segment information is presented in this
report.

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. The short-term nature of these leases serves to
reduce the risk to the Company of the adverse effects of inflation.

Year 2000 Computer Issues

         The "Year 2000 problem" is a general term used to identify those
computer programs or applications that are programmed to use a two-digit field,
instead of a four-digit field, for the year component of a date. Those programs
or applications which are programmed in this manner may recognize the year 2000
as the year 1900, thereby causing potential system failures or miscalculations,
which could result in disruptions of normal business operations. The Company has
evaluated its state of readiness, the costs involved to become compliant, the
risks involved, and its contingency plans. The Company's primary uses of
software systems are its corporate accounting and property management software.

         The Company has completed an initial assessment of its core computer
information systems and is now undertaking the necessary steps to make its
systems Year 2000 compliant. The Company's property management software is Year
2000 compliant, and it expects to upgrade its accounting software in the third
quarter of 1999 to make it Year 2000 compliant. The cost to upgrade its
accounting software is not expected to be material. The Company is currently
evaluating and assessing those computer systems that do not relate to
information systems, such as telecommunications, HVAC, and fire and safety
systems, which typically include embedded technology such as microcontrollers
that may be harder to test, and may require repairs or complete replacement. The
Company expects to complete this assessment during the second quarter of 1999.

         The Company has contacted all significant vendors, including banks,
mortgage loan service companies, and its third party payroll vendor to verify
that those vendors are also addressing the problem. The Company has developed
contingency plans where necessary. Certain Year 2000 issues that are beyond the
Company's control, such as the failure of a utility company to provide power to
residents, may adversely affect the Company's operations. At this time, no
estimates can be made as to any potential adverse impact that may result from
the failure of any of the Company's vendors to become Year 2000 compliant,
although the Company continues to believe that there will be no direct material
effect on its operating performance or results of operations.

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



                                       42
<PAGE>   44


the intent, belief or expectations of the Company and its management regarding
the Company's strategies and plans for operations and growth, including
development and construction 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:

-        competition and overbuilding in the Company's markets (currently
         Atlanta and Charlotte);
-        increasing operating costs that cannot be passed along to residents
         through rental rate increases;
-        construction risks for the Company's development pipeline due to
         factors that include unexpected weather problems, shortages in
         materials and supplies, and labor strikes;
-        risks related to the national and local economic climate;
-        the Company's dependence upon the Atlanta market;
-        risks of entering new markets outside the Atlanta area;
-        financing risks including risks of substantial indebtedness, not being
         able to obtain debt or equity financing to fund the Company's growth
         strategy, or not being able to refinance its existing mortgage debt
         beginning in 2002;
-        tax risks including the possible effects of changes in tax law and
         regulation;
-        possible environmental liability; and
-        costs of compliance with the Americans With Disabilities Act and
         similar laws.

      In addition, the market price of the Common Stock may from time to time
fluctuate widely 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.



                                       43
<PAGE>   45


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

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

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

<TABLE>
<CAPTION>
                                                                                                                       FAIR VALUE
                                                                                                                       DECEMBER 31,
(DOLLARS IN THOUSANDS)               1999       2000      2001       2002         2003     THEREAFTER        TOTAL        1999
---------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>        <C>      <C>        <C>         <C>        <C>              <C>        <C>
Principal Reductions in
Mortgage Notes                       $906       $971     $1,042     $9,059      $16,874      $51,121        $79,973      $79,973

Average interest rates               6.99%      6.99%      6.99%      6.96%        6.88%        6.87%          6.99%        6.99%
</TABLE>


                                       44
<PAGE>   46


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.


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

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

        Independent Auditors' Report (Deloitte & Touche LLP).................................   F-2

        Consolidated Financial Statements and Schedule for the Years
            Ended December 31, 1998, 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

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


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

         Effective December 19, 1997, the Company dismissed Deloitte & Touche
LLP, the independent accounting firm that 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.



                                       45
<PAGE>   47


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.

         Charles S. Roberts, age 52, a director since July 1994, is Chairman of
the Board, Chief Executive Officer and President of the Company. Mr. Robert's
term as a director expires at the 2000 annual meeting of shareholders. Mr.
Roberts owns, directly or indirectly, all of the outstanding stock of, and is
the president and sole director of, Roberts Properties, Inc. and Roberts
Properties Construction, Inc. Mr. Roberts also owned substantially all of the
outstanding interests in Roberts Properties Management, L.L.C. until its
acquisition by Roberts Properties Residential, L.P. on April 1, 1997.

         In October 1970 Mr. Roberts established Roberts Properties, Inc. to
develop, construct and manage real estate. Beginning in 1985, Mr. Roberts and
his affiliates began to focus on developing upscale multifamily residential
communities and have won numerous local, regional and national awards for the
development of these communities. Mr. Roberts is a frequent national speaker on
the topic of developing upscale multifamily housing and has been recognized as a
leader in this industry. In April 1995, Roberts Properties Management, Inc. was
recognized as the Property Management Company of the Year by the National
Association of Home Builders. On a regional level, Roberts Properties, Inc. was
awarded the prestigious Southeast Builders Conference Aurora Award for the best
rental apartment community eight out of nine years during the period 1988
through 1996. On a national level, Roberts Properties, Inc. was awarded the
prestigious Pillars of the Industry Award from the National Association of Home
Builders for the best low-rise apartments in 1991 and 1992. In 1993, Roberts
Properties, Inc. was awarded the coveted Golden Aurora Award for best overall
development in the Southeast.

         James M. Goodrich, age 58, a director since October 1994, is a
consulting engineer and private investor. Dr. Goodrich's term expires at the
2000 annual meeting of shareholders. Dr. Goodrich is a director of the North
American Electric Reliability Council whose mission is to promote the
reliability of the electricity supply for North America. In 1975 Dr. Goodrich
founded Energy Management Associates, which provides operations and financial
planning software and related consulting services to the electric and gas
utility industries. Dr. Goodrich was Executive Vice President of Energy
Management Associates from 1975 until October 1993 and was a member of its board
of directors until 1992, when it was sold to Electronic Data Systems
Corporation. Prior to his experience with Energy Management Associates, Dr.
Goodrich served in the United States Navy for five years as an officer on the
staff of Admiral Hyman Rickover; this position involved technical support of the
design and development of nuclear power plants for the Navy. Dr. Goodrich holds
a Ph.D. in Nuclear Engineering, a master's degree in Engineering-Economic
Systems, and a bachelor of arts degree, all from Stanford University. He also
holds a master's degree in Engineering Science from George Washington
University. Dr. Goodrich has appeared as an expert witness before numerous state
public utility commissions, the Federal Energy Regulatory Commission, federal
courts and arbitration panels.

         Wm. Jarell Jones, age 50, a director since October 1994, is an attorney
and has practiced law with the firm of Wm. Jarell Jones, P.C., in Statesboro,
Georgia since November 1993. Mr. Jones' term expires at the 1999 annual meeting
of shareholders. Mr. Jones is also a Certified Public Accountant, and in 1976 he
formed the public accounting firm of Jones & Kolb in Atlanta, Georgia and served
as Senior Tax Partner and Co-Managing Partner until December 1988. In 1990 Mr.
Jones moved to Statesboro and practiced law with the firm of Edenfield, Stone &
Cox until November 1992 and then with the firm of Jones & Rutledge from November
1992 until November 1993. Mr. Jones is the Chief Executive Officer of JQUAD,
Inc., a family owned holding company of timber, farming, and development
interests. Mr. Jones was a former director for six years and the former Chairman
for two years of the Downtown Statesboro Development Authority.

         Ben A. Spalding, age 64, a director since October 1994, is Executive
Vice President of DHL International, Inc., an executive search firm. Mr.
Spalding was the sole shareholder of Spalding & Company, a former NASD member
broker-dealer that had served from 1980 to 1996 as the exclusive broker-dealer
for limited partnerships sponsored by Mr. Roberts. Mr. Spalding's term expires
at the 2001 annual meeting of shareholders. Mr. Spalding served as President of
Spalding & Company from 1980 until 1994. For the 20-year period through 1983,
Mr. Spalding served in several positions with Johnson & Johnson in the health
care field, most recently as Healthcare Division Sales Manager for several
states in the



                                       46
<PAGE>   48


Southeast. Mr. Spalding has a bachelor's degree in Business Administration from
Bellarmine College. He has served in numerous positions with civic and
charitable organizations, including serving as a National Trustee of the Cystic
Fibrosis Foundation and a member of the Board of Trustees of the Metro-Atlanta
Crime Commission. He received the Cystic Fibrosis Dick Goldschmidt Award in 1986
for his efforts on behalf of the Cystic Fibrosis Foundation.

         George W. Wray, Jr., age 62, a director since February 1995, is a
private investor and Senior Partner of the Wray Partnership, a family investment
group. Mr. Wray's term expires at the 2001 annual meeting of shareholders. He
was employed with International Silver Company from the early 1960s to July
1993, most recently as a Vice President engaged in sales management for the
eastern United States. From the July 1993 acquisition of International Silver
Company by World Crisa Corporation (a division of Vitro S.A.) through September
1997, Mr. Wray was an independent sales agent for the successor organization .
Mr. Wray also served as a Vice President of Spalding & Company, an NASD
registered broker-dealer, from 1991 to 1997 and was a registered associate of
Spalding & Company from 1983 to 1997. Mr. Wray holds a bachelor's degree in
Industrial Relations from the University of North Carolina at Chapel Hill and
serves as an elder of the Peachtree Presbyterian Church in Atlanta.

         Dennis H. James, age 51, a director since June 1995, is Executive Vice
President of L. J. Melody & Company (formerly Shoptaw-James, Inc.), a commercial
mortgage banking firm. Mr. James' term expires at the 1999 annual meeting of
shareholders. Mr. James has over 25 years' experience in the mortgage banking
industry and has been involved in the production of income property straight
debt loans, participating mortgages, debt/equity joint ventures and sales. As
Executive Vice President of L. J. Melody & Company, he is responsible for the
Southeast Region's overall production and investor relations. He serves on both
the Allstate Life Insurance Company Correspondent Advisory Council and State
Farm Life Insurance Advisory Council. Mr. James has a bachelor's degree in
Industrial Management from Georgia Tech, and his professional education includes
attendance at numerous real estate institutes.

         Weldon R. Humphries, age 61, a director since February 1998, is a
private investor. Mr. Humphries' term expires at the 2001 annual meeting of
shareholders. Mr. Humphries recently retired from a distinguished twenty-year
career with Manor Care, Inc. (NYSE: MNR), where he was employed from January
1978 to November 1997 as Senior Vice President responsible for asset management,
acquisitions and development, and with Choice Hotels International, Inc. (NYSE:
CHH), where he served as Senior Vice-President responsible for asset management,
acquisitions and development from November 1997 to January 1998. Mr. Humphries
began his career as a senior mortgage analyst with Connecticut General Life
Insurance Company and later worked for Arvida Corporation, where he was
responsible for all real estate financing, development and marketing. 
Mr. Humphries has a BBA in Marketing from the University of Houston and an
MBA in Finance from the University of Hartford. He also served as an officer in
the United States Marine Corps.

         Charles R. Elliott, age 45, the Company's Secretary and Treasurer since
its inception, is the Company's Chief Financial Officer and has served in that
capacity since April 1995. Mr. Elliott served as a director of the Company from
October 1994 to February 1995. He worked for Hunneman Real Estate Corporation in
Boston, Massachusetts from 1979 to 1993, most recently as a Senior
Vice-President of Accounting and Finance. Mr. Elliott joined Roberts Properties
in August 1993 as Chief Financial Officer and served in that role until April
1995. He holds an undergraduate degree in Accounting and a master's degree in
Finance.

Section 16(a) Beneficial Ownership Reporting Compliance

         Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own beneficially more
than 10% of the Company's outstanding Common Stock to file with the SEC initial
reports of ownership and reports of changes in their ownership of the Company's
Common Stock. Directors, executive officers and greater than 10% shareholders
are required by SEC regulations to furnish the Company with copies of the forms
they file. To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company, during the fiscal year ended December 31,
1998, its directors, executive officers and greater than 10% shareholders
complied with all applicable Section 16(a) filing requirements.



                                       47
<PAGE>   49

ITEM 11. EXECUTIVE COMPENSATION.

Compensation of Executive Officers

         The executive officers of the Company are Mr. Charles S. Roberts, the
Company's Chairman of the Board, Chief Executive Officer and President, and Mr.
Charles R. Elliott, the Company's Secretary and Treasurer since its inception
and its Chief Financial Officer since April 1995.

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                                                Annual Compensation
                                                                  ------------------------------------------------
            Name and Principal Position                           Year            Salary ($)             Bonus ($)
            ---------------------------                           ----            ----------             ---------
            <S>                                                   <C>             <C>                    <C>
            Charles S. Roberts                                    1998              155,769                  0
              Chairman of the Board, Chief                        1997              129,857                  0
              Executive Officer, and President                    1996               75,000                  0

            Charles R. Elliott                                    1998               93,642               30,000
              Secretary, Treasurer and                            1997               75,000               38,500
              Chief Financial Officer                             1996               75,000               16,250
</TABLE>


         The Company is not a party to any employment agreements. Certain fees
are payable to affiliates of Mr. Roberts under agreements to provide consulting
services to the Company in the event of the sale of certain of the Communities.
See "Part III, Item 12, Certain Relationships and Related Transactions -
Payments to the Roberts Companies for Services - Consulting Fees."

Compensation of Directors

         The Company pays its directors who are not officers of the Company fees
for their services as directors. Mr. Roberts, who is the only director who is an
officer, is not paid any director fees. Non-officer directors receive a fee of
$1,000 for attendance, in person or by telephone, at each meeting of the Board
of Directors. In addition, the Company reimburses its directors for reasonable
travel expenses and out-of-pocket expenses incurred in connection with their
activities on behalf of the Company.

Compensation Committee Interlocks and Insider Participation

         Until December 15, 1998, the Compensation Committee of the Board of
Directors was composed of Dr. Goodrich, Mr. Jones, and Mr. Wray. Effective that
day, Mr. Humphries and Mr. James replaced Dr. Goodrich and Mr. Wray. None of
such persons was during 1998, or at any previous time, an officer or employee of
the Company or the Operating Partnership.

         Dennis H. James is Executive Vice President of L.J. Melody & Company,
formerly Shoptaw-James, Inc., a commercial mortgage banking firm that has
originated loans for the Company. In 1998 the Company paid L. J. Melody &
Company $63,000 in loan origination fees.



                                       48
<PAGE>   50


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

         The following table describes the beneficial ownership of Shares as of
March 1, 1999 for (a) each person who holds more than a 5% interest in the
Company, (b) directors, (c) executive officers, and (d) the directors and
executive officers as a group. Unless otherwise indicated in the footnotes, all
of such interests are owned directly, and the indicated person or entity has
sole voting and investment power. Except as described in this paragraph,
Unitholders generally have the right to require the Operating Partnership to
redeem their Units. 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%. A Unitholder who submits Units for redemption will receive,
at the election of the Company, either an equal number of Shares or cash in the
amount of the average of the daily market prices of the Common Stock for the 10
consecutive trading days prior to the date of submission multiplied by the
number of Units submitted. On February 1, 1999, however, the Company began a
six-month period in which Units cannot be submitted for redemption. After this
period, the Company intends to register Shares with the SEC to exchange for
Units beginning approximately August 1, 1999. The Company intends to again issue
Shares in exchange for Units presented for redemption after the waiting period
is over. Because Units can not be redeemed for Shares within 60 days of the date
that this report is filed with the SEC, Units owned by such persons are not
included in Number of Shares Beneficially Owned. The extent to which the persons
hold Units is described in the footnotes. Each of the persons known by the
Company to beneficially own more than 5% of the Common Stock has an address in
care of the Company's principal office.

<TABLE>
<CAPTION>
                 Name of                         Number of Shares
             Beneficial Owner                   Beneficially Owned         Percent of Shares(1)
             ----------------                   ------------------         --------------------
<S>                                             <C>                        <C>
Charles S. Roberts(2)                                 589,935                      12.5%

George W. Wray, Jr.(3)                                244,468                       5.2

James M. Goodrich(4)                                  256,651                       5.4

Ben A. Spalding(5)                                     13,021                         *

Dennis H. James(6)                                     44,796                         *

Wm. Jarell Jones                                        3,917                         *

Weldon R. Humphries(7)                                 30,000                         *

Charles R. Elliott                                      9,000                         *

All Directors and Executive  Officers as a
Group:   (8 persons)(8)                             1,191,788                      25.3%
</TABLE>
------------------------------
*Less than 1%.

(1) The total number of Shares outstanding used in calculating this percentage
is 4,719,544, the number of Shares outstanding as of March 1, 1999.

(2) Includes 2,444 Shares owned by his minor daughter. Mr. Roberts also owns
702,313 Units, and a trust for his minor daughter of which he is the sole
trustee owns 29,500 Units.

(3) Includes 1,500 Shares owned directly by Mr. Wray; 210,653 Shares owned by a
partnership, over which Shares Mr. Wray has voting and investment power as the
managing partner of such partnership; 27,257



                                       49
<PAGE>   51


Shares owned by his wife and 5,058 Shares owned by a trust of which she is a
co-trustee. Mr. Wray disclaims beneficial ownership of the 27,257 Shares owned
by Mrs. Wray and 5,058 Shares owned by a trust of which she is a co-trustee. Mr.
Wray also owns 21,752 Units; 109,868 Units are owned by the partnership
previously referenced; and Mr. Wray owns 2,917 Units owned jointly with his
daughter, over which Units he shares voting and investment power.

(4) Includes: 14,787 Shares owned directly by Dr. Goodrich; 110,507 Shares owned
jointly by Dr. Goodrich and his wife; 106,478 Shares owned by Goodrich
Enterprises, Inc., all of the outstanding shares of which are owned by Dr. and
Mrs. Goodrich and their sons; and 24,879 Shares owned by a trust for the benefit
of a son of Dr. and Mrs. Goodrich and of which Mrs. Goodrich is trustee. Dr.
Goodrich's beneficial ownership of Units includes 48,075 Units owned jointly by
Dr. and Mrs. Goodrich; and 6,835 Units owned by a trust for the benefit of a son
of Dr. and Mrs. Goodrich of which Mrs. Goodrich is trustee. Dr. Goodrich
disclaims beneficial ownership of the Units and Shares owned by the trust.

(5) Includes 5,457 Shares owned directly by Mr. Spalding and 7,564 Shares owned
by partnerships of which Mrs. Spalding is the managing partner. Mr. Spalding's
beneficial ownership of Units includes: 14,655 Units he owns directly; 2,917
Units owned by Mr. Spalding's wife; and 24,401 Units owned by partnerships of
which Mrs. Spalding is the managing partner. Mr. Spalding disclaims beneficial
ownership of all Units and Shares owned by his wife or partnerships of which she
is the managing partner.

(6) Mr. James also owns 2,405 Units.

(7) Owned by a trust of which Mr. Humphries is a co-trustee along with his
spouse.

(8) Includes 246,985 Shares as to which directors share voting and investment
power with another family member; also includes an aggregate of 64,758 Shares
beneficially owned by three directors' wives, as to which Shares such directors
disclaim beneficial ownership.

13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

General

          The Company conducts its business through the Operating Partnership,
owns a 63.2% interest in it, and is its sole general partner. Mr. Charles S.
Roberts owns all or substantially all of the outstanding shares of Roberts
Properties and Roberts Construction, which perform certain services for the
Company as explained below. Notes 1 and 8 to the Consolidated Financial
Statements of the Company provide further detail regarding certain of the
transactions described in this section.

Payments to the Roberts Companies for Services

         Overview. The Operating Partnership has paid substantial fees to the
Roberts Companies for various types of services and will continue to do so in
the future. These various arrangements are summarized below.

         Land Acquisitions. On June 22, 1998, the Company purchased the
Ballantyne land for $3,540,000 from a local Charlotte investment group unrelated
to the Company. As part of the closing costs, the Operating Partnership paid
Roberts Properties an acquisition fee of $166,000 for finding the property,
negotiating the sales contract, conducting due diligence and closing the
transaction. In addition, the Operating Partnership will pay Roberts Properties
a fee of $1,660,000, or $5,000 per unit, for designing, developing, and
overseeing construction of the Ballantyne project for a period of eighteen
months. The independent members of the Board of Directors approved the foregoing
arrangements with Roberts Properties.

         On June 24, 1998, the Company purchased the Abbotts Bridge land for
$5,294,000 from Roberts Properties. As part of the closing costs, the Operating
Partnership paid Roberts Properties an acquisition fee of $250,000 for finding
the property, negotiating the sales contract, conducting due diligence and
closing the transaction. In addition, the Operating Partnership will pay Roberts
Properties a fee of $2,025,000, or $5,000 per unit, for designing, developing,
and overseeing



                                       50
<PAGE>   52


construction of the Abbotts Bridge project for a period of eighteen months. The
independent members of the Board of Directors approved the foregoing
arrangements with Roberts Properties after reviewing two independent appraisals.
Roberts Properties acquired the property for $4,343,000 on March 6, 1997.

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

         Construction Contracts. The Company enters into contractual commitments
with Roberts Construction in the normal course of business related to the
construction of real estate assets. Roberts Construction is currently
constructing the first phase of Abbotts Bridge, consisting of 118 townhomes, and
completing the construction of the amenities and final landscaping at the second
phase of Plantation Trace. Each of these projects is being completed pursuant to
a cost plus 10% contract. Roberts Construction also served as construction
administrator and was paid $66,000 for its services in connection with the
construction of the second phase of Preston Oaks, which was completed in July
1998. The following table summarizes certain information regarding payments to
Roberts Construction for construction projects through March 1, 1999:

<TABLE>
<CAPTION>
                                            ACTUAL/                          AMOUNT
                                           ESTIMATED                        INCURRED        ESTIMATED
                                             TOTAL             TOTAL          FROM          REMAINING
                                           CONTRACT           AMOUNT       1/1/1998 TO     CONTRACTUAL
                                            AMOUNT           INCURRED        3/1/1999       COMMITMENT
                                          -----------      -----------     -----------     -----------
         <S>                              <C>              <C>             <C>             <C>
         Bradford Creek ............      $10,396,000      $10,396,000      $  370,000      $        0
         Plantation Trace - Phase II        4,726,000        4,631,000       4,631,000          95,000
         Abbott Bridge - Phase I ...        9,611,000        1,977,000       1,977,000       7,634,000
                                          -----------      -----------      ----------      ----------
                                          $24,733,000      $17,004,000      $6,978,000      $7,730,000
                                          ===========      ===========      ==========      ==========
</TABLE>

         Consulting Fees. Affiliates of Mr. Roberts have agreements with the
Company to provide consulting services in the event of a sale of the certain of
the Communities, with consulting fees ranging from 3% to 6% of the gross sales
proceeds of the property sold. These consulting agreement obligations were
assumed by the Company at the time of the formation of the Company and as the
Company subsequently acquired the limited partnerships that owned the
Communities not involved in the formation. These consulting fees as of December
31, 1998 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%
                           Crestmark Phase I                                  5%
                           Crestmark Phase II (land only)                     5%
                           Plantation Trace                                   6%
</TABLE>



                                       51
<PAGE>   53


         The sale of the Windsong community closed on January 9, 1998, at which
time a 2.95% consulting fee ($288,000) was paid to an affiliate of Mr. Roberts.
On July 17, 1998, the sale of the two retail centers known as Shoppes of River
Oaks and Shoppes of Plantation Trace was closed. In accordance with the
contract, a consulting fee of 6% ($60,000) was paid to an affiliate of Mr.
Roberts for the sale of the Shoppes of Plantation Trace. A negotiated fee of
2.32% ($32,500) was paid to an affiliate of Mr. Roberts in connection with the
sale of the Shoppes of River Oaks.

         Development Fees. From January 1, 1998 through March 1, 1999, the
Company paid Roberts Properties, Inc. $225,000 for development fees associated
with the Abbotts Bridge project, under the arrangement described above in "
-Land Acquisitions."

         Other Fees. From January 1, 1998 through March 1, 1998, affiliates of
Mr. Roberts received miscellaneous fees and cost reimbursements of $375,000.


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

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

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

INDEX TO FINANCIAL STATEMENTS


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

INDEPENDENT AUDITORS' REPORT (Deloitte & Touche LLP).........................................    F-2

CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE FOR THE YEARS ENDED DECEMBER 31,
1998, 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

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



                                       52
<PAGE>   54


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Roberts Realty Investors, Inc.:

We have audited the accompanying consolidated balance sheets of Roberts Realty
Investors, Inc. (a Georgia corporation) and its subsidiary as of December 31,
1998 and 1997 and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the two years in the period
ended December 31, 1998. These financial statements and the schedule referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedule based on our
audits.

We conducted our audits in accordance with 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 audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Roberts Realty Investors, Inc.
and its subsidiary as of December 31, 1998 and 1997 and the results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.

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


/s/ ARTHUR ANDERSEN LLP

Atlanta, Georgia
February 26, 1999



                                       F-1
<PAGE>   55


INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying consolidated statements of operations,
shareholders' equity, and cash flows of Roberts Realty Investors, Inc. (the
"Company") for the year ended December 31, 1996. Our audit also included the
information with respect to 1996 contained in the financial statement schedule
shown on page S-2. These financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule 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, such consolidated financial statements present fairly, in all
material respects, the results of operations and cash flows of Roberts Realty
Investors, Inc. for the year ended December 31, 1996 in conformity with
generally accepted accounting principles. Also, in our opinion, the 1996
information contained in such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.

/s/ DELOITTE & TOUCHE LLP

Atlanta, Georgia
February 28, 1997


                                      F-2
<PAGE>   56
ROBERTS REALTY INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                          DECEMBER 31,        DECEMBER 31,   
                                                                                             1998                1997  
                                                                                           --------            -------- 
<S>                                                                                       <C>                 <C>
ASSETS

REAL ESTATE ASSETS - At cost:
     Land                                                                                 $  20,239           $  20,151
     Buildings and improvements                                                              91,407              81,485
     Furniture, fixtures and equipment                                                       11,184              10,142
                                                                                          ---------           ---------
                                                                                            122,830             111,778
     Less accumulated depreciation                                                          (16,914)            (13,401)
                                                                                          ---------           ---------

         Operating real estate assets                                                       105,916              98,377

     Land held for future development                                                         6,065                   0
     Construction in progress and real estate under development                               7,035              11,320
                                                                                          ---------           ---------

         Net real estate assets                                                             119,016             109,697

CASH AND CASH EQUIVALENTS                                                                     4,106               7,117

RESTRICTED CASH                                                                                 470                 468

DEFERRED FINANCING COSTS - Net of accumulated amortization of
     $246 and $221 at December 31, 1998 and, 1997, respectively                               1,095                 708

OTHER ASSETS - Net                                                                              403                 360
                                                                                          ---------           ---------

                                                                                          $ 125,090           $ 118,350
                                                                                          =========           =========
LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:
     Mortgage notes payable                                                               $  79,973           $  67,951
     Accounts payable and accrued expenses                                                    1,187                 959
     Dividends and distributions payable                                                      1,092               1,057
     Due to affiliates (including retainage payable of $0 and $226 at
         December 31, 1998 and 1997, respectively)                                              398               2,411
     Security deposits and prepaid rents                                                        335                 414
                                                                                          ---------           ---------

         Total liabilities                                                                   82,985              72,792
                                                                                          ---------           ---------

COMMITMENTS AND CONTINGENCIES

MINORITY INTEREST OF UNITHOLDERS IN THE OPERATING PARTNERSHIP                                15,579              18,861
                                                                                          ---------           ---------

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, 4,764,037 and
         4,420,508 shares issued at December 31, 1998 and 1997, respectively                     47                  44
     Additional paid-in capital                                                              29,335              29,980
     Less treasury stock, at cost (19,300 shares and 0 shares at
         December 31, 1998 and 1997, respectively)                                             (145)                  0
     Unamortized restricted stock compensation                                                  (92)                  0
     Accumulated deficit                                                                     (2,619)             (3,327)
                                                                                          ---------           ---------
         Total shareholders' equity                                                          26,526              26,697
                                                                                          ---------           ---------

                                                                                          $ 125,090           $ 118,350
                                                                                          =========           =========

</TABLE>


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


                                      F-3
<PAGE>   57


ROBERTS REALTY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                             YEARS ENDED DECEMBER 31,
                                                                                             ------------------------

                                                                                    1998              1997              1996
                                                                                    ----              ----              ----
<S>                                                                              <C>               <C>              <C>

OPERATING REVENUES:
     Rental operations                                                           $    16,521       $    16,831      $    14,651
     Other operating income                                                              710               677              546
                                                                                 -----------       -----------      -----------

          Total operating revenues                                                    17,231            17,508           15,197
                                                                                 -----------       -----------      -----------

OPERATING EXPENSES:
     Personnel                                                                         1,805             1,694            1,365
     Utilities                                                                         1,068             1,131              932
     Repairs, maintenance and landscaping                                              1,051             1,090              956
     Real estate taxes                                                                 1,393               724            1,149
     Management fees to related party                                                      0               211              760
     Marketing, insurance and other                                                      754               801              689
     General and administrative expenses                                               1,725             1,714              926
     Depreciation of real estate assets                                                5,017             5,708            4,974
                                                                                 -----------       -----------      -----------

          Total operating expenses                                                    12,813            13,073           11,751
                                                                                 -----------       -----------      -----------

INCOME FROM OPERATIONS                                                                 4,418             4,435            3,446
                                                                                 -----------       -----------      -----------

OTHER INCOME (EXPENSE):
    Acquisition of Roberts Properties Management, L.L.C                                    0            (5,900)               0
     Interest income                                                                     384               395              353
     Interest expense                                                                 (4,555)           (4,670)          (3,724)
     Loss on disposal of assets                                                          (94)             (156)               0
     Amortization of deferred financing costs                                           (139)             (122)            (141)
     Other amortization expense                                                          (52)              (65)             (67)
                                                                                 -----------       -----------      -----------

          Total other expense                                                         (4,456)          (10,518)          (3,579)
                                                                                 -----------       -----------      -----------

LOSS BEFORE MINORITY INTEREST, GAIN ON SALE OF
    REAL ESTATE ASSETS AND EXTRAORDINARY ITEMS                                           (38)           (6,083)            (133)

MINORITY INTEREST OF UNITHOLDERS IN THE OPERATING PARTNERSHIP                             15             2,646               52
                                                                                 -----------       -----------      -----------

LOSS BEFORE GAIN ON SALE OF REAL ESTATE ASSETS
    AND EXTRAORDINARY ITEMS                                                              (23)           (3,437)             (81)

GAIN ON SALE OF REAL ESTATE ASSETS, net of minority interest
    of Unitholders in the Operating Partnership                                        1,218             1,012                0
                                                                                 -----------       -----------      -----------

INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS                                               1,195            (2,425)             (81)

EXTRAORDINARY ITEMS - Loss on early extinguishment of debt, net of
    minority interest of Unitholders in the Operating Partnership                       (487)             (184)             (99)
                                                                                 -----------       -----------      -----------

NET INCOME (LOSS)                                                                $       708       $    (2,609)     $      (180)
                                                                                 ===========       ===========      ===========

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

     Income (loss) before extraordinary items                                    $      0.26       $     (0.58)     $     (0.02)

     Extraordinary items                                                               (0.11)            (0.04)           (0.03)
                                                                                 -----------       -----------      -----------

     Net income (loss)                                                           $      0.15       $     (0.62)     $     (0.05)
                                                                                 ===========       ===========      ===========

     Weighted average common shares - basic                                        4,638,265         4,187,013        3,799,567

     Weighted average common shares - diluted                                      7,547,978         7,404,323        6,244,513

</TABLE>

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


                                      F-4
<PAGE>   58


ROBERTS REALTY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
-----------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                     COMMON SHARES
                                                     -------------     ADDITIONAL                                         TOTAL
                                               NUMBER OF                PAID-IN   TREASURY    DEFERRED   ACCUMULATED  SHAREHOLDERS'
                                             SHARES ISSUED    AMOUNT    CAPITAL    SHARES   COMPENSATION   DEFICIT      EQUITY 
                                             --------------------------------------------------------------------------------------

<S>                                          <C>             <C>       <C>        <C>       <C>          <C>          <C>

BALANCE AS OF DECEMBER 31, 1995               2,676,381      $  26      $18,240     $  0         $0        $(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        0          0          (718)        29,226
    Conversion of units to shares               234,179          2        1,410                                            1,412
    Dividends declared ($0.576 per share)                                (2,444)                                          (2,444)
    Adjustment for minority interest in
         the Operating Partnership                                        1,112                                            1,112
    Net loss                                                                                               (2,609)        (2,609)
                                             --------------------------------------------------------------------------------------

BALANCE AS OF DECEMBER 31, 1997               4,420,508        44       29,980         0          0        (3,327)        26,697
   Conversion of units to shares                330,468         3        2,002                                             2,005
   Dividends declared ($0.5775 per share)                               (2,702)                                           (2,702)
   Adjustment for minority interest in
        the Operating Partnership                                           66                                                66
   Repurchase of Units                                                    (122)                                             (122)
   Restricted stock issued to employees          13,061                    111                 (111)                           0
   Amortization of deferred compensation                                                         19                           19
   Treasury stock (19,300 shares at cost)                                           (145)                                   (145)
   Net income                                                                                                 708            708
                                             --------------------------------------------------------------------------------------

BALANCE AS OF DECEMBER 31, 1998               4,764,037       $47      $29,335     ($145)      ($92)      $(2,619)       $26,526
                                             ======================================================================================

</TABLE>

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


                                      F-5
<PAGE>   59


ROBERTS REALTY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>


                                                                                                      YEARS ENDED DECEMBER 31,
                                                                                                      ------------------------
                                                                                                    1998         1997         1996
                                                                                                    ----         ----         ----
<S>                                                                                           <C>           <C>         <C>
OPERATING ACTIVITIES:
  Net income (loss)                                                                            $      708      (2,609)       (180)
  Adjustments to reconcile net income (loss) to net cash provided by operating activities:
    Minority interest of Unitholders in the Operating Partnership                                     (15)     (2,646)        (52)
    Gain on sale of real estate assets                                                             (1,218)     (1,012)          0
    Loss on disposal of assets                                                                         94         156           0
    Depreciation and amortization                                                                   5,208       5,895       5,182
    Non-cash interest                                                                                   0         (55)        (55)
    Acquisition of Roberts Properties Management, L.L.C                                                 0       5,900           0
    Extraordinary items, net of minority interest of Unitholders in the Operating Partnership         487         184          99
    Amortization of deferred compensation                                                              19           0           0
  Changes in assets and liabilities:
    Decrease in restricted cash                                                                       148          64          85
    Decrease (increase) in other assets                                                               (34)        (15)        247
    Increase (decrease) in accounts payable and accrued expenses relating to operations               (23)        (94)        471
    Decrease in due to affiliates relating to operations                                                0        (251)       (225)
    Decrease in security deposits and prepaid rent                                                    (79)        (48)         (5)
                                                                                               ----------   ---------   ---------

               Net cash provided by operating activities                                            5,295       5,469       5,567
                                                                                               ----------   ---------   ---------

INVESTING ACTIVITIES:
  Proceeds from sale of real estate assets                                                         7,521      10,330           0
  Acquisition and construction of real estate assets                                             (25,756)    (11,867)    (16,473)
  Cash acquired in mergers                                                                             0           0         164
                                                                                               ----------   ---------   ---------

               Net cash used in investing activities                                              (18,235)     (1,537)    (16,309)
                                                                                               ----------   ---------   ---------

FINANCING ACTIVITIES:operations
  Proceeds from mortgage notes payable                                                             44,400      10,420      26,528
  Proceeds from mortgage notes payable held in escrow                                                (150)          0           0
  Payoff of mortgage notes, including prepayment penalty                                          (28,291)     (5,151)          0
  Principal repayments on mortgage notes payable                                                     (788)       (913)    (17,334)
  Payment of loan costs                                                                              (653)       (245)       (451)
  Proceeds from short-term loan                                                                       350           0           0
  Payoff of short-term loan                                                                          (350)          0           0
  Proceeds from issuance of shares                                                                      0           0       6,589
  Payment of share and unit issuance costs                                                              0           0        (613)
  Repurchase of Units                                                                                (122)          0           0
  Repurchase of treasury stock                                                                       (145)          0           0
  Payment of dividends and distributions                                                           (4,322)     (4,088)     (2,219)
                                                                                               ----------   ---------   ---------

        Net cash provided by financing activities                                                   9,929          23      12,500
                                                                                               ----------   ---------   ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                               (3,011)      3,955       1,758

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                                        7,117       3,162       1,404
                                                                                               ----------   ---------   ---------

CASH AND CASH EQUIVALENTS, END OF YEAR                                                         $    4,106   $   7,117   $   3,162
                                                                                               ==========   =========   =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

     Cash paid for interest                                                                    $    5,079   $   4,722   $   4,347
                                                                                               ==========   =========   =========


</TABLE>

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


                                      F-6
<PAGE>   60


ROBERTS REALTY INVESTORS, INC.

NOTES TO FINANCIAL STATEMENTS
------------------------------------------------------------------------------

1.       BUSINESS AND ORGANIZATION OF THE COMPANY

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

         The Company conducts all of its operations and owns all of its assets
         in and through Roberts Properties Residential, L.P., a Georgia limited
         partnership (the "Operating Partnership"), of which the Company is the
         sole general partner and had a 63.0% and 58.6% ownership interest at
         December 31, 1998 and 1997, respectively. As the sole general partner
         and owner of a majority interest of the Operating Partnership, the
         Company controls the Operating Partnership.

         The Company, as the general partner of the Operating Partnership, does
         not hold any limited partner interests in the Operating Partnership.
         Units of limited partnership interest ("Units") in the Operating
         Partnership outstanding at December 31, 1998 and 1997 were 2,784,611
         and 3,129,420, respectively. Units held by the minority interest as a
         percentage of total Units and shares of common stock ("Shares") of the
         Company outstanding were 37.0% and 41.4% at December 31, 1998 and
         1997, 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, 1998, the Company owned nine completed multifamily
         apartment communities totaling 1,778 apartment homes, and an
         additional 118 rental townhomes were under construction. On January 9,
         1998, the Company sold a 232-unit apartment community located on St.
         Simons Island, Georgia. On July 17, 1998, the Company sold its two
         retail centers totaling 15,698 square feet located at the entrance to
         two of its multifamily apartment communities. The Company also held
         land under development on which it expects to develop units in
         Charlotte and Atlanta in 1999.


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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


                                      F-7
<PAGE>   61


         on the weighted average number of Units outstanding during the period,
         which was 38.5%, 43.5% and 39.2% for the years ended December 31,
         1998, 1997 and 1996, respectively. The minority interest of the
         Unitholders was $15,579,000 and $18,861,000 at December 31, 1998 and
         1997, respectively.

         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 has the
         option either (a) to pay cash for such Units at their fair market
         value, 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 except as otherwise required by
         applicable securities laws.

         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 and from proceeds on mortgage financings.

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

         INTEREST AND REAL ESTATE TAXES. Interest and real estate taxes
         incurred during the construction period are capitalized and
         depreciated over the estimated useful lives of the constructed assets.
         Interest capitalized was $580,000, $388,000 and $527,000 for the years
         ended December 31, 1998, 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.


                                      F-8
<PAGE>   62


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

         NEW ACCOUNTING PRONOUNCEMENTS

         COMPREHENSIVE INCOME. The Company adopted Statements of Financial
         Accounting Standards ("SFAS") No. 130, "Reporting of Comprehensive
         Income," during 1998. SFAS 130 establishes standards for reporting and
         display of comprehensive income and its components. Comprehensive
         income is the total of net income and all other non-owner changes in
         shareholders' equity. As of December 31, 1998, the Company had no
         items of other comprehensive income.

         SEGMENTS. The Company adopted SFAS No. 131, "Disclosures About
         Segments of an Enterprise and Related Information," during 1998. SFAS
         131 establishes new standards for disclosure of segment information on
         the so-called "management approach." The management approach is based
         on the way that the chief operating decision maker organizes segments
         within a company for making operating decisions and assessing
         performance. Because the Company's real estate portfolio has similar
         economic characteristics, customers and products and services, the
         Company evaluates the operating performance of its real estate
         portfolio as one reportable segment, on the same basis of presentation
         for internal and external reporting. Therefore, no additional segment
         information is presented in this report.

         RECLASSIFICATIONS. Certain prior year amounts have been reclassified
         to conform with the 1998 presentation.


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

         On August 26, 1997, the Company completed the sale of the Autumn Ridge
         community for $10,601,000 in cash. The sale resulted in a net gain of
         $1,012,000, net of minority interest of Unitholders in the Operating
         Partnership.


                                      F-9
<PAGE>   63


         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 arm's-length. See Note 8 - Related Party
         Transactions.

         On January 9, 1998, the Company completed the sale of the Windsong
         Community for $9,750,000 in cash resulting in a gain, net of minority
         interest, of $918,000 on the sale of real estate assets and an
         extraordinary gain, net of minority interest, of $68,000 on the
         buyer's assumption of related mortgage indebtedness. Net sales
         proceeds were $5,194,000 after deduction for loan repayment of
         $3,959,000 and closing costs and prorations totaling $597,000. The
         Company reinvested the net sales proceeds in replacement properties in
         connection with a Section 1031 tax-deferred exchange as described
         below. See Note 8 - Related Party Transactions.

         On June 22, 1998, the Company purchased approximately 23.8 acres of
         undeveloped land in the Ballantyne area of Charlotte, North Carolina
         for $3,540,000 from a local Charlotte investment group. The Company
         intends to construct a 332-unit multifamily apartment community on the
         property, which is anticipated to begin in the second quarter of 1999.
         See Note 8 - Related Party Transactions.

         On June 24, 1998, the Company purchased approximately 49.1 acres of
         undeveloped land located in north Fulton County, Georgia for
         $5,294,000 from Roberts Properties, Inc., an affiliate owned by Mr.
         Roberts. The Company intends to construct a 405-unit multifamily
         apartment community on the property. Construction of the 118-unit
         first phase began in the third quarter of 1998, and the Company
         anticipates that construction on the 287-unit second phase will begin
         in the second quarter of 1999. See Note 8 Related Party Transactions.

         On June 25, 1998, the Company purchased approximately 35.3 acres of
         undeveloped land located in Gwinnett County, Georgia for $2,525,000
         from Roberts Properties Old Norcross, Ltd. The Company intends to
         construct a 249-unit multifamily apartment community on the property,
         which is anticipated to begin in the second quarter of 1999. See Note
         8 - Related Party Transactions.

         On July 17, 1998, the Company completed the sale of its two retail
         centers for $2,400,000 in cash resulting in a gain, net of minority
         interest, of $300,000. Net sales proceeds were $2,182,000, after
         deducting for closing costs and prorations of $218,000. The purchaser
         is unaffiliated with the Company, and the transaction was negotiated
         at arm's-length. The net book value of the property was $1,715,000 at
         June 30, 1998. See Note 8 - Related Party Transactions.

         Unaudited pro forma amounts for the years ended December 31, 1998 and
         1997, assuming the sales of Autumn Ridge, Windsong, and the two retail
         centers and the acquisition of Roberts Management had taken place as
         of January 1 for the periods presented, are presented below (dollars
         in thousands, except per share amounts). The unaudited pro forma
         information is not necessarily indicative of the results of operations
         of the Company had the acquisition and sales occurred at the beginning
         of the periods presented, nor is it indicative of future results.


<TABLE>
<CAPTION>

                                                                           1998              1997
                                                                           ----              ----
         <S>                                                             <C>                <C>
         Total operating revenues                                        $17,067            $14,475
         Income (loss) before extraordinary items                           (129)              (295)
         Net income (loss)                                                  (684)              (295)

         Per Share Data - Basic and Diluted
                  Income (loss) before extraordinary items               $ (0.03)           $ (0.07)
                  Net income (loss)                                        (0.15)             (0.07)

</TABLE>

                                      F-10
<PAGE>   64


4.       NOTES PAYABLE

         LINE OF CREDIT. The Company obtained a $1,000,000 revolving unsecured
         line of credit (the "Line") in April 1998 to provide funds for
         short-term working capital purposes. The Line has a one-year term and
         bears an interest rate of LIBOR + 150 basis points. At December 31,
         1998, no amount was outstanding under the Line.

         MORTGAGE NOTES. Mortgage notes payable were secured by the following
         Communities at December 31, 1998 and 1997, as follows:

<TABLE>
<CAPTION>

                                                                 FIXED INTEREST          PRINCIPAL OUTSTANDING
                                                                   RATE AS OF
         PROPERTY SECURING MORTGAGE              MATURITY           12/31/98          12/31/98            12/31/97
         --------------------------              --------           --------          --------            --------
         <S>                                     <C>             <C>               <C>                 <C>
         Bentley Place                           08/15/06            7.10%         $  4,000,000        $  4,045,000
         Bradford Creek                          06/15/08            7.15             8,359,000                   0
         Crestmark  - phase I (old)              05/01/01            7.50                     0           9,652,000
         Crestmark - phase II (old)              05/01/01            7.65                     0           3,985,000
         Crestmark (new, both phases)            10/01/08            6.57            15,957,000                   0
         Highland Park                           02/15/03            7.30             7,940,000           8,030,000
         Ivey Brook                              02/15/07            7.14             6,300,000           6,367,000
         Plantation Trace (old)                  09/15/00            7.75                     0           7,775,000
         Plantation Trace (new)                  10/15/08            7.09            11,881,000                   0
         Preston Oaks                            10/15/02            7.21             8,420,000           8,519,000
         River Oaks                              11/15/03            7.15             9,052,000           9,151,000
         Rosewood Plantation (old)               06/01/01            7.38                     0           6,357,000
         Rosewood Plantation (new)               07/15/08            6.62             8,064,000                   0
         Windsong                                02/01/00            9.00%                    0           4,070,000
                                                                                   ------------        ------------

                                                                                   $ 79,973,000        $ 67,951,000
                                                                                   ============        ============
</TABLE>

         The Company and certain non-owned affiliates of the Company have a
         $35,000,000 Advised Guidance Line with NationsBank N.A. for the
         purpose of providing financing for the acquisition or development of
         multifamily communities. Financing under the guidance line is
         available on a revolving basis and bears interest at LIBOR plus 1.80%
         or the prime rate, at the option of the borrower, payable monthly. The
         guidance line is not a commitment to lend, and each loan under the
         guidance line will be made at NationsBank's discretion in accordance
         with normal loan approval procedures. At December 31, 1998, there was
         no balance outstanding under the guidance line.

         On December 19, 1997, the Company received a commitment for an
         $8,400,000 loan secured by the Bradford Creek Community. The terms of
         the commitment included 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. The loan was closed on June 1, 1998. See Note 8
         - Related Party Transactions.

         On February 12, 1998, the Company received a commitment for an
         $11,900,000 loan secured by the Plantation Trace Community. The loan
         commitment included 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 was closed on September 29, 1998, and
         the existing mortgage note was repaid. The lender escrowed $150,000 of
         the proceeds pending completion of construction of the 50-unit second
         phase of Plantation Trace. Although the 50 apartment units were
         completed in 1998, the fitness center and other amenities will not be
         complete until the second quarter of 1999.

         On May 21, 1998, the Company received a commitment for an $8,100,000
         loan secured by the Rosewood Plantation Community. The loan commitment
         included a 10-year term with a fixed interest rate of 6.62% payable


                                      F-11
<PAGE>   65


         in monthly installments of $51,838 based on a 30-year amortization
         schedule. The loan was closed on June 23, 1998, and the existing
         mortgage note was repaid.

         On July 21, 1998, the Company received a commitment for a $16,000,000
         loan secured by the Crestmark Community. The loan commitment included
         a 10-year term with a fixed interest rate of 6.57% payable in monthly
         installments of $101,869 based on a 30-year amortization schedule. The
         loan was closed on September 30, 1998, and the existing two mortgage
         notes were repaid.

         The scheduled principal payments of all debt outstanding at December
         31, 1998 for each of the years ending December 31 are as follows:

<TABLE>

                 <S>                                      <C>
                 1999                                     $      906,000
                 2000                                            971,000
                 2001                                          1,042,000
                 2002                                          9,059,000
                 2003                                         16,874,000
                 Thereafter                                   51,121,000
                                                              ----------

                Mortgage notes payable                       $79,973,000
                                                              ==========

</TABLE>

         Real estate assets having a combined depreciated cost of approximately
         $103,961,000 serve as collateral for the outstanding debt at December
         31, 1998.


5.       EXTRAORDINARY ITEMS

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

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

         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, based on the weighted average number of Units outstanding
         during the period.


                                      F-12
<PAGE>   66


6.       FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS

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

         Cash and cash equivalents, accounts payable, accrued expenses,
         security deposits and other liabilities, due to their short-term
         nature, are carried at amounts which reasonably approximate their fair
         values at December 31, 1998 and 1997. Fixed rate mortgage debt with
         carrying values of $79,973,000 and $67,951,000 at December 31, 1998
         and 1997, respectively, is estimated by management to approximate fair
         value based upon interest rates available to the Company for debt with
         similar terms and maturities.


7.       SHAREHOLDERS' EQUITY

         EXCHANGES OF UNITS FOR SHARES. During the years ended December 31,
         1998, 1997, and 1996, a total of 330,468, 234,179, and 65,833 Units,
         respectively, were exchanged for the same number of Shares. Each
         conversion was reflected in the accompanying consolidated financial
         statements at book value.

         REDEMPTIONS OF UNITS FOR CASH. During the year ended December 31,
         1998, a total of 14,341 Units were redeemed for cash of $122,000. No
         Units were redeemed for cash in 1997 or 1996.

         RESTRICTED STOCK AWARDS. During the year ended December 31, 1998, the
         Company granted 13,061 shares of restricted stock to certain
         employees. The market value of these restricted stock grants totaled
         $111,000, which was recorded as unamortized restricted stock
         compensation and is shown as a separate component of stockholders'
         equity. This restricted stock vests 100% at the end of a three-year
         vesting period and is being amortized to compensation expense ratably
         over the vesting period. The Company issued no restricted stock grants
         in 1997 or 1996.

         TREASURY STOCK REPURCHASES. On September 3, 1998, the Company issued a
         press release announcing that its board of directors had authorized
         the repurchase of up to 300,000 shares of the Company's outstanding
         common stock. The Company intends to repurchase its shares from time
         to time by means of open market purchases depending on availability,
         its cash position and price per share. The Company repurchased 19,300
         shares in 1998 at a total cost of $145,000. From January 1, 1999
         through February 26, 1999, the Company repurchased 52,100 shares for
         $387,000.

         DIVIDENDS. On December 15, 1998, the Company's Board of Directors
         declared a quarterly distribution in the amount of $0.145 per common
         Share and Unit payable on January 15, 1999 to shareholders and
         unitholders of record on December 31, 1998. Of the total dividends
         declared for 1998 totaling $0.5775 per share, approximately $0.16 per
         share represents ordinary income, $0.05 per share represents capital
         gain and $0.37 per share represents a return of capital to the
         shareholders. 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 represented ordinary income, $0.21 per share represented capital
         gain, and $0.18 per share represented a return of capital to the
         shareholders. Of the total dividends declared for 1996 totaling
         $0.48125 per share, approximately $0.39 per share represented ordinary
         income, and $0.09 per share represented a return of capital to the
         shareholders.


                                      F-13
<PAGE>   67


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

<TABLE>
<CAPTION>

                                                                                  1998              1997            1996
                                                                                  ----              ----            ----
<S>                                                                          <C>               <C>               <C>
Income (loss) before extraordinary items - basic                             $    1,195        $    (2,425)      $       (81)
Minority interest of Unitholders in the Operating
   Partnership in income (loss) before extraordinary items                          748             (1,866)              (52)
                                                                             ----------        -----------       -----------

Income (loss) before extraordinary items - diluted                           $    1,943        $    (4,291)      $      (133)
                                                                             ==========        ===========       ===========


Net income (loss) - basic                                                    $      708        $    (2,609)      $      (180)
Minority interest of Unitholders in Operating
 Partnership in net income (loss)                                                   442             (2,006)             (116)
                                                                             ----------        -----------       -----------

Net income (loss) - diluted                                                  $    1,150        $    (4,615)      $      (296)
                                                                             ==========        ===========       ===========


Weighted average Shares - basic                                               4,638,265          4,187,013         3,799,567
Dilutive Securities - weighted average Units                                  2,909,713          3,217,310         2,444,946
                                                                             ----------        -----------       -----------

Weighted average Shares - diluted                                             7,547,978          7,404,323         6,244,513
                                                                             ==========        ===========       ===========

</TABLE>

8.       RELATED PARTY TRANSACTIONS

         LAND ACQUISITIONS. On June 22, 1998, the Company purchased the
         Ballantyne land for $3,540,000 from a local Charlotte investment group
         unrelated to the Company. As part of the closing costs, the Operating
         Partnership paid Roberts Properties, Inc., an affiliate of the Company
         owned by Mr. Roberts ("Roberts Properties"), an acquisition fee of
         $166,000 for finding the property, negotiating the sales contract,
         conducting due diligence and closing the transaction. In addition, the
         Operating Partnership will pay Roberts Properties a fee of $1,660,000,
         or $5,000 per unit, for designing, developing, and overseeing
         construction of the Ballantyne project for a period of eighteen
         months. The independent members of the Board of Directors approved the
         foregoing arrangements with Roberts Properties.

         On June 24, 1998, the Company purchased the Abbotts Bridge land for
         $5,294,000 from Roberts Properties. As part of the closing costs, the
         Operating Partnership paid Roberts Properties an acquisition fee of
         $250,000 for finding the property, negotiating the sales contract,
         conducting due diligence and closing the transaction. In addition, the
         Operating Partnership will pay Roberts Properties a fee of $2,025,000,
         or $5,000 per unit, for designing, developing, and overseeing
         construction of the Abbotts Bridge project for a period of eighteen
         months. The independent members of the Board of Directors approved the
         foregoing arrangements with Roberts Properties after reviewing two
         independent appraisals. Roberts Properties acquired the property for
         $4,343,000 on March 6, 1997.

         On June 25, 1998, the Company purchased the Old Norcross land for
         $2,525,000 from Roberts Properties Old Norcross, Ltd. ("Old Norcross,
         Ltd."). (Mr. Roberts, who is the general partner of Old Norcross,
         Ltd., received none of the sale proceeds as general partner or
         otherwise.) As part of the closing costs, the Operating Partnership
         paid Roberts Properties an acquisition fee of $119,250 for finding the
         property, negotiating the sales contract, conducting due diligence and
         closing the transaction. In addition, the Operating Partnership will
         pay Roberts


                                      F-14
<PAGE>   68


         Properties a fee of $1,245,000, or $5,000 per unit, for designing,
         developing, and overseeing construction of the Old Norcross project 
         for a period of eighteen months. The independent members of the Board
         of Directors approved the foregoing arrangements with Roberts
         Properties after reviewing two independent appraisals.

         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.

         CONSTRUCTION CONTRACTS. The Company enters into contractual 
         commitments in the normal course of business related to the
         construction of real estate assets with Roberts Properties
         Construction, Inc. ("Roberts Construction"), an affiliate of the
         Company owned by Mr. Roberts. Roberts Construction is currently
         constructing the first phase of Abbotts Bridge, consisting of 118
         townhomes, and completing the construction of the amenities and final
         landscaping at the second phase of Plantation Trace. Each of these
         projects is being completed pursuant to cost plus 10% contract.
         Roberts Construction also served as construction administrator and was
         paid $66,000 for its services in connection with the construction of
         the second phase of Preston Oaks, which was completed in July 1998.
         These contract amounts for projects started and/or completed during
         the last three years, from inception through December 31, 1998, are
         summarized in the following table:


<TABLE>
<CAPTION>

                                                      ACTUAL/
                                                     ESTIMATED                                   ESTIMATED
                                                       TOTAL                                     REMAINING
                                                     CONTRACT                AMOUNT              CONTRACTUAL
                                                      AMOUNT                INCURRED             COMMITMENT
                                                      ------                --------             -----------
<S>                                                  <C>                   <C>                   <C>

Highland Park                                        $8,741,000            $ 8,741,000            $         0
Ivey Brook                                            7,774,000              7,774,000                      0
Crestmark Club - Phase II                             4,817,000              4,817,000                      0
Bradford Creek                                       10,394,000             10,394,000                      0
Plantation Trace - Phase II                           4,726,000              4,513,000                213,000
Abbott Bridge - Phase I                               9,611,000              1,005,000              8,606,000
                                                     ----------            -----------            -----------

                                                    $46,063,000            $37,244,000            $ 8,819,000
                                                    ===========            ===========            ===========
</TABLE>


         The Company paid Roberts Construction for labor and materials to
         perform repairs and maintenance for the communities in the amount of
         $52,000, $513,000 and $2,174,000 in 1998, 1997 and 1996, respectively.

         DEVELOPMENT FEES. Roberts Properties received fees for various
         development services including market studies, business plans, design,
         finish selection, interior design and construction administration. 
         Fees incurred totaled $0, $990,000 and $430,000 for the years ended
         December 31, 1998, 1997 and 1996, respectively.

         MANAGEMENT FEES. Roberts Management provided property management
         services to the Company through March 31, 1997 for a fee of 5% of 
         gross income. On April 1, 1997, the Company acquired Roberts
         Management and, as a result, no longer pays 5% of gross property
         revenues to Roberts Management, although it does bear the actual
         overhead cost of managing the properties internally. Property
         management fees incurred totaled $0, $211,000 and $760,000 for the
         years ended December 31, 1998, 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.

         CONSULTING FEES. Affiliates of Mr. Roberts have agreements with the
         Company to provide consulting services in the event of a sale of
         certain of the communities, with consulting fees ranging from 3% to 6%
         of the gross sales proceeds of the property sold. These consulting
         agreement obligations were assumed by the Company at the time


                                      F-15
<PAGE>   69

         of the formation of the Company and as certain limited partnerships
         were subsequently acquired. These consulting fees as of December 31,
         1998 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%
                Crestmark Phase I                                  5%
                Crestmark Phase II (land only)                     5%
                Plantation Trace                                   6%

</TABLE>

         The sale of the Windsong community closed on January 9, 1998 at which
         time a 2.95% consulting fee ($288,000) was paid to an affiliate of Mr.
         Roberts. On July 17, 1998, the sale of the two retail centers known as
         Shoppes of River Oaks and Shoppes of Plantation Trace was closed. In
         accordance with the contract, a consulting fee of 6% ($60,000) was 
         paid to an affiliate of Mr. Roberts for the sale of the Shoppes of
         Plantation Trace. A negotiated fee of 2.32% ($32,500) was paid to an
         affiliate of Mr. Roberts in connection with the sale of the Shoppes of
         River Oaks.

         OTHER FEES. During 1998, 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 in January 1996 ($50,000),
         (3) the merger of Crestmark, L.P. into the Operating Partnership on
         May 1996 ($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 (6) miscellaneous fees and cost reimbursements
         ($507,000). These fees and costs incurred totaled $340,000, $283,000
         and $226,000 for the years ended December 31, 1998, 1997 and 1996,
         respectively.

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

         LOAN ORIGINATION FEES. A director of the Company is executive vice
         president of a commercial mortgage banking firm that has originated
         loans for the Company. Loan origination fees incurred totaled $63,000,
         $48,150 and $184,000 for the years ended December 31, 1998, 1997 and
         1996, respectively.


9.       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 that 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-


                                      F-16
<PAGE>   70


         one basis). The Company has adopted a policy that it will issue Shares
         in exchange for all such Units submitted, except as otherwise required
         by applicable securities laws. There were 2,784,611 Units outstanding
         at December 31, 1998 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.


10.      SUPPLEMENTAL CASH FLOW INFORMATION

         Non-cash investing and financing activities for the years ended
         December 31, 1998, 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.

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


11.      SUBSEQUENT EVENTS (UNAUDITED)

         On March 5, 1999, the Company received a commitment for a $9,500,000
         loan secured by Phase I of the Abbotts Bridge Community. The loan
         commitment included a 10-year term with a fixed interest rate of 6.95%
         payable in monthly installments of $62,885 based on a 30-year
         amortization schedule. The loan is scheduled to close in August 1999
         after completion and substantial lease-up of Phase I of the Abbotts
         Bridge Community. Such loan is intended to provide permanent financing
         to repay the construction indebtedness on this property, as discussed
         below.

         On March 9, 1999, the Company received a commitment for a $7,000,000
         construction loan to complete Phase I of Abbotts Bridge.


                                      F-17


<PAGE>   71


SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

ROBERTS REALTY INVESTORS, INC.

REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                            Initial Cost to Trust                                            Carried at Close of Period
                            ---------------------                                            --------------------------

                                                                    Improvements
                                                                     Capitalized
                                                   Buildings and   Subsequent to              Buildings and
Description           Encumbrance          Land     Improvements     Acquisition        Land   Improvements        Total
-----------           -----------          ----     ------------     -----------        ----   ------------        -----
<S>                   <C>             <C>           <C>              <C>               <C>    <C>              <C>

River Oaks               $  9,052     $   1,837        $   9,718       $     391   $   1,837      $  10,109    $  11,946
Rosewood Plantation         8,064         1,310            7,120             133       1,310          7,253        8,563
Preston Oaks                8,420         2,570           11,278             115       2,570         11,393       13,963
Highland Park               7,940         1,827           10,003              55       1,827         10,058       11,885
Ivey Brook                  6,300         3,073            8,929              42       3,073          8,971       12,044
Plantation Trace           11,881         2,385           15,802             105       2,385         15,907       18,292
Bentley Place               4,000         1,199            6,202              64       1,199          6,266        7,465
Bradford Creek              8,359         1,672           12,174               0       1,672         12,174       13,846
Crestmark                  15,957         4,366           20,397              63       4,366         20,460       24,826
                         --------     ---------        ---------       ---------   ---------      ---------    ---------
Total                    $ 79,973     $  20,239        $ 101,623       $     968   $  20,239      $ 102,591    $ 122,830
                         ========     =========        =========       =========   =========      =========    =========
</TABLE>


<TABLE>
<CAPTION>

                                                            Life on which                                                Date of
                                 Accumulated                 Depreciation                             Date              Original
Description                     Depreciation                  is Computed                         Acquired          Construction
-----------                     ------------                  -----------                         --------          ------------
<S>                             <C>                        <C>                                    <C>               <C>

River Oaks                          $  2,973               3 - 27.5 Years                         Oct - 94                  1992
Rosewood Plantation                    1,923               3 - 27.5 Years                         Oct - 94                  1994
Preston Oaks                           2,116               3 - 27.5 Years                         Oct - 94                  1995
Highland Park                          1,985               3 - 27.5 Years                         Oct - 94                  1995
Ivey Brook                             1,275               3 - 27.5 Years                         Mar - 95                  1997
Plantation Trace                       2,286               3 - 27.5 Years                         May - 95                  1990
Bentley Place                            977               3 - 27.5 Years                         Mar - 96                  1993
Bradford Creek                           465               3 - 27.5 Years                         Mar - 96                  1998
Crestmark                              2,914               3 - 27.5 Years                         Jun - 96                  1996
                                    --------
Total                               $ 16,914
                                    ========

</TABLE>

The accompanying notes are an integral part of this schedule.

 (A)     The Company enters into contractual commitments in the normal course of
         business related to the construction of real estate assets with Roberts
         Construction - see Note 8 to the Consolidated Financial Statements.


                                      S-1


<PAGE>   72


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

<TABLE>
<CAPTION>


                                                                         1998         1997        1996
                                                                    ---------    ---------    --------
<S>                                                                 <C>          <C>          <C>

     Balance at beginning of period                                 $ 111,778     $110,800    $ 74,242

       Additions during period:
        Acquisitions                                                        0            0      24,801
        Other additions                                                21,323       10,276       9,685
        Improvements                                                      792          613       2,072
                                                                    ---------    ---------    --------

           Total Additions                                             22,115       10,889      36,558
                                                                    ---------    ---------    --------


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

      Balance at close of period                                    $ 122,830    $ 111,778    $110,800
                                                                    =========    =========    ========
</TABLE>


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

<TABLE>
<CAPTION>

                                                                         1998         1997        1996
                                                                    ---------    ---------    --------
<S>                                                                 <C>          <C>          <C>

     Balance at beginning of period                                 $   13,401    $   8,915    $  3,941

       Additions during period:
        Depreciation expense                                             5,017        5,708       4,974
                                                                     ---------    ---------    --------
                                                          
       Deductions during period                           
        Sales                                                           (1,304)      (1,096)         --
        Other disposals:                                                  (200)        (126)         --
                                                                     ---------    ---------    --------
           Total disposals                                              (1,504)      (1,222)         --
                                                                     ---------    ---------    --------
                                                          
     Balance at close of period                                      $  16,914    $  13,401    $  8,915
                                                                     =========    =========    ========
 
</TABLE>
 
                                      S-2
<PAGE>   73


3.       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-K 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.

 
EXHIBIT
  NO.                           DESCRIPTION
-------                         -----------

<TABLE>
<CAPTION>

<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.]

4.2.6       Certificate of Merger filed with the Georgia Secretary of State on
            June 26, 1996, merging The Crestmark 

</TABLE>


                                      53
<PAGE>   74

<TABLE>

<S>         <C>
            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 1, 1997 merging Roberts Properties Management,
            L.L.C. with and into Roberts Properties Residential, L.P.
            [Incorporated by reference to Exhibit 4.2.7 from 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      Promissory Note executed by Roberts Properties Residential, L.P. in
            favor of The Prudential Insurance Company of America, dated June
            23, 1998, in the original principal amount of $8,100,000.00
            (Rosewood). [Incorporated by reference to Exhibit 10.4.5 from the
            Company's quarterly report on Form 10-Q for the quarter ended June
            30, 1998.]

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

</TABLE>


                                       54
<PAGE>   75


<TABLE>

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

10.5.1      Real Estate Note A executed by Roberts Properties Residential, L.P.
            in favor of Nationwide Life Insurance Company, dated January 30,
            1997, in the original principal amount of $5,670,000.00 (Ivey Brook
            - formerly Holcomb Bridge). [Incorporated by reference to Exhibit
            10.5.12 from 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.]

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

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

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

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

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

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

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.]

</TABLE>


                                       55
<PAGE>   76

<TABLE>

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

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

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

10.11.1     Amended and Restated Consulting Agreement between Roberts
            Properties Residential, L.P. and Roberts Properties, Inc., dated
            June 26, 1996. [Incorporated by reference to Exhibit 10.23.1 from
            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., 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.]

23.1        Consent of Arthur Andersen LLP

23.2        Consent of Deloitte & Touche LLP

27          Financial Data Schedule. (for SEC use only)

</TABLE>

(b) Current Reports on Form 8-K during the quarter ended December 31, 1998.

The Company filed no Current Reports on Form 8-K during the quarter ended
December 31, 1998.


                                       56
<PAGE>   77


                                   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 26, 1999

         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 26, 1999
Charles S. Roberts


/s/  Charles R. Elliott                              Secretary, Treasurer and Chief                      March 26, 1999
--------------------------------------------         Financial Officer (Principal Financial
Charles R. Elliott                                   Officer and Principal Accounting Officer)
                                                                                                 


/s/  James M. Goodrich                               Director                                            March 26, 1999
--------------------------------------------
James M. Goodrich


/s/  Dennis H. James                                 Director                                            March 26, 1999
--------------------------------------------
Dennis H. James


/s/  Wm. Jarell Jones                                Director                                            March 26, 1999
--------------------------------------------
Wm. Jarell Jones


/s/  Ben A. Spalding                                 Director                                            March 26, 1999
--------------------------------------------
Ben A. Spalding


/s/  George W. Wray, Jr.                             Director                                            March 26, 1999
--------------------------------------------
George W. Wray, Jr.


/s/  Weldon R. Humphries                             Director                                            March 26, 1999
--------------------------------------------
Weldon R. Humphries


</TABLE>


                                       57
<PAGE>   78


                                 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>


                                       58
<PAGE>   79


<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 1, 1997 merging Roberts Properties Management,
            L.L.C. with and into Roberts Properties Residential, L.P.
            [Incorporated by reference to Exhibit 4.2.7 from 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      Promissory Note executed by Roberts Properties Residential, L.P. in
            favor of The Prudential Insurance Company of America, dated June
            23, 1998, in the original principal amount of $8,100,000.00
            (Rosewood). [Incorporated by reference to Exhibit 10.4.5 from the
            Company's quarterly report on Form 10-Q for the quarter ended June
            30, 1998.]

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

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

10.5.1      Real Estate Note A executed by Roberts Properties Residential, L.P.
            in favor of Nationwide Life Insurance Company, dated January 30,
            1997, in the original principal amount of $5,670,000.00 (Ivey Brook
            - formerly Holcomb Bridge). [Incorporated by reference to Exhibit
            10.5.12 from 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.]

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

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

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

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

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

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

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

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

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

10.11.1     Amended and Restated Consulting Agreement between Roberts
            Properties Residential, L.P. and Roberts Properties, Inc., dated
            June 26, 1996. [Incorporated by reference to Exhibit 10.23.1 from
            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., 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.]

23.1        Consent of Arthur Andersen LLP

23.2        Consent of Deloitte & Touche LLP

27          Financial Data Schedule. (for SEC use only)


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