<PAGE> 1
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U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
Commission file number 0-28048
ROBERTS REALTY INVESTORS, INC.
(Exact name of small business issuer as specified 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)
(770) 394-6000
Issuer's telephone number
___________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by court. Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: Common Stock - 4,186,329
shares
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
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<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
--------- ------------
<S> <C> <C>
ASSETS
REAL ESTATE ASSETS - At cost: (Note 3)
Land $21,807 $19,937
Buildings and improvements 87,483 80,441
Furniture, fixtures, and equipment 11,418 10,429
-------- --------
120,708 110,807
Less accumulated depreciation (11,776) (8,915)
-------- --------
Operating real estate assets 108,932 101,892
Construction-in-progress and real estate under development 4,479 10,230
-------- --------
Net real estate assets 113,411 112,122
CASH AND CASH EQUIVALENTS 4,620 3,162
RESTRICTED CASH 718 532
DEFERRED FINANCING COSTS - net of accumulated amortization of $166 and 760 658
$111 at June 30, 1997 and December 31, 1996, respectively
OTHER ASSETS - Net 313 341
-------- --------
$119,822 $116,815
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Mortgage notes payable $ 69,313 $63,342
Accounts payable and accrued expenses 1,706 1,053
Dividends and distributions payable 981 870
Due to affiliates (including retainage payable of $95 and 900 2,540
$316 at June 30, 1997 and December 31, 1996, respectively)
Security deposits and prepaid rents 501 462
-------- --------
Total Liabilities 73,401 68,267
COMMITMENTS AND CONTINGENCIES (Note 5)
MINORITY INTEREST OF THE UNITHOLDERS
IN THE OPERATING PARTNERSHIP 20,704 19,322
-------- --------
SHAREHOLDERS' EQUITY:
Preferred shares, $.01 par value, 20,000,000 shares authorized,
no shares issued and outstanding
Common shares, $.01 par value, 100,000,000 shares authorized, 4,186,329
shares issued and outstanding at June 30, 1997 and December 31, 1996,
respectively 42 42
Additional paid-in capital 30,073 29,902
Accumulated deficit (4,398) (718)
-------- --------
Total shareholders' equity 25,717 29,226
-------- --------
$119,822 $116,815
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE> 3
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-------------------------------------
1997 1996
----------- -----------
<S> <C> <C>
OPERATING REVENUES:
Rental operations $ 4,272 $ 3,570
Other operating income 168 130
---------- -----------
Total operating revenues 4,440 3,700
---------- -----------
OPERATING EXPENSES:
Personnel 430 314
Utilities 282 226
Repairs, maintenance, and landscaping 253 223
Real estate taxes 368 315
Management fees to related party 185
Marketing, insurance, and other 246 159
General and administrative expenses 312 183
Depreciation of real estate assets 1,482 1,163
---------- -----------
Total operating expenses 3,373 2,768
---------- -----------
INCOME FROM OPERATIONS 1,067 932
---------- -----------
OTHER INCOME (EXPENSES):
Interest income 72 131
Interest expense (1,217) (912)
Loss on disposal of assets (26)
Amortization of deferred financing costs (29) (41)
Other amortization expense (8) (19)
Acquisition of Roberts Properties Management, L.L.C. (5,900)
---------- -----------
Total other income (expenses) (7,108) (841)
---------- -----------
INCOME (LOSS) BEFORE MINORITY INTEREST (6,041) 91
MINORITY INTEREST OF THE UNITHOLDERS
IN THE OPERATING PARTNERSHIP 2,694 (31)
---------- -----------
NET INCOME (LOSS) $ (3,347) $ 60
========== ===========
PER SHARE DATA:
Net income (loss) $ (0.80) $ 0.01
========== ===========
Dividends declared $ 0.13 $ 0.11875
========== ===========
Weighted average common shares 4,186,329 4,023,861
========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------
1997 1996
---------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) $ (3,672) $ (107)
Adjustments to reconcile net (loss) to net cash provided
by operating activities:
Minority interest of unitholders in the Operating Partnership (2,692) (3)
Acquisition of Roberts Properties Management, L.L.C. 5,900
Depreciation and amortization 3,022 2,261
Extraordinary item 101
Change in assets and liabilities net of amounts acquired:
(Increase) in restricted cash (186) (87)
Decrease in other assets 11 214
Increase in accounts payable and
accrued expenses relating to operations 649 609
(Decrease) in due to affiliates relating to operations (282) (171)
Increase in security deposits and prepaid rent 39 12
--------- --------
Net cash provided by operating activities 2,789 2,829
--------- --------
INVESTING ACTIVITIES:
Acquisition and construction of real estate assets (4,519) (5,099)
Purchase of furniture, fixtures and equipment (955) (42)
Loss on disposal of assets 45
Cash acquired in mergers 164
--------- --------
Net cash (used) in investing activities (5,429) (4,977)
--------- --------
FINANCING ACTIVITIES:
Proceeds from mortgage notes payable 6,420 13,178
Principal reductions on mortgage notes payable (423) (8,137)
Payment of note payable to affiliate (1,403)
Payment of loan costs (159) (202)
Proceeds from issuance of shares 6,589
Payment of share and unit issuance costs (563)
Payment of dividends and distributions (1,740) (566)
--------- --------
Net cash provided by financing activities 4,098 8,896
--------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,458 6,748
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,162 1,404
--------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4,620 $ 8,152
========= ========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid for interest, net of capitalized interest $ 2,340 $ 1,742
--------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------
1997 1996
---------- ----------
<S> <C> <C>
OPERATING REVENUES:
Rental operations $ 8,366 $ 6,659
Other operating income 325 229
---------- ----------
Total operating revenues 8,691 6,888
---------- ----------
OPERATING EXPENSES:
Personnel 869 595
Utilities 557 417
Repairs, maintenance, and landscaping 493 415
Real estate taxes 733 615
Management fees to related party 211 344
Marketing, insurance, and other 490 307
General and administrative expenses 560 330
Depreciation of real estate assets 2,913 2,159
---------- ----------
Total operating expenses 6,826 5,182
---------- ----------
INCOME FROM OPERATIONS 1,865 1,706
---------- ----------
OTHER INCOME (EXPENSES):
Interest income 146 160
Interest expense (2,358) (1,745)
Loss on disposal of assets (45)
Amortization of deferred financing costs (56) (86)
Other amortization expense (16) (44)
Acquisition of Roberts Properties Management, L.L.C. (5,900) _____
----------
Total other income (expenses) (8,229) (1,715)
---------- ----------
INCOME (LOSS) BEFORE MINORITY INTEREST AND
EXTRAORDINARY ITEM (6,364) (9)
MINORITY INTEREST OF THE UNITHOLDERS
IN THE OPERATING PARTNERSHIP 2,692 3
---------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (3,672) (6)
EXTRAORDINARY ITEM - Early extinguishment of debt, net of
minority interest of unitholders in the Operating Partnership (101)
---------- ----------
NET INCOME (LOSS) $ (3,672) $ (107)
========== ==========
PER SHARE DATA:
Income (Loss) before extraordinary item $ (0.88) $ (0.00)
========== ==========
Extraordinary item $ (0.03)
==========
Net income (loss) $ (0.88) $ (0.03)
========== ==========
Dividends declared $ 0.255 $ 0.2375
========== ==========
Weighted average common shares 4,186,329 3,406,470
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
ROBERTS REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE COMPANY
Roberts Realty Investors, Inc. (the "Company"), a Georgia corporation,
was formed July 22, 1994 to serve as a vehicle for investments in, and
ownership of, a professionally managed real estate portfolio of
multifamily apartment communities. The Company owns and operates
multifamily residential properties as a self-administered and
self-managed equity real estate investment trust (a "REIT").
Approximately 89% 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.
2. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by the
Company's management in accordance with generally accepted accounting
principles for interim financial information in conformity with the rules
and regulations of the Securities and Exchange Commission (the "SEC").
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) considered necessary
for a fair presentation have been included. The results of operations
for the six months ended June 30, 1997 are not necessarily indicative of
the results that may be expected for the full year. These financial
statements should be read in conjunction with the Company's December 31,
1996 audited financial statements and notes thereto included in the
Company's SEC filing on Form 10-KSB for the fiscal year ended December
31, 1996.
3. MORTGAGE NOTES PAYABLE
In February 1996, the Company received a commitment to provide financing
in the amount of $6,420,000 secured by the Ivey Brook Community. The
financing closed on January 30, 1997. The new mortgage note is in the
amount of $6,420,000 at a fixed interest rate of 7.14% payable in monthly
installments of $43,318 based on a 30-year amortization schedule. The
note matures on February 15, 2007. In connection with the financing, a
letter of credit was issued to the lender in the amount of $1,140,000
with an expiration date of January 30, 1998.
In March 1997, the Company received a commitment to provide financing for
the second phase of the Crestmark Community in the amount of $4,000,000
at a fixed interest rate of 7.65% payable in monthly installments of
$28,381 based on a 30-year amortization schedule. The note matures on
May 1, 2001. The second phase of Crestmark was unencumbered at June 30,
1997. The financing closed on July 17, 1997.
6
<PAGE> 7
In March 1997, the Company and certain non-owned affiliates of the
Company established a $35,000,000 Advised Guidance Line (the "Guidance
Line") with NationsBank N.A. (South) (the "Bank") for the purpose of
providing financing for the acquisition or development of multifamily
communities. Financing under the Guidance Line is available on a
revolving basis and bears interest at LIBOR plus 1.80% or Prime plus 0%,
at the option of the borrower, payable monthly. The Guidance Line is not
a commitment to lend and each loan under the Guidance Line will be made
at the Bank's discretion in accordance with normal loan approval
procedures.
Mortgage notes payable were secured by the following communities at June
30, 1997.
<TABLE>
<CAPTION>
FIXED INTEREST
RATE AS OF PRINCIPAL OUTSTANDING
MATURITY 06/30/97 06/30/97 12/31/96
--------------------------------------------------
<S> <C> <C> <C> <C>
Autumn Ridge 04/15/06 7.13% $ 4,911,935 $ 4,950,573
Bentley Place 08/15/06 7.10% 4,066,159 4,086,703
Crestmark Club 05/01/01 7.50% 9,720,680 9,786,700
Highland Park 02/15/03 7.30% 8,072,192 8,113,077
Ivey Brook 02/15/07 7.14% 6,399,341
Plantation Trace 09/15/00 7.75% 7,831,728 7,886,172
Preston Oaks 10/15/02 7.21% 8,565,899 8,611,269
River Oaks 11/15/03 7.15% 9,197,546 9,242,639
Rosewood Plantation 06/01/01 7.38% 6,402,456 6,446,506
Windsong 02/01/00 9.00% 4,145,166 4,218,747
------------------------
$69,313,102 $63,342,386
========================
</TABLE>
4. MINORITY INTEREST
The Company, as the general partner of the Operating Partnership, does
not hold any limited partner interests ("Units") in the Operating
Partnership. The Company's general partner interest was 55.4% and 60.2%
at June 30, 1997 and December 31, 1996, respectively. Units outstanding
at June 30, 1997 and December 31, 1996 were 3,363,430 and 2,773,430,
respectively. Units held by the minority interest as a percentage of
total Units and shares of the Company's Common Stock ("Shares")
outstanding was 44.6% at June 30, 1997 and 39.8% at December 31, 1996.
The minority interest of the unitholders in the Operating Partnership was
$20,704,000 and $19,322,000 at June 30, 1997 and December 31, 1996,
respectively. Subject to certain conditions, 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 minority interest
ownership percentage multiplied by the Operating Partnership's net assets
(total assets less total liabilities). The minority interest percentage
reflects the number of Shares and Units outstanding and will change as
additional Shares and Units are issued.
7
<PAGE> 8
5. COMMITMENTS AND CONTINGENCIES
The holders of Units have the right to require the Operating Partnership
to redeem their Units beginning when (a) the Shares are listed on a
national securities exchange or Nasdaq (an "Exchange"), and (b) Shares
issuable in redemption of Units have been registered with the SEC,
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 it will issue Shares in exchange for all such Units
submitted. There were 3,363,430 Units outstanding at June 30, 1997 that
could be exchanged for Shares, subject to the conditions described above.
The Company enters into contractual commitments in the normal course of
business related to the development and construction of real estate
assets. At June 30, 1997, these commitments totaled $11,630,000 as
summarized in the following table:
<TABLE>
<CAPTION>
TOTAL REMAINING
CONTRACT AMOUNT CONTRACTUAL
AMOUNT INCURRED COMMITMENT
----------- ---------- -----------
<S> <C> <C> <C>
Crestmark Club - Phase II $ 3,795,000 $3,760,000 $ 35,000
Plantation Trace - Phase II 3,157,000 3,157,000
Howell Ferry 8,829,000 391,000 8,438,000
----------- ---------- -----------
$15,781,000 $4,151,000 $11,630,000
=========== ========== ===========
</TABLE>
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.
On June 18, 1997, the Company's Board of Directors declared a quarterly
distribution in the amount of $0.13 per common Share and Unit payable on
July 15, 1997 to shareholders and unitholders of record on June 18, 1997.
6. EXTRAORDINARY ITEM
The 1996 extraordinary item resulted from the write-off of unamortized
deferred financing costs associated with the January 31, 1996 refinancing
of the mortgage note secured by the Highland Park Community. The
extraordinary item is net of $62,000 which was allocated to the minority
interest of the unitholders in the Operating Partnership, calculated on
the weighted average number of Units outstanding during the six months
ended June 30, 1996.
8
<PAGE> 9
7. ACQUISITION OF ROBERTS PROPERTIES MANAGEMENT, L.L.C.
On April 1, 1997, the Company acquired Roberts Properties Management,
L.L.C. ("Roberts Management"), the property management company that
managed the Company's multifamily apartment communities since the
Company's inception. The Operating Partnership issued a total of 590,000
Units valued at $10.00 per Unit or $5,900,000 to purchase Roberts
Management. Because Roberts Management, a related party, managed only
the properties owned by the Company, the transaction has been accounted
for as the settlement of a contract and expensed in the quarter ended
June 30, 1997. The Company now manages its own properties using Roberts
Management's property management systems and the property management
personnel formerly employed by Roberts Management. Although the Company
no longer pays 5% of gross property revenues to Roberts Management for
property management services, it does bear the actual overhead cost of
managing the properties internally. Pro forma amounts for the six months
ended June 30, 1997 and June 30, 1996, assuming the acquisition had taken
place prior to the periods presented (and the associated acquisition
expense is eliminated), are as follows (dollars in thousands except per
share amounts):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Net income (loss) $ (242) $ (64)
Earnings (loss) per common share $(0.06) $(0.02)
</TABLE>
8. CHANGE IN DEPRECIATION METHOD AND CAPITALIZATION POLICY
The Company has revised its method of accounting for replacements of
carpets and major appliances. Previously, all such replacements were
expensed. The Company's revised policy is to capitalize and depreciate
replacement carpets over five years and to capitalize and depreciate
replacements of major appliances over seven years. The change in
capitalization policy and depreciation method was adopted to more
accurately reflect the estimated useful life of carpets and major
appliances. The Company believes that the newly adopted policy is
preferable because it is consistent with policies of a majority of
similar entities and provides a better matching of expense with the
estimated period of benefit. The change in accounting principle is
inseparable from the effect of the change in accounting estimate and is
therefore treated as a change in accounting estimate. The new method
will be applied to current and future additions and replacements
beginning with the quarter ended June 30, 1997. The effect of the change
on the three months ended June 30, 1997 was to decrease the net loss by
$7,000 ($0.00 per share).
9. EARNINGS PER SHARE
Income (loss) before extraordinary item and net income (loss) per common
share for the six months ended June 30, 1997 and June 30, 1996 have been
computed by dividing income (loss) before extraordinary item and net
income (loss) by the weighted average number of Shares outstanding during
the periods of 4,186,329 and 3,406,470, respectively. The weighted
average number of Shares outstanding during the three months ended June
30, 1997 and June 30, 1996 was 4,186,329 and 4,023,861, respectively.
9
<PAGE> 10
10. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities for the six months ended June
30, 1996 and June 30, 1997 were as follows:
A. On March 21, 1996, the Company issued 744,940 Shares in
exchange for the assets and liabilities of Roberts Properties
Bentley Place, L.P. valued at $7,076,000 including cash of $165,000.
No mortgage debt was assumed in connection with this acquisition.
B. On June 26, 1996, the Operating Partnership issued 746,715
Units in exchange for the assets and liabilities of Crestmark Club,
L.P. valued at $7,280,000 including cash of $117,000. Mortgage debt
of $10,184,000 and a note payable to Mr. Charles S. Roberts in the
amount of $1,403,000 were assumed in connection with this
acquisition. The note to Mr. Roberts was repaid in full immediately
following the Crestmark closing.
C. On April 1, 1997, the Operating Partnership issued 590,000
Units in exchange for the assets and liabilities of Roberts
Properties Management, L.L.C. valued at $5,900,000.
11. SUBSEQUENT EVENTS
On July 11, 1997, the Company filed a Registration Statement on Form S-3
(the "Registration Statement") with the SEC to register 3,363,430 Shares
of the Company's Common Stock for issuance, if and to the extent the
Company elects to issue such Shares to holders of 3,363,430 Units upon
the tender of such Units for redemption. The registration Statement is
being reviewed by the SEC and is not effective.
The Company has filed an application with the American Stock Exchange
(the "AMEX") to list the Common Stock on the AMEX. The AMEX has approved
such listing application, and the Company expects that the trading of its
Shares on the AMEX will commence in August 1997.
The Company has entered into a contract for sale of the apartment
community known as Autumn Ridge. The contract, for a sales price of
$10,457,000, is subject to the normal conditions of sale. The net book
value of the property is approximately $8,551,000.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
OVERVIEW
Roberts Realty Investors, Inc. (the "Company) owns multifamily residential
properties as a self-administered and self-managed equity real estate investment
trust. On April 1, 1997, the Company began managing its own properties when it
acquired Roberts Properties Management, L.L.C. ("Roberts Management"). The
Operating Partnership issued a total of 590,000 Units valued at $10.00 per Unit
or $5,900,000 to purchase Roberts Management. Because Roberts Management, a
related party, managed only the properties owned by the Company, the transaction
has been accounted for as the settlement of a contract and expensed in the
quarter ended June 30, 1997. As of June 30, 1997, the Company owns 11
multifamily apartment communities consisting of 2,218 apartment homes of which
255 are under development or construction. This Quarterly Report on Form 10-QSB
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Although the Company believes the expectations reflected in the forward-looking
statements are based on reasonable assumptions, the Company's actual results
could differ materially from those set forth in the forward-looking statements.
Certain factors that might cause such a difference include, but are not limited
to, the following: occupancy rates and rents may be adversely affected by local
economic and market conditions, construction costs of a Community may exceed
original estimates and construction and lease-up of new Communities may not be
completed on schedule. The following discussion should be read in conjunction
with the Consolidated Financial Statements of Roberts Realty Investors, Inc. and
the Notes thereto appearing elsewhere herein.
RESULTS OF OPERATIONS
Comparison of Three Months Ended June 30, 1997 to Three Months Ended June 30,
1996. The changes in operating results for the three months ended June 30,
1997 compared to the three months ended June 30, 1996 are primarily the result
of increases in the number of apartment homes owned due to: (1) the lease-up of
the 146-unit Ivey Brook Community and the 86-unit second phase of Crestmark,
and (2) the acquisition of the 248-unit Crestmark Community in June 1996. For
the three months ended June 30, 1997, the Company recorded a net loss of
$3,347,000 or $0.80 per share (after minority interest) compared to net income
of $60,000 or $0.01 per share (after minority interest) for the three months
ended June 30, 1996. The Company's operating performance for all Communities
is summarized in the following table:
<TABLE>
<CAPTION>
PERCENTAGE
CHANGE FROM THREE MONTHS ENDED JUNE 30,
1996 TO 1997 1997 1996
------------ ---- ----
<S> <C> <C> <C>
Total operating revenues 20.0% $4,440,000 $3,700,000
Property operating expenses (1) 27.6% 1,579,000 1,237,000
Management fees paid to third party n/a 185,000
General and administrative expenses 70.5% 312,000 183,000
Depreciation of real estate assets 27.4% 1,482,000 1,163,000
Average physical occupancy (2) (3.3%) 94.5% 97.8%
Operating expense ratio (3) 2.2% 35.6% 33.4%
</TABLE>
11
<PAGE> 12
(1) Property operating expenses include personnel, utilities, real estate
taxes, insurance, maintenance, landscaping, marketing, 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 period and subtracting the
resulting number from 100%. The Company considers a Community to have
achieved stabilized occupancy on the earlier of (a) attainment of 95%
occupancy as of the first day of any month, or (b) one year after
completion of construction. The second quarter 1997 calculation does not
include the following: (1) Ivey Brook, which started its lease-up phase in
September 1996 and had physical occupancy of 90% on June 30, 1997, and (2)
the second phase of Crestmark, which started its lease-up phase in January
1997 and had physical occupancy of 73% on June 30, 1997. The second
quarter 1996 calculation does include the first phase of Crestmark
beginning June 1, 1996 which is the date the community was acquired by the
Company.
(3) Represents the total of property operating expenses divided by property
operating revenues expressed as a percentage.
Operating results for the eight communities that were fully stabilized during
both the three months ended June 30, 1996 and the three months ended June 30,
1997 (the River Oaks, Rosewood Plantation, Preston Oaks, Highland Park,
Plantation Trace, Windsong, Bentley Place and Autumn Ridge Communities) are
summarized as follows:
<TABLE>
<CAPTION>
PERCENTAGE
CHANGE FROM THREE MONTHS ENDED JUNE 30,
1996 TO 1997 1997 1996
------------ ---- ----
<S> <C> <C> <C>
Rental income 1.1% $3,376,738 $3,341,170
Total operating revenues 0.6% 3,472,819 3,451,307
Property operating expenses (1) 4.1% 1,210,948 1,163,377
Management fees paid to third party n/a 172,524
Net operating income (2) (1.1%) 2,261,871 2,287,930
Average physical occupancy (3) (1.9%) 95.7% 97.6%
Operating expense ratio (4) 1.2% 34.9% 33.7%
Average monthly rent per unit 3.9% $ 812 $ 781
</TABLE>
- --------------------
(1) Property operating expenses include personnel, utilities, real estate
taxes, insurance, maintenance, landscaping, marketing, and other fees.
(2) Because the Company acquired Roberts Properties Management, L.L.C. on
April 1, 1997, no management fees were paid during the three months ended
June 30, 1997. Therefore, net operating income for the three months ended
June 30, 1996 does not include management fees paid to a third party
totaling $172,524.
(3) Represents the average physical occupancy of the stabilized communities
calculated by dividing the total number of vacant days by the total
possible number of vacant days for the three months ended June 30, 1996
and 1997, and subtracting the resulting number from 100%.
(4) Represents the total of property operating expenses divided by property
operating revenues expressed as a percentage.
12
<PAGE> 13
The following explanation compares the Company's statements of operations for
the three months ended June 30, 1997 and June 30, 1996.
Rental income increased $702,000 or 19.7% from $3,570,000 for the three months
ended June 30, 1996 to $4,272,000 for the three months ended June 30, 1997.
The increase in rental income is due primarily to the following: (1) the
acquisition of the Crestmark Community in June 1996 ($306,000), (2) the
lease-up of the Ivey Brook Community and the second phase of Crestmark
($356,000), and (3) increased rental income from the eight fully stabilized
communities included in the Company's portfolio during both the three months
ended June 30, 1997 and June 30, 1996 ($36,000) which includes the effects of
increases in rental rates partially offset by declines in occupancy.
Property operating expenses (excluding depreciation, general and administrative
expenses and management fees) increased $342,000 or 27.6% from $1,237,000 to
$1,579,000. The increase is due primarily to the following: (1) the
acquisition of Crestmark in June 1996 ($161,000), (2) the commencement of
property operations for the Ivey Brook Community ($125,000), and (3) increase
in operating expenses at the eight fully stabilized communities included in the
Company's portfolio during both the three months ended June 30, 1997 and June
30, 1996 ($48,000). Property operating expenses as a percentage of operating
revenues increased from 33.4% for the three months ended June 30, 1996 to 35.6%
for the three months ended June 30, 1997.
Depreciation expense increased $319,000 or 27.4% from $1,163,000 to $1,482,000.
The increase is due primarily to the following: (1) the acquisitions of
Bentley Place and Crestmark, and (2) the completion of construction of Ivey
Brook during the first quarter of 1997.
General and administrative expenses increased $129,000 or 70.5% from $183,000
to $312,000 and include legal, accounting and tax fees, marketing and printing
fees, salaries, director fees and other costs. The increase is due primarily
to the following: (1) the overhead cost of managing the Company's properties
internally as a result of acquiring Roberts Properties Management, L.L.C. on
April 1, 1997, (2) the addition of administrative personnel needed to support
the Company's growth, and (3) the directors and officers liability insurance
policy obtained by the Company in September 1996. General and administrative
expenses as a percentage of operating revenues increased from 4.9% for the
three months ended June 30, 1996 to 7.0% for the three months ended June 30,
1997. The Company expects that as it continues to grow, such expenses will
decline as a percentage of operating revenues, even though general and
administrative expenses will increase in absolute terms.
Interest income decreased $59,000 or 45% from $131,000 to $72,000. The
decrease is due to lower cash equivalent investment balances during the three
months ended June 30, 1997 as a result of paying for the costs of construction
of Ivey Brook and the second phase of Crestmark from the Company's available
cash.
Interest expense increased $305,000 or 33.4% from $912,000 to $1,217,000 due
primarily to the following: (1) the mortgage debt assumed by the Company with
the acquisition of Crestmark in June 1996, and (2) the financing of Bentley
Place in August 1996.
13
<PAGE> 14
Comparison of Six Months Ended June 30, 1997 to Six Months Ended June 30, 1996.
The changes in operating results for the six months ended June 30, 1997
compared to the six months ended June 30, 1996 are primarily the result of
increases in the number of apartment homes owned due to: (1) the lease-up of
Ivey Brook and the second phase of Crestmark, and (2) the acquisition of
Bentley Place and Crestmark in March 1996 and June 1996, respectively. For the
six months ended June 30, 1997, the Company recorded a net loss of $3,672,000
or $0.88 per share (after minority interest) compared to a net loss of $107,000
or $0.03 per share (after minority interest and extraordinary item) for the six
months ended June 30, 1996. The Company's operating performance for all
Communities is summarized in the following table:
<TABLE>
<CAPTION>
PERCENTAGE
CHANGE FROM SIX MONTHS ENDED JUNE 30,
1996 TO 1997 1997 1996
------------ ---- ----
<S> <C> <C> <C>
Total operating revenues 26.2% $8,691,000 $6,888,000
Property operating expenses (1) 33.8% 3,142,000 2,349,000
Management fees paid to third party (38.7%) 211,000 344,000
General and administrative expenses 69.7% 560,000 330,000
Depreciation of real estate assets 34.9% 2,913,000 2,159,000
Average stabilized occupancy (2) (1.9%) 95.2% 97.1%
Operating expense ratio (3) 2.1% 36.2% 34.1%
</TABLE>
- -----------------------
(1) Property operating expenses include personnel, utilities, real estate
taxes, insurance, maintenance, landscaping, marketing, 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 period and subtracting the
resulting number from 100%. The calculation does not include the
following: (1) Ivey Brook, which started its lease-up phase in September
1996 and had physical occupancy of 90% on June 30, 1997, and (2) the
second phase of Crestmark, which started its lease-up phase in January
1997 and had physical occupancy of 73% on June 30, 1997. The calculation
does include the following: (1) Highland Park beginning March 1, 1996,
which is the date the community achieved stabilized occupancy, and (2)
Bentley Place beginning March 1, 1996 and Crestmark beginning June 1,
1996, which are the dates each community was acquired by the Company.
(3) Represents the total of property operating expenses divided by property
operating revenues expressed as a percentage.
14
<PAGE> 15
Operating results for the five communities that were fully stabilized during
both the six months ended June 30, 1996 and the six months ended June 30, 1997
(the River Oaks, Rosewood Plantation, Preston Oaks, Plantation Trace and
Windsong Communities) are summarized as follows:
<TABLE>
<CAPTION>
PERCENTAGE
CHANGE FROM SIX MONTHS ENDED JUNE 30,
1996 TO 1997 1997 1996
------------ ---- ----
<S> <C> <C> <C>
Rental income 0.6% $4,536,324 $4,508,730
Total operating revenues 0.3% 4,669,080 4,653,047
Property operating expenses (1) (0.3%) 1,522,144 1,526,036
Management fees paid to third party (49.8%) 116,866 232,611
Net operating income (2) 0.6% 3,146,936 3,127,011
Average stabilized occupancy (3) (2.6%) 96.5% 99.1%
Operating expense ratio (4) (0.2%) 32.6% 32.8%
Average monthly rent per unit 3.5% $ 822 $ 794
</TABLE>
- ------------------------
(1) Property operating expenses include personnel, utilities, real estate
taxes, insurance, maintenance, landscaping, marketing, and other fees.
(2) Because the Company acquired Roberts Properties Management, L.L.C. on
April 1, 1997, no management fees were paid during the three months ended
June 30, 1997. Therefore, net operating income does not include
management fees paid to a third party.
(3) Represents the average physical occupancy of the stabilized communities
calculated by dividing the total number of vacant days by the total
possible number of vacant days for the three months ended June 30, 1996
and 1997, and subtracting the resulting number from 100%.
(4) Represents the total of property operating expenses divided by property
operating revenues expressed as a percentage.
The following explanation compares the Company's statements of operations for
the six months ended June 30, 1997 and June 30, 1996.
Rental income increased $1,706,000 or 25.6% from $6,659,000 for the six months
ended June 30, 1996 to $8,366,000 for the six months ended June 30, 1997. The
increase in rental income is due primarily to the following: (1) the
acquisition of Bentley Place and Crestmark in March 1996 and June 1996,
respectively ($1,020,000), (2) the lease-up of the Ivey Brook and the second
phase of Crestmark ($491,000), (3) the stabilization of Autumn Ridge, which was
acquired in December 1995 ($124,000), (4) the stabilization of Highland Park,
which completed its lease-up in March 1996 ($43,000), and (5) increased rental
income from the five fully stabilized communities included in the Company's
portfolio during the six months ended June 30, 1997 and June 30, 1996 ($28,000)
including the effects of increases in rental rates partially offset by declines
in occupancy.
15
<PAGE> 16
Property operating expenses (excluding depreciation, general and administrative
expenses and management fees) increased $793,000 or 33.8% from $2,349,000 to
$3,142,000. The increase is due primarily to the following: (1) the
acquisition of Autumn Ridge, Bentley Place and Crestmark in December 1995,
March 1996 and June 1996, respectively ($508,000), and (2) the commencement of
property operations for the Ivey Brook Community ($263,000). Property
operating expenses as a percentage of operating revenues increased from 34.1%
for the six months ended June 30, 1996 to 36.2% for the six months ended June
30, 1997.
General and administrative expenses increased $230,000 or 69.7% from $330,000
to $560,000 and include legal, accounting and tax fees, marketing and printing
fees, salaries, director fees and other costs. The increase is due primarily
to the following: (1) the overhead cost of managing the Company's properties
internally as a result of acquiring Roberts Properties Management, L.L.C. on
April 1, 1997, (2) the addition of administrative personnel needed to support
the Company's growth, and (3) the directors and officers liability insurance
policy obtained by the Company in September 1996. General and administrative
expenses as a percentage of operating revenues increased from 4.8% for the six
months ended June 30, 1996 to 6.4% for the six months ended June 30, 1997.
Interest expense increased $613,000 or 35.1% from $1,745,000 to $2,358,000. The
increase is due primarily to the following: (1) the mortgage debt assumed by
the Company with the acquisition of Crestmark in June 1996, and (2) the
financing of Bentley Place in August 1996.
The mortgage note payable secured by the Highland Park Community was refinanced
in January 1996, prior to its contractual maturity. The unamortized loan costs
related to the mortgage note payable at the time of the refinancing were
charged to expense as an extraordinary item. The extraordinary item (early
extinguishment of a debt) for the six months ended June 30, 1996 was $163,000
(including the minority interests' share of $62,000).
LIQUIDITY AND CAPITAL RESOURCES
Comparison of Six Months Ended June 30, 1997 to Six Months Ended June 30, 1996.
Cash and cash equivalents increased $1,458,000 during the six months ended
June 30, 1997 compared to an increase of $6,748,000 during the six months ended
June 30, 1996. The increase is due to the excess of cash flow provided by
operating and financing activities over cash used in investing activities.
A primary source of liquidity to the Company is cash flow from operations.
Operating cash flows have historically been determined by the number of
apartment homes, rental rates and operating expenses with respect to such
apartment homes. Net cash provided by operating activities decreased $40,000
or 1.4%, from $2,829,000 to $2,789,000. The cash flow from the operations of
Bentley Place and Crestmark, which were acquired in March 1996 and June 1996,
respectively, was offset by lower occupancy rates and rent concessions from the
Company's stabilized communities. The highly competitive Atlanta apartment
market is experiencing weaker market conditions during 1997 compared to 1996.
The Company expects the current softness in the Atlanta apartment market to
continue through 1997 with market conditions improving during 1998. The
Company's average physical occupancy decreased 1.9% from 97.1% during the six
months ended June 30, 1996 to 95.2% during the six months ended June
16
<PAGE> 17
30, 1997. The effects of revenue and expense accruals are not material in
understanding the Company's cash flow from operations. Generally, depreciation
and amortization expenses are the most significant adjustments to net income
(loss) in arriving at cash provided by operating activities.
Net cash used in investing activities increased $452,000 from $4,977,000 for
the six months ended June 30, 1996 to $5,429,000 for the six months ended June
30, 1997 due primarily to an increase in construction of real estate assets.
The Company made no acquisitions of existing apartment communities during these
periods.
Net cash provided by financing activities decreased $4,798,000 from $8,896,000
for the six months ended June 30, 1996 to $4,098,000 for the six months ended
June 30, 1997. This decrease is due primarily to (1) net proceeds of
approximately $6,000,000 from the sale of 443,675 Shares in March 1996 and an
additional 255,500 Shares in May 1996, (2) the payment to an affiliate of
$1,403,000 of a note payable assumed in the acquisition of the Crestmark
Community in June 1996, (3) a higher level of net borrowings associated with
the financing of Ivey Brook for $6,420,000 in January 1997 compared to the
financing of Autumn Ridge for $5,000,000 in March 1996 , and (4) the payment of
two quarterly distributions on Shares and Units during the six months ended
June 30, 1997 compared to the payment of the Company's first quarterly
distribution in April 1996.
The Operating Partnership acquired (1) the fully operating Bentley Place
Community in March 1996 by issuing Shares, and (2) the fully operating
Crestmark Community and its 8.8 acres of adjacent undeveloped property in June
1996 by issuing Units. Similarly, the Company issued Shares in March 1996 in
an offering of Shares for cash to acquire the land for and fund the development
and construction of the Howell Ferry Community which began in April 1997. The
total estimated acquisition, development, and construction cost for the Howell
Ferry Community is $12,268,000, including the land acquisition cost of
$1,628,000. The Company will use $2,186,000 of its working capital, along with
an $8,454,000 mortgage loan (for which the Company has not yet obtained a
commitment), to develop and construct Howell Ferry.
The Operating Partnership is also developing a 51-unit second phase to
Plantation Trace and a 24-unit second phase to Preston Oaks. Construction of
the second phase of both Plantation Trace ($3,157,000) and Preston Oaks
($1,300,000) will be funded from the Company's working capital.
The Company anticipates that each Community's rental and other operating
revenues will be adequate to provide short-term (less than 12 months) liquidity
for the payment of direct rental operating expenses, interest and amortization
of principal on related mortgage notes payable and capital expenditures. The
Company expects to meet its other short-term liquidity requirements generally
through its net cash provided by operations, which it believes will be adequate
to meet its operating requirements and to satisfy applicable REIT dividend
payment requirements in both the short-term and in the long-term (greater than
12 months). Improvements and renovations at existing Communities are also
expected to be funded from property operations. The Company expects to meet its
long-term liquidity requirements, including future developments, debt maturities
and possible acquisitions, through the issuance of additional equity securities
of the Company and the proceeds from future mortgage financings. In addition,
the Company has entered into a contract to sell the Autumn Ridge Community for
$10,457,000. The Company
17
<PAGE> 18
expects to receive net proceeds of approximately $5,000,000 from the sale which
is anticipated to close in August 1997 but which is subject to normal
conditions of sale.
In February 1996, the Company received a commitment from Nationwide Life
Insurance Company for a permanent loan secured by the Ivey Brook Community.
The financing was completed on January 30, 1997. The principal amount of the
note is $6,420,000 at a fixed interest rate of 7.14% per annum for a ten-year
term. Based on a 30-year amortization schedule, the monthly payment of
principal and interest on the loan is $43,318.
In March 1997, the Company received a commitment to provide financing in the
amount of $4,000,000 secured by the second phase of the Crestmark Community.
The financing was completed on July 17, 1997. A portion of the loan proceeds
totaling $250,000 was deposited into escrow at loan closing and will be
released upon completion of final construction items and attainment of a
minimum occupancy requirement. The principal amount of the note is $4,000,000
at a fixed interest rate of 7.65% per annum and a maturity date of May 1, 2001.
Based on a 30-year amortization schedule, the monthly payment of principal and
interest on the loan is $28,381. The second phase of Crestmark was
unencumbered at June 30, 1997.
In March 1997, the Company and certain non-owned affiliates of the Company
established a $35,000,000 Advised Guidance Line (the "Guidance Line") with
NationsBank N.A. (South) (the "Bank") for the purpose of providing financing
for the acquisition or development of multifamily communities. Financing under
the Guidance Line is available on a revolving basis and bears interest at LIBOR
plus 1.80% or Prime plus 0%, at the option of the borrower, payable monthly.
The Guidance Line is not a commitment to lend, and each loan under the Guidance
Line will be made at the Bank's discretion in accordance with normal loan
approval procedures.
The Company's existing mortgage indebtedness will require balloon payments
coming due over the years 2000 to 2007 as summarized below:
<TABLE>
<S> <C>
2000 $11,253,000
2001 15,238,000
2002 8,025,000
2003 16,057,000
2006 7,535,000
2007 5,570,000
-----------
Total $63,678,000
===========
</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.
18
<PAGE> 19
Management believes that these sources of debt financing, equity capital,
operating cash flow and working capital of the Company will provide the
liquidity and adequate capital resources to begin and complete its planned
development and construction activities. The Company expects liquidity and
capital resources for additional acquisition and development to be provided by
a combination of secured long-term borrowing and issuance of equity securities.
FUNDS FROM OPERATIONS
The White Paper on Funds from Operations approved by the Board of Governors of
NAREIT in March 1995 defines Funds from Operations as net income (loss)
(computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of property and non-recurring items, plus real estate
related depreciation and amortization. The Company computes Funds from
Operations in accordance with the standards established by the White Paper,
which may differ from the methodology for calculating Funds from Operations
utilized by other equity REITs, and, accordingly, may not be comparable to such
other REITs. Funds from Operations does not represent amounts available for
management's discretionary use because of needed capital replacement or
expansion, debt service obligations, property acquisitions, development and
distributions, or other commitments and uncertainties. Funds from Operations
should not be considered as an alternative to net income (determined in
accordance with GAAP) as an indication of the Company's financial performance
or to cash flows from operating activities (determined in accordance with GAAP)
as a measure of the Company's liquidity, nor is it indicative of funds
available to fund the Company's cash needs, including its ability to make
distributions. The Company considers Funds From Operations ("FFO") to be an
important measure of its operating performance. While FFO does not represent
cash flows from operating, investing or financing activities as defined by
generally accepted accounting principles ("GAAP"), FFO does provide investors
with additional information with which to evaluate the ability of a REIT to pay
dividends, meet required debt service payments and fund capital expenditures.
The Company believes that in order to gain a clear understanding of its
operating results, FFO should be evaluated in conjunction with net income
(determined in accordance with GAAP). The following table reconciles net
income (loss) to FFO (dollars in thousands).
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) $ (3,347) $ 60 $ (3,672) $ (107)
Minority interest of Unitholders (2,694) 31 (2,692) (3)
Extraordinary item 101
Acquisition of RPM expense 5,900 5,900
Loss on disposal of assets 26 45
Amortization (real estate related) 8 19 16 44
Depreciation expense 1,482 1,163 2,913 2,159
--------- --------- --------- ---------
Funds From Operations $ 1,375 $ 1,273 $ 2,510 $ 2,194
========= ========= ========= =========
Weighted average Shares and Units
outstanding during the period 7,549,759 6,152,995 7,256,389 5,517,412
</TABLE>
19
<PAGE> 20
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of. Such adoption had no
material effect on the financial statements.
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 contract for the
Howell Ferry Community will be at a fixed price and equal substantially all of
the anticipated construction costs. The short-term nature of these leases and
the fixed price construction contract serve to reduce the risk to the Company of
the adverse effects of inflation.
20
<PAGE> 21
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of Shareholders on May 27, 1997. The
shareholders voted to elect Charles S. Roberts and James M. Goodrich to serve
as directors of the Company for a full three year term through the Annual
Meeting in 2000. A total of 2,330,725 votes were cast for, and 7,800 were
withheld from, the election of Charles S. Roberts, and a total of 2,330,725
votes were cast for, and 7,800 were withheld from, the election of James M.
Goodrich. The terms of office of directors Ben A. Spalding and George W. Wray,
Jr. expire at the Annual Meeting in 1998, and the terms of office of directors
Dennis H. James and Wm. Jarell Jones expire at the Annual Meeting in 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The exhibits required by Item 601 of Regulation SB are described in
the following Index to Exhibits and are filed as part of this report on Form
10-QSB. Exhibits 2.1 and 4.2.7 are incorporated by reference from the
Company's Current Report on Form 8-K filed on April 16, 1997.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2.1 Agreement and Plan of Merger by and between Roberts Properties
Residential, L.P. and Roberts Properties Management, L.L.C.,
dated April 1, 1997.
[Pursuant to Item 601 of Regulation S-B, the following
schedules and attachments to the foregoing Agreement and Plan
of Merger are omitted from this report.]
Exhibit A Certificate and Articles of Merger (filed as
Exhibit 4.2.7 as noted below)
Exhibit B Repurchase Option Agreement by and among Charles
S. Roberts, the Members with Article 6A Interests,
and Roberts Properties Residential, L.P.
Exhibit C Articles of Organization of Roberts Properties
Management, L.L.C.
Exhibit D Operating Agreement of Roberts Properties
Management, L.L.C.
Schedule 2.5 Certain Financial Statements of Roberts Properties
Management, L.L.C.
Schedule 2.8 Headquarters and Other Locations
</TABLE>
21
<PAGE> 22
<TABLE>
<S> <C>
Schedule 2.10 Certificate of Insurance
Schedule 2.17 List of Manager Contracts
4.2.7 Certificate and Articles of Merger filed with the Georgia
Secretary of State merging Roberts Properties Management, L.L.C.
with and into Roberts Properties Residential, L.P.
18 Letter on Change in Accounting Principles from Deloitte & Touche
LLP.
27 Financial Data Schedule (for SEC use only).
</TABLE>
(b) Reports on Form 8-K. The Company filed a Current Report on Form 8-K
on April 16, 1997 and Amendment No. 1 thereto on June 16, 1997. No other
Current Reports on Form 8-K were filed during the quarter for which this report
on Form 10-QSB is filed. The referenced report, as amended, described in Item
2 thereof the Company's acquisition on April 1, 1997 of Roberts Properties
Management, L.L.C., the property management company that has managed the
Company's multifamily apartment communities since the Company's inception.
Under Item 7(b) thereof the Company filed the following pro forma financial
statements: a pro forma condensed consolidated balance sheet as of March 31,
1997 and notes thereto; a pro forma consolidated statement of operations for
the twelve months ended December 31, 1996 and notes thereto; and a pro forma
consolidated statement of operations for the three months ended March 31, 1997
and notes thereto.
SIGNATURES
In accordance with Section 12 of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ROBERTS REALTY INVESTORS, INC.
Date: August 14, 1997 By:/s/ Charles S. Roberts
---------------------------------------
Charles S. Roberts, Chairman of the
Board, Chief Executive Officer, and
President
Date: August 14, 1997 By:/s/ Charles R. Elliott
---------------------------------------
Charles R. Elliott
Chief Financial Officer
22
<PAGE> 23
EXHIBIT INDEX
The exhibits required by Item 601 of Regulation SB are described in this
Index to Exhibits and are filed as part of this report on Form 10-QSB.
Exhibits 2.1 and 4.2.7 are incorporated by reference from the Company's Current
Report on Form 8-K filed on April 16, 1997.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2.1 Agreement and Plan of Merger by and between Roberts Properties
Residential, L.P. and Roberts Properties Management, L.L.C.,
dated April 1, 1997.
[Pursuant to Item 601 of Regulation S-B, the following
schedules and attachments to the foregoing Agreement and Plan
of Merger are omitted from this report.]
Exhibit A Certificate and Articles of Merger (filed as
Exhibit 4.2.7 as noted below)
Exhibit B Repurchase Option Agreement by and among Charles
S. Roberts, the Members with Article 6A Interests,
and Roberts Properties Residential, L.P.
Exhibit C Articles of Organization of Roberts Properties
Management, L.L.C.
Exhibit D Operating Agreement of Roberts Properties
Management, L.L.C.
Schedule 2.5 Certain Financial Statements of Roberts Properties
Management, L.L.C.
Schedule 2.8 Headquarters and Other Locations
Schedule 2.10 Certificate of Insurance
Schedule 2.17 List of Manager Contracts
4.2.7 Certificate and Articles of Merger filed with the Georgia
Secretary of State merging Roberts Properties Management, L.L.C.
with and into Roberts Properties Residential, L.P.
18 Letter on Change in Accounting Principles from Deloitte & Touche
LLP.
27 Financial Data Schedule (for SEC use only).
</TABLE>
23
<PAGE> 1
EXHIBIT 18
[DELOITTE & TOUCHE LLP LETTERHEAD]
August 1, 1997
Board of Directors
Roberts Realty Investors, Inc.
8010 Roswell Road
Suite 120
Atlanta, Georgia 30350
Dear Sirs:
At your request, we have read the description included in your Quarterly Report
on Form 10-QSB to the Securities and Exchange Commission for the quarter ended
June 30, 1997 of the facts relating to the change in accounting policy for
capital expenditures and depreciation. We believe, on the basis of the facts
so set forth and other information furnished to us by appropriate officials of
the Company, that the accounting change described in your Form 10-QSB is to an
alternative accounting principle that is preferable under the circumstances.
We have not audited any consolidated financial statements of Roberts Realty
Investors, Inc. and its consolidated subsidiaries as of any date or for any
period subsequent to December 31, 1996. Therefore, we are unable to express,
and we do not express, an opinion on the facts set forth in the above-mentioned
Form 10-QSB, on the related information furnished to us by officials of the
Company, or on the financial position, results of operations, or cash flows of
Roberts Realty Investors, Inc. and its consolidated subsidiaries as of any date
or for any period subsequent to December 31, 1996.
Yours truly,
DELOITTE & TOUCHE LLP
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,338,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,338,000
<PP&E> 125,187,000
<DEPRECIATION> 11,776,000
<TOTAL-ASSETS> 119,822,000
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0
0
<COMMON> 42,000
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<NET-INCOME> (3,672,000)
<EPS-PRIMARY> $(0.88)
<EPS-DILUTED> $(0.88)
</TABLE>
