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                                                        FHLMC Loan No. 002697238

                         REPLACEMENT RESERVE AGREEMENT
                           (REVISION DATE 08-01-2002)

         This REPLACEMENT RESERVE AGREEMENT ("Agreement") is made and entered
into, to be effective as of this ____ day of ______________________, 2002, by
and between ROBERTS PROPERTIES RESIDENTIAL, L.P., a limited partnership
organized and existing under the laws of the State of Georgia ("Borrower"), and
PRIMARY CAPITAL ADVISORS LC, a limited liability company organized and existing
under the laws of State of Georgia ("Lender") and its successors and assigns.

                               W I T N E S S E T H:

         WHEREAS, Lender has agreed to make and Borrower has agreed to accept
the Loan, which is to be evidenced by the Note and secured by the Security
Instrument encumbering the Land and the Improvements. The Land is described on
Exhibit "A" attached to this Agreement; and

         WHEREAS, as a condition of making the Loan, Lender is requiring
Borrower to establish the Replacement Reserve Fund for the funding of Capital
Replacements throughout the Loan term.

         NOW, THEREFORE, for and in consideration of the Loan, the mutual
promises and covenants herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Lender and Borrower agree as follows:

1.       Definitions. The following terms used in this Agreement shall have the
         meanings set forth below in this Section 1. Any term used in this
         Agreement and not defined shall have the meaning given to that term in
         the Security Instrument.

         (a)      "Capital Replacement" means the replacement of those items
                  listed on Exhibit "B" of this Agreement and such other
                  replacements of equipment, major components or capital systems
                  related to the Improvements as may be approved in writing or
                  required by Lender.

         (b)      "Disbursement Period" means the interval between disbursements
                  from the Replacement Reserve Fund, which interval shall be no
                  shorter than once a month.

         (c)      "Improvements" means the buildings, Personal Property and
                  improvements situated upon the Land, currently constituting a
                  multifamily apartment project known as Highland Park
                  Apartments.

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         (d)      "Initial Deposit" means the amount of Zero Dollars ($0.00)
                  made as of the date of this Agreement.

         (e)      "Inspection Fee" means a fee for performing any inspection
                  required by this Agreement in an amount not to exceed Five
                  Hundred and No/100 Dollars ($500.00) per inspection.

         (f)      "Investment Fee" means a one time fee for establishing the
                  Replacement Reserve Fund in the amount of Two Hundred Fifty
                  and No/100 Dollars ($250.00).

         (g)      "Loan" means the loan from Lender to Borrower in the original
                  principal amount of Ten Million and No/100 Dollars
                  ($10,000,000.00), as evidenced by the Note and secured by the
                  Security Instrument.

         (h)      "Minimum Disbursement Request Amount" means Two Thousand and
                  No/100 Dollars ($2,000.00).

         (i)      "Monthly Deposit" means the amount of Three Thousand One
                  Hundred Two and No/100 Dollars ($3,102.00) per month to be
                  deposited into the Replacement Reserve Fund in accordance with
                  this Agreement.

         (j)      "Property" means the Land and Improvements.

         (k)      "Replacement Reserve Deposit" means the Initial Deposit, the
                  Monthly Deposit and/or the Revised Monthly Deposit, as
                  appropriate.

         (l)      "Replacement Reserve Fund" means the account established
                  pursuant to this Agreement to defray the costs of Capital
                  Replacements.

         (m)      "Review Period" means the period ending 120 months after the
                  first monthly payment date.

         (n)      "Revised Monthly Deposit" means the amount per month that
                  Lender determines Borrower must deposit in the Replacement
                  Reserve Fund during any Subsequent Review Period.

         (o)      "Security Instrument" means the mortgage, deed of trust, deed
                  to secure debt, or other similar security instrument
                  encumbering the Property and securing Borrower's performance
                  of its Loan obligations.

         (p)      "Subsequent Review Period" means the period of 120 months
                  commencing either (i) at the termination of the Review Period
                  or (ii) at the termination of a prior

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                  Subsequent Review Period. There may be more than one
                  Subsequent Review Period.

2.       Replacement Reserve Fund

         (a)      Establishment; Funding.

                  (i)      Upon the closing of the Loan, the parties shall
                           establish the Replacement Reserve Fund and, if
                           required by Lender, Borrower shall pay the Initial
                           Deposit to Lender for deposit into the Replacement
                           Reserve Fund.

                  (ii)     Commencing on the date the first installment of
                           principal and/or interest is due under the Note and
                           continuing on the same day of each successive month
                           until the end of the Review Period, Borrower shall
                           pay the Monthly Deposit to Lender for deposit into
                           the Replacement Reserve Fund, together with its
                           regular monthly payments of principal and interest as
                           required by the Note and Security Instrument.

                  (iii)    Prior to the end of the Review Period, Lender will
                           assess the physical condition of the Property. Lender
                           may adjust the Monthly Deposit at the termination of
                           the Review Period to reflect Lender's determination
                           of the condition of the Property. Upon written notice
                           from Lender or Loan Servicer, Borrower shall begin
                           paying the Revised Monthly Deposit on the first
                           monthly payment date of the Subsequent Review Period
                           and shall continue paying the Revised Monthly Deposit
                           until Lender further adjusts the Replacement Reserve
                           Deposit during a Subsequent Review Period, if
                           applicable. If Lender does not provide Borrower with
                           written notice of a Revised Monthly Deposit, Borrower
                           shall continue to pay the Monthly Deposit or the
                           Revised Monthly Deposit then in effect.

         (b)      Investment of Deposits.  Borrower and Lender agree that Lender
                  shall hold all moneys deposited into the Replacement Reserve
                  Fund in an interest bearing account, and any interest earned
                  on such moneys shall be added to the principal balance of the
                  Replacement Reserve Fund and disbursed in accordance with the
                  provisions of this Agreement. Borrower acknowledges and agrees
                  that it shall not have the right to direct Lender as to any
                  specific investment of moneys in the Replacement Reserve Fund.
                  Lender shall not be responsible for any losses resulting from
                  investment of moneys in the Replacement Reserve Fund or for
                  obtaining any specific level or percentage of earnings on such
                  investment. Lender shall be entitled to deduct the Investment
                  Fee from the Replacement Reserve Fund for establishing the
                  Replacement Reserve.

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         (c)      Use. Subject to the pledge and security interest and other
                  rights of Lender set forth in this Agreement, the Replacement
                  Reserve Fund shall be maintained for the payment of the costs
                  of the Capital Replacements identified on Exhibit B.

         (d)      Deferral of Deposits. Notwithstanding subsections 2(a) through
                  (c) above, Lender defers its right to require Borrower to make
                  the Replacement Reserve Deposit. However, at the end of the
                  Review Period or any Subsequent Review Period, Lender reserves
                  the right to require that Borrower begin making the
                  Replacement Reserve Deposit if Lender reasonably determines
                  that the physical condition of the Property warrants that
                  Borrower begin making such deposit. Lender's determination to
                  require such deposit shall not depend on the existence of any
                  of the events set forth in subsection (e) below.

         (e)      Reinstatement of Deposits. Notwithstanding subsection 2(d)
                  above, Lender reserves the right to require at any time, upon
                  written notice to Borrower, that Borrower begin making the
                  Replacement Reserve Deposit if Lender reasonably determines
                  that any of the following events have occurred:

                  (i)      Borrower's default under the Note, Security
                           Instrument, or any other document delivered in
                           connection with the Loan, or

                  (ii)     the occurrence of a Transfer which is prohibited
                           under the terms of the Security Instrument or which
                           requires Lender's consent, or

                  (iii)    Borrower's failure to maintain the Property in a
                           satisfactory manner and/or in accordance with the
                           requirements of the Security Instrument.

3.       Performance of Capital Replacements; Disbursements.

         (a)      Requests for Disbursement.  Lender shall disburse funds from
                  the Replacement Reserve Fund, in its sole discretion,as
                  follows:

                  (i)      Borrower's Request. If Borrower determines, at any
                           time or from time to time, that a Capital Replacement
                           is necessary or desirable, Borrower shall perform
                           such Capital Replacement and request from Lender, in
                           writing, reimbursement for such Capital Replacement.
                           Borrower's request for reimbursement shall include
                           (A) a detailed description of the Capital Replacement
                           performed, together with evidence, satisfactory to
                           Lender, that the cost of such Capital Replacement has
                           been paid and (B) lien waivers from each contractor
                           and material supplier supplying labor or materials
                           for such Capital Replacement, if required by Lender.

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                  (ii)     Lender's Request. If Lender shall reasonably
                           determine at any time or from time to time, that a
                           Capital Replacement is necessary for the proper
                           maintenance of the Property, it shall so notify
                           Borrower, in writing, requesting that Borrower obtain
                           and submit to Lender bids for all labor and materials
                           required in connection with such Capital Replacement.
                           Borrower shall submit such bids and a time schedule
                           for completing each Capital Replacement to Lender
                           within thirty (30) days after Borrower's receipt of
                           Lender's written notice. Borrower shall perform such
                           Capital Replacement and request from Lender, in
                           writing, reimbursement for such Capital Replacement.
                           Borrower's request for reimbursement shall include
                           (A) a detailed description of the Capital Replacement
                           performed, together with evidence, satisfactory to
                           Lender, that the cost of such Capital Replacement has
                           been paid and (B) lien waivers from each contractor
                           and material supplier supplying labor or materials
                           for such Capital Replacement, if required by Lender.

         (b)      Conditions Precedent. Disbursement from the Replacement
                  Reserve Fund shall be made no more frequently than once every
                  Disbursement Period and, except for the final disbursement, no
                  disbursement shall be made in an amount less than the Minimum
                  Disbursement Request Amount. Disbursements shall be made only
                  if the following conditions precedent have been satisfied, as
                  reasonably determined by Lender:

                  (i)      Payment for Capital Replacement. The Capital
                           Replacement has been performed and/or installed on
                           the Property in a good and workmanlike manner with
                           suitable materials (or in the case of a partial
                           disbursement, performed and/or installed on the
                           Property to an acceptable stage) and paid for by
                           Borrower as evidenced by copies of all applicable
                           paid invoices or bills submitted to Lender by
                           Borrower at the time Borrower requests disbursement
                           from the Replacement Reserve Fund.

                  (ii)     No Default. There is no condition, event or act that
                           would constitute a default (with or without notice
                           and/or lapse of time) under this Agreement or any
                           other Loan Document.

                  (iii)    Representations and Warranties. All representations
                           and warranties of Borrower set forth in this
                           Agreement and in the Loan Documents are true in all
                           material respects.

                  (iv)     Continuing Compliance. Borrower is in full compliance
                           with the provisions of this Agreement, the other Loan
                           Documents and any request or demand by Lender
                           permitted hereby.

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                  (v)      No Lien Claim. No lien or claim based on furnishing
                           labor or materials has been filed or asserted against
                           the Property, unless Borrower has properly provided
                           bond or other security against loss in accordance
                           with applicable law.

                  (vi)     Approvals. All licenses, permits, and approvals of
                           governmental authorities required for the Capital
                           Replacement as completed to the applicable stage have
                           been obtained.

                  (vii)    Legal Compliance. The Capital Replacement as
                           completed to the applicable stage does not violate
                           any laws, ordinance, rules or regulations, or
                           building lines or restrictions applicable to the
                           Property.

4.       Right to Complete Capital Replacements. If Borrower abandons or fails
         to proceed diligently to undertake and/or complete any Capital
         Replacement in a timely fashion or is otherwise in default under this
         Agreement for 30 days after written notice of such failure by Lender to
         Borrower, Lender shall have the right (but not the obligation) to enter
         upon the Property and take over and cause the completion of such
         Capital Replacement. However, no such notice or grace period shall
         apply in the case of such failure which could, in Lender's judgment,
         absent immediate exercise by Lender of a right or remedy under this
         Agreement, result in harm to Lender or impairment of the security given
         under the Security Instrument or any other Loan Document. Any contracts
         entered into or indebtedness incurred upon the exercise of such right
         may be in the name of Borrower, and Lender is hereby irrevocably
         appointed the attorney in fact of Borrower, such appointment being
         coupled with an interest, to enter into such contracts, incur such
         obligations, enforce any contracts or agreements made by or on behalf
         of Borrower (including the prosecution and defense of all actions and
         proceedings in connection with the Capital Replacement and the payment,
         settlement or compromise of all bills and claims for materials and work
         performed in connection with the Capital Replacement) and do any and
         all things necessary or proper to complete any Capital Replacement
         including signing Borrower's name to any contracts and documents as may
         be deemed necessary by Lender. In no event shall Lender be required to
         expend its own funds to complete any Capital Replacement, but Lender
         may, in its sole discretion, advance such funds. Any funds advanced
         shall be added to the outstanding balance of the Loan, secured by the
         Security Instrument and payable to Lender by Borrower in accordance
         with the provisions of the Security Instrument pertaining to the
         protection of Lender's security and advances made by Lender. Borrower
         waives any and all claims it may have against Lender for materials
         used, work performed or resultant damage to the Property.

5.       Inspection. Lender or any representative of Lender may periodically
         inspect any Capital Replacement in process and upon completion during
         normal business hours or at any other reasonable time upon reasonable
         prior written notice to Borrower (except in an emergency, as determined
         by Lender in its discretion or after an Event of Default, in which
         event no

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         such prior notice shall be require). Lender shall be entitled to deduct
         the Inspection Fee from the Replacement Reserve Fund for performing any
         such inspection. If Lender, in its sole discretion, retains a
         professional inspection engineer or other qualified third party to
         inspect any Capital Replacement, Lender also shall be entitled to
         deduct from the Replacement Reserve Fund an amount sufficient to pay
         all reasonable fees and expenses charged by such third party inspector.

6.       Insufficient Account. If Borrower requests disbursement from the
         Replacement Reserve Fund for a Capital Replacement in accordance with
         this Agreement in an amount which exceeds the amount on deposit in the
         Replacement Reserve Fund, Lender shall disburse to Borrower only the
         amount on deposit in the Replacement Reserve Fund. Borrower shall pay
         all additional amounts required in connection with any such Capital
         Replacement from Borrower's own funds.

7.       Security Agreement. Borrower hereby conveys, pledges, transfers and
         grants to Lender a security interest pursuant to the Uniform Commercial
         Code of the Property Jurisdiction or any other applicable law in and to
         all money in the Replacement Reserve Fund, as same may increase or
         decrease from time to time, for the purpose of securing Borrower's
         obligations under this Agreement and to further secure Borrower's
         obligations under the Note, Security Instrument and other Loan
         Documents.

8.       Post Default. If Borrower defaults in the performance of its
         obligations under this Agreement or under the Note, Security Instrument
         or any other Loan Document, after the expiration of any applicable
         notice or cure period, Lender shall have all remedies available to them
         under Article 9 of the Uniform Commercial Code of the Property
         Jurisdiction and under any other applicable law. In addition, Lender
         may retain all money in the Replacement Reserve Fund, including
         interest, and in Lender's discretion, may apply such amounts, without
         restriction and without any specific order of priority, to the payment
         of any and all indebtedness or obligations of Borrower set forth in the
         Note, Security Instrument or any other Loan Document, including, but
         not limited to, principal, interest, taxes, insurance, reasonable
         attorneys' fees and costs (including those of Lender's in-house
         counsel) and disbursements actually incurred and/or repairs to the
         Property.

9.       Termination. If not sooner terminated by written concurrence of the
         parties, this Agreement shall terminate upon the payment in full of the
         Loan and all indebtedness incurred in connection therewith and upon
         such termination, Lender shall pay to Borrower all funds remaining in
         the Replacement Reserve Fund.

10.      No Amendment. Nothing contained in this Agreement shall be construed to
         amend, modify, alter, change or supersede the terms and provisions of
         the Note, Security Instrument or any other Loan Document; and, if there
         is a conflict between the terms and provisions of this Agreement and
         those of the Note, Security Instrument, or any other Loan Document

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         then the terms and provisions of the Note, Security Instrument or such
         other Loan Document shall control.

11.      Release; Indemnity.

         (a)      Release. Borrower covenants and agrees that, in performing any
                  of its duties under this Agreement, none of Lender, any Loan
                  Servicer, or any of their respective agents or employees shall
                  be liable for any losses, claims, damages, liabilities and
                  expenses that may be incurred by any of them as a result of
                  such performance, except that no such party will be released
                  from liability for any losses, claim, damages, liabilities or
                  expenses arising out of the willful misconduct or gross
                  negligence of such party.

         (b)      Indemnity. Borrower hereby agrees to indemnify and hold
                  harmless Lender, Loan Servicer and their respective agents and
                  employees against any and all losses, claims, damages,
                  liabilities and expenses including, without limitation,
                  reasonable attorneys' fees and costs (including those of
                  Lender's in-house counsel) and disbursements, which may be
                  imposed or incurred by any of them in connection with this
                  Agreement except that no such party will be indemnified from
                  liability for any losses, claims, damages, liabilities or
                  expenses arising out of the willful misconduct or gross
                  negligence of such party.

12.      Choice of Law. This Agreement shall be construed and enforced in
         accordance with the laws of the Property Jurisdiction.

13.      Successors and Assigns. Lender may assign its rights and interests
         under this Agreement in whole or in part and upon any such assignment,
         all the terms and provisions of this Agreement shall inure to the
         benefit of such assignee to the extent so assigned. The terms used to
         designate any of the parties herein shall be deemed to include the
         heirs, legal representatives, successors and assigns of such parties;
         and the term "Lender" shall also include any lawful owner, holder or
         pledgee of the Note. Reference herein to "person" or "persons" shall be
         deemed to include individuals and entities. Borrower may not assign or
         delegate its rights, interests, or obligations under this Agreement
         without first obtaining Lender's prior written consent.

14.      Attorneys' Fees. In the event that Lender engages the services of an
         attorney at law to enforce the provisions of this Agreement against
         Borrower, then Borrower shall pay all costs of such enforcement,
         including any reasonable attorneys' fees and costs (including those of
         Lender's in-house counsel) and disbursements actually incurred.

15.      Compliance with Laws; Insurance Requirements.

         (a)      Compliance with Laws. Borrower shall ensure that all Capital
                  Replacements comply with all applicable laws, ordinances,
                  rules and regulations of all

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                  governmental authorities having jurisdiction over the Property
                  and applicable insurance requirements including, without
                  limitation, applicable building codes, special use permits,
                  environmental regulations, and requirements of insurance
                  underwriters.

         (b)      Insurance Requirements. In addition to any insurance required
                  under the Loan Documents, Borrower shall provide or cause to
                  be provided workers' compensation, builder's risk (if required
                  by Lender), and public liability insurance and other insurance
                  required under applicable law in connection with any of the
                  Capital Replacements. All such policies that can be endorsed
                  with standard mortgage clauses making losses payable to Lender
                  or its assigns shall be so endorsed. The originals of such
                  policies shall be deposited with Loan Servicer.

16.      Remedies Cumulative. In the event of Borrower's default under this
         Agreement, Lender may exercise all or any one or more of its rights and
         remedies available under this Agreement, at law or in equity. Such
         rights and remedies shall be cumulative and concurrent, and may be
         enforced separately, successively or together, and Lender's exercise of
         any particular right or remedy shall not in any way prevent Lender from
         exercising any other right or remedy available to Lender. Lender may
         exercise any such remedies from time to time as often as Lender
         chooses.

17.      Determinations by Lender. Unless otherwise provided in this Agreement,
         in any instance where the consent or approval of Lender may be given or
         is required, or where any determination, judgment or decision is to be
         rendered by Lender under this Agreement, the granting, withholding or
         denial of such consent or approval and the rendering of such
         determination, judgment or decision shall be made or exercised by
         Lender (or its designated representative) at its sole and exclusive
         option and in its sole and absolute discretion.

18.      Completion of Capital Replacements. Lender's disbursement of moneys
         from the Replacement Reserve Fund or other acknowledgment of completion
         of any Capital Replacement in a manner satisfactory to Lender shall not
         be deemed a certification by Lender that the Capital Replacement has
         been completed in accordance with applicable building, zoning or other
         codes, ordinances, statutes, laws, regulations or requirements of any
         governmental authority or agency. Borrower shall at all times have the
         sole responsibility for ensuring that all Capital Replacements are
         completed in accordance with all such governmental requirements.

19.      No Agency or Partnership. Nothing contained in this Agreement shall
         constitute Lender as a joint venturer, partner or agent of Borrower, or
         render Lender liable for any debts, obligations, acts, omissions,
         representations or contracts of Borrower.

20.      Entire Agreement. This Agreement and the other Loan Documents represent
         the final agreement between the parties and may not be contradicted by
         evidence of prior,

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         contemporaneous or subsequent oral agreements. There are no oral
         agreements between the parties. All prior or contemporaneous
         agreements, understandings, representations and statements, oral or
         written, are merged into this Agreement and the other Loan Documents.
         Neither this Agreement nor any of its provisions may be waived,
         modified, amended, discharged or terminated except in writing signed by
         the party against which the enforcement of the waiver, modification,
         amendment, discharge or termination is sought, and then only to the
         extent set forth in writing; provided, however, that in the event of a
         Transfer requiring Lender's consent under the terms of the Security
         Instrument, one or more or all of the Modifications to Agreement set
         forth in Exhibit C (if any) may be modified or rendered void by Lender
         at Lender's option by notice to Borrower/transferee.

21.      Counterparts. This Agreement may be executed in multiple counterparts,
         each of which shall constitute an original document and all of which
         together shall constitute one agreement.

         ATTACHED EXHIBITS.  The following Exhibits are attached to this
         Agreement:

         [X]      Exhibit A         Legal Description of the Land (required)

         [X]      Exhibit B         Capital Replacements (required)

         [X]      Exhibit C         Modifications to Agreement

                            {Signatures on next page}

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         IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first written above.

                                 BORROWER:

                                 ROBERTS PROPERTIES RESIDENTIAL,
                                 L.P., a Georgia limited partnership

                                 By:      ROBERTS REALTY INVESTORS,
                                          INC., a Georgia corporation
                                          Its General Partner

                                          By: /s/ Charles S. Roberts
                                              ------------------------
                                          Name:  Charles S. Roberts
                                          Title: President

                                               [Corporate Seal]

                                 Taxpayer ID No: 58-2122875

                                 LENDER:

                                 PRIMARY CAPITAL ADVISORS LC

                                 By: /s/ Faron G. Thompson       (Seal)
                                    --------------------------------
                                 Name:  Faron G. Thompson
                                 Title: Managing Director
                                        Commercial Mortgage Banking

                                                                         PAGE 11

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                                    EXHIBIT A

                          LEGAL DESCRIPTION OF THE LAND

                                                                        PAGE A-1

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                                    EXHIBIT B

                              CAPITAL REPLACEMENTS

    Carpet/Vinyl Flooring                            Window Treatments
    Roofs                                            Furnaces/Boilers
    Air Conditioners                                 Ovens/Ranges
    Refrigerators                                    Dishwashers
    Water Heaters                                    Garbage Disposals
    Seal and stripe asphalt pavement                 Resurface pool shell
    Replace pump and filters                         Resurface tennis court

                                                                        PAGE B-1

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                                    EXHIBIT C

                 MODIFICATIONS TO REPLACEMENT RESERVE AGREEMENT

The following modifications are made to the text of the Instrument that precedes
this Exhibit:

1.       No Subsequent Review Period will apply to this transaction.

                                                                        PAGE D-1