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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) þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the fiscal year ended December 31, 2003. o
    
    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.   Georgia
    
    58-2122873(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)
 8010 Roswell Road, Suite 280Atlanta, GA
    
    30350(Address of Principal Executive Offices)
    
    (Zip Code)
 Issuers telephone
number:  (770) 394-6000 Securities registered under Section 12(b) of the Act: None Title of each class:
    
    Name of each exchange on which registered:N/A
    
    N/A
 Securities registered under Section 12(g) of the Exchange Act: Common
Stock   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
þ No o 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. þ Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). o State the aggregate market value of the voting common equity 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 the last business day of the
registrants most recently completed second fiscal quarter. (See definition of
affiliate in Rule 405.) $24,580,431 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. 5,241,028 shares of
common stock (as of February 29, 2004). Documents Incorporated by Reference. None




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TABLE OF CONTENTS  
 PAGEPART
I
    
    
    
    
    2ITEM
1.
    
    BUSINESS
    
    
    2ITEM 2.
    
    PROPERTIES
    
    
    11ITEM 3.
    
    LEGAL PROCEEDINGS
    
    
    22ITEM 4
    
    SUBMISSION OF MATTERS
TO A VOTE OF SECURITY HOLDERS
    
    
    22PART II
    
    
    
    
    23ITEM 5.
    
    MARKET FOR
REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
    
    
    23ITEM 6.
    
    SELECTED FINANCIAL DATA
    
    
    24ITEM 7.
    
    MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    26ITEM 7A.
    
    QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    47ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    49ITEM 9.
    
    CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    49ITEM 9A
    
    CONTROLS AND PROCEDURES
    
    
    49PART III
    
    
    
    
    50ITEM 10.
    
    DIRECTORS AND EXECUTIVE OFFICERS
    
    
    50ITEM 11.
    
    EXECUTIVE COMPENSATION
    
    
    52ITEM 12.
    
    SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
    
    
    53ITEM 13.
    
    CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS
    
    
    55ITEM 14.
    
    PRINCIPAL ACCOUNTING FEES AND SERVICES
    
    
    58PART IV
    
    
    
    
    61ITEM 15.
    
    EXHIBITS, FINANCIAL
STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
    
    
    61EX-21 SUSIDIARIES OF THE COMPANYEX-23.1 INDEPENDENT AUDITORS' CONSENTEX-31 SECTION 302 CERTIFICATION OF THE CEO AND CFOEX-32 SECTION 906 CERTIFICATION OF THE CEO AND CFO




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PART I 
 ITEM 1. DESCRIPTION OF BUSINESS. This report contains forward-looking statements within the meaning of
the federal securities laws. These statements relate to future economic
performance, plans and objectives of management for future operations and
projections of revenues and other financial items that are based on the beliefs
of our management, as well as assumptions made by, and information currently
available to, our management. The words expect, estimate, anticipate,
believe and similar expressions are intended to identify forward-looking
statements. Those statements involve risks, uncertainties and assumptions,
including industry and economic conditions, competition and other factors
discussed in this and our other filings with the SEC. If one or more of these
risks or uncertainties materialize or underlying assumptions prove incorrect,
actual outcomes may vary materially from those indicated. We will make
forward-looking statements in Items 1, 2, 5, 7 and 7A of this report. See
Disclosure Regarding Forward-Looking Statements at the end of Item 7 for a
description of some of the important factors that may affect actual outcomes. General Roberts Realty Investors, Inc. owns and operates multifamily residential
properties as a self-administered, self-managed equity real estate investment
trust, or REIT. We conduct our business through Roberts Properties
Residential, L.P., which we refer to as the operating partnership. The
operating partnership owns all our properties. As of February 29, 2004,
Roberts Realty owns a 72.6% interest in the operating partnership and is its
sole general partner. We expect to continue to conduct our business in this
organizational structure, which is sometimes called an umbrella partnership
or UPREIT. As of March 8, 2004, we own:  §
    
    seven existing multifamily apartment communities that are
stabilized containing a total of 1,694 apartment homes;§
    
    one community containing 319 apartment homes currently under
construction (we expect to complete construction by June 30, 2004);§
    
    a 10.9-acre site currently in the planning and design phase
on which we intend to build a 220-unit apartment community (referred
to in this report as the Northridge community);§
    
    a 42,090 square foot retail center currently under
construction; and§
    
    a 39,907 square foot office building currently under
construction, a part of which we intend to use as our corporate
office building (we intend to occupy the office building by May 1,
2004). Seven of our communities  Addison Place, Bradford Creek, Plantation
Trace, Preston Oaks, River Oaks, St. Andrews at the Polo Club and Veranda Chase
 totaling 1,694 apartment homes, are stabilized. We began leasing on March
13, 2004 at our 319-unit Charlotte, North Carolina community. All of our
communities are located in metropolitan Atlanta, Georgia, except our Charlotte
community and St. Andrews at the Polo Club, which is located in the city of
Wellington, Palm Beach County, Florida. 2




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We consider a community to have achieved stabilized occupancy on the
earlier of (a) attainment of 95% occupancy as of the first day of any month, or
(b) one year after completion of construction. As of February 29, 2004, our
seven stabilized communities totaling 1,694 apartment homes had a physical
occupancy rate of 92.9%. We are constructing a 42,090 square foot retail center, located at the
entrance to our Addison Place apartment community in Alpharetta, Georgia. We
expect to complete construction in the third quarter of 2004. In June 2001, we
purchased land and a partially constructed office building on Northridge
Parkway in North Fulton County, Georgia. We will use a portion of one floor of
the building as our corporate headquarters and currently expect to move into
those premises by May 1, 2004. We will lease the remaining space on that floor
to Roberts Properties and Roberts Construction, and we plan to lease the other
two floors to unaffiliated tenants. We are in the planning and design phase of
the Northridge community. In Atlanta, our primary market, negative job growth and historically low
mortgage interest rates have contributed to lower demand for apartments, while
the supply of multifamily units has increased. To maintain our physical
occupancy, we offer residents incentives in the form of concessions and lower
rents, which has adversely affected operating results at our stabilized
communities. We expect rent concessions and lower rents to continue for the
foreseeable future, and we cannot offer any assurances regarding the effects of
these conditions on our business or when multifamily market conditions might
improve. To the extent that these conditions continue and perhaps worsen,
particularly in Atlanta, our business, operating results and liquidity will be
affected adversely. On August 27, 2003, we paid a special distribution of $0.55 per share to
shareholders and $0.55 per unit to unitholders in the operating partnership of
record on August 18, 2003. We paid the special distribution from the profit
generated by the sale of our Highland Park community. In addition to experiencing lower operating revenues at our existing
properties, we are completing three properties under construction and one
property in the planning and design phase. In total, these four new properties
required an investment of approximately $13.4 million of our equity that is
currently not producing any cash flow. The decreased revenues from our
existing properties, together with our growth program, have reduced our cash
flow from operations. We believe that our cash flow from operations will begin
to improve as we finish our new properties under development and construction.
Until there is a sustained and broad-based economic recovery resulting in
positive job growth, however, the Atlanta apartment market will remain soft,
and we will continue to experience the negative effects of lower rents. In light of these factors, our board of directors suspended payment of our
regular quarterly dividends for the fourth quarter of 2001 and all of 2002 and
2003. We cannot predict when, or if, we will resume paying regular quarterly
dividends. We expect to continue to sell properties from time to time and to
pay special distributions to our shareholders and unitholders from the net sale
proceeds as we did in 2003 from the proceeds of the Highland Park sale. Roberts Realty is a Georgia corporation formed in July 1994. We expect to
continue to qualify as a REIT for federal income tax purposes. A REIT is a
legal entity that holds real estate interests and, through its payment of
distributions, is able to reduce or avoid incurring federal income tax at the
corporate level. This structure allows shareholders to participate in real
estate investments without the double taxation of income  i.e., at both the
corporate and shareholder levels  that generally results from an investment in
shares of a corporation. To maintain our qualification as a REIT, we must,
among other things, distribute annually to our shareholders at least 90% of our
taxable income. Our common stock is traded on the American Stock Exchange
under the symbol RPI. 3




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We have engaged two entities owned by Mr. Charles S. Roberts, our Chairman
of the Board and Chief Executive Officer, to perform services for the operating
partnership. These entities are Roberts Properties, Inc. and Roberts
Properties Construction, Inc., which we sometimes refer to as the Roberts
Companies. The Roberts Companies developed and constructed all of our existing
communities, except the 24-unit second phase of Preston Oaks and the 200-unit
St. Andrews at the Polo Club. We expect that affiliates of Mr. Roberts will
continue to develop and construct properties for us. Roberts Construction is
the general contractor of our Charlotte community and will oversee the
completion of construction. Roberts Construction began construction on both
the Addison Place Shoppes and the corporate office building before we purchased
them, and we have retained Roberts Construction to finish construction on these
projects. We have retained Roberts Properties to develop our Northridge
community and Roberts Construction to construct it. Our executive offices are located at 8010 Roswell Road, Suite 280,
Atlanta, Georgia 30350, and our telephone number is (770) 394-6000. We do not
maintain a corporate website. As of February 29, 2004, we have 42 full-time
employees. The Operating Partnership We conduct our business and own all of our real estate assets through the
operating partnership. We control the operating partnership as its sole
general partner. Our ownership interest in the operating partnership entitles
us to share in cash distributions from, and in the profits and losses of, the
operating partnership generally in proportion to our ownership percentage. In
this report we refer to units of limited partnership interest in the operating
partnership as units. The holders of units include the former limited
partners in the limited partnerships that were merged into the operating
partnership; Mr. Roberts; and the former owner of a retail center we acquired
and later sold. Holders of units in the operating partnership, sometimes referred to in
this report as unitholders, generally have the right to require the operating
partnership to redeem their units. A unitholder who submits units for
redemption will receive, at our election, either an equal number of shares or
cash for those units at their fair market value, based upon the then current
trading price of the shares. We have adopted a policy of issuing shares in
exchange for units. We also have the right, at our election, to issue shares
in exchange for all outstanding units. Our articles of incorporation limit
ownership by any one holder to 6% of the outstanding shares of our common
stock, 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. Shares issued for units are registered with the SEC and are freely
transferable, other than by affiliates. Whenever we issue shares, we are obligated to contribute the net proceeds
from that issuance to the operating partnership, and the operating partnership
is obligated to issue the same number of units to us. The operating
partnership agreement permits the operating partnership, without the consent of
the unitholders, to sell additional units and add limited partners. Growth Strategies Our business plan and growth strategy are focused on creating cash flow
and capital appreciation by building and managing new apartment homes of the
highest quality and value in excellent high-growth neighborhoods. Our business
objective is to increase the long-term total return to our shareholders through
appreciation in the value of our properties and the payment of dividends or
capital distributions when we sell properties. To achieve this objective, we
are pursuing the following growth strategies: 4




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(a)
    
    maximize cash flow from operations by seeking through
intensive management to maintain high occupancy levels, obtain
regular rent increases, manage resident turnover efficiently and
control operating expenses; and(b)
    
    develop and/or acquire new multifamily apartment communities
in Georgia, North Carolina and Florida. We will engage others, including the Roberts Companies, to help us pursue these
strategies, which are described in more detail below. Property Management Strategy. We believe that managing our communities
intensively is a fundamental element of our investment strategy. As of
February 29, 2004, we employ 35 property management personnel, including
property managers, leasing managers, leasing consultants, maintenance
supervisors and technicians. We believe our property management expertise will
enable us to continue to deliver quality services, thereby promoting resident
satisfaction, maintaining high resident retention, and enhancing the value of
each of the communities. Our property management strategy will continue to be:  §
    
    to increase average occupancy and rental rates as market
conditions permit;§
    
    to minimize resident turnover and delinquent rental payments
through strict review of each applicants creditworthiness;§
    
    to control operating expenses and increase net operating
income at each of our communities; and§
    
    provide superior service to our residents. Development Strategy. We intend to continue to develop high quality
apartment communities for long-term ownership. During the past 20 years, the
Roberts Companies have developed, constructed, and/or managed over 4,400
residential units. We believe that the number and quality of the apartment
units developed by the Roberts Companies, the relationships Mr. Roberts and
employees of the Roberts Companies have developed with local permitting and
governmental authorities, and the Roberts Companies experience with the
development, construction and financing process will minimize the barriers to
new development. These barriers include governmental growth control, a
difficult rezoning and permitting process, and the limited availability of
well-located sites. We believe that these restraints on construction, assuming
substantial improvement in the Atlanta economy, offer a continuing opportunity
for us to achieve favorable long-term returns on the development of
well-located, high quality apartment home communities. We have retained Roberts Properties to develop our Northridge community.
We also expect that Roberts Properties will continue to develop other
communities for us in the future. Although the experience of the Roberts
Companies will be most helpful to us in the Atlanta area, we believe that their
experience will enable us to continue to develop multifamily apartment
communities in North Carolina and Florida. Although we presently intend to engage the Roberts Companies in our
development and construction activities, we may hire other development or
construction companies in Atlanta and elsewhere if we deem it to be in our best
interests to do so. The most likely development scenario for the operating
partnership is for it to acquire properties already under development from
Roberts Properties and/or an entity formed by Mr. Roberts or his affiliates.
We may engage the Roberts Companies to develop properties on a fee basis, we
may enter into joint venture agreements with the Roberts Companies 5




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or we may acquire communities developed by the Roberts Companies and owned by
other affiliates of Mr. Roberts. We may also enter into similar arrangements
with others who are independent of Mr. Roberts. In analyzing the potential development of a particular community, we will
evaluate geographic, demographic, economic, and financial data, including:  §
    
    households, population and employment growth;§
    
    prevailing rental and occupancy rates in the immediate market
area and the perceived potential for growth in those rates;§
    
    costs that affect profitability of the investment, including
construction, financing, operating and maintenance costs;§
    
    income levels in the area;§
    
    existing employment bases;§
    
    traffic volume, transportation access, proximity to
commercial centers and regional malls; and§
    
    proximity to and quality of the areas schools. We will also consider physical elements regarding a particular site, including
the probability of zoning approval (if required), availability of utilities and
infrastructure, and other physical characteristics of the site. Environmental and Other Regulatory Matters Under various federal, state, and local laws and regulations, an owner of
real estate is liable for the costs of removal or remediation of hazardous or
toxic substances on the property. Those laws often impose liability without
regard to whether the owner knew of, or was responsible for, the presence of
the hazardous or toxic substances. The costs of remediation or removal of the
substances may be substantial, and the presence of the substances, or the
failure to promptly remediate the substances, may adversely affect the owners
ability to sell the real estate or to borrow using the real estate as
collateral. In connection with the ownership and operation of our apartment
communities and other real estate assets, we may be potentially liable for:  (a)
    
    remediation and removal costs; and(b)
    
    damages to persons or property arising from the existence or
maintenance of hazardous or toxic substances. The preliminary environmental assessments of our apartment communities and
other real estate assets have not revealed any environmental liability that we
believe would have a material adverse effect on our business, assets or results
of operations, nor are we aware of any liability of that type. Nevertheless,
these assessments may not have revealed all environmental liabilities, and we
may have material environmental liabilities that we do not know about. Future
uses or conditions  including changes in applicable environmental laws and
regulations  may cause us to have environmental liability. Costs of Compliance with Americans with Disabilities Act and Similar Laws 6




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Under the Americans with Disabilities Act of 1990, or the ADA, all places
of public accommodation are required to meet federal requirements related to
access and use by disabled persons. Although we believe that our communities
are substantially in compliance with present requirements of the ADA, we may
incur additional costs of complying with the ADA. A number of additional
federal, state and local laws may also require modifications to the
communities, or restrict further renovations to them, with respect to access by
disabled persons. For example, the Fair Housing Amendments Act of 1988
requires apartment communities first occupied after March 25, 1990 to be
accessible to the handicapped. Noncompliance with this Act could result in the
imposition of fines or an award of damages to private litigants. We believe
that our communities comply with that law. Additional legislation may impose further burdens or restrictions on
owners with respect to access by disabled persons. We cannot estimate the
ultimate cost of compliance with the ADA or that legislation, and, while those
costs are not expected to have a material adverse effect on us, those costs
could be substantial. Limitations or restrictions on the completion of
renovations may limit application of our investment strategy in some instances
or reduce overall returns on our investments. Insurance We carry comprehensive property, general liability, fire, extended
coverage and rental loss insurance on all of our existing communities, with
policy specifications, insured limits and deductibles customarily carried for
similar properties. We carry similar insurance with respect to our properties
under development or properties under construction, but with appropriate
exceptions given the nature of these properties. The Terrorism Risk Insurance Act of 2002 was signed into law on November
26, 2002. The law provides that losses resulting from certified acts of
terrorism will be partially reimbursed by the United States after a statutory
deductible amount is paid by the insurance company providing coverage. The law
also requires that the insurance company offer coverage for terrorist acts for
an additional premium. We accepted the offer to include this coverage in our
property and casualty policies. We believe that our properties are adequately covered by insurance. There
are, however, some types of losses (such as losses arising from acts of war)
that are not generally insured because they are either uninsurable or not
economically insurable. If an uninsured loss or a loss in excess of insured
limits occurs, we could lose our capital invested in a property, as well as the
anticipated future revenues from the property, and we would continue to be
obligated on any mortgage indebtedness or other obligations related to the
property. Any loss of that kind would adversely affect us. Investment, Financing, and Conflict of Interest Policies Our investment policies, financing policies and conflict of interest
policies are set by our board of directors. The board of directors has adopted
the policies summarized below, including the Code of Ethics and Business
Conduct we adopted on March 17, 2004 pursuant to new requirements of the
American Stock Exchange. Our board may amend or revise them from time to time
without a vote of our shareholders or any vote of the partners of the operating
partnership, except that:  (a)
    
    we cannot change our policy of holding our assets and
conducting our business exclusively through the operating
partnership without amending the operating partnership agreement,
which will generally require the consent of the holders of a
majority in interest of the limited partners in the operating
partnership including, if applicable, Roberts Realty; and 7




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(b)
    
    changes in our conflicts of interest policies must be
approved by a majority of the independent directors and otherwise be
consistent with legal requirements. Investment Policies Investments in Real Estate or Interests in Real Estate. We conduct all of
our investment activities through the operating partnership and will do so for
so long as the operating partnership exists. (The agreement of limited
partnership of the operating partnership provides that it is not required to be
dissolved until 2093.) Our investment objectives are to achieve stable cash
flow available for distributions and, over time, to increase cash flow and
portfolio value by continuing to develop multifamily apartment communities for
long-term ownership as well as acquiring additional multifamily apartment
communities that we anticipate will produce additional cash flow. Our policy is to develop assets where we believe that favorable investment
opportunities exist based on market conditions at the time of the investment. We expect to pursue our investment objectives primarily through the direct
ownership of properties by the operating partnership, although, as discussed
below, we may also pursue indirect property ownership opportunities. We intend
to develop multifamily apartment communities primarily in Georgia, North
Carolina and Florida. Future development or investment activities will not be
limited by our governing documents to any geographic area, product type or
specified percentage of our assets. Possible Acquisition of Communities Developed by Mr. Roberts or His
Affiliates. Mr. Roberts and Roberts Properties have been engaged in the
development of residential and commercial real estate since the early 1970s,
and Mr. Roberts expects that he and Roberts Properties will continue to engage
in real estate development. Provided that any transaction or agreement must
comply with the policies discussed under Conflict of Interest Policies, we
may engage in transactions of various types with Mr. Roberts, Roberts
Properties and/or other affiliates of Mr. Roberts to develop or acquire real
estate. Those transactions may include:  §
    
    hiring Mr. Roberts or Roberts Properties to develop and
construct real estate under a fee arrangement;§
    
    acquiring undeveloped property from Mr. Roberts or his
affiliates for future development; or§
    
    acquiring from Mr. Roberts or his affiliates partially or
completely constructed properties, whether in their lease-up phase
or already leased-up. No particular arrangements have been determined, other than the communities now
under construction and development as described elsewhere in this report. Securities of or Interest in Persons Primarily Engaged in Real Estate
Activities and Other Issuers. We and the operating partnership also may invest
in securities of other entities engaged in real estate activities or invest in
securities of other issuers, including investments by us and the operating
partnership for the purpose of exercising control over those entities. We or
the operating partnership may acquire all or substantially all of the
securities or assets of other REITs or similar entities where those investments
would be consistent with our investment policies. We do not currently intend
to invest in the securities of other issuers. In making any of the investments
described in this paragraph, we intend to comply with the percentage of
ownership limitations and gross income tests necessary for REIT qualification
under the Internal Revenue Code. Also, we will not make any investments if the
proposed investment would cause us or the operating partnership to be an
investment company under the Investment Company Act of 1940. 8




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No Investments in Mortgages. We do not own any mortgages and do not
currently intend to invest in mortgages or to engage in originating, servicing
or warehousing mortgages. Financing Policies Our organizational documents do not limit the amount of indebtedness we
may incur. We have an informal policy that we will not incur indebtedness in
excess of 75% of what the board of directors believes is the fair market value
of our assets at any given time. We may, however, from time to time
re-evaluate our borrowing policies in light of then current economic
conditions, relative costs of debt and equity capital, market value of the
operating partnerships real estate assets, growth and acquisition
opportunities and other factors. Modification of this policy may adversely
affect the interests of our shareholders. To the extent that the board of directors determines to seek additional
capital, we may raise capital through additional equity offerings, debt
financing or retention of cash flow or a combination of these methods. Our
retention of cash flow is subject to provisions in the Internal Revenue Code
requiring a REIT to distribute a specified percentage of taxable income, and we
must also take into account taxes that would be imposed on undistributed
taxable income. As long as the operating partnership is in existence, we will
contribute the net proceeds of all equity capital we raise to the operating
partnership in exchange for units or other interests in the operating
partnership. We have not established any limit on the number or amount of mortgages on
any single property or on the operating partnerships portfolio as a whole. Conflict of Interest Policies The board of directors is subject to provisions of Georgia law that are
designed to eliminate or minimize potential conflicts of interest. We can give
no assurances, however, that these policies will always eliminate the influence
of those conflicts. If these policies are not successful, the board could make
decisions that might fail to reflect fully the interests of all shareholders. Under Georgia law, a director may not misappropriate corporate
opportunities that he learns of solely by serving as a member of the board of
directors. In addition, under Georgia law, a transaction effected by us or any
entity we control (including the operating partnership) in which a director, or
specified related persons and entities of the director, have a conflicting
interest of such financial significance that it would reasonably be expected to
exert an influence on the directors judgment may not be enjoined, set aside or
give rise to damages on the grounds of that interest if either:  §
    
    the transaction is approved, after disclosure of the
interest, by the affirmative vote of a majority of the disinterested
directors, or by the affirmative vote of a majority of the votes
cast by disinterested shareholders; or§
    
    the transaction is established to have been fair to us. The board of directors has adopted a policy that all conflicting interest
transactions must be authorized by a majority of the disinterested directors,
but only if there are at least two directors who are disinterested with respect
to the matter at issue. In addition, under the applicable rules of the
American Stock Exchange, related party transactions are subject to appropriate
review and oversight by our Audit Committee, which is composed of Wm.
Jarell Jones, its chairman, Dennis H. James, and George W. Wray, Jr. 9




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New Code of Ethics and Business Conduct On March 17, 2004, our board of directors adopted a Code of Business
Conduct and Ethics as required by the rules of the American Stock Exchange and
the federal Sarbanes-Oxley Act. Our code is designed to deter wrongdoing and
to promote:  (1)
    
    honest and ethical conduct, including the ethical
handling of corporate opportunities and actual or apparent
conflicts of interest between personal and professional
relationships;(2)
    
    full, fair, accurate, timely and understandable
disclosure in reports and documents that we file with, or submit
to, the SEC and in other public communications we make;(3)
    
    compliance with applicable governmental laws, rules and
regulations;(4)
    
    confidentiality; protection and proper use of company
assets;(5)
    
    equal employment opportunities and prohibition of
discrimination or harassment;(6)
    
    the prompt internal reporting of violations of the code
to an appropriate person or persons identified in the code; and(7)
    
    accountability for adherence to the code. Other Policies We and the operating partnership have authority to offer our securities
and to repurchase and otherwise reacquire our securities, and we may engage in
those activities in the future. We have adopted a policy that we will issue
shares to unitholders who exercise their rights of redemption. In the future,
we may make loans to joint ventures in which we participate to meet working
capital needs. We have not engaged in trading, underwriting, agency
distribution or sale of securities of other issuers, and we do not intend to do
so. We intend to make investments in a manner so that we will not be treated
as an investment company under the Investment Company Act of 1940. In September 1998 our board authorized a stock repurchase plan. See Item
7, Managements Discussion and Analysis of Financial Condition and Results of
Operations  Stock Repurchase Plan, for an explanation of this plan and our
repurchases of our shares since 1998. At all times, we intend to make investments in a manner to be consistent
with the requirements of the Internal Revenue Code for us to qualify as a REIT
unless, because of changing circumstances or changes in the Internal Revenue
Code or in applicable regulations, the board of directors decides that it is no
longer in our best interests to qualify as a REIT. For a description of the competition in our markets, see Item 2,
Properties  Competition. 10




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##### Table of Contents



ITEM 2. PROPERTIES. General As of March 8, 2004, we own:  §
    
    seven existing multifamily apartment communities that are
stabilized containing a total of 1,694 apartment homes;§
    
    one community containing 319 apartment homes that is under
construction;§
    
    a 10.9-acre site currently in the planning and design phase
on which we intend to build a 220-unit apartment community (referred
to in this report as the Northridge community);§
    
    a 42,090 square foot retail center currently under
construction; and§
    
    a 39,907 square foot office building currently under
construction, a part of which we intend to use as our corporate
office building. We sold our 188-unit Highland Park community on August 6, 2003. We believe that in the long-term, the demand for multifamily housing in
Atlanta will increase due to Atlantas growing population, although recent job
losses in Atlanta have resulted in a weaker apartment market. According to the
Atlanta Regional Commission, which we refer to as the ARC, both population and
job growth in Atlanta are projected to be above the national average for the
foreseeable future. The ARC is the regional planning and governmental
coordination agency for the 10-county Atlanta Region, which is composed 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 estimated population of the Atlanta Region increased by 7.0% from
3,429,400 persons in 2000 to 3,669,300 persons in 2003, making it one of the
largest metropolitan areas in the country and the largest in the Southeast.
The population of the Atlanta Region, including Coweta, Forsyth and Paulding
counties, is projected to grow to 4,223,300 persons in 2010. Housing units in the Atlanta Region increased an estimated 30.5%, from
1,052,430 units in 1990 to 1,373,058 units in 2000. Multifamily homes in the
Atlanta Region increased 21.7% from 342,441 units in 1990 to 416,682 units in
2000. The Atlanta Region added 12,393 units in 2003, 14,823 units in 2002 and
16,237 units in 2001. The following table summarizes basic information about our communities. 11




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##### Table of Contents



YearCompleted
    
    Number
    
    Approximateor to be
    
    of
    
    Rentable AreaCommunity
    
    Location
    
    Completed
    
    Units
    
    (Square Feet)Existing
Communities:Plantation Trace(1)
    
    Atlanta
    
    1990/1998
    
    
    232
    
    
    
    310,956River Oaks
    
    Atlanta
    
    1992
    
    
    216
    
    
    
    276,208Preston Oaks (2)
    
    Atlanta
    
    1995/1998
    
    
    213
    
    
    
    257,180Bradford Creek
    
    Atlanta
    
    1998
    
    
    180
    
    
    
    243,941Addison Place (3)
    
    Atlanta
    
    1999/2001
    
    
    403
    
    
    
    603,506St. Andrews
at the Polo Club (4)
    
    Palm Beach County, FL
    
    2001
    
    
    200
    
    
    
    309,073Veranda Chase (5)
    
    Atlanta
    
    2002
    
    
    250
    
    
    
    329,572Subtotal/Average
    
    
    
    
    1,694
    
    
    
    2,330,436Communities and Other
Properties Under
Construction:Charlotte
    
    Charlotte
    
    2004
    
    
    319
    
    
    
    404,222Addison Shoppes
    
    Atlanta
    
    2004
    
    
    N/A
    
    
    
    42,090Northridge Office
Building
    
    Atlanta
    
    2004
    
    
    N/A
    
    
    
    39,907
   [Continued from above table, first column(s) repeated] December 2003Average Rental Rates
    
    Average PhysicalAverage
    
    
    
    
    
    
    
    
    
    Occupancy for theUnit Size
    
    
    
    
    
    Per Square
    
    12 Months EndedCommunity
    
    Location
    
    (Square Feet)
    
    Per Unit
    
    Foot
    
    Dec. 31, 2003Existing
Communities:Plantation Trace(1)
    
    Atlanta
    
    1,340
    
    $
    891
    
    
    $
    0.67
    
    
    
    89.8
    %River Oaks
    
    Atlanta
    
    1,279
    
    
    905
    
    
    
    0.71
    
    
    
    89.7
    %Preston Oaks (2)
    
    Atlanta
    
    1,207
    
    
    980
    
    
    
    0.81
    
    
    
    96.1
    %Bradford Creek
    
    Atlanta
    
    1,355
    
    
    952
    
    
    
    0.70
    
    
    
    92.4
    %Addison Place (3)
    
    Atlanta
    
    1,498
    
    
    1,053
    
    
    
    0.70
    
    
    
    89.8
    %St. Andrews
at the Polo Club (4)
    
    Palm Beach County, FL
    
    1,545
    
    
    1,251
    
    
    
    0.81
    
    
    
    86.7
    %Veranda Chase (5)
    
    Atlanta
    
    1,318
    
    
    870
    
    
    
    0.66
    
    
    
    82.4
    %Subtotal/Average
    
    1,376Communities and Other
Properties Under
Construction:Charlotte
    
    Charlotte
    
    1,267
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AAddison Shoppes
    
    Atlanta
    
    N/A
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ANorthridge Office
Building
    
    Atlanta
    
    N/A
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    (1)
    
    Plantation Trace was completed in two phases. The 182-unit first phase
was completed in 1990 and the 50-unit second phase was completed in 1998.  (2)
    
    Preston Oaks was completed in two phases. The 189-unit first phase was
completed in 1995 and the 24-unit second phase was completed in 1998.  (3)
    
    Addison Place was completed in two phases. The 118-unit first phase of
Addison Place was completed in October 1999, and the 285-unit second phase
was completed in September 2001.  (4)
    
    St. Andrews at the Polo Club was purchased on November 6, 2001. The
200-unit community was purchased during its initial lease-up phase.  (5)
    
    Veranda Chase completed its lease-up phase in June 2003. 12




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##### Table of Contents



Annual operating data regarding our stabilized communities at December
31, 2003 are summarized in the following table. The second phase of Addison
Place is described separately for this purpose. 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. Physical Occupancy RateMonthCompletedInitialCommunity
    
    Lease up
    
    1999
    
    2000
    
    2001
    
    2002
    
    2003Plantation
Trace
    
    
    9/90
    
    
    
    90
    %
    
    
    93.7
    %
    
    
    90.0
    %
    
    
    80.6
    %
    
    
    89.8
    %River Oaks
    
    
    2/93
    
    
    
    93
    %
    
    
    97.3
    %
    
    
    94.0
    %
    
    
    95.8
    %
    
    
    89.7
    %Preston Oaks
    
    
    8/95
    
    
    
    98
    %
    
    
    98.2
    %
    
    
    97.1
    %
    
    
    97.0
    %
    
    
    96.1
    %Bradford
Creek
    
    
    8/98
    
    
    
    93
    %
    
    
    93.6
    %
    
    
    94.1
    %
    
    
    94.3
    %
    
    
    92.4
    %Addison Place
    
    
    5/00
    
    
    
    N/A
    
    
    
    97.4
    %*
    
    
    90.3
    %
    
    
    69.9
    %
    
    
    89.8
    %Addison Place
Phase II (1)
    
    
    9/02
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    63.6
    %*
    
    
    N/A
    
    
    
    N/ASt. Andrews
    
    
    11/02
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    87.2
    %
    
    
    86.7
    %Veranda Chase
    
    
    6/03
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    82.4
    %
   [Continued from above table, first column(s) repeated] Average Effective Annual Rental RatesMonth 
Completed
    1999
    
    2000
    
    2001
    
    2002
    
    2003Initial
    Per
    
    Per
    
    Per
    
    Per
    
    Per
    
    Per
    
    Per
    
    Per
    
    Per
    
    PerCommunity
    
    Lease up
    Unit
    
    Sq. Ft.
    
    Unit
    
    Sq. Ft.
    
    Unit
    
    Sq. Ft.
    
    Unit
    
    Sq. Ft.
    
    Unit
    
    Sq. Ft.Plantation
Trace
    
    
    9/90
    
    $
    956
    
    
    $
    0.71
    
    
    $
    994
    
    
    $
    0.74
    
    
    $
    1,030
    
    
    $
    0.77
    
    
    $
    978
    
    
    $
    0.73
    
    
    $
    920
    
    
    $
    0.69River Oaks
    
    
    2/93
    
    $
    930
    
    
    $
    0.73
    
    
    $
    953
    
    
    $
    0.75
    
    
    $
    983
    
    
    $
    0.77
    
    
    $
    925
    
    
    $
    0.72
    
    
    $
    900
    
    
    $
    0.70Preston Oaks
    
    
    8/95
    
    $
    994
    
    
    $
    0.82
    
    
    $
    1,038
    
    
    $
    0.86
    
    
    $
    1,079
    
    
    $
    0.89
    
    
    $
    1,033
    
    
    $
    0.86
    
    
    $
    994
    
    
    $
    0.82Bradford
Creek
    
    
    8/98
    
    $
    949
    
    
    $
    0.70
    
    
    $
    987
    
    
    $
    0.73
    
    
    $
    1,024
    
    
    $
    0.76
    
    
    $
    956
    
    
    $
    0.71
    
    
    $
    935
    
    
    $
    0.69Addison Place
    
    
    5/00
    
    
    N/A
    
    
    
    N/A
    
    
    $
    1,288
    *
    
    $
    0.76
    *
    
    $
    1,335
    
    
    $
    0.79
    
    
    $
    1,127
    
    
    $
    0.75
    
    
    $
    1,061
    
    
    $
    0.71Addison Place
Phase II (1)
    
    
    9/02
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    $
    1,148
    *
    
    $
    0.81
    *
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ASt. Andrews
    
    
    11/02
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    $
    1,346
    
    
    $
    0.87
    
    
    $
    1,272
    
    
    $
    0.82Veranda Chase
    
    
    6/03
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    $
    875
    
    
    $
    0.66
   (1)
    
    Addison Place Phase II completed its lease-up in September 2002;
beginning with 2002, both phases are combined. 13




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##### Table of Contents



As described below, our Atlanta communities are located in Gwinnett and
Fulton counties and four submarkets, or geographic areas, within these
counties. We also have one community in Charlotte and one in Palm Beach
County, Florida. The Charlotte community and St. Andrews at the Polo Club are
described after the Georgia properties. Each heading identifies the community
or communities within the specified county and submarket. We obtained
population and employment data for each Atlanta submarket from the ARC.
Multiple communities are located in the Duluth submarket; thus those
communities compete not only with unaffiliated apartment communities but also
with each other. Gwinnett County From 1990 to 2003, Gwinnetts population increased 84.6% to 658,200
persons. Gwinnetts strong employment base, transportation networks, excellent
public education system and affordable home prices contribute to the countys
growth. Gwinnett is home to approximately 235 international firms, over 860
manufacturing firms and 1,300 high technology firms that generate many of its
378,413 jobs. The average household income of the county is approximately
$81,000. Gwinnett County is home to our communities located in the City of
Duluth and unincorporated Gwinnett. Duluth Area  Plantation Trace, River Oaks and Bradford Creek Communities Duluth. Our Plantation Trace, River Oaks and Bradford Creek communities
are located in the City of Duluth, in western Gwinnett County. Duluth has
exceeded even Gwinnett County as a whole in percentage of population growth;
its population has increased more than 200% since 1990. Duluth is located just
west of I-85 and Gwinnett Place Mall, a 1,100,000 square foot regional mall. Plantation Trace. Plantation Trace is a 232-unit garden apartment
community that was completed in two phases: a 182-unit first phase in 1990 and
a 50-unit second phase in 1998, sometimes referred to below as Phase II.
Plantation Trace consists of 31 two- and three-story Nantucket-style stone and
wood sided buildings located on a 29.2-acre site on Pleasant Hill Road
approximately one-half mile west of its intersection with Peachtree Industrial
Boulevard. In 1990, the 182-unit first phase received the Aurora Award from
the Southeast Builders Conference for Best Rental Apartment Community in the
Southeast. The Plantation Trace community, with its award-winning traditional
architecture and landscaped grounds, features a clubhouse, a modern fitness and
exercise facility, two lighted tennis courts, a sand volleyball court, a
multi-station playground, two free-form swimming pools, a small wading pool, a
stone paver pool deck and a covered whirlpool spa. In addition to upscale
amenities, Plantation Trace offers such interior features as nine foot
ceilings, crown molding, pickled wood cabinetry in the kitchen and bath, marble
vanity tops, fireplaces, vaulted ceilings and Palladian windows in select
units, designer wallcoverings and full laundry rooms with washer and dryer
connections. Phase II provides the Plantation Trace community with direct
access to the Chattahoochee River, as well as to jogging trails around the
existing lake and nature areas along the river. Plantation Trace has a variety of floor plans, including 28 one-bedroom
units ranging from 901 to 929 square feet, 48 two-bedroom standard and 66
two-bedroom roommate units ranging from 1,228 to 1,298 square feet and 40
three-bedroom units ranging from 1,471 to 1,494 square feet. Phase II contains
7 one-bedroom units of approximately 966 square feet each, 6 two-bedroom units
of approximately 1,433 square feet each, 18 two-bedroom townhouses of
approximately 1,490 square feet each, 12 three-bedroom townhouses of
approximately 1,948 square feet each, 7 four-bedroom townhouses of
approximately 2,314 square feet each and 33 garages of 200 square feet each.
The weighted average unit size is 1,340 square feet. As of December 31, 2003,
rental rates ranged from $795 to $2,025 per month, with a weighted 14




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average monthly rent of $891 per unit and $0.67 per square foot. Local real
estate taxes were $225,000 in 2003. The physical occupancy rate for the entire
Plantation Trace community as of December 31, 2003 was 96.4%. 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, a sand volleyball
court, a multi-station playground, a free-form swimming pool, a stone paver
pool deck and a whirlpool spa. In addition to upscale amenities, River Oaks
offers such interior features as nine foot ceilings, crown molding, garden
tubs, pickled pine cabinetry in the kitchen and bath, marble vanity tops,
fireplaces and vaulted ceilings in select units, designer wallcoverings and
full laundry rooms with washer and dryer connections. River Oaks has a variety of floor plans, including 40 one-bedroom units at
approximately 907 square feet, 32 two-bedroom roommate units, 24 two-bedroom
deluxe units, 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 1,279 square feet. As of December 31, 2003, the
community was 88.5% occupied, and rental rates ranged from $850 to $1,135 per
month, with a weighted average monthly rent of $905 per unit and $0.71 per
square foot. Local real estate taxes were $202,000 in 2003. 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, a clubroom, a laundry room, two lighted tennis courts, a
free-form swimming pool, a stone paver pool deck, a 12-acre nature area, a
courtyard highlighted by a water fountain and a gated entrance. In addition to
the upscale amenities, Bradford Creek offers such interior features as nine
foot ceilings and a computer room in select units, crown moldings, garden tubs,
white raised-panel cabinetry in the kitchen and bath, marble vanity tops,
breakfast bars, designer wallcoverings and full laundry rooms with washer and
dryer connections. Each building was constructed using cobblestone and vinyl
siding and offers private patios or balconies along with gables and varying
paint colors. Bradford Creek contains 28 one-bedroom units of approximately 990 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 1,579 square feet each. The weighted
average unit size is 1,355 square feet. As of December 31, 2003, the community
was 92.8% occupied, and rental rates ranged from $750 to $995 per month,
resulting in a weighted average monthly rent of $952 per unit and $0.70 per
square foot. Local real estate taxes were $177,000 in 2003. Unincorporated Gwinnett  Veranda Chase (formerly Old Norcross) Veranda Chase.The Veranda Chase community, completed in 2002, is 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. It
is near I-85, GA-316 and Gwinnett Place Mall, a 1,100,000 square foot regional
mall. This community consists of 15 two- and three-story buildings and has 250
garden-style apartments. It includes details such as stacked stone accents,
traditional siding and oversized porches in each unit. Amenities include a
clubhouse, an exercise room with weight equipment, a 15




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swimming pool, a lighted tennis court, a childrens playground, extensive
nature trails along beautiful streams and private wooded views. Veranda Chase has 73 one-bedroom units of approximately 970 square feet
each, 45 two-bedroom standard units of approximately 1,334 square feet each, 66
two-bedroom roommate units of approximately 1,378 square feet each, and 66
three-bedroom units of approximately 1,633 square feet each. The weighted
average unit size is 1,318 square feet. As of December 31, 2003, the community
was 92.4% occupied. Rental rates range from $840 to $1,215 per month,
resulting in a weighted average monthly rent of $870 per unit and $0.66 per
square foot. Local real estate taxes were $226,000 in 2003. Fulton County Fulton County is the largest county in the Atlanta Region in terms of
population, employment, housing units and land area. Perimeter Center/North Springs Area  Preston Oaks and Northridge
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 Childrens Healthcare of
Atlanta. 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 InterContinental Hotels Group, UPS, Cingular and
Hewlett-Packard have located their worldwide or regional headquarters within
the Perimeter Center area. Preston Oaks. Preston Oaks is a 213-unit garden apartment community that
was completed in two phases: a 189-unit first phase in August 1995 and a
24-unit second phase in 1998. Preston Oaks consists of nine two- and
three-story buildings located on Mt. Vernon Highway in the Perimeter Center
area. The traditional architecture consists of stacked stone and vinyl siding
incorporating details of gabled roofs, Palladian windows, columns and bay
windows. The community is located on an 11.5-acre site and features extensive
landscaping. The amenities are similar to those of our other existing
communities, with a custom swimming pool, a lighted tennis court, a fitness
center with individual workout stations and a large clubhouse. Interior
features include garden tubs, oversized walk-in closets, pickled pine cabinetry
in the kitchen and bath, crown molding, mirrored walls and chair railing in the
dining rooms. Phase one consists of 36 one-bedroom units with 902 square feet
each, 92 two-bedroom units ranging from 1,225 to 1,285 square feet and 61
three-bedroom units with 1,440 square feet each. Phase two consists of 24
one-bedroom apartment units with 902 square feet each. The weighted average
unit size is 1,207 square feet. Preston Oaks is conveniently located less than one mile from Perimeter
Mall, a 1,200,000 square foot regional mall, and in close proximity to the
areas numerous office developments. Several stand-alone restaurants and major
retail centers either exist or are being developed near the community. 16




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##### Table of Contents



As of December 31, 2003, Preston Oaks was 96.1% occupied, and its rental
rates ranged from $915 to $1,315 per month, resulting in a weighted average
monthly rent of $980 per unit and $0.81 per square foot. Local real estate
taxes were $218,000 in 2003. Northridge.The Northridge community will be located on a 10.9 acre site
located adjacent to our former Highland Park community. We intend to construct
a 220-unit upscale apartment community consisting of one- and two-bedroom
apartments with covered parking for residents. We expect to start construction
by the end of 2004, and we estimate the total cost to be approximately $24
million. Alpharetta Area  Addison Place Alpharetta. The Alpharetta area offers convenient proximity and access to
both urban and suburban employment bases and retail conveniences. Georgia 400
provides direct access within minutes to major regional malls such as North
Point Mall and Perimeter Center Mall. The Phipps Plaza/Lenox Mall/Buckhead
area and downtown Atlantas Central Business District are readily accessible
via the Georgia 400 extension, which connects to I-85 South near downtown
Atlanta. Within this corridor is a large base of residential, commercial and office
developments. North Point Malls success accelerated the already high rate of
residential development, which caters to the upscale consumer. North Fultons
neighborhoods have been a major factor in the emergence of the Georgia 400
corridor as a center for corporate headquarters. North Fultons population was
340,301 at the end of 2002 and is projected to grow 16.6% to approximately
397,000 by 2007. The average North Fulton household income in 2003 was
$112,000. The Windward project, which straddles Georgia 400, is the regions
largest mixed-use development. Based on our market research, we believe North
Fulton County has been adversely affected by the economic downturn. Our
indicators include, among others, unemployment rates, apartment vacancies,
business failures and mortgage foreclosures. Addison Place Phases I and II.Addison Place is a 403-unit community
located on Abbotts Bridge Road near the intersection of Abbotts Bridge and
Jones Bridge roads. The first phase contains 118 townhouses consisting of 60
two-bedroom townhouses of approximately 1,497 square feet each and 58
three-bedroom townhouses of approximately 1,903 square feet each. The second
phase of Addison Place contains 285 garden-style apartment homes. It includes
11 different floor plans, including 60 one-bedroom units ranging from 765 to
1,034 square feet, 147 two-bedroom units ranging from 1,150 to 1,550 square
feet, 58 three-bedroom units at approximately 1,706 square feet and 20
four-bedroom units at approximately 2,074 square feet, along with 40
direct-entry garages. The weighted average unit size is 1,498 square feet.
The buildings are of a traditional design with stacked stone accents, brick and
vinyl siding. The community features two swimming pools, a modern fitness and
exercise facility, a business center, mens and womens saunas and a
playground. As of December 31, 2003, Addison Place was 91.7% occupied, and its monthly
rental rates ranged from $760 to $1,925 per month, with a weighted average
monthly rent of $1,053 per unit and $0.70 per square foot. Local real estate
taxes were $381,000 in 2003. Charlotte, North Carolina The following information is based on statistics and estimates published
by the Charlotte Chamber of Commerce. Between 1990 and 2003, Mecklenburg
Countys population grew from 511,363 to 773,299 persons. It is projected to
grow to 1,063,127 persons by 2012. Employment has grown to a total of 387,822
residents employed in 2002. Nine of the nations top 200 banks operate in
Charlotte, including Bank of America, N.A. and Wachovia Corporation (formerly
First Union Corporation). Other major employers include Carolinas Healthcare
System, Charlotte-Mecklenburg School System, Duke 17




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##### Table of Contents



Energy Corporation and USAirways. Additionally, 286 of the nations largest
industrial and service corporations listed by FORTUNE magazine have facilities
in the area. Our Charlotte community is located on a 23.8-acre site at the intersection
of Lancaster Highway (old NC-521) and John J. Delaney Drive in the Ballantyne
area, the largest mixed-use development in Mecklenburg County. This community
will have 319 garden-style apartments, consisting of 110 one-bedroom units
ranging from 766 square feet to 1,030 square feet, 143 two-bedroom units
ranging from 1,144 square feet to 1,550 square feet, 48 three-bedroom units at
1,783 square feet and 18 four-bedroom units at 2,081 square feet, along with 36
direct-entry garages. The weighted average unit size is 1,267 square feet. We
estimate the cost of construction on this development to be approximately
$30,800,000, of which $24,000,000 is being funded with a construction loan that
we obtained in February 2002. The community is located near I-485 and I-77,
which offer convenient access to downtown Charlotte and I-85. Palm Beach County, Florida  St. Andrews at the Polo Club According to the Palm Beach Development Board, Palm Beach County is the
third most populated county in Florida behind Dade and Broward counties to the
south. The population of Palm Beach County grew from 870,000 persons in 1990
to 1,190,000 persons in 2002, a 37% increase, and is projected to grow to
1,500,000 persons by 2005. It is considered the most affluent county in
Florida. West Palm Beach and Boca Raton are the two largest cities in the
county, with the downtown West Palm Beach area undergoing a multi-billion
dollar renaissance, which includes the recently completed mixed-use project
City Place. St. Andrews at the Polo Club.St. Andrews at the Polo Club community is
located on a 13.7-acre site adjacent to the Palm Beach Polo and Country Club in
Wellington, Palm Beach County, Florida. The property is conveniently located
1.5 miles from The Mall at Wellington Green, a new 1.3 million square foot
regional mall that opened in October 2001. The 200-unit community includes 160
garden apartments and 40 townhouse units, and each of the 200 units has its own
garage. The interiors of each apartment include luxurious features such as
nine- and ten-foot-high ceilings, wood-burning fireplaces, crown molding,
glass-enclosed showers and a top-of-the-line General Electric appliance
package. Amenities for the residents include a swimming pool, a spa and gazebo
bar area, a business center, an indoor racquetball court, a lighted tennis
court and a clubhouse with a fitness center. The unit mix includes 80 two-bedroom garden apartments ranging from 1,223
square feet to 1,404 square feet, 80 three-bedroom garden apartments ranging
from 1,492 square feet to 1,627 square feet, and 40 townhouses of approximately
1,427 square feet each. The weighted average unit size is 1,545 square feet.
As of December 31, 2003, the property was 91.2% occupied. Rental rates ranged
from $1,210 to $1,830 per month, resulting in a weighted average monthly rent
of $1,251 per unit and $0.81 per square foot. Local real estate taxes were
$507,000 in 2003. The table on the following page summarizes the amenities of each of the
existing communities and of our Charlotte community, which is now under
construction. 18




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##### Table of Contents



Summary of Amenities of the Communities Patio,
    
    WasherPorch
    
    & Dryer
    
    Garden
    
    Fire-
    
    Vaulted
    
    SwimmingCommunity
    
    Balcony
    
    Hook-ups
    
    Tubs
    
    Places*
    
    Ceilings*
    
    PoolExisting
Communities:Plantation
Trace
    
    Yes
    
    Yes
    
    Yes(1)
    
    Yes(2)
    
    Yes
    
    YesRiver Oaks
    
    Yes
    
    Yes
    
    Yes
    
    Yes
    
    Yes
    
    YesPreston Oaks
    
    Yes
    
    Yes
    
    Yes
    
    No
    
    Yes
    
    YesBradford Creek
    
    Yes
    
    Yes
    
    Yes
    
    No
    
    Yes
    
    YesAddison Place
    
    Yes
    
    Yes
    
    Yes
    
    No
    
    Yes
    
    YesSt. Andrews at
The Polo Club
    
    Yes
    
    Yes
    
    Yes
    
    Yes
    
    Yes
    
    YesVeranda Chase
    
    Yes
    
    Yes
    
    Yes
    
    No
    
    Yes
    
    YesCommunity Under
Construction:Charlotte
    
    Yes
    
    Yes
    
    Yes
    
    Yes
    
    No
    
    Yes
   [Continued from above table, first column(s) repeated] Club-house
    
    
    
    
    
    
    
    SandFitness
    
    Whirl-
    
    Car
    
    Tennis
    
    Volley-
    
    Play-
    
    LaundryCommunity
    
    Center
    
    pool
    
    Wash
    
    Court(s)
    
    ball
    
    ground
    
    Room
    
    OtherExisting
Communities:Plantation
    
    Yes
    
    Yes
    
    Yes
    
    Yes
    
    Yes
    
    Yes
    
    Yes
    
    Riverfront,Trace
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Lake, NaturePreserveRiver Oaks
    
    Yes
    
    Yes
    
    Yes
    
    Yes
    
    Yes
    
    Yes
    
    Yes
    
    Riverfront,Nature PreservePreston Oaks
    
    Yes
    
    No
    
    Yes
    
    Yes
    
    No
    
    No
    
    YesBradford Creek
    
    Yes
    
    No
    
    Yes
    
    Yes
    
    No
    
    No
    
    Yes
    
    Nature PreserveAddison Place
    
    Yes
    
    No
    
    Yes
    
    Yes
    
    No
    
    Yes(1)
    
    Yes
    
    Lake,Nature TrailSt. Andrews at
    
    Yes
    
    Yes
    
    No
    
    Yes
    
    No
    
    No
    
    Yes
    
    Located next to golfThe Polo Club
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    courseVeranda Chase
    
    Yes
    
    No
    
    Yes
    
    Yes
    
    No
    
    Yes
    
    Yes
    
    Nature TrailCommunity Under
Construction:Charlotte
    
    Yes
    
    No
    
    Yes
    
    Yes
    
    No
    
    No
    
    Yes
    
    Walking Trail,Two Lakes
    *   In select units
(1) Phase II only
(2) Phase I only 19




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##### Table of Contents



Competition All of the communities are located in developed areas, and numerous other
apartment projects are located within the market area of each community. The
number of competitive apartment communities in the area could have a material
adverse effect on our ability to lease our apartments at the rental rates
anticipated, and we can give no assurances regarding the development of
additional competing multifamily communities in the future. The remainder of
this section summarizes the competition for each of the communities. The
following information reflects our study of apartment communities in each
submarket that we believe to be closely competitive with our community or
communities within that submarket. This section includes summary information
we obtained from various sources  including developers and real estate
brokers, as well as on-site visits  regarding those apartment communities.
Although we have attempted to verify the information and believe that it is
substantially accurate on the whole, information regarding a particular
community may be incorrect due to the sources relied upon or erroneous
information supplied by competitors. Plantation Trace, River Oaks and Bradford Creek.The Duluth submarket,
which we consider to include the area within a two-mile radius from the River
Oaks, Plantation Trace and Bradford Creek communities, currently consists of
approximately 19 multifamily communities, including ours. Although the
Bridgewater apartment community  which was previously developed and sold by an
affiliate of Mr. Roberts  is located more than two miles from Plantation
Trace, it is also included in the Duluth market area because it offers units
with attached garages and its architecture and amenities are similar to
Plantation Trace. Of the approximately 19 existing communities in the area,
seven were completed in the last six years, including Bradford Creek and the
second phase of Plantation Trace. Due to the quality of construction, age of
the communities, type of amenities, resident profiles and rental rates, we
believe that only 11 of the other 16 communities are in direct competition with
Plantation Trace, River Oaks and Bradford Creek. Preston Oaks.We believe that the north central Perimeter multifamily
submarket includes the area within a two-mile radius around this community. It
is generally bounded by Roswell Road to the west, Ashford Dunwoody Road to the
east, Spalding Drive to the north and Glenridge Drive to the south, and it
currently consists of approximately 26 multifamily communities, including
Preston Oaks. Of the 25 other existing communities in the market area, only
six were built before 1983. The remaining 19 communities range from
approximately one to 12 years of age. We believe that Preston Oaks competes
with all 25 of these communities. Northridge.We believe the North Springs multifamily submarket includes
the area within an approximately two-mile radius around this planned community.
It is generally bounded by the Chattahoochee River to the north and west,
Georgia 400 to the east and Dalrymple Road to the south, and currently consists
of 34 communities, including Highland Park which we sold on August 6, 2003. Of
the approximately 34 existing communities in the market area, only five have
been built since 1989. The remaining communities range in age from 15 years to
over 20 years. We believe our Northridge community will draw residents from
all of the other 34 communities located in the market area, but only 11 of the
34 communities will compete closely with the Northridge community. Addison Place.We believe the Alpharetta multifamily submarket includes
the area within an approximately four-mile radius around this community. It is
generally bounded by the Chattahoochee River to the east, Old Alabama to the
south, Georgia 400 to the west and Windward Parkway to the north, and it
currently consists of approximately 12 communities, including Addison Place.
We believe that Addison Place draws residents from all of the approximately 11
other communities located in the market area, which compete closely with
Addison Place. 20




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##### Table of Contents



Veranda Chase. We believe the Veranda Chase multifamily submarket
includes the area within an approximately two-mile radius around the Veranda
Chase community. It is generally bounded by Herrington Road to the east, Club
Drive to the south, Steve Reynolds Boulevard to the west and Sugarloaf Parkway
to the north and east, and it currently consists of approximately 24
communities, including Veranda Chase. We believe that Veranda Chase draws
residents from all of the approximately 23 other communities located in the
market area, but due to their amenities, quality of construction and resident
profile, only seven of the 23 other communities compete closely with Veranda
Chase. Charlotte. We consider the Charlotte multifamily submarket to include the
area within an approximately two-mile radius around the community. It is
generally bounded by Providence 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 approximately nine communities, including our
community. We believe that once construction of our Charlotte community is
complete, it will draw residents from all of the approximately eight other
existing communities located in the market area. St. Andrews at the Polo Club. We consider the West Palm Beach County
submarket to include the area within an approximate three mile radius around
this community. It is generally bordered by the Florida Turnpike to the east,
Lake Worth Road to the south, Okechobee Road to the north, and the Loxahatchee
National Wildlife Refuge to the west. The submarket consists of nine existing
apartment communities (including ours), and two new communities currently under
construction. Of the nine existing communities, four were built during the
last five years. St. Andrews competes with six of the nine communities in its
market area. Summary of Debt Secured by Our Properties See Item 7, Managements Discussion and Analysis of Financial Condition
and Results of Operations  Liquidity and Capital Resources  Debt Summary
Schedule, for an explanation of our current debt structure, including for each
loan: the principal balance at December 31, 2003 and at its scheduled
maturity, interest rate, maturity date, amortization schedule and monthly
principal and interest payment. Possible Additional Communities to Be Developed From time to time Roberts Properties plans the development of other
apartment communities to be located on property owned by Roberts Properties or
other affiliates of Mr. Roberts, or on property that one of those entities is
interested in acquiring. Mr. Roberts may elect to raise the required equity by
syndicating a limited partnership or limited liability company. Alternatively,
we may seek to raise the equity required to purchase and develop the community
by selling shares. If Mr. Roberts elects to raise equity through a limited
partnership or limited liability company, Mr. Roberts may seek to cause the
partnership to be merged into the operating partnership at a later date. A
transaction of that nature would require the consent of a majority in interest
of the limited partners of the partnership and of a majority of the
disinterested members of our board of directors, and we can give no assurances
regarding whether Mr. Roberts will ultimately determine to seek a merger in
that manner, or whether such a merger would in fact be approved by the
requisite majority in interest of limited partners in the partnership and by a
majority of the disinterested members of the board. See Item 13, Certain Relationships and Related Transactions  Payments to
the Roberts Companies, for more information about the payment of fees to the
Roberts Companies in connection with the development and construction of our
communities and properties. 21




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##### Table of Contents



Other Real Estate Assets In addition to the communities, we also own a retail center and a
corporate office building, both of which are under construction. Addison Place
retail center is a 42,090 square foot retail center at the intersection of
Abbotts Bridge Road and Jones Bridge Road in Alpharetta, Georgia and located
directly in front of our Addison Place apartment community. We entered into a
cost plus 5% contract with Roberts Construction to build the retail center,
which we expect to be completed by the third quarter of 2004. On June 28, 2001, we acquired a partially constructed office building
located adjacent to our Northridge land on which we are developing a new
community. The three-story, 39,907 square foot building will serve as our
corporate headquarters, and we intend to occupy a portion of one floor in the
building by May 1, 2004. We will lease the remaining space on that floor to
Roberts Properties and Roberts Construction, and we plan to lease the other two
floors to unaffiliated tenants. We have entered into a contract with Roberts
Construction to finish constructing the building at cost. We also intend to
retain Roberts Construction to perform tenant finish work for approximately
$600,000. We expect to begin leasing activities in the second quarter of 2004. See Item 13, Certain Relationships and Related Transactions  Payments to
the Roberts Companies, for more information about the payment of fees to the
Roberts Companies in connection with the development and construction of these
projects. 
 ITEM 3. LEGAL PROCEEDINGS. Neither Roberts Realty, the operating partnership nor the communities are
presently subject to any material litigation nor, to our knowledge, is any
material litigation threatened against any of them. Routine litigation arising
in the ordinary course of business is not expected to result in any material
losses to us or the operating partnership. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matter was submitted to a vote of security holders during the fourth quarter of 2003. 22




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##### Table of Contents



PART II 
 ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Our common stock trades on the American Stock Exchange, or AMEX, under the
symbol RPI. The following table sets forth the quarterly high and low
closing sales prices per share reported on the AMEX during 2003 and 2002, as
well as the quarterly dividends declared per share: DividendsQuarter Ended
    
    High
    
    Low
    
    Declared2003First Quarter
    
    $
    6.35
    
    
    $
    5.95
    
    
    NoneSecond Quarter
    
    
    6.64
    
    
    
    5.85
    
    
    NoneThird Quarter
    
    
    7.35
    
    
    
    6.15
    
    
    $
    0.55Fourth Quarter
    
    
    7.35
    
    
    
    6.85
    
    
    None2002First Quarter
    
    $
    7.25
    
    
    $
    6.60
    
    
    NoneSecond Quarter
    
    
    8.22
    
    
    
    7.35
    
    
    NoneThird Quarter
    
    
    7.35
    
    
    
    6.45
    
    
    NoneFourth Quarter
    
    
    6.75
    
    
    
    5.90
    
    
    None
 On February 29, 2004, there were approximately 352 holders of record of
our common stock. As of February 29, 2004, we had 5,241,028 shares outstanding (excluding
shares held in treasury). In addition, 1,980,218 shares are reserved for
issuance to unitholders from time to time upon their exercise of redemption
rights as explained in Item 1, Description of Business  The Operating
Partnership. There is no established public trading market for the units. As
of February 29, 2004, the operating partnership had 212 unitholders of record. We depend upon distributions from the operating partnership to fund our
distributions to shareholders. Distributions by the operating partnership, and
thus distributions by us, will continue to be at the discretion of the board of
directors and will be equal in amount for each unit and share. On August 27, 2003, we paid a special distribution of $0.55 per share to
shareholders and $0.55 per unit to unitholders in the operating partnership of
record on August 18, 2003. We paid the special distribution from the profit
generated by the sale of Highland Park. Our board of directors suspended
payment of our regular quarterly dividends for the fourth quarter of 2001 and
all of 2002 and 2003. We cannot predict when, or if, we will resume paying
regular quarterly dividends. We expect to continue to sell properties from
time to time and to pay special distributions to our shareholders and
unitholders from the net sale proceeds as we did in 2003 from the proceeds of
the Highland Park sale. To maintain our qualification as a REIT under the Internal Revenue Code,
we must make annual distributions to shareholders of at least 90% of our
taxable income, which does not include net capital gains. Under some
circumstances, we may be required to make distributions in excess of cash
available for distribution to meet those distribution requirements. During the twelve months ended December 31, 2003, 2002 and 2001, we issued
a total of 1,512, 3,077 and 18,290 shares, respectively, net of forfeitures of
restricted common stock to certain employees as incentive compensation. The
restrictions on transfer lapse at specified dates three years after the
respective grant date. The grants were exempt from registration as private
placements under section 4(2) of the Securities Act of 1933. We affixed
appropriate legends to the share certificates we issued in these transactions.
All recipients of these securities had adequate access, through their
relationships with us, to information about us. All of these securities are
deemed to be restricted securities for purposes of the Securities Act. 23




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##### Table of Contents



ITEM 6. SELECTED FINANCIAL DATA. OPERATING DATA:
(Dollars in Thousands, Except Per Share Amounts) YEARS ENDED DECEMBER 31,2003
    
    2002
    
    2001
    
    2000
    
    1999OPERATING DATA:REVENUES:Rental operations
    
    $
    18,042
    
    
    $
    15,862
    
    
    $
    14,941
    
    
    $
    16,629
    
    
    $
    16,131Other operating income
    
    
    1,151
    
    
    
    971
    
    
    
    1,037
    
    
    
    1,289
    
    
    
    1,118Total revenues
    
    
    19,193
    
    
    
    16,833
    
    
    
    15,978
    
    
    
    17,918
    
    
    
    17,249EXPENSES:Property operating and maintenance expense (exclusive of
depreciation and amortization) (1)
    
    
    7,565
    
    
    
    6,842
    
    
    
    5,417
    
    
    
    6,069
    
    
    
    6,005Depreciation of real estate assets
    
    
    6,733
    
    
    
    6,556
    
    
    
    4,995
    
    
    
    4,979
    
    
    
    5,045Interest expense
    
    
    7,578
    
    
    
    6,381
    
    
    
    4,525
    
    
    
    4,382
    
    
    
    4,668Interest income
    
    
    (77
    )
    
    
    (39
    )
    
    
    (263
    )
    
    
    (214
    )
    
    
    (159
    )Amortization of deferred financing costs
    
    
    296
    
    
    
    314
    
    
    
    203
    
    
    
    193
    
    
    
    203Other amortization expense
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    11Expenses related to retirement of debt
    
    
    0
    
    
    
    0
    
    
    
    604
    
    
    
    103
    
    
    
    291General and administrative expense
    
    
    2,072
    
    
    
    2,155
    
    
    
    1,732
    
    
    
    2,197
    
    
    
    1,964Loss on disposal of assets
    
    
    13
    
    
    
    33
    
    
    
    20
    
    
    
    70
    
    
    
    69Total expenses
    
    
    24,180
    
    
    
    22,242
    
    
    
    17,233
    
    
    
    17,779
    
    
    
    18,097GAIN (LOSS) FROM CONTINUING OPERATIONS BEFORE MINORITY
INTEREST AND GAINS ON SALE OF REAL ESTATE ASSETS
    
    
    (4,987
    )
    
    
    (5,409
    )
    
    
    (1,255
    )
    
    
    139
    
    
    
    (848
    )MINORITY INTEREST OF UNITHOLDERS
IN THE OPERATING PARTNERSHIP
    
    
    1,416
    
    
    
    1,703
    
    
    
    411
    
    
    
    (47
    )
    
    
    309GAIN (LOSS) FROM CONTINUING OPERATIONS BEFORE GAINS ON
SALE OF REAL ESTATE ASSETS
    
    
    (3,571
    )
    
    
    (3,706
    )
    
    
    (844
    )
    
    
    92
    
    
    
    (539
    )GAINS ON SALE OF REAL ESTATE ASSETS, net of minority interest
of unitholders in the operating partnership
    
    
    77
    
    
    
    941
    
    
    
    7,981
    
    
    
    2,416
    
    
    
    1,023INCOME (LOSS) FROM CONTINUING OPERATIONS
    
    
    (3,494
    )
    
    
    (2,765
    )
    
    
    7,137
    
    
    
    2,508
    
    
    
    484INCOME FROM DISCONTINUED OPERATIONS, net of
minority interest of unitholders in the operating partnership
    
    
    6,184
    
    
    
    249
    
    
    
    303
    
    
    
    324
    
    
    
    232Net income (loss)
    
    $
    2,690
    
    
    $
    (2,516
    )
    
    $
    7,440
    
    
    $
    2,832
    
    
    $
    716INCOME (LOSS) PER COMMON SHARE  BASIC AND DILUTED:Income (loss) from continuing operations
    
    $
    (0.68
    )
    
    $
    (0.56
    )
    
    $
    1.47
    
    
    $
    0.51
    
    
    $
    0.10Income from discontinued operations
    
    
    1.20
    
    
    
    0.05
    
    
    
    0.06
    
    
    
    0.07
    
    
    
    0.05Net income (loss)
    
    $
    0.52
    
    
    $
    (0.51
    )
    
    $
    1.53
    
    
    $
    0.58
    
    
    $
    0.15Dividends
declared (2)
    
    $
    0.5500
    
    
    $
    0.0000
    
    
    $
    0.3300
    
    
    $
    0.7400
    
    
    $
    1.0850
 December 31,BALANCE SHEET DATAReal estate assets, before accumulated depreciation
    
    $
    152,553
    
    
    $
    152,065
    
    
    $
    129,734
    
    
    $
    111,673
    
    
    $
    116,990Real estate assets, net of accumulated depreciation
    
    
    121,682
    
    
    
    127,628
    
    
    
    111,647
    
    
    
    90,513
    
    
    
    98,409Total assets
    
    
    177,739
    
    
    
    179,007
    
    
    
    165,503
    
    
    
    131,529
    
    
    
    127,078Total debt
    
    
    137,510
    
    
    
    137,416
    
    
    
    120,581
    
    
    
    93,690
    
    
    
    88,850Minority interest of unitholders in the operating partnership
    
    
    9,214
    
    
    
    9,361
    
    
    
    11,996
    
    
    
    10,607
    
    
    
    12,013Shareholders equity
    
    
    24,049
    
    
    
    22,479
    
    
    
    25,374
    
    
    
    21,437
    
    
    
    22,310
   Footnotes are on the following page. 24




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##### Table of Contents



December 31,2003
    
    2002
    
    2001
    
    2000
    
    1999OTHER DATA:Cash flow provided from (used in):Operating activities of continuing operations
    
    $
    1,594
    
    
    $
    1,959
    
    
    $
    5,000
    
    
    $
    5,496
    
    
    $
    5,047Operating activities of discontinued operations
    
    
    377
    
    
    
    810
    
    
    
    986
    
    
    
    989
    
    
    
    870Investing activities
    
    
    (4,739
    )
    
    
    (16,221
    )
    
    
    (49,684
    )
    
    
    (11,565
    )
    
    
    (7,003
    )Financing activities
    
    
    5,809
    
    
    
    16,377
    
    
    
    44,820
    
    
    
    4,902
    
    
    
    (1,347
    )Net increase (decrease) in cash and cash equivalents
    
    
    3,041
    
    
    
    2,925
    
    
    
    1,122
    
    
    
    (178
    )
    
    
    (2,433
    )Cash and cash equivalents, beginning of year
    
    
    5,542
    
    
    
    2,617
    
    
    
    1,495
    
    
    
    1,673
    
    
    
    4,106Cash and cash equivalents, end of year
    
    
    8,583
    
    
    
    5,542
    
    
    
    2,617
    
    
    
    1,495
    
    
    
    1,673Funds from
operations(3)
    
    $
    2,163
    
    
    $
    1,988
    
    
    $
    4,722
    
    
    $
    6,173
    
    
    $
    5,126Weighted average common shares outstanding  basic
    
    
    5,171,748
    
    
    
    4,943,280
    
    
    
    4,870,117
    
    
    
    4,881,601
    
    
    
    4,737,008Weighted average common shares outstanding  diluted (effect of operating
partnership units)
    
    
    7,223,727
    
    
    
    7,220,593
    
    
    
    7,226,123
    
    
    
    7,367,068
    
    
    
    7,448,757Total stabilized communities (at end of year)
    
    
    7
    
    
    
    7
    
    
    
    5
    
    
    
    8
    
    
    
    9Total stabilized apartments (at end of year)
    
    
    1,694
    
    
    
    1,632
    
    
    
    1,029
    
    
    
    1,633
    
    
    
    1,779Average physical occupancy (stabilized communities) (4)
    
    
    89.4
    %
    
    
    86.2
    %
    
    
    93.3
    %
    
    
    95.9
    %
    
    
    93.7
    %
   (1)
    
    Property operating expenses include personnel, utilities, real estate
taxes, insurance, maintenance, landscaping, marketing and property
administration expenses.(2)
    
    We began paying dividends and distributions on our common stock and
units beginning on April 15, 1996.(3)
    
    Funds from Operations, or FFO, is defined by the National Association
of Real Estate Investment Trusts as net income (loss), computed in
accordance with accounting principles generally accepted in the United
States (GAAP), excluding gains (or losses) from debt restructuring and
sales of property and non-recurring items, plus real estate related
depreciation and amortization. We use the current NAREIT definition of
FFO. Effective January 1, 2000, NAREIT amended its definition of FFO to
include all non-recurring items, except those defined as extraordinary
items under GAAP and gains and losses from sales of depreciable
operating property. We consider FFO to be an important measure of our
operating performance; however, FFO does not represent amounts available
for managements discretionary use for payment of capital replacement or
expansion, debt service obligations, property acquisitions, development
and distributions or other commitments and uncertainties. FFO should
not be considered as an alternative to net income (determined in
accordance with GAAP) as an indication of our financial performance or
cash flows from operating activities (determined in accordance with
GAAP) as a measure of our liquidity, nor is it indicative of funds
available to fund our cash needs, including our ability to make
distributions. We consider FFO to be an important measure of our
operating performance. While FFO does not represent cash flows from
operating, investing or financing activities as defined by GAAP, FFO
does provide investors with additional information with which to
evaluate the ability of a REIT to pay dividends, meet required debt
service payments and fund capital expenditures. We believe that to gain
a clear understanding of our operating results, FFO should be evaluated
in conjunction with net income (determined in accordance with GAAP).
FFO represents funds from operations available for shareholders and
unitholders. See Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations  Supplemental Disclosure
of Funds From Operations, for a reconciliation of net income to FFO.(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%. (Amounts have been restated, as appropriate, to give effect to discontinued operations.) 25




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##### Table of Contents



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. Overview We own multifamily residential properties as a self-administered and
self-managed equity real estate investment trust. At December 31, 2003, we
owned seven completed and stabilized multifamily apartment communities,
consisting of 1,694 apartment homes and one other community under construction
consisting of 319 apartment homes. Also, we have a community under development
consisting of 220 apartment homes, which when completed, will increase the size
of our portfolio to 2,233 apartment homes. In Atlanta, our primary market, negative job growth and historically low
mortgage interest rates have contributed to lower demand for apartments, while
the supply of multifamily units has increased. As of December 31, 2003, our
average stabilized occupancy was 92.6%. As of February 29, 2004, our average
stabilized occupancy was 92.9%. To maintain our physical occupancy we offer
residents incentives in the form of concessions and lower rents, which result
in decreased revenues and income from operations from our stabilized
communities. We expect rent concessions and lower rents to continue for the
foreseeable future, and we cannot offer any assurances regarding the effects of
these conditions on our business or when multifamily market conditions might
improve. To the extent that these conditions continue and perhaps worsen,
particularly in Atlanta, our business, operating results and liquidity will be
affected adversely. On August 6, 2003, we sold our Highland Park community for $17,988,000,
resulting in a gain of approximately $6,070,000, net of minority interest of
$2,432,000. Net sales proceeds were approximately $6,932,000 after deduction
of:  (a)
    
    $9,930,000 for the mortgage note payable assumed by the
buyer,(b)
    
    closing costs and prorations totaling $227,000, and(c)
    
    a partnership profits interest distribution of $899,000 paid
to Roberts Properties under the partnership agreement of the
operating partnership. On August 27, 2003, we paid a special distribution of $0.55 per share to
shareholders and $0.55 per unit to unitholders in the operating partnership of
record on August 18, 2003. We paid the special distribution from the profit
generated by the sale of Highland Park. Previously, our board of directors
suspended payment of our regular quarterly dividends for the fourth quarter of
2001 and all of 2002 and 2003. We cannot predict when, or if, we will resume
paying regular quarterly dividends. We expect to continue to sell properties
from time to time and to pay special distributions to our shareholders and
unitholders from the net sale proceeds as we did in 2003 from the proceeds of
the Highland Park sale. We sold our 9.5-acre East Fox Court land in November 2002 for $3,200,000
plus reimbursement of $302,000 of previously paid sewer costs. We were able to
take advantage of its appreciation in value and elected to divest it because it
did not fit with our long-term development plans. Because there was no debt on
the property, the full amount of proceeds was available for our general
corporate working capital purposes. Part of our business plan and growth strategy involves divesting smaller
properties that are less efficient to lease and maintain. Following this
strategy, we sold our 146-unit Ivey Brook community in June 2000 and our
152-unit Rosewood Plantation community in January 2001 and redeployed the net
cash proceeds into new properties where we expect the yield and long-term
growth to be greater. 26




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##### Table of Contents



In 2001 we used the proceeds from the sale of our Rosewood Plantation
community plus loan proceeds to purchase two parcels of undeveloped land (one
of which was the East Fox Court land we later sold); a partially constructed
retail center; and a partially constructed office building, for a total of
approximately $13.4 million as part of a Section 1031 tax-deferred exchange.
We are developing and intend to build a 220-unit apartment community on the
second parcel of land located in north Atlanta. We expect construction to be
complete in the third quarter of 2004 on our Addison Place retail center, a
42,090 square foot retail center located at the entrance of our Addison Place
apartment community. We anticipate finishing construction of our office
building in the second quarter of 2004 and intend to use a portion of one floor
of the building as our corporate headquarters. We will lease the remaining
space on that floor to Roberts Properties and Roberts Construction, and we plan
to lease the other two floors to unaffiliated tenants. We sold Crestmark in July 2001 and reinvested the proceeds in November
2001 through a Section 1031 tax-deferred exchange into the 200-unit St. Andrews
at the Polo Club apartment community located in the City of Wellington,
Florida. This exchange redeployed our equity from Douglas County, Georgia to
Palm Beach County, Florida, a substantially stronger growth market. We will continue to seek opportunities to maximize shareholder value. As
noted above, these efforts may include periodically selling some of our
apartment communities as we have done in the past and making distributions to
our shareholders from the sales proceeds. Results of Operations for the Years Ended December 31, 2003, 2002 and 2001 Results for All Communities Our operating performance for all of our communities is summarized in the
following table: Year Ended December 31,
    
    Year Ended December 31,%
    
    
    
    
    
    
    
    
    
    %(dollars in thousands)
    
    2003
    
    2002
    
    Change
    
    2002
    
    2001
    
    ChangeTotal operating revenues
    
    $
    19,193
    
    
    $
    16,833
    
    
    
    14.0
    %
    
    $
    16,833
    
    
    $
    15,978
    
    
    
    5.4
    %Property operating expenses(1)
    
    $
    7,565
    
    
    $
    6,842
    
    
    
    10.6
    %
    
    $
    6,842
    
    
    $
    5,417
    
    
    
    26.3
    %General and administrative expenses
    
    $
    2,072
    
    
    $
    2,155
    
    
    
    (3.9
    %)
    
    $
    2,155
    
    
    $
    1,732
    
    
    
    24.4
    %Depreciation of real estate assets
    
    $
    6,733
    
    
    $
    6,556
    
    
    
    2.7
    %
    
    $
    6,556
    
    
    $
    4,995
    
    
    
    31.3
    %Income from operations
    
    $
    2,823
    
    
    $
    1,280
    
    
    
    120.5
    %
    
    $
    1,280
    
    
    $
    3,834
    
    
    
    (66.6
    %)Net income (loss)
    
    $
    2,690
    
    
    $
    (2,516
    )
    
    
    206.9
    %
    
    $
    (2,516
    )
    
    $
    7,440
    
    
    
    (133.8
    %)Average stabilized occupancy(2)
    
    
    89.6
    %
    
    
    86.2
    %
    
    
    3.4
    %
    
    
    86.2
    %
    
    
    91.3
    %
    
    
    (5.1
    %)
   (1)
    
    Property operating expenses include personnel, utilities, real estate
taxes, insurance, maintenance, landscaping, marketing and property
administration expenses.(2)
    
    Represents the average physical occupancy of our stabilized properties
calculated by dividing the total number of vacant days by the total
possible number of vacant days for each period and subtracting the
resulting number from 100%. The calculation includes the following
properties only through the dates shown, which are the dates we sold each
respective property: (a) Highland Park only through August 6, 2003; (b)
Rosewood Plantation only through January 4, 2001; and (c) Crestmark only
through July 11, 2001. For the year ended December 31, 2003, we recorded net income of $2,690,000
or $0.52 per share compared to a net loss of ($2,516,000) or ($0.51) per share
for the year ended December 31, 2002 and net income of $7,440,000 or $1.53 per
share for the year ended December 31, 2001. The $5,206,000 increase from a net
loss of ($2,516,000) in 2002 to net income of $2,690,000 in 2003 is due
primarily to the following: 27




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(a)
    
    a gain of $6,070,000, net of minority interest, on the sale
of Highland Park in August 2003;(b)
    
    a $1,861,000 increase in operating revenues due to the
completion of Veranda Chase in November 2002;(c)
    
    a $935,000 increase in operating revenues at Addison Place;(d)
    
    an $83,000 decrease in general and administrative expenses;
and(e)
    
    a $38,000 increase in interest income due to higher cash
balances;offset by:  (f)
    
    an increase of $1,197,00 in interest expense associated with:  
    
    Veranda Chase, which was completed in the fourth quarter of 2002;
offset by:
    
    the sale of Highland Park in August 2003;  (g)
    
    a gain of $1,043,000, net of minority interest, on the sale
of our East Fox property in November 2002;(h)
    
    a $723,000 increase in property operating expenses (excluding
depreciation and general and administrative expenses) primarily due
to the completion of Veranda Chase in November 2002;(i)
    
    a $287,000 decrease in the minority interest in the loss
before gains on the sale of real estate assets and extraordinary
items;(j)
    
    a $269,000 decrease in same-property operating revenues;(k)
    
    a $179,000 decrease in operating revenues at St. Andrews at
the Polo Club; and(l)
    
    an increase of $177,000 in depreciation expense due to the
completion of Veranda Chase in November 2002, offset by the sale of
Highland Park in August 2003. The $9,956,000 decrease from net income of $7,440,000 in 2001 to a net
loss of ($2,516,000) in 2002 is due primarily to the following:  (a)
    
    gains on the sales of real estate assets, net of minority
interest, of $5,188,000 on the sale of Rosewood Plantation in
January 2001 and $2,793,000 on the sale of Crestmark in July 2001;(b)
    
    a $660,000 decrease in same-property operating revenues;(c)
    
    a $1,958,000 decrease in operating revenues due to the sale
of Crestmark in July 2001;(d)
    
    an increase of depreciation expense due to the completion of
Addison Place Phase II in September 2001, the purchase of St.
Andrews at the Polo Club in November 2001, and the completion of
Veranda Chase in November 2002, offset by the sale of Crestmark in
July 2001; 28




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##### Table of Contents



(e)
    
    higher interest expense associated with:  
    
    Addison Place Phase II, which was completed in the third quarter of 2001;
    
    the purchase of St. Andrews at the Polo Club in November 2001;
    
    Veranda Chase, which was completed in the fourth quarter of 2002;
offset by:
    
    the sale of Crestmark in July 2001;  (f)
    
    an increase of $1,495,000 in property operating expenses
(excluding depreciation and general and administrative expenses)
primarily due to the purchase of St. Andrews at the Polo Club in
November 2001, the completion of Addison Place Phase II in September
2001, the completion of Veranda Chase in November 2002, offset by a
$676,000 decrease in property operating expenses due to the sale of
Crestmark in July 2001;(g)
    
    a $423,000 increase in general and administrative expenses;(h)
    
    a $224,000 decrease in interest income due to lower cash
balances after funds were invested in real estate assets and to
lower interest rates; and(i)
    
    an increase of $111,000 in amortization of loan costs;offset by:  (j)
    
    increases in operating revenues at St. Andrews at the Polo
Club by $2,561,000 and at Addison Place by $449,000;(k)
    
    a $405,000 increase in operating revenues from Veranda Chase;
and(l)
    
    a $1,292,000 increase in the minority interest in the loss
from continuing operations before gains on sale of real estate
assets. Same-Property Operating Performance Same-property results for the four communities that were fully stabilized
during the three years ended December 31, 2003, 2002 and 2001 (Bradford Creek,
River Oaks, Plantation Trace and Preston Oaks) are summarized in the table
below. 29




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##### Table of Contents



Year Ended December 31,
    
    Year Ended December 31,%
    
    
    
    
    
    
    
    
    
    %(dollars in thousands)
    
    2003
    
    2002
    
    Change
    
    2002
    
    2001
    
    ChangeTotal operating revenues
    
    $
    9,259
    
    
    $
    9,528
    
    
    
    (2.8
    %)
    
    $
    9,528
    
    
    $
    10,119
    
    
    
    (5.8
    %)Property operating expenses(1)
    
    $
    3,520
    
    
    $
    3,458
    
    
    
    1.8
    %
    
    $
    3,458
    
    
    $
    3,324
    
    
    
    4.0
    %Average stabilized occupancy(2)
    
    
    91.9
    %
    
    
    91.6
    %
    
    
    0.3
    %
    
    
    91.6
    %
    
    
    93.1
    %
    
    
    (1.5
    %)Average monthly rent per
apartment home
    
    $
    938
    
    
    $
    973
    
    
    
    (3.6
    %)
    
    $
    973
    
    
    $
    1,029
    
    
    
    (5.4
    %)Lease renewal percentage(3)
    
    
    55.7
    %
    
    
    57.0
    %
    
    
    (1.3
    %)
    
    
    57.0
    %
    
    
    53.7
    %
    
    
    3.3
    %
   (1)
    
    Property operating expenses include personnel, utilities, real estate
taxes, insurance, maintenance, landscaping, marketing and property
administration expenses.(2)
    
    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%.(3)
    
    Represents the number of leases renewed divided by the number of leases
expired during the period presented, expressed as a percentage. Our 2003 same-property operating performance, when compared to 2002,
includes a 2.8% decrease in operating revenues, a 0.3% increase in average
occupancy from 91.6% to 91.9%, a 3.6% decrease in average monthly rent and a
1.3% decrease in our lease renewal percentage. Our 2002 same-property operating performance, when compared to 2001,
includes a 5.8% decrease in operating revenues, a 1.5% decrease in average
occupancy from 93.1% to 91.6%, a 5.4% decrease in average monthly rent and a
3.3% increase in our lease renewal percentage. Comparison of Statements of Operations The following discussion compares our statements of operations for the
years ended December 31, 2003, 2002 and 2001. Property operating revenue increased $2,360,000 or 14.0% from $16,833,000
for the year ended December 31, 2002 to $19,193,000 for the year ended December
31, 2003. The increase is due primarily to the following:  (a)
    
    a $1,861,000 increase in operating revenues due to the
completion of Veranda Chase in November 2002;(b)
    
    a $935,000 increase in operating revenues at Addison Place;offset by:  (c)
    
    a $269,000 decrease in same-property operating revenues; and(d)
    
    a $179,000 decrease in operating revenues at St. Andrews at
the Polo Club. Property operating revenue increased $855,000 or 5.4% from $15,978,000 for
the year ended December 31, 2001 to $16,833,000 for the year ended December 31,
2002. The increase is due primarily to the following:  (a)
    
    a $2,561,000 increase in operating revenues due to the
purchase of St. Andrews at the Polo Club in November 2001; 30




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##### Table of Contents



(b)
    
    a $449,000 increase in operating revenues at Addison Place
due to the completion of Addison Place Phase II in September 2001;(c)
    
    a $405,000 increase in operating revenues due to the
completion of Veranda Chase in November 2002;offset by:  (d)
    
    a $1,958,000 decrease in operating revenues due to the sale
of Crestmark in July 2001;(e)
    
    a $660,000 decrease in same-property operating revenues. Property operating expenses (excluding depreciation and general and
administrative expenses) increased $723,000 or 10.6% from $6,842,000 for the
year ended December 31, 2002 to $7,565,000 for the year ended December 31,
2003. The increase in property operating expenses is due primarily to the
following:  (a)
    
    a $62,000 increase in same-property operating expenses;(b)
    
    a $593,000 increase in operating expenses due to the
completion of Veranda Chase in November 2002; and(c)
    
    a $27,000 increase in operating expenses at St. Andrews at
the Polo Club. Property operating expenses (excluding depreciation and general and
administrative expenses) increased $1,425,000 or 26.3% from $5,417,000 for the
year ended December 31, 2001 to $6,842,000 for the year ended December 31,
2002. The increase in property operating expenses is due primarily to the
following:  (a)
    
    a $1,205,000 increase due to the purchase of the St. Andrews
at the Polo Club community in November 2001;(b)
    
    a $400,000 increase due to the completion of Addison Place
Phase II in September 2001;(c)
    
    a $366,000 increase due to the completion of Veranda Chase in
November 2002;(d)
    
    a $202,000 increase in same-property expenses;offset by:  (e)
    
    a $676,000 decrease due to the sale of Crestmark in July
2001. General and administrative expenses decreased $83,000 or 3.9% from
$2,155,000 for the year ended December 31, 2002 to $2,072,000 for the year
ended December 31, 2003 and include salaries; legal, accounting and tax fees;
recruiting, travel and lodging expenses; director fees; marketing and printing
fees and other costs. This decrease is due primarily to decreases in corporate
office salaries, recruiting costs; and travel expenses. General and
administrative expenses as a percentage of operating revenues decreased from
12.8% for the year ended December 31, 2002 to 10.8% for the year ended December
31, 2003. General and administrative expenses increased $423,000 or 24.4% from
$1,732,000 for the year ended December 31, 2001 to $2,155,000 for the year
ended December 31, 2002 and include salaries; 31




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##### Table of Contents



legal, accounting and tax fees; recruiting travel and lodging expenses;
director fees; marketing and printing costs; and other costs. This increase is
due primarily to increases in corporate office salaries, recruiting and
marketing costs, and travel expenses. General and administrative expenses as a
percentage of operating revenues increased from 10.8% for the year ended
December 31, 2001 to 12.8% for the year ended December 31, 2002. Depreciation expense increased $177,000 or 2.7% from $6,556,000 for the
year ended December 31, 2002 to $6,733,000 for the year ended December 31,
2003. The increase is due primarily to the completion of Veranda Chase in
November 2002. Depreciation expense increased $1,561,000 or 31.3% from $4,995,000 for the
year ended December 31, 2001 to $6,556,000 for the year ended December 31,
2002. The increase is due primarily to the purchase of St. Andrews at the Polo
Club in November 2001, the completion of the second phase of Addison Place in
September 2001, the completion of Veranda Chase in November 2002, offset by the
sale of Crestmark in July 2001. Interest expense increased $1,197,000 or 18.8% from $6,381,000 for the
year ended December 31, 2002 to $7,578,000 for the year ended December 31,
2003. The increase is due primarily to an increase of $1,043,000 associated
with the loan to finance Veranda Chase. Interest expense increased $1,856,000 or 41.0% from $4,525,000 for the
year ended December 31, 2001 to $6,381,000 for the year ended December 31,
2002. The increase is due primarily to:  (a)
    
    an increase of $693,000 in interest expense due to the
completion of Addison Place Phase II in September 2001;(b)
    
    an increase of $1,229,000 associated with the loan obtained
to finance the purchase of St. Andrews at the Polo Club in November
2001;(c)
    
    $501,000 associated with the loan to finance Veranda Chase;offset by:(d)
    
    a decrease of $539,000 due to the sale of Crestmark in July
2001. On January 4, 2001, we sold the 152-unit Rosewood Plantation community for
$14,800,000. The sale resulted in a gain of $5,188,000, net of minority
interest of $2,554,000. Net sales proceeds were $5,820,000 after deducting
$7,400,000 for the mortgage note payable assumed by the buyer, $476,000 for a
loan paydown, $364,000 for closing costs and prorations and $740,000 for a
partnership profits interest paid to Roberts Properties. Unamortized loan
costs of $93,000 were charged to expense as expenses related to retirement of
debt. In April 2002, we settled a claim under the warranty provisions of the
sale contract and paid the buyer $150,000, which is shown in the 2002 financial
statements as a reduction of the gain on sale of real estate assets (before
minority interest of $48,000). On May 30, 2001, we purchased from Roberts Properties approximately 9.5
acres of undeveloped land located at the corner of Jones Bridge Road and East
Fox Court, in Alpharetta, Georgia across Jones Bridge Road from Addison Place.
Roberts Properties had purchased the property for $1,070,000, and the
$1,447,000 price we paid includes approximately $377,000 in development-related
work previously performed by Roberts Properties. The purchase price was
reduced by $356,000 as a result of a sewer moratorium. On June 20, 2001, we purchased approximately 6.84 acres of land from REES
59 for $4,470,000, including closing costs, to construct a 42,090 square foot
retail center at the intersection of Abbotts 32




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##### Table of Contents



Bridge Road and Jones Bridge Road in Alpharetta, Georgia in front of the
Addison Place community. REES 59 had previously purchased the land for
$3,514,000 from Roberts Properties Jones Bridge, LLC, of which Mr. Roberts
owned a 90% interest. The purchase was funded by the Rosewood Plantation sales
proceeds as part of a Section 1031 tax-deferred exchange. On June 28, 2001, we purchased approximately 10.9 acres from Roberts
Properties to construct a 220-unit upscale apartment community located adjacent
to our former Highland Park community. The purchase price was $5,376,000,
including closing costs, and the transaction was part of a Section 1031
tax-deferred exchange partially funded by sales proceeds from the sale of
Rosewood Plantation. We estimate that the total cost of the project will be
approximately $24,000,000. On June 28, 2001, we purchased a partially constructed office building and
approximately 3.9 acres of land from Roberts Properties for $2,147,000,
including closing costs. We intend to complete construction and use a portion
of one floor of the building as our corporate headquarters. We will lease the
remaining space on that floor to Roberts Properties and Roberts Construction,
and we plan to lease the other two floors to unaffiliated tenants. On July 11, 2001, we completed the sale of our 334-unit Crestmark
community for $25,000,000. The sale resulted in a gain of $2,793,000, net of
minority interest of $1,325,000. Net cash proceeds were $8,013,000 after
deducting $15,485,000 for the mortgage note payable assumed by the buyer,
$574,000 for closing costs and prorations and $928,000 for a partnership
profits interest paid to Roberts Properties. Unamortized loan costs of
$169,000 were charged to expense as expenses related to retirement of debt. On November 6, 2001, we purchased the 200-unit St. Andrews at the Polo
Club apartment community located in the City of Wellington, Palm Beach County,
Florida from an unrelated party for a purchase price of $27,778,000, including
closing costs, as part of a Section 1031 tax-deferred exchange partially funded
by net proceeds from the sale of Crestmark. To provide the balance of the
funds needed to purchase St. Andrews at the Polo Club, we obtained a
$21,000,000 permanent loan from State Farm Life Insurance Company. The loan
bears a fixed interest rate of 6.95% per annum and has a 10-year term. On November 21, 2002, we sold the 9.5 acres of land located at the corner
of Jones Bridge Road and East Fox Court, in Alpharetta, Georgia for $3,200,000
plus a reimbursement of previously paid sewer costs of $302,000. The sale
resulted in a gain of $1,043,000, net of minority interest of $480,000. On February 28, 2003, we received an aggregate of $381,000 in connection
with the sale of land, reimbursement for land improvements and conveyances of
temporary construction easements to Fulton County, Georgia for road
right-of-way projects at our Addison Place community, which resulted in a gain
of $77,000, net of minority interest of unitholders in the operating
partnership. On August 6, 2003, we completed the sale of our Highland Park community
for $17,988,000, resulting in a gain of approximately $6,070,000, net of
minority interest of $2,432,000. Net sales proceeds were approximately
$6,932,000 after deduction of $9,930,000 for the mortgage note payable, which
was assumed by the buyer, closing costs and prorations totaling $227,000, and a
partnership profits interest of $899,000 paid to Roberts Properties under the
amended partnership agreement of the operating partnership. Liquidity and Capital Resources Comparison of Years Ended December 31, 2003, 2002 and 2001. Cash and cash
equivalents increased $3,041,000 from $5,542,000 as of December 31, 2002 to
$8,583,000 as of December 31, 2003. The increase was due to a decrease in cash
used in investing activities, offset by a decrease in cash provided by
financing activities and a decrease in cash provided by operating activities.
Cash and cash 33




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equivalents increased $2,925,000 from $2,617,000 as of December 31, 2001 to
$5,542,000 as of December 31, 2002. The increase was due to our investing and
financing activities offset by a decrease in cash provided by operating
activities. A primary source of liquidity for us is cash flow from operations.
Operating cash flows have historically been determined by the number of
apartment homes, rental rates and operating expenses with respect to those
apartment homes. Net cash provided by operations decreased $798,000 from
$2,769,000 during 2002 to $1,971,000 during 2003. The decrease in cash flow
from operations is due primarily to a decrease in operating income from our
same-properties and higher interest expense. Net cash provided by operating activities decreased $3,217,000 from
$5,986,000 during 2001 to $2,769,000 during 2002. The decrease is primarily
due to a decrease in operating income from our same-properties, a decrease from
the sale of Crestmark in July 2001, and higher interest expense, offset by the
additional cash flow from St. Andrews at the Polo Club. On August 27, 2003, we paid a special distribution of $0.55 per share to
shareholders and $0.55 per unit to unitholders of record on August 18, 2003.
We paid this special distribution from the profit generated by the sale of our
188-unit Highland Park community. Previously, our board of directors suspended
payment of our regular quarterly dividends for the fourth quarter of 2001 and
all of 2002 and 2003. We cannot predict when, or if, we will resume paying
regular quarterly dividends. We expect to continue to sell properties from
time to time and to pay special distributions to our shareholders and
unitholders from the net sale proceeds as we did in 2003 from the proceeds of
the Highland Park sale. In addition to experiencing lower operating revenues at our existing
properties, we are completing three properties
under construction and one property in the planning and design phase. In
total, these four new properties required an investment of approximately $13.4
million of our equity that is currently not producing any cash flow. The
decreased revenue, together with our growth program, has reduced our cash flow
from operations. We believe that our cash flow from operations will begin to
improve as we complete our new properties under development and construction.
Until there is a sustained and broad-based economic recovery resulting in
positive job growth, however, the Atlanta apartment market will remain soft,
and we will continue to experience the negative effects of lower rents. Net cash used in investing activities decreased $11,482,000 from
$16,221,000 during 2002 to $4,739,000 during 2003. The decrease is due
primarily to the following:  (a)
    
    construction and development costs of $11,667,000 in 2003
related to Veranda Chase, Charlotte, the corporate office building
and the Addison Place retail center compared to construction and
development costs of $19,542,000 in 2002 related to Veranda Chase,
Charlotte, the corporate office building and the Addison Place
retail center;offset by:(b)
    
    proceeds of $381,000 from the sale of land and reimbursement
for land improvements for right-of-way projects at the Addison Place
community in February 2003 and proceeds of $6,932,000 from the sale
of Highland Park in August 2003 compared to proceeds of $3,471,000
from the sale of East Fox Court land in 2002. Net cash used in investing activities decreased $33,463,000 from
$49,684,000 during 2001 to $16,221,000 during 2002. The decrease is due
primarily to the following: 34




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(a)
    
    construction and development costs of $19,542,000 in 2002
related to Veranda Chase, Charlotte, the corporate office building
and Addison Place retail center compared to acquisition,
construction and development costs of $64,364,000 in 2001 related to
our Addison Place Phase II, Veranda Chase, Charlotte, East Fox Court
and Northridge communities, the Addison Place Shoppes, the corporate
office building, and the purchase of St. Andrews at the Polo Club;offset by:(b)
    
    proceeds of $3,471,000 from the sale of East Fox Court land
in 2002 compared to proceeds of $6,368,000 and $8,312,000 from the
sales of Rosewood Plantation and Crestmark, respectively, in 2001. Net cash provided by financing activities decreased $10,568,000 from
$16,377,000 of net cash provided in 2002 to $5,809,000 of net cash provided
during 2003. This decrease is due primarily to the following:  (a)
    
    a decrease of $6,120,000 from the $18,687,000 proceeds
received from construction loans in 2002 compared to $12,567,000
received in 2003;(b)
    
    an increase in cash used for dividends and distributions paid
to $3,962,000 in 2003 compared to none in 2002;(c)
    
    an increase in payoffs of land notes payable of $2,400,000
due to the payoff of the $3,700,000 Addison Place retail center land
loan in 2003 compared to the payoff of the $1,300,000 East Fox Court
land loan in 2002;(d)
    
    net increase of $2,372,000 from the refinancing of the
Highland Park mortgage loan in 2002, compared to a net increase of
$2,263,000 from the refinancing of the River Oaks mortgage loan in
2003;offset by:(e)
    
    net repayments of $2,000,000 on the line of credit in 2002,
compared to no borrowings or repayments on the line of credit in
2003. Net cash provided by financing activities decreased $28,443,000 from
$44,820,000 of net cash provided in 2001 to $16,377,000 of net cash provided
during 2002. This decrease is due primarily to the following:  (a)
    
    net increase of $3,730,000 from the refinancing of the
Preston Oaks mortgage loan, plus $21,000,000 from the mortgage loan
to finance the St. Andrews at the Polo Club acquisition in 2001,
compared to a net increase of $2,372,000 from the refinancing of
Highland Park in 2002;(b)
    
    net repayments of $2,000,000 on the line of credit in 2002,
compared to borrowings on the line of credit of $2,000,000 in 2001;(c)
    
    a decrease related to no borrowings for land loans in 2002
compared to the $6,700,000 proceeds received from land notes payable
in connection with borrowings to finance the construction of Addison
Shoppes and the Northridge community, plus $1,300,000 to fund the
purchase of the East Fox Court land in 2001; 35




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offset by:(d)
    
    an increase of $1,135,000 from the $18,687,000 proceeds
received from construction loans in 2002 compared to the $17,552,000
received in 2001;(e)
    
    a decrease in payoffs of land notes payable of $700,000 due
to the payoff of the $1,300,000 East Fox Court land loan in 2002
compared to the payoff of the $2,000,000 Veranda Chase loan in 2001;(f)
    
    a decrease in cash used to repurchase treasury stock due to
the repurchase of 69,500 shares for $554,000 in 2001 compared to
none in 2002; and(g)
    
    a decrease in cash used for dividends and distributions paid
from $3,190,000 in 2001 compared to none in 2002. The table and accompanying footnotes on the following two pages explain
our current debt structure, including for each loan: the principal balance at
December 31, 2003 and at its scheduled maturity, interest rate, maturity date,
amortization schedule and monthly principal and interest payment. 36




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##### Table of Contents



ROBERTS REALTY INVESTORS, INC.
DEBT SUMMARY SCHEDULE
(Listed in order of maturity)
December 31, 2003 Interest
    
    Maturity
    
    Balance at
    
    Monthly
    
    CurrentLender
    
    Interest Terms
    
    Rate
    
    Date
    
    Maturity
    
    Payment
    
    BalanceOffice Building(1)(2)
    
    Bank of North Georgia
    
    LIBOR plus 200 b.p.
    
    
    3.12
    
    
    
    06/01/04
    
    
    $
    5,280,000
    
    
    Interest only
    
    $
    3,657,000Revolving $1 million credit line(1)
    
    Bank of North Georgia
    
    LIBOR plus 200 b.p.
    
    
    4.00
    
    
    
    06/01/04
    
    
    
    0
    
    
    Interest only
    
    
    0Northridge Apartments land loan(1)
    
    SouthTrust Bank
    
    LIBOR plus 175 b.p.
    
    
    2.87
    
    
    
    07/10/04
    
    
    
    3,000,000
    
    
    Interest only
    
    
    3,000,000Revolving $2 million credit line(1)
    
    Compass Bank
    
    LIBOR plus 175 b.p.
    
    
    3.75
    
    
    
    08/01/04
    
    
    
    0
    
    
    Interest only
    
    
    0Addison Place Phase II(3)
    
    Wachovia Bank
    
    Fixed-rate const/perm
    
    
    8.62
    
    
    
    05/10/05
    
    
    
    22,071,000
    
    
    Variable
    
    
    22,282,000Addison Place Shoppes(1)
    
    Compass Bank
    
    LIBOR plus 185 b.p.
    
    
    3.50
    
    
    
    04/30/06
    
    
    
    6,500,000
    
    
    Interest only
    
    
    3,391,000Preston Oaks(4)
    
    Freddie Mac
    
    Fixed-rate permanent
    
    
    7.18
    
    
    
    02/01/08
    
    
    
    11,694,000
    
    
    $
    86,034
    
    
    
    12,310,000Charlotte(1)(2)
    
    AmSouth Bank
    
    LIBOR plus 200 b.p.
    
    
    3.12
    
    
    
    03/10/08
    
    
    
    19,642,000
    
    
    Interest only
    
    
    16,410,000Veranda Chase(5)
    
    Compass Bank
    
    Fixed-rate const/perm
    
    
    7.38
    
    
    
    04/25/08
    
    
    
    16,348,000
    
    
    Interest only
    
    
    17,000,000Bradford Creek(6)
    
    Nationwide Life
    
    Fixed-rate permanent
    
    
    7.15
    
    
    
    06/15/08
    
    
    
    7,290,000
    
    
    $
    56,734
    
    
    
    7,861,000Plantation Trace(7)
    
    Prudential Life
    
    Fixed-rate permanent
    
    
    7.09
    
    
    
    10/15/08
    
    
    
    10,313,000
    
    
    $
    79,892
    
    
    
    11,185,000Addison Place Phase I(7)
    
    Prudential Life
    
    Fixed-rate permanent
    
    
    6.95
    
    
    
    11/15/09
    
    
    
    8,387,000
    
    
    $
    62,885
    
    
    
    9,177,000St. Andrews at the Polo Club(8)
    
    State Farm
    
    Fixed-rate permanent
    
    
    6.95
    
    
    
    12/01/11
    
    
    
    18,138,000
    
    
    $
    139,009
    
    
    
    20,534,000River Oaks(4)
    
    Freddie Mac
    
    Fixed-rate permanent
    
    
    5.54
    
    
    
    09/01/13
    
    
    
    8,945,000
    
    
    $
    61,307
    
    
    
    10,703,000Totals
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    137,608,000
    
    
    
    
    
    
    $
    137,510,000
 37




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##### Table of Contents



(1)
    
    The interest rate shown for variable-rate debt is as of December 31, 2003.
The revolving $1 million credit line with Bank of North Georgia has an
interest rate floor of 4.00%. The revolving $2 million credit line with
Compass Bank has an interest rate floor of 3.75%. The construction loan on
the Addison Place Shoppes with Compass Bank has an interest rate floor of
3.50%.(2)
    
    The construction loans for Charlotte and the office building are not yet
fully drawn. The amount shown in the column titled Balance at Maturity
assumes the full amount of each loan is drawn and required principal payments
are made prior to maturity.(3)
    
    The loan secured by Addison Place Phase II is a floating rate loan with no
prepayment premium for early termination. The interest rate on the loan was
synthetically fixed with an interest rate swap agreement, which may result in
a prepayment premium depending upon market interest rates. The prepayment
premium (if any) is equal to the present value of the difference between the
existing fixed interest rate on the interest rate swap agreement and the
current replacement rate for a similar structure in the marketplace at the
time of prepayment. There is no minimum prepayment fee. Remaining principal
payments on the loan are scheduled as follows: 2004 - $152,000; 2005 -
$59,000, plus the balloon payment due of $22,071,000.(4)
    
    The loans secured by the Preston Oaks and River Oaks communities 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
loans are prepaid after expiration of the yield maintenance period, but more
than 90 days before the maturity date, the prepayment premium will be 1% of
the unpaid principal balance of the notes. The loans may be prepaid in full
during the last 90 days before their maturity dates without any prepayment
premium.(5)
    
    The construction loan for Veranda Chase is not yet fully drawn. The
amount shown in the column titled Balance at Maturity assumes the full
amount of this loan is drawn and required principal payments are made prior to
maturity. The loan is a floating rate loan with no prepayment premium for
early termination. The interest rate on the loan was synthetically fixed with
an interest rate swap agreement, which may result in a prepayment premium
depending upon market interest rates. The prepayment premium (if any) is
equal to the present value of the difference between the existing fixed
interest rate on the interest rate swap agreement and the current replacement
rate for a similar structure in the marketplace at the time of prepayment.
There is no minimum prepayment fee.(6)
    
    The loan secured by the Bradford Creek community may be prepaid in full
upon payment of a premium equal to the greater of (a) 1% of the outstanding
principal balance of the loan or (b) the sum of the present value of the
scheduled monthly payments to the maturity date and the present value of the
balloon payment due on the maturity date, less the outstanding principal
balance of the loan on the date of prepayment. The loan may be prepaid in
full during the last 90 days before its maturity date without any prepayment
premium.(7)
    
    Each of the loans secured by the Plantation Trace and Addison Place Phase
I communities may be prepaid upon payment of a premium equal to the greater of
(a) 1% of the principal amount being prepaid multiplied by a fraction having
as its numerator the number of months to maturity and its denominator the
number of months in the full term of the loan or (b) the present value of the
loan less the amount of principal and accrued interest being repaid. Each
loan may be prepaid in full during the last 30 days before its maturity date
without any prepayment premium.(8)
    
    The St. Andrews at the Polo Club loan may not be prepaid for a period of
three years (no earlier than December 1, 2004). We must give written notice
at least 30 days before the date selected by us as the prepayment date, at
which time the entire outstanding principal may be prepaid along with a
prepayment fee equal to the greater of (a) 1% of the entire principal amount
to be prepaid 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. The loan may be prepaid in full after September 1,
2011 without any prepayment premium. 38




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##### Table of Contents



Our existing loans will require balloon payments, in addition to monthly
principal amortization, coming due over the years 2004 to 2012 as summarized
below: Debt Maturity Schedule: Aggregate BalloonYear
    
    Payments
    
    Applicable Communities or Properties2004
    
    $
    8,280,000
    
    
    Northridge apartments land loan and Northridge office building2005
    
    
    22,071,000
    
    
    Addison Place Phase II2006
    
    
    6,500,000
    
    
    Addison Place retail center2007
    
    
    02008
    
    
    65,287,000
    
    
    Preston Oaks, Bradford Creek, Plantation Trace, Charlotte and Veranda Chase2009
    
    
    8,387,000
    
    
    Addison Place Phase I2010
    
    
    02011
    
    
    18,138,000
    
    
    St. Andrews at the Polo Club2012
    
    
    02013
    
    
    8,945,000
    
    
    River OaksTotal
    
    $
    137,608,000
 On August 21, 2003, we closed a $10,750,000 loan from L.J. Melody &
Company, a mortgage banking firm, to refinance the River Oaks property.
Because we increased the loan amount from $8,500,000 to $10,750,000, we
received net cash proceeds of approximately $2,100,000. As planned, L.J.
Melody immediately assigned the loan to the Federal Home Loan Mortgage
Corporation (Freddie Mac). The terms of the loan include a ten-year term with
a fixed interest rate of 5.54% payable in monthly installments of $61,307 based
on a 30-year amortization schedule. Roberts Realty paid an origination fee of
$74,875 to L.J. Melody & Company in connection with this loan. Dennis H.
James, a director of Roberts Realty, is Managing Director  Southeast Region,
with L.J. Melody & Company. We have lines of credit with two banks aggregating $3,000,000 to provide
funds for short-term working capital purposes. One facility, in the amount of
$1,000,000, expires June 1, 2004. The other credit facility, in the amount of
$2,000,000, expires August 1, 2004. No principal or interest is currently
outstanding on either facility. Although we intend to renew both lines of
credit, there is no assurance that the banks will offer renewals or, if those
renewals are offered, that they will be on favorable terms. On May 30, 2003, we closed a $6,500,000 construction loan to fund the
construction of the Addison Place retail center. The loan is secured by the
land and improvements and matures on April 30, 2006. Monthly payments are
interest only at the 30-day LIBOR plus 185 basis points. At December 31, 2003,
$3,391,000 was drawn on the loan. On June 28, 2001, we closed a $3,000,000 loan secured by the Northridge
land located next to our former Highland Park community. We intend to
construct a 220-unit apartment community on this property. The loan has a
balance of $3,000,000 and matures on July 10, 2004. We intend to roll the loan
into a construction loan upon starting construction of the project. There is
no assurance that this financing will be available or, if it is available, that
it will be on favorable terms. During the first quarter of 2004, we agreed to settle a lawsuit we filed
against an architectural firm contracted to work on our Addison Place Phase II
and Charlotte properties. We will receive proceeds of approximately $500,000
as a result of the settlement and are required to pay $120,000 to the defendant
for use of their architectural plans. The $120,000 represents amounts the
defendants previously billed us but we had
not paid because of this business dispute. The $120,000 amount we are required
to pay is included in accounts payable and accrued expenses in the December 31,
2003 balance sheet in our 39




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consolidated financial statements included
in this report. We expect to recognize the $500,000 in settlement proceeds in
the first quarter of 2004. Although we currently have sufficient cash and available funds under our
lines of credit to fund all debt maturities during 2004, we anticipate that we
will secure permanent financing on the Northridge office building prior to the
maturity date of the construction loan and roll the loan on the Northridge land
into a construction loan upon starting construction of the project. With
respect to the debt that matures after 2004, we anticipate that we will repay
only a small portion of the principal of that indebtedness before maturity and
that we will not have funds on hand sufficient to repay it at maturity.
Therefore, it will be necessary for us to refinance that debt through (a) debt
financing collateralized by mortgages on individual communities or groups of
communities and/or (b) equity offerings. Other than as described above, we anticipate that each propertys rental
and other operating revenues will be adequate to provide short-term (less than
12 months) liquidity for the payment of direct rental operating expenses,
interest and amortization of principal on related mortgage notes payable and
capital expenditures. We expect to meet our other short-term liquidity
requirements generally through our net cash provided by operations, which we
believe will be adequate to meet our operating requirements in both the short
term and in the long term (greater than 12 months). We also expect to fund
improvements and renovations at existing communities from property operations.
We expect to meet our long-term liquidity requirements, including future
developments and debt maturities, from the proceeds of construction and
permanent loans. Contractual Obligations The following table presents contractual obligations of Roberts Realty by
the period the payments are due (dollars in thousands, unaudited): Payments due by periodContractual obligations
    
    Total
    
    Less than 1 year
    
    1-3 years
    
    3-5 years
    
    More than 5 yearsLong-Term Debt Obligations (1)
    
    $
    137,510
    
    
    $
    7,890
    
    
    $
    28,856
    
    
    $
    63,303
    
    
    $
    37,461Capital Lease Obligations
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Operating Lease Obligations
    
    
    10
    
    
    
    10
    
    
    
    0
    
    
    
    0
    
    
    
    0Due to Roberts Construction (2)
    
    
    1,878
    
    
    
    1,878
    
    
    
    0
    
    
    
    0
    
    
    
    0Interest Rate Swap Contract
Payable (3)
    
    
    3,255
    
    
    
    0
    
    
    
    3,255
    
    
    
    0
    
    
    
    0Total
    
    $
    142,653
    
    
    $
    9,778
    
    
    $
    32,111
    
    
    $
    63,303
    
    
    $
    37,461
   (1)
    
    See Debt Summary Schedule above for a description of our long-term debt
obligations.(2)
    
    See Item 13, Certain Relationships and
Related Transactions  Payments to
the Roberts Companies  Construction Contractsfor a description of our
construction contracts with Roberts Construction, under which we are
obligated to pay Roberts Construction to provide construction services to
us.(3)
    
    See Critical Accounting Policies  Derivatives and Hedging Activitiesand
Item 7A, Quantitative and Qualitative Disclosures about Market Risk for a
description of our use of derivative financial instruments in the form of
interest rate swaps to hedge interest rate exposure on variable-rate debt.
We do not use such instruments for trading or speculative purposes. As
described in detail in the references sections of this report, we entered
into two interest rate swap agreements to 40




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effectively fix the variable interest rates on our $22,500,000 Addison
Place Phase II permanent loan and our $17,000,000 Veranda Chase
construction loan. Critical Accounting Policies Our financial statements are prepared in accordance with accounting
principles generally accepted in the United States (GAAP). A summary of the
significant accounting policies we use is included in Note 2 to the
consolidated financial statements. A summary of recent accounting
pronouncements and the expected impact on our financial statements is also
included in Note 2. Because we are in the business of owning, operating, and
developing apartment communities, our critical accounting policies relate to
cost capitalization and derivatives and hedging activities. The following is a
summary of our overall accounting policy in this area. Cost Capitalization Our real estate assets are stated at the lower of depreciated cost or fair
value, if deemed impaired. The cost of buildings and improvements includes
interest, property taxes, insurance, and development fees incurred during the
construction period. Ordinary repairs and maintenance are expensed as
incurred; major replacements and betterments are capitalized and depreciated
over their estimated useful lives. Depreciation expense is computed on a
straight-line basis over the estimated useful lives of 27.5 years for buildings
and improvements, 15 years for land improvements, and five to seven years for
furniture, fixtures and equipment. We capitalize direct costs associated with the development and
construction of our apartment communities. We expense all internal costs
associated with the acquisition of operating apartment communities to general
and administrative expense in the period we incur those costs. We capitalize
interest on qualifying construction expenditures in accordance with SFAS No.
34, Capitalization of Interest Cost, for our real estate assets. During the
development and construction of a new apartment community, we capitalize
related interest costs, as well as other carrying costs such as property taxes
and insurance. We begin to expense these items as the construction of the
community becomes substantially complete and the apartment homes become
available for initial occupancy. Accordingly, we gradually reduce the amounts
we capitalize as we complete construction. During the lease-up period, as a
community transitions from initial occupancy to stabilized occupancy, revenues
are generally insufficient to cover interest, carrying costs and operating
expenses. The size and duration of this lease-up deficit depends on how
quickly construction is completed, how quickly we lease the apartments
available for occupancy, and what rent levels we achieve at the community. The
leasing absorption of our communities in lease-up has been slowed as a result
of the weakness in the national economy, particularly in our primary market of
Atlanta. Capitalization of interest and other carrying costs such as property
taxes and insurance ceases entirely upon completion of development and
construction activities. Derivatives and Hedging Activities We generally enter into fixed rate debt instruments. In certain
situations, we may utilize derivative financial instruments in the form of
interest rate swaps to hedge interest rate exposure on variable-rate debt. We
do not use such instruments for trading or speculative purposes. We entered
into two interest rate swap agreements to effectively fix the variable interest
rates on our $22,500,000 Addison Place Phase II permanent loan and our
$17,000,000 Veranda Chase construction loan. Effective January 1, 2001, we adopted SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended. SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities by requiring that all derivatives be recognized on the 41




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balance sheet and measured at fair value. Gains or losses resulting from
changes in the fair value of derivatives are recognized in earnings or recorded
in other comprehensive income, and recognized in the income statement when the
hedged item affects earnings, depending on the purpose of the derivatives and
whether they qualify for hedge accounting treatment. Our swap agreements have
been designated as cash flow hedges and, accordingly, are recorded at fair
value in the consolidated balance sheet, and the related gains or losses are
deferred in stockholders equity, net of minority interest, as a component of
other comprehensive income. Any ineffective portions of cash flow hedges are
recognized immediately in earnings. We intend to hold the interest rate swap
arrangements and related debt agreements until maturity. In the event the
interest rate swap agreement is terminated, we would discontinue prospectively
reclassifying amounts in accumulated other comprehensive income to earnings
based upon when the hedged transactions are recognized in earnings. Amounts
received or paid in connection with the swap agreements are recognized as
adjustments to interest related to the designated debt. The net effect of this
accounting is that interest on the variable rate-debt is generally recorded
based on fixed interest rates. In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities
under SFAS No. 133. SFAS No. 149 is generally effective for contracts entered
into or modified after September 30, 2003 and for hedging relationships
designated after September 30, 2003. The adoption of SFAS No. 149 did not have
a material effect on our financial position, results of operations and cash
flows. The fair value of our interest rate swap agreements at December 31, 2003
was a liability of $3,255,000, which is a result of lower market interest rates
compared to the synthetically fixed rates. This liability was recorded as a
decrease in shareholders equity of $2,353,000 (accumulated other comprehensive
income), net of minority interest of $902,000. We have no other derivative or
hedging instruments. For additional information related to this topic, see
Item 7A, Quantitative and Qualitative Disclosure About Market Risk. Stock Repurchase Plan Our board of directors has authorized the repurchase of up to 400,000
shares of our outstanding common stock. We repurchased 362,588 shares for
$2,764,000 prior to 2002, and we currently have authority to repurchase an
additional 37,412 shares. We did not repurchase any shares during 2003 or
2002. We will continue to repurchase our shares from time to time by means of
open market purchases depending on availability, our cash position, and the
price per share. Supplemental Disclosure of Funds From Operations Funds from Operations, or FFO, is defined by the National Association of
Real Estate Investment Trusts as net income (loss), computed in accordance with
generally accepted accounting principles, excluding gains (or losses) from debt
restructuring and sales of property and non-recurring items, plus real estate
related depreciation and amortization. We compute FFO in accordance with the
current NAREIT definition, which may differ from the methodology for
calculating FFO utilized by other equity REITs and, accordingly, may not be
comparable to those other REITs. FFO does not represent amounts available for
managements discretionary use for payment of 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 (loss) (determined in accordance with GAAP) as an
indication of our financial performance or cash flows from operating activities
(determined in accordance with GAAP) as a measure of our liquidity, nor is it
indicative of funds available to fund our cash needs, including our ability to
make distributions. We believe that to 42




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gain a clear understanding of our operating results, FFO should be evaluated in
conjunction with net income (loss) (determined in accordance with GAAP). FFO is used by industry analysts and investors as a supplemental measure
of an equity REITs operating performance. Historical cost accounting for real
estate assets implicitly assumes that the value of real estate assets
diminishes predictably over time. Because real estate values instead have
historically risen or fallen with market conditions, many industry investors
and analysts have considered presentation of operating results for real estate
companies that use historical cost accounting to be insufficient by themselves.
Thus NAREIT created FFO as a supplemental measure of REIT operating
performance that excludes historical cost depreciation, among other items, from
GAAP net income. We believe that the use of FFO, combined with the required
primary GAAP presentations, improves the understanding of operating results of
REITs among the investing public and makes comparisons of REIT operating
results more meaningful. Our management evaluates the operating performance of
our apartment communities in part based on FFO. In 2001, we incurred expenses of $604,000 related to the retirement of
debt that were treated as an extraordinary item in accordance with GAAP.
Extraordinary items are excluded when calculating FFO. As of January 1, 2003,
we adopted SFAS 145, which no longer characterizes such costs as extraordinary
and which requires prior periods to be restated. According, we have restated
FFO for 2001. Adoption of SFAS 145 had no effect on our net income (loss) or
financial position. The following table reconciles net income (loss) to FFO (dollars in
thousands, unaudited). Twelve Months Ended December 31,2003
    
    2002
    
    2001Net income (loss)
    
    $
    2,690
    
    
    $
    (2,516
    )
    
    $
    7,440Minority
interest of unitholders  continuing operations
    
    
    (1,416
    )
    
    
    (1,703
    )
    
    
    (411
    )Minority
interest of unitholders  discontinued operations
    
    
    45
    
    
    
    114
    
    
    
    146Loss on disposal of assets
    
    
    11
    
    
    
    33
    
    
    
    27Gain on sale of real estate assets, net of minority interest
    
    
    (77
    )
    
    
    (1,043
    )
    
    
    Gain on sale of Highland Park, net of minority interest
    
    
    (6,070
    )
    
    
    
    
    
    
    Gain on sale of Crestmark, net of minority interest
    
    
    
    
    
    
    
    
    
    
    (2,793
    )(Gain) loss on sale of Rosewood Plantation, net of
minority interest
    
    
    
    
    
    
    102
    
    
    
    (5,188
    )Depreciation
expense  continuing operations
    
    
    6,733
    
    
    
    6,556
    
    
    
    4,995Depreciation
expense  discontinued operations
    
    
    247
    
    
    
    445
    
    
    
    506Funds From Operations
    
    $
    2,163
    
    
    $
    1,988
    
    
    $
    4,722Weighted average shares and units
outstanding during the period
    
    
    7,223,727
    
    
    
    7,220,593
    
    
    
    7,226,123
 43




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New Accounting Pronouncements In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations (effective July 1, 2001) and SFAS No. 142, Goodwill and Other
Intangible Assets (effective January 1, 2002). SFAS No. 141 prohibits
pooling-of-interests accounting for acquisitions and requires that the purchase
price of properties acquired after June 2001 be allocated to land, building,
tenant improvements and identified intangible assets. Intangible assets can
consists of above or below market leases, customer relationships or the value
of in-place leases. Assets acquired, other than intangibles, are depreciated
using the methodology detailed in the Real Estate Assets and Depreciation
section (see Note 2). Above or below market leases are amortized into rental
revenues over the individual remaining lease terms. In-place leases are
amortized over the term of the lease. SFAS No. 142 specifies that goodwill
and some intangible assets will no longer be amortized but instead will be
subject to periodic impairment testing. The adoption of SFAS No. 141 and 142
did not have a material impact on Roberts Realtys financial position or
results of operations. In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No.144 establishes new
rules for measuring impairment of long-lived assets and accounting for
discontinued operations. SFAS No. 144 supersedes SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of, and among other factors, establishes criteria beyond that previously
specified in SFAS No. 121 to determine when a long-lived asset is to be
considered held for sale. On January 1, 2002, Roberts Realty adopted SFAS No.
144, which did not have a material effect on financial position or results of
operations. However, SFAS No. 144 required modification of the presentation of
the operating results from real estate held for sale in Roberts Realtys
statement of operations. In April 2002, SFAS No. 145 Rescission of SFAS Nos. 4, 44, 64 and
Amendment of SFAS No. 13 and Technical Corrections was issued. SFAS No. 145
prevents treatment as extraordinary, gains or losses on extinguishment of debt
not meeting the criteria of Accounting Principles Board Opinion No. 30. SFAS
No. 145 is effective for fiscal years beginning after May 15, 2002. The
adoption will affect the classifications of those amounts in the financial
statements of subsequent periods and comparative prior periods. At January 1,
2003, upon adoption of SFAS No. 145, Roberts Realty reclassified the
extraordinary loss recognized during fiscal 2001 to Expenses Related to
Retirement of Debt (included in continuing operations) in the accompanying 2001
Consolidated Statement of Operations. The expenses related to retirement of
debt relate to the write-off of unamortized loan costs and prepayment fees of
(a) the Preston Oaks mortgage note, which was refinanced in February 2001, (b)
the Rosewood community, which was sold in January 2001, and (c) the Crestmark
community which was sold in July 2001 (see Note 5). In June 2002, SFAS No. 146, Accounting for Costs Associated with Exit or
Disposal Activities, was issued. SFAS No. 146 addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including certain costs incurred in a restructuring). SFAS No.
146 requires recognition of a liability for a cost associated with an exit or
disposal activity when the liability is incurred as opposed to when the entity
commits to an exit plan under EITF Issue No. 94-3. SFAS No. 146 is effective
for exit or disposal activities initiated after December 31, 2002. The
adoption of SFAS No. 146 did not have a material impact on Roberts Realtys
financial position or results of operations. In November 2002, the FASB issued FASB Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others  an 44




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Interpretation of SFAS Nos. 5, 57, and 107, and rescission of FASB
Interpretation No. 34 (FIN 45). FIN 45 elaborates on the disclosures to be
made by a guarantor in its financial statements. It also requires a guarantor
to recognize a liability for the fair value of the obligation undertaken in
issuing the guarantee at the inception of a guarantee. The disclosure
requirements of FIN 45 are effective for Roberts Realty as of December 31,
2002. The recognition provisions of FIN 45 will be applied on a prospective
basis to guarantees issued after December 31, 2002. The requirements of FIN 45
did not have a material impact on Roberts Realtys financial position or
results of operations. In January 2003, the FASB issued FASB Interpretation No. 46,
Consolidation of Variable Interest Entities, an interpretation of ARB No. 51
(FIN 46). FIN 46 addresses consolidation by business enterprises of variable
interest entities (VIEs). In December 2003, FIN 46 was revised by FIN 46R.
FIN 46 applied immediately to variable interest entities created after January
31, 2003, and with respect to variable interests held before February 1, 2003,
FIN 46R will apply beginning with the quarter ending March 31, 2004, the first
quarter of fiscal 2004. Adoption of this new method of accounting for VIEs did
not and is not expected to have a material impact on Robert Realtys financial
position or results of operations. In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities
under SFAS No. 133. SFAS No. 149 is generally effective for contracts entered
into or modified after September 30, 2003 and for hedging relationships
designated after September 30, 2003. The adoption of SFAS No. 149 did not have
a material impact on Roberts Realtys results of operations, financial
condition or cash flows. In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity.
SFAS No. 150 establishes standards for the classification and measurement of
certain financial instruments with characteristics of both liabilities and
equity. This statement requires an issuer to classify certain instruments as
liabilities (or assets in some circumstances) and is effective May 31, 2003 for
all financial instruments which existed prior to May 31, 2003. The application
of SFAS No. 150 to mandatorily redeemable non-controlling interests in finite
life entities was indefinitely deferred. Roberts Realty does not have any
financial instruments as defined in SFAS No. 150, and the adoption of SFAS No.
150 did not have a material impact on Robert Realtys financial position or
results of operations. Inflation Because substantially all of our apartment leases are for an initial term
of not more than 12 months, we are able, if market conditions permit, to seek
increases in rents after the expiration of each lease. The short-term nature
of these leases serves to reduce the risk to us of the adverse effects of
inflation. Disclosure Regarding Forward-Looking Statements This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These statements appear in a number of places in this
report and include all statements that are not historical facts. Some of the
forward-looking statements relate to our intent, belief or expectations
regarding our strategies and plans for operations and growth, including
development and construction of new multifamily apartment communities. Other
forward-looking statements relate to trends affecting our financial condition
and results of operations and our anticipated capital needs and expenditures.
These forward-looking 45




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statements are not guarantees of future performance and involve risks and
uncertainties, and actual results may differ materially from those that are
anticipated in the forward-looking statements. These risks include the
following:  §
    
    The current unfavorable market and economic conditions in
Atlanta, Charlotte and Palm Beach County could continue to depress
our occupancy and rental rates and adversely affect our financial
performance.§
    
    Further unfavorable changes in market and occupancy
conditions, perhaps as a result of war or terrorism, could depress
our occupancy and rental rates even further and worsen our financial
performance.§
    
    Increased competition in the Atlanta, Charlotte and Palm
Beach County markets could limit our ability to lease our apartment
homes or increase or maintain rents.§
    
    Conflicts of interest inherent in business transactions
between or among Roberts Realty and/or the operating partnership on
one hand, and Mr. Roberts and/or his affiliates on the other hand,
could result in our paying more for property or services than we
would pay an independent seller or provider.§
    
    Construction risks inherent in our development and
construction of the Northridge community, our corporate office
building and our Addison Place retail center, and the other
communities and properties we may develop in the future, could
adversely affect our financial performance.§
    
    We may be unable to lease-up our Charlotte and Northridge
communities as we expect, our financial performance will be
adversely affected.§
    
    We may be unable to extend the maturity date or otherwise
refinance some or all of our $3,000,000 land loan that matures in
July 2004, or we may be able to do so only on unfavorable terms.§
    
    We may be unable to secure permanent financing or otherwise
refinance some or all of our construction loan on our office
building that matures on June 1, 2004, or we may be able to do so
only on unfavorable terms. We expect that loan to have a principal
balance of approximately $5,280,000 at its maturity.§
    
    We may be unable to obtain replacement financing to make
balloon payments on our long-term debt as it matures, or we might
have to refinance our debt on less favorable terms.§
    
    Because our organizational documents do not limit the amount
of debt we may incur, we could increase the amount of our debt as a
percentage of the estimated value of our properties.§
    
    Our operations could be adversely affected if we lose key
personnel, particularly Mr. Roberts.§
    
    We could incur costs from environmental problems even though
we did not cause, contribute to or know about them.§
    
    Compliance or failure to comply with the Americans with
Disabilities Act and other similar laws could result in substantial
costs.§
    
    We may be unable to rent approximately two-thirds of our
corporate office building to unaffiliated tenants as we intend. In addition, the market price of the common stock may from time to time
fluctuate materially as a result of, among other things:  §
    
    our operating results;§
    
    the operating results of other REITs, particularly apartment REITs; and 46




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§
    
    changes in the performance of the stock market in general. 
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Because some of our debt bears interest at rates that are not fixed, we
are exposed to market risk from changes in interest rates, which may adversely
affect our financial position, results of operations and cash flows. In
seeking to minimize the risks from interest rate fluctuations, we manage
exposures through our regular operating and financing activities. We do not
use financial instruments for trading or other speculative purposes. We are
exposed to interest rate risk primarily through our borrowing activities, which
are described in Notes 5 and 6 to the consolidated financial statements
included in this report. All of our permanent mortgage loans secured by our
existing communities bear interest at fixed rates except our mortgage loan on
Addison Place Phase II. These permanent mortgage loans had an aggregate
outstanding principal balance of $71,770,000 at December 31, 2003. Our Addison
Place Phase II loan and our Veranda Chase construction loan have synthetically
fixed interest rates. These loans had an aggregate outstanding principal
balance of $39,282,000 at December 31, 2003. When we closed each of these
loans, we entered into interest rate swap agreements that synthetically fixed
the interest rates on those loans. The fair value of those interest rate swap
agreements at December 31, 2003 was a liability of $3,255,000 as a result of
lower market interest rates compared to the synthetically fixed rates.
Provided that we hold these instruments until maturity, as we intend, we will
not pay any interest other than that stated in the loan and swap agreements.
The liability recorded at December 31, 2003 will be reduced as we perform under
these instruments, as the difference between the market interest rate and the
fixed rates decrease, and as these obligations mature. The remaining long-term construction loans, which had an aggregate
outstanding balance of $23,458,000 at December 31, 2003, bear interest ranging
from 185 to 200 basis points over the 30-day LIBOR rate. Our lines of credit
and land loan interest rates range from 175 to 200 basis points over the 30-day
LIBOR rate. At December 31, 2003, those loans had an aggregate outstanding
principal balance of $3,000,000. Given our interest rate swap agreements and
the current interest rate environment, we believe there is no material market
risk exposure to our consolidated financial position, results of operations or
cash flows. The table below presents principal reductions and related weighted average
interest rates by year of expected maturity for our debt obligations. 47




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Fair Value(Dollars In Thousands)
    
    2004
    
    2005
    
    2006
    
    2007
    
    2008
    
    Thereafter
    
    Total
    
    12/31/03Principal reductions in
fixed rate mortgage
notes
    
    $
    962
    
    
    $
    1,032
    
    
    $
    1,104
    
    
    $
    1,183
    
    
    $
    30,028
    
    
    $
    37,461
    
    
    $
    71,770
    
    
    $
    77,418Average interest rates
    
    
    6.82
    %
    
    
    6.82
    %
    
    
    6.82
    %
    
    
    6.82
    %
    
    
    6.82
    %
    
    
    6.58
    %
    
    
    6.82
    %
    
    
    5.10
    %Principal reductions
in variable rate
mortgage notes
    
    $
    152
    
    
    $
    22,130
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    22,282
    
    
    $
    22,282Principal reductions
in construction/
permanent loans
    
    $
    3,776
    
    
    $
    520
    
    
    $
    4,070
    
    
    $
    729
    
    
    $
    31,363
    
    
    $
    0
    
    
    $
    40,458
    
    
    $
    40,458Principal reductions
in land loan
    
    $
    3,000
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    3,000
    
    
    $
    3,000Interest Rate Swap
(Notional Principal
Amount)Pay fixed/ Receive
variable
    
    $
    271
    
    
    $
    22,300
    
    
    $
    182
    
    
    $
    197
    
    
    $
    16,332
    
    
    $
    0
    
    
    $
    39,282
    
    
    
    ($3,255
    )Average Pay rate
    
    
    8.08
    %
    
    
    8.08
    %
    
    
    7.38
    %
    
    
    7.38
    %
    
    
    7.38
    %
    
    
    0.00
    %
    
    
    8.08
    %
    
    
    6.00
    %Receive rate
    
    LIBOR
    
    LIBOR
    
    LIBOR
    
    LIBOR
    
    LIBOR
    
    LIBOR
    
    LIBOR
    
    LIBOR
 We estimate the fair value of our debt based on current borrowing rates
for issuance of debt with similar terms and remaining maturities. 48




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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.  
 Independent Auditors Report
    
    
    F-1Consolidated Financial Statements and Schedule as of December 31, 2003 and
2002 and for the Years Ended December 31, 2003, 2002 and 2001:Consolidated Balance Sheets
    
    
    F-2Consolidated Statements of Operations
    
    
    F-3Consolidated Statements of Shareholders Equity
    
    
    F-4Consolidated Statements of Cash Flows
    
    
    F-5Notes to Consolidated Financial Statements
    
    
    F-6Schedule III  Real Estate and Accumulated Depreciation
    
    
    S-1
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE. Upon the recommendation of our audit committee, the board of directors of
Roberts Realty voted to dismiss Arthur Andersen LLP as our independent auditors
and appoint Deloitte & Touche, LLP to serve as our independent auditors for the
fiscal year ended December 31, 2002. Pursuant to the boards action, the
dismissal of Arthur Andersen and the appointment of Deloitte & Touche became
effective on June 19, 2002. As discussed in our Form 8-K dated June 19, 2002,
there were no disagreements with or reportable events concerning Arthur
Andersen, and we had not engaged Deloitte & Touche in any consultation. 
 ITEM 9A. CONTROLS AND PROCEDURES As of December 31, 2003, we carried out an evaluation, under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e).
Based upon that evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that our current disclosure controls and procedures are
effective as of December 31, 2003. The design of any system of controls and procedures is based in part upon
certain assumptions about the likelihood of future events. There can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions, regardless of how remote. 49




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PART III 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Directors and Executive Officers Charles S. Roberts, age 57, has served as our Chairman of the Board, Chief
Executive Officer and President since July 1994. Mr. Roberts term as a
director expires at the 2006 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
Roberts Properties 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 has been 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 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 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 was awarded the coveted Golden Aurora Award for
best overall development in the Southeast. Wm. Jarell Jones, age 55, a director since October 1994, is an attorney
and has practiced law with the firm of Wm. Jarell Jones, P.C., in Statesboro
and St. Simons, Georgia since November 1993. Mr. Jones term expires at the
2005 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 69, a director since October 1994, has worked
part-time with Matteson Partners, an Atlanta-based executive search firm, from
April 2003 to the present. Mr. Spaldings term expires at the 2004 annual
meeting of shareholders. Previously he served from 2000 to April 2003 as
Executive Vice President of DHR International, Inc., an executive search firm.
Mr. Spalding was the sole shareholder of Spalding & Company, a former NASD
member broker-dealer that served from 1980 to 1996 as the exclusive
broker-dealer for limited partnerships sponsored by Mr. Roberts. 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 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. 50




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George W. Wray, Jr., age 67, 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 2004 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 56, a director since June 1995, is Managing Director
 Southeast Region, with L.J. Melody & Company, a commercial mortgage banking
firm. Mr. James term expires at the 2005 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 Managing
Director of L.J. Melody & Company, he is responsible for the Southeast Regions
overall production and investor relations. He has served 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. Charles R. Elliott, age 50, served as a director from October 1994 to
February 1995 and became a director again in 2000. Previously he was our
Secretary and Treasurer from our inception until July 15, 2002, and our Chief
Financial Officer from April 1995 until July 15, 2002, when he became our
Senior Vice President  Real Estate. He left Roberts Realty as a full-time
employee on August 30, 2002 and returned on a full-time basis from February 17,
2003 to September 30, 2003 as our Chief Operating Officer. In this interim
period he provided limited consulting services for which he was paid a fee.
Mr. Elliotts term expires at the 2006 annual meeting of shareholders. 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. Gregory D. Fletcher, age 38, joined Roberts Realty as Corporate Controller
on July 7, 2003 and has served as our Chief Financial Officer, Secretary and
Treasurer since October 3, 2003. Previously he served as Corporate Controller
of Clarus Corporation from September 2000 to March 2003, Corporate Accounting
Manager with American Business Products, Inc. from April 1997 to May 2000 and
Corporate Accounting Manager with Engraph, Inc. from January 1991 to April
1997. Mr. Fletcher is a Certified Public Accountant, holds a Bachelor of
Science degree in Accounting and a Masters degree in Business Administration. Audit Committee The audit committee of our board of directors is composed of Mr. Jones,
its chairman, Mr. James, and Mr. Wray. The board has determined that Mr. Jones
is an audit committee financial expert and is independent as that term is
used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of
1934. 51




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Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934 requires Roberts
Realtys directors and executive officers and persons who own beneficially more
than 10% of our outstanding common stock to file with the SEC initial reports
of ownership and reports of changes in their ownership of our common stock.
Directors, executive officers and greater than 10% shareholders are required by
SEC regulations to furnish us with copies of the forms they file. To our
knowledge, based solely on a review of the copies of such reports furnished to
us, during the fiscal year ended December 31, 2003, our directors, executive
officers and greater than 10% shareholders complied with all applicable Section
16(a) filing requirements. Code of Business Conduct and Ethics As described in Item 1, Business  Investment, Financing and Conflict of
Interest Policies, we have adopted a Code of Business Conduct and Ethics. We
will provide a copy of the Code of Business Conduct and Ethics free of charge
to any person who requests it in writing. Please direct your request to our
Chief Financial Officer, 8010 Roswell Road. Suite 280, Atlanta, GA 30350. 
 ITEM 11. EXECUTIVE COMPENSATION. Compensation of Executive Officers Mr. Charles S. Roberts, our Chairman of the Board, Chief Executive Officer
and President, is our only executive officer whose total salary and bonus
exceeded $100,000 during 2003. Mr. Roberts is our named executive officer. Summary Compensation Table Annual CompensationName and Principal Position
    
    Year
    
    Salary ($)
    
    Bonus ($)Charles S. Roberts
    
    
    2003
    
    
    
    150,000
    
    
    
    0Chairman of the Board, Chief
    
    
    2002
    
    
    
    150,000
    
    
    
    0Executive Officer and President
    
    
    2001
    
    
    
    150,000
    
    
    
    0
 We are not a party to any employment agreements. Although our board of
directors has from time to time in the past made individual grants of shares of
restricted stock to our officers, we have no equity compensation plans under
which we could issue stock, restricted stock or restricted stock units, phantom
stock, stock options, SARs, stock options in tandem with SARs, warrants,
convertible securities, performance units and performance shares, or similar
instruments. The board of directors may elect to grant restrictive shares in
the future, and in each such event, the board will approve the specific
issuance of shares to an individual officer or officers. Under rules of the
American Stock Exchange now in effect, however, we may not grant any additional
shares of restricted stock to officers, directors, employees, or consultants
without approval of our shareholders. No shares are presently reserved for
that purpose. We make payments to affiliates of Mr. Roberts under various agreements and
arrangements. See Item 13, Certain Relationships and Related Transactions 
Payments to the Roberts Companies. 52




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Compensation of Directors We pay our directors who are not officers of Roberts Realty fees for their
services as directors. Mr. Roberts, who is an officer, is not paid any
director fees. Mr. Elliott served as an officer during parts of 2002 and 2003,
and we did not pay him any directors fees during the time he was employed as an
officer. We paid him directors fees of $5,000 and $4,000 in 2003 and 2002,
respectively, during the time he was not employed as an officer. Other
non-officer directors receive an annual fee of $12,000 for attendance, in
person or by telephone, at meetings of the board of directors. Effective June
1, 2003, the board approved additional compensation of $250 per month to Mr.
Jones for serving as the Chairman of the Audit Committee. We paid Mr. Jones a
total of $1,750 during 2003 for his service as Chairman of the Audit Committee.
In addition, we reimburse our directors for reasonable travel expenses and
out-of-pocket expenses incurred in connection with their activities on our
behalf. Compensation Committee Interlocks and Insider Participation The Compensation Committee of the Board of Directors is composed of Mr.
James and Mr. Jones. Neither of them was during 2003, or at any previous time,
an officer or employee of Roberts Realty or Roberts Properties Residential,
L.P. Dennis H. James, one of our directors, is a Managing Director of L.J.
Melody & Company, a commercial mortgage banking firm that has originated loans
for us. We have paid L.J. Melody fees in the past for originating loans for
us. On August 21, 2003, Roberts Realty closed a $10,750,000 loan from L.J.
Melody to refinance our River Oaks community. As planned, L.J. Melody
immediately assigned the loan to the Federal Home Loan Mortgage Corporation
(Freddie Mac). We paid an origination fee of $74,875 to L.J. Melody in
connection with this loan. 
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table describes the beneficial ownership of shares of our
common stock as of February 29, 2004 for:  §
    
    each person or entity known by us to be the beneficial owner
of more than 5% of the outstanding shares of common stock;§
    
    each director and our named executive officer; and§
    
    our directors and executive officers as a group. Except as noted in the footnotes, the person owns all shares and
partnership units directly and has sole voting and investment power. Each of
the persons known by us to beneficially own more than 5% of the common stock
has an address in care of our principal office, except for Dr. James M.
Goodrich, whose address is 524 Manor Ridge Drive, Atlanta, Georgia 30304. The
Number of Shares Owned column in the table includes the shares owned by the
persons named but does not include shares they may acquire by exchanging units
of partnership interest in Roberts Properties Residential, L.P., our operating
partnership, for shares of common stock as explained in the following
paragraph. The Number of Units Beneficially Owned column in the table reflects
all shares that each person has the right to acquire by exchanging units for
shares. Under SEC rules, the shares that can be acquired in exchange for units
are deemed to be outstanding and to be beneficially owned by the person or
group holding those units when computing the percentage ownership of that
person or group, but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person or group. Except as described in this paragraph, unitholders generally have the
right to require the operating partnership to redeem their units. Our articles
of incorporation limit ownership by any one holder to 6% of our outstanding
shares, other than by Mr. Roberts, who is limited to 25%. Accordingly, a
unitholder cannot redeem units if upon their redemption he would hold more
shares than permitted under the 53




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applicable percentage limit. Given the total number of shares and units
they own, each of Mr. Roberts, Dr. Goodrich and Mr. Wray may be unable to
redeem all the units they own unless and until other unitholders redeem a
sufficient number of units to cause the number of outstanding shares of common
stock to be increased to a level sufficient to permit their redemption. A
unitholder who submits units for redemption will receive, at our election,
either (a) an equal number of shares or (b) cash in the amount of the average
of the daily market prices of the common stock for the 10 consecutive trading
days before the date of submission multiplied by the number of units submitted.
Our policy is to issue shares in exchange for units submitted for redemption. Number of UnitsName of
    
    Number of Shares
    
    Beneficially
    
    
    
    
    
    Percent ofBeneficial Owner
    
    Owned
    
    Owned
    
    Total
    
    Class(1)Charles S. Roberts (2)
    
    
    941,018
    
    
    
    738,012
    
    
    
    1,679,030
    
    
    
    28.1
    %George W. Wray, Jr. (3)
    
    
    246,880
    
    
    
    119,266
    
    
    
    366,146
    
    
    
    6.8James M. Goodrich (4)
    
    
    281,847
    
    
    
    0
    
    
    
    281,847
    
    
    
    5.4Dennis H. James
    
    
    80,122
    
    
    
    2,405
    
    
    
    82,527
    
    
    
    1.6Ben A. Spalding (5)
    
    
    21,252
    
    
    
    27,318
    
    
    
    48,570
    
    
    
    *Wm. Jarell Jones(6)
    
    
    7,012
    
    
    
    0
    
    
    
    7,012
    
    
    
    *Charles R. Elliott
    
    
    11,875
    
    
    
    0
    
    
    
    11,875
    
    
    
    *All directors and
executive officers as
a group: (6 persons)
(7)
    
    
    1,308,159
    
    
    
    887,001
    
    
    
    2,195,160
    
    
    
    35.8
    %
   *Less than 1%. (1) The total number of shares outstanding used in calculating this percentage
is 5,241,028, the number of shares outstanding as of February 29, 2004. (2) Includes 2,744 shares owned by Mr. Roberts minor daughter. A trust for
his minor daughter of which he is the sole trustee owns 29,500 units. (3) Includes 213,065 shares owned by a partnership, over which shares Mr. Wray
has voting and investment power as the managing partner of such partnership;
and 27,257 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. The partnership owns 95,568 units. (4) Includes 110,507 shares owned jointly by Dr. Goodrich and his wife; and
108,478 shares owned by Goodrich Enterprises, Inc., all of the outstanding
shares of which are owned by Dr. and Mrs. Goodrich and their sons. (5) Includes 7,564 shares owned by partnerships of which Mr. Spaldings wife is
the managing partner. Mr. Spaldings beneficial ownership of units includes
2,917 units owned by Mrs. Spalding 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. 54




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(6) Includes 1,745 shares owned by Mr. Jones wife, to which Mr. Jones
disclaims beneficial ownership. (7) Includes an aggregate of 41,624 shares and 27,318 units beneficially owned
by three directors wives, as to which shares such directors disclaim
beneficial ownership. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. General Roberts Realty conducts its business through Roberts Properties
Residential, L.P., which we refer to as the operating partnership; owns a 72.6%
interest in it as of February 29, 2004, and is its sole general partner. Mr.
Charles S. Roberts owns all of the outstanding shares of both Roberts
Properties, Inc. and Roberts Properties Construction, Inc., which we refer to
together as the Roberts Companies. We have paid these companies to perform
services for us as explained below. Under applicable SEC rules, this Item 13 describes any transaction, or
series of similar transactions, since January 1, 2003, or any currently
proposed transaction, or series of similar transactions, to which we were or
are to be a party, in which the amount involved exceeds $60,000 and in which
any of the following persons had, or will have, a direct or indirect material
interest: (a) any of our directors or executive officers; (b) any holder
we believe owns of record or beneficially more than 5% of
our outstanding common stock or units; and (c) any member of the immediate family of any of those persons. Notes 3 and 10 to our consolidated financial statements included in this report
provide further detail regarding some of the transactions described in this
section, including in some cases information for periods before 2003. Payments to the Roberts Companies Overview. We have 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. Transactions with Affiliates of Mr. Roberts. On January 4, 2001, we sold
our 152-unit Rosewood Plantation community. We used the net proceeds from that
sale to complete a Section 1031 tax-deferred exchange for four properties in
2001 to defer taxes we would otherwise have incurred on the gain from the sale.
These transactions are described in more detail in Notes 3 and 10 to the
consolidated financial statements included in this report. We sold one of the
properties in 2002. Our agreements to pay development and construction fees
with respect to the remaining three properties are described below. Those
agreements are also included in the summaries of development fees and
construction fees that follow this subsection. Addison Place Retail Center. On February 27, 2001, we signed an exchange
agreement with an intermediary to acquire land previously owned by Roberts
Properties Jones Bridge, LLC, of which Mr. Roberts owned a 90% interest. We
are constructing a 42,090 square foot retail center on the 6.84-acre property,
which is located at the intersection of Abbotts Bridge Road and Jones Bridge
Road in 55




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front of our Addison Place community in Alpharetta, Georgia. We acquired the
property on June 30, 2001 for approximately $4,470,000. In connection with
these transactions, Roberts Properties Jones Bridge, LLC received $3,498,000
for the property. We entered into a cost plus 5% contract with Roberts
Construction to complete the retail center. Northridge Community. On June 28, 2001, we purchased 10.9 acres of
undeveloped land from Roberts Properties. We are developing a 220-unit
apartment community on this site, which is located on Northridge Parkway in
Atlanta adjacent to our former Highland Park community. We retained Roberts
Properties to complete the design and development work for a fee of $2,500 per
unit, or $550,000. We also entered into a cost plus 10% contract with Roberts
Construction to build the 220 apartment units. Corporate Office Building. On June 28, 2001, we purchased a partially
constructed office building and approximately 3.9 acres of land from Roberts
Properties. The three-story, 39,907 square foot building will serve as our
corporate headquarters, and we currently expect to occupy a portion of one
floor in the building by May 1, 2004. We will lease the remaining space on
that floor to Roberts Properties and Roberts Construction, and we plan to lease
the other two floors to unaffiliated tenants. Roberts Construction will
complete construction of the building at cost and will perform tenant finish
work for approximately $600,000. Roberts Construction will not earn a profit
on the construction of the building or on the tenant finish work. Development Fees. From time to time we pay Roberts Properties fees for
various development services that include market studies, business plans,
design, finish selection, interior design and construction administration. In
2003, we paid Roberts Properties a fee of $2,500 per unit, or $550,000, to
complete the design and development work on the Northridge community. We made
no other development fee payments to Roberts Properties from January 1, 2003
through February 29, 2004. Construction Contracts. Roberts Realty enters into contracts in the
normal course of business with Roberts Construction, of which Mr. Roberts
beneficially owns all of the outstanding shares. The following table
summarizes certain information regarding payments to Roberts Construction for
other construction projects through February 29, 2004. For the Addison Place
Phase II, Veranda Chase and Charlotte projects, we pay Roberts Construction its
cost, plus a fee of 10% of its cost. For the Addison Place retail center, we
pay Roberts Construction its cost, plus a fee of 5% of its cost. We pay
Roberts Construction its cost, but no additional fee, for construction of the
corporate office building. Actual/
    
    Total
    
    Total
    
    EstimatedEstimated
    
    Amount
    
    Amount
    
    RemainingTotal Contract
    
    Incurred through
    
    Incurred 1/1/03
    
    ContractualAmount
    
    2/29/04
    
    through 2/29/04
    
    CommitmentAddison Place
Phase II
    
    $
    21,876,000
    
    
    $
    21,816,000
    
    
    $
    (6,000
    )
    
    $
    60,000Veranda Chase
    
    
    15,608,000
    
    
    
    15,608,000
    
    
    
    192,000
    
    
    
    0Charlotte
    
    
    23,193,000
    
    
    
    19,033,000
    
    
    
    7,994,000
    
    
    
    4,160,000Corporate Office
Building
    
    
    5,581,000
    
    
    
    4,803,000
    
    
    
    1,050,000
    
    
    
    778,000Addison Place Retail Center
    
    
    3,058,000
    
    
    
    2,422,000
    
    
    
    416,000
    
    
    
    636,000$
    69,316,000
    
    
    $
    63,682,000
    
    
    $
    9,646,000
    
    
    $
    5,634,000
 56




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Partnership Profits Interest. Between 1994 and 1996, the operating
partnership acquired nine limited partnerships of which Mr. Roberts was the
sole general partner. Each partnership owned an apartment community that had
been developed or was in the development process. As a part of each
acquisition, the operating partnership assumed an existing financial obligation
to an affiliate of Mr. Roberts. That financial obligation has been formalized
as a profits interest in the operating partnership. As the holder of the
profits interest, Roberts Properties may receive distributions in certain
circumstances. Upon a sale of any of the acquired properties, Roberts
Properties will receive a distribution of a specified percentage of the gross
sales proceeds. Upon a change in control of Roberts Realty or the operating
partnership, Roberts Properties will receive a distribution of the applicable
percentages of the fair market value of each of the properties up to the
maximum amount. The amount to be distributed to Roberts Properties with
respect to each affected property will be limited to the amount by which the
gross proceeds from the sale of that property, or, in connection with a change
in control, its fair market value, exceeds the sum of:  §
    
    the debt assumed, or taken subject to, by the operating
partnership in connection with its acquisition of the property;§
    
    the equity issued by the operating partnership in acquiring the property; and§
    
    all subsequent capital improvements to the property made by the operating partnership. The percentages that apply to the sales proceeds, or fair market value, of
the three properties subject to this arrangement are shown in the following
table: River Oaks
    
    
    5
    %Preston Oaks Phase I
    
    
    5
    %Plantation Trace Phase I
    
    
    6
    %
 If Roberts Realty exercises its option to acquire all of the outstanding
units for shares, it must simultaneously purchase the profits interest for cash
in the amount the holder of that interest would receive if a change in control
occurred at that time. Except for units and the partnership profits interest related to the
original nine limited partnerships acquired between 1994 and 1996, no
partnership interests have been, or are presently expected to be, issued or
assumed by the operating partnership. During 2003, we paid profits interests
of $899,000 (5% of sale proceeds) to Roberts Properties in connection with the
sale of the Highland Park community. We made no other profits interest
distributions to Roberts Properties from January 1, 2003 through February 29,
2004. Other Fees.From January 1, 2003 to February 29, 2004, we paid Roberts
Properties $159,000 for reimbursement of operating costs and expenses, and we
paid Roberts Construction $69,000 for project work done at our communities. 57




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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Our Auditors during 2002 and 2003 Deloitte & Touche LLP has served as our independent auditors since June
2002. Previously, Arthur Andersen LLP had served as our independent public
accountants from 1997 until June 18, 2002. On that date, upon the
recommendation of our audit committee, our board of directors voted to dismiss
Andersen as our independent auditors and appoint Deloitte & Touche to serve as
our independent auditors for the year ended December 31, 2002. Pursuant to the
boards action, the dismissal of Andersen and the appointment of Deloitte &
Touche became effective on June 19, 2002. 58




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Audit Fees For 2002. The aggregate fees billed by Deloitte & Touche for professional
services rendered for the audit of our annual financial statements for the
fiscal year ended December 31, 2002, and for the reviews of the financial
statements included in our Quarterly Reports on Form 10-Q for the second and
third quarters of that fiscal year, were $95,400. For the first quarter of
2002, Arthur Andersen LLP billed us $6,700. For 2003. The aggregate fees billed by Deloitte & Touche for professional
services rendered for the audit of our annual financial statements for the
fiscal year ended December 31, 2003, and for the reviews of the financial
statements included in our Quarterly Reports on Form 10-Q for that fiscal year,
were $111,000. During 2003, Deloitte & Touche performed a re-audit of our
annual financial statements for the fiscal year ended December 31, 2001, for
which we paid them $38,000. Audit Related Fees We did not engage either Deloitte & Touche or Andersen to provide, and
neither of them billed for, professional services that were reasonably related
to the performance of the audit of our 2002 or 2003 financial statements, but
which are not reported in the previous paragraph. Tax Fees For 2002. The aggregate fees billed by Deloitte & Touche for professional
services rendered related to tax compliance, tax advice, and tax planning for
the fiscal year ended December 31, 2002, were $64,275. Andersen billed us for
no professional services rendered related to tax compliance, tax advice, and
tax planning for the fiscal year ended December 31, 2002. For 2003. The aggregate fees billed by Deloitte & Touche for professional
services rendered related to tax compliance, tax advice, and tax planning for
the fiscal year ended December 31, 2003, were $86,525. All Other Fees For 2002. Deloitte & Touche did not bill us for any services for the
fiscal year ended December 31, 2002 other than for the services described in
the foregoing paragraphs. The aggregate fees billed by Andersen for services
rendered to us for the fiscal year ended December 31, 2002, other than for the
services described in the foregoing paragraphs, were $7,000. Andersons
services related to our acquisitions and dispositions of properties, and our
related SEC reports for those activities. For 2003. Deloitte & Touche did not bill us for any services for the
fiscal year ended December 31, 2003 other than for the services described in
the foregoing paragraphs. Pre-Approval Policy Our audit committee pre-approval guidelines with respect to pre-approval
of audit and non-audit services are summarized below. General.The audit committee is required to pre-approve the audit and
non-audit services performed by the independent auditor in order to assure that
the provision of such services does not impair the auditors independence.
Unless a type of service to be provided by the independent auditor has 59




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received general pre-approval, it will require specific pre-approval by
the audit committee. Any proposed services exceeding pre-approved cost levels
requires specific pre-approval by the audit committee. Audit Services.The annual audit services engagement terms and fees are

subject to the specific pre-approval of the audit committee. In addition to
the annual audit services engagement specifically approved by the audit
committee, the audit committee has granted general pre-approval for other audit
services, which are those services that only the independent auditor reasonably
can provide. Audit-related Services.Audit-related services are assurance and related
services that are reasonably related to the performance of the audit or review
of our financial statements and that are traditionally performed by the
independent auditor. The audit committee believes that the provision of
audit-related services does not impair the independence of the auditor. Tax Services.The audit committee believes that the independent auditor
can provide tax services to us, such as tax compliance, tax planning and tax
advice without impairing the auditors independence. The audit committee will
not permit the retention of the independent auditor in connection with a
transaction initially recommended by the independent auditor, the purpose of
which may be tax avoidance and the tax treatment of which may not be supported
in the Internal Revenue Code and related regulations. All Other Services. The audit committee has granted pre-approval to those
permissible non-audit services classified as all other services that it
believes are routine and recurring services, and would not impair the
independence of the auditor. Pre-Approval Fee Levels. To facilitate managements day-to-day conduct of
our business, the audit committee deemed it advisable and in our best interests
to permit certain routine, non-audit services without the necessity of
pre-approval by the audit committee. Therefore, the audit committee expects to
establish a pre-approval fee level per engagement. Any proposal for services
exceeding this level will require specific pre-approval by the audit committee.
Although management may engage non-audit services from our independent auditor
within this limit, management cannot enter into any engagement that would
violate the SECs rules and regulations related to auditor independence. These
non-audit service engagements are to be reported to the audit committee as
promptly as practicable. 60




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PART IV 
 ITEM 15. 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 PageINDEPENDENT AUDITORS REPORT
    
    
    F-1CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE AS OF DECEMBER 31, 2003
AND 2002 AND FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001:Consolidated Balance Sheets
    
    
    F-2Consolidated Statements of Operations
    
    
    F-3Consolidated Statements of Shareholders Equity
    
    
    F-4Consolidated Statements of Cash Flows
    
    
    F-5Notes to Consolidated Financial Statements
    
    
    F-6Schedule III  Real Estate and Accumulated Depreciation
    
    
    S-1
 61




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INDEPENDENT AUDITORS REPORT To Roberts Realty Investors, Inc.: We have audited the accompanying consolidated balance sheets of Roberts Realty
Investors, Inc. (a Georgia corporation) and its subsidiary (the Company) as
of December 31, 2003 and 2002, and the related consolidated statements of
operations, shareholders equity, and cash flows for each of the three years in
the period ended December 31, 2003. Our audits also included the financial
statement schedule listed in the Index to Financial Statements at Item 8.
These financial statements and the financial statement schedule are the
responsibility of the companys management. Our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 provides a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Roberts Realty Investors, Inc. and
its subsidiary at December 31, 2003 and 2002, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2003 in conformity with accounting principles generally accepted
in the United States of America. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material
respects, the information set forth therein. As discussed in Note 2 to the consolidated financial statements, in 2002 the
Company changed its method of accounting for discontinued operations to conform
to Statement of Financial Accounting Standards No. 144. /s/ Deloitte & Touche LLP Atlanta, Georgia
March 17, 2004 F-1




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ROBERTS REALTY INVESTORS, INC. 
 CONSOLIDATED BALANCE SHEETS (Dollars in Thousands, Except Per Share Data)
 December 31,
    
    December 31,2003
    
    2002ASSETSREAL ESTATE ASSETS  At cost:Land
    
    $
    20,411
    
    
    $
    20,482Buildings and improvements
    
    
    118,694
    
    
    
    118,511Furniture, fixtures and equipment
    
    
    13,448
    
    
    
    13,072152,553
    
    
    
    152,065Less accumulated depreciation
    
    
    (30,871
    )
    
    
    (24,437
    )Operating real estate assets
    
    
    121,682
    
    
    
    127,628Construction in progress and real estate under development
    
    
    45,510
    
    
    
    35,015Net real estate assets
    
    
    167,192
    
    
    
    162,643CASH AND CASH EQUIVALENTS
    
    
    8,583
    
    
    
    5,542RESTRICTED CASH
    
    
    342
    
    
    
    309DEFERRED FINANCING COSTS  Net of accumulated amortization of
$716 and $668 at December 31, 2003 and 2002, respectively
    
    
    1,146
    
    
    
    1,191ASSETS HELD FOR SALE
    
    
    
    
    
    
    8,570OTHER ASSETS  Net
    
    
    476
    
    
    
    752$
    177,739
    
    
    $
    179,007LIABILITIES AND SHAREHOLDERS EQUITYLIABILITIES:Mortgage notes payable
    
    $
    94,052
    
    
    $
    92,834Construction loans payable
    
    
    40,458
    
    
    
    27,891Land notes payable
    
    
    3,000
    
    
    
    6,700Interest rate swap contract payable
    
    
    3,255
    
    
    
    4,813Accounts payable and accrued expenses
    
    
    1,372
    
    
    
    2,178Due to Roberts Construction (including retainage payable of $952 and $1,122 at
December 31, 2003 and 2002, respectively)
    
    
    1,878
    
    
    
    2,258Security deposits and prepaid rents
    
    
    461
    
    
    
    413Liabilities related to assets held for sale
    
    
    
    
    
    
    10,080Total liabilities
    
    
    144,476
    
    
    
    147,167COMMITMENTS AND CONTINGENCIES (Note 11)MINORITY INTEREST OF UNITHOLDERS IN THE OPERATING PARTNERSHIP
    
    
    9,214
    
    
    
    9,361SHAREHOLDERS EQUITY:Preferred shares, $.01 par value, 20,000,000 shares authorized, no shares
issued or outstanding
    
    
    
    
    
    
    Common shares, $.01 par value, 100,000,000 shares authorized, 5,585,206 and
5,459,391 shares issued at December 31, 2003 and 2002, respectively
    
    
    56
    
    
    
    55Additional paid-in capital
    
    
    26,050
    
    
    
    25,408Less treasury shares, at cost (362,588 shares at
December 31, 2003 and 2002)
    
    
    (2,764
    )
    
    
    (2,764
    )Unamortized deferred compensation
    
    
    (93
    )
    
    
    (139
    )Retained earnings
    
    
    3,153
    
    
    
    3,317Accumulated other comprehensive loss
    
    
    (2,353
    )
    
    
    (3,398
    )Total shareholders equity
    
    
    24,049
    
    
    
    22,479$
    177,739
    
    
    $
    179,007
 See notes to the consolidated financial statements. F-2




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##### Table of Contents



ROBERTS REALTY INVESTORS, INC. 
 CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands, Except Per Share Data)
 Years Ended December 31,2003
    
    2002
    
    2001OPERATING REVENUES:Rental operations
    
    $
    18,042
    
    
    $
    15,862
    
    
    $
    14,941Other operating income
    
    
    1,151
    
    
    
    971
    
    
    
    1,037Total operating revenues
    
    
    19,193
    
    
    
    16,833
    
    
    
    15,978OPERATING EXPENSES:Personnel
    
    
    2,028
    
    
    
    1,820
    
    
    
    1,553Utilities
    
    
    1,163
    
    
    
    1,091
    
    
    
    961Repairs, maintenance and landscaping
    
    
    1,284
    
    
    
    1,051
    
    
    
    926Real estate taxes
    
    
    1,937
    
    
    
    1,811
    
    
    
    1,224Marketing, insurance and other
    
    
    1,153
    
    
    
    1,069
    
    
    
    753General and administrative expenses
    
    
    2,072
    
    
    
    2,155
    
    
    
    1,732Depreciation expense
    
    
    6,733
    
    
    
    6,556
    
    
    
    4,995Total operating expenses
    
    
    16,370
    
    
    
    15,553
    
    
    
    12,144INCOME FROM OPERATIONS
    
    
    2,823
    
    
    
    1,280
    
    
    
    3,834OTHER INCOME (EXPENSE):Interest income
    
    
    77
    
    
    
    39
    
    
    
    263Interest expense
    
    
    (7,578
    )
    
    
    (6,381
    )
    
    
    (4,525
    )Loss on disposal of assets
    
    
    (13
    )
    
    
    (33
    )
    
    
    (20
    )Expenses related to retirement of debt
    
    
    
    
    
    
    
    
    
    
    (604
    )Amortization of deferred financing costs
    
    
    (296
    )
    
    
    (314
    )
    
    
    (203
    )Total other expense
    
    
    (7,810
    )
    
    
    (6,689
    )
    
    
    (5,089
    )LOSS FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST AND
GAINS ON SALE OF REAL ESTATE ASSETS
    
    
    (4,987
    )
    
    
    (5,409
    )
    
    
    (1,255
    )MINORITY INTEREST OF UNITHOLDERS IN THE OPERATING PARTNERSHIP
    
    
    1,416
    
    
    
    1,703
    
    
    
    411LOSS FROM CONTINUING OPERATIONS BEFORE GAINS ON SALE OF REAL
ESTATE ASSETS
    
    
    (3,571
    )
    
    
    (3,706
    )
    
    
    (844
    )GAINS ON SALE OF REAL ESTATE ASSETS, net of minority interest
of unitholders in the operating partnership
    
    
    77
    
    
    
    941
    
    
    
    7,981INCOME (LOSS) FROM CONTINUING OPERATIONS
    
    
    (3,494
    )
    
    
    (2,765
    )
    
    
    7,137INCOME FROM DISCONTINUED OPERATIONS, net of
minority interest of unitholders in the operating partnership
    
    
    6,184
    
    
    
    249
    
    
    
    303NET INCOME (LOSS)
    
    $
    2,690
    
    
    $
    (2,516
    )
    
    $
    7,440INCOME (LOSS) PER COMMON SHARE  BASIC AND DILUTED (Note 8):Income (loss) from continuing operations
    
    $
    (0.68
    )
    
    $
    (0.56
    )
    
    $
    1.47Income from discontinued operations
    
    
    1.20
    
    
    
    0.05
    
    
    
    0.06Net income (loss)
    
    $
    0.52
    
    
    $
    (0.51
    )
    
    $
    1.53Weighted
average common shares - basic
    
    
    5,171,748
    
    
    
    4,943,280
    
    
    
    4,870,117Weighted average common shares  diluted (effect of
operating partnership units)
    
    
    7,223,727
    
    
    
    7,220,593
    
    
    
    7,226,123Cash dividends per share
    
    $
    0.55
    
    
    $
    0.00
    
    
    $
    0.33
 See notes to the consolidated financial statements. F-3




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##### Table of Contents



ROBERTS REALTY INVESTORS, INC. 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (Dollars in Thousands, Except Share and Per Share Data)
 Common Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    TotalNumber of
    
    
    
    
    
    Paid-In
    
    Treasury
    
    Deferred
    
    Comprehensive
    
    Retained
    
    ShareholdersShares Issued
    
    Amount
    
    Capital
    
    Shares
    
    Compensation
    
    Income
    
    Earnings
    
    EquityBALANCE AS OF DECEMBER 31, 2000
    
    
    5,161,299
    
    
    $
    52
    
    
    $
    23,741
    
    
    
    ($2,210
    )
    
    
    ($146
    )
    
    $
    0
    
    
    $
    0
    
    
    $
    21,437Conversion of units to shares
    
    
    86,978
    
    
    
    1
    
    
    
    435
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    436Dividends declared ($0.33 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,607
    )
    
    
    (1,607
    )Adjustment for minority interest in
the operating partnership
    
    
    
    
    
    
    
    
    
    
    1,017
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,017Restricted shares issued to employees
    
    
    18,290
    
    
    
    
    
    
    
    141
    
    
    
    
    
    
    
    (141
    )Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85
    
    
    
    
    
    
    
    
    
    
    
    85Treasury shares (69,500 shares at cost)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (554
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (554
    )Cumulative effect of change in
accounting principle
    
    
    
    
    
    
    
    
    
    
    (278
    )
    
    
    
    
    
    
    
    
    
    
    (564
    )
    
    
    
    
    
    
    (842
    )Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    (646
    )
    
    
    
    
    
    
    
    
    
    
    (1,392
    )
    
    
    
    
    
    
    (2,038
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,440
    
    
    
    7,440BALANCE AS OF DECEMBER 31, 2001
    
    
    5,266,567
    
    
    
    53
    
    
    
    24,410
    
    
    
    (2,764
    )
    
    
    (202
    )
    
    
    (1,956
    )
    
    
    5,833
    
    
    
    25,374Comprehensive income (loss)Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,516
    )
    
    
    (2,516
    )Unrealized loss on interest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,442
    )
    
    
    
    
    
    
    (1,442
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,958
    )Conversion of units to shares
    
    
    189,747
    
    
    
    2
    
    
    
    952
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    954Restricted shares issued to employees,
net of forfeitures
    
    
    3,077
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    (13
    )Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76
    
    
    
    
    
    
    
    
    
    
    
    76Adjustment for minority interest in
the operating partnership
    
    
    
    
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33BALANCE AS OF DECEMBER 31, 2002
    
    
    5,459,391
    
    
    
    55
    
    
    
    25,408
    
    
    
    (2,764
    )
    
    
    (139
    )
    
    
    (3,398
    )
    
    
    3,317
    
    
    
    22,479Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,690
    
    
    
    2,690Unrealized gain on interest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,045
    
    
    
    
    
    
    
    1,045Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,735Conversion of units to shares
    
    
    124,303
    
    
    
    1
    
    
    
    623
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    624Dividends declared ($0.55 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,854
    )
    
    
    (2,854
    )Restricted shares issued to employees,
net of forfeitures
    
    
    1,512
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    (8
    )Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    54Adjustment for minority interest in
the operating partnership
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11BALANCE AS OF DECEMBER 31, 2003
    
    
    5,585,206
    
    
    $
    56
    
    
    $
    26,050
    
    
    
    ($2,764
    )
    
    
    ($93
    )
    
    
    ($2,353
    )
    
    $
    3,153
    
    
    $
    24,049
 See notes to the consolidated financial statements. F-4




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##### Table of Contents



ROBERTS REALTY INVESTORS, INC. 
 CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands)
 Years Ended December 31,2003
    
    2002
    
    2001OPERATING ACTIVITIES:Net income (loss)
    
    $
    2,690
    
    
    $
    (2,516
    )
    
    $
    7,440Adjustments
to reconcile net income (loss) to net cash provided by operating activities of
continuing operations:Income from discontinued operations, net of minority interest
    
    
    (6,184
    )
    
    
    (249
    )
    
    
    (303
    )Minority interest of unitholders in the operating partnership
    
    
    (1,416
    )
    
    
    (1,703
    )
    
    
    (411
    )Gain on sale of real estate assets, net of minority interest
    
    
    (77
    )
    
    
    (941
    )
    
    
    (7,981
    )Loss on disposal of assets
    
    
    13
    
    
    
    33
    
    
    
    20Depreciation and amortization
    
    
    7,029
    
    
    
    6,886
    
    
    
    5,209Expenses related to retirement of debt
    
    
    
    
    
    
    
    
    
    
    604Amortization of deferred compensation
    
    
    54
    
    
    
    76
    
    
    
    85Changes in assets and liabilities:Increase in restricted cash
    
    
    (33
    )
    
    
    (1
    )
    
    
    50Decrease (increase) in other assets
    
    
    276
    
    
    
    (321
    )
    
    
    284(Decrease) increase in accounts payable and accrued expenses relating to operations
    
    
    (806
    )
    
    
    661
    
    
    
    84Increase in security deposits and prepaid rent
    
    
    48
    
    
    
    34
    
    
    
    (81
    )Net cash provided by operating activities from continuing operations
    
    
    1,594
    
    
    
    1,959
    
    
    
    5,000Net cash provided by operating activities from discontinued operations
    
    
    377
    
    
    
    810
    
    
    
    986Net cash provided by operating activities
    
    
    1,971
    
    
    
    2,769
    
    
    
    5,986INVESTING ACTIVITIES:Proceeds from sale of real estate assets
    
    
    7,313
    
    
    
    3,471
    
    
    
    14,680Acquisition and construction of real estate assets
    
    
    (12,052
    )
    
    
    (19,692
    )
    
    
    (64,364
    )Net cash used in investing activities
    
    
    (4,739
    )
    
    
    (16,221
    )
    
    
    (49,684
    )FINANCING ACTIVITIES:Proceeds from mortgage notes payable
    
    
    10,750
    
    
    
    32,500
    
    
    
    33,700Payoff of mortgage notes, including prepayment penalty
    
    
    (8,487
    )
    
    
    (7,519
    )
    
    
    (8,970
    )Principal repayments on mortgage notes payable
    
    
    (1,107
    )
    
    
    (1,032
    )
    
    
    (812
    )Proceeds from land notes payable
    
    
    
    
    
    
    
    
    
    
    8,000Payoff of land notes payable
    
    
    (3,700
    )
    
    
    (1,300
    )
    
    
    (2,000
    )Payment of loan costs
    
    
    (252
    )
    
    
    (459
    )
    
    
    (906
    )Proceeds from line of credit
    
    
    
    
    
    
    802
    
    
    
    2,000Payoff of line of credit
    
    
    
    
    
    
    (2,802
    )
    
    
    Proceeds from construction loans
    
    
    12,567
    
    
    
    18,687
    
    
    
    17,552Payoff of construction loans
    
    
    
    
    
    
    (22,500
    )
    
    
    Repurchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (554
    )Payment of dividends and distributions
    
    
    (3,962
    )
    
    
    
    
    
    
    (3,190
    )Net cash provided by financing activities
    
    
    5,809
    
    
    
    16,377
    
    
    
    44,820NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    3,041
    
    
    
    2,925
    
    
    
    1,122CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
    
    
    5,542
    
    
    
    2,617
    
    
    
    1,495CASH AND CASH EQUIVALENTS, END OF YEAR
    
    $
    8,583
    
    
    $
    5,542
    
    
    $
    2,617SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid for interest
    
    $
    9,395
    
    
    $
    9,058
    
    
    $
    7,009
 See notes to the consolidated financial statements. F-5




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##### Table of Contents



ROBERTS REALTY INVESTORS, INC. 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  1.
    
    BUSINESS AND ORGANIZATIONRoberts Realty Investors, Inc., 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 consisting primarily of
multifamily apartment communities. Roberts Realty owns and operates
multifamily residential properties as a self-administered, self-managed
equity real estate investment trust (a REIT). Six of Roberts Realtys
completed apartment communities are located in the Atlanta metropolitan
area with the seventh located in Palm Beach County, Florida.Roberts Realty 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 Roberts Realty is the
sole general partner and had a 72.3% and 70.6% ownership interest at
December 31, 2003 and December 31, 2002, respectively. As the sole
general partner and owner of a majority interest of the operating
partnership, Roberts Realty controls the operating partnership.Roberts Realty, 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, 2003 and 2002 were 2,002,467 and
2,126,770, respectively. Units held by the minority interest as a
percentage of total Units and shares of common stock (shares) of
Roberts Realty outstanding were 27.7% and 29.4% at December 31, 2003 and
2002, respectively. The minority interest percentage reflects the number
of Shares and Units outstanding and will change as additional Shares and
Units are issued.At December 31, 2003, Roberts Realty owned seven completed multifamily
apartment communities totaling 1,694 apartment homes (1,494 in the
Atlanta metropolitan area and 200 in Palm Beach County, Florida); an
additional 319 apartment homes were under construction in Charlotte,
North Carolina, and a 220-unit apartment community in Atlanta was in the
planning and design phase. In addition, Roberts Realty has a 39,907
square foot commercial office building and a 42,090 square foot retail
center under construction at December 31, 2003.2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of Presentation.The accompanying consolidated financial
statements include the consolidated accounts of Roberts Realty and the
operating partnership. All significant inter-company accounts and
transactions have been eliminated in consolidation. The financial
statements of Roberts Realty 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 and redeemed. The
minority interest of the unitholders in the earnings or loss of the
operating partnership on the accompanying statements of operations is
calculated based on the weighted average number of units outstanding
during the period, which was 28.4%, 31.5% and 32.6% for the years ended
December 31, 2003, 2002 and 2001, respectively. The minority interest of
the unitholders was $9,214,000 and $9,361,000 at December 31, 2003 and
2002, respectively. F-6




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##### Table of Contents



Holders of partnership units generally have the right to require the
operating partnership to redeem their units for shares. Upon submittal
of units for redemption, the operating partnership has the option either
(a) to acquire those units in exchange for shares, on a one-for-one
basis, or (b) to pay cash for those units at their fair market value,
based upon the then current trading price of the shares. Roberts Realty
has adopted a policy that it will issue shares in exchange for all future
units submitted.Real Estate Assets and Depreciation.Real estate assets 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 Roberts Realty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
five to seven years.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
of $342,000 and $309,000 at December 31, 2003 and 2002, respectively.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 $1,345,000, $2,196,000 and $1,910,000 for the years ended December
31, 2003, 2002, and 2001, respectively.Revenue Recognition.Roberts Realty leases its residential properties
under operating leases with terms generally one year or less. Rental
income is recognized when earned, which materially approximates revenue
recognition on a straight-line basis.Income Taxes.Roberts Realty 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, Roberts Realty
generally will not be subject to federal and state income taxation at the
corporate level to the extent it distributes annually at least 90% of its
taxable income, as defined in the Code, to its shareholders and satisfies
certain other requirements. Provided that qualification as a REIT is
maintained, Roberts Realty generally will not be subject to federal
income tax on distributed net income in the future. Accordingly, no
provision has been made for federal and state income taxes in the
accompanying consolidated financial statements.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 that are convertible into shares of
common stock. F-7




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Use of Estimates.The preparation of financial statements in conformity
with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities 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.New Accounting Pronouncements.In June 2001, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 141, Business Combinations (effective July 1,
2001) and SFAS No. 142, Goodwill and Other Intangible Assets (effective
January 1, 2002). SFAS No. 141 prohibits pooling-of-interests accounting
for acquisitions and requires that the purchase price of properties
acquired after June 2001 be allocated to land, building, tenant
improvements and identified intangible assets. Intangible assets can
consists of above or below market leases, customer relationships or the
value of in-place leases. Assets acquired, other than intangibles, are
depreciated using the methodology detailed in the Real Estate Assets and
Depreciation section. Above or below market leases are amortized into
rental revenues over the individual remaining lease terms. In-place
leases are amortized over the term of the lease. SFAS No. 142 specifies
that goodwill and some intangible assets will no longer be amortized but
instead will be subject to periodic impairment testing. The adoption of
SFAS No. 141 and 142 did not have a material impact on Roberts Realtys
financial position or results of operations.In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No.144 establishes
new rules for measuring impairment of long-lived assets and accounting
for discontinued operations. SFAS No. 144 supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of, and among other factors, establishes criteria
beyond that previously specified in SFAS No. 121 to determine when a
long-lived asset is to be considered held for sale. On January 1, 2002,
Roberts Realty adopted SFAS No. 144, which did not have a material effect
on financial position or results of operations. However, SFAS No. 144
required modification of the presentation of the operating results from
real estate held for sale in Roberts Realtys statement of operations.In April 2002, SFAS No. 145 Rescission of SFAS Nos. 4, 44, 64 and
Amendment of SFAS No. 13 and Technical Corrections was issued. SFAS No.
145 prevents treatment as extraordinary, gains or losses on
extinguishment of debt not meeting the criteria of Accounting Principles
Board Opinion No. 30. SFAS No. 145 is effective for fiscal years
beginning after May 15, 2002. The adoption will affect the
classifications of those amounts in the financial statements of
subsequent periods and comparative prior periods. At January 1, 2003,
upon adoption of SFAS No. 145, Roberts Realty reclassified the
extraordinary loss recognized during fiscal 2001 to Expenses Related to
Retirement of Debt (included in continuing operations) in the
accompanying 2001 Consolidated Statement of Operations. The expenses
related to retirement of debt relate to the write-off of unamortized loan
costs and prepayment fees of (a) the Preston Oaks mortgage note, which
was refinanced in February 2001, (b) the Rosewood community, which was
sold in January 2001, and (c) the Crestmark community which was sold in
July 2001 (see Note 5).In June 2002, SFAS No. 146, Accounting for Costs Associated with Exit or
Disposal Activities, was issued. SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No.
94-3, Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including certain costs incurred in
a restructuring). SFAS No. 146 requires recognition of a liability for
a cost associated with an exit or disposal activity when the liability is
incurred as opposed to when the entity commits to an exit plan under EITF
Issue No. 94-3. SFAS No. 146 is effective for exit or disposal
activities initiated after December 31, 2002. The adoption of SFAS No.
146 did not have a material impact on Roberts Realtys financial position
or results of operations. F-8




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##### Table of Contents



In November 2002, the FASB issued FASB Interpretation No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others - an
Interpretation of SFAS Nos. 5, 57, and 107, and rescission of FASB
Interpretation No. 34 (FIN 45). FIN 45 elaborates on the disclosures
to be made by a guarantor in its financial statements. It also requires
a guarantor to recognize a liability for the fair value of the obligation
undertaken in issuing the guarantee at the inception of a guarantee. The
disclosure requirements of FIN 45 are effective for Roberts Realty as of
December 31, 2002. The recognition provisions of FIN 45 will be applied
on a prospective basis to guarantees issued after December 31, 2002. The
requirements of FIN 45 did not have a material impact on Roberts Realtys
financial position or results of operations.In January 2003, the FASB issued FASB Interpretation No. 46,
Consolidation of Variable Interest Entities, an interpretation of ARB
No. 51 (FIN 46). FIN 46 addresses consolidation by business
enterprises of variable interest entities (VIEs). In December 2003,
FIN 46 was revised by FIN 46R. FIN 46 applied immediately to variable
interest entities created after January 31, 2003, and with respect to
variable interests held before February 1, 2003, FIN 46R will apply
beginning with the quarter ending March 31, 2004, the first quarter of
fiscal 2004. Adoption of this new method of accounting for VIEs did not
and is not expected to have a material impact on Robert Realtys
financial position or results of operations.In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities. SFAS No. 149 amends
and clarifies the accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133. SFAS No. 149 is generally
effective for contracts entered into or modified after September 30, 2003
and for hedging relationships designated after September 30, 2003. The
adoption of SFAS No. 149 did not have a material impact on Roberts
Realtys results of operations, financial condition or cash flows.In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity. SFAS No. 150 establishes standards for the classification and
measurement of certain financial instruments with characteristics of both
liabilities and equity. This statement requires an issuer to classify
certain instruments as liabilities (or assets in some circumstances) and
is effective May 31, 2003 for all financial instruments which existed
prior to May 31, 2003. The application of SFAS No. 150 to mandatorily
redeemable non-controlling interests in finite life entities was
indefinitely deferred. Roberts Realty does not have any financial
instruments as defined in SFAS No. 150, and the adoption of SFAS No. 150
did not have a material impact on Robert Realtys financial position or
results of operations.3.
    
    ACQUISITIONS AND DISPOSITIONSOn January 4, 2001, Roberts Realty sold the Rosewood Plantation community
for $14,800,000. The sale resulted in a gain of $5,188,000, net of
minority interest of the unitholders in the operating partnership.
Roberts Realty acquired the property in October 1994. Rosewood
Plantation is a 152-unit apartment home community located in Gwinnett
County in the Atlanta metropolitan area. Net sales proceeds were
$5,820,000 after deducting $7,400,000 for the mortgage note payable
assumed by the buyer, $476,000 for a loan pay down, $364,000 for closing
costs and prorations, and $740,000 for a partnership profits interest
paid to Roberts Properties, under the terms of the agreement of limited
partnership of the operating partnership. Roberts Realty invested the
net sales proceeds in replacement properties in connection with a Section
1031 tax deferred exchange. See Note 10  Related Party Transactions.
On April 25, 2002, Roberts Realty entered into a mutual release agreement
in settlement of a lawsuit filed December 28, 2001 by the buyer of
Rosewood Plantation under the terms of the warranty provisions of the
sales contract. The lawsuit was settled for $150,000 and is shown in the
2002 F-9




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##### Table of Contents



financial statements as a loss on sale of real estate asset of $102,000
(net of minority interest of $48,000).On February 27, 2001, Roberts Realty signed an exchange agreement with an
intermediary to acquire land previously owned by Roberts Properties Jones
Bridge, LLC, of which Mr. Roberts owned a 90% interest. Roberts Realty
is constructing a 42,090 square foot retail center on the 6.84-acre
property, which is located at the intersection of Abbotts Bridge Road and
Jones Bridge Road in front of its Addison Place community in Alpharetta,
Georgia. Roberts Realty acquired the property on June 20, 2001 for
approximately $4,470,000. In connection with these transactions, Roberts
Properties Jones Bridge, LLC received $3,498,000 for the property.
Through December 31, 2003, Roberts Realty paid Roberts Construction
approximately $2,248,000 for construction-related work on the property.
Roberts Realty entered into a cost plus 5% contract with Roberts
Construction to complete the retail center. See Note 10  Related Party
Transactions.On May 30, 2001, Roberts Realty purchased from Roberts Properties 9.5
acres of undeveloped land located at the corner of Jones Bridge Road and
East Fox Court, across Jones Bridge Road from Addison Place. Roberts
Properties had purchased the property for $1,070,000; Roberts Realty paid
$1,447,000, which includes approximately $377,000 in development-related
work performed by Roberts Properties. Roberts Realty paid Roberts
Properties an additional $180,000 during 2002 to complete the development
and design work. The purchase price was reduced by $356,000 as a result
of a sewer moratorium.On June 28, 2001, Roberts Realty purchased approximately 10.9 acres from
Roberts Properties to construct a 220-unit upscale apartment community
located adjacent to its former Highland Park community. The purchase
price was $5,376,000 including closing costs, and the transaction was
part of a Section 1031 tax-deferred exchange partially funded by sales
proceeds from the sale of Rosewood Plantation. The total cost of the
project is estimated to be $24,000,000. Roberts Realty paid Roberts
Properties to complete the design and development work for a fee of
$2,500 per unit, or $550,000. Roberts Realty entered into a cost plus
10% contract with Roberts Construction to build the 220 apartment units.
See Note 10  Related Party Transactions.On June 28, 2001, Roberts Realty purchased a partially constructed office
building and approximately 3.9 acres of land from Roberts Properties for
$2,147,000, including closing costs. Roberts Realty intends to complete
construction and estimates total project costs of $6,300,000, including
the amount paid at closing. Roberts Construction will complete
construction of the building at cost and will perform tenant finish work
for approximately $600,000. Roberts Properties will not be paid a
development fee for this project. Roberts Realty will use a portion of
one floor of the building as its corporate headquarters. Roberts Realty
will lease the remaining space on that floor to Roberts Properties and
Roberts Construction and plans to lease the other two floors to
unaffiliated tenants.On July 11, 2001, Roberts Realty closed the sale of its Crestmark
community for $25,000,000. The sale resulted in a gain of $2,793,000,
net of minority interest of unitholders in the operating partnership.
Crestmark is a 334-unit apartment community located in Douglasville,
Georgia. Net cash proceeds were $8,013,000 after deducting $15,485,000
for the mortgage note payable assumed by the buyer, $574,000 for closing
costs and prorations, and $928,000 for a partnership profits interest
paid to Roberts Properties under the terms of the amended agreement of
limited partnership of the operating partnership. Roberts Realty
invested the net sales proceeds in a replacement property (St. Andrews at
the Polo Club, as described in the following paragraph) in connection
with a Section 1031 tax deferred exchange. See Note 10  Related Party
Transactions.On November 6, 2001, Roberts Realty purchased the 200-unit St. Andrews at
the Polo Club apartment community located in the City of Wellington, Palm
Beach County, Florida from an F-10




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##### Table of Contents



unrelated party for a purchase price of $27,778,000, including closing
costs, as part of a Section 1031 tax-deferred exchange partially funded
by sales proceeds from the Crestmark sale. To provide the balance of the
funds needed to purchase St. Andrews, Roberts Realty obtained a
$21,000,000 permanent loan from State Farm Life Insurance Company. The
loan bears a fixed interest rate of 6.95% and has a 10-year term. The
results of St. Andrews have been included in the consolidated financial
statements since November 6, 2001. The purchase price was allocated to
the assets acquired as follows: Assets acquired
    
    November 6, 2001Land
    
    $
    4,167,000Buildings and improvements
    
    
    20,834,000Furniture, fixtures and equipment
    
    
    2,777,000Total assets acquired
    
    $
    27,778,000
  In accordance with SFAS 141, the purchase price allocation was based on
the estimated fair value of each of the asset classes at the date of
acquisition. The fair value was primarily determined based on an
independent appraisal of current replacement cost for a similar property.
No values were assigned to in-place leases, above or below market
leases, or tenant relationships since Roberts Realty determined such values to be
immaterial at the date of acquisition.On November 21, 2002, Roberts Realty sold the 9.5 acres of land located
at the corner of Jones Bridge Road and East Fox Court, in Alpharetta,
Georgia for $3,200,000 plus a reimbursement of previously paid sewer
costs of $302,000. The sale resulted in a gain of $1,043,000, net of
minority interest of unitholders in the operating partnership.On February 28, 2003, Roberts Realty received an aggregate of $381,000 in
connection with the sale of land, reimbursement for land improvements and
conveyances of temporary construction easements to Fulton County, Georgia
for road right-of-way projects at the Addison Place community, which
resulted in a gain of $77,000, net of minority interest of unitholders in
the operating partnership.On August 6, 2003, Roberts Realty completed the sale of its Highland Park
community for $17,988,000, resulting in a gain of approximately
$6,070,000, net of minority interest of $2,432,000. Net sales proceeds
were approximately $6,932,000 after deduction of $9,930,000 for the
mortgage note payable, which was assumed by the buyer, closing costs and
prorations totaling $227,000, and a partnership profits interest of
$899,000 paid to Roberts Properties under the amended partnership
agreement of the operating partnership.Unaudited pro forma amounts for the years ended December 31, 2003, 2002
and 2001 assuming the purchase of St. Andrews at the Polo Club and the
sales of Highland Park, Ivey Brook, Rosewood Plantation and Crestmark had
taken place as of January 1, 2001 for the period 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 Roberts Realty had the acquisition and sales occurred at
the beginning of the period presented, nor is it indicative of future
results. Years Ended December 31,2003
    
    2002
    
    2001Total operating revenues
    
    $
    19,193
    
    
    $
    16,833
    
    
    $
    14,790Net loss
    
    
    (3,494
    )
    
    
    (2,663
    )
    
    
    (1,937
    )Per Share Data  Basic and DilutedNet loss
    
    
    (0.68
    )
    
    
    (0.54
    )
    
    
    (0.40
    )
 F-11




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##### Table of Contents



4.
    
    DISCONTINUED OPERATIONS  For the twelve months ended December 31, 2003, 2002 and 2001, income from
discontinued operations relates to Roberts Realtys 188-unit Highland
Park community that Roberts Realty sold on August 6, 2003.The following table summarizes information for Highland Park as of
December 31, 2002 (dollars in thousands): December 31,2002Land
    
    $
    1,827Buildings and improvements
    
    
    9,100Furniture, fixtures and equipment
    
    
    1,22612,153Less accumulated depreciation
    
    
    (3,793
    )Operating real estate assets
    
    
    8,360Restricted cash
    
    
    32Deferred financing costs, net of accumulated amortization
    
    
    157Other assets
    
    
    21Assets held for sale
    
    $
    8,570Mortgage note payable
    
    $
    9,991Accounts payable and accrued expenses
    
    
    44Security deposits and prepaid rents
    
    
    45Liabilities related to assets held for sale
    
    $
    10,080
  The following table summarizes revenue and expense information for
Highland Park for the twelve month periods ended December 31, 2003, 2002
and 2001 (dollars in thousands): F-12




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##### Table of Contents



Twelve Months EndedDecember 31,2003
    
    2002
    
    2001OPERATING REVENUES:Rental operations
    
    $
    1,190
    
    
    $
    2,073
    
    
    $
    2,129Other operating income
    
    
    62
    
    
    
    105
    
    
    
    118Total operating revenues
    
    
    1,252
    
    
    
    2,178
    
    
    
    2,247OPERATING EXPENSES:Personnel
    
    
    116
    
    
    
    226
    
    
    
    186Utilities
    
    
    63
    
    
    
    114
    
    
    
    114Repairs, maintenance and landscaping
    
    
    77
    
    
    
    128
    
    
    
    123Real estate taxes
    
    
    111
    
    
    
    186
    
    
    
    189Marketing, insurance and other
    
    
    70
    
    
    
    124
    
    
    
    96Depreciation of real estate assets
    
    
    247
    
    
    
    445
    
    
    
    506Total operating expenses
    
    
    684
    
    
    
    1,223
    
    
    
    1,214INCOME FROM OPERATIONS
    
    
    568
    
    
    
    955
    
    
    
    1,033OTHER EXPENSE:Interest expense
    
    
    (402
    )
    
    
    (570
    )
    
    
    (561
    )Gain (loss) on disposal of assets
    
    
    2
    
    
    
    0
    
    
    
    (7
    )Amortization of deferred financing costs
    
    
    (9
    )
    
    
    (22
    )
    
    
    (16
    )Total other expense
    
    
    (409
    )
    
    
    (592
    )
    
    
    (584
    )Income before minority interest
    
    
    159
    
    
    
    363
    
    
    
    449MINORITY INTEREST OF UNITHOLDERS IN THE
OPERATING PARTNERSHIP
    
    
    (45
    )
    
    
    (114
    )
    
    
    (146
    )INCOME BEFORE GAIN ON SALE OF REAL ESTATE
    
    
    114
    
    
    
    249
    
    
    
    303GAIN ON SALE OF HIGHLAND PARK, net of
minority interest of unitholders
    
    
    6,070
    
    
    
    
    
    
    
    INCOME FROM DISCONTINUED OPERATIONS
    
    $
    6,184
    
    
    $
    249
    
    
    $
    303
  5.
    
    NOTES PAYABLE  Roberts Realty has four types of debt: unsecured lines of credit;
mortgage notes secured by some of its apartment communities;
construction/permanent loans secured by other apartment communities and
properties; and land loans incurred to purchase undeveloped land. These
loans are summarized below.  Lines of Credit.Roberts Realty has unsecured lines of credit with two
banks, aggregating $3,000,000, to provide funds for short-term working
capital needs. One facility, in the amount of $1,000,000, expires June
1, 2004. The other facility, in the amount of $2,000,000, expires August
1, 2004. At December 31, 2003, there were no borrowings under either
line of credit. F-13




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##### Table of Contents



Mortgage Notes.The permanent mortgage notes payable secured by Roberts
Realtys completed apartment communities at December 31, 2003 and
December 31, 2002 were as follows: FixedInterestRate as of
    
    Principal OutstandingProperty Securing Mortgage
    
    Maturity
    
    12/31/03
    
    12/31/03
    
    12/31/02Addison Place  Phase I
    
    
    11/15/09
    
    
    
    6.95
    %
    
    $
    9,177,000
    
    
    $
    9,289,000Addison
Place  Phase II (1)
    
    
    5/10/05
    
    
    
    8.62
    %
    
    
    22,282,000
    
    
    
    22,427,000Bradford Creek
    
    
    6/15/08
    
    
    
    7.15
    %
    
    
    7,861,000
    
    
    
    7,976,000Highland Park (2)
    
    
    12/01/12
    
    
    
    6.76
    %
    
    
    
    
    
    
    9,991,000Plantation Trace
    
    
    10/15/08
    
    
    
    7.09
    %
    
    
    11,185,000
    
    
    
    11,345,000Preston Oaks
    
    
    2/01/08
    
    
    
    7.18
    %
    
    
    12,310,000
    
    
    
    12,453,000River Oaks (3)
    
    
    11/15/03
    
    
    
    7.15
    %
    
    
    
    
    
    
    8,579,000River Oaks (3)
    
    
    09/01/13
    
    
    
    5.54
    %
    
    
    10,703,000
    
    
    
    St. Andrews at the Polo Club
    
    
    12/01/11
    
    
    
    6.95
    %
    
    
    20,534,000
    
    
    
    20,766,000$
    94,052,000
    
    
    $
    102,826,000
   (1) As explained below in Construction Loans, the interest rate on
this loan has been synthetically fixed at the rate shown.  (2) The buyer of Highland Park assumed the mortgage note secured by that
property upon its sale on August 6, 2003. Accordingly, the $9,930,000
principal balance on that date reduced the gross sales proceeds from the
transaction.  (3) On August 21, 2003, Roberts Realty closed a $10,750,000 loan from
L.J. Melody & Company, a mortgage banking firm, to refinance the River
Oaks property. As planned, L.J. Melody & Company immediately assigned
the loan to the Federal Home Loan Mortgage Corporation. Because the loan
amount increased from $8,500,000 to $10,750,000, Roberts Realty received
net cash proceeds of approximately $2,100,000. The terms of the loan
include a ten-year term with a fixed interest rate of 5.54% payable in
monthly installments of $61,307 based on a 30-year amortization schedule.
Roberts Realty paid an origination fee of $74,875 to L.J. Melody &
Company in connection with this loan. Dennis H. James, a director of
Roberts Realty, is Managing Director  Southeast Region, with L.J. Melody
& Company.  Real estate assets having a combined depreciated cost of $101,541,000
served as collateral for the outstanding mortgage debt at December 31,
2003.  Construction Loans.On May 3, 2000, Roberts Realty closed a $22,500,000
construction/permanent loan to fund the construction of Addison Place 
Phase II. The loan has a 5-year term and bears interest at the 30-day
LIBOR rate plus 150 basis points. Roberts Realty entered into a separate
agreement that synthetically fixed the interest rate at 8.62% (Note 6).
On May 1, 2002, the construction loan automatically converted to a
permanent loan with principal and interest payments due monthly for the
remaining term of the loan.  On April 26, 2001, Roberts Realty closed a $17,000,000
construction/permanent loan to fund the construction of its 250-unit
Veranda Chase community located in Atlanta. The loan has a seven-year
term and bears an interest rate of the 30-day LIBOR plus 150 basis
points. Monthly payments are interest only for the first three years of
the loan and thereafter include principal and interest based on a 30-year
amortization schedule for the remaining four years. At the closing of F-14




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##### Table of Contents



the loan, Roberts Realty entered into a separate agreement that
synthetically fixed the interest rate at 7.38% (Note 6) for the first
five years of the loan. At December 31, 2003, $17,000,000 was drawn on
the loan.  On June 28, 2001, Roberts Realty closed a $5,280,000 loan to fund the
construction of the Northridge commercial office building. The loan is
secured by the land and improvements, has a 35-month term, and bears
interest at the 30-day LIBOR plus 200 basis points. At December 31,
2003, $3,657,000 was drawn on the loan. Roberts Realty intends to secure
permanent financing on this property prior to the maturity date on this
loan of June 1, 2004.  On February 21, 2002, Roberts Realty closed a $24,000,000
construction/permanent loan to fund the construction of its 319-unit
apartment community in Charlotte, North Carolina. The loan matures on
March 10, 2006, with Roberts Realty having the option to exercise two
additional one-year extensions. Monthly payments are interest only
through March 10, 2005 at the 30-day LIBOR plus 200 basis points;
thereafter, principal and interest will be payable in monthly
installments calculated using a 30-year amortization schedule and an
assumed interest rate of 7.0% plus actual interest. At December 31,
2003, $16,410,000 was drawn on the loan.  On May 30, 2003, Roberts Realty closed a $6,500,000 construction loan to
fund the construction of the Addison Place retail center. The loan is
secured by the land and improvements and matures on April 30, 2006.
Monthly payments are interest only at the 30-day LIBOR plus 185 basis
points. At December 31, 2003, $3,391,000 was drawn on the loan.  Land Loans.On June 28, 2001, Roberts Realty closed a $3,000,000 land
loan to fund the initial construction of the Northridge apartment
community. The loan matures on July 10, 2004, is secured by the
Northridge land, and bears an interest rate of the 30-day LIBOR plus 175
basis points. At December 30, 2003, $3,000,000 was drawn on the loan.
Roberts Realty intends to roll the loan into a construction loan upon
starting construction of the project.  The scheduled principal payments of all debt outstanding at December 31,
2003 for each of the years ending December 31 are as follows: 2004
    
    $
    7,890,0002005
    
    
    23,682,0002006
    
    
    5,174,0002007
    
    
    1,912,0002008
    
    
    61,391,000Thereafter
    
    
    37,461,000$
    137,510,000
  Interest capitalized was $1,345,000, $2,196,000 and $1,910,000 for the
twelve months ended December 31, 2003, 2002 and 2001, respectively.  During 2001 Roberts Realty recorded a loss on early extinguishment of
debt as a result of the write-off of unamortized loan costs and
prepayment fees related to (a) the Preston Oaks mortgage note, which was
refinanced in February 2001, (b) the Rosewood community, which was sold
in January 2001, and (c) the Crestmark community which was sold in July
2001. Of the total loss of $604,000  $342,000 related to Preston Oaks,
$93,000 related to Rosewood and $169,000 related to Crestmark. These
amounts are recorded as expenses related to retirement of debt in the
accompanying consolidated statements of operations. F-15




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##### Table of Contents



6.
    
    DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES.  Effective January 1, 2001, Roberts Realty adopted SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, as
amended. SFAS No. 133 establishes accounting and reporting standards for
derivative instruments and for hedging activities by requiring that all
derivatives be recognized on the balance sheet and measured at fair
value. Gains or losses resulting from changes in the fair value of
derivatives are recognized in earnings or recorded in other comprehensive
income, and recognized in the income statement when the hedged item
affects earnings, depending on the purpose of the derivatives and whether
they qualify for hedge accounting treatment.  Roberts Realty generally enters into fixed rate debt instruments. In
certain situations, Roberts Realty may utilize derivative financial
instruments in the form of interest rate swaps to hedge interest rate
exposure on variable-rate debt. Roberts Realty does not use these
instruments for trading or speculative purposes. Roberts Realty has
entered into interest rate swap agreements to effectively fix the
interest rates on its Addison Place  Phase II mortgage loan and its
Veranda Chase construction/permanent loan (see Note 5  Notes Payable).
The swap agreements expire May 10, 2005 and May 5, 2006, respectively.
The swap agreements have been designated as cash flow hedges and,
accordingly, are recorded at fair value in the consolidated balance
sheets, and the related gains or losses are deferred in shareholders
equity, net of minority interest, as a component of other comprehensive
income. Amounts received or paid in connection with the swap agreements
are recognized as adjustments to interest expense related to the
designated debt. Any ineffective portion of cash flow hedges are
recognized immediately in earnings. Roberts Realty intends to hold the
interest rate swap arrangements and related debt agreements until
maturity. In the event the interest rate swap agreement is terminated,
Roberts Realty would discontinue prospectively reclassifying amounts in
accumulated other comprehensive income to earnings based upon when the
hedged transactions are recognized in earnings.  At December 31, 2003, Roberts Realty recorded a liability of $3,255,000
relating to the estimated fair value of the swaps as a result of lower
market interest rates. This resulted in a decrease in shareholders
equity of $2,353,000 (accumulated other comprehensive loss), net of
minority interest of $902,000. At December 31, 2002, the liability
relating to the estimated fair value of the swaps was $4,813,000, which
resulted in a decrease in shareholders equity of $3,398,000 (accumulated
other comprehensive loss), net of minority interest of $1,415,000.
Provided that Roberts Realty holds these instruments until maturity, as
it intends, it will not pay any interest other than that stated in the
loan and swap agreements. The liability recorded at December 31, 2003
will be reduced as Roberts Realty performs under these instruments, as
the difference between the market interest rate and the fixed rates
decreases, and as these obligations mature.  7.
    
    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.  The fair value of Roberts Realtys interest rate swap agreements on its
construction/permanent loans was a liability of $3,255,000 and $4,813,000
at December 31, 2003 and 2002, respectively.  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, 2003 and 2002. Fixed rate mortgage debt with an aggregate
carrying value of $71,770,000 at December 31, 2003 has an estimated
approximate fair value of F-16




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##### Table of Contents



$77,418,000 based on interest rates available to Roberts Realty for debt
with similar terms and maturities.  8.
    
    SHAREHOLDERS EQUITY  Exchanges of Units for Shares.During the years ended December 31, 2003,
2002, and 2001, a total of 124,303, 189,747, and 86,978 units,
respectively, were exchanged for the same number of shares. Each
conversion was reflected in the accompanying consolidated financial
statements at book value.  Restricted Share Awards.During the years ended December 31, 2003, 2002,
and 2001, Roberts Realty granted 1,512, 3,077 and 18,290 shares,
respectively, net of forfeitures, of restricted stock to certain
employees. The market value of these restricted stock grants totaled
$7,000, $13,000 and $141,000 respectively, which was recorded as
unamortized deferred compensation and is shown as a separate component of
shareholders equity. These restricted shares vest 100% at the end of a
three or four-year vesting period and are being amortized to compensation
expense ratably over the vesting period.  Treasury Share Repurchases.During the year ended December 31, 2001
Roberts Realty repurchased 69,500 treasury shares at a total cost of
$554,000. Roberts Realty did not repurchase any treasury shares in 2003
or 2002.  Dividends. On August 27, 2003, Roberts Realty paid a special
distribution of $0.55 per share to shareholders and $0.55 per unit to
unitholders in the operating partnership of record on August 18, 2003.
Roberts Realty suspended payment of its regular quarterly dividend for
all four quarters of 2003, all four quarters of 2002 and the fourth
quarter of 2001. Of the dividends declared for 2003 totaling $0.55 per
share, approximately $0.52 per share represents capital gain and $0.03
per share represents a return of capital to the shareholders. Of the
dividends declared for 2001 totaling $0.33 per share, approximately $0.14
per share represents ordinary income, $0.05 per share represents capital
gain and $0.14 per share represents a return of capital to the
shareholders.  Earnings Per Share.Reconciliations of income available to common
shareholders and weighted average shares and units used in Roberts
Realtys basic and diluted earnings per share computations are detailed
below (dollars in thousands). 2003
    
    2002
    
    2001Income (loss) from continuing operations  basic
    
    $
    (3,494
    )
    
    $
    (2,765
    )
    
    $
    7,137Minority interest of unitholders in the operating
partnership in income attributable to
continuing operations
    
    
    (1,384
    )
    
    
    (1,271
    )
    
    
    3,468Income (loss) from continuing operations  diluted
    
    $
    (4,878
    )
    
    $
    (4,036
    )
    
    $
    10,605Income from discontinued operations - basic
    
    $
    6,184
    
    
    $
    249
    
    
    $
    303Minority interest of unitholders in the operating
partnership in income attributable to
discontinued operations
    
    
    2,477
    
    
    
    114
    
    
    
    146Income from discontinued operations  diluted
    
    $
    8,661
    
    
    $
    363
    
    
    $
    449Net income (loss)  diluted
    
    $
    3,783
    
    
    $
    (3,673
    )
    
    $
    11,054Weighted average shares  basic
    
    
    5,171,748
    
    
    
    4,943,280
    
    
    
    4,870,117Dilutive securities  weighted average units
    
    
    2,051,979
    
    
    
    2,277,313
    
    
    
    2,356,006Weighted average shares  diluted
    
    
    7,223,727
    
    
    
    7,220,593
    
    
    
    7,226,123
 F-17




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##### Table of Contents



9.
    
    SEGMENT REPORTING  SFAS No. 131 established standards for reporting financial and
descriptive information about operating segments in annual financial
statements. Operating segments are defined as components of an
enterprise about which separate financial information is available that
is evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance. Roberts Realtys
chief operating decision maker is its chief executive officer.  Roberts Realty owns, operates, develops and constructs multifamily
apartment communities located in Georgia and Florida and is constructing
a community in North Carolina. These apartment communities generate
rental revenue and other income through the leasing of apartment homes.
Roberts Realty evaluates the performance of each of its apartment
communities on an individual basis. However, because each of the
apartment communities has similar economic characteristics, residents,
and products and services, the apartment communities have been aggregated
into one reportable segment. This segment comprises 100% of Roberts
Realtys total revenues for each of the three years ended December 31,
2003.  Roberts Realty is constructing a 42,090 square foot retail center located
adjacent to its Addison Place apartment community and a 39,907 square
foot office building located adjacent to its Northridge apartment land.
Roberts Realty anticipates that when these assets begin to produce a
material amount of revenue, Roberts Realty will account for them in
separate segments.  10.
    
    RELATED PARTY TRANSACTIONS  Roberts Realty enters into transactions with Roberts Properties and
Roberts Construction, affiliates of Mr. Roberts, the Chairman of the
Board, Chief Executive Officer, and President of Roberts Realty
Investors, Inc. in the ordinary course of business. These transactions
are discussed below.  Land Acquisitions.On May 30, 2001, Roberts Realty purchased the East
Fox Court land from Roberts Properties for $1,447,000. Roberts
Properties had purchased the property for $1,070,000, and the $1,447,000
price Roberts Realty paid included $377,000 in development-related work
previously performed by Roberts Properties. Roberts Properties completed
the design and development work in 2002 for a fee of $180,000. The
independent members of the board of directors approved the foregoing
arrangements with Roberts Properties.  On June 20, 2001, Roberts Realty purchased the Addison Place retail
center land from REES 59 L.L.C. for $4,470,000. REES 59 had previously
purchased the land from Roberts Properties Jones Bridge, LLC, of which
Mr. Roberts owned a 90% interest. Roberts Realty entered into a cost
plus 5% contract with Roberts Construction to complete the retail center.
The independent members of the board of directors approved the foregoing
arrangements with Roberts Properties and Roberts Construction.  On June 28, 2001, Roberts Realty purchased the Northridge apartment land
from Roberts Properties for $5,376,000. Roberts Realty retained Roberts
Properties to complete the design and development work for a fee of
$2,500 per unit, or $550,000. Roberts Realty also entered into a cost
plus 10% contract with Roberts Construction to build the 220 apartment
units. The independent members of the board of directors approved the
foregoing arrangements with Roberts Properties and Roberts Construction. F-18




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##### Table of Contents



On June 28, 2001, Roberts Realty purchased land and the partially
constructed Northridge office building from Roberts Properties for
$2,147,000. The three-story, 39,907 square foot building will serve as
Roberts Realtys corporate headquarters, and Roberts Realty currently
expects to occupy a portion of one floor in the building by May 1, 2004.
Roberts Realty will lease the remaining space on that floor to Roberts
Properties and Roberts Construction and plans to lease the other two
floors to unaffiliated tenants. Roberts Realty entered into a contract
with Roberts Construction to complete construction of the building at
cost and intends to retain Roberts Construction to perform tenant finish
work for approximately $600,000. Roberts Construction will not earn a
profit on the construction of the building or on the tenant finish work.
Roberts Properties did not earn a profit on the sale of the land to
Roberts Realty nor will it be paid a development fee for this project.
The independent members of the board of directors approved the foregoing
arrangements with Roberts Properties and Roberts Construction.  Construction Contracts.Roberts Realty enters into contractual
commitments with Roberts Construction in the normal course of business
related to the construction of real estate assets. Mr. Roberts
beneficially owns all of the outstanding shares of Roberts Construction.
Roberts Construction constructed Addison Place Phase II and Veranda Chase
under cost plus 10% contracts. Roberts Construction is constructing the
Charlotte apartment community under a cost plus 10% arrangement. In
2001, Roberts Realty entered into a cost plus 5% contract with Roberts
Construction related to the construction of the 42,090 square foot
Addison Place retail center. Also, in 2001, Roberts Realty entered into
a contract with Roberts Construction related to the construction of the
Northridge corporate office building at cost. In 2003, Roberts Realty
entered into a cost plus 10% contract with Roberts Construction related
to the construction of the Northridge Community. The contractual
amounts for projects started and/or completed with Roberts Construction
during the last three years, from inception through December 31, 2003 are
summarized in the following table: Actual/Estimated
    
    
    
    
    
    EstimatedTotal
    
    
    
    
    
    RemainingContract
    
    Amount
    
    ContractualAmount
    
    Incurred
    
    CommitmentAddison Place retail center
    
    $
    2,598,000
    
    
    $
    2,248,000
    
    
    $
    350,000Northridge Office Building
    
    
    5,527,000
    
    
    
    4,420,000
    
    
    
    1,107,000Charlotte
    
    
    23,193,000
    
    
    
    18,136,000
    
    
    
    5,057,000Veranda Chase
    
    
    15,608,000
    
    
    
    15,608,000
    
    
    
    Addison Place  Phase II
    
    
    21,876,000
    
    
    
    21,816,000
    
    
    
    60,000Northridge
Community (1)
    
    
    248,000
    
    
    
    231,000
    
    
    
    17,000$
    69,050,000
    
    
    $
    62,459,000
    
    
    $
    6,591,000
  (1) Only includes contract for site work and detention pond construction.  At December 31, 2003 and 2002, the amounts due to Roberts Construction
are summarized in the following table: December 31
    
    December 312003
    
    2002Addison Place retail center
    
    $
    95,000
    
    
    $
    6,000Northridge Office Building
    
    
    251,000
    
    
    
    214,000Charlotte
    
    
    1,517,000
    
    
    
    1,158,000Veranda Chase
    
    
    11,000
    
    
    
    834,000Addison Place  Phase II
    
    
    
    
    
    
    46,000Northridge
Community
    
    
    4,000
    
    
    
    Total
    
    $
    1,878,000
    
    
    $
    2,258,000
 F-19




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##### Table of Contents



Roberts Realty estimates the remaining contractual commitment will be
paid to Roberts Construction in 2004.  Roberts Realty paid Roberts Construction for labor and materials to
perform capital improvements for the communities in the amount of
$57,000, $43,000 and $161,000 in 2003, 2002 and 2001, respectively.  Development Fees.Roberts Properties received fees for various
development services including market studies, business plans, design,
finish selection, interior design and construction administration
(including amounts described in Land Acquisitions above). Fees
incurred totaled $550,000, $180,000 and $109,000 for the years ended
December 31, 2003, 2002 and 2001, respectively.  Partnership Profits Interests.Between 1994 and 1996, the operating
partnership acquired nine limited partnerships of which Mr. Roberts was
the sole general partner. As a part of each acquisition, the operating
partnership assumed an existing financial obligation to an affiliate of
Mr. Roberts. That financial obligation has been formalized as a profits
interest in the operating partnership (Profits Interests). There were
three remaining Profits Interests as of December 31, 2003.  As the holder of the Profits Interests, Roberts Properties may receive
distributions in certain circumstances. Upon a sale of any of the
acquired properties, Roberts Properties will receive a distribution of a
specified percentage of the gross sales proceeds. Upon a change in
control of Roberts Realty or the operating partnership, Roberts
Properties will receive a distribution of the applicable percentages of
the fair market values of all of the properties. The amount to be
distributed to Roberts Properties with respect to each affected property
will, however, be limited to the amount by which the gross proceeds from
the sale of that property, or, in connection with a change in control,
its fair market value, exceeds the sum of:  
    
    the debt assumed, or taken subject to, by the
operating partnership in connection with its acquisition of
the property;
    
    the equity issued by the operating partnership in
acquiring the property; and
    
    all subsequent capital improvements to the
property made by the operating partnership.  The percentages that apply to the sales prices, or fair market values, of
the affected properties are shown in the following table as of December
31, 2003: River Oaks
    
    
    5
    %Preston Oaks Phase I
    
    
    5
    %Plantation Trace Phase I
    
    
    6
    %
  If Roberts Realty exercises its option to acquire all of the outstanding
units for shares, it must simultaneously purchase the Profits Interests
for cash in the amount the holder of that interest would receive if a
change in control occurred at that time.  Except for units and the partnership profits interest related to the
original nine limited partnerships acquired between 1994 and 1996, no
partnership interests have been, or are presently expected to be, issued
or assumed by the operating partnership.  During 2003 Profits Interests of $899,000 were paid in connection with
the sale of the Highland Park community. During 2001 Profits Interests of
$1,668,000 were paid in connection with the sale of the Rosewood
community, $740,000 and the Crestmark community, $928,000. There were no
Profits Interests paid during 2002. F-20




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##### Table of Contents



Roberts Realty accounts for distributions required under the partnership
profits interests as a reduction of the sales proceeds upon the
disposition of an affected property as required by SFAS 141, Business
Combinations. The partnership profits interest distribution will reduce
the reported gain on the disposition of any affected property in the
future.  Other Fees.During 2003, 2002 and 2001, affiliates of Mr. Roberts
received miscellaneous fees and cost reimbursements of $163,000,
$184,000, and $145,000 for the years ended December 31, 2003, 2002 and
2001, respectively.  Loan Origination Fees.A director of Roberts Realty is Managing
Director  Southeast Region, with L.J. Melody & Company, a commercial
mortgage banking firm that has originated loans for Roberts Realty. Loan
origination fees incurred were $75,000 in 2003 and $125,000 in 2001 (none
in 2002).  11.
    
    COMMITMENTS AND CONTINGENCIES  Roberts Realty 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,
Roberts Realty believes that the final outcome of these matters will not
have a material adverse effect on Roberts Realtys financial position or
results of operations.  As a result of the mergers of various limited partnerships into the
operating partnership, the former partners of these limited partnerships
received units. Holders of units have the right to require the operating
partnership to redeem their units for shares, subject to certain
conditions. Upon submittal of units for redemption, the operating
partnership will have the option either (a) to pay cash for those units
at their fair market value, which will be based upon the then current
trading price of the shares, or (b) to acquire those units in exchange
for shares (on a one-for-one basis). Roberts Realty has adopted a policy
that it will issue shares in exchange for all future units submitted.
There were 2,002,467 units outstanding at December 31, 2003 that could be
exchanged for shares, subject to the conditions described above.  Roberts Realty 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 Roberts Realtys financial position or
results of operations.  12.
    
    SUPPLEMENTAL CASH FLOW INFORMATION  Roberts Realty paid $150,000 in April 2002 in connection with the
settlement of a lawsuit with the buyer of Rosewood Plantation under the
terms of the warranty provisions of the sales contract (Note 3). This
amount is shown in the financial statements as a loss on the sale of real
estate assets, net of minority interest of $48,000.  Non-cash investing and financing activities for the years ended December
31, 2003, 2002, and 2001 were as follows:  A.
    
    On January 4, 2001, Roberts Realty sold the Rosewood
Plantation community. As a condition of the sale, the purchaser
assumed the mortgage note payable associated with the property in
the amount of $7,400,000. At closing, there was a $476,000
reduction in the sales proceeds which represented a pay down on the
mortgage note payable. F-21




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##### Table of Contents



B.
    
    On July 11, 2001, Roberts Realty sold the Crestmark
community. As a condition of the sale, the purchaser assumed the
mortgage note payable associated with the property in the amount of
$15,485,000.C.
    
    On August 6, 2003, Roberts Realty sold the Highland Park
community. As a condition of the sale, the purchaser assumed the
mortgage note payable associated with the property in the amount of
$9,930,000.  13.
    
    SUMMARIZED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)(In thousands, except per share data) Quarter EndedMarch 31
    
    June 30
    
    September 30
    
    December 31Year Ended December 31, 2003Total operating revenues
    
    $
    4,624
    
    
    $
    4,741
    
    
    $
    4,916
    
    
    $
    4,912Income from operations
    
    
    514
    
    
    
    615
    
    
    
    840
    
    
    
    854Loss from continuing operations
    
    
    (943
    )
    
    
    (971
    )
    
    
    (809
    )
    
    
    (771
    )Income from discontinued operations
    
    
    56
    
    
    
    49
    
    
    
    6,078
    
    
    
    Net income (loss)
    
    
    (887
    )
    
    
    (922
    )
    
    
    5,269
    
    
    
    (771
    )Per share (basic and diluted):Loss from continuing operations
    
    $
    (0.18
    )
    
    $
    (0.19
    )
    
    $
    (0.16
    )
    
    $
    (0.15
    )Income from discontinued operations
    
    
    0.01
    
    
    
    0.01
    
    
    
    1.17
    
    
    
    0.00Net income (loss)
    
    
    (0.17
    )
    
    
    (0.18
    )
    
    
    1.01
    
    
    
    (0.15
    )Year Ended December 31, 2002Total operating revenues
    
    $
    4,132
    
    
    $
    4,083
    
    
    $
    4,164
    
    
    $
    4,454Income from operations
    
    
    510
    
    
    
    383
    
    
    
    72
    
    
    
    315Loss from continuing operations
    
    
    (892
    )
    
    
    (742
    )
    
    
    (1,095
    )
    
    
    (35
    )Income (loss) from discontinued operations
    
    
    158
    
    
    
    (42
    )
    
    
    54
    
    
    
    78Net income (loss)
    
    
    (734
    )
    
    
    (784
    )
    
    
    (1,041
    )
    
    
    43Per share (basic and diluted):Loss from continuing operations
    
    $
    (0.18
    )
    
    $
    (0.17
    )
    
    $
    (0.22
    )
    
    $
    (0.00
    )Income (loss) from discontinued operations
    
    
    0.03
    
    
    
    0.01
    
    
    
    0.01
    
    
    
    0.01Net income (loss)
    
    
    (0.15
    )
    
    
    (0.16
    )
    
    
    (0.21
    )
    
    
    0.01
  (Amounts have been restated, as appropriate, to give effect to discontinued
operations).  14.
    
    SUBSEQUENT EVENT (UNAUDITED)  During the first quarter of 2004, Roberts Realty agreed to settle a
lawsuit it filed against an architectural firm contracted to work on its
Addison Place Phase II and Charlotte properties. Roberts Realty will
receive proceeds of approximately $500,000 as a result of the settlement
and is required to pay $120,000 to the defendant for use of their
architectural plans. The $120,000 represents amounts the defendants
previously billed Roberts Realty but which Roberts Realty had not paid
because of this business dispute. The $120,000 amount Roberts Realty is
required to pay is included in accounts payable and accrued expenses in
the December 31, 2003 balance sheet in its consolidated financial
statements included in this report. Roberts Realty expects to recognize
the $500,000 in settlement proceeds in the first quarter of 2004. F-22




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##### Table of Contents



SCHEDULE III  REAL ESTATE AND ACCUMULATED DEPRECIATION ROBERTS REALTY INVESTORS, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 2003
(Dollars in Thousands) Initial Cost to Company
    
    Carried at Close of PeriodImprovementsCapitalizedAfterBuildings and
    
    Acquisition/
    
    
    
    
    
    Buildings andDescription
    
    Encumbrance
    
    Land
    
    Improvements
    
    Construction
    
    Land
    
    Improvements
    
    TotalRiver Oaks
    
    $
    10,703
    
    
    $
    1,837
    
    
    $
    9,718
    
    
    $
    1,096
    
    
    $
    1,833
    
    
    $
    10,818
    
    
    $
    12,651Preston Oaks
    
    
    12,310
    
    
    
    2,570
    
    
    
    11,278
    
    
    
    423
    
    
    
    2,570
    
    
    
    11,701
    
    
    
    14,271Addison Place Phase II
    
    
    22,282
    
    
    
    696
    
    
    
    5,168
    
    
    
    23,457
    
    
    
    3,152
    
    
    
    26,169
    
    
    
    29,321Plantation Trace
    
    
    11,185
    
    
    
    2,385
    
    
    
    15,802
    
    
    
    1,605
    
    
    
    2,385
    
    
    
    17,407
    
    
    
    19,792Veranda Chase (A)
    
    
    17,000
    
    
    
    2,559
    
    
    
    0
    
    
    
    19,052
    
    
    
    2,579
    
    
    
    19,032
    
    
    
    21,611Charlotte
    
    
    16,410
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Northridge Corporate Office Bldg. (A)
    
    
    3,657
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Northridge Apartments (A)
    
    
    3,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Addison Shoppes (A)
    
    
    3,391
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Bradford Creek
    
    
    7,861
    
    
    
    1,672
    
    
    
    12,174
    
    
    
    167
    
    
    
    1,672
    
    
    
    12,341
    
    
    
    14,013St. Andrews at the Polo Club
    
    
    20,534
    
    
    
    4,167
    
    
    
    23,651
    
    
    
    221
    
    
    
    4,167
    
    
    
    23,872
    
    
    
    28,039Addison Place Phase I
    
    
    9,177
    
    
    
    2,080
    
    
    
    10,440
    
    
    
    335
    
    
    
    2,053
    
    
    
    10,802
    
    
    
    12,855Total
    
    $
    137,510
    
    
    $
    17,966
    
    
    $
    88,231
    
    
    $
    46,356
    
    
    $
    20,411
    
    
    $
    132,142
    
    
    $
    152,553
 Life on which
    
    
    
    
    
    Date ofAccumulated
    
    Depreciation
    
    Date
    
    OriginalDescription
    
    Depreciation
    
    is Computed
    
    Acquired
    
    ConstructionRiver Oaks
    
    $
    4,964
    
    
    3  27.5 Years
    
    Oct - 94
    
    
    1992Preston Oaks
    
    
    4,673
    
    
    3  27.5 Years
    
    Oct - 94
    
    
    1995Addison Place Phase II
    
    
    4,013
    
    
    3  27.5 Years
    
    Jun - 98
    
    
    1999Plantation Trace
    
    
    6,098
    
    
    3  27.5 Years
    
    May - 95
    
    
    1990Veranda Chase
    
    
    1,470
    
    
    3  27.5 Years
    
    Nov - 02
    
    
    2000Bradford Creek
    
    
    3,546
    
    
    3  27.5 Years
    
    Mar - 96
    
    
    1998St. Andrews at the Polo Club
    
    
    3,544
    
    
    3  27.5 Years
    
    Nov - 01
    
    
    2000Addison Place Phase I
    
    
    2,563
    
    
    3  27.5 Years
    
    Sep  99
    
    
    1999Total
    
    $
    30,871
 The accompanying notes are an integral part of this schedule. S-1




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##### Table of Contents



(A)
    
    A portion of Addison Place Shoppes, Charlotte, Northridge community, and
the Northridge corporate office building were under construction as of
December 31, 2003. Construction in progress and real estate under
development of $45,510,000 as of December 31, 2003 (which is excluded from
Schedule III) includes these properties.  (B)
    
    Roberts Realty enters into contractual commitments in the normal course
of business related to the construction of real estate assets with Roberts
Construction  see Note 10 to the Consolidated Financial Statements.  (C)
    
    Gross capitalized costs of real estate assets are summarized as follows: 2003
    
    2002
    
    2001BALANCE AT BEGINNING OF PERIOD
    
    $
    164,217
    
    
    $
    143,527
    
    
    $
    123,680Additions during period:Other additions
    
    
    
    
    
    
    22,487
    
    
    
    53,316Improvements
    
    
    1,271
    
    
    
    227
    
    
    
    380Total Additions
    
    
    1,271
    
    
    
    22,714
    
    
    
    53,696Deductions during period:Sales
    
    
    (12,632
    )
    
    
    (1,741
    )
    
    
    (33,564
    )Other disposals
    
    
    (303
    )
    
    
    (283
    )
    
    
    (285
    )Total disposals
    
    
    (12,935
    )
    
    
    (2,024
    )
    
    
    (33,849
    )Balance at close of period
    
    $
    152,553
    
    
    $
    164,217
    
    
    $
    143,527
  (D)
    
    Accumulated depreciation on real estate assets is as follows: 2003
    
    2002
    
    2001BALANCE AT BEGINNING OF PERIOD
    
    $
    28,229
    
    

    $
    21,463
    
    
    $
    24,061Additions during period:Depreciation expense
    
    
    6,980
    
    
    
    7,001
    
    
    
    5,501DEDUCTIONS DURING PERIODSales
    
    
    (4,065
    )
    
    
    0
    
    
    
    (7,864
    )Other disposals:
    
    
    (273
    )
    
    
    (235
    )
    
    
    (235
    )Total disposals
    
    
    (4,338
    )
    
    
    (235
    )
    
    
    (8,099
    )Balance at close of period
    
    $
    30,871
    
    
    $
    28,229
    
    
    $
    21,463
 S-2




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##### Table of Contents



3. Exhibits. We have filed some of the exhibits required by Item 601 of Regulation S-K
with previous registration statements or reports. As specifically noted in the
following Index to Exhibits, those previously filed exhibits are incorporated
into this annual report on Form 10-K by reference. All exhibits contained in
the following Index to Exhibits that are designated with an asterisk are
incorporated into this annual report by reference from our initial Registration
Statement on Form 10-SB filed with the SEC on March 22, 1996; the applicable
exhibit number in that Registration Statement is provided beside the asterisk. We will provide a copy of any or all of the following exhibits to any
shareholder who requests them, for a cost of ten cents per page. ExhibitNo.
    
    DescriptionArticles of Incorporation, Bylaws and Certificates and Articles of Merger:3.1
    
    Articles of Incorporation of Roberts Realty Investors, Inc. filed with
the Georgia Secretary of State on July 22, 1994. [* 2.1]3.2
    
    Bylaws of Roberts Realty Investors, Inc. [* 2.2]4.1
    
    Agreement of Limited Partnership of Roberts Properties Residential, L.P.,
dated as of July 22, 1994. [* 3.1]4.1.1
    
    First Amended and Restated Agreement of Limited Partnership of Roberts
Properties Residential, L.P., dated as of October 1, 1994. [* 3.1.1]4.1.2
    
    Amendment #1 to First Amended and Restated Agreement of Limited
Partnership of Roberts Properties Residential, L.P., dated as of October
13, 1994. [* 3.1.2]4.1.3
    
    Amendment #2 to First Amended and Restated Agreement of Limited
Partnership of Roberts Properties Residential, L.P. [Incorporated by
reference to Exhibit 10.1 from our Registration Statement on Form S-3
filed July 8, 1999, registration number 333-82453.]4.2
    
    Certificate of Limited Partnership of Roberts Properties Residential,
L.P. filed with the Georgia Secretary of State on July 22, 1994. [* 3.2]4.2.1
    
    Certificate of Merger filed with the Georgia Secretary of State on
October 13, 1994, merging Roberts Properties River Oaks, L.P.; Roberts
Properties Rosewood Plantation, L.P.; Roberts Properties Preston Oaks,
L.P.; and Roberts Properties Highland Park, L.P. with and into Roberts
Properties Residential, L.P. (1994 Consolidation). [* 3.2.1]4.2.2
    
    Certificate of Merger filed with the Georgia Secretary of State on March
24, 1995, merging Roberts Properties Holcomb Bridge, L.P. with and into
Roberts Properties Residential, L.P. (Holcomb Bridge Merger). [* 3.2.2]
 62




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##### Table of Contents



ExhibitNo.
    
    Description4.2.3
    
    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 our quarterly report on
Form 10-QSB for the quarter ended June 30, 1996.]4.2.6
    
    Certificate of Merger filed with the Georgia Secretary of State on June
26, 1996, merging The Crestmark Club, L.P. with and into Roberts
Properties Residential, L.P. (Crestmark Merger). [Incorporated by
reference to Exhibit 4.2.6 from our quarterly report on Form 10-QSB for
the quarter ended June 30, 1996.]4.2.7
    
    Certificate and Articles of Merger filed with the Georgia Secretary of
State on April 1, 1997 merging Roberts Properties Management, L.L.C. with
and into Roberts Properties Residential, L.P. [Incorporated by reference
to Exhibit 4.2.7 from our current report on Form 8-K dated April 1,
1997.]Material Agreements with Affiliates:10.1.1
    
    Amended and Restated Consulting Agreement between Roberts Properties
Residential, L.P. and Roberts Properties, Inc., dated June 26, 1996.
[Incorporated by reference to Exhibit 10.23.1 from our quarterly report
on Form 10-QSB for the quarter ended June 30, 1996.]10.1.2
    
    Amended and Restated Consulting Agreement between Roberts Properties
Residential, L.P. and Roberts Properties Group, Inc., dated June 26,
1996. [Incorporated by reference to Exhibit 10.23.2 from our quarterly
report on Form 10-QSB for the quarter ended June 30, 1996.]10.1.3
    
    Design and Development Agreement between Roberts Properties Residential,
L.P. and Roberts Properties, Inc. (Addison Place). [Incorporated by
reference to Exhibit 10.14.11 from our quarterly report on Form 10-Q for
the quarter ended June 30, 2000.]10.1.4
    
    Design and Development Agreement between Roberts Properties Residential,
L.P. and Roberts Properties, Inc. (Veranda Chase). [Incorporated by
reference to Exhibit 10.16.04 from our quarterly report on Form 10-Q for
the quarter ended June 30, 2000.]10.1.5
    
    Construction Administration Agreement between Roberts Residential, L.P.
and Roberts Properties, Inc. (Veranda Chase). [Incorporated by reference
to Exhibit 10.16.05 from our quarterly report on Form 10-Q for the
quarter ended June 30, 2000.]10.1.6
    
    Design and Development Agreement between Roberts Properties Residential,
L.P. and Roberts Properties, Inc. (Charlotte). [Incorporated by reference
to Exhibit 10.17.01 from our quarterly report on Form 10-Q for the
quarter ended June 30, 2000.]
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##### Table of Contents



ExhibitNo.
    
    Description10.1.7
    
    Construction Administration Agreement between Roberts Residential, L.P.
and Roberts Properties, Inc. (Charlotte). [Incorporated by reference to
Exhibit 10.17.02 from our quarterly report on Form 10-Q for the quarter
ended June 30, 2000.]10.1.8
    
    Agreement and Plan of Merger by and between Roberts Properties
Residential, L.P. and Roberts Properties Management, L.L.C., dated April
1, 1997 [Incorporated by reference to Exhibit 2.1 from our current
report on Form 8-K dated April 1, 1997.]10.1.9
    
    Sales Contract between Roberts Properties, Inc. and Roberts Properties
Residential, L.P., dated May 25, 2001 (East Fox Court). [Incorporated by
reference to Exhibit 10.18.1 from our quarterly report on Form 10-Q for
the quarter ended June 30, 2001.]10.1.10
    
    Design and Development Agreement between Roberts Properties Residential,
L.P. and Roberts Properties, Inc. dated June 15, 2001 (East Fox Court).
[Incorporated by reference to Exhibit 10.18.2 from our quarterly report
on Form 10-Q for the quarter ended June 30, 2001.]10.1.11
    
    Sales Contract between Roberts Properties, Inc. and Roberts Properties
Residential, L.P. dated June 27, 2001 (Northridge). [Incorporated by
reference to Exhibit 10.19.1 from our quarterly report on Form 10-Q for
the quarter ended June 30, 2001.]10.1.12
    
    Sales Contract between Roberts Properties, Inc. and Roberts Properties
Residential, L.P., dated June 27, 2001 (Corporate Office Building).
[Incorporated by reference to Exhibit 10.20.1 from our quarterly report
on Form 10-Q for the quarter ended June 30, 2001.]10.1.13
    
    Construction Administration Agreement between Roberts Residential, L.P.
and Roberts Properties, Inc. (Corporate Office Building). [Incorporated
by reference to Exhibit 10.20.5 from our quarterly report on Form 10-Q
for the quarter ended September 30, 2001.]10.1.14
    
    Restricted Stock Award Agreement between Roberts Realty Investors, Inc.
and Charles R. Elliott, dated March 20, 2001. [Incorporated by reference
to Exhibit 10.17.1 from our annual report on Form 10-K for the year ended
December 31, 2001.]10.1.15
    
    Construction Administration Agreement between Roberts Residential, L.P.
and Roberts Properties, Inc. (Addison Place Shoppes). [Incorporated by
reference to Exhibit 10.21.3 from our quarterly report on Form 10-Q for
the quarter ended September 30, 2001.]10.1.16
    
    Design and Development Agreement between Roberts Properties Residential,
L.P. and Roberts Properties, Inc. dated June 15, 2001 (Northridge).
[Incorporated by reference to Exhibit 10.1.17 from our annual report on
Form 10-K for the year ended December 31, 2001.]10.1.17
    
    Construction Agreement between Roberts Properties Residential, L.P. and
Roberts Properties Construction, Inc. (Northridge). [Incorporated by
reference to Exhibit 10.1.18 from our quarterly report on Form 10-Q for
the quarter ended March 31, 2003.]
 64




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##### Table of Contents



ExhibitNo.
    
    DescriptionPreston Oaks Financing Documents:10.2.1
    
    Multifamily Note executed by Roberts Properties Residential,
L.P. in favor of Primary Capital Advisors LC, dated February 1,
2001, in the original principal amount of $12,700,000 (Preston
Oaks). [Incorporated by reference to Exhibit 10.1.3 from our
quarterly report on Form 10-Q for the quarter ended March 31,
2001.]10.2.2
    
    Multifamily Deed to Secure Debt, Assignment of Rents and
Security Agreement executed by Roberts Properties Residential,
L.P. in favor of Primary Capital Advisors LC, dated February 1,
2001 (Preston Oaks). [Incorporated by reference to Exhibit
10.1.4 from our quarterly report on Form 10-Q for the quarter
ended March 31, 2001.]Highland Park Financing Documents:10.3.1
    
    Multifamily Note executed by Roberts Properties Residential,
L.P. in favor of Primary Capital Advisors LC, dated November 21,
2002, in the original principal amount of $10,000,000 (Highland
Park).10.3.2
    
    Multifamily Deed to Secure Debt, Assignment of Rents and
Security Agreement executed by Roberts Properties Residential,
L.P. in favor of Primary Capital Advisors LC, dated November 21,
2002 (Highland Park).10.3.3
    
    Replacement Reserve Agreement executed by Roberts Properties
Residential, L.P. in favor of Primary Capital Advisors LC, dated
November 21, 2002 (Highland Park).River Oaks Financing Documents:10.4.1
    
    Multifamily Note executed by Roberts Properties Residential,
L.P. in favor of L.J. Melody & Company, dated August 21, 2003,
in the original principal amount of $10,750,000 (River Oaks).*
[Incorporated by reference to Exhibit 10.4.1 from our quarterly
report on Form 10-Q for the quarter ended September 30, 2003.]10.4.2
    
    Multifamily Deed to Secure Debt, Assignment of Rents and
Security Agreement executed by Roberts Properties Residential,
L.P. in favor of L.J. Melody & Company, dated August 21, 2003
(River Oaks).* [Incorporated by reference to Exhibit 10.4.2
from our quarterly report on Form 10-Q for the quarter ended
September 30, 2003.]10.4.3
    
    Replacement Reserve Agreement executed by Roberts Properties
Residential, L.P. in favor of L.J. Melody & Company, dated
August 21, 2003 (River Oaks).* [Incorporated by reference to
Exhibit 10.4.3 from our quarterly report on Form 10-Q for the
quarter ended September 30, 2003.]10.4.4
    
    Guaranty executed by Roberts Realty Investors, Inc. in favor of
L.J. Melody & Company, dated August 21, 2003 (River Oaks).*
[Incorporated by reference to Exhibit 10.4.4 from our quarterly
report on Form 10-Q for the quarter ended September 30, 2003.] *
    
    L.J. Melody & Company immediately assigned the loan and related
documents to the Federal Home Loan Mortgage Corporation (Freddie
Mac).
 65




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##### Table of Contents



ExhibitNo.
    
    DescriptionPlantation Trace Financing Documents:10.5.1
    
    Promissory Note executed by Roberts Properties Residential, L.P.
in favor of The Prudential Insurance Company of America, dated
September 29, 1998, in the original principal amount of
$11,900,000 (Plantation Trace). [Incorporated by reference to
Exhibit 10.07.04 from our quarterly report on Form 10-Q for the
quarter ended September 30, 1998.]10.5.2
    
    Deed to Secure Debt and Security Agreement executed by Roberts
Properties Residential, L.P. in favor of The Prudential
Insurance Company of America, dated September 29, 1998, and
related collateral documents (Plantation Trace). [Incorporated
by reference to Exhibit 10.07.05 from our quarterly report on
Form 10-Q for the quarter ended September 30, 1998.]10.5.3
    
    Limited Guaranty executed by Roberts Realty Investors, Inc. in
favor of The Prudential Insurance Company of America, dated
September 29, 1998 (Plantation Trace). [Incorporated by
reference to Exhibit 10.07.06 from our quarterly report on Form
10-Q for the quarter ended September 30, 1998.]Bradford Creek Financing Documents:10.6.1
    
    Real Estate Note executed by Roberts Properties Residential,
L.P. in favor of Nationwide Life Insurance Company, dated June
1, 1998, in the original principal amount of $8,400,000.00
(Bradford Creek). [Incorporated by reference to Exhibit 10.8.6
from our quarterly report on Form 10-Q for the quarter ended
June 30, 1998.]10.6.2
    
    Deed to Secure Debt and Security Agreement executed by Roberts
Properties Residential, L.P. in favor of Nationwide Life
Insurance Company of America, dated June 1, 1998, and related
collateral documents (Bradford Creek). [Incorporated by
reference to Exhibit 10.8.7 from our quarterly report on Form
10-Q for the quarter ended June 30, 1998.]10.6.3
    
    Guaranty between Roberts Realty Investors, Inc. and Nationwide
Life Insurance Company of America, dated June 1, 1998 (Bradford
Creek). [Incorporated by reference to Exhibit 10.8.8 from our
quarterly report on Form 10-Q for the quarter ended June 30,
1998.]Addison Place Phases I and II Financing Documents:10.7.1
    
    Promissory Note executed by Roberts Properties Residential, L.P.
in favor of The Prudential Insurance Company of America, dated
October 25, 1999, in the original principal amount of $9,500,000
(Addison Place Phase I). [Incorporated by reference to Exhibit
10.14.04 from our annual report on Form 10-K for the year ended
December 31, 1999.]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 October 25, 1999, and
related collateral documents (Addison Place Phase I).
[Incorporated by reference to Exhibit 10.14.05 from our annual
report on Form 10-K for the year ended December 31, 1999.]
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ExhibitNo.
    
    Description10.7.3
    
    Guaranty executed by Roberts Realty Investors, Inc. in favor of
The Prudential Insurance Company of America, dated October 25,
1999 (Addison Place Phase I). [Incorporated by reference to
Exhibit 10.14.06 from our annual report on Form 10-K for the
year ended December 31, 1999.]10.8.1
    
    Promissory Note executed by Roberts Properties Residential, L.P.
in favor of First Union National Bank, dated May 3, 2000, in the
original principal amount of $22,500,000 (Addison Place Phase
II). [Incorporated by reference to Exhibit 10.14.09 from our
quarterly report on Form 10-Q for the quarter ended June 30,
2000.]10.8.2
    
    Deed to Secure Debt, Security Agreement and Assignment of Leases
and Rents Agreement executed by Roberts Properties Residential,
L.P. in favor of First Union National Bank, dated May 3, 2000
(Addison Place Phase II). [Incorporated by reference to Exhibit
10.14.10 from our quarterly report on Form 10-Q for the quarter
ended June 30, 2000.]Veranda Chase (formerly Old Norcross) Financing Documents:10.9.1
    
    Promissory Note executed by Roberts Realty Residential, L.P. in
favor of Compass Bank, dated April 25, 2001, in the original
principal amount of $17,000,000 (Veranda Chase). [Incorporated
by reference to Exhibit 10.16.4 from our quarterly report on
Form 10-Q for the quarter ended June 30, 2001.]10.9.2
    
    Future Advance Deed to Secure Debt, Assignment of Rents and
Leases and Security Agreement executed by Roberts Properties
Residential, L.P. in favor of Compass Bank, dated April 25, 2001
(Veranda Chase). [Incorporated by reference to Exhibit 10.16.4
from our quarterly report on Form 10-Q for the quarter ended
June 30, 2001.]10.9.3
    
    Construction Loan Agreement executed by Roberts Properties
Residential, L.P. in favor of Compass Bank, dated April 25, 2001
(Veranda Chase). [Incorporated by reference to Exhibit 10.16.5
from our quarterly report on Form 10-Q for the quarter ended
June 30, 2001.]Northridge Community Financing Documents:10.10.1
    
    Promissory Note executed by Roberts Property Residential, L.P.
in favor SouthTrust Bank, dated June 28, 2001, in the original
principal amount of $3,000,000 (Northridge). [Incorporated by
reference to Exhibit 10.19.2 from our quarterly report on Form
10-Q for the quarter ended June 30, 2001.]10.10.2
    
    Deed to Secure Debt, Assignment of Leases and Rents and Security
Agreement executed by Roberts Realty Residential, L.P. in favor
of SouthTrust Bank, dated June 28, 2001 (Northridge).
[Incorporated by reference to Exhibit 10.19.3 from our quarterly
report on Form 10-Q for the quarter ended June 30, 2001.]10.10.3
    
    Assignment of Leases and Rents executed by Roberts Realty
Residential, L.P. in favor of SouthTrust Bank, dated June 28,
2001 (Northridge). [Incorporated by reference to Exhibit 10.19.4
from our quarterly report on Form 10-Q for the quarter ended
June 30, 2001.]
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ExhibitNo.
    
    Description10.10.4
    
    First Amendment to Security Instrument and Other Loan Documents
dated June 25, 2002 by and among Roberts Properties Residential.
L.P., Roberts Realty Investors, Inc. and SouthTrust Bank.
[Incorporated by reference to Exhibit 10.10.4 from our quarterly
report on Form 10-Q for the quarter ended June 30, 2002.]10.10.5
    
    Second Amendment to Loan Documents dated July 7, 2003 by and
among Roberts Properties Residential, L.P., Roberts Realty
Investors, Inc. and SouthTrust Bank (Northridge Community).
[Incorporated by reference to Exhibit 10.4.5 from our quarterly
report on Form 10-Q for the quarter ended September 30, 2003.]Corporate Office Building Financing Documents:10.11.1
    
    Promissory Note executed by Roberts Property Residential, L.P.
in favor of Bank of North Georgia, dated June 28, 2001 in the
original principal amount of $5,280,000 (Corporate Office
Building). [Incorporated by reference to Exhibit 10.20.2 from
our quarterly report on Form 10-Q for the quarter ended June 30,
2001.]10.11.2
    
    Construction Loan Agreement executed by Roberts Properties
Residential, L.P. in favor of the Bank of North Georgia, dated
June 28, 2001 (Corporate Office Building). [Incorporated by
reference to Exhibit 10.20.3 from our quarterly report on Form
10-Q for the quarter ended June 30, 2001.]10.11.3
    
    Deed to Secure Debt executed by Roberts Properties Residential,
L.P. in favor of the Bank of North Georgia, dated June 28, 2001
(Corporate Office Building). [Incorporated by reference to
Exhibit 10.20.4 from our quarterly report on Form 10-Q for the
quarter ended June 30, 2001.]Addison Place Shoppes Financing Documents:10.12.1
    
    Promissory Note executed by Roberts Properties Residential, L.P.
in favor of Compass Bank dated May 30, 2003 in the original
principal amount of $6,500,000 (Addison Place Shoppes).
[Incorporated by reference to Exhibit 10.12.1 from our quarterly
report on Form 10-Q for the quarter ended June 30, 2003.]10.12.2
    
    Construction Loan Agreement executed by Roberts Properties
Residential, L.P. in favor of Compass Bank, dated May 30, 2003
(Addison Place Shoppes). [Incorporated by reference to Exhibit
10.12.2 from our quarterly report on Form 10-Q for the quarter
ended June 30, 2003.]10.12.3
    
    Future Advance Deed to Secure Debt, Assignment of Rents and
Leases and Security Agreement executed by Roberts Properties
Residential, L.P. in favor of Compass Bank, dated May 30, 2003
(Addison Place Shoppes). [Incorporated by reference to Exhibit
10.12.3 from our quarterly report on Form 10-Q for the quarter
ended June 30, 2003.]10.12.4
    
    Assignment of Leases and Rents executed by Roberts Properties
Residential, L.P. in favor of Compass Bank, dated May 30, 2003
(Addison Place Shoppes). [Incorporated by reference to Exhibit
10.12.4 from our quarterly report on Form 10-Q for the quarter
ended June 30, 2003.]
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ExhibitNo.
    
    Description10.12.5
    
    Continuing Guaranty executed by Roberts Realty Investors, Inc.
in favor of Compass Bank, dated May 30, 2003 (Addison Place
Shoppes). [Incorporated by reference to Exhibit 10.12.5 from
our quarterly report on Form 10-Q for the quarter ended June 30,
2003.]St. Andrews at the Polo Club Financing Documents:10.13.1
    
    Promissory Note executed by Roberts Properties Residential, L.P.
in favor of State Farm Life Insurance Company, dated November 6,
2001 in the original principal amount of $21,000,000 (St.
Andrews at the Polo Club)10.13.2
    
    Mortgage and Security Agreement executed by Roberts Realty
Residential, L.P. in favor of State Farm Life Insurance Company,
dated November 6, 2001 (St. Andrews at the Polo Club)10.13.3
    
    Assignment of Rents and Lease executed by Roberts Realty
Residential, L.P. in favor of State Farm Life Insurance Company,
dated November 6, 2001 (St. Andrews at the Polo Club)10.13.4
    
    Guaranty Agreement (Rental Achievement) executed by Roberts
Realty Investors, Inc. in favor of State Farm Life Insurance
Company, dated November 6, 2001 (St. Andrews at the Polo Club)10.13.5
    
    Guaranty Agreement (Carve out) executed by Roberts Realty
Investors, Inc. in favor of State Farm Life Insurance Company,
dated November 6, 2001 (St. Andrews at the Polo Club)Charlotte Financing Documents:10.14.1
    
    Construction Loan Agreement executed by Roberts Properties
Residential, L.P. in favor of AmSouth Bank, dated February 21,
2002 (Charlotte construction loan) [Incorporated by reference to
Exhibit 10.4.1 from our quarterly report on Form 10-Q for the
quarter ended March 31, 2002.]10.14.2
    
    Promissory Note executed by Roberts Properties Residential, L.P.
in favor of AmSouth Bank, dated February 21, 2002 in the
original principal amount of $24,000,000 (Charlotte construction
loan). [Incorporated by reference to Exhibit 10.4.2 from our
quarterly report on Form 10-Q for the quarter ended March 31,
2002.]10.14.3
    
    Deed of Trust, Security Agreement, and Assignment of Rents and
Leases executed by Roberts Properties Residential, L.P. in favor
of AmSouth Bank, dated February 21, 2002 (Charlotte construction
loan). [Incorporated by reference to Exhibit 10.4.3 from our
quarterly report on Form 10-Q for the quarter ended March 31,
2002.]10.14.4
    
    Guaranty Agreement executed by Roberts Realty Investors, Inc. in
favor of AmSouth Bank, dated February 21, 2002 (Charlotte
construction loan). [Incorporated by reference to Exhibit 10.4.4
from our quarterly report on Form 10-Q for the quarter ended
March 31, 2002.]
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ExhibitNo.
    
    DescriptionOther Exhibits:21
    
    Subsidiaries of the Registrant23.1
    
    Independent Auditors Consent24.1
    
    Power of Attorney (contained on the signature page hereof).31
    
    Certifications of Charles S. Roberts and Gregory D. Fletcher
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32
    
    Certifications of Charles S. Roberts and Gregory D. Fletcher
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This
exhibit is not filed for purposes of Section 18 of the
Securities Exchange Act of 1934 but is instead furnished as
provided by applicable rules of the Securities and Exchange
Commission
   (b)
    
    Current Reports on Form 8-K during the quarter ended December 31, 2003.  1.
    
    Form 8-K dated and filed on November 7, 2003, furnishing
under Item 9 the press release regarding the financial results of
Roberts Realty Investors, Inc. for the three months ended September
30, 2003. 70




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SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized. ROBERTS REALTY INVESTORS, INC.By:
    
    /s/ Charles S. RobertsCharles S. Roberts, Chairman of the Board,Chief Executive Officer and President
 Date: March 17, 2004 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints jointly and severally, Charles S.
Roberts and Gregory D. Fletcher, and each one of them, his attorneys-in-fact,
each with the power of substitution, for him in any and all capacities, to sign
any and all amendments to this Annual Report (Form 10-K) and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each said attorneys-in-fact, or his substitute or substitutes, may do or cause
to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated. Signature
    
    Title
    
    Date/s/ Charles S. Roberts
    
    Chairman of the Board, ChiefExecutive Officer and President
    
    March 17, 2004Charles S. Roberts/s/ Gregory D. Fletcher
    
    Secretary, Treasurer, Chief
    
    March 17, 2004Financial Officer (Principal FinancialGregory D. Fletcher
    
    Officer and Principal Accounting Officer)/s/ Charles R. Elliott
    
    Director
    
    March 17, 2004Charles R. Elliott/s/ Dennis H. James
    
    Director
    
    March 17, 2004Dennis H. James/s/ Wm. Jarell Jones
    
    Director
    
    March 17, 2004Wm. Jarell Jones/s/ Ben A. Spalding
    
    Director
    
    March 17, 2004Ben A. Spalding/s/ George W. Wray, Jr.
    
    Director
    
    March 17, 2004George W. Wray, Jr.
 71