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U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-SB/A NO. 1
(Commission File No. 0-28048)
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
==============================
ROBERTS REALTY INVESTORS, INC.
(Name of Small Business Issuer in its charter)
GEORGIA 58-2122873
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
8010 ROSWELL ROAD, SUITE 120, ATLANTA, GEORGIA 30350
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (770) 394-6000
Securities to be registered under Section 12(b) of the Act: NONE
Title of each class to be so registered: Name of each exchange on which
N/A each class is to be registered: N/A
Securities to be registered under Section 12(g) of the Act:
COMMON STOCK
(Title of Class)
(Title of Class)
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TABLE OF CONTENTS
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PAGE
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PART I ........................................................ 1
ITEM 1. DESCRIPTION OF BUSINESS ........................ 1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION .............................. 7
ITEM 3. DESCRIPTION OF PROPERTY ........................ 11
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT .......................... 33
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS ................................ 35
ITEM 6. EXECUTIVE COMPENSATION ......................... 37
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS ................................... 38
ITEM 8. DESCRIPTION OF SECURITIES ...................... 47
PART II ....................................................... 56
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE
REGISTRANT'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS ............................ 56
ITEM 2. LEGAL PROCEEDINGS .............................. 57
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS .................................... 58
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES ........ 58
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS ...... 59
PART F/S ...................................................... 60
PART III ...................................................... 60
ITEM 1. INDEX TO EXHIBITS .............................. 60
ITEM 2. DESCRIPTION OF EXHIBITS ........................ 67
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FINANCIAL STATEMENTS ........................... F-1
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
Roberts Realty Investors, Inc. (the "Company") owns and operates
multifamily residential properties as a self-administered equity real estate
investment trust (a "REIT") for federal income tax purposes. The Company
conducts its business through Roberts Properties Residential, L.P. (the
"Operating Partnership"), of which the Company is the sole general partner and
in which the Company owns a 66.4% interest, and references herein to the
strategies or intentions of the Company assume that the Company will continue
to conduct its business in that manner. (This organizational structure is
sometimes called an "umbrella partnership" or "UPREIT.") The Operating
Partnership presently owns 10 multifamily apartment communities. The existing
communities of River Oaks, Rosewood Plantation, Plantation Trace, Preston Oaks,
Highland Park, Windsong, and Bentley Place, containing a total of 1,276
apartment units, are stabilized; the 207-unit Laurelwood community is under
redevelopment; and the 146-unit Holcomb Bridge community, the 180-unit Howell
Ferry community, and a 51-unit second phase of Plantation Trace are now under
construction or development. At December 31, 1995, the five stabilized
communities had a weighted physical occupancy rate of 98.4%, and the community
under redevelopment had a weighted average occupancy rate of 89.4%. (Because
the Operating Partnership did not acquire Bentley Place until March 1996 as
explained below, its occupancy rate is not reflected in the foregoing
percentage. The Company considers a community to have achieved stabilized
occupancy on the earlier of (a) attainment of 95% occupancy as of the first day
of any month, or (b) one year after completion of construction, provided that
any community under redevelopment is not considered to be stabilized during its
redevelopment.)
Subsequent to December 31, 1995, the Company solicited the consent of a
majority in interest of the limited partners of Roberts Properties Bentley
Place, L.P. ("Bentley Place, L.P.") to authorize the merger of Bentley Place,
L.P. into the Operating Partnership in consideration of 744,940 shares of the
Company's Common Stock, par value $.01 per share. (The Company's Common Stock
is hereinafter referred to as the "Shares" or the "Common Stock.") Upon the
effectiveness of the merger on March 21, 1996, the Operating Partnership
acquired the 117-unit Bentley Place apartment community. In addition, on May
7, 1996 the Company closed an "intrastate" offering (the "Cash Offering") in
which it sold 699,175 Shares in the aggregate for $9.50 per Share. Upon the
initial closing of the offering on March 29, 1996 at which 443,675 Shares were
issued, the Operating Partnership purchased 22.5 acres of land for the
development and construction of the 180-unit Howell Ferry community on such
land.
The Operating Partnership will in the near future begin soliciting the
consent of a majority in interest of the limited partners of The Crestmark
Club. L.P. ("Crestmark, L.P.") for the merger of Crestmark, L.P. into the
Operating Partnership in exchange for 746,649 units of limited partnership
interest in the Operating Partnership ("Units") valued at $9.75 per Unit, or
$7,279,831 in the aggregate. Crestmark, L.P. owns the 248-unit Crestmark
community and 8.8 acres of adjacent undeveloped property on which the Company
intends to build an 86-unit second phase of Crestmark.
Taking into account the sale of 699,175 Shares in the Cash Offering
and assuming the merger of Crestmark, L.P. into the Operating Partnership as
planned, the Company will own a 59.2% interest in the Operating Partnership,
which will own a portfolio of 11 multifamily apartment communities (the
"Communities") containing a total of 2,194 apartment homes, 670 of which will
be under construction, development, or redevelopment.
All but one of the Communities are located in metropolitan Atlanta; the
Windsong Community is located on St. Simons Island, Georgia. Nine of the
Communities were or are to be developed and constructed by affiliates of Mr.
Charles S. Roberts, the Chairman of the Board, Chief Executive Officer and
President of the Company. The Operating Partnership also owns two retail
centers totaling 15,698 square feet.
The Company is a Georgia corporation formed in July 1994 and expects to
continue to qualify as a REIT for federal income tax purposes. A REIT is a
legal entity that holds real estate interests and, through its payment of
distributions, is able to reduce or avoid incurring federal income tax at the
corporate level, allowing shareholders to participate in real estate
investments without the "double taxation" of income (i.e., at both the
corporate and shareholder
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levels) that generally results from investment in shares of a corporation. To
maintain its qualification as a REIT, the Company must, among other things,
distribute annually to its shareholders at least 95% of its taxable income,
subject to certain deductions, exclusions and additions. There is no public or
private trading market for the Common Stock.
The Operating Partnership, which is a Georgia limited partnership, has
engaged Roberts Properties Management, L.L.C. ("Roberts Management") to manage
the existing Communities it now owns and expects to engage Roberts Management
to manage the other Communities as they are completed. (Mr. Roberts owns
substantially all of the outstanding interests in Roberts Management.) Roberts
Management and certain other entities owned by Mr. Roberts perform services for
the Operating Partnership but are not owned by the Company or the Operating
Partnership. These entities, which in addition to Roberts Management are
Roberts Properties, Inc. ("Roberts Properties"), Roberts Properties Group, Inc.
("Roberts Group"), and Roberts Properties Construction, Inc. ("Roberts
Construction"), are sometimes hereinafter collectively referred to as the
"Roberts Companies."
The Company's executive offices are located at 8010 Roswell Road, Suite
120, Atlanta, Georgia 30350, and its telephone number is (770) 394-6000. At
December 31, 1995, the Company had three employees.
HISTORY
October 1994 Consolidation - River Oaks, Rosewood Plantation, Preston
Oaks, and Highland Park Communities. The Company assembled its initial
portfolio of four Communities in October 1994 in the simultaneous mergers of
four limited partnerships into the Operating Partnership (the "October 1994
consolidation"). All four partnerships were originally sponsored by Mr.
Charles S. Roberts. Upon consummating the October 1994 consolidation, which
received the consent of at least 92% in interest of the limited partners in
each of the four partnerships, the Company's assets consisted of a 53.8%
general partner interest in the Operating Partnership, which acquired the four
Communities. In connection with the October 1994 consolidation, a total of
1,043,647 Shares and 1,035,553 Units valued at $8.50 per Share/Unit, or
$17,673,200 in the aggregate, were issued to the partners of the four limited
partnerships.
Holcomb Bridge Community. In March 1995 after receiving the consent of
98% in interest of the limited partners of Roberts Properties Holcomb Bridge,
L.P., the Operating Partnership acquired the assets of such partnership, which
had previously acquired 11.8 acres of undeveloped land and raised the equity to
develop and construct a 146-unit apartment community at the intersection of
Holcomb Bridge Road and Peachtree Corners Circle in Gwinnett County, Georgia.
In connection with such transaction the Company issued 609,873 Shares valued at
$8.50 per Share, or $5,183,921 in the aggregate, to the partners of Roberts
Properties Holcomb Bridge, L.P.
Plantation Trace Community. In May 1995 after receiving the consent of
96% in interest of the limited partners of Roberts Properties Plantation Trace,
L.P., the Operating Partnership acquired the 182-unit Plantation Trace
Community, along with a 7,350 square foot retail center located in front of it,
by issuing 597,741 Units valued at $9.00 per Unit, or $5,379,669 in the
aggregate, to the partners of Roberts Properties Plantation Trace, L.P.
June-August 1995 Offering of Shares for Cash. In an offering conducted
from June 12, 1995 through August 25, 1995, the Company sold through Spalding &
Company an aggregate of 736,000 Shares at a price of $9.00 per Share.
Aggregate net proceeds of the offering were $5,988,080. On July 21, 1995 at the
initial closing of the offering, the Operating Partnership purchased 12.33
acres of land adjacent to Plantation Trace from Roberts Properties.
Construction of a second phase of Plantation Trace on such land is anticipated
to be completed in 1996. The remaining offering proceeds were used in December
1995 to fund the acquisition of the Laurelwood Community as described below.
Windsong. In September 1995 after receiving the consent of 98% in
interest of the limited partners of Roberts Properties-St. Simons, Ltd., the
Operating Partnership acquired Windsong, a 232-unit apartment community located
on St. Simons Island, Georgia, in exchange for 476,931 Units valued at $9.25
per Unit, or $4,411,612 in the aggregate, issued to the partners of Roberts
Properties-St. Simons, Ltd.
Laurelwood. On December 15, 1995, the Operating Partnership acquired
Laurelwood, a 207-unit apartment community, from an independent third party for
$7,775,000 in cash. The Operating Partnership funded the acquisition
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out of its available cash, and no debt was assumed or obtained in connection
therewith. On March 28, 1996, the Company obtained a $5,000,000 permanent loan
from Nationwide Life Insurance Company that is secured by Laurelwood.
Approximately $3,685,000 of the proceeds of such loan will be used for the
construction of the second phase of Plantation Trace. Laurelwood is currently
under a redevelopment program that includes new carpet, appliances, HVAC units,
kitchen flooring and other interior finishes, as well as new roofs, landscaping
and other exterior improvements.
Offering of Shares for Cash. On May 7, 1996 the Company closed an
"intrastate" offering in which it sold 699,175 Shares for $9.50 per Share (the
"Cash Offering"). Upon the initial closing of the offering on March 29, 1996,
the Operating Partnership paid Roberts Properties, Inc. $1,628,000 to purchase
approximately 22.5 acres of land in northeast metropolitan Atlanta and to
develop and construct the 180-unit Howell Ferry community on such property.
Additional net offering proceeds of approximately $2,186,000, along with an
$8,454,000 mortgage loan (for which the Company has not yet obtained a
commitment), will be used to develop and construct Howell Ferry. The remaining
$2,240,000 in net proceeds of the Cash Offering will be used for one or more of
the following purposes at the discretion of the Company's Board of Directors:
(a) reducing the amount of debt that would otherwise be obtained to finance
Howell Ferry; (b) funding the acquisition of an additional multifamily
apartment community or other real estate assets; and (c) providing funds for
general corporate purposes.
Bentley Place Community. In March 1996 after receiving the consent of
87% in interest of the limited partners of Bentley Place, L.P., the Operating
Partnership acquired the 117-unit Bentley Place Community by merger in
consideration of the issuance of 744,940 Shares valued by the Company at $9.50
per Share, or $7,076,930 in the aggregate, to the partners of Bentley Place,
L.P. No debt was assumed or obtained in connection with the merger. On April
2, 1996, the Company received a commitment from Nationwide Life Insurance
Company for a $4,100,000 loan to be secured by Bentley Place. The loan will
have a fixed interest rate of 7.10% per annum for a ten-year term. The closing
is expected to occur not later than September 30, 1996.
Crestmark. The Operating Partnership will in the near future begin
soliciting the consent of a majority in interest of the limited partners of
Crestmark, L.P., of which Mr. Roberts is the general partner, for the merger of
Crestmark, L.P. into the Operating Partnership in exchange for 746,649 Units
valued at $9.75 per Unit or $7,279,831 in the aggregate. Crestmark, L.P. owns
the 248-unit Crestmark Community and 8.8 acres of adjacent undeveloped property
on which the Company intends to build an 86-unit second phase of Crestmark.
The Company anticipates that the merger of Crestmark, L.P. into the Operating
Partnership will occur in June 1996.
Retail Centers. In addition to the 7,350 square foot Shoppes of
Plantation retail center acquired along with Plantation Trace as described
above, in December 1994 the Operating Partnership acquired a .86 acre parcel of
property located in front of the River Oaks Community for $296,693 in cash, and
construction of an 8,348 square foot, one story office/retail building was
completed in August 1995. In December 1995 the Operating Partnership sold The
Shoppes of Crestmark, a 7,078 square foot retail shopping center in Douglas
County, Georgia, for $940,000 and received net proceeds of approximately
$903,000 that will be used to acquire or develop additional multifamily
communities. The Operating Partnership had exchanged 104,478 Units valued at
$8.50 per Unit, or $888,063 in the aggregate, for The Shoppes of Crestmark in
January 1995.
The October 1994 consolidation and the Holcomb Bridge, Plantation
Trace, Windsong, and Bentley Place acquisitions were all structured as
statutory mergers under Georgia law in which the applicable limited
partnerships were merged into the Operating Partnership in exchange for Shares
or Units that were disbursed to the partners of such partnerships pursuant to
the terms of the merger agreements. (Out-of-state limited partners received
cash in lieu of Shares or Units.) The various Georgia limited partnerships
that have been merged into the Operating Partnership, and their dates of
formation, are: Roberts Properties River Oaks, L.P. - May 1991; Roberts
Properties Rosewood Plantation, L.P. - September 1992; Roberts Properties
Preston Oaks, L.P. - May 1993; Roberts Properties Highland Park, L.P. -
December 1993; Roberts Properties Holcomb Bridge, L.P. - October 1994; Roberts
Properties Plantation Trace, L.P. - September 1988; Roberts Properties-St.
Simons, Ltd. - December 1985; and Roberts Properties Bentley Place, L.P. -
December 1991. The Crestmark Club, L.P. is a Georgia limited partnership
formed in August 1990.
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The Operating Partnership intends to continue to acquire real estate
assets, primarily additional multifamily communities, financed through the
issuance of debt and/or equity securities of the Company and/or the Operating
Partnership. No assurances can be given that such intention will in fact be
carried out.
THE OPERATING PARTNERSHIP
The Operating Partnership is the entity through which the Company
conducts its business and owns all of its real estate assets. As the sole
general partner of the Operating Partnership, the Company controls the
Operating Partnership. The Board of Directors of the Company manages the
affairs of the Operating Partnership by directing the affairs of the Company.
The Company's ownership interest in the Operating Partnership entitles it to
share in cash distributions from, and in the profits and losses of, the
Operating Partnership generally in proportion to its ownership percentage. The
holders of Units, other than the Company, are the former limited partners in
the limited partnerships that were merged into the Operating Partnership, Mr.
Roberts, and the former owner of The Shoppes of Crestmark.
Holders of Units in the Operating Partnership (other than the Company)
have the right to require the Operating Partnership to redeem their Units
beginning when both of the following conditions have been satisfied: (a) the
Shares potentially issuable in connection with such issuance have been listed
on a national securities exchange or Nasdaq (in either case, an "Exchange"),
and (b) such Shares have been registered with all applicable securities
authorities. The foregoing conditions have not yet been satisfied. In
addition, the Company's articles of incorporation limit ownership by any one
holder to 6% of the outstanding Shares (other than by Mr. Roberts, who is
limited to 25%), and holders of Units (sometimes referred to herein as
"Unitholders") are not entitled to submit Units for redemption if and to the
extent that the issuance of Shares by the Company in redemption thereof would
cause such ownership limits to be violated. Upon submittal of Units for
redemption, the Operating Partnership will have the option either (a) to pay
cash for such Units in an amount equal to the number of such Units multiplied
by the average of the daily market prices of the Shares for the 10 consecutive
trading days prior to the redemption date (the "Cash Redemption Price"), or (b)
to require the Company to acquire such Units in exchange for either (x) the
Cash Redemption Price, or (y) a number of Shares equal to the number of Units
submitted for redemption. The Company anticipates that it will issue Shares in
exchange for any Units submitted for redemption. The Company will have the
right at its election to purchase all outstanding Units from Unitholders in
exchange for Shares, beginning on April 1, 1997 and at any time thereafter.
This purchase right is subject to the same conditions that apply to the
Unitholders' redemption right. See Part II, Item 1, "Market Price of and
Dividends on the Registrant's Common Equity and Other Shareholder Matters" for
a discussion of the Company's intentions to seek to list the Shares on an
Exchange.
Whenever the Company issues Shares of its Common Stock (or its
Preferred Stock, which it is also authorized to issue), the Company will be
obligated to contribute the net proceeds from such issuance to the Operating
Partnership, and the Operating Partnership will be obligated to issue an
equivalent number of Units, or equivalent other interests, to the Company. The
Operating Partnership Agreement permits the Operating Partnership, without the
consent of the Unitholders, to sell additional Units or other partnership
interests and add limited partners.
GROWTH STRATEGIES
The Company's business objectives are to maximize the current return to
its shareholders through increases in cash flow and to increase long-term total
returns to shareholders through appreciation in value of the Common Stock. The
Company intends to manage its Communities intensively to seek to maximize
current and long-term income and to increase the value of its assets, to
develop high quality apartment communities for long-term ownership, and to
acquire existing apartment communities where opportunities for favorable
investment returns exist. The Company is committed to achieving these
objectives by pursuing the following growth strategies and by engaging third
parties, including the Roberts Companies, for assistance as appropriate:
- Maximize cash flow from operations of the Communities - by seeking through
intensive management to maintain high occupancy levels, obtain regular
rent increases, manage resident turnover efficiently, and control
operating expenses.
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- Develop new multifamily apartment communities in Atlanta and also in the
Southeast region - consistent with management's historical policies of
constructing and effectively managing high quality multifamily communities
for long-term income and value enhancement.
- Acquire additional multifamily communities in Atlanta and also in the
Southeast region where, in the judgment of the Board of Directors, the
Company's business strengths have the potential to increase property value
and opportunities exist for enhanced investment returns.
- Pursue additional offerings of debt or equity securities to raise funds to
pursue the foregoing management, development and acquisition growth
strategies, each of which is discussed in more detail below.
Property Management Strategy. The Company believes that having its
Communities intensively managed is a fundamental element of its growth
strategy. Roberts Management will continue to manage the Communities for the
Company utilizing Roberts Management's staff of professional and support
personnel, including property managers, leasing managers, leasing consultants,
maintenance supervisors and technicians, and accounting personnel. As of
December 31, 1995, Roberts Management employed approximately 40 property
management personnel. In April 1995, Roberts Management was selected as the
Property Management Company of the Year by the National Association of Home
Builders' National Council of the Multifamily Industry. The Company believes
that Roberts Management's depth will enable it to deliver quality services,
thereby promoting resident satisfaction, improving resident retention, and
enhancing the value of each of the Communities.
Roberts Management's strategy will continue to be (i) to increase the
average occupancy and rental rates as market conditions permit, (ii) to
minimize resident turnover through strict review of creditworthiness and
ability to meet lease obligations, and (iii) to continue to monitor operating
expenses to increase net operating income at each of the Communities. The
geographic concentration of the Communities allows senior management of Roberts
Management to visit each of the Communities frequently and to supervise closely
the implementation of the marketing, leasing and maintenance programs developed
by Roberts Management. The Company may in the future seek to achieve the
benefits of operating as a self-managed REIT by pursuing a merger with Roberts
Management or another management company or by engaging its own employees.
Development Strategy. The Company currently intends to continue to
develop high quality apartment communities for long-term ownership. The
Company believes that the barriers to new development in the Atlanta market
will continue to constrain the rate of apartment community construction in
Atlanta. These barriers include governmental growth control; a difficult
rezoning and permitting process; and the limited availability of well-located
sites. The Company believes that these restraints on construction, coupled
with the predicted continued growth in population and household formations,
present an excellent opportunity for the Company to achieve favorable returns
on the development of well-located high quality apartment communities.
Roberts Properties has traditionally performed the development function
for limited partnerships sponsored by Mr. Roberts. Roberts Properties will
perform that function for the Operating Partnership with respect to the Holcomb
Bridge and Howell Ferry Communities and a second phase of each of Plantation
Trace and Crestmark, and Roberts Properties may continue to do so for other
projects in the future. The Company may seek to perform its own development
activities by engaging its own employees or by pursuing a merger with Roberts
Properties.
During the past 11 years the Roberts Companies have developed,
constructed and/or managed over 3,300 residential units. The Company believes
that the number and quality of the apartment units developed by the Roberts
Companies, the relationships Mr. Roberts and employees of the Roberts Companies
have developed with local permitting and governmental authorities, and the
Roberts Companies' experience with the development, construction and financing
process will minimize the barriers to new development often faced by less
experienced developers and national developers attempting to enter the Atlanta
market. Although the experience of the Roberts Companies will be most helpful
to the Company in the Atlanta area, the Company believes that such experience
will also enable the Company to develop multifamily apartment communities in
other areas in the Southeast. In such event the Company may, however,
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seek experienced local real estate professionals to assist in developing
communities with the standards and features developed in the competitive
Atlanta market.
Although the Company presently intends to engage the Roberts Companies
in its development activities, the Company may hire other development or
construction companies in Atlanta and elsewhere if it deems it to be in the
Company's best interests to do so. The most likely development scenario for the
Operating Partnership is for it to acquire properties and/or land purchase
contracts, together with existing development, construction, architectural,
land planning, and other related agreements, from Roberts Properties and/or an
entity formed by Mr. Roberts or his affiliates. This procedure is essentially
the one followed by syndicated limited partnerships sponsored by Mr. Roberts in
the past. The Company may engage the Roberts Companies to develop properties
on a fee basis; the Company may enter into joint venture agreements with the
Roberts Companies; or the Company may acquire communities developed by the
Roberts Companies and owned by other affiliates of Mr. Roberts. The Company
may also enter into any such arrangements with independent third parties.
In analyzing the potential development of a particular community, the
Company will evaluate certain geographic, demographic, economic and financial
data including household, population and employment growth; prevailing rental
and occupancy rates in the immediate market area and the perceived potential
for growth in those rates; costs that affect profitability of the investment,
including construction, financing, operating and maintenance costs; income
levels in the area; existing employment bases; traffic volume, transportation
access, proximity to commercial centers and regional malls; and proximity to
and quality of the area's schools. The Company will also consider certain
physical elements regarding a particular site, including the probability of
zoning approval (if required), availability of utilities and infrastructure,
and other physical characteristics of the site.
For information regarding the development and construction of the
Howell Ferry and Holcomb Bridge Communities and a second phase of each of
Plantation Trace and Crestmark, see Part I, Item 3, "Description of Property."
Acquisition Strategy. In addition to its management and development
strategies, the Company also intends to grow externally by selectively
acquiring existing apartment communities from third parties. The Company
believes that there are attractive acquisition opportunities in Atlanta and the
Southeast. The Company will selectively seek to acquire well-located apartment
communities that can be improved, through capital improvement programs and
intensive management, to meet the quality and performance standards of the
existing Communities. Such communities may fall into one or both of the
following categories: (i) communities that are in need of physical
improvements, or (ii) communities that, although well-located, have a history
of poor management and/or experience occupancy and financial problems that, in
either event, the Company believes it will be able to solve.
The Company believes that a suitable acquisition target should furnish
the Company with significant opportunity for increasing property value through
rent increases, reduction of expenses, or a combination of both through
effective property management or repositioning. Prior to acquiring an existing
property from a third party, the Operating Partnership (or Roberts Properties
on its behalf) will conduct a detailed market survey consisting of a study of
the specific market area in which the apartment community is located, to assure
that local demographics and economics are within the parameters desired by the
Company. The Operating Partnership will also undertake a study of the
competitive rental market to ascertain the strength and depth of the market
area through rental rate, occupancy level, and unit mix analysis. Finally, the
Operating Partnership will perform a physical inspection, a review of resident
mix, an assessment of current vacancies, and a complete rental analysis for the
target property. Capital improvement alternatives will also be examined,
including the economic feasibility of leaving the property "as-is" compared to
the benefits of investing in site redevelopment such as landscaping, signage,
exterior architectural redesign and construction, and modernization of the unit
interior.
Summary. Consistent with the Company's overall growth strategies, the
Company intends to continue to evaluate and initiate development and
acquisition opportunities. Other than as described in Part I, Item 3,
"Description of Property," there are no current negotiations with regard to any
specific acquisition or development. Although
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acquisition and development activities will initially be concentrated in the
Atlanta metropolitan and nearby areas, future development and investment
activities will, as noted above, not be limited to this area, but may be
pursued in other major metropolitan areas within the Southeast.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
OVERVIEW
The following discussion should be read in conjunction with the
accompanying financial statements and the notes thereto and is based primarily
on the consolidated and combined financial statements of the Company and its
Predecessors (Roberts Properties River Oaks, L.P., Roberts Properties Rosewood
Plantation, L.P., Roberts Properties Preston Oaks, L.P., Roberts Properties
Highland Park, L.P., Roberts Properties Holcomb Bridge, L.P., Roberts
Properties Plantation Trace, L.P., and Roberts Properties-St. Simons, Ltd., and
Roberts Properties Bentley Place, L.P.). On March 21, 1996 Roberts Properties
Bentley Place, L.P. was merged into the Operating Partnership, and the Company
has restated its historical financial statements to include Bentley Place for
all periods presented.
RESULTS OF OPERATIONS
The Company and its Predecessors have historically experienced net
losses due to the effects of depreciation and amortization, which are non-cash
expenses. The Company expects to continue to record net losses in future
periods due to the continued effects of these expenses. At December 31, 1995,
the Company owned eight completed and operating apartment communities
(including Bentley Place), with one apartment community and a second phase of
another under development or construction. The changes in operating results
from 1994 to 1995 are primarily the result of increases in the number of
apartment homes owned due to the completion of the Preston Oaks and Highland
Park Communities during 1995.
Comparison of Year Ended December 31, 1995 to Year Ended December 31,
1994. For the year ended December 31, 1995, loss before minority interest of
unitholders in the Operating Partnership and extraordinary item decreased
$240,000 or 55.8% when compared to the year ended December 31, 1994. The
Company's operating performance is summarized in the following table.
<TABLE>
<CAPTION>
Percentage
Change from
1994 to 1995 1995 1994
------------ ---- ----
<S> <C> <C> <C>
Property operating revenues 25.1% $9,632,000 $7,702,000
Property operating expenses(1) 20.8% $3,763,000 $3,116,000
General administrative expenses NM $430,000 $75,000
Depreciation of real estate assets 41.8% $2,626,000 $1,852,000
Income from operations 5.8% $2,813,000 $2,659,000
Average stabilized occupancy(2) (0.2%) 98.9% 99.1%
Operating expense ratio(3) (1.4%) 39.1% 40.5%
</TABLE>
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(1) Property operating expenses include personnel, utilities, real estate
taxes, insurance, maintenance, landscaping, marketing, management, and
other fees.
(2) Represents the average physical occupancy of the Company's stabilized
properties calculated by dividing the total number of vacant days by the
total possible number of vacant days for each year and then subtracting
the resulting number from 100%; the calculation does not include the
following properties: Laurelwood, which was purchased on December 15,
1995 and is under redevelopment; Preston Oaks and Highland Park, which
were both in their lease-up phase during 1995; and Holcomb Bridge, which
was under development during 1995.
(3) Represents the total of property operating expenses divided by operating
revenues expressed as a percentage.
Rental income increased $1,888,000 or 25.7% from $7,352,000 to
$9,240,000. This increase is due primarily to the addition of the Preston Oaks
and Highland Park Communities. Preston Oaks completed its lease-up phase in
August
7
<PAGE> 10
1995 and generated rental income of $985,000 during 1995 versus not being
operational during 1994. Highland Park was in its initial lease-up phase at
December 31, 1995 and generated rental income of $211,000 during 1995. Rental
income from the Company's stabilized properties during 1994 and 1995 (River
Oaks, Plantation Trace, Bentley Place, and Windsong) increased $219,000 or 3.6%
from $6,069,000 to $6,288,000. Rosewood Plantation, which completed its
lease-up phase in the second quarter of 1994, recorded additional rental income
of $311,000 during 1995. Also contributing to the increase in rental income
during 1995 was the acquisition of The Shoppes of Crestmark in January 1995
($89,000) and the acquisition of Laurelwood in December 1995 ($67,000).
Property operating expenses increased $647,000 or 20.8% from $3,116,000
to $3,763,000. This increase is due primarily to the completion of the Preston
Oaks and Highland Park Communities because personnel, maintenance, marketing
and other costs are expensed beginning with the start of the lease-up phase for
each community under development. Of the $647,000 increase in operating
expenses, $427,000 was attributable to Preston Oaks and Highland Park.
Operating expenses as a percent of operating revenues declined to 39.1% in 1995
from 40.5% in 1994, reflecting favorable operating cost leverage as the
Company's portfolio of properties expands.
Depreciation expense increased $744,000 or 41.8% from $1,852,000 to
$2,626,000. This increase is due primarily to the completion of the Preston
Oaks and Highland Park Communities because depreciation expense is recorded as
rental units are completed and available for occupancy.
General and administrative expenses increased $355,000 from $75,000 to
$430,000, primarily due to 1995 being the Company's first full year of
incurring general and administrative expenses. In 1994, the Company did not
incur general and administrative expenses until October 1, 1994. These
expenses include legal and accounting fees, marketing and printing fees,
salaries, director fees and other costs. The Company expects that as it
continues to grow, such expenses will decline as a percentage of operating
revenues, even though general and administrative expenses will increase in
absolute terms. In 1995, general and administrative expenses equaled 4.5% of
operating revenues.
Interest income increased $231,000 or 240% from $96,000 to $327,000.
This increase is due to higher cash equivalent investment balances during 1995
resulting from cash acquired in the acquisition of the Holcomb Bridge Community
and from the proceeds of the Company's offering of 736,000 Shares for cash that
was concluded in August 1995.
Interest expense increased $203,000 or 8.9% from $2,288,000 to
$2,491,000. This increase is due primarily to an increase in debt associated
with the completion of the Preston Oaks and Highland Park Communities as they
progressed from the construction phase (where interest is capitalized) to the
operating phase (where interest is expensed).
The Company incurred accounting fees, broker-dealer fees, legal fees,
printing costs, filing fees, and certain other expenses associated with the
October 1994 consolidation in which four limited partnerships were merged into
the Operating Partnership, which thereby acquired the River Oaks, Rosewood
Plantation, Preston Oaks, and Highland Park Communities. These costs, totaling
$446,000, are treated as a current period expense for the year ended December
31, 1994. In 1995 the Company incurred accounting fees, broker-dealer fees,
legal fees, printing costs, filing fees, and certain other expenses associated
with the mergers of three limited partnerships into the Operating Partnership,
which thereby acquired the Holcomb Bridge, Plantation Trace, and Windsong
Communities. These 1995 costs totaled $513,000.
Mortgage notes payable secured by Rosewood Plantation and Preston Oaks
were refinanced in 1994 and 1995, respectively, in each case prior to their
contractual maturity. The unamortized loan costs related to these mortgage
notes payable at the time of their refinancing were charged to expense as an
extraordinary item. The extraordinary item (early extinguishment of a debt) in
the year ended December 31, 1995 was $183,000 (including the minority
interests' share of $79,000) as compared to the extraordinary item of $135,000
in 1994.
8
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased $260,000 during 1995 from
$1,849,000 at December 31, 1994 to $1,589,000 at December 31, 1995. This
decrease is due to the excess of cash used in investing activities over cash
flow provided by operating and financing activities.
A primary source of liquidity to the Company is cash flow from
operations. Operating cash flows have historically been determined by the
number of apartment homes, rental rates, and operating expenses with respect to
such apartment homes. Net cash provided by operating activities increased
$768,000 from $1,898,000 to $2,666,000 primarily due to an increase in
operating revenues combined with improved operating cost leverage. The effects
of revenue and expense accruals are not material in understanding the Company's
cash flow from operations. Generally, depreciation and amortization expenses
are the most significant adjustments to net income (loss) in arriving at cash
provided by operating activities.
Net cash used in investing activities increased $17,295,000 from
$8,262,000 to $25,557,000, due primarily to the construction and completion of
Preston Oaks and Highland Park and the acquisition of Laurelwood.
Net cash provided by financing activities increased $16,251,000 from
$6,380,000 to $22,631,000, due primarily to an increase in borrowings
associated with the construction of Preston Oaks and Highland Park and from the
proceeds of the Company's offering of 736,000 Shares for cash that was
concluded in August 1995.
Each of the Predecessors (other than Roberts Properties-St. Simons,
Ltd.) was separately formed to develop and own an apartment community using a
combination of equity contributions and proceeds from a mortgage note payable
to provide liquidity for the investing activities related to development and
construction of its community and for other costs incidental to the beginning
of rental operations. (Unlike the other Predecessors, Roberts Properties-St.
Simons, Ltd. raised equity to purchase the existing Windsong Community, which
had been constructed and leased-up approximately 10 years earlier.)
The Operating Partnership acquired the fully operating Plantation Trace
and Windsong Communities in 1995 by issuing Units. Similarly, the Operating
Partnership expects to acquire the Crestmark Community and its 8.8 acres of
adjacent undeveloped property by issuing Units. The Company issued Shares: in
March 1995 to acquire the Holcomb Bridge Community, which is under development;
in March 1996 to acquire the existing Bentley Place Community; and in March
1996 in the Cash Offering to acquire the land for and fund the development of
the Howell Ferry Community (and for other corporate purposes). The Operating
Partnership is also redeveloping Laurelwood, developing a second phase of
Plantation Trace, and will pursue development of a second phase of Crestmark
after the merger of Crestmark, L.P. into the Operating Partnership. The
Company anticipates that each Community's rental and other operating revenues
after completion of redevelopment or construction will be adequate to provide
short-term liquidity for the payment of direct rental operating expenses,
interest and amortization of principal on related mortgage notes payable, and
capital expenditures.
The Company expects to meet its other short-term liquidity requirements
(consisting primarily of general and administrative expenses, quarterly
distributions, completion of development in process, and the funding of
possible acquisitions or pursuit of new development opportunities) through (a)
working capital provided by operations, (b) proceeds of mortgage notes payable
(related to the development and construction of Holcomb Bridge and Howell Ferry
and the financing of Laurelwood and Bentley Place), and (c) the proceeds of the
issuance of Shares in the Cash Offering. Management expects that the
development and construction of Holcomb Bridge will be funded by working
capital until the funding of a $6,420,000 permanent loan upon the completion of
that Community, for which the Company has received a commitment from Nationwide
Life Insurance Company. Construction of the second phase of Plantation Trace
will be funded from a portion of the proceeds of the $5,000,000 permanent loan
from Nationwide Insurance Company that closed on March 28, 1996 and is secured
by Laurelwood. The planned development of Howell Ferry is anticipated to be
funded with the net proceeds of the Cash Offering and an $8,454,000 loan for
which the Company is seeking a commitment.
9
<PAGE> 12
The Company, through the Operating Partnership, obtained a $1,000,000
unsecured revolving line of credit from First Union National Bank of Georgia in
1995. At December 31, 1995, no borrowings were outstanding, although $163,000
of the line of credit had been reserved for the letter of credit issued in
connection with the refinancing of Highland Park. The Company elected not to
renew the line of credit upon its expiration in May 1996.
On August 10, 1995, the Company received a commitment from Nationwide Life
Insurance Company to refinance the existing loan secured by Highland Park for
$8,178,000 at a fixed interest rate of 7.30% per annum for a seven-year term.
The refinancing was completed on January 31, 1996. Based on a 30-year
amortization schedule, the monthly payment of principal and interest on the
loan is $56,066.
On September 20, 1995, the Company refinanced the $8,711,000 loan secured
by Preston Oaks with a new loan from Nationwide Life Insurance Company at a
fixed interest rate of 7.21% per annum for a seven-year term. Based on a
30-year amortization schedule, the monthly payment of principal and interest on
the loan is $59,188.
The Operating Partnership sold The Shoppes of Crestmark on December 8,
1995 for a price of $940,000, and the net proceeds of such sale will be used to
acquire or develop additional multifamily communities.
On December 15, 1995, the Company, through the Operating Partnership,
acquired the Laurelwood Community from an independent third party for
$7,775,000 in cash. The Company funded the purchase price from current working
capital. On March 28, 1996, the Company obtained a $5,000,000 permanent loan
from Nationwide Life Insurance Company that is secured by Laurelwood. The loan
has a 10-year term with monthly payments of principal and interest in the amount
of $35,739 based on a 25-year amortization schedule and a fixed interest rate
of 7.125% per annum.
On January 23, 1996, the Company received a commitment from Nationwide
Life Insurance Company for a $9,250,000 permanent loan to refinance the
existing debt on the River Oaks Community, which matures with a principal
balance of $8,827,000 in November 1996. The commitment is for a loan with a
term of seven years with monthly payments of principal and interest based on a
30-year amortization schedule and a fixed interest rate of 7.15% per annum.
On February 27, 1996, the Company received a commitment from Nationwide
Life Insurance Company for a permanent loan to be secured by Holcomb Bridge to
be funded on or before January 31, 1997 at the completion of construction. The
principal amount of the note will be $6,420,000 and will bear interest at a
fixed interest rate of 7.14% per annum for a 10-year term.
On May 7, 1996 the Company closed an "intrastate" offering (the "Cash
Offering") in which it sold 699,175 Shares in the aggregate for $9.50 per
Share. Upon the initial closing of the offering on March 29, 1996 at which
443,675 Shares were issued, the Operating Partnership paid Roberts Properties,
Inc. $1,628,000 to purchase approximately 22.5 acres of land for the
development and construction of the 180-unit Howell Ferry Community on such
property. Additional net offering proceeds of approximately $2,186,000, along
with an $8,454,000 mortgage loan (for which the Company has not yet obtained a
commitment), will be used to develop and construct Howell Ferry. The remaining
$2,240,000 in net proceeds of the offering will be used for one or more of the
following purposes at the discretion of the Company's Board of Directors: (a)
reducing the amount of debt that would otherwise be obtained to finance Howell
Ferry; (b) funding the acquisition of an additional multifamily apartment
community or other real estate assets; and (c) providing funds for general
corporate purposes.
On April 2, 1996, the Company received a commitment from Nationwide Life
Insurance Company for a $4,100,000 loan to be secured by Bentley Place. The
loan will have a fixed interest rate of 7.10% per annum for a ten-year term.
The closing is expected to occur not later than September 30, 1996, and the
loan costs are estimated to be approximately $73,000.
10
<PAGE> 13
The Company's existing mortgage indebtedness and the indebtedness it
expects to obtain pursuant to the commitments described above will require
balloon payments coming due over the years 2000 to 2006 as summarized below:
<TABLE>
<S> <C>
1997 $ 0
1998 $ 0
1999 $ 0
2000 $11,254,000
2001 $ 6,042,000
2002 $ 7,954,000
2003 $15,928,000
2004 $ 0
2005 $ 0
2006 $13,078,000
-----------
Total $54,256,000
===========
</TABLE>
Because the Company anticipates that only a small portion of the principal of
such indebtedness will be repaid prior to maturity and that the Company may not
have funds on hand sufficient to repay such indebtedness, it will be necessary
for the Company to refinance such debt through (a) debt financing
collateralized by mortgages on individual Communities or groups of Communities
or uncollateralized private or public debt offerings, and/or (b) additional
equity offerings.
Management believes that these sources of debt financing, equity capital,
operating cash flow and working capital of the Company, coupled with the
$2,240,000 in additional net proceeds of the Cash Offering, will provide the
liquidity and adequate capital resources to begin and complete its planned
development and construction activities. The Company expects liquidity and
capital resources for additional acquisition and development to be provided by
a combination of secured long term borrowing and issuance of equity securities.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of." Management believes that its adoption in 1996 will
not have a material effect on the Company's financial position or results of
operations.
INFLATION
Substantially all apartment leases are for an initial term of not more
than 12 months and thus may enable the Company to seek increases in rents after
the expiration of each lease. Additionally, the construction contracts for the
Holcomb Bridge and Howell Ferry Communities and for the second phase of
Plantation Trace will be at fixed prices and equal substantially all of the
anticipated construction costs. The short-term nature of these leases and the
fixed price construction contracts serve to reduce the risk to the Company of
the adverse effects of inflation.
ITEM 3. DESCRIPTION OF PROPERTY.
GENERAL
The Operating Partnership presently owns 10 multifamily apartment
communities. The existing communities of River Oaks, Rosewood Plantation,
Plantation Trace, Preston Oaks, Highland Park, Windsong, and Bentley Place,
containing a total of 1,276 apartment units, are stabilized; the 207-unit
Laurelwood community is under redevelopment; and the 146-unit Holcomb Bridge
community, the 180-unit Howell Ferry community and a 51-unit second phase of
Plantation Trace are now under construction or development. As of December 31,
1995, the five stabilized communities had a weighted physical occupancy rate of
98.4%, and the community under redevelopment had a weighted average
11
<PAGE> 14
occupancy rate of 89.4%. (Because the Operating Partnership did not acquire
Bentley Place until March 1996, its occupancy rate is not reflected in the
foregoing percentage. The Company considers a community to have achieved
stabilized occupancy on the earlier of (a) attainment of 95% occupancy as of
the first day of any month, or (b) one year after completion of construction,
provided that any community under redevelopment is not considered to be
stabilized during its redevelopment.) At December 31, 1995, Highland Park was
in the final phase of its lease-up, being 68% occupied and 80% leased.
Assuming that the Operating Partnership acquires the assets of Crestmark, L.P.
by merger as anticipated, the Operating Partnership will own 11 multifamily
apartment communities containing a total of 2,194 apartment homes, 670 of which
will be under construction, development, or redevelopment. With the exception
of Windsong, all of the Communities are located in the Atlanta metropolitan
area. The 232-unit Windsong Community is located on St. Simons Island
approximately 10 miles east of Brunswick, Georgia.
The Company believes that the demand for multifamily housing in Atlanta
will increase due to Atlanta's growing population. According to the Atlanta
Regional Commission (the "ARC"), both population and job growth in Atlanta are
projected to be above the national average for the foreseeable future. (The
ARC is the regional planning and governmental coordination agency for the
10-county Atlanta Region.) Based upon information provided by the ARC and the
U.S. Census Bureau, the population of the Atlanta metropolitan area is
projected to grow 40.9% for the period from 1990 to 2010. According to the
Georgia Department of Labor, the metropolitan Atlanta unemployment rate was
4.5% in 1995, which is below the 1995 Georgia unemployment rate of 5.2% and the
1995 U.S. unemployment rate of 5.6%.
According to the ARC, the population of metropolitan Atlanta increased by
50.14% from 1980 to 1995, and nine metropolitan Atlanta counties rank among the
nation's top 50 fastest growing counties. As reported by the ARC, the Atlanta
metropolitan area currently has a population of approximately 2,847,000, making
it the ninth largest metropolitan area in the country and the largest in the
Southeast.
12
<PAGE> 15
Certain basic information regarding the Communities and the retail centers
is summarized in the following table:
THE COMMUNITIES
<TABLE>
Year
Completed Number Approximate Average
or to be of Rentable Area Unit Size
Community Location Completed Units (Square Feet) (Square Feet)
--------- -------- --------- ------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Existing Communities:
Windsong St. Simons
Island, GA 1975 232 225,624 973
Plantation
Trace Duluth, GA 1990 182 229,453 1,260
River Oaks Duluth, GA 1992 216 275,632 1,276
Rosewood
Plantation Norcross, GA 1994 152 192,476 1,266
Preston Oaks Atlanta, GA 1995 189 235,129 1,244
Highland Park Atlanta, GA 1995 188 231,248 1,230
Laurelwood Atlanta, GA 1971 207 281,700 1,361
Bentley Place(4) Tucker, GA 1993 117 108,598 928
Crestmark(5) Douglasville, GA 1993 248 254,591 1,027
Communities Under Construction or to Be Developed:
Second Phase of
Plantation Trace Duluth, GA 1996 51 79,250 1,554
Holcomb Bridge Norcross, GA 1996 146 194,800 1,334
Howell Ferry Duluth, GA 1997 180 233,870 1,299
Second Phase of
Crestmark(5) Douglasville, GA 1997 86 105,516 1,227
----- --------- -----
Total/ 2,194 2,647,887
Average ===== ========= 1,207
=====
</TABLE>
<TABLE>
<CAPTION>
December 1995 Average
Average Rental Rates Occupancy
-------------------- for the Twelve
Per Square Months Ended
Community Per Unit Foot Dec. 31, 1995
--------- -------- ---- --------------
<S> <C> <C> <C>
Existing Communities:
Windsong $580 $0.60 98%
Plantation
Trace $808 $0.64 98%
River Oaks $841 $0.66 99%
Rosewood
Plantation $837 $0.66 99%
Preston Oaks $873 $0.70 N/A(1)
Highland Park $832 $0.68 N/A(2)
Laurelwood $628 $0.46 N/A(3)
Bentley Place(4) $702 $0.76 99%
Crestmark(5) $747 $0.73 99%
Communities Under Construction or to Be Developed:
Second Phase of
Plantation Trace N/A N/A N/A
Holcomb Bridge N/A N/A N/A
Howell Ferry N/A N/A N/A
Second Phase of
Crestmark(5) N/A N/A N/A
</TABLE>
RETAIL CENTERS
<TABLE>
<CAPTION>
Average
Year Occupancy
Completed Approximate December 1995 for the Twelve
or to be Rentable Area Average Rental Rates Months Ended
Retail Center Location Completed (Square Feet) Per Square Foot Dec. 31, 1995
- ------------- -------- --------- -------------- -------------------- --------------
<S> <C> <C> <C> <C> <C>
Shoppes of
Plantation Duluth, GA 1992 7,350 $1.35 100%
Shoppes of
River Oaks Duluth, GA 1995 8,348 N/A(2) N/A(2)
------
Total 15,698
======
</TABLE>
(1) Preston Oaks completed its lease-up phase in August 1995, and its twelve
month historical occupancy percentage is not comparable. Its occupancy at
December 31, 1995 was 100%.
(2) Community or retail center is in its initial lease-up stage.
(3) Laurelwood was acquired on December 15, 1995 and was 89% occupied at
December 31, 1995. Occupancy levels for the 12 month period ended
December 31, 1995 are not available.
(4) Bentley Place was acquired in March 1996 as described elsewhere herein.
(5) Crestmark is anticipated to be acquired by merger in June 1996 as described
elsewhere herein.
13
<PAGE> 16
Certain annual operating data regarding six of the Communities are
summarized in the following table. Because the Preston Oaks Community did not
achieve stabilized occupancy until August 1995 and the Highland Park Community
did not achieve stabilized occupancy until March 1996, information regarding
those Communities is omitted from the table. The Operating Partnership
purchased Laurelwood from an independent third party on December 15, 1995 and
commenced redevelopment of Laurelwood shortly thereafter. Occupancy and rental
information regarding Laurelwood for the period from 1991-1995 is not
available, thus Laurelwood is also omitted from the table.
<TABLE>
<CAPTION>
Average Effective Annual Rental Rates
-------------------------------------
1991 1992 1993 1994 1995
Month Occupancy Rate ---- ---- ---- ---- ----
Completed -------------- Per Per Per Per Per Per Per Per Per Per
Community Initial Leaseup 1991 1992 1993 1994 1995 Unit Sq. Ft. Unit Sq. Ft. Unit Sq. Ft. Unit Sq. Ft. Unit Sq. Ft.
--------- --------------- ---- ---- ---- ---- ---- ---- ------- ---- ------- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Windsong Prior to 1991 97% 98% 98% 98% 98% $488 $0.50 $514 $0.53 $528 $0.54 $563 $0.58 $592 $0.61
Plantation
Trace 9/90 98% 98% 98% 98% 98% $716 $0.56 $718 $0.56 $750 $0.59 $775 $0.61 $805 $0.63
River Oaks 2/93 N/A(1) N/A N/A 98% 98% N/A N/A N/A N/A N/A N/A $787 $0.62 $820 $0.65
Rosewood
Plantation 5/94 N/A N/A N/A N/A 99% N/A N/A N/A N/A N/A N/A N/A N/A $817 $0.64
Bentley Place(2) 9/93 N/A N/A N/A 97% 98% N/A N/A N/A N/A N/A N/A $684 $0.74 $688 $0.74
Crestmark(3) 4/94 N/A N/A N/A N/A 98% N/A N/A N/A N/A N/A N/A N/A N/A $709 $0.69
</TABLE>
(1) Throughout this table, "N/A" means "not applicable," i.e., the Community
had not achieved stabilized occupancy at the beginning of the applicable
period.
(2) Bentley Place was acquired in March 1996 as described elsewhere herein.
(3) Crestmark is anticipated to be acquired by merger in June 1996 as described
elsewhere herein.
14
<PAGE> 17
As described below, the Communities are located in six submarkets of the
Atlanta metropolitan area and on St. Simons Island, Georgia. Each heading
identifies the Community or Communities within the specified submarket.
Population and employment data provided for each submarket were in each case
obtained from the ARC. Multiple Communities are located in each of the Duluth,
Peachtree Corners and Perimeter Center/North Springs submarkets, thus those
Communities compete not only with unaffiliated apartment communities but also
with each other.
DULUTH AREA - PLANTATION TRACE, RIVER OAKS, AND HOWELL FERRY COMMUNITIES
Duluth. The City of Duluth is located in northwest Gwinnett County, which
from 1985 until 1990 ranked first in the nation in growth among counties with a
population of more than 100,000. Since 1980, Gwinnett's population has
increased 118% to a current level of 362,800. Gwinnett's strong employment
base, transportation networks, excellent public education system and affordable
home prices are factors that contribute to the county's remarkable growth.
Home to more than 247 international firms and over 700 manufacturing and high
technology firms that generate many of its 182,300 jobs, the county leads all
metropolitan Atlanta counties in percentage employment growth, increasing 181%
since 1980. Duluth has exceeded even Gwinnett County as a whole in percentage
of population growth; its population has increased 223% since 1980. Duluth is
located near I-85 and Gwinnett Place Mall, a 1,100,000 square foot regional
mall.
Plantation Trace. Plantation Trace, which was completed in 1990, consists
of 20 two and three story Nantucket-style stone and wood sided buildings
located on a 16.9 acre site on Pleasant Hill Road approximately one-half mile
west of its intersection with Peachtree Industrial Boulevard. In 1990, this
182-unit garden apartment community received the Aurora Award from the
Southeast Builders' Conference for "Best Rental Apartment Community in the
Southeast."
The Plantation Trace Community, with its traditional award-winning
architecture and landscaped grounds, features a large clubhouse with a fitness
center, two lighted tennis courts, sand volleyball court, multi-station
playground, free-form swimming pool, small wading pool, stone paver pool deck
and a covered whirlpool spa. In addition to upscale amenities, Plantation
Trace offers such interior features as nine foot ceilings, crown molding,
pickled wood cabinetry in the kitchen and bath, marble vanity tops, fireplaces,
vaulted ceilings and Palladian windows in select units, designer wallcoverings
and full laundry rooms with washer and dryer connections.
Plantation Trace has a variety of floorplans, including 28 one bedroom
units ranging from 901 to 929 square feet, 48 two bedroom standard and 66 two
bedroom roommate units ranging from 1,228 to 1,298 square feet, and 40 three
bedroom units ranging from 1,471 to 1,494 square feet. The weighted average
unit size is 1,260 square feet. Rental rates range from $665 to $910 per
month, with a weighted average monthly rent of $808 per unit and $.64 per
square foot. Plantation Trace has averaged approximately 98% occupancy since
stabilization in September 1990. The Community was 97% occupied on December
31, 1995.
Plantation Trace is presently encumbered by a loan that will mature on
September 15, 2000 in the approximate amount of $7,433,000. The interest rate
on this loan is fixed at 7.75% per annum, and monthly payments of principal and
interest of $59,860 are based on a 28-year amortization schedule. The loan was
obtained on August 12, 1993 and may be prepaid upon payment of a prepayment
premium equal to the greater of (a) 1% multiplied by a fraction having as its
numerator the number of months to maturity and its denominator the number of
months in the full term of the loan, or (b) the present value of the loan less
the amount of principal and accrued interest being repaid. The Community is
subject to local real estate taxes which in 1995 were $170,986; there can be no
assurances that real estate or other taxes will not be increased or imposed in
future years.
51-Unit Second Phase of Plantation Trace. A second phase of 51 apartment
units is currently under development on 12.33 acres adjacent to the existing
Plantation Trace Community. Construction of this 51-unit expansion ("Phase
II") is expected to be completed in 1996. Phase II will contain 25 two bedroom
units of approximately 1,350 square feet each and 26 three bedroom units of
approximately 1,750 square feet each. Each of the 51 units will have an
approximately 200 square foot attached garage. The anticipated monthly rental
rates are $945 for a two bedroom garage unit and $1,075 for a three bedroom
garage unit, resulting in a weighted average monthly rent of $1,011 per unit
and
15
<PAGE> 18
$0.65 per square foot. Roberts Properties is developing Phase II for the
Operating Partnership and may, at its discretion, change the unit mix or site
plan, provided that any material change must be approved by the Company's Board
of Directors.
The architectural style, land planning, landscaping and amenities of Phase
II are expected to be similar to those of the Company's other Communities, and
the enlarged Plantation Trace Community will continue to be managed by Roberts
Management. A modern fitness and exercise facility and a second free-form
swimming pool will be added to the existing amenities at Plantation Trace. The
fitness facility to be located on the Phase II property will be approximately
1,550 square feet in size, with individual aerobics equipment and workout
stations similar to the exercise facilities at the Company's other Communities.
The second swimming pool will be similar in design to the existing pools at
the Communities. Phase II will also provide the Plantation Trace Community
direct access to the Chattahoochee River, as well as to jogging trails and
nature areas to be developed around the existing lake and along the river.
The construction of Phase II will be completed pursuant to a fixed price
construction contract with Roberts Construction in the amount of $3,157,000.
Assuming that Phase II is built to the initial contract specifications, any
excess construction costs not approved by the Operating Partnership as a change
order will be borne by Roberts Construction, and if Roberts Construction's
costs are lower than anticipated, its savings will constitute additional
profit. Any adverse soil conditions that may be encountered and any stormwater
management facilities that may be required other than the existing lake will
not be covered by the fixed price construction contract, and any costs
associated with these conditions will be borne by the Operating Partnership.
If, during the construction of Phase II, the Operating Partnership upgrades the
contract plans and specifications from those agreed to initially, such change
orders may increase the amount paid to Roberts Construction. The Company
anticipates that there will be approximately $157,850, or approximately 5% of
the contract price, in net profit to Roberts Construction on the construction
contract.
The land on which Phase II will be constructed is presently unencumbered.
The development and construction of Phase II will be funded from the proceeds
of a $5,000,000 loan secured by Laurelwood.
River Oaks. River Oaks, which was completed in 1992, consists of 22 two
and three story Charleston-style brick and wood sided buildings located on a
31.6 acre site on Pleasant Hill Road adjacent to the Chattahoochee River to the
west and the Plantation Trace Community to the east. The River Oaks Community,
with its traditional architecture and landscaped grounds, features a large
clubhouse with a fitness center, two lighted tennis courts, sand volleyball
court, multi-station playground, free-form swimming pool, stone paver pool
deck, and covered whirlpool spa. In addition to upscale amenities, River Oaks
offers such interior features as nine foot ceilings, crown molding, garden
tubs, pickled pine cabinetry in the kitchen and bath, marble vanity tops,
fireplaces and vaulted ceilings in select units, designer wallcoverings, and
full laundry rooms with washer and dryer connections.
River Oaks has a variety of floor plans, including 40 one bedroom units at
approximately 907 square feet, 32 two bedroom roommate, 24 two bedroom deluxe
and 48 two bedroom standard units ranging from 1,276 to 1,309 square feet, and
72 three bedroom units with approximately 1,457 square feet. The weighted
average unit size is 1,276 square feet. Rental rates range from $670 to $940
per month, with a weighted average monthly rent of $841 per unit and $.66 per
square foot. River Oaks has averaged approximately 98% occupancy since
stabilization in February 1993. The Community was 98% occupied on December 31,
1995.
River Oaks is presently encumbered by a loan that will mature on November
15, 1996 in the approximate amount of $8,827,000. The interest rate on this
loan is fixed at 9.375% per annum, and based upon a 30-year amortization
schedule, the monthly payment is $75,357. The loan was originally obtained on
October 31, 1991. On January 23, 1996, the Company received a commitment
letter from Nationwide Life Insurance Company to refinance the existing loan
secured by River Oaks by lending $9,250,000 at a fixed interest rate of 7.15%
per annum for a seven-year term. Based upon a 30-year amortization schedule,
the monthly payment will be $62,475. The closing of the refinancing is
expected to occur not later than October 31, 1996, and the expenses of such
refinancing will be approximately $135,000. Prepayment of the loan within a
month of its maturity as the Company intends will not require any prepayment
premium.
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The Community is subject to local real estate taxes that in 1995 were $205,795;
there can be no assurances that real estate or other taxes will not be
increased or imposed in future years.
Howell Ferry. The 180-unit Howell Ferry Community will be 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. Howell Ferry will contain 28 one
bedroom units of approximately 915 square feet each, 46 two bedroom standard
units of approximately 1,275 square feet each, 47 two bedroom roommate units of
approximately 1,300 square feet each, and 59 three bedroom units of
approximately 1,500 square feet each. Leasing is anticipated to start in
October 1996, with anticipated monthly rental rates of $675 for a one bedroom
unit, $825 for a two bedroom standard unit, $845 for a two bedroom roommate
unit, and $950 for a three bedroom unit, resulting in a weighted average
monthly rent of $848 per unit and $0.65 per square foot. Roberts Properties is
developing Howell Ferry for the Operating Partnership and may, at its
discretion, change the unit mix, square footages, or site plan, provided that
any material change must be approved by the Company's Board of Directors.
The architectural style, land planning, landscaping and amenities of
Howell Ferry are expected to be similar to those of the Company's other
Communities. The Howell Ferry Community will be managed by Roberts Management
and will feature a large clubhouse with fitness center, club room and laundry
room, similar to the clubhouses at the Company's other Communities. Howell
Ferry will also provide its residents a free-form swimming pool, two lighted
tennis courts, a children's playground, and an approximately 12 acre nature
area.
A total of $12,267,837 is estimated to be required to purchase the Howell
Ferry land and to develop and construct the Community. This amount will be
composed of the $3,813,837 net proceeds of the sale of the minimum 442,200
Shares in the Cash Offering, plus a loan to be obtained in the amount of
$8,454,000 to be secured by Howell Ferry. The Company has not obtained a
commitment for a loan for the development of Howell Ferry, and no assurances
can be given regarding such loan or its terms.
The construction of Howell Ferry will be completed pursuant to a fixed
price construction contract with Roberts Construction in the amount of
$8,828,600. Assuming that Howell Ferry is built to the initial contract
specifications, any excess construction costs not approved by the Operating
Partnership as a change order will be borne by Roberts Construction, and if
Roberts Construction's costs are lower than anticipated, its savings will
constitute additional profit. Any adverse soil conditions that may be
encountered or any additional stormwater management facilities that may be
needed other than the existing floodplain will not be covered by the fixed
price construction contract, and any costs associated with these conditions
will be borne by the Operating Partnership. If, during the construction of
Howell Ferry, the Operating Partnership upgrades the contract plans and
specifications from those agreed to initially, such change orders may increase
the amount paid to Roberts Construction. The Company anticipates that there
will be approximately $250,000, or approximately 2.8% of the contract price, in
net profit to Roberts Construction on the construction contract.
The Howell Ferry Community will be subject to local real estate taxes
which, based on other similar properties in Gwinnett County, the Operating
Partnership anticipates will be approximately $172,000 in 1997, the first year
the Community will be taxed as a completed and stabilized property.
PEACHTREE CORNERS AREA - ROSEWOOD PLANTATION AND HOLCOMB BRIDGE COMMUNITIES
Peachtree Corners. Located in west Gwinnett County, Peachtree Corners
benefits from the existing and improving transportation networks, employment
resources and consumer conveniences in the area. Over 400 firms are located in
the Peachtree Corners area, occupying more than 4,500,000 square feet of office
and distribution space and providing Gwinnett County with approximately 35% of
its total jobs. Peachtree Corners' most prominent office/institutional
development is Technology Park/Atlanta, which has become the premier location
in Georgia for national and international high tech companies. With over
2,100,000 square feet of space occupied by more than 70 firms, approximately
4,500 people are employed at Technology Park/Atlanta. Almost equidistant
within eight miles of three regional shopping malls, each containing over
1,000,000 square feet of retail space, the area is conveniently accessible to
major retail activity centers.
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Rosewood Plantation. This Community, which was completed in May 1994,
targets the upper tier of the apartment resident market. The 152-unit
Community is located on Spalding Drive just southwest of Holcomb Bridge Road on
a 21 acre site. Since 1989 each of the elementary, middle and high schools
serving the Community has been designated as the Gwinnett County School of
Excellence by the Gwinnett County Board of Education for at least one year, and
the middle school has been designated as a Georgia School of Excellence by the
Georgia Department of Education and a National Blue Ribbon School of Excellence
by the U.S. Department of Education. Due partly to the highly-regarded public
school system in the area, Rosewood Plantation is an attractive choice for
white collar professionals and families who choose the rental lifestyle.
Rosewood Plantation is composed of 7 two and three story buildings with brick
accents and wood siding.
Rosewood Plantation has 29 one bedroom units with 914 square feet, 45 two
bedroom standard units with 1,247 to 1,276 square feet, 43 two bedroom roommate
units with 1,310 square feet, and 35 three bedroom units with 1,510 square
feet. The weighted average unit size is 1,266 square feet, with rental rates
ranging from $700 to $960. Rosewood Plantation has averaged approximately 98%
occupancy since stabilization in June 1994. At December 31, 1995, the
Community was 100% occupied and had a weighted average monthly rent of $837 per
unit and $0.66 per square foot.
Rosewood Plantation's amenities include a clubhouse offering an exercise
room with weight equipment, and a clubroom with a big screen television and bar
with kitchen facilities. The recreational area includes a free-form swimming
pool with stone paver deck, lighted tennis court, children's playground,
walking trails through the nature area, and a two acre lake.
Each building is patterned after the architecture of Charleston, featuring
columned porches, transom windows, and distinctive gables. The interior of
each apartment home offers high-end finishes such as crown molding, garden
tubs, marble vanity tops, bay windows, and large walk-in closets.
The Community is currently encumbered by a loan that will mature on June
1, 2001 in the approximate amount of $5,995,000. The interest rate on this
loan is fixed at 7.375% per annum, and monthly payments of principal and
interest of $46,849 are based upon a 28-year amortization schedule. The loan
was obtained on May 25, 1994 and was personally guaranteed by Mr. Roberts as a
condition of the lender's approval of the October 1994 consolidation. (The
guaranty was released in March 1996 after the Highland Park Community achieved
a 90% leasing and occupancy level.) The loan may not be prepaid prior to June
1, 1997 but can be prepaid at any time thereafter subject to the payment of a
premium of 4% of the amount prepaid in the loan year June 1, 1997 through May
31, 1998; such prepayment premium will be reduced by 1% each loan year until
March 2, 2001, after which date no prepayment premium will be due. The
Community is subject to local real estate taxes that in 1995 were $125,407;
there can be no assurances that real estate or other taxes will not be
increased or imposed in future years.
Holcomb Bridge. The Holcomb Bridge Community will consist of 146 upscale
apartment units comprising approximately 194,800 square feet in a total of 12
buildings located on an 11.8 acre site at the intersection of Holcomb Bridge
Road and Peachtree Corners Circle in the Peachtree Corners area. Holcomb
Bridge will benefit from its excellent location at a major intersection amidst
an established multifamily market area in close proximity to Gwinnett County's
largest employment base.
Holcomb Bridge is anticipated to have 13 one bedroom units with
approximately 920 square feet, 36 two bedroom standard units with approximately
1,275 square feet, 50 two bedroom roommate units with approximately 1,310
square feet, and 47 three bedroom units with approximately 1,520 square feet.
The weighted average unit size will be approximately 1,334 square feet.
Projected monthly rental rates are $650 for a one bedroom unit, $810 for a two
bedroom standard unit, $850 for a two bedroom roommate unit, and $940 for a
three bedroom unit, resulting in a weighted average rent of $852 per unit and
$0.64 per square foot. Roberts Properties is developing Holcomb Bridge for the
Operating Partnership and may, at its discretion, change the unit mix, square
footages, or site plan, provided that any material change must be approved by
the Company's Board of Directors.
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The buildings will be of traditional design with either stacked stone or
brick accents and wood or vinyl siding with the facades varying from building
to building. Exterior features will include gables, bay windows, varying paint
colors with white trim, and private patios or balconies. Extensive landscaping
will be installed, including mature trees, flowers, and shrubbery. The
interior features will include crown molding in the living/dining rooms,
designer wallcoverings, separate laundry rooms, breakfast bars, garden tubs,
and private balconies. Recreational amenities will include a swimming pool and
fitness center.
Construction of the Holcomb Bridge Community and certain improvements will
be completed pursuant to a fixed price construction contract with Roberts
Construction in the amount of $6,420,000. Assuming the Community is built to
the initial contract specifications, any excess construction costs not approved
by the Operating Partnership as a change order will be borne by Roberts
Construction, and if Roberts Construction's costs are lower than anticipated,
its savings will constitute profit. Any adverse soil conditions that may be
encountered or any special stormwater management facilities that may be needed
will not be covered by the fixed price construction contract, and any costs
associated with these conditions will be borne by the Operating Partnership.
If, during construction of the Community, the Operating Partnership upgrades
the contract plans and specifications from those agreed to initially, such
change orders may increase the amount paid to Roberts Construction. The
Company anticipates that there will be no profit to Roberts Construction on the
construction contract.
On February 27, 1996, the Company received a commitment letter from
Nationwide Life Insurance Company for a loan to be secured by Holcomb Bridge in
the amount of $6,420,000. The loan will have a term of 10 years and will bear
interest at a fixed rate of 7.14% per annum. Based upon a 30-year amortization
schedule, the monthly payment will be $43,318, with a balance of $5,570,000 due
at maturity. The closing of the loan is expected to occur on or before January
31, 1997. The Holcomb Bridge Community will be subject to local real estate
taxes which, based on other similar properties in Gwinnett County, the
Operating Partnership anticipates will be approximately $119,000 in 1997, the
first year the Community will be taxed as a completed and stabilized property.
PERIMETER CENTER/NORTH SPRINGS AREA - PRESTON OAKS AND HIGHLAND PARK COMMUNITIES
Perimeter Center/North Springs. The Perimeter Center/North Springs area
offers convenient proximity and access to both urban and suburban employment
bases and retail conveniences. Georgia 400 and I-285 provide direct access
within minutes to major regional malls such as North Point Mall and Perimeter
Center Mall. The Phipps Plaza/Lenox Mall/Buckhead area and downtown Atlanta's
Central Business District are readily accessible via the Georgia 400 extension,
which connects to I-85 South near downtown Atlanta.
Within this corridor is a large base of residential, commercial and office
developments. The south quadrant of the area includes medical facilities such
as Northside Hospital, St. Joseph's Hospital and Scottish Rite Children's
Hospital. Perimeter Center encompasses office developments that exceed
18,500,000 square feet of space, with such Class A facilities as Ravinia,
Northpark Town Center, Concourse and Perimeter Center Office Park. Several
prominent companies such as Holiday Inn, UPS and Hewlett-Packard have located
their worldwide or regional headquarters within the Perimeter Center area.
This area, which includes portions of Fulton and DeKalb Counties, has an
average household income of approximately $73,000, which is considerably higher
than the metropolitan Atlanta average of $44,913. The median value of a single
family home in this area exceeds $200,000.
Preston Oaks. This Community, which was completed in August 1995, is a
two and three story mid-density multifamily residential community consisting of
8 two and three story buildings located on Mt. Vernon Highway in the Perimeter
Center area. The traditional architecture consists of stacked stone and vinyl
siding incorporating details of gabled roofs, Palladian windows, columns, and
bay windows. The Community consists of 36 one bedroom units, 92 two bedroom
units, and 61 three bedroom units. The 189 units range in size from 901 to
1,437 square feet, with a weighted average unit size of 1,244 square feet.
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Preston Oaks is conveniently located less than one mile from Perimeter
Mall, a 1,200,000 square foot regional mall, and in close proximity to the
area's numerous office developments. Several stand-alone restaurants and major
retail centers either exist or are being developed near the Community.
The Community is located on a 10.4 acre site and features extensive
landscaping. The amenities are similar to those of the other existing
Communities, with custom swimming pool, lighted tennis court, fitness center
with individual work-out stations, and a large clubhouse. Interior features
include garden tubs, oversized walk-in closets, pickled pine cabinetry in the
kitchen and bath, crown molding, mirrored walls, and chair-railing in the
dining rooms.
Leasing began in March 1995, and at December 31, 1995, Preston Oaks was
100% occupied. Preston Oaks' rental rates are $720 for a one bedroom unit,
$850 for the two bedroom standard unit, $900 for the two bedroom roommate unit,
and $1,000 for a three bedroom unit, resulting in a weighted average monthly
rent of $873 per unit and $0.70 per square foot. Construction of the Community
and certain improvements was completed pursuant to a fixed price construction
contract with Roberts Construction in the amount of $7,805,700. Although
Roberts Construction was originally anticipated to earn a $390,000 profit on
the construction contract, Roberts Construction incurred an approximately
$464,000 loss.
Preston Oaks is encumbered by a loan that will mature on October 15, 2002
in the approximate amount of $7,965,000. The loan is evidenced by a promissory
note bearing interest at a fixed rate of 7.21% per annum, and monthly payments
of principal and interest in the amount of $59,188 are based on a 30-year
amortization schedule. The loan 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 prior
to its maturity date without any prepayment premium. The Community is subject
to local real estate taxes which, based on taxes on other similar properties in
Fulton County, the Company anticipates will be approximately $181,000 in 1996,
the first year the Community will be taxed as a completed and stabilized
property.
Highland Park. This Community consists of 188 upscale apartment units in
a total of eight buildings on a 10.9 acre site. Located on Dunwoody Place in
the North Springs area of north Fulton County, Highland Park benefits from its
close proximity to Georgia 400, which provides direct access within minutes to
major retail and employment areas to the north such as North Point Mall and
Windward, and to the south such as Perimeter Mall and Perimeter Center.
Highland Park has 42 one bedroom units with 901 square feet, 32 two
bedroom standard units with 1,223 square feet, 62 two bedroom roommate units
with 1,283 square feet, and 52 three bedroom units with 1,437 square feet. The
weighted average unit size is 1,230 square feet.
The buildings are of a traditional design with stacked stone accents and
vinyl siding with the facades varying from building to building. Exterior
features include gables, bay windows, various paint colors with white trim, and
private patios or balconies. Extensive landscaping has been installed
including mature trees, flowers and shrubbery. The interior features include
crown molding in the living/dining rooms, designer wallcoverings, separate
laundry rooms, breakfast bars, garden tubs and private balconies. Recreational
amenities include a swimming pool, tennis court, and fitness center.
Leasing began in July 1995, and at December 31, 1995 the Highland Park
Community was in the final phase of its lease-up, being 68% occupied and 80%
leased. (As of April 28, 1996, Highland Park was 100% occupied.) Highland
Park's monthly rental rates are $665 for a one bedroom unit, $820 for a two
bedroom standard unit, $845 for a two bedroom roommate unit, and $940 for a
three bedroom unit, resulting in a weighted average rent of $832 per unit and
$0.68 per square foot. Construction of Highland Park was recently completed
pursuant to a fixed price construction contract with Roberts Construction in
the amount of $8,020,490. Although Roberts Construction was originally
anticipated to earn a $401,000 profit on the construction contract, Roberts
Construction is now expected to incur an approximately $190,000 loss.
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On September 27, 1994 the Operating Partnership obtained construction
financing from Bank South in the principal amount of $8,178,000. On August 10,
1995 the Company received a commitment letter from Nationwide Life Insurance
Company to refinance the existing loan. The closing of the refinancing
occurred on January 31, 1996, and the expenses of such refinancing were
$110,000. The original principal balance of the new loan is $8,178,000, and
the loan bears interest at a fixed rate of 7.30% per annum for a seven-year
term. The loan may be prepaid on the same terms described for the loan secured
by Preston Oaks. Based on a 30-year amortization schedule, the monthly payment
is $56,066.
The Community is subject to local real estate taxes which, based on other
similar properties in Fulton County, the Company anticipates will be
approximately $176,000 in 1996, the first year the Community will be taxed as a
completed and stabilized property.
EAST COBB AREA - LAURELWOOD COMMUNITY
Cobb County. Laurelwood is located in the East Cobb area of Cobb County,
approximately one mile east of I-75 and approximately two and one-half miles
north of I-285. Cobb County is immediately northwest of Atlanta, bisected by
I-75 and encompassing approximately 340 square miles. Cobb County ranks third
in the metropolitan Atlanta area with a population of more than 516,000
residents and 205,000 households. Cobb's median household income is among the
area's highest at more than $48,000 per household. Between 1989 and 1994
Cobb's population increased approximately 16.5%. Manufacturing remains strong
in Cobb, with Lockheed Aeronautical Systems as the top employer in the county,
employing more than 10,500 workers.
Cobb also boasts a strong retail base with two regional malls, Cumberland
Mall and Town Center Mall, in the southern and northern portions of the county,
respectively. Each mall exceeds 1,000,000 square feet and is the retail hub of
its respective area. Four interstate highways (I-75, I-20, I-285 and I-575)
traverse Cobb.
Delk Road Area. Delk Road is the second I-75 exit north of I-285 and
connects I-75 with the area's two other major north/south thoroughfares: Cobb
Parkway to the west and Powers Ferry Road to the east. Several office and
business park developments that total more than 1,500,000 square feet of space
and include corporations such as Lockheed, Motorola, MetLife and State Farm
contribute to a large employment base of approximately 10,000 people within the
Delk Road area. Retail conveniences support the large work force with shopping
centers, restaurants, and entertainment facilities.
Laurelwood. The Laurelwood Community, which was completed in 1971, is
situated on Bentley Road just south of Delk Road on approximately 17 acres and
consists of 21 two story buildings containing a total of 207 apartment units.
Laurelwood features large floor plans with either private entries at the
building fronts or through breezeways. The buildings have French stucco
exteriors, offering large private patios or balconies, with a mixture of
townhouse and garden apartments. Each of the units offers designer
wallcoverings and fully-equipped kitchens including frost-free refrigerators,
built-in dishwashers and washer/dryer connections. The on-site amenities
include a clubhouse, swimming pool and two childrens' playgrounds.
Laurelwood has a variety of floorplans, including 143 two bedroom garden
and townhouse plans ranging from 1,200 to 1,500 square feet and 64 three
bedroom garden and townhouse plans ranging from 1,400 to 2,000 square feet.
The weighted average unit size is 1,361 square feet; rental rates range from
$655 to $855 per month, with a weighted average rent per square foot of $0.46.
On December 31, 1995, Laurelwood was 89% occupied and had a weighted average
monthly rent of $628 per unit.
The Operating Partnership is currently redeveloping Laurelwood in a
program that includes such improvements as new appliances and kitchen flooring,
new HVAC units and new roofs on all the buildings. The redevelopment program
also includes upgrading Laurelwood's clubhouse and amenities area, enhancing
its landscaping, and creating a
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new entrance area and sign to improve its architectural appeal. The program is
expected to cost approximately $1,000,000, which the Company anticipates
funding from its working capital.
On December 15, 1995, the Company, through the Operating Partnership,
acquired Laurelwood for $7,775,000 in cash. The Company funded the purchase
price from current working capital. On March 28, 1996, the Company obtained a
$5,000,000 permanent loan from Nationwide Life Insurance Company that is
secured by Laurelwood. The loan has a 10-year term with monthly payments of
principal and interest in the amount of $35,739 based on a 25-year amortization
schedule and a fixed interest rate of 7.125% per annum. The Community is
subject to local real estate taxes, that in 1995 were $79,612; there can be no
assurances that real estate or other taxes will not be increased or imposed in
future years.
PLEASANTDALE AREA - BENTLEY PLACE COMMUNITY
DeKalb County. As one of Atlanta's core counties at the heart of the 18
county metropolitan statistical area, DeKalb County benefits not only from its
location but also from its mature infrastructure. DeKalb boasts an excellent
transportation network composed of three interstate highways: I-285, I-85 and
I-20. An established network of state and local secondary roads, including the
Stone Mountain Freeway, crosses the county, providing convenient accessibility
to all parts of the metropolitan area.
As metropolitan Atlanta's population recently surpassed 2,500,000, DeKalb
County's population topped 585,400, increasing by more than 102,300 or 21%
since 1990. An estimated 25% of the metropolitan Atlanta populace resides in
DeKalb County. The average household income in DeKalb County is $35,721. Home
to over 300 international companies and more than 240 Fortune 500 firms,
DeKalb-based businesses provide approximately 340,000 jobs.
Pleasantdale Area. The area in which Bentley Place is located is referred
to as Pleasantdale, which is a developed area convenient to I-85 and I-285 in
northwest DeKalb County and southeast Gwinnett County. Pleasantdale is home to
major employers such as UPS, Scientific-Atlanta, Kraft Foodservice, Rockwell
International and Westinghouse. The Pleasantdale area also includes the
Norfolk-Southern Industrial District, which contains more than 5,000,000 square
feet of warehouse/distribution space, including AT&T's 1,300,000 square foot
cable and fiber-optics manufacturing facility, which employs approximately
3,500 people.
Bentley Place. Bentley Place, a 117-unit garden apartment community that
was completed in 1993, consists of 5 three story stacked stone and wood-sided
buildings located on a 4.6 acre site at the intersection of Pleasantdale Road
and Tucker-Norcross Road, approximately 1.7 miles southeast of the intersection
of Pleasantdale Road and I-85. (The Operating Partnership acquired Bentley
Place in March 1996.)
The Bentley Place Community, with its traditional award-winning
architecture and landscaped grounds, features a large clubroom with a fitness
center, free-form swimming pool, stone paver pool deck and a whirlpool spa. In
addition to upscale amenities, Bentley Place offers such interior features as
crown molding, pickled wood cabinetry in the kitchen and bath, marble vanity
tops, vaulted and trey ceilings in select units, Palladian windows, designer
wallcoverings, and full laundry room with washer and dryer connections.
Bentley Place has a variety of floor plans, including 41 one bedroom units
of approximately 700 square feet, 40 two bedroom standard units of
approximately 1,016 square feet, and 36 two bedroom roommate units of
approximately 1,083 square feet. The weighted average unit size is 928 square
feet. Rental rates range from $605 to $795 per month, with a weighted average
monthly rent of $702 per unit and $0.76 per square foot. Bentley Place has
averaged approximately 98% occupancy since stabilization in September 1993.
The Community was 100% occupied on December 31, 1995.
Bentley Place is presently unencumbered by a loan. On April 2, 1996, the
Company received a commitment from Nationwide Life Insurance Company for a
$4,100,000 loan to be secured by Bentley Place. The loan will have a fixed
interest rate of 7.10% per annum for a ten-year term. The closing is expected
to occur not later than September 30,
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1996, and the loan costs are estimated to be approximately $73,000. The
Community is subject to local real estate taxes that in 1995 were $97,030;
there can be no assurances that real estate or other taxes will not be
increased or imposed in future years.
THORNTON ROAD/I-20 AREA - CRESTMARK COMMUNITY (TO BE ACQUIRED)
Background. As disclosed in Part I, Item 1, Description of Business -
General, the Operating Partnership will in the near future begin soliciting the
consent of a majority in interest of the limited partners of The Crestmark
Club, L.P. ("Crestmark, L.P.") for the merger of Crestmark, L.P. into the
Operating Partnership in exchange for 746,649 Units valued at $9.75 per Unit,
or $7,279,831 in the aggregate. The Operating Partnership anticipates that
this merger will be completed in June 1996, although if the Operating
Partnership does not obtain the consent of a majority in interest of the
limited partners of Crestmark, L.P. as expected, the merger will not take place
and the Operating Partnership will accordingly not acquire the Crestmark
Community and the 8.8 adjacent acres of property on which the Company expects
to develop an additional 86-unit second phase of Crestmark.
Douglas County. Douglas County, one of the 18 counties in the Atlanta
metropolitan statistical area, is located west of Atlanta and encompasses 202
square miles. The county is surrounded by Fulton, Cobb, Carroll and Paulding
Counties, with the Chattahoochee River as its southeastern border. Its
population was estimated at 85,000 in 1995, an increase of 20% since 1990.
Douglas County's economic base is diversified, having generated approximately
28,000 jobs in 1995. Employment has been growing at an annual rate of nearly
12% over the last 10 years. Douglas County benefits from its accessibility to
downtown Atlanta to the east via I-20 and to Hartsfield International Airport
to the southeast via Thornton Road/Camp Creek Parkway. Just across the county
line to the east lies the Fulton Industrial District, the Southeast's largest
contiguous industrial park. The Fulton Industrial District consists of
54,400,000 square feet of both manufacturing and warehouse space and stretches
six miles north and south along Fulton Industrial Boulevard. It represents 20%
of Atlanta's total inventory of warehouse/industrial space, and an additional
1,000,000 square feet is under construction. There are numerous Fortune 500
companies with representation in the Fulton Industrial District, employing more
than 100,000 people.
Thornton Road/I-20 Area. Thornton Road is the third exit west of I-285 on
I-20 and connects I-20 with Hartsfield International Airport to the southeast
and the significant residential base of West Cobb and Paulding counties to the
north and east. Several office and business parks that total more than
2,000,000 square feet of space and include corporations such as BellSouth,
Mitsubishi, Robert Bosch Corporation, TDK Electronics, and Saab-Scania
contribute to a large employment base of approximately 20,000 people within the
Thornton Road area. Restaurant, hospitality and retail conveniences support
the existing employment and residential base in the Thornton Road corridor.
The area also benefits from its close proximity to the Fulton Industrial
District as well as the Six Flags Over Georgia amusement park, both of which
are less than three miles away. At the northwest corner of the Thornton
Road/I-20 interchange is the Columbia/HCA Parkway Medical Center, a 320-bed
acute care medical facility that employs approximately 600 people.
Crestmark. Crestmark, which was completed in 1993, consists of 9 three
and four story stacked stone and wood sided buildings located on a 23.4 acre
site on Thornton Road, approximately one-half mile north of its intersection
with I-20 in Douglas County. In 1993, this 248-unit garden apartment community
received two Aurora Awards from the Southeast Builders' Conference, one for
"Best Landscape Design in the Southeast" and another for "Best Recreational
Facility in the Southeast."
The Crestmark Community, with its traditional award-winning architecture
and landscaped grounds, features a large 14,000 square foot clubhouse with a
club room, full kitchen, fitness center and aerobics room, a business center
and conference room, two lighted tennis courts, multi-station playground,
walking and jogging trail, free-form swimming pool, stone paver pool deck and a
whirlpool spa. In addition to the upscale amenities, Crestmark offers such
interior features as nine foot ceilings, crown and chair-rail molding, pickled
wood cabinetry in the kitchen and baths, marble vanity tops, fireplaces,
vaulted and trey ceilings, Palladian and bay windows in select units, designer
wallcoverings and full laundry rooms with washer and dryer connections.
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<PAGE> 26
Crestmark has a variety of floorplans including 29 one bedroom standard
units with 704 square feet, 50 one bedroom deluxe units with 816 square feet,
33 two bedroom standard units with 1,005 square feet, 86 two bedroom deluxe
units with 1,110 square feet, and 50 three bedroom units with 1,295 square
feet. The weighted average unit size is 1,027 square feet. Rental rates range
from $600 to $890 per month, with a weighted average monthly rent of $747 per
unit and $0.73 per square foot. Crestmark has averaged approximately 99%
occupancy since stabilization in April 1994. The Community was 99% occupied on
March 31, 1996.
Crestmark is presently encumbered by a loan that will mature on May 1,
2001 in the approximate amount of $9,124,000. The interest rate on this loan
is fixed at 7.50% per annum, and monthly payments of principal and interest of
$71,999 are based on a 28-year amortization schedule. The loan was obtained on
April 27, 1994. The Community is subject to local real estate taxes which in
1995 were $162,731; there can be no assurances that real estate or other taxes
will not be increased or imposed in future years.
The 8.8 acre tract of undeveloped land adjacent to Crestmark is currently
encumbered by two secured loans totaling approximately $1,735,500 that the
Operating Partnership anticipates that it will repay in full shortly after the
closing of the Crestmark, L.P. merger. The first priority secured loan is owed
to NationsBank, N.A. (South) in the estimated amount at closing of $323,171.
The second priority secured loan is owed to Mr. Roberts in the estimated amount
at closing of $1,412,329. The Operating Partnership anticipates that it will
also repay, shortly after the closing, $121,423 owed to Roberts Construction
for change orders from the original construction and $28,077 owed to Roberts
Management for start-up costs.
86-Unit Second Phase of Crestmark. The Company plans to pursue
development of a second phase of 86 apartment units on 8.8 acres adjacent to
the existing Crestmark Community. Construction of this 86-unit expansion is
expected to be completed in 1997. The second phase will contain 19 one bedroom
standard units of approximately 901 square feet each, 21 two bedroom standard
units of approximately 1,223 square feet each, 22 two bedroom roommate units of
approximately 1,283 square feet each, and 24 three bedroom units of
approximately 1,437 square feet each. The anticipated monthly rental rates are
$660 for the one bedroom standard units, $745 for the two bedroom standard
units, $795 for the two bedroom roommate units, and $905 for the three bedroom
units, resulting in a weighted average monthly rent of $784 per unit and $0.64
per square foot. Roberts Properties is developing the second phase of
Crestmark for the Operating Partnership and may, at its discretion, change the
unit mix or site plan, provided that any material change must be approved by
the Company's Board of Directors. Roberts Properties expects to complete the
process of having the property rezoned from commercial to multifamily use in
the near future.
The architectural style, land planning, landscaping and amenities of the
second phase of Crestmark are expected to be similar to those of the Company's
other Communities, and the enlarged Crestmark Community will continue to be
managed by Roberts Management. A second free-form swimming pool will be added
to the existing amenities at Crestmark.
The construction of the second phase of Crestmark will be completed
pursuant to a fixed price construction contract with Roberts Construction in
the amount of $3,795,015. Assuming that the second phase is built to the
initial contract specifications, any excess construction costs not approved by
the Operating Partnership as a change order will be borne by Roberts
Construction, and if Roberts Construction's costs are lower than anticipated,
its savings will constitute additional profit. Any adverse soil conditions
that may be encountered and any stormwater management facilities that may be
required other than the existing detention pond will not be covered by the
fixed price construction contract, and any costs associated with these
conditions will be borne by the Operating Partnership. If, during the
construction of the second phase, the Operating Partnership upgrades the
contract plans and specifications from those agreed to initially, such change
orders may increase the amount paid to Roberts Construction. The Company
anticipates that there will be approximately $189,750, or approximately 5% of
the contract price, in net profit to Roberts Construction on the construction
contract.
The development and construction of the second phase will be funded from
the Company's cash and/or from a construction loan to be secured by the second
phase.
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<PAGE> 27
ST. SIMONS ISLAND - WINDSONG COMMUNITY
St. Simons Island. St. Simons Island, located in Glynn County on the
southeast coast of Georgia, is approximately 75 miles north of Jacksonville, 85
miles south of Savannah, 275 miles southeast of Atlanta, and less than four
miles east of the city of Brunswick. Glynn County encompasses 439 square miles
and contains the "Golden Isles of Georgia," including St. Simons Island, Sea
Island, Jekyll Island, Little St. Simons Island, and Cumberland Island.
Although its tropical climate and coastal environment are inviting tourist
attractions, large companies such as Georgia Pacific, Hercules, Jered Brown
Brothers, Rich SeaPak and King & Prince Seafood have facilities in Glynn County
and are the major employers in Brunswick and on St. Simons Island. The
population in both Glynn County and on St. Simons Island has been increasing
steadily since 1990, when it totaled 62,496 and 13,784, respectively.
According to the Brunswick/Glynn County Development Authority, the 1994
estimated population was 69,120 for Glynn County and 18,000 for St. Simons
Island. Tourism is Glynn County's largest employer and in 1994 supported
approximately 52% of all employment in Glynn County. The Golden Isles of
Georgia are home to such high-end resorts as the Cloister, the King & Prince
Beach Resort, and the Sea Palms Golf & Tennis Resort. Visitors to St. Simons
Island will find a wide range of accommodations, including seven hotels and
more than 50 restaurants in the quaint island village.
Windsong. Windsong, which was constructed in two phases in 1972 and 1974,
is situated on approximately 16 wooded acres and consists of 21 two story
buildings containing a total of 232 apartment units. It is located on Mallory
Street approximately two miles west of the Atlantic Ocean coastline. The
Community surrounds an approximately one acre lake upon which a 1,600 square
foot clubhouse with an exterior deck overlooking the lake is located.
The two story buildings within the Community are wood-sided, featuring
large private patios or balconies. With a mixture of townhouse and garden
apartments, Windsong offers either private entries at the building fronts or
through breezeways. Each of the units offers designer wallcoverings and fully
equipped kitchens including frost-free refrigerators, built-in dishwashers and
washer/dryer connections. The on-site amenities include two swimming pools,
two tennis courts, a heated jacuzzi pool, and a children's playground, as well
as picnic areas around the lake. The Company is planning to improve the
amenities at Windsong, including constructing a new clubhouse, pool, laundry
room, and exercise facility; these improvements, if implemented, are
anticipated to cost approximately $500,000, which the Company will fund from
working capital.
Windsong has a variety of floorplans, including 56 one bedroom units of
approximately 695 square feet, 128 two bedroom garden and townhouse plans
ranging from 920 to 1,178 square feet, and 48 three bedroom garden and
townhouse plans ranging from 1,150 to 1,386 square feet. The weighted average
unit size is 973 square feet, and rental rates range from $525 to $650 per
month, with a weighted average rent per square foot of $0.60. At December 31,
1995, Windsong was 98% occupied and had a weighted average monthly rent of $580
per unit.
Windsong is presently encumbered by a loan that will mature on March 1,
2000 in the approximate amount of $3,734,000. The interest rate on this loan
is fixed at 9.0% per annum, and based on a 22-year amortization schedule, the
monthly payment is $37,918. The loan was originally obtained on January 28,
1993. The loan may not be prepaid on or prior to February 1, 1998 but may be
prepaid in full thereafter upon payment of a premium equal to the greater of
(a) 1% of the then outstanding principal balance, or (b) an amount calculated
according to a yield maintenance formula. The loan may be prepaid without
payment of a premium during the last 90 days prior to its maturity. The
Community is subject to local real estate taxes that in 1995 were $69,831;
there can be no assurance that real estate or other taxes will not be increased
or imposed in future years.
The table on the following page summarizes the amenities of each of the
Communities.
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<PAGE> 28
SUMMARY OF AMENITIES OF THE COMMUNITIES
<TABLE>
<CAPTION>
PATIO, WASHER CLUB-HOUSE
PORCH & DRYER GARDEN FIRE- VAULTED SWIMMING FITNESS
COMMUNITY BALCONY HOOK-UPS TUBS PLACES(*) CEILINGS(*) POOL CENTER
--------- ------- -------- ------ --------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Existing Communities:
Windsong Yes Yes No No No Yes-2 Yes(1)
Plantation Trace Yes Yes No Yes Yes Yes Yes
River Oaks Yes Yes Yes Yes Yes Yes Yes
Rosewood Plantation Yes Yes Yes No No Yes Yes
Preston Oaks Yes Yes Yes No Yes Yes Yes
Highland Park Yes Yes Yes No Yes Yes Yes
Laurelwood Yes Yes No No No Yes Yes(1)
Bentley Place Yes Yes Yes No Yes Yes Yes
Crestmark Yes Yes Yes Yes Yes Yes Yes
Communities Under Construction or to Be Developed:
Holcomb Bridge Yes Yes Yes No Yes Yes Yes
Second Phase
of Plantation Trace Yes Yes Yes No Yes Yes Yes(2)
Second Phase of Crestmark Yes Yes Yes No Yes Yes No
Howell Ferry Yes Yes Yes No Yes Yes Yes
</TABLE>
<TABLE>
<CAPTION>
SAND
WHIRL- CAR TENNIS VOLLEY- PLAY- LAUNDRY
COMMUNITY POOL WASH COURT(S) BALL GROUND ROOM OTHER
--------- ------ ---- -------- ------- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Existing Communities:
Windsong Yes No Yes-2 No Yes Yes Lake
Plantation
Trace Yes Yes Yes-2 Yes Yes Yes Lake
River Oaks Yes Yes Yes-2 Yes Yes Yes Riverfront,
nature preserve
Rosewood Lake,
Plantation No Yes Yes-1 No Yes Yes nature preserve
Preston Oaks No Yes Yes-1 No No Yes
Highland Park No Yes Yes-1 No Yes Yes
Laurelwood No No No No Yes Yes
Bentley Place Yes No No No No Yes
Crestmark Yes Yes Yes-2 No Yes Yes Nature preserve,
jogging trail
Communities Under Construction or to Be Developed:
Holcomb Bridge No Yes No No No Yes
Second Phase of Riverfront, lake,
Plantation Trace No No No No No No nature preserve
Second Phase
of Crestmark No No No No No No
Howell Ferry No Yes Yes-2 No Yes Yes Nature preserve
</TABLE>
- ----------------------------
(*) In select units
(1) Clubhouse only, no fitness center
(2) Fitness center, no clubhouse
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<PAGE> 29
POSSIBLE ADDITIONAL COMMUNITIES TO BE DEVELOPED
From time to time Roberts Properties plans the development of other
apartment communities to be located on property owned by Roberts Properties or
other affiliates of Mr. Roberts, or on property that one of such entities is
interested in acquiring. Mr. Roberts may elect to raise the required equity
for any such community by syndicating a limited partnership. Alternatively,
the Company may seek to raise the equity required to purchase and develop the
community by selling Shares. If Mr. Roberts elects to raise equity through a
limited partnership, Mr. Roberts may seek to cause such partnership to be
merged into the Operating Partnership at a later date. Such a transaction
would require the consent of a majority in interest of the limited partners of
such partnership and of a majority of the disinterested members of the
Company's Board of Directors, and no assurances can be given regarding whether
Mr. Roberts will ultimately determine to seek a merger in that manner, or
whether such a merger would in fact be approved by the requisite majority in
interest of limited partners in such partnership and by a majority of the
disinterested members of the Board.
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
effect on the Company's ability to lease the Company's apartments at the rental
rates anticipated, and no assurances can be given regarding the development of
additional competing multifamily communities in the future. The remainder of
this section summarizes the competition for each of the Communities. The
following information reflects the study by Roberts Properties of apartment
complexes in each submarket that are believed by the Company to be closely
competitive with the Community or Communities within such submarket. This
section includes certain summary information obtained from various sources -
including developers and real estate brokers, as well as on-site visits -
regarding those apartment communities. Although Roberts Properties has
attempted to verify such information and believes that it is substantially
accurate on the whole, information regarding a particular community may
incorrect due to the sources relied upon or erroneous information supplied by
competitors.
Windsong. The St. Simons market area, which the Company considers to be
all of St. Simons Island and the City of Brunswick, currently consists of 13
multifamily communities (including Windsong) containing 1,485 existing
apartment units. Of the 13 existing communities in the area, 12 were built
between 1972 and 1985. The remaining community, Glynn Place in Brunswick, was
built in 1993. The Company believes that Windsong draws residents from all of
the other communities located in the market area, but only two, Island Square
and Island Retreat, compete closely with Windsong due to their location on St.
Simons Island. In addition to the 13 existing communities in the market area,
two multifamily communities totaling approximately 250 units are planned for
construction on St. Simons Island. Because these communities will be new and
will offer modern amenities not found at Windsong, their rental rates will be
higher and they will compete closely with Windsong. The proposed site plans
for both new communities must be reviewed and approved by the Glynn County
Board of Commissioners. If approved, construction on both communities is
anticipated to begin in 1996.
Plantation Trace, River Oaks, and Howell Ferry. The Duluth market area,
which the Company considers to be a two mile radius from these Communities,
currently consists of 13 multifamily communities (including River Oaks and
Plantation Trace) containing 3,604 existing apartment units. (Although the
Bridgewater apartment community - which was previously developed and sold by an
affiliate of Mr. Roberts - is located more than two miles from Plantation
Trace, it is also included in the Duluth market area described herein because
it offers units with attached garages and its architecture and amenities are
similar to Plantation Trace and its Phase II.) Of the 13 existing communities
in the area, six were built between 1983 and 1988. The remaining seven
communities - including Plantation Trace and River Oaks - have been built since
1988. Due to the quality of construction, age of the communities, type of
amenities, resident profiles and rental rates, the Company believes that only
the other five communities built since 1988 - Wesley Plantation (both Highlands
and Meadows), Tree Summit, Bridgewater and Bristol Park - are in direct
competition with Plantation Trace and River Oaks and will be in direct
competition with Howell Ferry.
27
<PAGE> 30
In addition, four multifamily communities totaling approximately 1,300
units are either planned or currently under construction in the Duluth market
area. The Company believes that as these 1,300 new units are completed, they
will compete directly with Plantation Trace, River Oaks, and Howell Ferry,
which could adversely affect the operating results for those Communities.
Rosewood Plantation and Holcomb Bridge. The Peachtree Corners multifamily
market area, which is a three mile radius from these two Communities, currently
consists of 21 multifamily communities (including Rosewood Plantation) totaling
6,276 apartment units. Of the 21 existing communities in the market area, only
two, Rosewood Plantation and Wynfield Trace, have been built since 1988. The
remaining communities range from approximately seven to twenty-two years of
age. The Company believes that Rosewood Plantation draws residents from all of
the other 20 communities located in the market area but that only five of the
20 communities compete closely with Rosewood Plantation, and will compete
closely with Holcomb Bridge. In addition to the 6,276 existing apartment
units, another multifamily apartment community, AMLI at River Exchange,
totaling 192 units, is currently under construction within one-half mile of
Rosewood Plantation. Upon its anticipated completion in December 1996, this
community will also compete with Rosewood Plantation and Holcomb Bridge.
Preston Oaks. The Company believes that the north central Perimeter
multifamily market area is a two mile radius around this Community. It is
generally bounded by Roswell Road to the west, Ashford Dunwoody Road to the
east, Spalding Drive to the north and Glenridge Drive to the south, and it
currently consists of 17 multifamily communities (excluding Preston Oaks)
totaling 4,472 apartment units. Of the 17 existing communities in the market
area, only four were built prior to 1983, totaling 756 apartment units. The
remaining 13 communities totaling 3,716 units range from approximately one to
five years of age. The Company believes that Preston Oaks competes with all 17
existing communities. In addition to the 4,472 existing apartment units,
approximately 1,600 units in six communities are either planned or are
currently under construction. Upon completion, these six communities, along
with the 17 existing communities, will compete with Preston Oaks.
Highland Park. The North Springs multifamily market area is an
approximately two mile radius around this Community. It is generally bounded
by the Chattahoochee River to the north and west, Georgia 400 to the east and
Dalrymple Road to the south, and currently consists of 31 communities
(excluding Highland Park) totaling 9,492 apartment units. Of the 31 existing
communities in the market area, only two have been built since 1989. The
remaining communities range in age from five years to over 20 years. The
Company believes that Highland Park will draw residents from all of the 31
communities located in the market area, but that only eight of the 31
communities will compete closely with Highland Park. In addition to the 31
existing communities in the market area, three communities totaling
approximately 800 units are currently under construction. Upon completion,
these three communities will also compete with Highland Park.
Laurelwood. The East Cobb/Delk Road multifamily submarket, which the
Company considers to be within a one mile radius of Laurelwood, currently
consists of 14 multifamily communities (including Laurelwood) containing 4,429
existing apartment units. All of the 14 existing communities in the area were
built between 1969 and 1986. Two of these communities, Stonemill and Park
Knoll, were recently renovated on the exterior and interior of each unit.
Although 22 and 12 years old, respectively, each community has been upgraded
with modern features and amenities. Following the completion of the planned
renovation at Laurelwood, the Company believes it will draw residents from all
of the communities in the submarket but will compete closely with only 10 of
the 14 communities due to their age, quality of construction and resident
profile.
Bentley Place. The Pleasantdale multifamily market area, which is a two
mile radius around Bentley Place, currently consists of 26 multifamily
communities (including Bentley Place) totaling 6,917 apartment units. Of the
26 existing communities in the market area, only three (Bentley Place, Arbor
Mill and Shadow Lake) have been built since 1989, totaling 619 apartment units.
The remaining properties range from approximately four to 20 years old. The
Company believes that Bentley Place draws residents from all of the other 25
properties located in the market area. However, based upon a comparison of
factors such as quality of features, architecture, number and type of
amenities,
28
<PAGE> 31
construction quality and age of community, the Company believes that only seven
of the 26 communities compete closely with Bentley Place. Each of these seven
properties was constructed between 1986 and 1990.
Crestmark. The Thornton Road multifamily market area is an approximately
two mile radius around the Crestmark Community. It is generally bounded by
I-20 to the south, Blairs Bridge Road to the east, and Georgia Highway 78 to
the north and west, and it currently consists of six communities (including
Crestmark) totaling 2,032 apartment units. Of the six existing communities in
the market area, only three have been built since 1990. The remaining
communities range in age from six years to nine years. Of the 2,032 units
currently in the market, approximately 41% are one-bedroom units, 48% are
two-bedroom units and 11% are three-bedroom units. The Company believes that
Crestmark will draw residents from all of the five other communities located in
the market area, but due to their amenities, quality of construction and
resident profile, only three of the five other communities will compete closely
with Crestmark.
OTHER REAL ESTATE ASSETS
In addition to the Communities, the Operating Partnership owns two retail
centers totaling 15,698 square feet. The Shoppes of Plantation is a 7,350
square foot retail center located on Pleasant Hill Road in front of Plantation
Trace on a .85 acre parcel. The Shoppes of River Oaks is a 8,348 square foot,
one story office/retail building located on a .86 acre parcel on Pleasant Hill
Road in front of River Oaks and is in its lease-up phase. (The retail centers
together compose less than 2% of the Company's assets and generated less than
2% of its gross revenues for 1995.)
ENVIRONMENTAL AND OTHER REGULATORY MATTERS
Under various federal, state and local laws and regulations, an owner of
real estate is liable for the costs of removal or remediation of certain
hazardous or toxic substances on such property. Such laws often impose such
liability without regard to whether the owner knew of, or was responsible for,
the presence of such hazardous or toxic substances. The costs of remediation
or removal of such substances may be substantial, and the presence of such
substances, or the failure to promptly remediate such substances, may adversely
affect the owner's ability to sell such real estate or to borrow using such
real estate as collateral. In connection with its ownership and operation of
the Communities and its other real estate assets, the Operating Partnership may
be potentially liable for (a) such remediation and removal costs, and (b)
damages to persons or property arising from the existence or maintenance of
such hazardous or toxic substances.
All of the Communities and the other real estate assets have been subject
to Phase I or similar environmental assessments that are intended to discover
information regarding, and to make a preliminary evaluation of the
environmental condition of, the surveyed properties and surrounding properties.
The Phase I assessments of Windsong and Laurelwood revealed the existence of
asbestos containing materials that in their current state require no removal.
The Phase I assessments recommended, and the Company has implemented, an
operations and maintenance program that outlines the procedures to be followed
in the event that such materials were to be disturbed. The Phase I assessment
of Bentley Place revealed an adjacent site that was listed on the regulatory
lists of the Georgia Environmental Protection Division ("EPD"). The Phase I
assessment recommended, and the Company performed, additional environmental
investigation which determined that a petroleum product release was discovered
in 1990 on property adjacent to Bentley Place. Fina Oil & Chemical Company
("Fina"), the adjacent property owner, repaired the source of the release in
1990. Since that time, Fina has submitted a proposed corrective action plan to
the EPD. The corrective action plan, together with other submittals by Fina to
the EPD, indicate that Fina has begun to remove the released product. The
semi-annual monitoring reports on file at the EPD reveal the possibility that
petroleum constituents have migrated via groundwater onto Bentley Place. The
Company has been advised by its attorneys and environmental consultants that
Fina is responsible for cleaning up the release to the extent required by the
EPD regulations. Also, the Company's environmental consultants have informed
the Company that despite a possible groundwater impact at Bentley Place, no
threat to human health or safety is suggested. The Company's environmental
consultants intend to continue to monitor the EPD files to ensure compliance by
Fina with the EPD regulations.
29
<PAGE> 32
The Phase I assessments of the other Communities and other real estate
assets have not revealed any environmental liability that the Company believes
would have material adverse effect on the Operating Partnership's business,
assets or results of operations, nor is the Company aware of any such
liability. Nevertheless, it is possible that these assessments did not reveal
all environmental liabilities or that there are material environmental
liabilities of which the Company is unaware.
COSTS OF COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT AND SIMILAR LAWS
Under the American with Disabilities Act of 1990 (the "ADA"), all places
of public accommodation are required to meet certain federal requirements
related to access and use by disabled persons. These requirements became
effective in 1992. Although management of the Company believes that the
Communities are substantially in compliance with present requirements of the
ADA, final regulations under the ADA have not yet been promulgated and the
Company may incur additional costs of complying with the ADA. A number of
additional federal, state and local laws exist which also may require
modifications to the Communities, or restrict certain further renovations to
them, with respect to access by disabled persons. For example, the Fair
Housing Amendments Act of 1988 (the "FHAA") requires apartment communities
first occupied after March 13, 1990 to be accessible to the handicapped.
Noncompliance with the FHAA could result in the imposition of fines or an award
of damages to private litigants. The Company believes that the Communities
that are subject to the FHAA are in compliance with such law.
Additional legislation may impose further burdens or restrictions on
owners with respect to access by disabled persons. The ultimate amount of the
cost of compliance with the ADA or such legislation is not currently
ascertainable, and, while such costs are not expected to have a material effect
on the Company, such costs could be substantial. Limitations or restrictions
on the completion of certain renovations may limit application of the Company's
investment strategy in certain instances or reduce overall returns on the
Company's investments.
INSURANCE
The Company carries comprehensive liability, fire, extended coverage and
rental loss insurance with respect to all of its existing Communities, with
policy specifications, insured limits and deductibles customarily carried for
similar properties. The Company carries similar insurance with respect to its
other properties, but with such exceptions as are appropriate given the
undeveloped nature of certain of these properties. In the opinion of
management, the Communities and the Company's other properties are adequately
covered by insurance. There are, however, certain types of losses (such as
losses arising from acts of war) that are not generally insured because they
are either uninsurable or not economically insurable. Should an uninsured loss
or a loss in excess of insured limits occur, the Company could lose its capital
invested in a property, as well as the anticipated future revenues from such
property, and would continue to be obligated on any mortgage indebtedness or
other obligations related to the property. Any such loss would adversely
affect the Company.
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES
The following is a discussion of investment policies, financing policies,
conflict of interest policies and policies with respect to certain other
activities of the Company and the Operating Partnership. The policies with
respect to these activities have been determined by the Company's Board of
Directors and may be amended or revised from time to time at the discretion of
the Board without a vote of the shareholders of the Company or any vote of the
partners of the Operating Partnership, except that (i) the Company cannot
change its policy of holding its assets and conducting its business exclusively
through the Operating Partnership without amending the Operating Partnership
Agreement (which will generally require the consent of the holders of a
majority in interest of the limited partners in the Operating Partnership
including, if applicable, the Company), and (ii) changes in certain policies
with respect to conflicts of interest must be approved by a majority of the
independent directors and otherwise be consistent with legal requirements.
30
<PAGE> 33
INVESTMENT POLICIES
Investments in Real Estate or Interests in Real Estate. The Company
conducts all of its investment activities through the Operating Partnership and
will do so for so long as the Operating Partnership exists. (The Agreement of
Limited Partnership of the Operating Partnership provides that it is not
required to be dissolved until 2093.) The Company's investment objectives are
to achieve stable cash flow available for distributions and, over time, to
increase cash flow and portfolio value by (i) continuing to develop multifamily
apartment communities for long-term ownership; (ii) acquiring additional
multifamily apartment communities that will produce additional cash flow; and
(iii) to a significantly lesser degree, acquiring and/or developing retail
centers and other income-producing real estate. The Company's policy is to
acquire or develop assets where the Company believes that favorable investment
opportunities exist based on market conditions at the time of the investment.
The Company expects to pursue its investment objectives primarily through
the direct ownership of properties by the Operating Partnership, although, as
discussed below, the Company may also pursue indirect property ownership
opportunities. The Company currently intends to acquire or develop multifamily
apartment communities primarily in the Atlanta metropolitan area but may pursue
the acquisition or development of multifamily apartment communities in other
parts of the Southeast or in other areas of the United States. Future
development or investment activities will not be limited by the governing
documents of the Company and the Operating Partnership to any geographic area,
product type or specified percentage of the Company's assets.
Possible Acquisition of Communities Developed by Mr. Roberts or His
Affiliates. Mr. Roberts and Roberts Properties have been engaged in the
development of residential and commercial real estate since the early 1970s,
and Mr. Roberts expects that he and Roberts Properties will continue to engage
in real estate development. Provided that any transaction or agreement must
comply with the policies discussed under "Conflict of Interest Policies," the
Company and/or the Operating Partnership may engage in transactions of various
types with Mr. Roberts, Roberts Properties and/or other affiliates of Mr.
Roberts in connection with the development or acquisition of real estate. Such
transactions may include: hiring Mr. Roberts or Roberts Properties to develop
real estate under a fee arrangement; acquiring undeveloped property from Mr.
Roberts or his affiliates for future development; or acquiring from Mr. Roberts
or his affiliates partially or completely constructed properties, whether in
their lease-up phase or already leased-up. The particular terms of any
arrangement have not been determined, and other than the Communities now under
development as described above, no specific arrangement of such type is
presently contemplated.
Securities of or Interest in Persons Primarily Engaged in Real Estate
Activities and Other Issuers. Subject to the percentage of ownership
limitations and gross income tests necessary for REIT qualification under the
Internal Revenue Code, the Company and the Operating Partnership also may
invest in securities of other entities engaged in real estate activities or
invest in securities of other issuers, including investments by the Company and
the Operating Partnership for the purpose of exercising control over such
entities. No such investments will be made, however, unless the Board of
Directors determines that the proposed investment would not cause the Company
or the Operating Partnership to be an "investment company" within the meaning
of the Investment Company Act of 1940, as amended. The Company or the
Operating Partnership may acquire all or substantially all of the securities or
assets of other REITs or similar entities where such investments would be
consistent with the Company's investment policies. The Company does not
currently intend to invest in the securities of other issuers except in
connection with acquisitions of indirect interests in properties, such as the
acquisition of limited partnership interests in a single asset limited
partnership.
No Investments in Mortgages. The Company does not own any mortgages and
does not currently intend to invest in mortgages or to engage in originating,
servicing, or warehousing mortgages.
FINANCING POLICIES
The organizational documents of the Company and the Operating Partnership
impose no limits on the amount of indebtedness they may incur. The Company has
an initial informal policy that the Company and the Operating Partnership will
not incur indebtedness in excess of 75% of what the Board of Directors believes
is the fair market value
31
<PAGE> 34
of the Operating Partnership's assets at any given time. The Company may,
however, from time to time re-evaluate its borrowing policies in light of then
current economic conditions, relative costs of debt and equity capital, market
value of the Operating Partnership's real estate assets, growth and acquisition
opportunities and other factors. Modification of such policy may adversely
affect the interests of the shareholders of the Company.
To the extent that the Board of Directors determines to seek additional
capital, the Company may raise such capital through additional equity
offerings, debt financing or retention of cash flow (subject to provisions in
the Internal Revenue Code requiring the distribution by a REIT of a certain
percentage of taxable income and taking into account taxes that would be
imposed on undistributed taxable income), or a combination of these methods.
As long as the Operating Partnership is in existence, the net proceeds of all
equity capital raised by the Company will be contributed to the Operating
Partnership in exchange for Units or other interests in the Operating
Partnership.
The Company has not established any limit on the number or amount of
mortgages that may be placed on any single property or on the Operating
Partnership's portfolio as a whole.
CONFLICT OF INTEREST POLICIES
The Board of Directors is subject to certain provisions of Georgia law
that are designed to eliminate or minimize certain potential conflicts of
interest. There can be no assurances, however, that these policies always will
be successful in eliminating the influence of such conflicts, and if they are
not successful, decisions could be made that might fail to reflect fully the
interest of all shareholders.
Pursuant to Georgia law, each director will be subject to restrictions on
misappropriation of corporate opportunities to himself or his affiliates
learned of solely as a result of his service as a member of the Board of
Directors. In addition, under Georgia law, a transaction effected by the
Company or any entity controlled by the Company (including the Operating
Partnership) in which a director or certain related persons and entities of the
director has a conflicting interest, as defined thereunder, of such financial
significance that it would reasonably be expected to exert an influence on the
director's judgment may not be enjoined, set aside or give rise to damages on
the grounds of such interest if (a) the transaction is approved, after
disclosure of the interest, by the affirmative vote of a majority of the
disinterested directors, or by the affirmative vote of a majority of the votes
cast by disinterested shareholders, or (b) the transaction is established to
have been fair to the Company. The Board of Directors has adopted a policy
that all such conflicting interest transactions must be authorized by a
majority of the disinterested directors, but only if there are at least two
directors who are disinterested with respect to the matter at issue.
CERTAIN POLICIES WITH RESPECT TO OTHER ACTIVITIES
The Company and the Operating Partnership have authority to offer their
securities and to repurchase and otherwise reacquire their securities, and they
may engage in such activities in the future. The Company presently anticipates
that it will elect to issue Shares to holders of Units in the Operating
Partnership upon the exercise of the Unitholders' rights of redemption. In the
future, the Company and the Operating Partnership may make loans to joint
ventures in which they participate in order to meet working capital needs. The
Company and the Operating Partnership have not engaged in trading,
underwriting, agency distribution or sale of securities of other issuers and do
not intend to do so. The Company and the Operating Partnership intend to make
investments in a manner such that they will not be treated as an investment
company under the Investment Company Act of 1940, as amended.
At all times, the Company intends to make investments in a manner so as to
be consistent with the requirements of the Internal Revenue Code for the
Company to qualify as a REIT unless, because of changing circumstances or
changes in the Internal Revenue Code (or in Treasury Regulations), the Board of
Directors decides that it is no longer in the best interests of the Company to
qualify as a REIT.
32
<PAGE> 35
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth the beneficial ownership of Units and
Shares of Common Stock at May 7, 1996, for (i) each person who holds more than
a 5% interest in the Operating Partnership or the Company, (ii) directors of
the Company, (iii) the executive officers of the Company, and (iv) the
directors and executive officers of the Company as a group. Unless otherwise
indicated in the footnotes, all of such interests are owned directly, and the
indicated person or entity has sole voting and investment power. (Addresses
are provided only for 5% owners.)
<TABLE>
<CAPTION>
Percent
Percent Percent of All
Name of Number of Units of All Number of Shares of Shares
Beneficial Owner Beneficially Owned Units(1) Beneficially Owned Shares(2) & Units(3)
---------------- ------------------ -------- ------------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Charles S. Roberts(4)
8010 Roswell Road
Suite 120
Atlanta, Georgia 30350 119,714 1.9% 418,054 10.1% 8.7%
George W. Wray, Jr.(5)
6235 Weatherly Drive, N.W.
Atlanta, Georgia 30328 159,834 2.6% 151,852 3.7% 5.0%
James M. Goodrich(6)
524 Manor Ridge Drive
Atlanta, Georgia 30305 157,240 2.5% 59,797 1.4% 3.5%
Penelope Goodrich(7)
524 Manor Ridge Drive
Atlanta, Georgia 30305 161,960 2.6% 89,768 2.2% 4.1%
Ben A. Spalding(8) 14,655 (*) 2,957 (*) (*)
Dennis H. James 2,917 (*) 8,151 (*) (*)
Wm. Jarell Jones - - 2,917 (*) (*)
Charles R. Elliott - 5,017 (*) (*)
-------
All Directors and
Executive Officers as a Group:
(7 persons)(9) 454,360 7.3% 648,745 15.7% 17.8%
</TABLE>
- -----------------------------
(*)Less than 1%.
(1) Represents the number of Units held by the person as a percentage of
the total number of Units outstanding (6,213,044 Units) assuming none of the
Units is redeemed for Shares. Units are not presently redeemable, and the
timing of when the Units will become redeemable is uncertain. Redemption of
Units is subject to certain conditions. Among other restrictions, Units cannot
be redeemed if the redemption would cause the holder to violate the limitations
on ownership contained in the Company's Articles of Incorporation. See Part
II, Item 1, "Market Price of and Dividends on the Registrant's Common Equity
and Other Shareholder Matters - Company's Intentions to Seek to List the Shares
on an Exchange."
(2) Represents the number of Shares held by the person as a percentage of
the total number of Shares outstanding (4,123,413 Shares) assuming none of the
Units is redeemed for Shares.
33
<PAGE> 36
(3) Assumes that all Units held by the person are redeemed for Shares. The
total number of Shares outstanding used in calculating this percentage
(6,213,044 Shares) assumes that all of the Units held by other persons (other
than the 4,123,413 Units held by the Company, which are not redeemable) are
redeemed for Shares.
(4) Includes: 119,714 Units and 415,429 Shares owned directly by Mr. Roberts
and 2,625 Shares owned by Roberts Properties, Inc., all of the outstanding
shares of which are owned by Mr. Roberts.
(5) Includes: 20,781 Units owned directly by Mr. Wray; 136,136 Units and
151,852 Shares owned by a partnership, over which Units and Shares Mr. Wray has
voting and investment power as the managing partner of such partnership; and
2,917 Units owned jointly with his daughter, over which Units he shares voting
and investment power. Does not include 8,497 Units and 15,678 Shares owned by
his wife and 5,058 Shares owned by a trust of which his wife is a co-trustee,
with respect to which Units and Shares Mr. Wray disclaims beneficial ownership.
(6) Includes: 8,950 Units and 14,787 Shares owned directly by Mr. Goodrich;
43,812 Units and 45,010 Shares owned jointly by Mr. Goodrich and Mrs. Penelope
Goodrich, his wife; and 104,478 Units owned by Goodrich Enterprises, Inc., all
of the outstanding shares of which are owned by Mr. and Mrs. Goodrich and by
certain trusts of which Mrs. Goodrich is trustee. Does not include 6,835
Units and 21,379 Shares owned by a trust for the benefit of one son of Mr. and
Mrs. Goodrich and of which Mrs. Goodrich is trustee and 6,835 Units and 23,379
Shares owned by a trust for the benefit of another son of Mr. and Mrs. Goodrich
and of which Mrs. Goodrich is trustee, with respect to which Units and Shares
Mr. Goodrich disclaims beneficial ownership.
(7) Includes: 43,812 Units and 45,010 Shares owned jointly by Mrs. Goodrich
and Mr. James M. Goodrich, her husband; 104,478 Units owned by Goodrich
Enterprises, Inc., all of the outstanding shares in which are owned by Mr. and
Mrs. Goodrich and by certain trusts of which Mrs. Goodrich is trustee; 6,835
Units and 21,379 Shares owned by a trust for the benefit of one son of Mr. and
Mrs. Goodrich and of which Mrs. Goodrich is trustee; and 6,835 Units and
23,379 Shares owned by a trust for the benefit of another son of Mr. and Mrs.
Goodrich and of which Mrs. Goodrich is trustee. Does not include 8,950 Units
and 14,787 Shares owned by Mr. Goodrich, with respect to which Units Mrs.
Goodrich disclaims beneficial ownership.
(8) Excludes 2,917 Units owned by Mr. Spalding's wife, and 19,592 Units
and 7,564 Shares owned by partnerships of which Mr. Spalding's wife is the
managing partner; Mr. Spalding disclaims beneficial ownership of all such Units
and Shares.
(9) Includes 46,729 Units and 45,010 Shares as to which directors share
voting and investment power with another family member; does not include an
aggregate of 44,676 Units and 71,058 Shares beneficially owned by three
directors' wives, as to which Units and Shares such directors disclaim
beneficial ownership.
34
<PAGE> 37
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
DIRECTORS
The following table sets forth certain information with respect to the
directors of the Company. All directors were elected in 1994 other than George
W. Wray, Jr., who was elected in February 1995, and Dennis H. James, who was
elected in June 1995.
<TABLE>
Name Age Position With The Company
- ---- --- -------------------------
<S> <C> <C>
Charles S. Roberts 49 Chairman of the Board, Chief Executive
Officer, President and Director (term
as director expires 1997)
James M. Goodrich 55 Director (term as director expires 1997)
Dennis H. James 49 Director (term as director expires 1996)
Wm. Jarell Jones 48 Director (term as director expires 1996)
Ben A. Spalding 61 Director (term as director expires 1998)
George W. Wray, Jr. 59 Director (term as director expires 1998)
</TABLE>
The following is a biographical summary of the experience of the directors
of the Company:
Charles S. Roberts is Chairman of the Board, Chief Executive Officer,
President, and a Director of the Company. He is also the President and sole
Director of each of the Roberts Companies. In October 1970 he established
Roberts Properties, Inc. to develop, construct and manage real estate.
Beginning in 1988, Mr. Roberts and his affiliates began to focus on developing
upscale multifamily residential communities. Mr. Roberts is a frequent
national speaker on the topic of developing upscale multifamily housing and has
been recognized as a leader in this industry, as communities he and his
affiliates developed have won numerous local, regional and national awards. In
particular, Roberts Properties won the Southeast Builders' Conference Aurora
Award for the "Best Rental Apartment Community in the Southeast" for 1988,
1989, 1992, 1993 and 1994, and in April 1995, Roberts Management was recognized
as the Property Management Company of the Year by the National Association of
Home Builders' National Council of the Multifamily Industry. Through March 21,
1996, entities affiliated with Mr. Roberts sponsored 54 different programs,
raising approximately $89,000,000 in equity and having an aggregate total
capitalization of approximately $230,000,000. These programs consisted of
multifamily residential communities with 2,918 units; approximately 277,307
square feet of other income producing real estate, principally shopping centers
and office buildings; and nine parcels of undeveloped land.
Since the mid-1980s Mr. Roberts has focused his real estate activities on
multifamily residential communities. Since 1986 Mr. Roberts has sponsored 12
different multifamily residential programs which raised a total of $48,595,000
in equity from a total of 2,072 investors. (One limited partnership raised
equity twice, the second time to purchase an adjoining tract and increase the
size of the community.) The programs purchased a total of 13 properties, all
of which were located in the metropolitan Atlanta area, except for the Windsong
Community located on St. Simons Island, Georgia. Twelve of the properties were
undeveloped land when purchased, and the programs developed and constructed
their communities on such properties. Only one existing community, Windsong,
was purchased. The total purchase price of the undeveloped properties was
$20,292,000. Windsong was purchased for $5,400,000. The remaining 11
apartment communities were constructed and developed by programs having a total
capitalization of $143,510,000. Because all of these programs were sponsored
in the form of limited partnerships that were expected to be liquidated upon
the sale of their respective properties, none of the programs had investment
objectives similar to those of the Company. All but four of the communities
have been acquired by the Operating Partnership. One of those four
communities, Crestmark, is expected to be acquired in June 1996, and the
remaining three communities, having a total capitalization of $51,660,000 and
total equity of $14,860,000, were sold to an unrelated third party in May 1995
for a total of $58,150,000. Other than properties acquired by limited
partnerships that have been merged into the Operating
35
<PAGE> 38
Partnership, no program purchased any properties in the past three years. See
Part I, Item 7, Certain Relationships and Related Transactions - Land Sales for
information regarding purchases of properties by the limited partnerships that
have been merged into the Operating Partnership. Assuming the Operating
Partnership acquires Crestmark as expected, all of the multifamily residential
programs sponsored by Mr. Roberts will have either sold their communities to an
independent third party or been merged into the Operating Partnership.
James M. Goodrich, a Director of the Company, is a consulting engineer and
private investor. In 1975 Dr. Goodrich founded Energy Management Associates,
which provides operations and financial planning software and related
consulting services to the electric and gas utility industries. Dr. Goodrich
was Executive Vice President of Energy Management Associates from 1975 until
October 1993 and was a member of its board of directors until 1992, when it was
sold to Electronic Data Systems Corporation. Prior to his experience with
Energy Management Associates, Dr. Goodrich served in the United States Navy for
five years as an officer on the staff of Admiral Hyman Rickover; this position
involved technical support of the design and development of nuclear power
plants for the Navy. Dr. Goodrich holds a Ph.D. in Nuclear Engineering, a
master's degree in Engineering-Economic Systems, and a bachelor of arts degree,
all from Stanford University. He also holds a master's degree in Engineering
Science from George Washington University. Dr. Goodrich has appeared as an
expert witness before numerous state public utility commissions, the Federal
Energy Regulatory Commission, federal courts and arbitration panels.
Dennis H. James, a Director of the Company, is President and Director of
Shoptaw-James, Inc., one of the largest privately owned commercial mortgage
banking firms in the Southeast. 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 President of Shoptaw-James, Inc., he is responsible for
the overall production of the company and its investor relationships, while
sharing in its extended planning and management. He is a director of Main
America Capital, which specializes in financing small income property
mortgages; he is a trustee on the Alexander Tharpe Board, the fund-raising
organization of the Georgia Tech Athletic Association that funds all
scholarships for student athletes at Georgia Tech; and he serves on the
Allstate Life Insurance Company Correspondent 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.
Wm. Jarell Jones, a Director of the Company, is an attorney and has
practiced law with the firm of Wm. Jarell Jones, P.C., in Statesboro, Georgia
since November 1993. 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 January 1989, Mr. Jones became a general partner of Simpson Seacoast, which
along with its affiliates managed and developed real estate and operated a real
estate brokerage and an NASD-member securities firm. 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 Vice Chairman and a director of the Downtown
Statesboro Development Authority.
Ben A. Spalding, a Director of the Company, is the sole shareholder of
Spalding & Company, an NASD member broker-dealer that has, since its founding
by Mr. Spalding in 1980, served as the exclusive broker-dealer for limited
partnerships sponsored by Mr. Roberts. Mr. Spalding served as President of
Spalding & Company from 1980 until 1994; he is presently a registered associate
of Spalding & Company. 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.
George W. Wray, Jr., a Director of the Company, is a private investor and
Senior Partner of the Wray Partnership, a family investment group. 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. Since the July
36
<PAGE> 39
1993 acquisition of International Silver Company by World Crisa Corporation, a
division of Vitro S.A., Mr. Wray has been an independent sales agent for the
successor organization. Mr. Wray has also served as a Vice President of
Spalding & Company, an NASD registered broker-dealer, since 1991 and has been a
registered associate of Spalding & Company since 1983. Mr. Wray holds a
bachelor's degree in Industrial Relations from the University of North Carolina
at Chapel Hill. Mr. Wray also serves as an elder of the Peachtree Presbyterian
Church in Atlanta.
EXECUTIVE OFFICERS
The executive officers of the Company are Mr. Roberts, whose biographical
information is provided above, and Mr. Charles R. Elliott, the Company's
Secretary and Treasurer since its inception and its Chief Financial Officer
since March 1995. Mr. Elliott served as a Director of the Company from October
1994 to February 1995. Mr. Elliott is 42 years old. 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. He holds
an undergraduate degree in Accounting and a master's degree in Finance.
ITEM 6. EXECUTIVE COMPENSATION.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
compensation that was paid in 1994 and 1995 to the Company's executive
officers.
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
Annual Compensation
-------------------
Name and Principal Position Year Salary ($)
- --------------------------- ---- ----------
<S> <C> <C>
Charles S. Roberts 1994 $18,750(1)
Chairman of the Board, Chief
Executive Officer, President and
Director 1995 $75,000
Charles R. Elliott
Secretary, Treasurer and 1994 -
Chief Financial Officer 1995 $45,000(2)
</TABLE>
- --------------------
(1) The Company paid no salaries from its inception on July 22, 1994
through September 30, 1994, and the amount shown was paid in the period October
1, 1994 through December 1, 1994.
(2) Mr. Elliott's employment as Chief Financial Officer commenced on April
1, 1995, and the amount shown is for the period April 1, 1995 through December
31, 1995. He received no other compensation from the Company in 1995.
The Company is not a party to any employment agreements.
COMPENSATION OF DIRECTORS
The Company pays its directors who are not officers of the Company fees
for their services as directors. These directors (presently Messrs. Spalding,
Goodrich, James, Jones and Wray) receive a fee of $500 for attendance (in
person or by telephone) at each meeting of the Board of Directors. Officers of
the Company who are directors (presently Mr. Roberts) are not paid any director
fees. In addition, the Company will reimburse its directors for reasonable
travel and out-of-pocket expenses incurred in connection with their activities
on behalf of the Company.
37
<PAGE> 40
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
GENERAL
The transactions and relationships summarized below are of not only the
Company and the Operating Partnership but also of the following limited
partnerships sponsored by Mr. Charles S. Roberts that have been merged into the
Company and the Operating Partnership since October 1, 1994: Roberts
Properties River Oaks, L.P. ("River Oaks, L.P."); Roberts Properties Rosewood
Plantation, L.P. ("Rosewood Plantation, L.P."); Roberts Properties Preston
Oaks, L.P. ("Preston Oaks, L.P."); Roberts Properties Highland Park, L.P.
("Highland Park, L.P."); Roberts Properties Holcomb Bridge, L.P. ("Holcomb
Bridge, L.P."); Roberts Properties Plantation Trace, L.P. ("Plantation Trace,
L.P."); Roberts Properties-St. Simons, Ltd. ("St. Simons, Ltd."); and Roberts
Properties Bentley Place, L.P. ("Bentley Place, L.P.") (the foregoing
partnerships, together with The Crestmark Club, L.P., which is referred to
herein as "Crestmark, L.P." and which is anticipated to be merged into the
Operating Partnership in June 1996, are sometimes collectively referred to
hereinafter as the "Community Partnerships" and individually as a "Community
Partnership"). Note 7 to the consolidated and combined financial statements of
the Company included herewith provides further detail regarding certain of the
transactions described herein. Mr. Roberts, the Chairman of the Board, Chief
Executive Officer and President of the Company, founded the Company in July
1994 and is its "promoter" for SEC purposes. Mr. Roberts owns, directly or
indirectly, all of the outstanding stock of the Roberts Companies.
GUARANTEES BY MR. CHARLES S. ROBERTS
Since January 1, 1992, Mr. Roberts has personally guaranteed mortgage
loans secured by certain of the Communities. The aggregate outstanding
principal face amount of new loan guarantees by Mr. Roberts was approximately
$7,389,000 during 1992, $5,055,000 during 1993, $4,065,000 during 1994, and
$14,156,000 during 1995. In the ordinary course of acquiring, developing,
constructing and refinancing Communities, the loans personally guaranteed
pursuant to these guarantees and other guarantees previously extended remain
subject to further modification, extension, exculpation and repayment, with the
result that the liability of Mr. Roberts under certain of these guarantees has
been and may be modified, extended, reduced or eliminated. As a result of a
Community's meeting certain construction and leasing milestones, Mr. Roberts
was released from a personal guarantee of $9,008,000 in 1994. The aggregate
principal face amount of loans secured by the Communities and guaranteed by Mr.
Roberts that were refinanced with nonrecourse loans (thereby eliminating the
guarantees of such loans) was approximately $0 during 1992, $0 during 1993,
$6,298,000 during 1994, and $8,509,000 during 1995. In May 1994 the Rosewood
Plantation loan was refinanced, and Mr. Roberts was released from his personal
guarantee of the construction loan. To obtain the lender's consent to the
October 1994 consolidation, however, Mr. Roberts was required to personally
guarantee such loan again in the approximate amount of $6,626,000 until the
Preston Oaks and Highland Park Communities were completed and attained certain
occupancy and lease-up levels. (Mr. Roberts was released from such guaranty in
March 1996 after these requirements were met.) At December 31, 1995, the
following guarantees by Mr. Roberts of mortgage loans secured by the referenced
Communities were in effect: Rosewood Plantation - $6,530,000; and Highland
Park - $7,555,000.
PAYMENTS TO THE ROBERTS COMPANIES FOR SERVICES
Overview. The Company, the Operating Partnership, and the Community
Partnerships have paid substantial fees to the Roberts Companies for various
types of services, and the Operating Partnership will continue to do so in the
future. These various arrangements are summarized below.
38
<PAGE> 41
Construction Contracts. Since January 1, 1992, the Community Partnerships
and the Operating Partnership have paid and will be obligated to pay Roberts
Construction the following amounts (as of December 31, 1995):
<TABLE>
<CAPTION>
Remaining Contractual
Total Contract Amount Amount Incurred Commitment
- --------------------- --------------- ----------
<S> <C> <C>
$40,639,000 $34,262,000 $6,377,000
</TABLE>
In addition, certain of the Community Partnerships have paid or will pay
Roberts Construction for purchases made on their behalf and for additional
features added or built on their Communities that are not part of the original
construction contracts. These amounts aggregated $5,000 during 1992, $1,148,000
during 1993 (including $121,423 related to Crestmark that has not yet been paid
but which is expected to be paid shortly after the merger of Crestmark, L.P.
into the Operating Partnership in June 1996), $215,000 during 1994, and $538,000
during 1995. (Roberts Construction typically estimates that it will earn a
profit of 5% of the construction contract amount on contracts with affiliates of
Mr. Roberts. As a result of the pressures on the metropolitan Atlanta
construction market resulting largely from preparations for the 1996 Olympic
Games, however, prices for labor and materials have become more difficult to
estimate. Roberts Construction suffered a loss of $464,000 on the construction
of Preston Oaks and is anticipated to suffer a loss of approximately $315,000 on
the construction of Highland Park.) The Operating Partnership entered into a
fixed price construction contract with Roberts Construction in the amount of
$8,828,600 for the construction of the Howell Ferry Community. The Company
anticipates that there will be approximately $250,000, or 2.8% of the contract
price, in net profit to Roberts Construction on the construction contract for
Howell Ferry. Assuming Crestmark, L.P. is merged into the Operating Partnership
as anticipated, the Operating Partnership will enter into a fixed price
construction contract with Roberts Construction in the amount of $3,795,015 for
the construction of the second phase of the Crestmark Community. The Company
anticipates that there will be approximately $189,750 or 5% of the contract
price, in net profit to Roberts Construction on the construction contract for
the second phase of Crestmark.
Development, Organization and Finance Fees. The Community Partnerships
have paid the Roberts Companies for various services. These fees include
organization, loan acquisition and financial advisory fees; market study and
business plan fees; design and development fees; construction administration
fees; partnership administration fees; property management systems fees; and
finish selection and interior design fees. These fees totaled $832,000 in 1992,
$1,250,000 in 1993, $1,681,000 in 1994, and $730,000 in 1995. Each of these
fees was identified and quantified in the prospectus pursuant to which each of
the Community Partnerships raised equity, and each of such fees was paid in
accordance with the respective prospectus. The Operating Partnership will pay
Roberts Properties: (a) $735,000 in fees for design, development, finish
selection, interior design, and construction administration services in
connection with the development and construction of Howell Ferry; and (b)
$430,000 in fees for design and development services in connection with the
development and construction of the second phase of Crestmark. The Community
Partnerships have also paid the Roberts Companies for services in connection
with the refinancing of loans by the Partnerships. These fees totaled $0 in
1992, $46,000 in 1993, $60,000 in 1994, and $0 for 1995.
Property Management Fees. Roberts Management has provided management
services to the Community Partnerships and to the Operating Partnership. Prior
to the October 1994 consolidation, Roberts Management typically charged a fee of
6% of gross income (5% for Plantation Trace, L.P. and Bentley Place, L.P.), plus
annual incentive management fees equal to 15% of the amount by which net
operating income exceeded forecasted amounts (provided that neither Plantation
Trace, L.P. nor Highland Park, L.P. was required to pay an incentive management
fee). Upon the October 1994 consolidation and upon each of the other mergers
with the Community Partnerships, the management contracts were amended (a) to
provide for a fee of 5% of gross income, (b) to eliminate the incentive
management fees, and (c) to provide for a five-year term from the date of the
applicable merger. (The management contract for Crestmark will similarly be
amended upon the merger of Crestmark, L.P. into the Operating Partnership.)
Total management fees paid to Roberts Management by the Community Partnerships
and the Operating Partnership were $197,000 during 1992, $369,000 during 1993,
$518,000 during 1994, and $623,000 during 1995. Roberts Management will
continue to perform management services for 5% of the gross income from property
operations. Crestmark, L.P. owes Roberts Management
39
<PAGE> 42
$28,077 for management start-up costs incurred by Crestmark, L.P. and not yet
reimbursed. The Operating Partnership expects to repay this obligation shortly
after the merger of Crestmark, L.P. into the Operating Partnership in June
1996.
Consulting Fees. Various Roberts Companies entered into contracts with
the Community Partnerships to provide consulting services in the event of a sale
of applicable Community, as follows: Roberts Properties - River Oaks, Highland
Park, Holcomb Bridge, Windsong and Crestmark; Roberts Group - Rosewood
Plantation, Preston Oaks, and Bentley Place; and Roberts Management - Plantation
Trace and the Shoppes of Plantation. The fee for such services was specified as
5% of the gross sales proceeds of the property sold (except 6% in the case of
Plantation Trace; an amount customary for sales of similar properties for
Windsong; and 3% in the case of Bentley Place). In the October 1994
consolidation and upon each of the other mergers with the Community
Partnerships, the Operating Partnership assumed such contracts, which in each
instance were amended to provide that a payment would be triggered upon a
"change in control" of the Company or the Operating Partnership, which is
defined as (i) any transaction, whether by merger, consolidation, asset sale or
otherwise which results in the acquisition of beneficial ownership by any person
or group of 50% or more of the outstanding Shares or of the outstanding Units in
the Operating Partnership, (ii) sale of all or substantially all of the assets
of the Company or the Operating Partnership, or (iii) the liquidation of the
Company or the Operating Partnership. Notwithstanding the foregoing, a "change
in control" will not be deemed to have occurred in the event of the sale of the
Operating Partnership's assets to the Company or the merger of the Operating
Partnership into the Company if no change in control of the Company occurs as a
result. (The consulting fee arrangement for Crestmark will similarly be amended
upon the merger of Crestmark, L.P. into the Operating Partnership.) These
consulting fee arrangements will not apply to any multifamily communities
acquired by the Operating Partnership or the Company from a seller who is not
affiliated with Mr. Roberts, and upon the payment of a fee in the event of a
change in control, the agreements will be terminated.
Any right to be paid such a consulting fee upon the October 1994
consolidation or any subsequent merger was waived, and to date, neither the
Community Partnerships nor the Operating Partnership has paid such a consulting
fee to any of the Roberts Companies. See Part I, Item 8, "Description of
Securities - Anti-takeover Provisions - Consulting Fee Arrangements with the
Roberts Companies."
Acquisition and Other Consulting Fees. In 1995 the Operating
Partnership paid fees and reimbursed costs to Roberts Properties in connection
with: (i) construction and leasing administration services at The Shoppes of
River Oaks ($50,000); (ii) the sale of The Shoppes of Crestmark ($28,000); (iii)
the acquisition of Laurelwood ($125,000); and (iv) the merger of St. Simons,
Ltd. into the Operating Partnership ($50,000). The total of these fees and
costs paid in 1995 was $253,000. Crestmark, L.P. paid Roberts Properties a fee
of $23,000 for its services in assisting in the sale of a parcel of undeveloped
land in 1995. The Operating Partnership paid no such fees and reimbursed no
such costs in 1994. In 1996 the Operating Partnership has reimbursed or will
reimburse Roberts Properties for payroll and other expenses of Roberts
Properties in connection with two consent solicitations as follows: $50,000
paid upon the closing of the Bentley Place, L.P. merger in March 1996, and
$50,000 to be paid upon the anticipated closing of the Crestmark, L.P. merger in
June 1996.
40
<PAGE> 43
ACQUISITIONS OF SHARES AND UNITS BY MR. CHARLES S. ROBERTS
The following table describes how Mr. Roberts acquired the total of 418,054
Shares and 119,714 Units he presently owns:
<TABLE>
<CAPTION>
Type of Transaction Number of Shares Number of Units
------------------- ---------------- ---------------
<S> <C> <C>
Initial Capitalization of Company and Operating Partnership as of
July 1994, for $3.04 per Share/Unit in cash ............................. 163,061 1,645
Shares/Units in the October 1994 consolidation in lieu of
out-of-state residents, for $8.50 per Share/Unit in cash................ 27,616 26,825
Shares in the October 1994 consolidation in consideration
for his limited partner interests in Highland Park, L.P. acquired
in a private nonissuer transaction (valued at $8.50 per Share) .......... 3,988 -
Units in the October 1994 consolidation in consideration for his
general partner interests in River Oaks, L.P. and Rosewood
Plantation, L.P. (valued at $8.50 per Unit). ............................ - 50,607
Shares in March 1995 in consideration for his general partner
interest in Holcomb Bridge, L.P. (valued at $8.50 per Share) ............ 71,310 -
Shares in March 1995 in consideration for his limited partner
interests in Holcomb Bridge, L.P. (valued at $8.50 per Share)............ 1,206 -
Units in the May 1995 merger in lieu of out-of-state residents,
for $9.00 per Unit in cash .............................................. - 48,296
Units in the May 1995 merger for his general partner interest in
Plantation Trace, L.P. (valued at $9.00 per Unit) ....................... - 43,548
Units in the May 1995 merger in exchange for his limited partner
interest in Plantation Trace, L.P. acquired in a private nonissuer
transaction (valued at $9.00 per Unit) .................................. - 2,917
Shares received in exchange for Units in June 1995 ...................... 78,038 (78,038)
Shares acquired by Roberts Properties in the June 1995 offering of
Shares for $8.28 per Share in cash....................................... 2,625 -
Units in the September 1995 merger in lieu of out-of-state
residents, for $9.25 per Unit in cash.................................... - 29,086
Units in the September 1995 merger for his general partner
interest in the general partner of St. Simons, Ltd. (valued
at $9.25 per Unit) ..................................................... - 23,914
Shares received in exchange for Units in December 1995 29,086 (29,086)
Shares in the March 1996 merger in lieu of out-of-state residents,
for $9.50 per Share in cash.............................................. 23,659 -
Shares in the March 1996 merger for his general partner interest
in Bentley Place, L.P. ................................................. 17,465 -
------- -------
TOTAL ...................................................... 418,054 119,714
======= =======
</TABLE>
Mr. Roberts acquired his general partner interests in the Community
Partnerships for a nominal amount in each case. The values in the consolidation
or merger transactions referenced above were determined by Mr. Roberts based
upon his evaluation of the equity in each limited partnership in light of its
debt and his opinion regarding the value of its assets. In each instance other
than the 1994 consolidation the Company's Board of Directors approved the
valuation proposed by Mr. Roberts, who abstained from voting as a director on
each merger. A number of the acquisitions of Shares or Units by Mr. Roberts in
connection with mergers of various Community Partnerships into the Operating
Partnership involved his payment of cash into escrow pursuant to the terms of
the applicable merger agreement to provide the funds needed to allocate cash,
rather than Shares or Units, to limited partners in the Community Partnership
who were not residents of Georgia when the merger occurred. The cash paid by Mr.
Roberts equaled the applicable value per Share or Unit used in the merger, and
Mr. Roberts was allocated the Shares or Units, as applicable, that would have
been distributed to the out-of-state residents had they resided in Georgia.
This feature of each merger agreement was necessitated by the reliance by the
Company and the Operating Partnership upon the "intrastate" exemption from
securities registration provided under Section 3(a)(11) of the Securities Act of
1933 and Rule 147 promulgated by the Securities and Exchange Commission
regarding intrastate offerings. For an offering to be exempt as an intrastate
offering, securities may not be sold to persons who do not reside in the state
in which the offering is being conducted.
41
<PAGE> 44
ACQUISITIONS OF SHARES AND UNITS BY OTHER DIRECTORS, OFFICER AND SIGNIFICANT
SECURITY HOLDERS
The following table summarizes the acquisitions of beneficial ownership of
Shares and Units from the Company and the Operating Partnership by directors
other than Mr. Roberts, by Mr. Charles R. Elliott, the other officer of the
Company, and by beneficial owners of more than 5% of the Units or Shares
outstanding. Each such person acquired his or her Shares and/or Units in
connection with (a) the October 1994 consolidation, (b) the January 1995
acquisition of The Shoppes of Crestmark by the Operating Partnership, (c) the
March 1995 Holcomb Bridge, L.P. merger, (d) the May 1995 Plantation Trace, L.P.
merger, (e) the Company's offering of Shares for $9.00 per Share in cash that
was completed in August 1995, (f) the September 1995 St. Simons, Ltd. merger,
(g) the March 1996 Bentley Place, L.P. merger, and/or (h) the Cash Offering.
Except for acquisitions of limited partnership interests in private nonissuer
transactions as noted below, each director paid the same price for his limited
partnership interests as all other holders of limited partner interests in the
Community Partnerships, and accordingly each person received Shares and/or
Units in the consolidation and the mergers on the same basis as any other
holder in such Community Partnership.
<TABLE>
(b) Acquisition of (c) March 1995 (d) May 1995
(a) October 1994 The Shoppes of Holcomb Bridge, Plantation Trace,
Individual(1) Consolidation Crestmark(2) L.P. Merger L.P. Merger
---------- ------------- --------- ----------- -----------
Shares Units Units Shares Units
------ ----- ----- ------ -----
<S> <C> <C> <C> <C> <C>
George W. Wray, Jr.(*) 33,447 88,833 33,768 26,251
James M. Goodrich(*) 17,796 25,566 104,478 11,457 8,750
Penelope Goodrich 26,694 39,236 - 23,517 8,750
Wm. Jarell Jones(*) - - - - 2,917(4)(6)
Charles R. Elliott - - - - 2,917(4)(6)
Ben A. Spalding(*) - - - - -
Dennis H. James(*) - - - - -
<CAPTION>
(g) March 1996
(e) 1995 Cash (f) Sept. 1995 St. Bentley Place, (h) Cash
Individual(1) Offering Simons, Ltd. Merger L.P. Merger Offering
-------- ------------------- ----------- --------
Shares Units Shares Shares
------ ----- ------ ------
<S> <C> <C> <C> <C>
George W. Wray, Jr.(*) 18,925(3) 44,750(4) 2,957(4) 60,300(3)
James M. Goodrich(*) 12,800 8,950 17,744(5) --
Penelope Goodrich 20,800 - 2,957(5) 15,800
Wm. Jarell Jones(*) - - - --
Charles R. Elliott - - - 2,100(3)
Ben A. Spalding(*) - 12,231(7) 2,957(4) --
Dennis H. James(*) - - 2,957(4)
</TABLE>
(*)Denotes individuals who are directors.
- -------------------
(1) For a description of the beneficial ownership of each person listed, see
Part I, Item 4, "Security Ownership of Certain Beneficial Owners and
Management." In particular, Mr. and Mrs. Goodrich share beneficial ownership
of certain of the Shares and Units listed in this table.
(2) On January 31, 1995, the Operating Partnership acquired The Shoppes of
Crestmark, a 7,078 square foot retail center with service and retail tenants
on Thornton Road in Douglas County, Georgia. The seller was Goodrich
Enterprises, Inc., all of the stock of which was owned by Mr. James M.
Goodrich, a director of the Company; the stock of Goodrich Enterprises, Inc.
is currently owned by Mr. Goodrich; Penelope Goodrich, his wife; and certain
trusts of which Mrs. Goodrich is trustee. The sales price was $888,063, paid
in the form of 104,478 Units in the Operating Partnership (valued at $8.50 per
Unit by negotiation between the Company and Mr. Goodrich). Goodrich
Enterprises, Inc. acquired the land on May 28, 1993 and completed construction
of the retail center in February 1994 with a total cost of approximately
$777,000. The retail center was subsequently sold for $940,000 on December 8,
1995.
(3) As a registered associate of Spalding & Company, Mr. Wray purchased
Shares net of the $.72 per Share and $.665 per Share broker-dealer commissions
as permitted under the terms of the 1995 offering of Shares at $9.00 per Share
and the Cash Offering, respectively. Mr. Elliott, as an employee of Roberts
Properties, similarly purchased Shares in the Cash Offering net of the $.665
per Share brokerage commission.
(4) Each individual acquired his limited partnership interest(s) in the
applicable Community Partnership in a private nonissuer transaction.
(5) Mr. Goodrich acquired two and one half limited partnership interests in
Bentley Place, L.P.'s original offering and in December 1995 acquired, jointly
with Mrs. Goodrich, an additional one half limited partnership interest in a
private nonissuer transaction.
(6) In December 1995 and April 1996, respectively, each of Mr. Jones and Mr.
Elliott exchanged his Units for an equal number of Shares.
(7) Mr. Spalding was a limited partner in the general partner of St. Simons,
Ltd. In accordance with the agreement and plan of merger for the merger of St.
Simons, Ltd. into the Operating Partnership, Mr. Spalding (a) received 5,519
Units for his limited partnership interest in the general partner of St.
Simons, Ltd. (for which he paid only a nominal amount) and (b) purchased
6,712 Units in lieu of the purchase of such Units by out-of-state limited
partners of St. Simons, Ltd., for which Units he paid cash in the amount of
$9.25 per Unit, the value used in the merger.
42
<PAGE> 45
Land Sales
Roberts Properties, Inc., which is wholly-owned by Mr. Roberts, acquired
and then subsequently sold to several of the Community Partnerships the property
on which the respective Community has been or is to be developed. Such
transactions are summarized in the table below. In each case the purchase price
was determined by Mr. Roberts and disclosed in the prospectus used in connection
with the syndication of each Community Partnership. (For information regarding
land sales from Roberts Properties to the Operating Partnership, see the table
on the following page.)
Profit of Roberts Properties, Inc. on Land Sales
to the Community Partnerships
<TABLE>
<CAPTION>
Purchase Date of Purchase
Price Paid by Acquisition by Price Paid by
Community Date of Purchase by Roberts Community Community Land
Partnership Roberts Properties Properties Partnership Partnership Profit
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
River Oaks, L.P. 8/21/91 $1,355,000 8/21/91 $1,753,000 $ 398,000
Rosewood Plantation,
L.P. 8/18/92 $ 708,000 1/05/93 $1,140,000 $ 432,000
Preston Oaks, L.P. 4/16/93 $1,617,500 7/21/93 $1,617,500(2) $ 0(1)
Highland Park, L.P. 10/08/93 $1,000,000 5/09/94 $1,538,416 $ 538,416
Holcomb Bridge, L.P.(2) 8/16/94 $1,460,000 1/24/95 $1,460,000 $ 0(2)
---------- ----------
Totals $6,140,500 $8,637,966 $1,368,416
========== ========== ==========
</TABLE>
- -----------------
(1) Preston Oaks, L.P. paid Roberts Properties an additional amount of
$62,100 in reimbursement of carrying costs of the property until closing, the
costs of securing a lease on a small adjoining tract subsequently acquired by
Preston Oaks, L.P., and rental payments under such lease through the closing
date, all as described in such partnership's prospectus. In addition, on June
16, 1994 Preston Oaks, L.P. acquired the small adjoining tract of land that it
was leasing for $240,000 from an unrelated third party. The total purchase
price for the entire tract of land was $1,919,600.
(2) As described in its prospectus, Holcomb Bridge, L.P. paid Roberts
Properties an additional amount of $50,000 in reimbursement of Roberts
Properties' carrying costs (principally interest on the loan secured by the
property) from its acquisition in August 1994 until its sale to Holcomb Bridge,
L.P. in January 1995.
- --------------------
The Operating Partnership acquired Bentley Place, L.P. by merger in
March 1996 as described elsewhere herein. Bentley Place, L.P. purchased
property from Roberts Properties on July 31, 1992 for a price of $1,129,050.
Roberts Properties did not earn a profit on the sale to Bentley Place, L.P.
43
<PAGE> 46
In addition to the foregoing transactions between Roberts Properties and
the Community Partnerships, Roberts Properties has sold two parcels directly to
the Operating Partnership as summarized below. In each instance, the purchase
price was proposed by Mr. Roberts to the Company's Board of Directors, who
approved each transaction with Mr. Roberts abstaining from voting as a director.
Profit of Roberts Properties, Inc. on Land Sales
to the Operating Partnership
<TABLE>
<CAPTION>
Purchase Date of Purchase
Price Paid by Acquisition by Price Paid by
Date of Purchase by Roberts Operating Operating Land
Roberts Properties Properties Partnership Partnership Profit
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2/16/93(1) $121,500 7/21/95(1) $445,485 $306,595(1)
8/15/94(2) $275,000 12/14/94 $296,693 $ 0(2)
-------- -------- --------
Totals $396,500 $742,178 $306,595
======== ======== ========
</TABLE>
- --------------
(1) The Operating Partnership acquired this 12.33 acre parcel for the
development of the second phase of Plantation Trace. The land profit reflects
a reduction in the amount of the $17,390 spent by Roberts Properties on
acquisition costs of the property that were not reimbursed by the Operating
Partnership.
(2) The Operating Partnership acquired this .86 acre parcel located in front
of River Oaks for the construction of The Shoppes of River Oaks. Included
in the purchase price paid by the Operating Partnership was $21,693 in
reimbursement of Roberts Properties' carrying and other development costs
in connection with such property; therefore, Roberts Properties earned no
profit on the sale.
COMPENSATION TO SHOPTAW-JAMES, INC.
Dennis H. James, a Director of the Company, is President and a Director
of Shoptaw-James, Inc., a commercial mortgage banking firm that has originated
loans for the Company and its Predecessors. Specifically, Shoptaw-James, Inc.
received fees of $7,500 in 1994 for the transfer of the loan secured by River
Oaks and the reduction of the transfer fee in that regard; $87,110 for the
refinancing of Preston Oaks in 1995; and $46,780 for the refinancing of Highland
Park in 1996. Shoptaw-James, Inc. received or is anticipated to receive the
following fees in the months noted: $37,500 for the loan secured by Laurelwood
(March 1996); $69,375 for the refinancing of River Oaks (October 1996); and
$48,150 for the loan to be secured by Holcomb Bridge (January 1997).
44
<PAGE> 47
COMPENSATION TO SPALDING & COMPANY
Ben A. Spalding, one of the Company's directors, owns all of the
outstanding stock of Spalding & Company, an NASD member broker-dealer that has
participated as the distributor or solicitation agent in numerous offerings by
affiliates of Mr. Roberts, including the Company, the Operating Partnership, and
the Community Partnerships. The Operating Partnership and the Community
Partnerships have paid the following compensation to Spalding & Company since
January 1, 1994:
<TABLE>
<CAPTION>
Entity Involved in Amount of Compensation Date of Closing of
Offering/Solicitation to Spalding & Company Offering/Solicitation
--------------------- --------------------- ---------------------
<S> <C> <C>
Highland Park, L.P.
(offering of units) $ 408,000 5/9/94
Operating Partnership
(October 1994
consolidation) $ 125,000 10/1/94
----------
Subtotal for 1994 $ 533,000
==========
Holcomb Bridge, L.P.
(offering of units) $ 308,000 1/24/95
Holcomb Bridge, L.P.
(solicitation for
March 1995 merger) $ 44,000 3/24/95
Plantation Trace, L.P.
(solicitation for May
1995 merger) $ 40,000 5/16/95
Operating Partnership
(1995 cash offering
of Shares) $ 491,760 8/25/95
St. Simons, Ltd.
(solicitation for
September 1995
merger) $ 20,000 9/27/95
----------
Subtotal for 1995 $ 903,760
==========
Bentley Place, L.P.
(solicitation for
March 1996 merger) $ 25,000 3/21/96
Operating Partnership
(1995-1996 cash
offering of Shares) $ 411,870 3/29/96 and 5/7/96
==========
Subtotal for 1996 $ 436,870
==========
Total $1,873,630
==========
</TABLE>
OCTOBER 1994 CONSOLIDATION
On October 13, 1994, effective October 1, 1994, River Oaks, L.P.,
Rosewood Plantation, L.P., Preston Oaks, L.P., and Highland Park, L.P. were
merged into the Operating Partnership. River Oaks, L.P. had constructed River
Oaks at a cost of $11,594,000. The River Oaks, L.P. partners were allocated a
total of 638,596 Units valued at $8.50 per Unit, or $5,428,068 in the aggregate,
in the merger. Rosewood Plantation, L.P. had constructed Rosewood Plantation
for
45
<PAGE> 48
$8,448,000. The partners in Rosewood Plantation, L.P. were allocated a total
of 396,957 Units valued at $8.50 per Unit, or $3,374,137 in the aggregate, in
the merger. Preston Oaks, L.P. had raised a total of $3,924,000 in equity,
acquired land for the construction of Preston Oaks as described above in "Land
Sales," and obtained development plans. The Preston Oaks, L.P. limited
partners were allocated a total of 535,176 Shares valued at $8.50 per Share, or
$4,549,000 in the aggregate, in the merger. Highland Park, L.P. had raised a
total of $4,080,000 in equity, acquired land for the development of Highland
Park as described above in "Land Sales," and obtained development plans. The
Highland Park, L.P. limited partners were allocated a total of 508,471 Shares
valued at $8.50 per Share, or $4,322,000 in the aggregate, in the merger.
The mergers received the consent of at least 92% in interest of the
limited partners in each of the four partnerships. Mr. Roberts received 50,607
Units in consideration of his general partner interests in River Oaks, L.P. and
Rosewood Plantation, L.P. but received no Shares in consideration of his general
partner interests in Preston Oaks, L.P. and Highland Park, L.P. Certain other
persons received Shares or Units as described in "Acquisitions of Shares and
Units by Other Directors, Officer and Significant Security Holders." The values
in the mergers described above were determined by Mr. Roberts based upon his
evaluation of the equity of each limited partnership in light of its debt (if
any) and Mr. Roberts' opinion of the value of its assets.
MARCH 1995 MERGER OF ROBERTS PROPERTIES HOLCOMB BRIDGE, L.P. INTO THE
OPERATING PARTNERSHIP
On March 24, 1995, Holcomb Bridge, L.P. was merged into the Operating
Partnership in exchange for 609,873 Shares valued at $8.50 per Share ($5,183,921
in the aggregate). Holcomb Bridge, L.P. had raised a total of $4,400,000 in
equity, purchased land for the development of Holcomb Bridge, and obtained
development plans. The value was determined by Mr. Roberts based upon his
evaluation of the equity of Holcomb Bridge, L.P. in light of his opinion
regarding the value of its assets. The Company's Board of Directors approved
the valuation proposed by Mr. Roberts, who abstained from voting as a director
on the merger. The transaction received the consent of 98% of the limited
partners of Holcomb Bridge, L.P. Mr. Roberts received 71,310 Shares for his
general partner interest in Holcomb Bridge, L.P., and certain other persons
received Shares as described in "Acquisitions of Shares and Units by Other
Directors, Officer and Significant Security Holders."
MAY 1995 MERGER OF ROBERTS PROPERTIES PLANTATION TRACE, L.P. INTO THE
OPERATING PARTNERSHIP
On May 16, 1995, Plantation Trace, L.P. was merged into the Operating
Partnership in exchange for 597,741 Units of the Operating Partnership valued at
$9.00 per Unit ($5,379,669 in the aggregate). The value used in the merger was
determined by Mr. Roberts based upon his evaluation of the equity of Plantation
Trace, L.P. in light of its debt and his opinion regarding the value of its
assets. The Company's Board of Directors approved the valuation proposed by Mr.
Roberts, who abstained from voting as a director on the merger. The transaction
received the consent of 96% of the limited partners of Plantation Trace, L.P.
Mr. Roberts received 43,548 Units for his general partner interest in Plantation
Trace, L.P., and certain other persons received Units as described in
"Acquisitions of Shares and Units by Other Directors, Officer and Significant
Security Holders."
SEPTEMBER 1995 MERGER OF ROBERTS PROPERTIES-ST. SIMONS, LTD. INTO THE OPERATING
PARTNERSHIP
On September 27, 1995, St. Simons, Ltd. was merged into the Operating
Partnership in exchange for 476,931 Units valued at $9.25 per Unit ($4,411,612
in the aggregate). The value used in the merger was determined by Mr. Roberts
based upon his evaluation of the equity of St. Simons, Ltd. in light of its debt
and his opinion regarding the value of its assets. The Company's Board of
Directors approved the valuation proposed by Mr. Roberts, who abstained from
voting as a director on the merger. The transaction received the consent of 98%
of the limited partners of St. Simons, Ltd. Mr. Roberts received 23,914 Units
for his general partner interest in the general partner of St. Simons, Ltd., and
certain other persons received Units as described in "Acquisitions of Shares and
Units by Other Directors, Officer and Significant Security Holders."
46
<PAGE> 49
MARCH 1996 MERGER OF ROBERTS PROPERTIES BENTLEY PLACE, L.P. INTO THE OPERATING
PARTNERSHIP
On March 21, 1996, Bentley Place, L.P. was merged into the Operating
Partnership in exchange for 744,940 Shares valued at $9.50 per Share ($7,076,930
in the aggregate). The value used in the merger was determined by Mr. Roberts
based upon his evaluation of the equity of Bentley Place, L.P. in light of its
obligations and his opinion regarding the value of its assets. The Company's
Board of Directors approved the valuation proposed by Mr. Roberts, who abstained
from voting as a director on the merger. The transaction received the consent
of 87% of the limited partners of Bentley Place, L.P. Mr. Roberts received
17,465 Shares for his general partner interest in Bentley Place, L.P., and
certain other persons received Shares as described in "Acquisitions of Shares
and Units by Other Directors, Officer and Significant Security Holders."
PROPOSED MERGER OF THE CRESTMARK CLUB, L.P. INTO THE OPERATING PARTNERSHIP
The Operating Partnership will in the near future begin soliciting the
consent of a majority in interest of the limited partners of Crestmark, L.P., of
which Mr. Roberts is the general partner, for the merger of Crestmark, L.P. into
the Operating Partnership in exchange for 746,649 Units valued at $9.75 per Unit
or $7,279,831 in the aggregate. Crestmark, L.P. owns the 248-unit Crestmark
Community and 8.8 acres of adjacent undeveloped property on which the Company
intends to build an 86-unit second phase of Crestmark. The Company anticipates
that the merger of Crestmark, L.P. into the Operating Partnership will occur in
June 1996. The 8.8 acre tract of undeveloped land adjacent to Crestmark is
currently encumbered by a second priority secured loan owed to Mr. Roberts in
the estimated amount at closing of $1,412,329. Crestmark, L.P. also owes
$121,423 to Roberts Construction for change orders from the original
construction of Crestmark and $28,077 to Roberts Management for start-up costs.
The Operating Partnership will assume these obligations in the merger and
currently expects to repay them shortly after the closing of the merger.
Mr. Roberts will receive 44,509 Units for his general partner interest
in Crestmark, L.P., for which he paid only a nominal amount, and he will receive
another 9,857 Units for which he will pay $91,177 in cash ($9.25 per Unit), with
such cash to be allocated to out-of-state limited partners in the merger. In
addition, a general partnership of which Mr. George W. Wray, Jr., a director of
the Company, is managing general partner will receive 16,835 Units in the merger
for its seven units of limited partnership interest in Crestmark, L.P.; and
James M. Goodrich, a director of the Company, and his spouse Penelope Goodrich
will receive 4,810 Units for their two units of limited partnership interest in
Crestmark, L.P. The Wray partnership and Mr. and Mrs. Goodrich paid the same
amount for their interests in Crestmark, L.P. as all other limited partners. In
addition, Mr. and Mrs. Goodrich will acquire an additional 21,622 Units by
paying $200,004 in cash ($9.25 per Unit), with such cash to be allocated to
out-of-state limited partners in the merger.
ITEM 8. DESCRIPTION OF SECURITIES.
GENERAL
The authorized capital stock of the Company consists of 100,000,000
shares of Common Stock, $.01 par value per share, and 20,000,000 shares of
Preferred Stock, $.01 par value per share. The following description of the
terms and provisions of the shares of stock of the Company and certain other
matters does not purport to be complete and is subject to and qualified in its
entirety by reference to the applicable provisions of the Georgia Business
Corporation Code (the "GBCC") and the Company's Articles of Incorporation.
Following the description of the stock of the Company is a description
of the material terms of the Operating Partnership's Agreement of Limited
Partnership (the "Operating Partnership Agreement") and of the Units. Such
description does not purport to be complete and is subject to and qualified in
its entirety by reference to the applicable provisions of the Operating
Partnership Agreement.
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COMMON STOCK
Each holder of Shares is entitled to one vote at shareholders' meetings
for each Share held. Neither the Articles of Incorporation nor the By-Laws
provide for cumulative voting for the election of directors. Subject to the
prior rights of any series of Preferred Stock that may be issued, holders of
Shares are entitled to receive, pro rata, such distributions as may be declared
by the Board of Directors out of funds legally available therefor, and are also
entitled to share, pro rata, in any other distributions to the shareholders. On
April 15, 1996 the Company paid its first quarterly distribution of $0.11875 per
Share to shareholders of record on March 19, 1996. The Company depends upon
distributions from the Operating Partnership to fund its distributions to
shareholders. See Part II, Item 1, "Market Price of and Dividends on the
Registrant's Common Equity and Other Shareholder Matters."
There are no redemption or sinking fund provisions and no direct
limitations in any indenture or agreement on payment of distributions to
shareholders.
Holders of Shares do not have any preemptive rights or other rights to
subscribe for additional Shares.
PREFERRED STOCK
Under the Articles of Incorporation, the Board of Directors may issue,
without any further action by the shareholders, shares of Preferred Stock of one
or more series, including any preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption as shall be set forth in resolutions adopted by the
Board of Directors. Articles of Amendment must be filed with the Georgia
Secretary of State prior to the issuance of any shares of Preferred Stock of the
applicable series.
CLASSIFICATION AND REMOVAL OF THE BOARD OF DIRECTORS
The Articles of Incorporation provide for the Board of Directors to be
divided into three classes of directors, with each class to consist as nearly as
possible of an equal number of directors. The term of office of the first class
of directors expired at the 1995 annual meeting of shareholders (and Messrs. Ben
A. Spalding and George W. Wray, Jr. were elected to full three-year terms
expiring in 1998); the term of the second class of directors will expire at the
1996 annual meeting of shareholders; and the term of the third class will expire
at the 1997 annual meeting of shareholders. The terms of office of the
directors of the Company are set forth in Part I, Item 5, "Directors, Executive
Officers, Promoters and Control Persons." At each annual meeting of
shareholders, the class of directors to be elected at such meeting will be
elected for a three-year term, and the directors in the other two classes will
continue in office. Because holders of Shares will have no right to cumulative
voting for the election of directors, the holders of a majority of the
outstanding Shares will be able to elect all of the successors of the class of
directors whose term expires at each annual meeting of shareholders.
The Articles of Incorporation also provide that, except for any
directors who may be elected by holders of a class or series of stock other than
the Common Stock, directors may be removed only by the affirmative vote of
shareholders holding at least 75% of all of the votes entitled to be cast for
the election of directors. Vacancies on the Board of Directors may be filled by
the affirmative vote of the remaining directors and, in the case of a vacancy
resulting from the removal of a director, by the shareholders by a majority of
the votes entitled to be cast for the election of directors. A vote of
shareholders holding at least 75% of all the votes entitled to be cast thereon
is required to amend, alter, change, repeal or adopt any provisions inconsistent
with the foregoing classified board and director removal provisions. These
provisions may make it more difficult and time-consuming to change majority
control of the Board of Directors of the Company and, thus, reduce the
vulnerability of the Company to an unsolicited proposal for the takeover of the
Company or the removal of incumbent management.
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SPECIAL MEETINGS
Under the By-Laws, special meetings of the shareholders may be called by
shareholders only if such shareholders hold outstanding shares representing more
than 50% of all votes entitled to be cast on any issue proposed to be considered
at any such special meeting.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS
The By-Laws provide that with respect to an annual meeting of
shareholders, the proposal of business to be considered by shareholders may be
made only (i) by or at the direction of the Board of Directors, or (ii) by a
shareholder who has complied with the advance notice procedures set forth in the
By-Laws. In addition, with respect to any meeting of shareholders, nominations
of persons for election to the Board of Directors may be made only (i) by or at
the direction of the Board of Directors, or (ii) by any shareholder of the
Company who is entitled to vote at the meeting and who has complied with the
advance notice provisions set forth in the By-Laws.
MANAGEMENT LIABILITY
The Articles of Incorporation eliminate, subject to certain exceptions,
the personal liability of a director to the Company or its shareholders for
monetary damage for breaches of such director's duty of care or other duties as
a director. The Articles do not provide for the elimination of or any
limitation on the personal liability of a director for (i) any appropriation, in
violation of the director's duties, of any business opportunity of the Company,
(ii) acts or omissions which involve intentional misconduct or a knowing
violation of law, (iii) unlawful corporate distributions, or (iv) any
transactions from which the director derived an improper personal benefit. The
Articles of Incorporation of the Company further provide that if the GBCC is
amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the Company
shall be eliminated or limited to the fullest extent permitted by the GBCC, as
amended. These provisions of the Articles of Incorporation will limit the
remedies available to a shareholder in the event of breaches of any director's
duties to such shareholder or the Company.
ANTI-TAKEOVER PROVISIONS
The Articles of Incorporation and By-Laws, as well as certain consulting
fee arrangements with the Roberts Companies, contain a number of provisions that
might have the effect of entrenching current management and delaying or
discouraging a hostile takeover of the Company. These provisions include, among
others, the following:
Issuance of Preferred Stock. The Board of Directors has the power to
issue 20,000,000 shares of Preferred Stock, in one or more classes or series and
with such rights and preferences as determined by the Board of Directors, all
without shareholder approval. Because the Board of Directors has the power to
establish the preferences and rights of each class or series of Preferred Stock,
it may afford the holders in any series or class of Preferred Stock preferences,
powers and rights, voting or otherwise, senior to the rights of holders of
Common Stock. The Board of Directors has no present plans to issue any shares
of Preferred Stock.
Restrictions on Transfer - Ownership Limits. The Articles of
Incorporation contain certain restrictions on the number of Shares of Common
Stock that individual shareholders may own. For the Company to qualify as a
REIT under the Internal Revenue Code, as a general matter no more than 50% in
value of its outstanding Shares may be owned, directly or indirectly, by five or
fewer individuals. The Common Stock must also be beneficially owned by 100 or
more persons. Because the Company expects to continue to qualify as a REIT, the
Articles of Incorporation contain restrictions on the acquisition of Common
Stock that are intended to insure compliance with these requirements.
Subject to certain exceptions specified in the Articles of
Incorporation, no holder may own or be deemed to own more than 6% of the issued
and outstanding Shares. Mr. Roberts is not subject to such limit, but he is
instead prohibited from acquiring more than an aggregate of 25% of the
outstanding Shares, and he is prohibited from acquiring any Shares if such
acquisition would cause five beneficial owners of Shares to beneficially own in
the aggregate more than 50% in value of the outstanding Shares. Mr. Roberts
owns 418,054 Shares directly or 10.1% of the Common Stock outstanding. (He also
owns 119,714 Units.)
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If any shareholder purports to transfer shares to a person and either
the transfer would result in the Company's failing to qualify as a REIT, or the
shareholder knows that such transfer would cause the transferee to hold more
than the applicable ownership limit, the purported transfer shall be null and
void, and the shareholder will be deemed not to have transferred the shares. In
addition, if any person holds Shares in excess of the applicable limit, such
person will be deemed to hold the Shares that caused the limit to be exceeded in
trust for the Company, and such person will not receive dividends or
distributions with respect to such Shares and will not be entitled to vote such
Shares. The person will be required to sell such Shares to the Company pursuant
to certain provisions in the Articles of Incorporation.
Although the foregoing restrictions on transfer are intended only to
insure compliance with the REIT requirements under the Internal Revenue Code,
they may have the effect of discouraging a takeover of the Company.
Supermajority Voting Requirements. The Articles of Incorporation
provide that no transaction of a fundamental nature, including mergers in which
the Company is not the survivor, share exchanges, consolidations, or sale of all
or substantially all of the assets of the Company, may be effectuated without
the affirmative vote of at least three-quarters of the votes entitled to vote
generally in any such matter. Similarly, the Articles of Incorporation may not
be amended (except for certain limited matters) without the affirmative vote of
at least three-quarters of the votes entitled to be voted generally in the
election of directors. The By-Laws may be amended by either the affirmative
vote of three-quarters of all shares outstanding and entitled to vote generally
in the election of the directors, or the affirmative vote of a majority of the
Company's directors then holding office, unless the shareholders prescribed that
any such By-Law may not be amended or repealed by the Board of Directors.
Georgia Anti-Takeover Statutes. The GBCC generally restricts a company
from entering into certain business combinations with an interested shareholder
(which is defined as any person or entity that is the beneficial owner of at
least 10% of the company's voting stock) or its affiliates for a period of five
years after the date on which such shareholder became an interested shareholder,
unless (i) the transaction is approved by the board of directors of the company
prior to the date such person became an interested shareholder, (ii) the
interested shareholder acquires 90% of the company's voting stock in the same
transaction in which it exceeds 10%, or (iii) subsequent to becoming an
interested shareholder, such shareholder acquires 90% of the company's voting
stock and the business combination is approved by the holders of a majority of
the voting stock entitled to vote thereon (the "Business Combination Statute").
The GBCC provides that the Business Combination Statute will not apply unless
the bylaws of the corporation specifically provide that the Business Combination
Statute is applicable to the corporation. The Company has not elected to be
covered by such statute, but it could do so by action of the Board of Directors
at any time.
The GBCC also contains provisions that impose certain fair price and
other procedural requirements applicable to certain business combinations (the
"Fair Price Statute") with any person who owns 10% or more of the common stock
(an "interested shareholder"). These statutory requirements restrict business
combinations with, and accumulations of shares of voting stock of, certain
Georgia corporations. The Fair Price Statute will apply to a company only if
the company elects to be covered by the restrictions imposed by these statutes.
The Company has not elected to be covered by such Fair Price Provisions, but it
could do so by action of the Board of Directors at any time.
Mr. Roberts became an interested shareholder upon the October 1994
consolidation and therefore is exempt from the application of the Business
Combination Statute even if adopted by the Company in the future. Mr. Roberts
will also be exempt from the application of the Fair Price Statute even if
adopted by the Company in the future, provided that during the three year period
prior to the consummation of the business combination (i) he never ceased to be
an interested shareholder, and (ii) he never increased his percentage ownership
of any class or series of equity securities of the Company by more than 1% in
any twelve-month period. Accordingly, to the extent that these statutes might
otherwise afford protection from a transaction not in the best interests of
shareholders, such protection may not be available to transactions proposed by
Mr. Roberts.
Classified Board of Directors. The Company's Board of Directors is
divided into three classes of directors serving staggered three-year terms. The
use of a classified board may render more difficult a change in control of the
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Company or removal of incumbent management, because the term of office of only
one-third of the directors (depending upon the class whose term expires) will
expire in a given year. Further, directors elected by the holders of Common
Stock may be removed only by the affirmative vote of shareholders holding at
least 75% of all of the votes entitled to be cast for the election of
directors.
Consulting Fee Arrangements with the Roberts Companies. Roberts
Properties, for River Oaks, Highland Park, Holcomb Bridge, Windsong, and
Crestmark; Roberts Group, for Rosewood Plantation, Preston Oaks, and Bentley
Place; and Roberts Management, for the Plantation Trace Community and the
Plantation Trace Shoppes, are presently entitled to receive a consulting fee of
5% of the gross sales proceeds upon a sale by the Operating Partnership of the
applicable property and also upon a "change in control" of either the Operating
Partnership or the Company (except 6% in the case of Plantation Trace; an amount
customary for sales of similar properties for Windsong; and 3% in the case of
Bentley Place). See Part I, Item 7, "Certain Relationships and Transactions -
Payments to the Roberts Companies for Services - Consulting Fees." Because of
the substantial payments that would be triggered in the event of a change in
control, those consulting fee arrangements may deter a takeover of the Company.
VOTING RIGHTS
Shareholders are entitled to elect the Company's Board of Directors at
each annual meeting of the Company, although the Board is classified, i.e.,
separated into three separate classes, as previously noted.
The Articles of Incorporation provide that the affirmative vote of
three-quarters of all of the votes entitled to be cast on the matter shall be
necessary to approve and authorize the following acts of the Company:
(a) amendment of the Articles of Incorporation (except: to amend the
Articles to terminate the Company's status as a REIT upon approval of a majority
of all of the votes entitled to be cast on the matter; to change the name of the
Company; to increase the number of authorized shares of Common Stock or
Preferred Stock or both; or to amend the Articles of Incorporation by the filing
of articles of amendment designating the terms of one or more series of the
Preferred Stock, which under the Articles may be done by the Board of Directors
without a shareholder vote);
(b) consolidation of the Company with one or more companies to form a
new consolidated company;
(c) merger of the Company into another company, with the Company not
being the survivor;
(d) a share exchange in which shares of the Company will be acquired;
(e) sale, lease, exchange or other transfer of all, or substantially
all, of the property and assets of the Company, including its goodwill and
franchises; or
(f) the voluntary or involuntary liquidation, dissolution or winding-up
of the Company.
TRANSFER AGENT
The Company's transfer agent is First Union National Bank of North
Carolina.
THE OPERATING PARTNERSHIP AGREEMENT AND THE UNITS
General. The Company and the Operating Partnership are organized in an
"UPREIT" structure, with the Company owning a 66.4% interest in the Operating
Partnership as its sole general partner. This following section explains the
material features of the Operating Partnership Agreement and the Units.
Distributions and Allocations. Distributions from the Operating
Partnership are to be made (pending issuance, if ever, of interests in the
Operating Partnership other than Units) to all partners in proportion to the
respective numbers of Units held by them. Distributions from the Operating
Partnership are to be made only as and when determined by the
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Company as general partner of the Operating Partnership. To obtain funds to
satisfy certain requirements which the Company must satisfy to qualify as a
REIT, the Company is expected to cause the Operating Partnership to make
periodic distributions to itself, and consequently and concurrently to the
limited partners in the Operating Partnership. The Operating Partnership's
items of income, gain, loss, deduction and credit are generally to be allocated
(pending issuance, if ever, of interests in the Operating Partnership other
than Units) to all partners in proportion to the respective numbers of Units
held by them.
Contributions. Although the Operating Partnership Agreement does not
require contributions from the Operating Partnership's partners, under certain
circumstances funds may be applied to obligations of the Operating Partnership
to effect tax withholdings as respects partners, in which event such funds will
be subject to recovery either by actual withholding from amounts otherwise
distributable to partners or directly from partners upon demand by the Operating
Partnership.
Management. The Operating Partnership was organized as a Georgia limited
partnership and exists pursuant to the terms of the Operating Partnership
Agreement. The Company, as sole general partner of the Operating Partnership,
has the exclusive power and authority to conduct the business of the Operating
Partnership. Accordingly, the limited partners may not take part in the
operation, management or control of the business of the Operating Partnership by
virtue of being holders of Units, and, except as described below, they have no
right to approve or veto actions taken by the general partner. In particular,
the Company, as general partner of the Operating Partnership, is authorized to
cause the Operating Partnership to refinance and/or to sell or otherwise dispose
of any or all of the Operating Partnership's assets without obtaining the
consent or approval of any limited partner. The limited partners may not remove
the Company as general partner of the Operating Partnership.
In its capacity as general partner of the Operating Partnership, the
Company is required to act as a fiduciary for the limited partners. At the same
time, the Company, as a widely held organization, owes fiduciary duties to its
shareholders. One can expect that, in some circumstances, the duties of the
Company to its shareholders will conflict with its duties to the limited
partners; in particular, in view of the fact that the Company intends to
continue to qualify as a REIT, its own tax objectives may on occasion differ
from those of limited partners in the Operating Partnership. In general, such
potential conflicts are expected to be resolved in favor of the Company's
shareholders, and the Operating Partnership Agreement includes provisions
authorizing that resolution.
In particular, although as general partner of the Operating Partnership
the Company is to act in good faith in the best interest of the Operating
Partnership, in assessing whether any actions meet those standards there is to
be no requirement for consideration of the separate interests of the limited
partners in the Operating Partnership, including the tax consequences thereto.
Further, the Operating Partnership Agreement provides that any action will be
considered to meet those standards if it is taken by the Company in the good
faith belief that it is necessary to protect the ability of the Company to
continue to qualify as a REIT or to avoid certain taxes that may be assessed on
REITs in certain circumstances.
Issuance of Additional Interests in the Operating Partnership. The
Company is authorized to cause the Operating Partnership from time to time to
issue additional Units or other interests in the Partnership, including
interests with economic and control rights different from and preferential to
corresponding rights associated with Units, provided that no such additional
Units or other interests in the Partnership shall be issued to the Company
unless either (i) such additional Units or other interests are issued to all
partners in proportion to their respective ownership percentages (i.e., at least
initially, the respective percentages which the number of Units held by each
partner bears to the total of all outstanding Units) or (ii) the additional
Units or other interests are issued in connection with an issuance by the
Company of shares of its own stock carrying rights such that the economic
interests attributable to such shares are substantially similar to the rights of
the additional interests in the Operating Partnership, and the net proceeds of
issuance of such shares are contributed to the Operating Partnership. No
issuance of interests in the Operating Partnership other than Units is presently
contemplated.
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Company's Right to Convert Interests in the Operating Partnership. The
Operating Partnership Agreement provides that the Company is entitled, at any
time and from time to time, to convert portions of its interest in the Operating
Partnership from general partner interests to limited partner interests, so long
as, immediately thereafter, the Company continues to hold, as general partner,
either (i) interests in the Operating Partnership having aggregate value at
least equal to 25% of the aggregate value of all outstanding interests in the
Operating Partnership, or (ii) at least 25% of all outstanding Units and of all
other classes and series of interests in the Operating Partnership.
Transferability of Interests in the Operating Partnership. The
Operating Partnership Agreement provides that the Company may not transfer any
of its interests as general partner in the Operating Partnership without the
consent of (i) a majority in interest of the limited partners (including the
Company, to the extent of its interest in the Operating Partnership as a limited
partner), and (ii) a majority in interest of all limited partners other than the
Company and its Affiliates. The Operating Partnership Agreement also provides
that no limited partner will be entitled, without the Company's consent, to
assign or otherwise transfer all or any portion of his or her Units, or to
effect substitution of an assignee for such partner as a partner in the
Operating Partnership. If an assignment of an interest in the Operating
Partnership is permitted, but not full substitution, the assignee will be
entitled only to receive the distributions from the Operating Partnership which
would otherwise be made to the assignor.
Operations. The Operating Partnership Agreement permits the Company, as
general partner of the Operating Partnership, to control the Operating
Partnership's affairs, and in particular to do so in furtherance of its own tax
objectives. Thus the Operating Partnership Agreement authorizes the Company to
operate the Operating Partnership in a manner that will enable the Company to
satisfy the requirements for classification as a REIT. The Company does not and
will not receive any compensation for its services as general partner of the
Operating Partnership. As a partner in the Operating Partnership, however, the
Company has rights to allocations and distributions comparable to those of other
partners in the Operating Partnership. In addition, as noted immediately below,
the Operating Partnership pays all expenses incurred by the Company.
Inability of the Company to Engage in Other Businesses; Reimbursement of
All Company Expenses. While the Operating Partnership is in existence, the
Company may not conduct any business other than the business of the Operating
Partnership, and may not own assets other than its interest(s) in the Operating
Partnership and bank accounts and similar assets (expected to be incidental)
necessary for it to fulfill its responsibilities. As a corollary to this
restriction, the Operating Partnership pays all expenses incurred by the
Company, including, but not limited to, expenses relating to the Crestmark. L.P.
merger, the ongoing administration and operation of the Company and the
Operating Partnership, and any other offering of additional Units or Shares or
other interests in the Operating Partnership and/or the Company. Other persons
(including officers, directors, employees, agents and other affiliates of the
Company) are not prohibited under the Operating Partnership Agreement from
engaging in other business activities and are not required to present any
business opportunities to the Operating Partnership.
Borrowing by the Operating Partnership. The Company is authorized to
cause the Operating Partnership to borrow money and to issue and guarantee debt
as the Company deems necessary for the Operating Partnership to conduct its
activities. Such debt may be secured by mortgages, deeds of trust, liens or
encumbrances on the real estate assets of the Operating Partnership or of
organizations in which the Operating Partnership has direct or indirect
interests. The Company also may cause the Operating Partnership to borrow money
to enable the Operating Partnership to make distributions in an amount
sufficient to permit the Company to qualify as a REIT and to avoid the payment
of federal income tax.
Redemption/Purchase of Units. Holders of Units in the Operating
Partnership (other than the Company) have the right to require the Operating
Partnership to redeem their Units beginning when both of the following
conditions have been satisfied: (a) the Shares potentially issuable in
connection with such issuance have been listed on a national securities exchange
or Nasdaq (in either case, an "Exchange"), and (b) such Shares have been
registered with all applicable securities authorities. The foregoing conditions
have not yet been satisfied. In addition, the Company's articles of
incorporation limit ownership by any one holder to 6% of the outstanding Shares
(other than by Mr. Roberts, who is limited to 25%), and holders of Units
(sometimes referred to herein as "Unitholders") are not entitled to submit
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Units for redemption if and to the extent that the issuance of Shares by the
Company in redemption thereof would cause such ownership limits to be violated.
Upon submittal of Units for redemption, the Operating Partnership will have
the option either (a) to pay cash for such Units in an amount equal to the
number of such Units multiplied by the average of the daily market prices of
the Shares for the 10 consecutive trading days prior to the redemption date
(the "Cash Redemption Price"), or (b) to require the Company to acquire such
Units in exchange for either (x) the Cash Redemption Price, or (y) a number of
Shares equal to the number of Units submitted for redemption. The Company
anticipates that it will issue Shares in exchange for all Units submitted for
redemption. The Company will have the right at its election to purchase all
outstanding Units from Unitholders in exchange for Shares, beginning on April
1, 1997 and at any time thereafter. This purchase right is subject to the same
conditions that apply to the Unitholders' redemption right. See Part II, Item
1, "Market Price of and Dividends on the Registrant's Common Equity and Other
Shareholder Matters" for a discussion of the Company's intentions to seek to
list the Shares on an Exchange.
No Withdrawal by Limited Partners. No limited partner has the right to
withdraw from or reduce his or her investment or interest in the Operating
Partnership except as a result of the redemption or purchase of his or her
Units, as described above under "Redemption/Purchase of Units."
Dissolution, Winding Up and Termination. The Operating Partnership will
continue until December 31, 2093, unless sooner dissolved and terminated. The
Operating Partnership will be dissolved prior to the expiration of its term upon
the occurrence of the earliest of: (a) any event following which all or
substantially all of the assets of the Operating Partnership consist of cash and
other assets which are readily marketable in an established active market; (b)
any event or circumstances producing dissolution by operation of law; (c) the
decision by the Company, with the concurrence of a majority in interest of the
limited partners (including the Company, to the extent of its interest in the
Operating Partnership as a limited partner), that it would be in the best
interest of the Operating Partnership to dissolve; or (d) the liquidation or
bankruptcy of the Company, or of its retirement or resignation (which would
itself constitute a breach of the Operating Partnership Agreement), or of any
other event of withdrawal as respects the Company (in any such case, a
"disqualification"), other than a permitted transfer by the Company of its
interest as general partner in the Operating Partnership. The Operating
Partnership Agreement provides, however, that in the case of dissolution for a
reason described in clause (d) preceding, if at least (i) a majority in interest
of the partners, other than the Company and its Affiliates, and (ii) a majority
in interest of all partners, so determine within 90 days of such dissolution,
the Operating Partnership will be reconstituted on such terms and conditions as
such majorities in interest may in good faith determine, and all other partners
will be required to join in such reconstitution (except that no partner can be
required to become a general partner in the absence of his or her consent).
Although the Operating Partnership Agreement obliges all partners to join in a
reconstitution of the Operating Partnership under the circumstances described in
the preceding sentence, such obligations may not be specifically enforceable; as
a result, a partner refusing to join in such a reconstitution may have the power
to prevent reconstitution of the Operating Partnership, although by so doing the
refusing partner would be exposing himself or herself to liability for breach of
the Operating Partnership Agreement. In the event of "disqualification" of the
Company, the Company will become a limited partner in the Operating Partnership,
retaining its Units (and, if applicable, the economic incidents of its other
interests in the Operating Partnership).
Following dissolution, in the absence of reconstitution, the Operating
Partnership's "liquidating partners" are to proceed with the orderly liquidation
of the Operating Partnership's assets and liabilities and, eventually,
termination of the Operating Partnership. The Operating Partnership's
"liquidating partners" will be the Company, acting alone, unless the Company is
not then the general partner of the Operating Partnership, in which event the
"liquidating partners" will be the Operating Partnership's general partner(s),
or, if there are then no general partners, the Operating Partnership's limited
partners, acting by concurrence of a majority in interest (including, if
applicable, the Company to the extent of its interest as a limited partner in
the Operating Partnership).
Amendments. Generally, the Operating Partnership Agreement can be
amended with, and only with, the consent of the Company and a majority in
interest of the limited partners (including the Company, to the extent of its
interest in the Operating Partnership as a limited partner); moreover, any
amendment which would increase the obligation of any partner to contribute to
the Operating Partnership or the responsibility of any limited partner as such
for liabilities of the Operating Partnership will also require the written
approval of all partners so affected, and no requirement in the
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Operating Partnership Agreement for the concurrence of any partner or partners
or particularly-sized group of partners can be altered except with the written
concurrence of such partner, partners, or particularly-sized group.
Although approvals of limited partners are generally required for
amendments to the Operating Partnership Agreement, the Company can unilaterally
amend the Operating Partnership Agreement to facilitate or implement any of the
following purposes: (1) to add to the obligations of the Company or surrender
any right or power granted to the Company or any of its affiliates for the
benefit of the limited partners, without producing a material adverse impact on
the limited partners; (2) to set forth the designations, rights, powers, duties,
and preferences of the holders of additional interests in the Operating
Partnership (other than Units); (3) to reflect a change that is of an
inconsequential nature, or to cure any ambiguity, correct or supplement any
provision in the Operating Partnership Agreement not inconsistent with law or
with other provisions, or to make other changes with respect to matters arising
under the Operating Partnership Agreement that will not be inconsistent with law
or with the provisions of the Operating Partnership Agreement, in any such case
without producing a material adverse impact on the limited partners; or (4) to
satisfy any requirements, conditions, or guidelines contained in any order,
directive, opinion, ruling or regulation of a federal or state agency or
contained in federal or state law, without producing a material adverse impact
on the limited partners.
Management Liability. Any action of the Company as the general partner
of the Operating Partnership or any decision of the Company as the general
partner of the Operating Partnership to refrain from acting on behalf of the
Operating Partnership, undertaken in a good faith belief that such action or
omission is necessary or advisable to protect the ability of the Company to
continue to qualify as a REIT or to avoid the incurring by the Company of any
taxes under sections 857 and/or 4981 of the Internal Revenue Code, is expressly
authorized under the Operating Partnership Agreement, is deemed to be approved
by all of the Unitholders, and shall be considered to be in the best interest of
the Operating Partnership and taken in good faith with respect to the Operating
Partnership. Further, the Operating Partnership Agreement provides that each
partner in the Operating Partnership and the Operating Partnership itself
releases each shareholder, director, officer, trustee, limited partner and other
Affiliate of the Company from all duties of care and loyalty owed, as a result
of the existence of the Operating Partnership, by each such person to such
partner or the Operating Partnership. (Such release may be unenforceable as
against public policy.)
Management Indemnification. Under the Operating Partnership Agreement,
the Operating Partnership is required to indemnify any person or entity made a
party to a proceeding by reason of his or its status as the general partner or
as a director or officer of the Operating Partnership or the Company, or by
reason of such person's liability for any indebtedness of the Operating
Partnership. In addition, the Company as the general partner of the Operating
Partnership may designate other persons from time to time whether before or
after the event giving rise to potential liability, in its sole and absolute
discretion, to be indemnified under the provisions of the Operating Partnership
Agreement. The Operating Partnership is required to indemnify any such person
from and against any and all losses, including attorneys' fees and other legal
fees and expenses, relating to the operations of the Operating Partnership or
the Company in which such person may be or is threatened to be involved unless
it is established that: (i) the act or omission of such person was material to
the matter giving rise to the proceeding and either was committed in bad faith
or was the result of active and deliberate dishonesty; (ii) such person actually
received an improper personal benefit in money, property or services; or (iii)
in the case of any criminal proceeding, such person had reasonable cause to
believe that the act or omission was unlawful. The Operating Partnership shall
pay or reimburse reasonable expenses incurred by such person upon receipt by the
Operating Partnership of (i) a written affirmation by such person of his or her
good faith belief that the standard of conduct necessary for indemnification has
been met, and (ii) a written undertaking by or on behalf of such person to repay
the amount if it shall ultimately be determined that the standard of conduct has
not been met. The Operating Partnership may, but is not obligated to, purchase
and maintain insurance for any such purposes.
Voting Rights. The Company may not transfer its interest as a general
partner in the Operating Partnership without the consent of both (i) a majority
in interest of the limited partners in the Operating Partnership (including the
Company, to the extent of its interest in the Operating Partnership as a limited
partner therein) and (ii) a majority in interest of all limited partners in the
Operating Partnership other than the Company and its Affiliates. Also, a
majority in interest of the limited partners in the Operating Partnership other
than the Company and its Affiliates, and a majority in interest of all partners
in the Operating Partnership, including the Company and its Affiliates, may
reconstitute the
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Operating Partnership within 90 days after a dissolution arising out of a
liquidation or bankruptcy of the Company as general partner, or of its
retirement or resignation in breach of the Operating Partnership Agreement, or
of any other event of withdrawal by the Company as general partner. If the
general partner decides that it would be in the best interest of the Operating
Partnership to dissolve, such dissolution may be effectuated only with the
concurrence of a majority in interest of the limited partners of the Operating
Partnership, including the Company to the extent of its interest in the
Operating Partnership as a limited partner.
As described above, certain amendments to the Operating Partnership
Agreement may be made only with the approval of the Company as general partner
and a majority in interest of the limited partners (including the Company, to
the extent of its interest in the Operating Partnership as a limited partner),
provided that any amendment to the Operating Partnership Agreement that
increases the obligation of any partner to contribute to the Operating
Partnership or the responsibility of any limited partner as such for liabilities
of the Operating Partnership shall also require the written approval of all
partners so affected.
Unitholders will have no right to vote as shareholders of the Company
until they exercise their right to redeem Units and receive Shares, or their
Units are purchased by the Company for Shares. See "Redemption/Purchase of
Units" above.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
NO PUBLIC TRADING MARKET
There is no public or private trading market for the Common Stock or for
Units in the Operating Partnership. On May 3, 1996 there were 803 holders of
record of the Common Stock.
The Company currently has 4,123,413 Shares outstanding. In addition,
2,089,631 Shares have been reserved for issuance to Unitholders from time to
time upon their exercise of certain redemption rights as explained below and in
Part I, Item 1, "Description of Business - The Operating Partnership."
COMPANY'S INTENTIONS TO SEEK TO LIST THE SHARES ON AN EXCHANGE
The Company intends to seek to list the Shares on an Exchange to provide
shareholders with a way to sell their Shares should they desire to do so. The
Company is presently considering two alternatives to accomplish this listing:
(a) by seeking to list the Shares itself, or (b) by engaging in a reverse merger
of the Company into a smaller REIT whose shares are already listed on an
Exchange. No assurances can be given regarding which alternative the Company
will ultimately decide to pursue, and no assurances can be given that the Shares
will ever be listed on an Exchange or that an active trading market for the
Shares will develop.
In addition to the Company's desire to provide shareholders with a way
to sell their Shares should they decide to do so, the Company is contractually
obligated to seek a listing of the Shares on an Exchange. The Operating
Partnership Agreement provides that Unitholders have a right to require the
Operating Partnership to redeem their Units at any time and from time to time
after March 31, 1996 if certain conditions have been satisfied. These
conditions include listing the Shares that the Company intends to exchange for
Units submitted for redemption, and the Company has agreed in the Operating
Partnership Agreement to use reasonable efforts to cause Shares sufficient to
purchase all Units that may be submitted for redemption to be listed on an
Exchange and to be registered with all appropriate federal and state securities
authorities so that the Shares may be issued to the Unitholder seeking
redemption.
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Although the Company believes that it presently meets all of the
requirements for the alternate listing categories under both the AMEX and Nasdaq
requirements, the Company has not applied for a listing, and no assurances can
be given that the Shares will in fact be listed. The timing of any listing of
the Shares is uncertain. Although the reverse merger alternative could possibly
be accomplished as early as the fall of 1996, which is earlier than the Company
will likely be able to seek to list the Shares itself, no assurances can be
given that any such transaction will be attempted or accomplished.
Assuming the Shares are listed and are registered with all appropriate
federal and state securities authorities, however, as many as 2,089,631 Units
could be redeemed for Shares, and the holders of such Shares may seek to sell
them on the market. No prediction can be made as to the effect, if any, that
future sales of Shares of Common Stock, or the availability of Shares for future
sale, will have on the market price prevailing from time to time. Sales of
substantial amounts of Shares of Common Stock (including Shares issued upon the
redemption of Units), or the perception that such sales could occur, could
adversely affect the prevailing market price of the Shares.
NO DISTRIBUTIONS THROUGH 1995; COMPANY'S PAYMENT OF DISTRIBUTIONS IN APRIL 1996
Until April 15, 1996, the Company had paid no distributions on the
Common Stock since its inception. The Company depends upon distributions from
the Operating Partnership to fund its distributions to shareholders.
Distributions by the Operating Partnership, and thus distributions by the
Company, will continue to be at the discretion of the Board of Directors and
will be equal in amount for each Unit or Share. The Company and the Operating
Partnership paid their first distributions, for the first quarter of 1996, of
$.11875 per Share/Unit on April 15, 1996 to holders of record on March 19,
1996. (This amount, if annualized, would equal $.475 per Share/Unit.) The
Company intends to maintain the expected quarterly distribution of $.11875 per
Share/Unit throughout 1996. The projected annual distributions in 1996 are
based upon management's knowledge and belief of the Company's expected results
of operations and cash flows for 1996. In particular, management reviewed the
budgeted 1996 revenues and expenses for each stabilized property to arrive at
total projected cash flow for 1996. The cash flow budget did not include the
properties that were expected to be under construction during 1996. Based upon
these estimates, the Company's Board of Directors approved the payment of
quarterly distributions of $0.11875 per Share/Unit, noting that such amount,
when annualized to $.475 per Share/Unit, was equal to approximately 75% of
budgeted cash flow for 1996 and 5% of the $9.50 price per Share used in the
Cash Offering. There can be no assurances that any distributions will be made
after April 1996 or that the expected level of distributions will be maintained
by the Operating Partnership and the Company.
The Company and the Operating Partnership believe that their estimate of
funds available for distribution in 1996 constitutes a reasonable basis for
setting the expected distribution amount for 1996. The actual return that the
Operating Partnership will realize and cash that will be available for
distributions to Unitholders and shareholders will be affected by a number of
factors, including the revenues received from the existing Communities, the
acquisition or development of other apartment communities by the Operating
Partnership, the operating expenses of the Communities, the expenses of the
Operating Partnership and the Company, the interest expense of the Operating
Partnership, unanticipated capital expenditures, the adequacy of reserves, and
the effects of new competition in the markets where the Communities are located.
The Company elected to become a REIT beginning with the partial year
ended December 31, 1994. To maintain its qualification as a REIT under the
Internal Revenue Code, the Company must make annual distributions to
shareholders of at least 95% of its taxable income (which does not include net
capital gains). Under certain circumstances, the Company may be required to
make distributions in excess of cash available for distribution in order to meet
such distribution requirements.
ITEM 2. LEGAL PROCEEDINGS.
Neither the Company, the Operating Partnership, nor the Communities are
presently subject to any material litigation nor, to the Company's knowledge, is
any material litigation threatened against any of them. Routine litigation
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arising in the ordinary course of business is not expected to result in any
material losses to the Company and the Operating Partnership.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
In July 1994, the Company issued 163,061 Shares to Mr. Charles S.
Roberts at a price of $3.04 per Share in cash, or $495,705 in the aggregate, in
the initial capitalization of the Company.
In October 1994, the Company issued a total of 1,043,647 Shares in
connection with the consolidation into the Operating Partnership of four limited
partnerships sponsored by Mr. Roberts. Holders of limited partnership interests
in two of the partnerships received these Shares, which the Company valued at
$8.50 per Share, or $8,871,000 in the aggregate. The Operating Partnership
acquired the Preston Oaks and Highland Park Communities in consideration for the
Shares. (Holders of limited partnership interests in the other two partnerships
received a total of 1,035,553 Units valued at $8.50 per Unit, and the Operating
Partnership acquired the River Oaks and Rosewood Plantation Communities in
consideration thereof.)
In March 1995, the Operating Partnership acquired Holcomb Bridge, L.P.
by merger. Holcomb Bridge, L.P. had previously acquired 11.8 acres of
undeveloped land and raised the equity to develop and construct a 146-unit
apartment community. In connection with the merger of Holcomb Bridge, L.P. into
the Operating Partnership, the Company issued 609,873 Shares valued at $8.50 per
Share, or $5,183,921 in the aggregate, to Mr. Roberts, the general partner of
Holcomb Bridge, L.P., and the limited partners of Holcomb Bridge, L.P.
In June 1995 the Company issued 78,038 Shares to Mr. Roberts in exchange
for an equal number of Units.
In a "best efforts, minimum or none" offering conducted from June 12,
1995 through August 25, 1995, the Company sold through Spalding & Company, an
NASD member broker-dealer, an aggregate of 736,000 Shares at a price of $9.00
per Share. Aggregate net proceeds of the offering were $5,988,080. The Shares
were offered to existing holders of Shares and Units as well as to other persons
who were residents of the State of Georgia. The offering was registered under
the Georgia Securities Act of 1973, as amended.
On November 1, 1995, the Company commenced an offering (the "Cash
Offering") of up to 736,850 Shares of its Common Stock for $9.50 per Share in
cash (increased from the original maximum of 631,580 Shares after the original
offering was fully subscribed). Spalding & Company is the broker-dealer in this
"best efforts, minimum or none" offering. Upon the initial closing of the
offering on March 29, 1996 at which 443,675 Shares were issued, the Operating
Partnership purchased approximately 22.5 acres of land for the development and
construction of the 180-unit Howell Ferry Community on such land. Net proceeds
from the sale of more than the minimum 442,200 Shares will be used for one or
more of the following purposes at the discretion of the Company's Board of
Directors: (a) reducing the amount of debt that would otherwise be obtained to
finance the Howell Ferry Community; (b) funding the acquisition of an additional
multifamily apartment community or other real estate assets; and (c) providing
funds for general corporate purposes. The offering was registered under the
Georgia Securities Act of 1973, as amended. At the closing of the offering on
May 7, 1996, the Company issued an additional 255,500 Shares, thus the Company
sold a total of 699,175 Shares in the offering.
In December 1995 the Company issued a total of 45,762 Shares to three
individuals (including Mr. Roberts, who received 29,086 Shares) in exchange for
an equal number of Units, and in April 1996 the Company issued 2,917 Shares to
Mr. Charles R. Elliott, the Company's Chief Financial Officer, in exchange for
an equal number of Units.
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In March 1996, the Operating Partnership acquired Bentley Place, L.P. by
merger. Bentley Place, L.P. owned the 117-unit Bentley Place Community. In
connection with such merger, the Company issued 744,940 Shares valued at $9.50
per Share, or $7,076,930 in the aggregate, to the partners of Bentley Place,
L.P.
The Company issued the Shares in each of the transactions described
above in reliance upon the "intrastate" exemption from securities registration
provided under Section 3(a)(11) of the Securities Act of 1933 and Rule 147
promulgated by the Securities and Exchange Commission regarding intrastate
offerings. The Company believes that it has satisfied the conditions of Rule
147 for each of the offerings. In each merger transaction a prospectus/consent
solicitation statement was distributed to the limited partners of the solicited
limited partnership to seek their approval of the applicable merger. In the two
offerings of Shares for cash a prospectus that was included in the registration
statement filed with the Georgia Commissioner of Securities was distributed to
each offeree. All of the Communities are located in the State of Georgia.
Based in part upon written representations of each offeree, the Company believes
that all offerees were residents of the State of Georgia. Limited partners in
all but one of the Community Partnerships originally purchased their limited
partnership units in "intrastate" offerings registered under the Georgia
Securities Act of 1973, as amended. The few limited partners of each of the
Community Partnerships who no longer resided in the State of Georgia at the time
of the applicable solicitation received cash in lieu of Shares according to the
terms of each consent solicitation and merger agreement, thus no security was
offered or sold to such persons. The certificates evidencing the Shares have a
Rule 147 "legend" describing the applicable restrictions on transfer printed on
them, and the Company has issued stop transfer instructions to its transfer
agent with respect to such Shares. Further, the offerees were notified that the
applicable restrictions on transfer and procedures will apply in connection with
the issuance of new certificates for any of the Shares that are presented for
transfer during the nine month period from the end of the offering during which
transfer of the Shares is restricted to residents of the State of Georgia.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's officers and directors are and will be indemnified under
Georgia law, the Company's By-Laws, and the Operating Partnership Agreement
against certain liabilities.
As permitted by Georgia law, the Company's Articles of Incorporation
provide that a director shall not be personally liable to the Company or its
shareholders for monetary damages for breach of duty of care or any other duty
owed to the Company as a director, except that such provision shall not
eliminate or limit the liability of a director (i) for any appropriation, in
violation of his duties, of any business opportunity of the Company, (ii) for
acts or omissions that involve intentional misconduct or a knowing violation of
law, (iii) for unlawful corporate distributions, or (iv) for any transaction
from which the director received an improper personal benefit.
Under the By-Laws, the Company is required to indemnify to the fullest
extent permitted by the GBCC, any individual made a party to a proceeding (as
defined in the GBCC) because he is or was a director or officer, against
liability (as defined in the GBCC) incurred in the proceeding, if he acted in a
manner he believed in good faith to be in or not opposed to the best interests
of the Company and, in the case of any criminal proceeding, he had no reasonable
cause to believe his conduct was unlawful. The Company is required to pay for
or reimburse the reasonable expenses incurred by a director or officer who is a
party to a proceeding in advance of final disposition of the proceeding if: (a)
such person furnishes the Company a written affirmation of his good faith belief
that he has met the standard of conduct set forth above; and (b) such person
furnishes the Company a written undertaking to repay any advances if it is
ultimately determined that he is not entitled to indemnification. The written
undertaking required by clause (b) above must be an unlimited general obligation
of such person but need not be secured and may be accepted without reference to
financial ability to make repayment. A corporation may not indemnify a director
under this provision of the GBCC (i) in connection with a proceeding by or in
the right of the corporation in which the director was adjudged liable to the
corporation; or (ii) in connection with any other proceeding in which he was
adjudged liable on the basis that he improperly received a personal benefit.
The rights to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in the
By-Laws are not exclusive of any other right which any person may have under any
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statute, provision of the Articles of Incorporation, provision of the By-Laws,
agreement, vote of shareholders or disinterested directors, or otherwise.
Under the Operating Partnership Agreement, the Operating Partnership is
required to indemnify any person made a party to a proceeding by reason of his
or its status as the general partner or as a director or officer of the
Operating Partnership or the Company, or by reason of such person's liability
for any indebtedness of the Operating Partnership. In addition, the Company as
the general partner of the Operating Partnership may designate other persons
from time to time whether before or after the event giving rise to potential
liability, in its sole and absolute discretion, to be indemnified under the
provisions of the Operating Partnership Agreement. The Operating Partnership is
required to indemnify any such person from and against any and all losses,
including attorneys' fees and other legal fees and expenses, relating to the
operations of the Operating Partnership or the Company in which such person may
be or is threatened to be involved unless it is established that: (i) the act
or omission of such person was material to the matter giving rise to the
proceeding and either was committed in bad faith or was the result of active and
deliberate dishonesty; (ii) such person actually received an improper personal
benefit in money, property or services; or (iii) in the case of any criminal
proceeding, such person had reasonable cause to believe that the act or omission
was unlawful. The Operating Partnership shall pay or reimburse reasonable
expenses incurred by such person upon receipt by the Operating Partnership of
(i) a written affirmation by such person of his or her good faith belief that
the standard of conduct necessary for indemnification has been met, and (ii) a
written undertaking by or on behalf of such person to repay the amount if it
shall ultimately be determined that the standard of conduct has not been met.
The Operating Partnership may, but is not obligated to, purchase and maintain
insurance for any such purposes.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Company and/or the Operating Partnership pursuant to the foregoing provisions,
the Company has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is therefore unenforceable.
PART F/S
The financial statements contained in the accompanying Index to
Consolidated Financial Statements covered by Independent Auditors' Report are
filed as part of this Registration Statement on Form 10-SB/A No. 1.
PART III
ITEM 1. INDEX TO EXHIBITS
Except for exhibit 6.21, which is filed with this Form 10-SB/A No. 1,
all exhibits were filed with the Company's initial filing of its Registration
Statement on Form 10-SB on March 22, 1996 and are incorporated herein by
reference.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
2.1 Articles of Incorporation of Roberts Realty Investors, Inc. filed with the Georgia Secretary of
State on July 22, 1994.
2.2 Bylaws of Roberts Realty Investors, Inc.
3.1 Agreement of Limited Partnership of Roberts Properties Residential, L.P., dated as of July 22, 1994.
3.1.1 First Amended and Restated Agreement of Limited Partnership of Roberts Properties Residential,
L.P., dated as of October 1, 1994.
</TABLE>
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<TABLE>
<S> <C>
3.1.2 Amendment #1 to First Amended and Restated Agreement of Limited Partnership of Roberts Properties Residential,
L.P., dated as of October 13, 1994.
3.2 Certificate of Limited Partnership of Roberts Properties Residential, L.P. filed with the Georgia Secretary
of State on July 22, 1994.
3.2.1 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).
3.2.2 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).
3.2.3 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).
3.2.4 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).
6.1.1 Partnership Administration Agreement between Roberts Properties Preston Oaks, L.P. and Roberts Properties,
Inc., dated July 21, 1993 (Preston Oaks Syndication).
6.1.2 Design and Development Agreement between Roberts Properties Preston Oaks, L.P. and Roberts Properties, Inc.,
dated July 21, 1993 (Preston Oaks Syndication).
6.1.3 Construction Administration Agreement between Roberts Properties Preston Oaks, L.P. and Roberts Properties,
Inc., dated July 21, 1993 (Preston Oaks Syndication).
6.1.4 Property Management Start-up Agreement between Roberts Properties Preston Oaks, L.P. and Roberts Properties
Management, Inc., dated July 21, 1993 (Preston Oaks Syndication).
6.1.5 Finish, Selection and Interior Design Agreement between Roberts Properties Preston Oaks, L.P. and Roberts
Properties, Inc., dated July 21, 1993 (Preston Oaks Syndication).
6.1.6 Standard Form of Agreement between Owner and Contractor between Roberts Properties Preston Oaks, L.P. and
Roberts Properties Construction, Inc., dated as of July 12, 1993 (Preston Oaks).
6.1.7 Consulting Agreement between Roberts Properties Preston Oaks, L.P. and Roberts Properties Group, Inc., dated
July 21, 1993 (Preston Oaks Syndication).
6.1.7.1 Amendment #1 to Consulting Agreement regarding Preston Oaks, dated October 13, 1994 (1994 Consolidation).
6.1.8 Property Management Agreement between Roberts Properties Preston Oaks, L.P. and Roberts Properties Management,
Inc., dated July 21, 1993 (Preston Oaks Syndication).
6.1.8.1 Amendment #1 to Property Management Agreement regarding Preston Oaks, dated October 13, 1994 (1994
Consolidation).
</TABLE>
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<TABLE>
<S> <C>
6.2.1 Design and Development Agreement between Roberts Properties Highland Park, L.P. and Roberts Properties, Inc.,
dated May 9, 1994 (Highland Park Syndication).
6.2.2 Finish Selection and Interior Design Agreement between Roberts Properties Highland Park, L.P. and Roberts
Properties, Inc., dated May 9, 1994 (Highland Park Syndication).
6.2.3 Construction Administration Agreement between Roberts Properties Highland Park, L.P. and Roberts Properties,
Inc., dated May 9, 1994 (Highland Park Syndication).
6.2.4 Partnership Administration Agreement between Roberts Properties Highland Park, L.P. and Roberts Properties,
Inc., dated May 9, 1994 (Highland Park Syndication).
6.2.5 Standard Form of Agreement between Owner and Contractor between Roberts Properties Highland Park, L.P. and
Roberts Properties Construction, Inc., dated as of May 9, 1994 (Highland Park).
6.2.6 Consulting Agreement between Roberts Properties Highland Park, L.P. and Roberts Properties, Inc., dated May 9,
1994 (Highland Park Syndication).
6.2.6.1 Amendment #1 to Consulting Agreement regarding Highland Park, dated October 13, 1994 (1994 Consolidation).
6.2.7 Property Management Agreement between Roberts Properties Highland Park, L.P. and Roberts Properties Management,
Inc., dated May 9, 1994 (Highland Park Syndication).
6.2.7.1 Amendment #1 to Property Management Agreement regarding Highland Park, dated October 13, 1994 (1994 Consolidation).
6.3.1 Solicitation Agreement dated September 1, 1994, by and among Roberts Realty Investors, Inc., Roberts Properties
Residential, L.P., Charles S. Roberts, and Spalding & Company (1994 Consolidation).
6.3.2 Consolidation Agreement and Plan of Merger, dated October 13, 1994, by and among Roberts Realty Investors,
Inc.; Roberts Properties Residential, L.P.; Charles S. Roberts; 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. (1994 Consolidation).
6.3.3 Consulting Agreement between Roberts Properties, Inc. and Roberts Properties River Oaks, LP., dated August 21, 1991
(River Oaks Syndication).
6.3.3.1 Amendment #1 to Consulting Agreement regarding River Oaks, dated October 13, 1994 (1994 Consolidation).
6.3.4 Property Management Agreement between Roberts Properties Management, Inc. and Roberts Properties River Oaks, L.P.,
dated August 21, 1991 (River Oaks Syndication).
6.3.4.1 Amendment #1 to Property Management Agreement regarding River Oaks, dated October 13, 1994 (1994 Consolidation).
6.3.5 Construction Loan Agreement between Confederation Life Insurance Company and Roberts Properties River Oaks, L.P.,
dated as of October 31, 1991 (River Oaks).
</TABLE>
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<TABLE>
<S> <C>
6.3.6 Real Estate Note executed by Roberts Properties River Oaks, L.P. in favor of Confederation Life Insurance
Company, dated October 31, 1991, in the original principal amount of $9,060,000.00, as assigned to Federal
National Mortgage Association (River Oaks).
6.3.6.1 First Modification of Real Estate Note among Roberts Properties River Oaks, L.P., Confederation Life
Insurance Company and Charles S. Roberts, dated as of February 15, 1993 (River Oaks).
6.3.7 Unconditional Guaranty of Payment and Performance executed by Charles S. Roberts for the benefit of
Confederation Life Insurance Company, dated as of October 31, 1991 (River Oaks).
6.3.8 Deed to Secure Debt and Security Agreement executed by Roberts Properties River Oaks, L.P. in favor of
Confederation Life Insurance Company, dated as of October 31, 1991, and related collateral documents, as
assigned to Federal National Mortgage Association by instrument recorded June 6, 1994 (River Oaks).
6.3.9 Assumption and Release Agreement among Roberts Properties River Oaks, L.P., Roberts Properties Residential,
L.P. and Federal National Mortgage Association, dated October 13, 1994 (1994 Consolidation).
6.3.10 Consulting Agreement between Roberts Properties Group, Inc. and Roberts Properties Rosewood Plantation,
L.P., dated January 5, 1993 (Rosewood Syndication).
6.3.10.1 Amendment #1 to Consulting Agreement regarding Rosewood, dated October 13, 1994 (1994 Consolidation).
6.3.11 Property Management Agreement between Roberts Properties Rosewood Plantation, L.P. and Roberts Properties
Management, Inc., dated January 5, 1993 (Rosewood Syndication).
6.3.11.1 Amendment #1 to Property Management Agreement regarding Rosewood, dated October 13, 1994 (1994 Consolidation).
6.3.12 Real Estate Note executed by Roberts Properties Rosewood Plantation, L.P. in favor of Commonwealth of
Pennsylvania State Employees' Retirement Board, dated May 25, 1994, in the original principal amount of
$6,650,000.00, as assigned to Legg Mason Real Estate Services South, Inc., as further assigned to Federal Home
Loan Mortgage Corporation (Rosewood).
6.3.13 Deed to Secure Debt and Security Agreement executed by Roberts Properties Rosewood Plantation, L.P. in favor of
Commonwealth of Pennsylvania State Employees' Retirement Board, dated May 25, 1994, and related collateral
documents, as assigned to Legg Mason Real Estate Services South, Inc. by instruments dated August 23, 1995, as
further assigned to Federal Home Loan Mortgage Corporation by instruments dated August 24, 1995 (Rosewood).
6.3.14 First Amendment to Deed to Secure Debt and Security Agreement between Roberts Properties Rosewood Plantation,
L.P. and Commonwealth of Pennsylvania State Employees' Retirement Board, dated August 1, 1994, as assigned to
Legg Mason Real Estate Services South, Inc. by instruments dated August 23, 1995, as further assigned to Federal
Home Loan Mortgage Corporation by instruments dated August 24, 1995 (Rosewood).
6.3.15 Assumption Agreement between Roberts Properties Residential, L.P. and Commonwealth of Pennsylvania State
Employees' Retirement Board, dated October 13, 1994 (1994 Consolidation).
</TABLE>
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<TABLE>
<S> <C>
6.4 Sales Contract between Roberts Properties, Inc., as Seller, and Roberts Properties Residential, L.P., as
Purchaser, dated December 5, 1994 (.86 acres adjacent to River Oaks).
6.5.1 Organization, Loan Acquisition and Financial Advisory Agreement between Roberts Properties Holcomb Bridge,
L.P. and Roberts Properties, Inc., dated January 24, 1995 (Holcomb Bridge Syndication).
6.5.2 Design and Development Agreement between Roberts Properties Holcomb Bridge, L.P. and Roberts Properties,
Inc., dated January 24, 1995 (Holcomb Bridge Syndication).
6.5.3 Finish Selection and Interior Design Agreement between Roberts Properties Holcomb Bridge, L.P. and Roberts
Properties, Inc., dated January 24, 1995 (Holcomb Bridge Syndication).
6.5.4 Construction Administration Agreement between Roberts Properties Holcomb Bridge, L.P. and Roberts Properties,
Inc., dated January 24, 1995 (Holcomb Bridge Syndication).
6.5.5 Partnership Administration Agreement between Roberts Properties Holcomb Bridge, L.P. and Roberts Properties,
Inc., dated January 24, 1995 (Holcomb Bridge Syndication).
6.5.6 Consulting Agreement between Roberts Properties Holcomb Bridge, L.P. and Roberts Properties, Inc., dated
January 24, 1995 (Holcomb Bridge Syndication).
6.5.7 Property Management Agreement between Roberts Properties Holcomb Bridge, L.P. and Roberts Properties
Management, Inc., dated January 24, 1995 (Holcomb Bridge Syndication).
6.5.7.1 Amendment #1 to Property Management Agreement Regarding Roberts Properties Holcomb Bridge, L.P., effective
as of March 24, 1995 (Holcomb Bridge Merger).
6.6 Sales Contract between Goodrich Enterprises, Inc., as Seller, and Roberts Properties Residential, L.P., as
Purchaser, dated January 25, 1995 (The Shoppes of Crestmark).
6.7.1 Solicitation Agreement by and among Spalding & Company, Roberts Realty Investors, Inc., Roberts Properties
Residential, L.P., Roberts Properties Holcomb Bridge, L.P., Charles S. Roberts and Brian J. Sullivan, dated
February 21, 1995 (Holcomb Bridge Merger).
6.7.2 Acquisition Agreement and Plan of Merger by and among Roberts Realty Investors, Inc., Roberts Properties
Residential, L.P., Roberts Properties Holcomb Bridge, L.P., Charles S. Roberts and Brian J. Sullivan, dated
March 24, 1995 (Holcomb Bridge Merger).
6.8.1 Loan Agreement between First Union National Bank of Georgia and Roberts Properties Residential, L.P., dated
as of May 1, 1995 (Line of Credit).
6.8.2 Promissory Note executed by Roberts Properties Residential, L.P. in favor of First Union National Bank of
Georgia, dated May 1, 1995, in the original principal amount of $1,000,000.00 (Line of Credit).
6.8.3 Unconditional Guaranty of Payment and Performance executed by Roberts Realty Investors, Inc. for the benefit of
First Union National Bank of Georgia, dated as of May 1, 1995 (Line of Credit).
6.8.4 Unconditional Guaranty of Payment and Performance executed by Charles S. Roberts for the benefit of First Union
National Bank of Georgia, dated as of May 1, 1995 (Line of Credit).
</TABLE>
64
<PAGE> 67
<TABLE>
<S> <C>
6.9.1 Solicitation Agreement by and among Spalding & Company, Roberts Realty Investors, Inc., Roberts Properties
Residential, L.P., Roberts Properties Plantation Trace, L.P., and Charles S. Roberts, dated April 14, 1995
(Plantation Trace Merger).
6.9.2 Merger Agreement and Plan of Merger by and among Roberts Realty Investors, Inc., Roberts Properties
Residential, L.P., Roberts Properties Plantation Trace, L.P., and Charles S. Roberts, dated May 16, 1995
(Plantation Trace Merger).
6.9.3 Consulting Agreement by and between Roberts Properties Residential, L.P. and Roberts Properties Management,
Inc., dated May 16, 1995 (Plantation Trace Merger).
6.9.4 Property Management Agreement between Roberts Properties Plantation Trace, L.P. and Roberts Properties
Management, Inc., dated December 8, 1988 (Plantation Trace Syndication).
6.9.4.1 Amendment #1 to Property Management Agreement Regarding Roberts Properties Plantation Trace, L.P., dated
May 16, 1995 (Plantation Trace Merger).
6.9.5 Promissory Note executed by Roberts Properties-Plantation Trace, L.P. in favor of The Prudential Insurance
Company of America, dated August 12, 1993, in the original principal amount of $8,200,000.00 (Plantation
Trace).
6.9.6 Deed to Secure Debt and Security Agreement from Roberts Properties-Plantation Trace, L.P. to The Prudential
Insurance Company of America, dated August 12, 1993 (Plantation Trace).
6.9.7 Assumption of Liability Agreement among The Prudential Insurance Company of America, Roberts
Properties-Plantation Trace, L.P. and Roberts Properties Residential, L.P., dated May 16, 1995 (Plantation
Trace Merger).
6.10.1 Dealer Agreement among Roberts Realty Investors, Inc., Spalding & Company, and Roberts Properties Residential,
L.P. (as to Section 7 only), dated June 12, 1995 (Summer 1995 Cash Offering).
6.10.1.1 Amendment No. 1 to Dealer Agreement, dated July 31, 1995 (Summer 1995 Cash Offering).
6.10.1.2 Amendment No. 2 to Dealer Agreement, dated August 10, 1995 (Summer 1995 Cash Offering).
6.10.2 Sales Contract between Roberts Properties, Inc., as Seller, and Roberts Properties Residential, L.P., as
Purchaser, dated July 14, 1995 (Summer 1995 Cash Offering).
6.10.3 Design and Development Agreement between Roberts Properties Residential, L.P. and Roberts Properties, Inc.
dated July 21, 1995 (Summer 1995 Cash Offering).
6.10.4 Escrow Agreement among Roberts Realty Investors, Inc., Spalding & Company and First Union National Bank of
Georgia, dated June 12, 1995 (Summer 1995 Cash Offering).
6.10.4.1 Amendment No. 1 to Escrow Agreement, dated July 31, 1995 (Summer 1995 Cash Offering).
6.11.1 Real Estate Note executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance
Company, dated September 20, 1995, in the original principal amount of $8,711,000.00 (Preston Oaks).
6.11.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of
Nationwide Life Insurance Company, dated September 20, 1995, and related collateral documents (Preston Oaks).
</TABLE>
65
<PAGE> 68
<TABLE>
<S> <C>
6.12.1 Solicitation Agreement by and among Spalding & Company, Roberts Realty Investors, Inc., Roberts
Properties Residential, L.P., Roberts Properties-St. Simons, Ltd., and GP-St. Simons, Ltd., dated
August 25, 1995 (Windsong Merger).
6.12.2 Merger Agreement and Plan of Merger by and among Roberts Properties Residential, L.P., GP-St.
Simons, Ltd., and Roberts Properties-St. Simons, Ltd., dated September 22, 1995 (Windsong Merger).
6.12.3 Consulting Agreement by and between Roberts Properties Residential, L.P. and Roberts Properties, Inc.,
dated September 27, 1995 (Windsong Merger).
6.12.4 Management Contract between Roberts Properties-St. Simons, Ltd. and Roberts Properties, Inc., dated
December 27, 1985 (Windsong Syndication).
6.12.4.1 Amendment #1 to Management Contract Regarding Windsong, dated September 27, 1995 (Windsong Merger).
6.12.5 Promissory Note executed by Roberts Properties-St. Simons, Ltd. in favor of John Hancock Mutual Life
Insurance Company, dated March 1, 1988, in the original principal amount of $4,400,000.00 (Windsong).
6.12.5.1 Amendment to Promissory Note between Roberts Properties-St. Simons, Ltd. and John Hancock Mutual Life
Insurance Company, dated as of March 1, 1988 (Windsong).
6.12.5.2 Amended and Restated Promissory Note dated January 28, 1993 in the original principal amount of
$4,350,000.00, attached as Exhibit A to that certain Note Modification Agreement between Roberts
Properties-St. Simons, Ltd. and John Hancock Mutual Life Insurance Company, dated January 28, 1993
(Windsong).
6.12.6 Deed to Secure Debt and Security Agreement executed by Roberts Properties-St. Simons, Ltd. in favor of
John Hancock Mutual Life Insurance Company, dated March 1, 1988, and related collateral documents (Windsong).
6.12.7 Modification to Security Instruments between Roberts Properties-St. Simons, Ltd. and John Hancock Mutual
Life Insurance Company, dated January 28, 1993 (Windsong).
6.12.8 Modification to Promissory Note and Security Instruments dated January 28, 1993 between Roberts Properties-St.
Simons, Ltd. and John Hancock Mutual Life Insurance Company (Windsong).
6.12.9 Assumption Agreement between Roberts Properties Residential, L.P. and John Hancock Mutual Life Insurance
Company, dated September 27, 1995 (Windsong Merger).
6.13 Purchase/Sale Agreement between Prime MFP III Limited Partnership, as Seller, and Roberts Properties Residential,
L.P., as Purchaser, dated October 27, 1995 (Laurelwood).
6.14.1 Dealer Agreement among Roberts Realty Investors, Inc., Spalding & Company, and Roberts Properties Residential,
L.P. (as to Section 7 only), dated November 1, 1995 (1995-1996 Cash Offering).
6.14.2 Escrow Agreement among Roberts Realty Investors, Inc., Spalding & Company and First Union National Bank of
Georgia, dated November 1, 1995 (1995-1996 Cash Offering).
</TABLE>
66
<PAGE> 69
<TABLE>
<S> <C>
6.15.1 Sales Contract between Roberts Properties Residential, L.P., as Seller, and Mike Atsalis and Nicholas
Fridas, as Purchaser, dated October 25, 1995, as assigned by Mike Atsalis and Nicholas Fridas to The
Shoppes of Crestmark, Inc. by Assignment of Sales Contract dated December 8, 1995 (The Shoppes of Crestmark).
6.15.2 Limited Warranty Deed from Roberts Properties Residential, L.P. to The Shoppes of Crestmark, Inc.,
dated December 8, 1995 (The Shoppes of Crestmark).
6.16 Application/Contract for Mortgage Loan between Roberts Properties Residential, L.P. and Nationwide Life
Insurance Company, dated January 23, 1996 (River Oaks).
6.17 Solicitation Agreement by and among Spalding & Company, Roberts Realty Investors, Inc., Roberts
Properties Residential, L.P., Roberts Properties Bentley Place, L.P. and Charles S. Roberts, dated January
26, 1996 (Bentley Place Merger).
6.18.1 Real Estate Note A executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance
Company, dated January 31, 1996, in the original principal amount of $6,678,000.00 (Highland Park).
6.18.2 Real Estate Note B executed by Roberts Properties Residential, L.P. in favor of Employers Life Insurance
Company of Wausau, dated January 31, 1996, in the original principal amount of $1,500,000.00 (Highland Park).
6.18.3 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of
Nationwide Life Insurance Company and Employers Life Insurance Company of Wausau, dated January 31, 1996,
and related collateral documents (Highland Park).
6.19 Application/Contract for Mortgage Loan between Roberts Properties Residential, L.P. and Nationwide Life
Insurance Company, dated February 15, 1996 (Laurelwood).
6.20 Application/Contract for Mortgage Loan between Roberts Properties Residential, L.P. and Nationwide Life
Insurance Company, dated February 27, 1996 (Holcomb Bridge).
6.21 Assignment/Assumption by Multifamily Management, Inc. (f/k/a Roberts Properties Management, Inc.) to Roberts
Properties Management, L.L.C. dated April 30, 1996 assigning property management agreements, together with
Consent to Assignment and Assumption executed by Roberts Properties Residential, L.P. dated April 30, 1996.
</TABLE>
ITEM 2. DESCRIPTION OF EXHIBITS
Except for exhibit 6.21, which is filed with this Form 10-SB/A No. 1,
the exhibits contained in the accompanying Index to Exhibits are incorporated by
reference from the Company's initial Registration Statement on Form 10-SB filed
on March 22, 1996.
67
<PAGE> 70
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this Amendment No. 1 to registration statement on Form
10-SB to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: May 7, 1996 ROBERTS REALTY INVESTORS, INC.
By: /s/ Charles S. Roberts
-----------------------------------
Charles S. Roberts, Chairman of the
Board, Chief Executive Officer, and
President
<PAGE> 71
<TABLE>
<CAPTION>
ROBERTS REALTY INVESTORS, INC.
INDEX TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------------
PAGE
<S> <C>
ROBERTS REALTY INVESTORS, INC.
Unaudited Pro Forma Consolidated Financial Information:
Roberts Realty Investors, Inc.
Pro Forma Condensed Consolidated Balance Sheet as of December
31, 1995 F-1
Roberts Realty Investors, Inc.
Pro Forma Consolidated Statement of Operations for the Year
Ended December 31, 1995 F-4
Roberts Realty Investors, Inc., Mergers, Acquisitions, and Sale
Pro Forma Consolidated Statement of Operations for the Year
Ended December 31, 1995 F-7
Roberts Realty Investors, Inc.
Pro Forma Consolidated Statement of Operations for the Year Ended
December 31, 1994 F-11
Consolidated and Combined Financial Statements:
Independent Auditors' Report F-15
Consolidated and Combined Balance Sheets, as Restated, as of December
31, 1995 and 1994 F-16
Consolidated and Combined Statements of Operations, as Restated, for
the Years Ended December 31, 1995 and 1994 F-17
Consolidated and Combined Statements of Shareholders' (Predecessors')
Equity, as Restated, for the Year Ended December 31, 1995 and
the Periods October 1, 1994 through December 31, 1994, and January
1, 1994 through September 30, 1994 F-18
Consolidated and Combined Statements of Cash Flows, as Restated,
for the Years Ended December 31, 1995 and 1994 F-19
Notes to the Consolidated and Combined Financial Statements, as
Restated, for the Years Ended December 31, 1995 and 1994 F-20
</TABLE>
<PAGE> 72
<TABLE>
<CAPTION>
ROBERTS REALTY INVESTORS, INC.
INDEX TO FINANCIAL STATEMENTS
(CONTINUED)
- -------------------------------------------------------------------------------
PAGE
<S> <C>
THE CRESTMARK CLUB L.P.
Financial Statements:
Independent Auditors' Report F-30
Balance Sheets as of December 31, 1995 and 1994 F-31
Statements of Operations for Each of the Three Years in the Period
Ended December 31, 1995 F-32
Statements of Partners' Equity for Each of the Three Years in the
Period Ended December 31, 1995 F-33
Statements of Cash Flows for Each of the Three Years in the Period
Ended December 31, 1995 F-34
Notes to Financial Statements for Each of the Three Years in the
Period Ended December 31, 1995 F-35
</TABLE>
<PAGE> 73
ROBERTS REALTY INVESTORS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
This unaudited pro forma condensed consolidated balance sheet is presented as
if Roberts Realty Investors, Inc. (the "Company") had completed (a) the cash
offering of 699,175 shares of common stock of the Company (the "Offering") and
received the estimated proceeds therefrom, and (b) the merger with The
Crestmark Club, L.P. (the "Merger") on December 31, 1995. This unaudited pro
forma condensed consolidated balance sheet should be read in conjunction with
the historical financial statements of the Company and The Crestmark Club, L.P.
and the notes thereto. In management's opinion, all adjustments necessary to
reflect the effects of the transactions mentioned above have been made.
This unaudited pro forma condensed consolidated balance sheet is not
necessarily indicative of what the actual financial position would have been at
December 31, 1995 had the transactions mentioned above been consummated on
December 31, 1995, nor does it purport to represent the future financial
position of the Company.
<TABLE>
<CAPTION>
(Dollars in Thousands) Roberts Pro Forma Roberts
Realty Adjustments Realty The The
Investors, Prior Investors, The Merger Company
Inc. to Inc. Prior Crestmark Pro Forma Pro Forma
Historical Merger to Merger Club, L.P. Adjustments Consolidated
(A) (I)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
NET REAL ESTATE ASSETS $67,672 $1,638 (B) $69,310 $13,426 $82,736
CASH AND CASH EQUIVALENTS 1,589 13,356 (C) 14,945 100 $(1,991)(J) 13,054
RESTRICTED CASH 421 421 129 550
OTHER ASSETS - Net 1,447 160 (D) 1,607 183 (1)(K) 1,789
------- ------- ------- ------- ------- -------
$71,129 $15,154 $86,283 $13,838 $(1,992) $98,129
======= ======= ======= ======= ======= =======
LIABILITIES AND
SHAREHOLDERS' EQUITY
LIABILITIES:
Mortgage notes payable $43,798 $9,100 (E) $52,898 $11,306 $(1,394)(L) $62,810
Other liabilities 1,908 0 1,908 593 (289)(M) 2,212
------- ------- ------- ------- ------- -------
45,706 9,100 54,806 11,899 (1,683) 65,022
MINORITY INTEREST 9,661 915 (F) 10,576 2,932 (N) 13,508
SHAREHOLDERS' EQUITY:
Common stock 34 7 (G) 41 41
Additional paid-in capital 16,099 5,132 (H) 21,231 (1,119)(O) 20,112
Accumulated deficit (371) 0 (371) 1,939 (2,122)(P) (554)
------- ------- ------- ------- ------- -------
Net equity 15,762 5,139 20,901 1,939 (3,241) 19,599
------- ------- ------- ------- ------- -------
$71,129 $15,154 $86,283 $13,838 $(1,992) $98,129
======= ======= ======= ======= ======= =======
</TABLE>
F - 1
<PAGE> 74
Adjustments to pro forma condensed consolidated balance sheet (unaudited):
(A) Reflects the historical consolidated balance sheet of Roberts Realty
Investors, Inc. as of December 31, 1995.
(B) Reflects an increase for the purchase of land from a related party
($1,628,000) at the closing of the Offering and the payment of closing
costs on the land ($10,000).
(C) Reflects the proceeds of the Offering of 699,175 shares of common stock
at $9.50 per share ($6,642,000) less the estimated legal, accounting, and
other offering costs ($123,000), broker-dealer commissions ($465,000), and
the payments made from the proceeds of the Offering for net real estate
assets as shown in adjustment (B) ($1,638,000). Reflects an increase for
the funding of the loans to be secured by the Laurelwood ($5,000,000) and
Bentley Place ($4,100,000) Communities. Reflects a decrease for the
estimated loan costs of the Laurelwood ($87,000) and Bentley Place
($73,000) loans.
(D) Reflects the increase for the estimated loan costs of the Laurelwood
($87,000) and Bentley Place loans ($73,000).
(E) Reflects an increase for the loans to be secured by the Laurelwood
($5,000,000) and Bentley Place ($4,100,000) Communities.
(F) Reflects the increase in minority interest for the 33.6% ownership
interest after the closing of the Offering ($915,0000).
(G) Reflects the par value of 699,175 common shares ($7,000) issued in the
Offering.
(H) Reflects the increase in additional paid-in capital as a result of the
Offering ($6,047,000) less the charge to equity for the additional
minority interest ($915,000) resulting from the Company's contribution to
the Operating Partnership of the net proceeds of the Offering.
(I) Reflects The Crestmark Club, L.P. balance sheet as of December 31, 1995.
(J) Reflects the payment of the legal, accounting, and certain other costs
associated with the merger of The Crestmark Club, L.P. ($308,000) and the
payment of the Crestmark land loans ($1,394,000) and the accrued interest
($289,000) on one of the loans.
(K) Reflects a decrease for the write-off of the unamortized loan costs
($1,000) associated with the repayment of the Crestmark land loans.
(L) Reflects a decrease for the repayment of the loans secured by the
Crestmark land ($323,000) and ($1,071,000).
(M) Reflects a decrease for the payment of the accrued interest on one of the
loans ($289,000).
(N) Reflects a decrease for the minority interest's share of the Merger costs
of $308,000 or ($126,000). Reflects an increase for the additional
minority interest ($3,058,000) resulting from the Company's contribution
to the Operating Partnership of the net assets acquired in the Merger and
reflects the minority ownership of 40.8% after the Merger.
(O) Reflects the equity received from The Crestmark Club, L.P. ($1,939,000).
Reflects the charge to equity for the additional minority interest
($3,058,000) resulting from the Company's contribution to the Operating
Partnership of the net assets acquired in the Merger.
F - 2
<PAGE> 75
(P) Reflects a decrease for the reclassification of the equity received from
The Crestmark Club, L.P. ($1,939,000) to minority interest and a decrease
for the Company's share of the Merger costs $308,000 or ($182,000) and
($1,000) for the write-off of the unamortized loan costs associated with
the repayment of the Crestmark land loans.
F - 3
<PAGE> 76
ROBERTS REALTY INVESTORS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
The unaudited pro forma consolidated statement of operations is presented as if
Roberts Realty Investors, Inc. (the "Company") had effected the following
transactions (a) the completion of the cash offering of 699,175 shares of
common stock of the Company (the "Offering") and received the estimated
proceeds therefrom, (b) the acquisitions of Roberts Properties Plantation
Trace, L.P., Roberts Properties Holcomb Bridge, L.P., Roberts Properties - St.
Simons, Ltd., and Roberts Properties Bentley Place, L.P. (the "Mergers"), (c)
the June 1995 cash offering (the "Cash Offering"), (d) the purchase and sale of
the Shoppes of Crestmark, (e) the purchase of the Laurelwood Community, and (f)
the merger with The Crestmark Club, L.P. (the "Merger") on January 1, 1995.
The unaudited pro forma consolidated statement of operations should be read in
conjunction with the historical financial statements of the Company, and the
notes thereto and the Roberts Realty Investors, Inc., Mergers, the
Acquisitions, and Sale Pro Forma Consolidated Statement of Operations for the
year ended December 31, 1995. In management's opinion, all adjustments
necessary to reflect the effects of the Mergers, the Acquisitions, the Cash
Offering, the Offering, the purchase and sale of the Shoppes of Crestmark, the
purchase of the Laurelwood Community, and the Merger have been made.
This unaudited pro forma consolidated statement of operations is not
necessarily indicative of what the actual results of operations of the Company
would have been assuming all of the transactions noted above had been
consummated on January 1, 1995, nor does it purport to represent the results of
operations for future periods.
F - 4
<PAGE> 77
<TABLE>
<CAPTION>
ROBERTS REALTY INVESTORS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(Unaudited)
- --------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
THE COMPANY
PRO FORMA FOR THE THE
MERGERS CRESTMARK CRESTMARK
ACQUISITIONS, CLUB, L.P. MERGER THE COMPANY
AND SALE HISTORICAL PRO FORMA PRO FORMA
(A) (B) ADJUSTMENTS CONSOLIDATED
<S> <C> <C> <C> <C>
Total operating revenues $10,855 $2,193 $13,048
------- ------ -------
Operating expenses:
Personnel 1,123 237 1,360
Utilities 683 169 852
Repairs, maintenance, and landscaping 762 121 883
Real estate taxes 780 185 965
Marketing, management fees, and other 1,039 264 $(22)(C) 1,281
General and administrative expenses 430 430
Depreciation of real estate assets 2,925 677 3,602
------- ------ ---- -------
Total operating expenses 7,742 1,653 (22) 9,373
------- ------ ---- -------
Income from operations 3,113 540 22 3,675
------- ------ ---- -------
Other income (expenses):
Interest income 327 6 333
Loss on sale of assets (21) 21 (D)
Interest expense (3,135) (908) 160 (E) (3,883)
Amortization expense (310) (44) 14 (F) (340)
------- ------ ---- -------
Total other income (expenses) (3,118) (967) 195 (3,890)
------- ------ ---- -------
Loss before minority interest (5) (427) 217 (215)
Minority interest 2 86 (G) 88
------- ------ ---- -------
Net loss to the Company $ (3) $ (427) $303 $ (127)
======= ====== ==== =======
Per share data (H):
Net loss $ (0.00) $ (0.03)
======= =======
Weighted average common shares
assumed to be outstanding (H) 4,123,413 4,123,413
========= =========
</TABLE>
F - 5
<PAGE> 78
Adjustments to pro forma consolidated statement of operations (unaudited):
(A) Reflects the Company's unaudited historical consolidated statement of
operations for the year ended December 31, 1995, as adjusted on a pro
forma basis for the Mergers, the Cash Offering, the purchase and sale of
the Shoppes of Crestmark, the purchase of the Laurelwood Community, and
the Offering. See pages F-7 to F-10.
(B) Reflects The Crestmark Club, L.P. historical statement of operations for
the year ended December 31, 1995.
(C) Reflects the reduction in management fees for The Crestmark Club, L.P.
from 6% to 5% of gross income from property operations as a result of
amending the management contract upon the Merger ($22,000).
(D) Reflects the elimination of the loss on the nonrecurring sale of land
($21,000).
(E) Reflects a decrease in interest expense due to the payment of the
Crestmark land loans at the closing of the Merger.
(F) Reflects the reduction in amortization expense ($9,000) resulting from
the write-off of The Crestmark Club, L.P.'s unamortized organization
costs. Reflects a decrease in amortization expense ($5,000) resulting
from the write-off of the unamortized loan costs associated with the
Crestmark land loans.
(G) Represents the adjustment to reflect the 40.8% minority interest which
will exist upon completion of the Merger.
(H) Based on 4,123,413 shares of common stock outstanding, including
1,206,708 shares outstanding at December 31, 1995 and 2,916,705 shares
issued in connection with the acquisition of the Holcomb Bridge Community,
the exchange of an equivalent number of Operating Partnership units for
shares, the Cash Offering, the Offering, and the Merger on a pro forma
basis. Earnings per share is unaffected by partners who receive units in
the Operating Partnership instead of shares of common stock of the Company
because unitholders and shareholders effectively share equally in the net
loss of the Operating Partnership.
F - 6
<PAGE> 79
ROBERTS REALTY INVESTORS, INC.,
MERGERS, ACQUISITIONS, AND SALE
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
The unaudited pro forma consolidated statement of operations is presented as if
Roberts Realty Investors, Inc. (the "Company") had effected the following
transactions (a) the completion of the cash offering of 699,175 shares of
common stock of the Company (the "Offering") and received the estimated
proceeds therefrom, (b) the mergers with Roberts Properties Plantation Trace,
L.P., Roberts Properties Holcomb Bridge, L.P., Roberts Properties - St. Simons,
Ltd., and Roberts Properties Bentley Place, L.P. (the "Mergers"), (c) the June
1995 cash offering (the "Cash Offering"), (d) the purchase and sale of the
Shoppes of Crestmark, and (e) the purchase of the Laurelwood Community on
January 1, 1995. The unaudited pro forma consolidated statement of operations
should be read in conjunction with the historical financial statements of the
Company, and the notes thereto. In management's opinion, all adjustments
necessary to reflect the effects of the Mergers, the Cash Offering, the
purchase and sale of the Shoppes of Crestmark, the purchase of the Laurelwood
Community, and the Offering have been made.
This unaudited pro forma consolidated statement of operations is not
necessarily indicative of what the actual results of operations of the Company
would have been assuming all of the transactions noted above had been
consummated on January 1, 1995, nor does it purport to represent the results of
operations for future periods.
F - 7
<PAGE> 80
<TABLE>
<CAPTION>
ROBERTS REALTY INVESTORS, INC.
MERGERS, ACQUISITIONS, AND SALE
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(Unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
The Company
The Pro Forma
Company Laurelwood For Mergers,
Historical Historical Pro Forma Acquisitions,
(A) (B) Adjustments and Sale
<S> <C> <C> <C> <C>
Total operating revenues $ 9,632 $1,337 $(114)(C) $ 10,855
--------- ------ ----- ---------
Operating expenses:
Personnel 952 173 (2)(D) 1,123
Utilities 537 157 (11)(E) 683
Repairs, maintenance, and landscaping 665 101 (4)(F) 762
Real estate taxes 697 89 (6)(G) 780
Marketing, management fees, and other 912 78 49 (H) 1,039
General and administrative expenses 430 430
Depreciation of real estate assets 2,626 299 (I) 2,925
--------- ------ ----- ---------
Total operating expenses 6,819 598 325 7,742
--------- ------ ----- ---------
Income from operations 2,813 739 (439) 3,113
--------- ------ ----- ---------
Other income (expenses):
Interest income 327 327
Gain on sale of asset 16 (16)(J)
Interest expense (2,491) (644)(K) (3,135)
Amortization expense (342) 32 (L) (310)
Merger costs (513) 513 (M)
--------- ----- ---------
Total other income (expenses) (3,003) (115) (3,118)
--------- ------ ----- ---------
Income (loss) before minority interest
and extraordinary item (190) 739 (554) (5)
Minority interest 82 (80)(N) 2
--------- ------ ----- ---------
Income (loss) before extraordinary item (108) 739 (634) (3)
Extraordinary item - loss on early
extinguishment of debt (net of the
minority interest portion of $79) (104) 104 (O)
--------- ------ ----- ---------
Net income (loss) to the Company $ (212) $ 739 $(530) $ (3)
========= ====== ===== =========
Per share data (P):
Loss before extraordinary item $ (0.04) $ (0.00)
Extraordinary item (0.03) (0.00)
--------- ---------
Net loss $ (0.07) $ (0.00)
========= =========
Weighted average common shares
assumed to be outstanding (P) 2,866,880 4,123,413
========= =========
</TABLE>
F - 8
<PAGE> 81
Adjustments to pro forma consolidated statement of operations (unaudited):
(A) Reflects the Company's historical consolidated statement of operations
for the year ended December 31, 1995.
(B) Reflects the Laurelwood Community's unaudited revenues and direct
operating expenses for the period ended December 15, 1995.
(C) Reflects the reduction in rental income as a result of the sale of the
Shoppes of Crestmark ($114,000).
(D) Reflects the reduction in personnel as a result of the sale of the
Shoppes of Crestmark ($2,000).
(E) Reflects the reduction in utilities as a result of the sale of the
Shoppes of Crestmark ($11,000).
(F) Reflects the reduction in repairs and maintenance as a result of the
sale of the Shoppes of Crestmark ($4,000).
(G) Reflects the reduction in real estate taxes as a result of the sale of
the Shoppes of Crestmark ($6,000).
(H) Reflects the reduction in management fees for Roberts Properties - St.
Simons, Ltd. from 6% to 5% of gross income from property operations as a
result of amending the management contract upon the Merger ($11,000) and a
reduction of management fees ($4,000) and other expenses ($3,000) as a
result of the sale of the Shoppes of Crestmark. Reflects an increase for
a 5% management fee as a result of the acquisition of the Laurelwood
Community ($67,000).
(I) Reflects a decrease in depreciation as a result of the sale of the
Shoppes of Crestmark ($13,000). Reflects an increase for the depreciation
on the Laurelwood Community ($312,000).
(J) Reflects the elimination of the gain as a result of the sale of the
Shoppes of Crestmark ($16,000).
(K) Reflects an increase in interest expense ($354,000) for the $5,000,000
loan that will be placed on the Laurelwood Community. The loan will have
a fixed interest rate of 7.125% for a 10-year term with monthly payments
of principal and interest based on a 25-year amortization schedule. The
loan costs are estimated to be $87,000. Reflects an increase in interest
expense ($290,000) for the $4,100,000 loan that will be placed on the
Bentley Place Community. The loan will have a fixed interest rate of
7.10% for a 10-year term with monthly payments of principal and interest
based on a 30-year amortization schedule. The loan costs are estimated to
be $73,000.
(L) Reflects the amortization expense on the estimated loan costs associated
with the Laurelwood ($9,000) and Bentley Place ($7,000) Communities.
Reflects a decrease ($48,000) for the write-off of the Holcomb Bridge
partnership's organizational costs.
(M) Represents the adjustment to eliminate the nonrecurring merger costs
incurred in connection with the acquisition of the Holcomb Bridge,
Plantation Trace, Windsong and Bentley Place Communities.
(N) Represents the adjustment to reflect the 33.6% minority interest which
will exist upon completion of the Offering.
(O) Represents the adjustment to eliminate the nonrecurring extraordinary
item related to the loss on early extinguishment of debt.
F - 9
<PAGE> 82
(P) Based on 4,123,413 shares of common stock outstanding, including
1,206,708 shares outstanding at December 31, 1995 and 2,916,705 shares
issued in connection with the acquisition of the Holcomb Bridge and
Bentley Place Communities, the exchange of an equivalent number of
Operating Partnership units for shares, the Cash Offering, and the
Offering on a pro forma basis. Earnings per share is unaffected by
partners who receive units in the Operating Partnership instead of shares
of common stock of the Company because unitholders and shareholders
effectively share equally in the net loss of the Operating Partnership.
F - 10
<PAGE> 83
ROBERTS REALTY INVESTORS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
The unaudited pro forma consolidated statement of operations is presented as if
Roberts Realty Investors, Inc. (the "Company") had effected the following
transactions (a) the completion of the cash offering of 699,175 shares of
common stock of the Company (the "Offering") and received the estimated
proceeds therefrom, (b) the acquisitions of Roberts Properties Plantation
Trace, L.P., Roberts Properties Holcomb Bridge, L.P., Roberts Properties - St.
Simons, Ltd., and Roberts Properties Bentley Place, L.P. (the "Mergers"), (c)
the June 1995 cash offering (the "Cash Offering"), (d) the purchase and sale of
the Shoppes of Crestmark, (e) the purchase of the Laurelwood Community, (f) the
formation of the Company (the "Consolidation"), and (g) the merger with The
Crestmark Club, L.P. (the "Merger") on January 1, 1994. The unaudited pro
forma consolidated statement of operations should be read in conjunction with
the historical financial statements of the Company, and The Crestmark Club,
L.P., and the notes thereto. In management's opinion, all adjustments
necessary to reflect the effects of the Mergers, the Cash Offering, the
Offering, the purchase and sale of the Shoppes of Crestmark, the purchase of
the Laurelwood Community, and the Merger have been made.
This unaudited pro forma consolidated statement of operations is not
necessarily indicative of what the actual results of operations of the Company
would have been assuming all of the transactions noted above had been
consummated on January 1, 1994, nor does it purport to represent the results of
operations for future periods.
F - 11
<PAGE> 84
<TABLE>
<CAPTION>
ROBERTS REALTY INVESTORS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
(Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
The
Crestmark
The Company Club, L.P. Laurelwood
Historical Historical Historical Pro Forma The Company
(A) (B) (C) Adjustments Pro Forma
<S> <C> <C> <C> <C> <C>
Total operating revenues $ 7,702 $ 2,209 $1,317 $ 11,228
--------- ------- ------ ---- ---------
Operating expenses:
Personnel 703 241 150 1,094
Utilities 454 256 139 849
Repairs, maintenance, and landscaping 614 101 183 898
Real estate taxes 569 177 86 832
Marketing, management fees, and other 776 381 84 $ 43 (D) 1,284
General and administrative expenses 75 282 (E) 357
Depreciation of real estate assets 1,852 786 312 (F) 2,950
--------- ------- ------ ----- ---------
Total operating expenses 5,043 1,942 642 637 8,264
--------- ------- ------ ----- ---------
Income from operations 2,659 267 675 (637) 2,964
--------- ------- ------ ----- ---------
Other income (expenses):
Interest income 96 1 97
Interest expense (2,288) (874) (492)(G) (3,654)
Amortization expense (451) (60) (140)(H) (651)
Formation costs (446) 446 (I)
--------- ------- ----- ---------
Total other income (expenses) (3,089) (933) (186) (4,208)
--------- ------- ------ ----- ---------
Loss before minority interest and extraordinary item (430) (666) 675 (823) (1,244)
Minority interest 173 335 (J) 508
--------- ------- ------ ----- ---------
Loss before extraordinary item (257) (666) 675 (488) (736)
Extraordinary item - loss on early extinguishment of debt (135) (59) 194 (K)
--------- ------- ------ ----- ---------
Net loss to the Company $ (392) $ (725) $ 675 $(294) $ (736)
========= ======== ====== ===== =========
Per share data (L):
Loss before extraordinary item $ (0.07) $ -
========= =========
Net loss $ (0.11) $ (0.18)
========= =========
Weighted average common shares
assumed to be outstanding (L) 3,544,239 4,123,413
========= =========
</TABLE>
F - 12
<PAGE> 85
Adjustments to pro forma consolidated statement of operations (unaudited):
(A) Reflects the Company's historical consolidated statement of operations
for the year ended December 31, 1994.
(B) Reflects The Crestmark Club, L.P. historical statement of operations for
the year ended December 31, 1994.
(C) Reflects the historical statement of operations for the year ended
December 31, 1994.
(D) Reflects the increase in management fees of 5% of gross property
operations for the Laurelwood ($66,000) and Bentley Place ($48,000)
Communities. Reflects a reduction in management fees from 6% to 5% of
gross income from property operations as a result of amending the
management contracts upon the Mergers and the Consolidation ($50,000), as
well as the Merger ($21,000).
(E) Reflects an adjustment to increase general and administrative expenses of
the Company to account for a full year of operations. These expenses
include salaries, directors' compensation, insurance, and other operating
expenses.
(F) Reflects an increase in depreciation expense as a result of the
acquisition of the Laurelwood Community.
(G) Reflects an increase in interest expense ($354,000) for the $5,000,000
loan that will be placed on the Laurelwood Community. The loan will have
a fixed interest rate of 7.125% for a 10-year term with monthly payments
of principal and interest based on a 25-year amortization schedule. The
loan costs are estimated to be $87,000. Reflects an increase in interest
expense ($290,000) for the $4,100,000 loan that will be placed on the
Bentley Place Community. The loan will have a fixed interest rate of
7.10% for a 10-year term with monthly payments of principal and interest
based on a 30-year amortization schedule. The loan costs are estimated to
be $73,000. Reflects a decrease in interest expense due to the payment of
the Crestmark land loans ($152,000) at the closing of the Merger.
(H) Reflects a decrease in amortization expense related to the write-off of
organizational expenses as a result of the Mergers and the Consolidation
($140,000). Reflects a decrease in amortization expense related to the
write-off of organization expenses as a result of the Merger ($9,000).
Reflects a decrease in amortization related to the write-off of the
unamortized loan costs ($7,000) associated with the Crestmark land loans
that will be paid at the closing of the Merger. Reflects an increase in
amortization expense for the loan costs associated with the Laurelwood
($9,000) and Bentley Place ($7,000) Communities.
(I) Reflects the elimination of the nonrecurring formation costs of the
Consolidation.
(J) Represents the adjustment to reflect the 40.8% minority interest which
will exist upon completion of the Merger.
(K) Reflects the adjustment to eliminate the nonrecurring extraordinary items
related to the loss on early extinguishment of debt.
F - 13
<PAGE> 86
(L) Based on 4,123,413 shares of common stock outstanding, including
1,206,708 shares issued in the Consolidation and 2,916,705 shares issued
in connection with the acquisition of the Holcomb Bridge Community, the
exchange of an equivalent number of Operating Partnership units for
shares, the Cash Offering, the Offering, and the Merger on a pro forma
basis. Earnings per share is unaffected by partners who receive units in
the Operating Partnership instead of shares of common stock of the Company
because unitholders and shareholders effectively share equally in the net
loss of the Operating Partnership.
F - 14
<PAGE> 87
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Roberts Realty Investors, Inc.:
We have audited the accompanying consolidated and combined balance sheets of
Roberts Realty Investors, Inc. (the "Company") as of December 31, 1995 and
1994, and the related consolidated and combined statements of operations,
shareholders' equity, and cash flows for the years then ended. These
consolidated and combined financial statements are the responsibility of the
Company's and Predecessors' management. Our responsibility is to express an
opinion on these consolidated and combined financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated and combined financial position of
Roberts Realty Investors, Inc. as of December 31, 1995 and 1994, and the
consolidated and combined results of its operations and cash flows for the
years then ended, in comformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
May 1, 1996
F - 15
<PAGE> 88
<TABLE>
<CAPTION>
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED AND COMBINED BALANCE SHEETS, AS RESTATED
DECEMBER 31, 1995 AND 1994
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------
ASSETS 1995 1994
<S> <C> <C>
REAL ESTATE ASSETS - At cost: (Notes 4 and 7)
Land $12,925 $ 7,041
Buildings and improvements 54,495 31,221
Furniture, fixtures, and equipment 7,148 4,056
------- -------
74,568 42,318
Less accumulated depreciation (9,575) (6,961)
------- -------
Operating real estate assets 64,993 35,357
Construction-in-progress and real estate under development 2,679 8,633
------- -------
Net real estate assets 67,672 43,990
CASH AND CASH EQUIVALENTS 1,589 1,849
RESTRICTED CASH 421 282
DEFERRED FINANCING COSTS - Net of accumulated amortization of $621
and $417 at December 31, 1995 and 1994, respectively 793 950
OTHER ASSETS - Net 654 354
------- -------
$71,129 $47,425
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Mortgage notes payable (Notes 4 and 6) $43,798 $29,774
Accounts payable and accrued expenses 536 266
Due to affiliates (including retainage payable of $246 and $106 at December 31,
1995 and 1994, respectively) 971 1,125
Security deposits and prepaid rents 401 227
------- -------
Total liabilities 45,706 31,392
COMMITMENTS AND CONTINGENCIES (Note 8)
MINORITY INTEREST OF THE UNITHOLDERS
IN THE OPERATING PARTNERSHIP (Note 5) 9,661 8,337
SHAREHOLDERS' EQUITY:
Preferred shares, $.01 par value, 20,000,000 shares authorized, no shares
issued and outstanding
Common shares, $.01 par value, 100,000,000 shares authorized, 3,421,321 and 1,951,648
shares issued and outstanding at December 31, 1995 and 1994, respectively 34 20
Additional paid-in capital 16,099 7,835
Accumulated deficit (371) (159)
------- -------
Total shareholders' equity 15,762 7,696
------- -------
$71,129 $47,425
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated and combined
financial statements.
F - 16
<PAGE> 89
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS, AS RESTATED
YEARS ENDED DECEMBER 31, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATING REVENUES:
Rental operations $ 9,240 $ 7,352
Other operating income 392 350
------- -------
Total operating revenues 9,632 7,702
OPERATING EXPENSES:
Personnel 952 703
Utilities 537 454
Repairs, maintenance, and landscaping 665 614
Real estate taxes 697 569
Marketing, management fees, and other 912 776
General and administrative expenses 430 75
Depreciation of real estate assets 2,626 1,852
------- -------
Total operating expenses 6,819 5,043
------- -------
INCOME FROM OPERATIONS 2,813 2,659
OTHER INCOME (EXPENSES):
Interest income 327 96
Gain on sale of real estate asset 16
Interest expense (2,491) (2,288)
Amortization of deferred financing costs (220) (181)
Other amortization expense (122) (270)
Merger costs (513)
Formation costs (446)
------- -------
Total other income (expenses) (3,003) (3,089)
------- -------
LOSS BEFORE MINORITY INTEREST
AND EXTRAORDINARY ITEM (190) (430)
MINORITY INTEREST OF THE UNITHOLDERS
IN THE OPERATING PARTNERSHIP 82 173
------- -------
LOSS BEFORE EXTRAORDINARY ITEM (108) (257)
EXTRAORDINARY ITEM - Early extinguishment of debt, net of
minority interest of unitholders in the Operating
Partnership in 1995 (Note 4) (104) (135)
------- -------
NET LOSS $ (212) $ (392)
======= =======
PER SHARE DATA: (NOTE 9)
Loss before extraordinary item $ (0.04) $ (0.11)
======= =======
Net loss $ (0.07) $ (0.14)
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated and combined
financial statements.
F - 17
<PAGE> 90
<TABLE>
<CAPTION>
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF
SHAREHOLDERS' (PREDECESSORS') EQUITY, AS RESTATED
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------------------------------------------------
COMMON SHARES TOTAL
---------------- ADDITIONAL SHAREHOLDERS'
NUMBER PAID-IN ACCUMULATED PREDECESSORS' (PREDECESSORS')
OF SHARES AMOUNT CAPITAL DEFICIT EQUITY EQUITY
<S> <C> <C> <C> <C> <C> <C>
PREDECESSORS
PREDECESSORS' EQUITY,
JANUARY 1, 1994 - $ - $ - $ - $13,724 $13,724
Capital contributions 4,080 4,080
Syndication costs (497) (497)
Collection of notes receivable 722 722
Capital distributions (1,640) (1,640)
Net loss (233) (233)
------------------------------------------------------------------------
PREDECESSORS' EQUITY,
SEPTEMBER 30, 1994 - - - - 16,156 16,156
ROBERTS REALTY INVESTORS, INC.:
Issuance of common shares for cash 163,061 2 493 $ 495
Issuance of common shares in exchange
for properties in the Consolidation 1,043,647 10 4,370 (4,380)
Issuance of common shares in the merger
of a partnership under common ownership
and management 744,940 8 3,112 (3,120)
Issuance of 1,035,553 units for Predecessors'
equity relating to minority interest in
properties merged in the Consolidation (4,250) (4,250)
Issuance of 1,074,672 units for Predecessors'
equity relating to minority interest in
properties acquired in the subsequent mergers (4,406) (4,406)
Predecessor capital distributions (140) (140)
Net loss (159) (159)
------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
DECEMBER 31, 1994 1,951,648 20 7,835 (159) 7,696
Proceeds of share offering, net 736,000 7 5,982 5,989
Conversion of Units to Shares 123,800 1 469 470
Capital contributions 4,400 4,400
Syndication costs (413) (413)
Capital distributions (20) (20)
Issuance of common shares in the merger
of a partnership under common ownership
and management 609,873 6 3,961 (3,967)
Predecessor capital distributions (670) (670)
Adjustment for minority interest in the
Operating Partnership (1,478) (1,478)
Net loss (212) (212)
------------------------------------------------------------------------
SHAREHOLDERS' EQUITY,
DECEMBER 31, 1995 3,421,321 $34 $16,099 $(371) $ - $15,762
========================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated and combined
financial statements.
F - 18
<PAGE> 91
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS, AS RESTATED
YEARS ENDED DECEMBER 31, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (212) $ (392)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Minority interest of unitholders in the Operating Partnership (82) (173)
Depreciation and amortization 2,968 2,304
Early extinguishment of debt 104 135
Gain on sale of real estate asset (16)
(Increase) decrease in restricted cash (139) (49)
(Increase) decrease in deferred financing charges (142)
(Increase) decrease in other assets (499) 293
Increase (decrease) in accounts payable and
accrued expenses relating to operations 244 (119)
Increase (decrease) in due to affiliates relating to operations 124
Increase in security deposits and prepaid rent 174 41
-------- -------
Net cash provided by operating activities 2,666 1,898
INVESTING ACTIVITIES:
Redemption of certificate of deposit 240
Proceeds from sale of real estate asset 903
Acquisition and construction of real estate assets (23,368) (7,757)
Purchase of furniture, fixtures and equipment (3,092) (745)
-------- -------
Net cash used in investing activities (25,557) (8,262)
FINANCING ACTIVITIES:
Proceeds from mortgage notes payable 22,948 8,499
Principal reductions on mortgage notes payable (8,924) (4,404)
Proceeds from issuance of Shares and Units 6,586 500
Payment of share issuance costs (597)
Payment of loan costs (269) (516)
Payment of syndication costs (413) (570)
Capital contributions from Predecessors 4,400 4,802
Capital distributions to Predecessors (1,100) (1,931)
-------- -------
Net cash provided by financing activities 22,631 6,380
-------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (260) 16
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,849 1,833
-------- -------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,589 $ 1,849
======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest, net of capitalized interest $ 2,467 $ 2,121
======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated and combined
financial statements.
F - 19
<PAGE> 92
ROBERTS REALTY INVESTORS, INC.
NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND FORMATION OF THE COMPANY
Roberts Realty Investors, Inc. (the "Company"), a Georgia corporation, was
formed July 22, 1994 to serve as a vehicle for investments in, and
ownership of, a professionally managed real estate portfolio of
multifamily apartment communities. The Company owns and operates
multifamily residential properties as a self-administered equity real
estate investment trust (a "REIT"). Approximately 85% of the Company's
total apartment units are located in the Atlanta metropolitan area.
The Company conducts all of its operations and owns all of its assets in
and through Roberts Properties Residential, L.P., a Georgia limited
partnership (the "Operating Partnership"), of which the Company is the
sole general partner. As the sole general partner of the Operating
Partnership, the Company controls the Operating Partnership. The Board of
Directors of the Company manages the affairs of the Operating Partnership
by directing the affairs of the Company.
The Company began operations upon completion of a business combination
(the "Consolidation") with four limited partnerships sponsored by Charles
S. Roberts ("Mr. Roberts"), the sole general partner of each of the four
partnerships. The Consolidation, which was completed October 13, 1994 and
became effective October 1, 1994, was a roll-up of entities under common
ownership and management. The initial capitalization of the Company
included the issuance of 163,061 shares of the Company's Common Stock
("Shares") and 1,645 units of limited partnership interest ("Units"). In
connection with the Consolidation, a total of 1,043,647 Shares and
1,035,553 Units of the Operating Partnership were issued. The four
limited partnerships and the number of Shares and Units issued in
connection with the Consolidation were as follows:
<TABLE>
<CAPTION>
SHARES UNITS
------ ---------
<S> <C> <C>
Roberts Properties River Oaks, L.P. ("River Oaks, L.P.") 638,596
Roberts Properties Rosewood Plantation, L.P. ("Rosewood Plantation, L.P.") 396,957
Roberts Properties Preston Oaks, L.P. ("Preston Oaks, L.P.") 535,176
Roberts Properties Highland Park, L.P. ("Highland Park, L.P.") 508,471
--------- ---------
1,043,647 1,035,553
</TABLE>
During 1995 and 1996, the Company acquired, by way of mergers (the
"Mergers"), the following four limited partnerships that were also under
common ownership and management.
Roberts Properties Holcomb Bridge, L.P. ("Holcomb Bridge, L.P.") In
March 1995, the Operating Partnership acquired the assets and liabilities
of Holcomb Bridge, L.P. which included 11.8 acres of undeveloped land for
construction of a 146-unit apartment community. In connection with the
Merger, the Company issued 609,873 Shares.
Roberts Properties Plantation Trace, L.P. ("Plantation Trace, L.P.") In
May 1995, the Operating Partnership acquired the assets and liabilities of
Plantation Trace, L.P. which included a 182-unit apartment community along
with a 7,350 square foot retail center located at the entrance to the
community. In connection with the Merger, the Operating Partnership
issued 597,741 Units.
F - 20
<PAGE> 93
Roberts Properties-St. Simons, Ltd. ("St. Simons, Ltd.") In September
1995, the Operating Partnership acquired the assets and liabilities of St.
Simons, Ltd. which included the 232-unit Windsong apartment community. In
connection with the merger, the Operating Partnership issued 476,931
Units.
Roberts Properties Bentley Place, L.P. ("Bentley Place, L.P.") In March
1996, the Operating Partnership acquired the assets and liabilities of
Bentley Place, L.P. ("Bentley Place, L.P.") which included a 117-unit
apartment community. In connection with the merger, the Company issued
744,940 Shares.
In an offering conducted from June 12, 1995 through August 25, 1995, the
Company sold an aggregate of 736,000 Shares at $9.00 per Share. The net
proceeds of approximately $5,989,000 will be used to fund construction of
a 51-unit second phase of Plantation Trace. A portion of the offering
proceeds were used in December 1995 to fund the purchase of Laurelwood, a
207-unit apartment community, from an independent third party for
$7,775,000 in cash. The Company closed a $5,000,000 mortgage loan secured
by the Laurelwood community on March 28, 1996 (see Note 4), and plans to
use the funds for the construction of the second phase of Plantation
Trace.
2. BASIS OF PRESENTATION
For the period after the Consolidation (October 1, 1994), the accompanying
financial statements include the consolidated accounts of the Company and
the Operating Partnership. For the periods prior to the Consolidation,
the accompanying financial statements reflect the combined accounts of the
seven former limited partnerships (does not include Holcomb Bridge, L.P.
which was not formed until 1995) discussed in Note 1 ("Predecessors").
The Consolidation was accomplished using an umbrella partnership, or
"UPREIT", structure. With respect to the Consolidation and the subsequent
mergers of Holcomb Bridge, L.P., Plantation Trace, L.P., St. Simons, Ltd.
and Bentley Place, L.P. into the Operating Partnership, the partners
(including Mr. Roberts for his general partner interests) received either
Shares or Units. The acquisition of all partnership interests were
accounted for as reorganizations of entities under common ownership and
management and, accordingly, were recorded at historical cost in a manner
similar to that in pooling of interests accounting.
All significant intercompany accounts and transactions have been
eliminated in consolidation. The financial statements of the Company, for
the period after the Consolidation, have been adjusted for the minority
interest of the unitholders in the Operating Partnership. Because Units
will become exchangeable for cash, or at the option of the Company, for
Shares on a one-for-one basis, the minority interest of the unitholders in
the Operating Partnership is calculated based on the weighted average
number of Shares and Units outstanding during the period.
The federal Securities Exchange Act of 1934 (the "1934 Act") provides that
a company having more than 500 shareholders and more than $5,000,000 in
assets as of the end of its fiscal year must become a reporting company
with the Securities and Exchange Commission (the "SEC") within 120 days
thereafter. The Company met these requirements at the end of 1995 and is
therefore required to register its common shares under the 1934 Act. As a
result, for the purpose of filing the Company's 1934 Act registration
statement, the Company has restated its financial statements for the years
ended December 31, 1995 and 1994 to include the entities that were merged
subsequent to the
F - 21
<PAGE> 94
Consolidation and were under common ownership and management for all
financial statement periods in which the common ownership and management
existed. This includes Holcomb Bridge, L.P., Plantation Trace, L.P., St.
Simons, Ltd. and Bentley Place, L.P., which were merged into the Company
and the Operating Partnership in March 1995, May 1995, September 1995 and
March 1996, respectively.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
REAL ESTATE ASSETS AND DEPRECIATION All real estate assets are to be
held and used and are recorded at depreciated cost less reductions for
impairment. In identifying potential impairment, management considers
such factors as declines in a property's operating performance or market
value, a change in use, or adverse changes in general market conditions.
In determining whether an asset is impaired, management estimates the
future cash flows expected to be generated from the asset's use and its
eventual disposition. If the sum of these estimated future cash flows on
an undiscounted basis is less than the asset's carrying cost, the asset is
written down to its fair value. None of the Company's real estate assets
have required write-downs from historical cost. Management does not
expect any material effect on the financial statements upon the adoption
of SFAS No. 121, Accounting for Impairment of Long-Lived Assets.
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, including
all carpet and appliance replacements, are expensed as incurred. Major
replacements and betterments are capitalized and depreciated over their
estimated useful lives. Buildings are generally depreciated over 27.5
years. Land improvements are depreciated over 15 years, and furniture,
fixtures and equipment are depreciated over 5 to 7 years.
REVENUE RECOGNITION The Company leases its residential properties under
operating leases with terms generally one year or less. Rental income is
recognized when earned, which is not materially different than revenue
recognition on a straight-line basis.
CASH AND CASH EQUIVALENTS All investments purchased with an original
maturity of three months or less are considered to be cash equivalents.
RESTRICTED CASH Restricted cash consists of resident security deposits
and monies held by lenders for the payment of real estate taxes and
insurance.
DEFERRED FINANCING COSTS Deferred financing costs include fees and costs
incurred to obtain financings and are amortized on the straight-line
method over the terms of the related debt.
INTEREST AND REAL ESTATE TAXES Interest and real estate taxes incurred
during the construction period are capitalized and depreciated over the
lives of the constructed assets. Interest capitalized was $582,000 and
$67,000 for the years ended December 31, 1995 and 1994, respectively.
F - 22
<PAGE> 95
FORMATION COSTS The Company incurred accounting fees, broker-dealer
fees, legal fees, printing costs, filing fees, and certain other expenses
associated with the Consolidation. These costs, totaling $446,000, are
treated as a current period expense for the year ended December 31, 1994.
INCOME TAXES The Company elected to be taxed as a REIT under the
Internal Revenue Code of 1986, as amended (the "Code"), commencing with
the taxable year ended December 31, 1994. As a result, the Company
generally will not be subject to federal and state income taxation at the
corporate level to the extent it distributes annually at least 95% of its
taxable income, as defined in the Code, to its shareholders and satisfies
certain other requirements. Accordingly, no provision has been made for
federal and state income taxes in the accompanying consolidated financial
statements for the period subsequent to September 30, 1994.
Prior to the Consolidation, the Predecessors' operations were conducted
through a variety of partnerships. In accordance with partnership
taxation, each partner was responsible for reporting its share of taxable
income or loss. Accordingly, no provision has been made in the
accompanying combined financial statements for federal, state or local
income taxes through September 30, 1994.
RECLASSIFICATIONS Certain reclassifications have been made to 1994
amounts for comparative purposes.
4. MORTGAGE NOTES PAYABLE
Mortgage notes payable were secured by the following communities at
December 31, as follows:
<TABLE>
<CAPTION>
FIXED
INTEREST PRINCIPAL OUTSTANDING
RATE AS OF DECEMBER 31,
MATURITY 12/31/95 1995 1994
-------------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Highland Park September 1999 8.50% $ 7,554,642 $ 479,896
Plantation Trace September 2000 7.75% 7,988,948 8,084,084
Preston Oaks October 2002 7.21% 8,697,260 1,428,359
River Oaks November 1996 9.38% 8,888,508 8,956,017
Rosewood Plantation June 2001 7.38% 6,529,892 6,607,368
Windsong March 2000 9.00% 4,139,074 4,217,682
----------- -----------
$43,798,324 $29,773,406
=========== ===========
</TABLE>
Fixed interest rates on mortgage debt outstanding at December 31, 1994
ranged from 7.38% to 9.38%.
At December 31, 1995, Mr. Roberts had personally guaranteed the mortgage
notes payable on the Highland Park and Rosewood Plantation communities.
The guaranty on Highland Park was released when the mortgage note payable
for Highland Park was refinanced on January 31, 1996. The guaranty on
Rosewood Plantation was released in March 1996 after the Highland Park
community achieved a 90% leasing and occupancy level.
F - 23
<PAGE> 96
On January 23, 1996, the Company received a commitment to refinance the
existing loan secured by the River Oaks community for $9,250,000 at a
fixed interest rate of 7.15% for a term of seven years. Management
expects the refinancing to close by October 31, 1996.
On January 31, 1996, the Company completed the refinancing of the mortgage
note secured by the Highland Park community. The new mortgage note is in
the amount of $8,178,000 at a fixed interest rate of 7.30% payable in
monthly installments of $56,066 based on a 30-year amortization schedule.
The note matures on February 15, 2003.
On February 27, 1996, the Company received a commitment to provide
financing in the amount of $6,420,000 secured by the Holcomb Bridge
community. Holcomb Bridge is under construction and was unencumbered at
December 31, 1995. The terms of the financing include a fixed interest
rate of 7.14% with a balloon payment due at the end of ten years.
Management expects the financing to close on or before January 31, 1997.
On March 28, 1996, the Company completed the financing of the Laurelwood
community. The new mortgage note is in the amount of $5,000,000 at a
fixed interest rate of 7.13% payable in monthly installments of $35,739
based on a 25-year amortization schedule. The note matures on April 15,
2006.
On April 2, 1996, the Company received a commitment to provide financing
in the amount of $4,100,000 secured by the Bentley Place community. The
Bentley Place community was unencumbered at December 31, 1995. The terms
of the financing include a fixed interest rate of 7.10% with a balloon
payment due at the end of ten years. Management expects the financing to
close on or before September 30, 1996.
The scheduled principal maturities of all debt outstanding at December 31,
1995 for each of the years ending December 31, are as follows (in
thousands):
<TABLE>
<S> <C>
1996 $ 9,325
1997 472
1998 512
1999 8,329
2000 11,496
Thereafter 14,242
-------
44,376
Less: unfunded amounts 578
-------
Mortgage notes payable $43,798
=======
</TABLE>
Real estate assets having a combined depreciated cost of approximately
$51,434,000 serve as collateral for the outstanding debt at December 31,
1995.
EXTRAORDINARY ITEMS The 1995 extraordinary item resulted from the
write-off of unamortized deferred financing costs associated with the
September 20, 1995 refinancing of the mortgage note secured by the Preston
Oaks community. The extraordinary item is net of $79,000 which was
allocated to the minority interest of the unitholders in the Operating
Partnership, calculated on the weighted average number of Units
outstanding during 1995. The 1994 extraordinary item resulted
F - 24
<PAGE> 97
from the write-off of unamortized deferred financing costs associated with
the May 25, 1994 refinancing of the construction loan secured by the
Rosewood Plantation community.
5. MINORITY INTEREST
The Company, as the general partner of the Operating Partnership, does not
hold any limited partner interests in the Operating Partnership. The
Company's general partner interest is 62% and 48% at December 31, 1995 and
1994, respectively. The minority interest of the unitholders in the
Operating Partnership is $9,661,000 and $8,337,000 at December 31, 1995
and 1994, respectively. Units will become exchangeable for cash, or at
the option of the Company, for Shares on a one-for-one basis. Units held
by the minority interest as a percentage of total Units and Shares
outstanding was 38.0% and 52.0% at December 31, 1995 and 1994,
respectively. Accordingly, the minority interest of the unitholders in
the Operating Partnership is calculated based on the minority interest
ownership percentage multiplied by the Company's net assets (total assets
less total liabilities) recorded at historical cost.
6. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
The following disclosures of estimated fair value were determined by
management using available market information and appropriate valuation
methodologies. Because considerable judgement is necessary to interpret
market data and develop the related estimates of fair value, the estimates
presented herein are not necessarily indicative of the amounts that could
be realized upon disposition of the financial instruments. The use of
different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.
Cash and cash equivalents, accounts payable, accrued expenses, security
deposits and other liabilities are carried at amounts which reasonably
approximate their fair values at December 31, 1995. Fixed rate mortgage
debt with a carrying value of $43,798,000 at December 31, 1995 has an
estimated aggregate fair value of $45,087,000. Interest rates currently
available to the Company for debt with similar terms and maturities were
used to estimate the fair value of this debt. Several of the Company's
loans are expected to be refinanced at lower interest rates prior to their
scheduled maturities which would reduce the estimated fair value of such
debt.
7. RELATED PARTY TRANSACTIONS
REAL ESTATE ACQUISITIONS On May 9, 1994, Highland Park, L.P. acquired a
10.9-acre tract of land for development of a 188-unit apartment community
located in Fulton County, Georgia from Roberts Properties, Inc., an
affiliate of Mr. Roberts, for $1,538,000.
On July 21, 1993, Preston Oaks, L.P. acquired from Roberts Properties,
Inc. for $1,670,000 a 10-acre tract of land and assumed a five-year land
lease on an additional .4-acre tract of land. The 10-acre and .4-acre
tracts of land are contiguous and are located in Fulton County, Georgia.
The land lease provided Preston Oaks, L.P. the option to purchase the
.4-acre tract anytime after April 16, 1994 for $240,000. On June 16,
1994, Preston Oaks, L.P. exercised its option and purchased the .4-acre
tract for $240,000.
F - 25
<PAGE> 98
On December 14, 1994, the Company acquired, through the Operating
Partnership, a .9-acre tract of land located in Gwinnett County, Georgia
from Roberts Properties, Inc. for $297,000. The .9-acre tract of land is
located directly in front of the River Oaks community. The Company
constructed an 8,348 square foot retail center on this tract of land
during 1995.
On January 24, 1995, Holcomb Bridge, L.P. acquired an 11.8-acre tract of
land for the development of a 146-unit apartment community located in
Gwinnett County, Georgia from Roberts Properties, Inc. for $1,510,000.
On January 31, 1995, the Operating Partnership acquired a 7,078 square
foot retail center ("Shoppes of Crestmark") valued at $888,000 from an
affiliate of a director of the Company in exchange for 104,478 Units. The
retail center was subsequently sold for $940,000 in December 1995.
On July 21, 1995, the Company acquired, through the Operating Partnership,
a 12.3-acre tract of land located adjacent to the existing Plantation
Trace community from Roberts Properties, Inc. for $445,000. The Company
intends to develop a second phase to the Plantation Trace community on
this tract.
CONSTRUCTION CONTRACTS Each of the Predecessors entered into fixed price
construction contracts with Roberts Properties Construction, Inc., which
is an affiliate of Mr. Roberts. These contract amounts from inception
through December 31, 1995 are summarized in the following table:
<TABLE>
<CAPTION>
TOTAL REMAINING
CONTRACT AMOUNT CONTRACTUAL
AMOUNT INCURRED COMMITMENT
----------- ----------- -----------
<S> <C> <C> <C>
River Oaks $ 8,532,000 $ 8,532,000
Bentley Place 3,777,000 3,777,000
Rosewood Plantation 6,083,000 6,083,000
Preston Oaks 7,806,000 7,806,000
Highland Park 8,021,000 7,967,000 $ 54,000
Holcomb Bridge 6,420,000 97,000 6,323,000
----------- ----------- ----------
$40,639,000 $34,262,000 $6,377,000
=========== =========== ==========
</TABLE>
In addition, certain of the Predecessors have paid or will pay Roberts
Properties Construction, Inc. for purchases made on their behalf and for
additional features added or built on their property that are not part of
the original construction contracts. These amounts aggregated $538,000
and $215,000 during 1995 and 1994, respectively. The Predecessors also
paid Roberts Properties Construction, Inc. for labor and materials to
perform repairs and maintenance for the communities in the amount of
$115,000 and $76,000 in 1995 and 1994, respectively.
DEVELOPMENT, ORGANIZATION, AND FINANCE FEES Fees have historically been
paid to affiliates of Mr. Roberts for various services. These fees
include organization, loan acquisition and financial advisory fees,
market study and business plan fees, design and development fees,
construction administration fees, property management systems fees and
finish selection and interior design fees. Fees incurred during the years
ended December 31, 1995 and 1994 were $730,000 and $1,530,000,
respectively.
F - 26
<PAGE> 99
MANAGEMENT FEES Roberts Properties Management, Inc., an affiliate of Mr.
Roberts, provided property management services to the Predecessors for a
fee of 6% of gross income in addition to annual incentive management fees
equal to 15% of the amount by which net operating income exceeded
forecasted amounts. The property management agreement for each community
was amended upon the completion of the merger of the applicable
partnership into the Operating Partnership. The amendment resulted in a
reduction of the property management fees paid to Roberts Properties
Management, Inc. from 6% of gross income to 5% of gross income. In
addition, the annual incentive management fees were eliminated. Property
management fees were $491,000 and $387,000 for the years ended December
31, 1995 and 1994, respectively.
CONSULTING FEES Affiliates of Mr. Roberts have contracted with each of
the Predecessors to provide consulting services in the event of a sale of
the community, with consulting fees ranging from 3% to 6% of the gross
sales proceeds of the property sold. Although the consulting fee was
waived at the time of the merger of each partnership into the Operating
Partnership, the Company and the Operating Partnership have assumed these
contracts as a term of each merger. There have been no sales of any of
the apartment communities.
OTHER FEES Affiliates of Mr. Roberts received fees and cost
reimbursements for services related to (1) construction and leasing
administration services at the Shoppes of River Oaks ($50,000), (2) the
sale of the Shoppes of Crestmark ($28,000), (3) the acquisition of the
Laurelwood community ($125,000), (4) the merger of St. Simons, Ltd. into
the Operating Partnership ($50,000), and (5) the 1994 refinancing of the
Rosewood Plantation community ($30,000). The total of these fees and
costs paid in 1995 and 1994 were $253,000 and $30,000, respectively.
BROKER-DEALER FEES A director of the Company owns all of the outstanding
stock of an NASD member broker-dealer that has participated as the
distributor or solicitation agent in numerous offerings by the Company and
the Operating Partnership. Fees paid for these services were $904,000 and
$533,000 for the years ended December 31, 1995 and 1994, respectively.
Additional fees will be paid, subject to the satisfaction of certain
conditions, related to the merger of Bentley Place, L.P. and the
completion of the Company's share offering as more fully described in Note
11.
LOAN ORIGINATION FEES A director of the Company is president of a
commercial mortgage banking firm that has originated loans for the Company
and its Predecessors. Loan origination fees paid were $87,000 and $8,000
for the years ended December 31, 1995 and 1994, respectively. Additional
fees will be paid as various of the Company's communities are refinanced
during 1996, as more fully described in Note 4.
8. COMMITMENTS AND CONTINGENCIES
As a result of the mergers of River Oaks, L.P., Rosewood Plantation, L.P.,
Plantation Trace, L.P. and St. Simons, Ltd. into the Operating
Partnership, the former partners of these four partnerships received
Units. Holders of Units have the right to require the Operating
Partnership to redeem their Units beginning when the Shares are listed on
a national securities exchange or Nasdaq (an "Exchange"), subject to
certain conditions. Upon submittal of Units for redemption, the Operating
Partnership will have the option either (a) to pay cash for such Units at
their fair market value, which will be based upon the then current trading
price of the Shares on an Exchange, or (b) to acquire such Units in
exchange for Shares (on a one-for-one basis). The Company anticipates that
it
F - 27
<PAGE> 100
will issue Shares in exchange for all such Units submitted. There were
2,092,548 Units outstanding at December 31, 1995 that could be exchanged
for Shares, subject to the conditions described above.
At December 31, 1995, the Company had outstanding a Letter of Credit in
the amount of $163,000 issued in connection with the refinancing of the
Highland Park community. The Letter of Credit was returned to the Company
in February 1996 upon completing the refinancing of Highland Park.
Subsequent to December 31, 1995, three additional Letters of Credit
totaling $395,400 were issued in connection with the financing of the
River Oaks, Holcomb Bridge and Bentley Place communities.
The Company enters into contractual commitments in the normal course of
business related to the development of real estate assets. At December
31, 1995, these commitments totaled $6,377,000 consisting of the remaining
contractual commitments relating to the construction of Highland Park and
Holcomb Bridge (See Note 7). Management does not believe that the
completion of these commitments will result in a material adverse effect
on the Company's financial position or results of operations.
9. EARNINGS PER SHARE
Earnings (loss) per common share for loss before extraordinary item and
net loss for the year ended December 31, 1995 and the three months ended
December 31, 1994 following the Consolidation has been computed by
dividing loss before extraordinary item and net loss by the weighted
average number of Shares outstanding during the periods of 2,866,880 and
1,951,648, respectively, as restated to reflect mergers of entities under
common ownership and management subsequent to the Consolidation for which
Shares were issued. For the nine months ended September 30, 1994
preceding the Consolidation, loss before extraordinary item and net loss
per Share for the Predecessors has been computed based upon the combined
weighted average number of Shares of 1,592,591 and Units of 2,110,653
issued to investors in the Predecessors.
10. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities for the years ended December
31, 1995 and 1994 were as follows:
A. The Company issued 1,043,647 Shares in exchange for the equity
of Preston Oaks, L.P. and Highland Park, L.P. totaling $6,953,000
including cash of $931,000.
B. The Operating Partnership issued 1,035,553 Units in exchange
for the equity of River Oaks, L.P. and Rosewood Plantation, L.P.
totaling $3,514,000 including cash of $296,000.
C. The Operating Partnership issued 104,478 Units, valued at
$888,000, in exchange for a 7,078 square foot retail center in 1995.
The retail center was subsequently sold in December 1995.
D. The Company issued 609,873 Shares in exchange for the equity of
Holcomb Bridge, L.P. totaling $3,967,000 including cash of
$1,728,000.
E. The Operating Partnership issued 1,074,672 Units in exchange
for the equity of Plantation Trace, L.P. and St. Simons, Ltd.
totaling $269,000 including cash of $651,000.
F - 28
<PAGE> 101
F. The Company issued 744,940 Shares in exchange for the equity of
Bentley Place, L.P. totaling $5,420,000 including cash of $188,000.
Total Predecessors' equity of $16,156,000 at September 30, 1994 included
the following:
<TABLE>
<S> <C>
Preston Oaks, L.P. $ 3,406,000
Highland Park, L.P. 3,547,000
River Oaks, L.P. 1,756,000
Rosewood Plantation, L.P. 1,758,000
Plantation Trace, L.P. 752,000
Bentley Place, L.P. 5,420,000
St. Simons, Ltd. (483,000)
-----------
Total Predecessors' equity at September 30, 1994 $16,156,000
</TABLE>
11. SUBSEQUENT EVENTS
On November 1, 1995, the Company commenced an offering of up to 631,580
Shares ("Cash Offering") at a price of $9.50 per Share. On April 19,
1996, the Company increased the size of the Cash Offering from 631,580
Shares to 736,850 Shares after the original Cash Offering was fully
subscribed and extended the termination date of the Cash Offering to May
10, 1996. Upon the initial closing of the Cash Offering on March 29, 1996
at which 443,675 Shares were issued, the Operating Partnership purchased
22.5 acres of land for $1,628,000 for the development and construction of
a 180-unit apartment community. Development costs are anticipated to be
approximately $12,268,000 and would include the purchase of the land,
entering into a fixed price construction contract with an affiliate of Mr.
Roberts in the amount of $8,829,000 and other contracts with Roberts
Properties, Inc. related to design, development, and construction
administration in the aggregate amount of $735,000. Additional net
proceeds from the Cash Offering will be used for other purposes at the
discretion of the Company's Board of Directors.
On February 20, 1996, the Company's Board of Directors declared a
distribution in the amount of $0.11875 per common share payable on April
15, 1996 to shareholders of record on March 19, 1996.
On March 21, 1996, the Company acquired the assets and liabilities of
Bentley Place, L.P. in exchange for 744,940 Shares. Bentley Place is a
117-unit apartment community located in DeKalb County, Georgia. The
Company's historical financial statements have been restated to include
the balances and results of operations of this entity under common
ownership and management for all periods presented.
On May 1, 1996, the Company's Board of Directors approved making an offer
to acquire the General Partner's and limited partners' interests in The
Crestmark Club, L.P. ("Crestmark") in exchange for 746,649 Units of the
Operating Partnership. Crestmark is a limited partnership under common
ownership and management with the Company. Crestmark's assets of
$13,838,000 (at historical cost), subject to liabilities totaling
$11,899,000 at December 31, 1995, include a 248-unit apartment community
and 8.8 acres of adjoining land located in Douglas County, Georgia.
F - 29
<PAGE> 102
INDEPENDENT AUDITORS' REPORT
Partners of The Crestmark Club, L.P.:
We have audited the accompanying balance sheets of The Crestmark Club, L.P.
(the "Partnership") as of December 31, 1995 and 1994 and the related statements
of operations, partners' equity (deficit), and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Partnership as of December 31, 1995 and
1994 and the results of its operations and cash flows for each of the three
years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
April 19, 1996
(Except for paragraph four of Note 1
as to which the date is May 1, 1996)
F - 30
<PAGE> 103
THE CRESTMARK CLUB, L.P.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
ASSETS 1995 1994
<S> <C> <C>
REAL ESTATE ASSETS - At cost:
Land:
Improved $ 1,840 $ 1,840
Unimproved 1,824 2,276
Buildings and improvements 10,281 10,281
Furniture, fixtures, and equipment 1,410 1,414
------- -------
15,355 15,811
Less accumulated depreciation (1,929) (1,254)
------- -------
Net real estate assets 13,426 14,557
CASH AND CASH EQUIVALENTS 100 101
RESTRICTED CASH 129 99
DEFERRED FINANCING COSTS - Net of accumulated
amortization of $57 and $27, respectively 166 196
OTHER ASSETS - Net 17 24
------- -------
$13,838 $14,977
======= =======
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Mortgage notes payable $10,235 $10,751
Note payable to General Partner 1,071 1,071
Accounts payable and accrued expenses 59 75
Due to affiliates 475 356
Security deposits and prepaid rents 59 66
------- -------
Total liabilities 11,899 12,319
COMMITMENTS AND CONTINGENCIES
PARTNERS' EQUITY 1,939 2,658
------- -------
$13,838 $14,977
======= =======
</TABLE>
See notes to financial statements.
F - 31
<PAGE> 104
THE CRESTMARK CLUB, L.P.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in Thousands)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
OPERATING REVENUES:
Rental operations $2,024 $1,930 $ 650
Other operating income 169 279 113
------ ------ -----
Total operating revenues 2,193 2,209 763
OPERATING EXPENSES:
Personnel 237 241 185
Utilities 169 256 121
Repairs, maintenance, and landscaping 121 101 48
Real estate taxes 185 177 71
Marketing, management fees, and other 264 381 359
Depreciation of real estate assets 677 786 468
------ ------ -----
Total operating expenses 1,653 1,942 1,252
------ ------ -----
INCOME (LOSS) FROM OPERATIONS 540 267 (489)
OTHER INCOME (EXPENSES):
Interest income 6 1 5
Gain (loss) on sale of real estate assets (21) 114
Interest expense (908) (874) (524)
Amortization expense (44) (60) (77)
------ ------ -----
Total other income (expenses) (967) (933) (482)
------ ------ -----
LOSS BEFORE EXTRAORDINARY ITEM (427) (666) (971)
EXTRAORDINARY ITEM - Loss on early
extinguishment of debt (59)
------ ------ -----
NET LOSS $ (427) $ (725) $(971)
====== ====== =====
</TABLE>
See notes to financial statements.
F - 32
<PAGE> 105
THE CRESTMARK CLUB, L.P.
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Equity
<S> <C> <C> <C>
PARTNERS' EQUITY, JANUARY 1, 1993 $ - $4,390 $4,390
Net loss (194) (777) (971)
----- ------ ------
PARTNERS' EQUITY (DEFICIT),
DECEMBER 31, 1993 (194) 3,613 3,419
Capital distributions (7) (29) (36)
Net loss (145) (580) (725)
----- ------ ------
PARTNERS' EQUITY (DEFICIT),
DECEMBER 31, 1994 (346) 3,004 2,658
Capital distributions (58) (234) (292)
Net loss (85) (342) (427)
----- ------ ------
PARTNERS' EQUITY (DEFICIT),
DECEMBER 31, 1995 $(489) $2,428 $1,939
===== ====== ======
</TABLE>
See notes to financial statements.
F - 33
<PAGE> 106
THE CRESTMARK CLUB, L.P.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
(Dollars in Thousands)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $(427) $(725) $ (971)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation 677 786 468
Amortization 44 60 77
Loss on early extinguishment of debt 59
(Gain) loss on sale of real estate assets 21 (114)
(Increase) decrease in restricted cash (30) 5 318
(Increase) decrease in other assets (1) 311 (326)
Increase (decrease) in accounts payable,
accrued expenses, and due to affiliates 103 (516) 628
Increase (decrease) in security deposits and
prepaid rents (7) 29 37
----- ------ -------
Net cash provided by operating activities 380 9 117
INVESTING ACTIVITIES:
Proceeds from sales of real estate assets 467 300
Real estate construction, development, and sales costs (34) (440) (3,555)
Purchase of furniture, fixtures, and equipment (19) (1,395)
----- ------ -------
Net cash provided (used) by investing activities 433 (459) (4,650)
FINANCING ACTIVITIES:
Proceeds from mortgage notes payable 10,100 4,738
Principal reductions on mortgage notes payable (516) (9,307) (193)
Payment of loan costs (6) (223) (2)
Capital distributions to partners (292) (36)
----- ------ ------
Net cash provided (used) by financing activities (814) 534 4,543
----- ------ ------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1) 84 10
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 101 17 7
----- ------ -------
CASH AND CASH EQUIVALENTS, END
OF YEAR $ 100 $ 101 $ 17
===== ====== =======
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Interest paid in cash, net of capitalized interest of
$0, $0, and $189, respectively $ 798 $ 838 $ 414
===== ====== =======
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Payment of construction and development
costs by issuance of a payable to an affiliate $ - $ 121 $ -
===== ====== =======
</TABLE>
See notes to financial statements.
F - 34
<PAGE> 107
THE CRESTMARK CLUB, L.P.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Organization - The Crestmark Club, L.P. (the "Partnership"), a Georgia
limited partnership, was formed on August 10, 1990 pursuant to the Revised
Uniform Limited Partnership Act of the State of Georgia to develop a
248-unit apartment community (the "Community") on approximately 23.4 acres
of land in Douglas County, Georgia.
The Limited Partnership Agreement provides for Mr. Charles S. Roberts (the
"General Partner") to operate the business affairs of the Partnership. The
General Partner contributed a nominal amount of cash to the Partnership for
his interest. The Partnership consists of the General Partner interest and
292 limited partnership units. The Partnership will continue in existence
until its expiration on December 31, 2025, unless terminated earlier in
accordance with the provisions of the limited partnership agreement.
On January 11, 1991, the Partnership received capital contributions from the
limited partners in the amount of $3,489,000, acquired land, and began
development activities. The Partnership received subsequent capital
contributions from its limited partners of $1,621,000 for a total of
$5,110,000 of capital contributions. The Partnership began rental
operations and became a fully operating extended stay suites inn in 1993.
In August 1994, pursuant to a change in the Partnership's business plan, the
Community began operating as an apartment community.
On May 1, 1996, the Board of Directors of Roberts Realty Investors, Inc.
approved making an offer to acquire the General Partner's and limited
partners' interests in the Partnership through a merger. Roberts Realty
Investors, Inc., a Georgia corporation, is a real estate investment trust
under the Internal Revenue Code of 1986, as amended, and is the sole general
partner of Roberts Properties Residential, L.P. The proposed merger would
involve Roberts Properties Residential, L.P. issuing 746,649 limited
partnership units to the partners of the Partnership and assuming the
Partnership's assets and liabilities. Beginning in the second quarter of
1996, subject to certain limitations, the limited partnership units in
Roberts Properties Residential, L. P. will be convertible to an equivalent
number of shares of Roberts Realty Investors, Inc. The 746,649 limited
partnership units would represent an indirect ownership interest in Roberts
Realty Investors, Inc. of 11.9% as of December 31, 1995. Mr. Charles S.
Roberts is the Chairman of the Board, President, Chief Executive Officer,
and a 13.5% shareholder of Roberts Realty Investors, Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Real Estate Assets and Depreciation - Real estate assets which are held for
use are carried at historical cost reduced 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
F - 35
<PAGE> 108
changes in general market conditions. In determining whether an asset is
impaired, management estimates the future cash flows expected to be
generated from the asset's use and its eventual disposition. If the sum of
these estimated future cash flows on an undiscounted basis is less than the
asset's carrying cost, the asset is written down to its fair value. None of
the Partnership's real estate assets have required write-downs from their
historical cost.
Expenditures related to the development, acquisition, and improvement of
real estate assets are capitalized as land, buildings, and improvements.
Ordinary repairs and maintenance are expensed as incurred; replacements or
betterments are capitalized and depreciated over their estimated useful
lives. Buildings are depreciated on a straight-line basis over 27.5 years.
Land improvements are depreciated using the 150% declining-balance method
over 15 years. Furniture, fixtures, and equipment are depreciated using the
200% declining-balance method over 5 to 7 years.
Revenue Recognition - The Partnership leases the Community under operating
leases with terms generally one year or less. Rental income is recognized
when earned, which is not materially different than revenue recognition on a
straight-line basis as there are no material rental concessions.
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
held in trust for the tenants of the Community in a segregated escrow
account and monies held by lenders for the payment of interest, real estate
taxes, insurance, and certain other specified costs.
Deferred Financing Costs - Deferred financing costs include fees and costs
incurred to obtain financing and are amortized on the straight-line method
over the terms of the related loan. The amounts included in amortization
expense for the years ended 1995, 1994, and 1993 were $36,000, $52,000, and
$69,000, respectively.
Interest and Real Estate Taxes - Interest and real estate taxes incurred
during the construction period were capitalized as a cost of the real estate
asset and are depreciated over the life of the constructed asset.
Partners' Equity - Partners' capital contributions, distributions, and
profit and loss are allocated in accordance with the terms of the limited
partnership agreement. Generally, these items are allocated in proportion
to a partner's respective ownership interest, 80% in aggregate to the
limited partners and 20% to the General Partner. Distributions from
proceeds of a property sale are distributed first to the limited partners in
amounts equal to their original invested capital. Remaining distributions
from property sale proceeds are then distributed in proportion to a
partner's respective ownership interest. The Partnership incurred legal
fees and other syndication costs of $703,000 in 1991 that were recorded as a
reduction of limited partners' equity.
Income Taxes - The Partnership is a limited partnership and is not subject
to federal and state income taxes. Accordingly, no recognition has been
given to income taxes in the accompanying financial statements of the
Partnership since the taxable income or loss of the Partnership is included
in the tax returns of the individual partners. The tax returns of the
Partnership are subject to examination by federal and state taxing
authorities. If such examinations result in adjustments to distributive
shares of taxable income or loss, the tax liability of the partners would be
adjusted accordingly.
F - 36
<PAGE> 109
3. MORTGAGE NOTES PAYABLE AND NOTE PAYABLE TO GENERAL PARTNER
On January 11, 1991, in connection with the purchase of the land (see Note
5), the Partnership assumed a loan held by Roberts Properties Thornton Road,
Ltd., a related party. The loan was dated July 8, 1986 and had an original
principal balance of $2,200,000 of which the remaining principal amount
assumed by the Partnership was $1,017,000. The note originally bore interest
at prime plus 1%, was scheduled to mature on January 10, 1992, and has been
extended annually. Subsequent to December 31, 1995, the note was modified
to the interest rate of the prime rate or 1.80% above LIBOR at the election
of the borrower, with a maturity date of April 1, 1997. The loan requires
monthly payments of interest only on the outstanding principal balance. The
loan is collateralized by 7.7 acres of undeveloped land adjacent to the
Community and by a payment and performance guarantee of the General Partner.
The outstanding principal balance at December 31, 1995 was $323,000.
The Partnership has a mortgage note payable to the General Partner in the
original amount of $1,083,000 which is collateralized by a second priority
deed on the undeveloped land. The note bears interest at the prime rate
plus 1% and had an original maturity date of January 10, 1992 but has
subsequently been extended annually until April 1, 1997. The outstanding
principal balance at December 31, 1995 was $1,071,000.
The Partnership had a mortgage note payable in the form of a construction
loan dated March 6, 1992 in the original amount of $9,250,000 with a
maturity date of February 6, 1995. The note was due in monthly installments
of interest only on the outstanding principal balance at the prime rate plus
1% with fixed monthly principal payments of approximately $5,000 commencing
in October 1993. The note was collateralized by the Community, an
assignment of leases and rents, and by a payment and performance guarantee
provided by the General Partner.
On April 27, 1994, the outstanding principal balance of the construction
loan described above was paid in full from the proceeds of a permanent loan.
Unamortized loan costs associated with the construction loan were $59,000
at the repayment date and were expensed upon repayment of the loan. The
write-off of the unamortized loan costs incurred on this extinguishment of
debt are presented as an extraordinary item in the accompanying statement of
operations for the year ended December 31, 1994. The new mortgage note
payable in the original amount of $10,100,000 is dated April 27, 1994 and is
collateralized by the Community and an assignment of leases and rents. The
note is due in monthly installments of principal and interest in the amount
of $72,000 based on a 28-year amortization schedule until the note matures
on May 1, 2001. The fixed interest rate on the note is 7.50%. The
Partnership paid Roberts Properties, Inc., an affiliate of the General
Partner, a financing fee of $30,000 for the services provided in the
acquisition of the permanent loan. Other loan costs associated with the
refinancing totaled $186,000. The outstanding principal balance at December
31, 1995 was $9,912,000.
F - 37
<PAGE> 110
The scheduled principal maturities on the mortgage notes payable and note
payable to the General Partner are as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
<S> <C>
1996 $ 114,000
1997 1,528,000
1998 144,000
1999 155,000
2000 168,000
2001 9,197,000
-----------
$11,306,000
===========
</TABLE>
4. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
The following disclosures of estimated fair value were determined by
management using available market information and appropriate valuation
methodologies. Because considerable judgment is necessary to interpret
market data and develop the related estimates of fair value, the estimates
presented herein are not necessarily indicative of the amounts that could be
realized upon disposition of the financial instruments. The use of
different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.
Cash and cash equivalents, restricted cash, mortgage notes payable, accounts
payable, accrued expenses, security deposits, and other liabilities are
recorded at amounts which reasonably approximate their fair values at
December 31, 1995. Interest rates currently available to the Partnership
for debt with similar terms and maturities were used to estimate the fair
value of the debt.
5. RELATED PARTY TRANSACTIONS
On January 11, 1991, the Partnership acquired 2.8 acres of land from Roberts
Properties, Inc., an affiliate of the General Partner, for $295,000. An
additional 32.2 acres of land were acquired from Roberts Properties Thornton
Road, L.P., an affiliate of the General Partner for $4,009,000.
On May 28, 1993, the Partnership sold a .8 acre tract of land to a limited
partner for $300,000.
The Partnership entered into a fixed price construction contract in 1991
with Roberts Properties Construction, Inc., an affiliate of the General
Partner, in the amount of $9,500,000. In addition, the Partnership paid
Roberts Properties Construction, Inc. $182,000 for purchases made on the
Partnership's behalf and for additional features built on the property that
were not a part of the original construction contract.
F - 38
<PAGE> 111
The Partnership has paid fees to affiliates of the General Partner for
various services. These amounts from inception through December 31, 1995
are summarized below:
<TABLE>
<S> <C>
Partnership Administration Fee $150,000
Financial and Loan Origination Fee 150,000
Organization Fee 25,000
Design and Development Fee 500,000
Offering Advisory Fee 50,000
Market Study Fee 175,000
----------
$1,050,000
==========
</TABLE>
The Partnership Administration Fee was amortized on a straight-line basis
over a 24-month period for certain administrative services performed for the
Partnership. The Organization Fee was capitalized as an organizational cost
to be amortized on a straight-line basis over 60 months. The Offering
Advisory Fee was capitalized as a syndication cost and charged against the
limited partners' equity. The Financial and Loan Origination Fee was
capitalized as a loan cost and amortized over the life of the loan. The
Design and Development Fee and Market Study Fee were capitalized into the
cost of the real estate assets.
Roberts Properties Management, Inc., an affiliate of the General Partner,
provides property management services to the Partnership for a fee of 6% of
gross income. The management contract has an initial term through December
31, 1995 and automatically renews each year unless otherwise terminated.
Management fees were $132,000, $131,000, and $46,000 for the years ended
December 31, 1995, 1994, and 1993, respectively.
An affiliate of the General Partner has contracted with the Partnership to
provide consulting services in the event of a sale of the Community for a
fee not to exceed 5% of the gross sales proceeds. The General Partner has
offered to waive this fee in connection with the proposed merger. Any
subsequent sale or change in control would again be subject to this fee. An
affiliate of the General Partner earned a fee of $23,000 on the sale of a
parcel of undeveloped land in 1995.
6. DUE TO AFFILIATES
Amounts owed and accrued to affiliates of the General Partner have been
separately disclosed in the accompanying balance sheets as due to
affiliates. Such amounts include a note payable to Roberts Properties
Construction, Inc. in the amount of $121,000 related to unpaid costs of
constructing the Community, $289,000 in accrued and unpaid interest on the
note payable to the General Partner (see Note 3), and a payable to Roberts
Properties Management, Inc. in the amount of $65,000 for other costs.
F - 39
<PAGE> 1
EXHIBIT 6.21
Assignment/Assumption by Multifamily Management, Inc. (f/k/a Roberts
Properties Management, Inc.) to Roberts Properties Management, L.L.C. dated
April 30, 1996 assigning property management agreements, together with
Consent to Assignment and Assumption executed by Roberts
Properties Residential, L.P. dated April 30, 1996
<PAGE> 2
ASSIGNMENT/ASSUMPTION
KNOW ALL MEN BY THESE PRESENTS, that, for One Dollar ($1.00) in hand paid
by each party hereto to the other, and for other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged: (a) Multifamily Management, Inc., a Georgia corporation
("Assignor"), does hereby assign, transfer and convey unto Roberts Properties
Management, L.L.C., a Georgia limited liability company ("Assignee"), all of
Assignor's rights, title and interest in and to (i) the agreements listed on
Exhibit A attached hereto (the "Contracts") and (ii) the intangible assets
listed on Exhibit B attached hereto (the "Other Intangible Assets"); and (b)
Assignee does hereby assume all of Assignor's duties under the Contracts
arising at and after the effective date hereof.
WITNESS OUR HANDS on the dates indicated, but as of the first day of the
month in which such date occurs.
<TABLE>
<S> <C>
Date: April 30, 1996 Multifamily Management, Inc.
--------------
By: /s/ Anthony W. Shurtz
-------------------------------------
Authorized Agent
By: /s/ Brian J. Sullivan
-------------------------------------
Authorized Agent
Date: April 30, 1996 Roberts Properties Management, L.L.C.
--------------
By: /s/ Charles S. Roberts
-------------------------------------
Member
</TABLE>
<PAGE> 3
EXHIBIT A
CONTRACTS
Management Agreement dated December 27, 1985 between RPI and Roberts
Properties-St. Simons, Ltd. ("SSL"), as assigned (by RPI to Seller and
by SSL to Roberts Properties Residential, L.P. ("RPR")) and amended by
Amendment #1 effective September 27 as of September 1, 1995
Management Agreement dated December 8, 1988 between Seller and Roberts
Properties Plantation Trace, L.P. ("PT"), as assigned by PT to RPR and
amended by Amendment #1 effective May 16 as of May 1, 1995
Consulting Agreement dated May 16, 1995 between Seller and RPR
Management Agreement dated August 21, 1991 between Seller and Roberts
Properties River Oaks, L.P. ("RO"), as assigned by RO to RPR and
amended by Amendment #1 effective October 13 as of October 1, 1994
Management Agreement dated July 31, 1992 between Seller and Roberts
Properties Bentley Place, L.P. ("BP"), as assigned by BP to RPR and
amended by Amendment #1 effective March 21 as of March 1, 1996
Management Agreement dated January 5, 1993 between Seller and Roberts
Properties Rosewood Plantation, L.P. ("RP"), as assigned by RP to RPR
and amended by Amendment #1 effective October 13 as of October 1, 1994
Management Agreement dated July 21, 1993 between Seller and Roberts
Properties Preston Oaks, L.P. ("PO"), as assigned by PO to RPR and
amended by Amendment #1 effective October 13 as of October 1, 1994
Management Agreement dated May 9, 1994 between Seller and Roberts
Properties Highland Park, L.P. ("HP"), as assigned by HP to RPR and
amended by Amendment #1 effective October 13 as of October 1, 1994
Management Agreement dated January 11, 1991 between Seller and The
Crestmark Club, L.P.
Management Agreement dated December 15, 1995 between Seller and RPR
for the Laurelwood Apartment Community
<PAGE> 4
EXHIBIT B
OTHER INTANGIBLE ASSETS
Name (Roberts Properties Management)
Policies and Procedures Manuals
<PAGE> 5
CONSENT TO ASSIGNMENT AND ASSUMPTION
KNOW ALL MEN BY THESE PRESENTS, that, for One Dollar ($1.00) in hand paid
by each of Multifamily Management, Inc. ("Assignor") and Roberts Properties
Management, L.L.C. ("Assignee") to the undersigned, the undersigned does hereby
consent to assignment by Assignor to Assignee of all of Assignor's rights,
title and interest to and in the agreements listed on Exhibit A attached hereto
(the "Contracts"), and to Assignee's assumption of all of Assignor's duties
under such agreements, it being understood, however, that undersigned does not
release Assignor from any of such duties, the undersigned hereby reserving its
rights and powers to hold Assignor responsible for performance of all such
duties, it being understood that following such assignment and assumption
Assignor and Assignee shall be jointly and severally responsible to the
undersigned for performance of all such duties.
WITNESS THE HAND of the undersigned on the date indicated, but as of the
first day of the month in which such date occurs.
Date: April 30, 1996 Roberts Properties Residential, L.P.
--------------
By: Roberts Realty Investors, Inc.
By: /s/ Charles S. Roberts
---------------------------
President
<PAGE> 6
EXHIBIT A
CONTRACTS
Management Agreement dated December 27, 1985 between RPI and Roberts
Properties-St. Simons, Ltd. ("SSL"), as assigned (by RPI to Seller and
by SSL to Roberts Properties Residential, L.P. ("RPR")) and amended by
Amendment #1 effective September 27 as of September 1, 1995
Management Agreement dated December 8, 1988 between Seller and Roberts
Properties Plantation Trace, L.P. ("PT"), as assigned by PT to RPR and
amended by Amendment #1 effective May 16 as of May 1, 1995
Consulting Agreement dated May 16, 1995 between Seller and RPR
Management Agreement dated August 21, 1991 between Seller and Roberts
Properties River Oaks, L.P. ("RO"), as assigned by RO to RPR and
amended by Amendment #1 effective October 13 as of October 1, 1994
Management Agreement dated July 31, 1992 between Seller and Roberts
Properties Bentley Place, L.P. ("BP"), as assigned by BP to RPR and
amended by Amendment #1 effective March 21 as of March 1, 1996
Management Agreement dated January 5, 1993 between Seller and Roberts
Properties Rosewood Plantation, L.P. ("RP"), as assigned by RP to RPR
and amended by Amendment #1 effective October 13 as of October 1, 1994
Management Agreement dated July 21, 1993 between Seller and Roberts
Properties Preston Oaks, L.P. ("PO"), as assigned by PO to RPR and
amended by Amendment #1 effective October 13 as of October 1, 1994
Management Agreement dated May 9, 1994 between Seller and Roberts
Properties Highland Park, L.P. ("HP"), as assigned by HP to RPR and
amended by Amendment #1 effective October 13 as of October 1, 1994
Management Agreement dated December 15, 1995 between Seller and RPR
for the Laurelwood Apartment Community
