<PAGE> 1
As filed with the Securities and Exchange Commission on September 3, 1997
Registration Statement No. 333-31117
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------------------------
ROBERTS REALTY INVESTORS, INC.
(Exact name of registrant as specified in its charter)
Georgia 58-2122873
(State or other Jurisdiction (I.R.S. Employer
of Incorporation) Identification Number)
8010 Roswell Road, Suite 120
Atlanta, Georgia 30350
(770) 394-6000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Charles S. Roberts
Chairman of the Board, Chief Executive Officer,
and President
Roberts Realty Investors, Inc.
8010 Roswell Road, Suite 120
Atlanta, Georgia 30350
(770) 394-6000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
copy to:
Charles D. Vaughn, Esq.
Jonathan R. Coe, Esq.
Nelson Mullins Riley & Scarborough, L.L.P.
999 Peachtree Street, N.E., Suite 1400
Atlanta, Georgia 30309
---------------------
Approximate date of commencement of proposed sale to public: From time
to time after this registration statement becomes effective.
<PAGE> 2
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. / / __________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / _________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================================================
Proposed Proposed
Amount Maximum Maximum Amount Of
Title Of Shares To Be Aggregate Price Aggregate Registration
To Be Registered Registered Per Share (1) Offering Price Fee
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 3,363,430 $6.25 $21,021,438 $6,370.13*
==================================================================================================================================
</TABLE>
(1) This estimate is based on the book value of the securities computed as of
the latest practicable date prior to the date of filing this Registration
Statement pursuant to Rule 457(f) under the Securities Act of 1933, as amended,
and is made solely for purposes of determining the registration fee.
* Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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ii
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED SEPTEMBER __, 1997
ROBERTS REALTY INVESTORS, INC.
3,363,430 SHARES OF COMMON STOCK
Roberts Realty Investors, Inc. (the "Company") owns and operates
multifamily residential properties as a self-administered, self-managed equity
real estate investment trust (a "REIT"). The Company conducts its business
through Roberts Properties Residential, L.P. (the "Operating Partnership"), a
Georgia limited partnership. The Company owns a controlling interest in the
Operating Partnership and is its sole general partner. This organizational
structure is sometimes called an "umbrella partnership" or "UPREIT."
This Prospectus relates to 3,363,430 shares (the "Shares") of the
Company's Common Stock, $.01 par value per share (the "Common Stock"), that may
be acquired from time to time by one or more of the shareholders listed in this
Prospectus (the "Selling Shareholders") in connection with the redemption of
units of limited partnership interest (the "Units") in the Operating
Partnership. The Selling Shareholders may offer the Shares for sale or
otherwise transfer the Shares in transactions (which may include block
transactions) on the American Stock Exchange (the "AMEX"), or in negotiated
transactions or otherwise, at fixed prices, which may be changed, at market
prices prevailing at the time of sale, at negotiated prices, or without
consideration, or by any other legally available means. The Selling
Shareholders may offer the Shares to third parties (including purchasers)
directly or by or through brokers, dealers, agents or underwriters who may
receive compensation in the form of discounts, concessions or commissions or
otherwise. The Selling Shareholders and any brokers, dealers, agents or
underwriters that participate in the distribution of the Shares may be deemed
to be "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"). In that event any discounts, concessions and
commissions received by any such brokers, dealers, agents or underwriters and
any profit on resale of the Shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. The aggregate
net proceeds to the Selling Shareholders from the sale of the Shares will be
the purchase price of such Shares less any commissions. The Company will not
receive any proceeds from the sale of Shares by the Selling Shareholders. The
Company will pay all expenses incurred in connection with this offering, other
than underwriting discounts and selling commissions. See "Plan of
Distribution." The Units were issued in connection with the formation of the
Company and the merger into the Operating Partnership of various entities that
owned multifamily residential communities and a property management company.
The Common Stock has been approved for listing on the AMEX under the
symbol "RPI." To ensure that the Company maintains its qualification as a REIT,
ownership by any single person is limited to 6% of the outstanding Common Stock
of the Company (except for Charles S. Roberts, the Company's Chairman of the
Board, Chief Executive Officer, and President, who is limited to 25%).
SEE "RISK FACTORS" BEGINNING ON PAGE 1 OF THIS PROSPECTUS FOR A DESCRIPTION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PURCHASERS OF SHARES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is September __, 1997.
<PAGE> 4
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
complying with such Act files reports, proxy statements and other information
with the Securities and Exchange Commission (the "SEC"). Reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the SEC at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, as well as the regional offices
of the SEC at 7 World Trade Center (13th Floor), New York, New York 10048, and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such information can be obtained by mail from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. Such materials can also be inspected at the offices of the
AMEX, 86 Trinity Street, New York, New York 10006. The SEC maintains a Web site
at http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants, including the Company, that file
electronically with the SEC.
The Company has filed with the SEC a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act with respect to the
Shares. As permitted under certain SEC rules and regulations, this Prospectus
omits some of the information included in the Registration Statement. For
further information with respect to the Company and the Shares, prospective
purchasers should refer to the Registration Statement, including its exhibits.
Statements made in this Prospectus regarding the contents of any contract,
agreement or other documents are not necessarily complete. Prospective
purchasers should refer to each such contract, agreement or other document
filed as an exhibit to the Registration Statement for a more complete
description of the matter involved. Copies of the Registration Statement and
the exhibits may be inspected, without charge, at the offices of the SEC, or
obtained at prescribed rates from the Public Reference Section of the SEC at
the address set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the SEC
pursuant to the Exchange Act are incorporated by reference into this
Prospectus: (1) Annual Report on Form 10-KSB for the year ended December 31,
1996, as amended by Amendment No. 1 thereto filed April 30, 1997 and Amendment
No. 2 thereto filed September 3, 1997; (2) Quarterly Reports on Form 10-QSB for
the quarters ended March 31, 1997 and June 30, 1997; (3) Current Report on Form
8-K dated April 16, 1997, as amended by Amendment No. 1 thereto filed June 16,
1997; and (4) the description of the Common Stock included in the Company's
Form 10-SB/A No. 4 Registration Statement filed on July 25, 1996, including any
amendment or reports filed to update such description. (The Commission File No.
for the Company's Exchange Act reports is 0-28048.)
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and before
the termination of the offering of the Shares under this Prospectus shall be
deemed to be incorporated by reference into this Prospectus and to be a part of
it from the date of the filing of such reports and documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
into this Prospectus shall be deemed to be modified or superseded for the
purposes of this Prospectus to the extent that a statement contained in this
Prospectus or in any other subsequently filed document which also is
incorporated or is deemed to be incorporated by reference into this Prospectus
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide a copy of any or all of such documents
(exclusive of exhibits unless such exhibits are specifically incorporated by
reference into such documents), without charge, to each person to whom this
Prospectus is delivered, upon written or oral request to Roberts Realty
Investors, Inc., 8010 Roswell Road, Suite 120, Atlanta, Georgia 30350, (770)
394-6000, Attention: Charles R. Elliott, Chief Financial Officer.
<PAGE> 5
THE COMPANY
Roberts Realty Investors, Inc. (the "Company") owns and operates
multifamily residential properties as a self-administered, self-managed equity
real estate investment trust (a "REIT"). The Company conducts its business
through Roberts Properties Residential, L.P. (the "Operating Partnership"), a
Georgia limited partnership. The Company owns a controlling interest in the
Operating Partnership and is its sole general partner. This organizational
structure is sometimes called an "umbrella partnership" or "UPREIT."
The Company presently owns 10 multifamily apartment communities (the
"Communities") containing a total of 2,011 apartment homes. The River Oaks,
Rosewood Plantation, Plantation Trace, Preston Oaks, Highland Park, Windsong,
Bentley Place, Crestmark, and Ivey Brook Communities, containing a total of
1,756 apartment units, are completed; and the 180-unit Howell Ferry Community,
a 24-unit addition to Preston Oaks, and a 51-unit second phase of Plantation
Trace are now under construction or development. At June 30, 1997, the Company
owned nine stabilized Communities that had a physical occupancy rate of 94.4%
(the Company sold the 207-unit Autumn Ridge Community on August 26, 1997). The
Ivey Brook Community was in its initial lease-up phase and had a physical
occupancy rate of 90.4% at June 30, 1997. Ivey Brook is currently 100%
occupied. (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.)
All but one of the Communities are located in metropolitan Atlanta;
the 232-unit Windsong Community is located on St. Simons Island, Georgia. Nine
of the 10 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. The Company
expects to continue to qualify as a REIT for federal income tax purposes. A
REIT is a legal entity that holds real estate interests and, through its
payment of distributions, is able to reduce or avoid incurring federal income
tax at the corporate level, allowing shareholders to participate in real estate
investments without the "double taxation" of income (i.e., at both the
corporate and shareholder levels) that generally results from investment in
shares of a corporation. To maintain its qualification as a REIT, the Company
must, among other things, distribute annually to its shareholders at least 95%
of its taxable income, subject to certain deductions, exclusions and additions.
The Common Stock has been approved for trading on the AMEX under the symbol
"RPI," and the Company expects that trading on the AMEX will commence within 10
business days after the date of this Prospectus.
Certain entities owned by Mr. Roberts perform services for the
Operating Partnership but are not owned by the Company or the Operating
Partnership. These entities are Roberts Properties, Inc., Roberts Properties
Group, L.L.C., and Roberts Properties Construction, Inc. (sometimes referred to
collectively 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 June 30, 1997, the Company had 53 employees.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Shares by
the Selling Shareholders.
RISK FACTORS
This Prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act. The
Company's actual results may differ significantly from the results discussed in
the forward-looking statements. These forward-looking statements involve risks
and uncertainties that include, but are not limited to, those discussed below.
Prospective purchasers should carefully consider the following information
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along with the other information contained in this Prospectus before making an
investment decision regarding the Shares. The safe harbor for forward-looking
statements contained in Section 27A of the Securities Act and Section 21E of
the Exchange Act does not apply to initial public offerings.
CONFLICTS OF INTEREST
Mr. Charles S. Roberts is both (a) the Chairman of the Board of
Directors, Chief Executive Officer and President of the Company, and (b) the
owner of substantially all of the interests of the Roberts Companies. Because
Mr. Roberts and/or the Roberts Companies will develop and construct new
Communities and provide other services to the Company and to the Operating
Partnership, Mr. Roberts and the Roberts Companies face potential conflicts of
interest in providing services to the Company and the Operating Partnership.
These conflicts, which could result in decisions by Mr. Roberts as a director
and officer of the Company that do not fully reflect the interests of all
shareholders, are summarized below.
CONSTRUCTION OF NEW COMMUNITIES. Mr. Roberts faces conflicts of
interest in connection with the construction of new Communities for the
Operating Partnership. Specifically, the Operating Partnership will pay Roberts
Construction: (a) a total of $8,828,600 for a fixed price construction contract
to construct the Howell Ferry Community (with an estimated profit of $250,000,
or 2.8% of the contract price); (b) a total of $3,157,000 to construct a
51-unit second phase of the Plantation Trace Community (with an estimated
profit of $158,000, or 5.0% of the contract price); and (c) an estimated total
of $1,300,000 to construct a 24-unit second phase of the Preston Oaks Community
(with an estimated profit of $65,000, or 5.0% of the contract price). The
Company anticipates hiring Roberts Construction to construct other Communities
or phases of Communities in the future.
DEVELOPMENT FEES. The Operating Partnership has paid or 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; (b) $255,000
in fees for design and development services in connection with the development
and construction of the second phase of Plantation Trace; and (c) an estimated
$120,000 in fees for design and development services in connection with the
development and construction of the second phase of Preston Oaks.
CONSULTING FEES. Contracts between various Roberts Companies and the
Operating Partnership provide for the applicable Roberts Company to provide
consulting services in the event of a sale of the following properties: River
Oaks, Highland Park, Ivey Brook (formerly known as Holcomb Bridge), Windsong,
Crestmark, Rosewood Plantation, Preston Oaks, Bentley Place, Plantation Trace,
and the Shoppes of Plantation. The fee for such services is specified as 5% of
the gross sales proceeds of the property sold (except 6% in the case of
Plantation Trace and the Shoppes of Plantation and 3% in the case of Bentley
Place and Windsong). The contracts provide that a payment will 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 of Common Stock 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. Upon the payment of a fee
in the event of a change in control, the contracts will be terminated.
ACQUISITION AND OTHER CONSULTING FEES. The Operating Partnership has
paid in the past and may pay in the future fees to the Roberts Companies for
other services performed by the Roberts Companies, including services related
to acquisitions, sales and refinancings of properties.
OTHER ACTIVITIES OF MR. CHARLES S. ROBERTS AND THE ROBERTS COMPANIES.
Mr. Roberts and the Roberts Companies may continue providing development and
other services to other public and private real estate entities that are not
part of the Company or the Operating Partnership. Such business efforts may
pose a variety of conflicts of
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interest as the Roberts Companies concurrently seek to provide development,
construction and other services both to the Company and the Operating
Partnership and to the Roberts Companies' other customers. Such potential
conflicts include conflicts arising out of the acquisition and development of
properties, allocation of management time, allocation of services and costs,
and competition among multifamily apartment communities affiliated with Mr.
Roberts.
TAX CONSEQUENCES UPON SALE OR REFINANCING OF THE COMMUNITIES. Because
holders of Units in the Operating Partnership ("Unitholders") may experience
different and more adverse tax consequences compared to those experienced by
shareholders upon the sale or reduction of indebtedness on any of the
Communities, such Unitholders, including Mr. Roberts, may have different
objectives regarding the appropriate pricing and timing of any sale or
refinancing of the Communities. While the Company, as the sole general partner
of the Operating Partnership, has the exclusive authority to determine whether
and on what terms to sell an individual Community, certain members of the Board
of Directors (including Mr. Roberts) hold Units, and their status as
Unitholders may influence the Company not to sell particular Communities, even
though such sale might otherwise be financially advantageous to the Company and
its shareholders, or may influence the Company not to pay down or refinance
indebtedness on a particular Community with a significant level of debt.
POLICIES WITH RESPECT TO CONFLICTS OF INTEREST. The Company and the
Operating Partnership have adopted certain policies designed to eliminate or
minimize potential conflicts of interest. These policies include a policy
adopted by the Board of Directors that all transactions in which executive
officers or directors have a conflicting interest must be approved by a
majority of the disinterested directors of the Company (but only if the Board
has two or more directors who are disinterested with respect to the particular
matter under consideration). There can be no assurance, however, that these
policies will always be successful in eliminating the influence of such
conflicts, and if they are not successful, decisions might be made that may
fail to reflect fully the interest of all shareholders.
INVESTMENT RISKS
Purchasers of Shares face investment risks that include:
UNCERTAINTY REGARDING LIQUIDITY FOR SHAREHOLDERS. Although the Shares
have been approved for trading on the AMEX, no assurances can be given that an
active trading market for the Shares will develop or be maintained.
Accordingly, shareholders who desire to sell their Shares may be unable to do
so.
UNCERTAIN MARKET PRICE FOR SHARES. Assuming an active trading market
develops, there is considerable uncertainty regarding the prices at which the
Shares will trade. Among the factors that might adversely affect the trading
price of the Shares, many of which are beyond the control of the Company, are
the following: potential pent-up selling pressures as a result of the historic
illiquidity of the investments in the previous partnerships that have been
merged into the Operating Partnership; the Company's relatively short operating
history and relatively small capitalization; the absence of an active trading
market for the Shares; and increases in market interest rates, which may lead
purchasers of Common Stock to demand a higher annual yield from distributions
by the Company.
FLUCTUATION IN SHARE PRICES. The market price of the Shares may be
affected by the local and national economy and by overall trends in the stock
market.
EFFECT ON SHARE PRICE OF SHARES AVAILABLE FOR REDEMPTION. In addition
to the 4,186,329 Shares presently outstanding, 3,363,430 Shares are reserved
for issuance to Unitholders and have been registered for resale by the Selling
Shareholders pursuant to the Registration Statement of which this Prospectus is
a part. The Company anticipates that it will generally issue Shares in exchange
for any Units submitted for redemption. If a substantial number of Units are
redeemed for Shares and are sold into the public market, or the perception
exists that such sales could occur, the market price of the Shares could be
adversely affected as a result. No prediction can be made about the effect that
future sales of Common Stock will have on the market prices of the Common
Stock.
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EFFECT ON SHARE PRICE OF CASH DISTRIBUTIONS AND GROWTH PROSPECTS. It
is generally believed that the market value of the equity securities of REITs
is based in part upon expected future cash distributions and in part on the
REIT's reasonable growth expectations. For these and other reasons, the Shares
may trade at prices that differ from the net asset value per Share. To the
extent the Operating Partnership retains operating cash flow for investment
purposes, working capital reserves or other purposes, those retained funds,
while increasing the value of the underlying assets of the Company and the
Operating Partnership, may not correspondingly increase the market value of the
Shares.
POSSIBLE FUTURE DILUTION. Shareholders will be subject to the risk
that their equity interests may be diluted through the issuance of additional
equity securities by the Company and/or the Operating Partnership if such
securities are issued for less than their fair market value. The Company has
the right to issue, at the discretion of its Board of Directors, shares of
Common Stock in addition to those to be issued in connection with the
redemption of Units, upon such terms and conditions and at such prices as the
Board of Directors may establish. In addition, the Company may in the future
issue Preferred Stock that might have priority over the Common Stock as to
distributions and liquidation proceeds. Similarly, the Operating Partnership
may issue new Units or other partnership interests.
TAX RISKS
Purchasers of Shares face tax risks that include:
ADVERSE TAX CONSEQUENCES OF THE FAILURE OF THE COMPANY TO QUALIFY AS A
REIT. Although the Company is expected to continue to qualify as a REIT for
federal income tax purposes, such qualification will depend heavily on its
continued satisfaction of a variety of complex requirements. If the Company
were to fail to qualify as a REIT, the Company's income distributed to
shareholders would be subjected to two levels of taxation, first at the
corporate level and then at the individual level, substantially reducing the
shareholders' after-tax returns on investment in the Company. See "Federal
Income Tax Considerations - Requirements for Qualification" and "- Failure to
Qualify."
ADVERSE TAX CONSEQUENCES OF THE FAILURE OF THE OPERATING PARTNERSHIP
TO QUALIFY AS A PARTNERSHIP. Although the Operating Partnership is expected to
be classified as a partnership for federal income tax purposes, a failure of
such qualification would (a) subject the Operating Partnership's distributed
income to two levels of taxation and thereby reduce the amount of distributions
that could be made to the partners, including the Company, and (b) result in a
failure by the Company to qualify as a REIT. See "Federal Income Tax
Considerations - UPREIT Structure."
DISTRIBUTIONS TO SHAREHOLDERS; POTENTIAL REQUIREMENT TO BORROW. To
obtain the favorable tax treatment associated with all REITs qualifying under
the Internal Revenue Code of 1986, as amended (the "Code"), the Company
generally will be required each year to distribute to its shareholders at least
95% of its net taxable income. In addition, the Company will be subject to tax
on its undistributed net taxable income and net capital gain, and the 4%
nondeductible excise tax on the amount, if any, by which certain distributions
paid by it with respect to any calendar year are less than the sum of 85% of
its ordinary income plus 95% of its net capital gain income for the calendar
year. (Beginning in 1998, REITs will be permitted to designate amounts of
undistributed capital gain which will be includible in shareholders' taxable
income. Such amounts will also remain subject to tax at the level of the REIT,
but the shareholders will be entitled to tax credits for the tax paid by the
REIT.)
The Company has made and intends to continue to make distributions to
its shareholders, and to cause the Operating Partnership to make distributions
to its Unitholders, to comply with the distribution provisions of the Code and
to avoid income taxes and the nondeductible excise tax. All or substantially
all of the Company's income will consist of the Company's share of the income
of the Operating Partnership, and all or substantially all of the Company's
cash flow will consist of its share of distributions from the Operating
Partnership. Differences in timing between the recognition of income and the
receipt of cash (of the Company or the Operating Partnership) and the effect of
required debt amortization payments could require the Company to cause the
Operating Partnership to borrow funds on a short-term basis to meet the
distribution requirements that are necessary to achieve the tax benefits
associated with qualifying as a REIT. In such instances, the Operating
Partnership might need to borrow funds to avoid adverse tax
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consequences for the Company even if management believed that then prevailing
market conditions were not generally favorable for such borrowings or that such
borrowings would not be advisable in the absence of such tax considerations. If
the Company or the Operating Partnership is unable to obtain such borrowings,
the Company could fail to qualify as a REIT.
The amount of distributions by the Operating Partnership will be
dependent upon a number of factors, including the amount of cash available for
distribution, the Operating Partnership's financial condition, any decision by
the Board of Directors to reinvest funds rather than to distribute such funds,
the Operating Partnership's capital expenditures, the annual distribution
requirements under the REIT provisions of the Code, and such other factors as
the Board of Directors deems relevant. There is no assurance that the Operating
Partnership and the Company will be able to maintain their current distribution
rate.
LOSSES ARE NOT PASSED THROUGH TO SHAREHOLDERS. Tax losses of the
Company will not be passed through to the shareholders. See "Federal Income Tax
Considerations - Taxation of Shareholders - Losses of the Company."
TAXABLE INCOME IN EXCESS OF CASH DISTRIBUTIONS. As a partner in the
Operating Partnership, the Company will be required to include in its taxable
income its share of the taxable income of the Operating Partnership, whether or
not such income is matched by distributions from the Operating Partnership.
Allocations of net taxable income from the Operating Partnership in excess of
cash distributions from the Operating Partnership could produce a greater
amount of income which must be distributed to the Company's shareholders than
cash available for such distributions. These effects could be presented either
by normal operations of the Operating Partnership or in connection with a
disposition by the Operating Partnership of a Community (whether voluntarily,
as in the case of a sale, or involuntarily, as in the case of foreclosure). In
the case of such a disposition for a gain, each partner would be required to
include his or her share of such gain in his or her taxable income, and as a
result may be subject to substantial taxes, which could substantially exceed
his or her share of the cash proceeds from such disposition. In the case of the
Company, as noted above, allocations of sales gains in excess of distributions
of cash proceeds of sales could produce a greater amount of income which must
be distributed to its shareholders than cash available for such distributions.
See "Federal Income Tax Considerations - UPREIT Structure - Tax Allocations"
and "- Requirements for Qualification - Annual Distribution Requirements."
POSSIBLE ADVERSE EFFECTS OF TAX LAW CHANGES. Future changes in tax
laws may adversely affect investments in the Company. See "Federal Income Tax
Considerations - Introduction."
REAL ESTATE INVESTMENT RISKS
GENERAL RISKS. Real property investments are subject to varying
degrees of risk. The performance of equity investments in real estate depends
on the amount of income generated and expenses incurred. The Company's income
and ability to make distributions to its shareholders is dependent upon the
ability of its properties to generate income in excess of its requirements to
meet operating expenses, including debt service and capital expenditures.
Income from properties may be adversely affected by the national economic
climate, local conditions such as oversupply of apartments or a reduction in
demand for apartments in the area, the physical attractiveness of the
properties, the quality of management, competition from other available
apartments, the ability of the owner to provide adequate maintenance and
insurance, and increased operating costs (including real estate taxes). In
addition, income from properties and real estate values also are affected by
such factors as the cost of regulation and potential for liability under
applicable laws, including changes in tax laws, housing laws, interest rate
levels and the availability of financing. The Company's income would be
adversely affected if a significant number of residents were unable to pay rent
or apartments could not be rented on favorable terms. Certain significant
expenditures associated with each property (such as debt service, if any, real
estate taxes, and maintenance costs) are generally not reduced when income from
the property decreases.
OPERATING RISKS. The Company's multifamily apartment communities (the
"Communities") are subject to all of the operating risks common to apartment
ownership in general. Such risks include: competition from other apartment
developments; excessive building of comparable properties or increases in
unemployment in the areas in
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which the properties are located, either of which might adversely affect
apartment occupancy or rental rates; increases in operating costs due to
inflation and other factors, which increases may not necessarily be offset by
increased rents; inability or unwillingness of residents to pay rent increases;
and future enactment of rent control laws or other laws regulating multifamily
housing, including present and possible future laws relating to access by
disabled persons. If operating expenses increase, the local rental market may
limit the extent to which rents may be increased to offset the higher operating
expenses without adversely affecting occupancy rates. The occurrence of any one
or more of the above could adversely affect the Company's ability to continue
to make distributions to shareholders.
CONSTRUCTION AND LEASING OF HOWELL FERRY AND SECOND PHASES OF
PLANTATION TRACE AND PRESTON OAKS. The Company's financial performance will be
materially affected by whether or not (a) Roberts Construction constructs
Howell Ferry and the second phases of Plantation Trace and Preston Oaks in a
timely manner, and (b) the Company finds suitable initial and replacement
residents at acceptable rental rates. The actual completion dates and receipt
of all required certificates of occupancy for these projects may be later than
anticipated depending on any number of factors, including, but not limited to,
unexpected weather problems, shortages in materials and supplies, and labor
strikes. Further, the current softness in the metropolitan Atlanta apartment
market, which the Company expects will continue into 1998, may cause these new
Communities to be leased up more slowly than anticipated.
ACQUISITIONS RISKS. The Company intends to acquire multifamily
properties, which will entail risks that such properties will fail to perform
in accordance with expectations and that the estimated costs of rehabilitating
and improving such properties will prove inaccurate.
DEPENDENCE ON METROPOLITAN ATLANTA MARKET. A total of 1,779 of the
Company's 2,011 apartment units, and both of its retail centers, are located in
metropolitan Atlanta, Georgia. (The foregoing number of units assumes the
completion of development and construction of Howell Ferry and the second
phases of Plantation Trace and Preston Oaks.) The Company's performance is
therefore linked to Atlanta's economic conditions and its highly competitive
apartment market. The 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 30, 1997. A further decline in the
metropolitan Atlanta market or economy may adversely affect the performance of
the Company and its ability to make distributions to its shareholders.
INVESTMENTS IN OTHER COMMERCIAL REAL ESTATE. Although the Company
intends to invest primarily in multifamily apartment communities, it has
invested and may in the future invest in other commercial real estate if such
investments are specifically approved by the Board of Directors. Investments in
other forms of real estate will be subject to the risks unique to such
investments. The Company has no present plans to make any such investments.
INVESTMENTS AND DEVELOPMENT IN NEW MARKETS. Although the Company's
acquisition and development activities are now concentrated in the Atlanta
metropolitan and nearby areas, future development and investment activities
will not be limited to this area but may be spread among other major
metropolitan areas within the Southeast region. The Company's lack of
development experience in those areas and lack of familiarity with local
conditions may pose risks in connection with any such activities.
INDIRECT INVESTMENTS. The Company may invest in real estate by causing
the Operating Partnership to acquire equity interests in limited partnerships,
partnerships, joint ventures, trusts or other legal entities which in turn have
invested in real estate that constitutes appropriate investments for the
Company and the Operating Partnership. If the Company makes such investments,
these investments will expose the Company and the Operating Partnership to
certain risks not present had the Operating Partnership invested directly in
the real estate.
ILLIQUIDITY OF REAL ESTATE. Real estate investments are relatively
illiquid, which tends to limit the ability of the Company to vary the Operating
Partnership's portfolio promptly in response to changes in economic or other
conditions. In addition, the Code places limits on the ability of the Company,
and the Operating Partnership, to sell
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properties held for fewer than four years, which may affect the Company's
ability to sell properties without adversely affecting shareholders.
UNINSURED LOSSES. The Company carries comprehensive liability, fire,
extended coverage and rental loss insurance with respect to its properties,
with policy specifications and insured limits customarily carried for similar
properties. There are, however, certain types of losses (such as from floods,
wars or earthquakes) that may be either uninsurable or not economically
insurable. Should an uninsured loss occur, the Company could lose both its
capital invested in and anticipated profits from one or more of the properties.
POSSIBLE LIABILITY RELATING TO ENVIRONMENTAL 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 (and the Company)
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 assessment of Windsong revealed the existence of asbestos
containing materials that in their current state require no removal. The Phase
I assessment 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 and its environmental
consultants are monitoring the EPD files to ensure compliance by Fina with the
EPD regulations.
The Phase I assessments of the other Communities and other real estate
assets have not revealed any environmental liability that the Company believes
would have material adverse effect on the Operating Partnership's business,
assets or results of operations, nor is the Company aware of any such
liability. Nevertheless, it is possible that these assessments did not reveal
all environmental liabilities or that there are material environmental
liabilities of which the Company is unaware. No assurance can be given that
environmental assessments will reveal all potential environmental liabilities,
or that future uses or conditions (including, without limitation, changes in
applicable environmental laws and regulations) will not result in imposition of
environmental liability.
COSTS OF COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT AND SIMILAR
LAWS. Under the American with Disabilities Act of 1990 (the "ADA"), all places
of public accommodation are required to meet certain federal requirements
related to access and use by disabled persons. These requirements became
effective in 1992. The ADA does not, however, apply to multifamily properties,
such as multifamily apartment communities, except to the extent that portions
of such facilities, such as a leasing office, are open to the public. Although
management of the Company believes that the Communities are substantially in
compliance with present requirements of the ADA, the Company may
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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.
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.
FINANCING RISKS
RISKS OF SUBSTANTIAL INDEBTEDNESS. The Company is subject to the risks
associated with debt financing, including the risk that the Operating
Partnership's cash flow from operations will be insufficient to meet required
payments of principal and interest and the risk that its secured indebtedness
(which will not have been fully amortized at maturity) will not be able to be
refinanced or that the terms of such refinancing will not be as favorable as
the terms of the existing indebtedness. In addition, if the Company is unable
to meet the mortgage payments on a property, the property could be foreclosed
upon or otherwise transferred to the mortgagee with a resulting loss of income
and asset value to the Company.
At July 31, 1997, the Operating Partnership had an aggregate of
approximately $73,100,000 in indebtedness secured by the Communities. The
Company or the Operating Partnership expects to incur additional indebtedness
in connection with future acquisition or development of multifamily apartment
communities and for other purposes. Accordingly, the Company and the Operating
Partnership will be subject to the risks that: (a) the Operating Partnership
could lose its properties if the required principal and interest payments are
not made when due; and (b) the Operating Partnership's obligation to make
principal and interest payments may cause the Company to have to borrow funds
to meet the distribution requirements to maintain its REIT status.
RISK OF OBTAINING FINANCING FOR HOWELL FERRY COMMUNITY. Because the
Company has not yet obtained the anticipated $8,454,000 mortgage loan that will
be necessary to finance the construction of the Howell Ferry Community, the
Company, and thus the shareholders, face the risk that financing for such
Community will not be obtained or will be obtained on unfavorable terms.
NO FORMAL LIMITATION ON DEBT. The organizational documents of the
Company and the Operating Partnership do not limit the amount or percentage of
indebtedness they may incur. The Company has an informal leverage policy that
the Company and the Operating Partnership will not incur indebtedness that in
the aggregate exceeds 75% of what the Board of Directors determines to be the
current market value of the assets of the Operating Partnership. 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 properties, growth and acquisition opportunities and other
factors, and the Company may modify its borrowing policy to increase such
percentage. Modification of this policy may adversely affect the interests of
the shareholders of the Company.
RISKS OF RISING INTEREST RATES. Neither the Company nor the Operating
Partnership has any variable rate mortgage indebtedness outstanding. Should the
Company or the Operating Partnership incur variable rate debt in the future, a
significant rise in interest rates could adversely affect the Operating
Partnership's results of operations and its ability to make expected
distributions.
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RISKS OF LIMITATIONS ON CHANGES IN CONTROL
Certain provisions in the governing documents of the Company could be
used to deter attempts to obtain control of the Company in transactions not
approved by the Board of Directors, including: ownership limitations designed
to maintain the Company's qualification as a REIT (Mr. Roberts may not own more
than 25% of the outstanding Common Stock of the Company, and any other person
may not own more than 6%); the staggered terms of the Company's Board of
Directors; the ability of the Company to issue Preferred Stock; the inability
of the Company as the general partner of the Operating Partnership to transfer
its general partner interest in the Operating Partnership without the consent
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) and of a majority in interest of all limited
partners in the Operating Partnership other than the Company and its
affiliates; the "Business Combination" and "Fair Price" provisions of the
Georgia Business Corporation Code; the inability of the limited partners of the
Operating Partnership to remove the Company as its general partner, whether
with or without cause; and the consulting fees payable to the Roberts Companies
upon a change in control of the Company or the Operating Partnership. See
"Description of Common Stock - Anti-Takeover Provisions."
CHANGES IN INVESTMENT AND FINANCING POLICIES WITHOUT SHAREHOLDER APPROVAL
The investment and financing policies of the Company and the Operating
Partnership, and their policies with respect to certain other activities,
including their growth, debt, capitalization, distributions, and operating
policies, will be determined by the Board of Directors of the Company. Although
the Board of Directors has no present intention to do so, these policies may be
amended or revised from time to time at the discretion of the directors without
a vote of the shareholders or the Unitholders. Any such amendment or revision
may adversely affect the interests of the shareholders.
DESCRIPTION OF COMMON STOCK
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.
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. The Company depends upon distributions from the Operating
Partnership to fund its distributions to shareholders.
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.
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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. At each annual meeting of
shareholders, the class of directors to be elected at such meeting is elected
for a three-year term, and the directors in the other two classes 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
are 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.
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
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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 of 1986, as amended (the "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.
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.
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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.
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
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)
expires 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. Certain
entities owned by Mr. Roberts are presently entitled to receive a consulting
fee of 5% of the gross sales proceeds upon a sale by the Operating Partnership
of any one or more of eight of the Company's multifamily communities and also
upon a "change in control" of either the Operating Partnership or the Company
(provided that such fee is 6% in the case of Plantation Trace and the
Plantation Trace Shoppes and 3% in the case of Bentley Place and Windsong).
Because of the substantial payments that would be triggered in the event of a
change in control, the 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;
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(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.
FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTION
The following is a general summary of the material federal income tax
considerations associated with investments in Shares. The following discussion
is not exhaustive of all possible tax considerations and is not tax advice.
Moreover, this summary does not deal with all tax aspects that might be
relevant to a particular investor in light of his or her personal
circumstances, nor does it deal with particular types of taxpayers that are
subject to special treatment under the Code, such as tax-exempt organizations,
foreign persons, insurance companies, financial institutions and
broker-dealers. The Code provisions governing the federal income tax treatment
of REITs are highly technical and complex, and this summary is qualified in its
entirety by the applicable Code provisions, rules and regulations promulgated
thereunder, and administrative and judicial interpretations thereof. The
following discussion is based on current law.
Holt Ney Zatcoff & Wasserman, LLP, which has acted as tax counsel to
the Company in connection with this offering, has reviewed the following
discussion and is of the following opinions, in each case assuming (a) that
current statutory, regulatory, administrative and judicial law is applied, (b)
that the anti-abuse regulation discussed below is not applicable to the Company
and the Operating Partnership, (c) that the activities of the Company and the
Operating Partnership have been, are and will be as described in this
Prospectus, and (d) that no election to be classified as an association (taxed
as a corporation) for federal income tax purposes has been or will be filed by
or for the Operating Partnership:
(i) the following discussion fairly summarizes the federal income
tax considerations that are likely to be material to a shareholder of the
Company;
(ii) the Company was organized and has operated in conformity with the
requirements for qualification and taxation as a real estate investment trust
within the meaning of the Code, and the Company's current organization and
method of operation should enable it to continue to satisfy the requirements
for qualification and taxation as a REIT; and
(iii) the Operating Partnership has properly been and will properly be
classified as a partnership for federal income tax purposes.
Federal income tax law is essentially dynamic, changing continuously
and sometimes rapidly as a result of new legislation, new regulations, and new
administrative and judicial pronouncements. All tax matters affecting the
Company, the Operating Partnership, and/or the shareholders are and will be
subject to such change. Because an investment in the Company will likely be a
long-term investment, and because federal income tax considerations are of
particular importance in the case of investments in REITs, prospective
investors should consider carefully their exposure to the inherently
unpredictable character of tax law development before ultimately deciding to
invest.
EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT HIS OR HER OWN TAX
ADVISORS WITH RESPECT TO SUCH PERSON'S PURCHASE, HOLDING AND SALE OF SHARES.
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UPREIT STRUCTURE
In considering the federal income taxation of the Company and its
shareholders, two fundamental facts must be noted at the outset: (1) the
Company intends to continue to qualify as a real estate investment trust (a
"REIT") for purposes of such taxation; and (2) the Company intends to conduct
all of its business activities through the Operating Partnership. Qualification
as a REIT involves satisfaction of a variety of conditions, and special rules
apply to any would-be REIT which owns an interest in a partnership. The
observations in this section (i.e., under the caption "UPREIT Structure")
relate to the special rules applicable to organizations which own partnership
interests; in general, unless the context dictates otherwise, the observations
under other captions within this section relate to the general rules applicable
to REIT qualification and to REITs and their shareholders, and references
therein to the assets and/or income of the Company are intended to be read, in
appropriate circumstances, as references to the Company's share of the
Operating Partnership's assets and/or income.
TAX STATUS OF THE OPERATING PARTNERSHIP - IN GENERAL. If the Operating
Partnership were to be classified for federal income tax purposes as an
association taxable as a corporation, rather than as a partnership, the
Operating Partnership's income would be subject to tax, thereby reducing
amounts distributable to its partners, including the Company, and the Company
would fail to satisfy a number of conditions required for qualification as a
REIT. Both Holt Ney Zatcoff & Wasserman, LLP and the Company anticipate, based
upon the Code and Regulations as currently in effect, and assuming that the
anti-abuse regulation discussed below is not applicable to the Company and the
Operating Partnership, that the Operating Partnership has properly been and
will properly be classified as a partnership for federal income tax purposes.
TAX STATUS OF THE OPERATING PARTNERSHIP - "CHECK-THE-BOX" REGULATIONS.
Effective from and after January 1, 1997, new tax Regulations permit many
organizations which are not publicly traded to elect to be classified either as
a partnership or as a corporation for federal income tax purposes, and provide
that in the absence of an affirmative election the organization is considered
to have elected partnership status by default (or, if the organization was
formed earlier, its default election is the classification it has claimed for
earlier periods). If the Operating Partnership is not considered "publicly
traded" for this purpose (and the anti-abuse regulation discussed below is not
applicable), the Operating Partnership will be classified as a partnership
under the new rules.
TAX STATUS OF THE OPERATING PARTNERSHIP - "PUBLICLY-TRADED"
PARTNERSHIPS. Under section 7704 of the Code, certain organizations which would
otherwise be classified as partnerships for federal income tax purposes will
nevertheless be classified as corporations if interests in them are
publicly-traded. Although the Company does not expect a public market to
develop for interests in the Operating Partnership, and consequently the
Company believes that the Operating Partnership should not be considered
"publicly-traded" within the ordinary meaning of that phrase, under applicable
tax regulations the Partnership probably will be considered "publicly traded"
for purposes of section 7704. Such a result is not fatal to partnership tax
classification for the Operating Partnership, however, because section 7704
does not reclassify a "publicly-traded" organization if at least 90% of its
annual gross income is "qualified." As will be described below under
"Requirements for Qualification - Income Tests," in order for the Company to
qualify for REIT status the great bulk of its income must be of certain types,
all of which are "qualified" for purposes of section 7704. Consequently, if the
Operating Partnership is operated (as the Company anticipates) as though it
were itself seeking to qualify as a REIT, it should escape corporate tax
classification under section 7704 even if it were held to be "publicly-traded"
for purposes of that section.
TAX STATUS OF THE OPERATING PARTNERSHIP - "ANTI-ABUSE" REGULATION. On
December 29, 1994, the IRS published a regulation which purports to give the
IRS an additional weapon to combat what it perceives as tax abuses involving
partnerships. More particularly, the regulation provides that if a partnership
is formed or availed of to reduce or defer tax liabilities in a manner
"inconsistent with the intent of subchapter K" - subchapter K of chapter 1 of
the Code contains the general tax rules applicable to partnerships - the IRS
may take such action as it deems appropriate, including (but not limited to)
disregarding the partnership.
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The UPREIT structure of the Company and the Operating Partnership
arguably invites application of the regulation. In the first place, the typical
UPREIT structure does defer (and in some cases may reduce) tax liabilities, as
compared with tax liabilities which would be produced if only a REIT (and not
an operating partnership) were involved. Of course, this is true almost
inevitably when taxpayers decide to conduct activities collectively through a
partnership rather than a corporation, and an example in the regulation
indicates that the regulation is not designed to force taxpayers to select the
corporate form. In the case of an UPREIT, however, possible application of the
regulation is more inviting because interests in an UPREIT's operating
partnership are typically exchangeable, at least at certain times, for shares
in the REIT. At the same time, it must be noted that in various respects -
principally as regards matters of control - interests in an UPREIT's operating
partnership are quite different from shares in the REIT.
Although the "anti-abuse" regulation contains an example expressly
precluding its application to an UPREIT structure in certain circumstances -
including where partners in the operating partnership have rights at a future
time to exchange their interests in the operating partnership for cash or
shares of the REIT - the UPREIT arrangements considered in the example appear
to differ in certain potentially material respects from the arrangements
applicable to the Company and the Operating Partnership.
The regulatory example appears to base its favorable conclusion on the
assessment that the REIT and the operating partnership there being examined
have independent existences, and more particularly that the existence of the
operating partnership is not - despite the rights of partners to exchange their
interests for shares of the REIT - a transitory stage in what is in reality a
direct (ultimate) investment in the REIT itself. In reaching this assessment,
the example indicates that the REIT being examined may make real estate
investments other than through the operating partnership, and the example does
not contain any indication that the REIT may at its option exchange its shares
for interests in the Operating Partnership. The example concludes that:
although it may be likely that some or all of the partners with the
right to do so will, at some point, exercise their exchange rights,
and thereby receive either cash or [REIT] stock, the form of the
transaction as a separate partnership and real estate investment trust
is respected under substance over form principles [and therefore the]
Commissioner cannot invoke [the regulation] to recast the transaction.
As contrasted with the UPREIT structure examined in the regulatory
example, the arrangements applicable to the Company and the Operating
Partnership involve a greater likelihood that Unitholders will ultimately
become shareholders, for at least two reasons. First, the Partnership Agreement
effectively precludes the Company from making real estate investments or
conducting activities other than through the Operating Partnership. Second, the
Company does have the right, under certain circumstances, to exchange Shares
for Units and thereby effectively terminate the Operating Partnership's
existence. Consequently, insofar as the regulatory example's favorable
conclusion is founded on the degree of likelihood that the applicable operating
partnership will continue indefinitely, the situation as respects the Company
and the Operating Partnership does not present as strong a case for
non-applicability of the regulation.
Nevertheless, because, among other reasons, there are significant
conditions on the abilities of limited partners in the Operating Partnership to
exercise their rights to require redemption of their Units, and on the ability
of the Company to exercise its right to purchase all outstanding Units, it is
by no means clear that the Operating Partnership will be effectively terminated
in the near future, or at any particular time, and indeed the Operating
Partnership may well continue indefinitely into the future. In this connection,
moreover, management of the Company has represented that the Company's option
to exchange Shares for Units was included in the Partnership Agreement simply
to afford the Company an ability, under certain circumstances, to eliminate the
Operating Partnership should its administration become unduly burdensome, and
that in fact the Company has no present plan to exercise that option at any
particular future time (or at all, for that matter).
Consequently, although the UPREIT example in the anti-abuse regulation
does not by its terms apply to the Company and the Operating Partnership, its
apparent rationale affords the Company and the Operating Partnership a
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well-reasoned argument that the regulation should not be applied to the Company
and/or the Operating Partnership. There can be no certainty, however, that the
IRS will not seek to apply the regulation to the Company and/or the Operating
Partnership, nor that the courts would refuse to uphold such an attempt by the
IRS.
Because the anti-abuse regulation, if applicable, permits the IRS wide
latitude in recharacterizing the subject organizations and/or transactions, the
consequences of such application to the Company and/or the Operating
Partnership cannot be predicted with certainty. Among the possible
recharacterizations, however, would be to disregard the Operating Partnership
entirely, and to consider the assets and operations of, and the investors in,
the Operating Partnership as direct assets and operations of, and direct
investors in, the Company, in which event the Company could fail to satisfy
certain requirements for qualification as a REIT. See "Requirements for
Qualification - Organizational Requirements - In General" and "- Organizational
Requirements - Anti-Abuse Regulation," below. On the other hand, although the
anti-abuse regulation (when applicable) permits the IRS to act with
considerable discretion, that discretion is not unlimited; in particular, the
IRS is authorized under the regulation to take action "to achieve results that
are consistent with the intent of Subchapter K." Insofar as the Company's
qualification as a REIT is generally consistent with - indeed fundamentally
independent of - subchapter K, application of the anti-abuse regulation to
produce a failure of REIT qualification by an otherwise-qualifying organization
seems unlikely, particularly in view of the generally favorable attitude of the
regulation towards the UPREIT structure.
The remarks that follow generally assume, as the Company anticipates,
that the Operating Partnership is and will remain properly classified, for
federal income tax purposes, as a separate organization from the Company, and
as a partnership rather than a corporation.
TAX ALLOCATIONS. All or substantially all of the Company's income and
expenses are anticipated to arise indirectly out of the activities of the
Operating Partnership. For federal income tax purposes, the Company will be
required to account for its distributive share of the tax items of the
Operating Partnership, which in general will consist of a fraction of each such
item, such fraction being the result of dividing the number of Units held by
the Company by the total number of outstanding Units, subject to the remarks in
the following paragraphs.
When property is contributed to a partnership in exchange for an
interest in the partnership, the partnership generally takes a carryover basis
in that property for tax purposes equal to the adjusted basis of the
contributing partner in the property, rather than a basis equal to the fair
market value of the property at the time of contribution. Pursuant to section
704(c) of the Code, income, gain, loss and deduction attributable to such
contributed property must be allocated in a manner such that the contributing
partner is charged with, or benefits from, respectively, the unrealized gain or
unrealized loss associated with the property at the time of the contribution.
The amount of such unrealized gain or unrealized loss is generally equal to the
difference between the fair market value of the contributed property at the
time of contribution and the adjusted tax basis of such property at the time of
contribution (a "Book-Tax Difference"). Such allocations are solely for federal
income tax purposes and do not affect the book capital accounts or other
economic or legal arrangements among the partners.
The Operating Partnership currently owns certain Communities with
value in excess of tax basis; consequently, the Partnership Agreement requires
tax allocations to be made in a manner consistent with section 704(c).
Regulations under section 704(c) of the Code provide partnerships with
a choice of several methods of accounting for Book-Tax Differences. The
available methods include the "traditional method" (which was available under
prior law) and certain alternative methods. The Company intends to cause the
Operating Partnership to elect the "traditional method," which is the least
favorable method from the Company's perspective; under that method, the
carryover basis of contributed interests in the Communities in the hands of the
Operating Partnership could cause the Company (i) to be allocated lower amounts
of depreciation deductions for tax purposes than would be allocated to the
Company if all Communities were to have a tax basis equal to their fair market
value at the time of contribution and (ii) to be allocated taxable gain in the
event of a sale of such contributed interests in the Communities in excess of
the economic or book income allocated to the Company as a result of such sale,
with a corresponding benefit to the other partners in the Operating
Partnership. These allocations could, in certain circumstances, cause the
Company to
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recognize taxable income in excess of cash proceeds, which might adversely
affect the Company's ability to comply with REIT distribution requirements.
An additional set of special allocation rules mirrors the section
704(c) allocation rules and for that reason are sometimes referred to as the
"reverse section 704(c) rules." Whereas section 704(c) requires that
contributed property be taken into account at fair market value in determining
the contributing partners' capital accounts, and thereafter special allocations
with respect to the contributing partners are required to account for the
unrealized gain or loss inherent in the contributed property, the reverse
section 704(c) rules permit a partnership, in connection with contributions to
the partnership, to adjust non-contributing partners' capital accounts upwards
or downwards to reflect the then-current fair market value of the partnership's
assets (other than those being contributed), and thereafter special allocations
with respect to the non-contributing partners are required to account for the
unrealized gain or loss inherent in the partnership's assets other than those
being contributed.
The Partnership Agreement permits the Company, as general partner of
the Operating Partnership, to elect application of the reverse section 704(c)
rules. Because the Operating Partnership's distributions are in all events to
be apportioned among its partners by reference to the numbers of Units
respectively held by them, it is possible that the Operating Partnership's
allocations would not be valid for federal income tax purposes if there were a
difference between the capital account balances associated with different
Units; consequently, it is important that all Units carry the same capital
account balance. Because application of the reverse section 704(c) rules
produces the requisite uniformity of capital account balances, the Company has
elected to apply those rules.
As a result of Book-Tax Differences, the allocations required by
section 704(c), and the reverse section 704(c) rules, the Company's
distributive share of the Operating Partnership's tax items (i.e., the portion
of each item which the Company will include in calculating its taxable income
in general), may differ from its proportionate share of the assets and income
of the Operating Partnership (i.e., the portion of such assets and income
employed in testing the Company for qualification as a REIT; see "Requirements
for Qualification - Income and Asset Tests - In General; Proportionate Shares"
below). The Company does not expect that any material adverse effect will be
produced by this difference.
FEDERAL INCOME TAXATION OF THE COMPANY - IN GENERAL
The Company intends to operate so as to continue to meet the
requirements under the Code for qualification as a REIT. No assurance can be
given, however, that such requirements will be met. Such qualification depends
upon the Company's ability to meet the various requirements imposed under the
Code through actual operating results, as discussed below. Although Holt Ney
Zatcoff & Wasserman, LLP is of the opinion that, under certain assumptions (see
"Federal Income Tax Considerations Introduction") the Company has qualified and
will qualify as a REIT, Holt Ney Zatcoff & Wasserman, LLP will not review these
operating results, and no assurance can be given that actual operating results
will meet these requirements. The opinion of Holt Ney Zatcoff & Wasserman, LLP
is not binding on the IRS, and, as noted above under "Federal Income Tax
Considerations Introduction," the opinion is based on existing law,
regulations, published administrative pronouncements, and judicial decisions,
all of which are subject to change either prospectively or retroactively.
If the Company qualifies for taxation as a REIT, it generally will not
be subject to federal corporate income tax on that portion of its ordinary
income or capital gain that is currently distributed to shareholders. The REIT
provisions of the Code generally allow a REIT to deduct dividends paid to its
shareholders. This deduction for dividends paid to shareholders substantially
eliminates the federal "double taxation" on earnings (once at the corporate
level when earned and once again at the shareholder level when distributed)
that usually results from investments in a corporation.
Even if the Company qualifies for taxation as a REIT, however, the
Company is subject to federal income tax in certain circumstances. First, the
Company will be taxed at regular corporate rates on its undistributed REIT
taxable income, including undistributed net capital gains. (Beginning in 1998,
REITs will be permitted to designate amounts of undistributed capital gain
which will be includible in shareholders' taxable income. Such amounts will
also remain
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subject to tax at the level of the REIT, but the shareholders will be entitled
to tax credits for the tax paid by the REIT.) Second, the Company may be
subject to the "alternative minimum tax" as a consequence of its items of tax
preference. Third, if the Company has net income from the sale or other
disposition of "foreclosure property" that is held primarily for sale to
customers in the ordinary course of business or other non-qualifying income
from foreclosure property, it will be subject to tax at the highest corporate
rate on such income. Fourth, if the Company has net income from "prohibited
transactions" (which are, in general, certain sales or other dispositions of
property other than foreclosure property held primarily for sale to customers
in the ordinary course of business), such income will be subject to a 100% tax.
Fifth, if the Company should fail to satisfy either the 75% or 95% gross income
test (discussed below) but has nonetheless maintained its qualification as a
REIT because certain other requirements have been met, it will be subject to a
100% tax on the net income attributable to the greater of the amount by which
the Company fails the 75% or 95% test, multiplied by a fraction intended to
reflect the Company's profitability. Sixth, if the Company fails to distribute
during each year at least the sum of (i) 85% of its ordinary income for such
year, (ii) 95% of its capital gain net income for such year and (iii) any
undistributed taxable income from prior periods, the Company will be subject to
a 4% excise tax on the excess of such required distribution over the amounts
actually distributed. Seventh, if the Company should acquire any asset from a C
corporation (i.e., a corporation generally subject to full corporate-level tax)
in a carryover basis transaction and the Company subsequently recognizes gain
on the disposition of such asset during the ten-year period (the "Recognition
Period") beginning on the date on which the asset was acquired by the Company,
then, to the extent of the excess of (a) the fair market value of the asset as
of the beginning of the Recognition Period over (b) the Company's adjusted
basis in such asset as of the beginning of the Recognition Period (the
"Built-In Gain"), such gain will be subject to tax at the highest regular
corporate rate, pursuant to guidelines issued by the IRS (the "Built-In Gain
Rules").
REQUIREMENTS FOR QUALIFICATION
To qualify as a REIT, the Company must elect to be so treated and must
meet the requirements, discussed below, relating to the Company's organization,
sources of income, nature of assets and distributions of income to
shareholders.
ORGANIZATIONAL REQUIREMENTS - IN GENERAL. The Code defines a REIT as a
corporation, trust or association: (i) that is managed by one or more trustees
or directors, (ii) the beneficial ownership of which is evidenced by
transferable shares or by transferable certificates of beneficial interest,
(iii) that would be taxable as a domestic corporation were it not to qualify as
a REIT, (iv) that is neither a financial institution nor an insurance company
subject to certain provisions of the Code, (v) the beneficial ownership of
which is held by 100 or more persons, and (vi) during the last half of each
taxable year not more than 50% in value of the outstanding stock of which is
owned, directly or indirectly, through the application of certain attribution
rules, by five or fewer individuals (as defined in the Code to include certain
entities). In addition, certain other tests, described below, regarding the
nature of its income and assets also must be satisfied. The Code provides that
conditions (i) through (iv), inclusive, must be met during the entire taxable
year and that condition (v) must be met during at least 335 days of a taxable
year of 12 months, or during a proportionate part of a taxable year of less
than 12 months. Conditions (v) and (vi) (the "100 shareholder" and "five or
fewer" requirements) will not apply until after the first taxable year for
which an election is made to be taxed as a REIT. For purposes of conditions (v)
and (vi), pension funds and certain other tax-exempt entities are treated as
individuals, subject to a "look-through" exception in the case of condition
(vi), pursuant to which interests held by certain qualified trusts are
considered held by the beneficiaries of the trust rather than by the trust
itself.
Prior to consummation of the October 1994 consolidation, the Company
did not satisfy conditions (v) and (vi) above. The Company's issuance of Shares
in connection with the October 1994 consolidation allowed it to satisfy the 100
shareholder and five or fewer requirements. In addition, the Company's
organizational documents currently include certain restrictions regarding
transfer of its Shares which are intended (among other things) to assist the
Company in continuing to satisfy conditions (v) and (vi) above. See, however,
"Organizational Requirements - Anti-Abuse Regulation" below.
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A corporation may not elect to become a REIT unless its taxable year
is the calendar year. The Company has a calendar year taxable year.
ORGANIZATIONAL REQUIREMENTS - ANTI-ABUSE REGULATION. As noted above
under "UPREIT Structure - Tax Status of the Operating Partnership -
`Anti-Abuse' Regulation," if the recently-issued partnership tax anti-abuse
regulation were to be held applicable to the Company and/or the Operating
Partnership, and if in connection with that application the Operating
Partnership were to be ignored for federal income tax purposes, holders of
Units in the Operating Partnership would apparently be considered direct
investors in the Company. Under such circumstances the Operating Company
theoretically could fail either or both of conditions (ii) and (vi) above.
As respects condition (ii) above, which requires that interests in a
REIT be "transferable," the relevant fact is that Units in the Operating
Partnership are not freely transferable, but may be transferred only (among
other things) with the consent of the Company (in its role as general partner
of the Operating Partnership). Also, if the partnership tax anti-abuse
regulation were applied to ignore the Operating Partnership and to consider the
holders of Units to be direct investors in the Company, their holdings would
apparently be required to be taken into account in assessing the Operating
Partnership's satisfaction of condition (vi) above (the "five-or-fewer"
requirement). (Although to date no violation of that requirement would have
been produced by taking all Units into account as though they were direct
interests in the Company, the transfer restrictions included in the Company's
organizational documents do not literally apply to Units, so such a violation
could theoretically occur in the future if Units were considered interests in
the Company for tax purposes.)
Although there exists a possibility that application of the
partnership tax anti-abuse regulation to the Company and/or the Operating
Partnership could produce a failure of the Company to qualify as a REIT, for
the reasons discussed above under "UPREIT Structure - Tax Status of the
Operating Partnership - `Anti-Abuse' Regulation," the Company has a
well-reasoned argument that the regulation should not be applied to it and/or
the Operating Partnership, and even if the regulation were applied to the
Company and/or the Operating Partnership, its application to produce a failure
of REIT qualification by an otherwise-qualifying organization seems unlikely.
INCOME AND ASSET TESTS - IN GENERAL; PROPORTIONATE SHARES. In addition
to satisfying the organizational requirements described above, an organization
seeking to qualify as a REIT for federal income tax purposes must satisfy a
variety of conditions relating to its income and assets. In the case of an
organization which is a partner in a partnership, tax regulations provide that,
for purposes of testing for qualification as a REIT, the organization will be
deemed to own its proportionate share (determined by reference to its "capital
interest" in the partnership) of the assets of the partnership and will be
deemed to be entitled to the income of the partnership attributable to such
share. In addition, for such purposes the character of the assets and gross
income of the partnership are considered to retain the same character in the
hands of the organization as they have in the hands of the partnership.
There is some uncertainty concerning how one measures the "capital
interest" - and therefore the "proportionate share" of a partner in a
partnership for purposes of REIT qualification, particularly where, as will be
the case for the Company and the Operating Partnership, there are Book-Tax
Differences. As noted above under "UPREIT Structure - Tax Allocations,"
however, the Company does not expect that any material adverse effect will be
produced by this uncertainty or by any resulting difference between its
distributive share of the tax items of the Operating Partnership (employed in
calculating taxable income generally) and its proportionate share of the
Operating Partnership's assets and income (employed in testing for REIT
qualification).
INCOME TESTS. To maintain qualification as a REIT, three gross income
requirements must be satisfied annually.
- - First, at least 75% of the Company's gross income (excluding gross income
from prohibited transactions), for each taxable year must be derived
directly or indirectly from investments relating to real property or
mortgages on real property (including "rents from real property" and, in
certain circumstances, interest) or from certain types of temporary
investments.
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- - Second, at least 95% of the Company's gross income (excluding gross
income from prohibited transactions) for each taxable year must be derived
from such real property investments and from dividends, interest and gain
from the sale or disposition of stock or securities or from any
combination of the foregoing.
- - Third, short-term gain from the sale or other disposition of stock or
securities, gain from prohibited transactions and gain from the sale or
other disposition of real property held for less than four years (apart
from involuntary conversions and sales of foreclosure property) must
represent less than 30% of the Company's gross income (including gross
income from prohibited transactions) for each taxable year. (This
so-called 30% test has been repealed for 1998 and later years.)
Rents received or deemed to be received by the Company will qualify as
"rents from real property" in satisfying the gross income requirements for a
REIT described above only if several conditions are met.
First, the amount of rent generally must not be based in whole or in
part on the income or profits of any person.
- - Second, the Code provides that rents received from a resident will not
qualify as "rents from real property" in satisfying the gross income tests
if the REIT, or an owner of 10% or more of the REIT, directly or
constructively owns 10% or more of such resident (a "Related Party
Resident").
- - Third, if rent attributable to personal property leased in connection
with a lease of real property is greater than 15% of the total rent
received under the lease, then the portion of rent attributable to the
personal property will not qualify as "rents from real property."
- - Finally, for rents from property to qualify as "rents from real property"
the REIT generally must not operate or manage the property or furnish or
render services to residents, other than through an "independent
contractor" who is adequately compensated and from whom the REIT does not
derive any income (the "independent contractor rule"). However, (1) a REIT
may provide services with respect to a property without disqualifying the
rents therefrom if the services are "usually or customarily rendered" in
connection with the rental of room or other space for occupancy only and
are not otherwise considered "rendered to the occupant," and (2) the
independent contractor rule does not apply to disqualify rents which, if
received by a tax-exempt organization, would not constitute "unrelated
business taxable income." (Prior to 1998, any level of impermissible
activities with respect to a property disqualifies all
otherwise-qualifying income from that property; after 1997, the presence
of a de minimis amount of impermissible activities will disqualify only
the income from those activities, and not all otherwise-qualifying income
from the property.)
The Company does not anticipate charging rent that is based in whole
or in part on the income or profits of any person. The Company does not
anticipate deriving rent attributable to personal property leased in connection
with real property that exceeds 15% of the total rents. The Company does not
anticipate receiving rent from Related Party Residents.
The Company believes (1) that the services with respect to the
Communities that have been and will be provided either by it or by the
Operating Partnership are usually or customarily rendered in connection with
the rental of space for occupancy only and are not otherwise rendered to
particular residents, (2) that none of its activities or the activities of the
Operating Partnership have been or will be of a nature which would cause rental
income from the Communities to constitute "unrelated business taxable income"
if received by a tax-exempt organization, and (3) that therefore such
activities and the provision of such services will not cause rents received
with respect to the Communities to fail to qualify as "rents from real
property." Services with respect to the Communities that the Company believes
may not be provided by the Company directly without jeopardizing the
qualification of rent as "rents from real property" will be performed by
independent contractors.
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If the Company fails to satisfy one or both of the 75% or 95% gross
income test for any taxable year, it may nevertheless qualify as a REIT for
that year if it is eligible for relief under certain provisions of the Code.
These relief provisions will be generally available if (i) the Company's
failure to meet these tests was due to reasonable cause and not due to willful
neglect, (ii) the Company attaches a schedule of the sources of its income to
its federal income tax return, and (iii) any incorrect information on the
schedule is not due to fraud with intent to evade tax. It is not possible to
state whether or not, in all circumstances, the Company would be entitled to
the benefit of these relief provisions. As noted above under "Federal Income
Taxation of the Company - In General," even if these relief provisions apply a
tax would be imposed with respect to the excess net income. No similar
mitigation provision provides relief if the Company fails the 30% income test,
in which event the Company would cease to qualify as a REIT. (The 30% test has
been repealed for 1998 and later years.) See "Failure to Qualify" below.
ASSET TESTS. At the close of each quarter of its taxable year, the
Company also must satisfy three tests relating to the nature and
diversification of its assets.
- - First, at least 75% of the value of the Company's total assets must be
represented by real estate assets, cash, cash items and government
securities.
- - Second, no more than 25% of the Company's total assets may be represented
by securities other than those in the 75% asset class.
- - Third, of the investments included in the 25% asset class, the value of
any one issuer's securities owned by the Company may not exceed 5% of the
value of the Company's total assets, and the Company may not own more than
10% of any one issuer's outstanding voting securities.
After initially meeting the asset tests at the close of any quarter,
the Company will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset
values. If the failure to satisfy the asset tests results from an acquisition
of securities or other property during a quarter, the failure can be cured by
disposition of sufficient nonqualifying assets within 30 days after the close
of that quarter. The Company intends to maintain adequate records of the value
of its assets to ensure compliance with the asset tests and to take such other
actions within 30 days after the close of any quarter as may be required to
cure any noncompliance.
ANNUAL DISTRIBUTION REQUIREMENTS. To be taxed as a REIT, the Company
is required to distribute dividends (other than capital gain dividends) to its
shareholders in an amount at least equal to (a) the sum of (i) 95% of the
Company's "REIT taxable income" (computed without regard to the dividends-paid
deduction and the Company's capital gain) and (ii) 95% of the net income, if
any, from foreclosure property in excess of the special tax on income from
foreclosure property, minus (b) the sum of certain items of non-cash income.
Such distributions must be paid in the taxable year to which they relate, or in
the following taxable year if declared before the Company timely files its
federal income tax return for such year and if paid on or before the first
regular dividend payment after such declaration. Even if the Company satisfies
the foregoing distribution requirements, to the extent that the Company does
not distribute all of its net capital gain or "REIT taxable income" as
adjusted, it will be subject to tax thereon at regular capital gains or
ordinary corporate tax rates. Furthermore, if the Company should fail to
distribute during each calendar year at least the sum of (a) 85% of its
ordinary income for that year, (b) 95% of its capital gain net income for that
year, and (c) any undistributed taxable income from prior periods, the Company
would be subject to a 4% excise tax on the excess of such required distribution
over the amounts actually distributed. In addition, if the Company disposes of
any asset subject to the Built-In Gain Rules during the Recognition Period for
that asset, the Company will be required, pursuant to guidance issued by the
IRS, to distribute at least 95% of the Built-In Gain (after tax), if any,
recognized on the disposition of the asset.
The Company intends to make timely distributions sufficient to satisfy
the annual distribution requirements.
The Company expects that its REIT taxable income will be less than its
cash flow due to the allowance of depreciation and other non-cash charges in
computing REIT taxable income. Accordingly, the Company anticipates
23
<PAGE> 26
that it will generally have sufficient cash or other liquid assets to enable it
to satisfy the 95% distribution requirement. It is possible, however, that the
Company, from time to time, may not have sufficient cash or other liquid assets
to meet the 95% distribution requirement or to distribute such greater amount
as may be necessary to avoid income and excise taxation, due to timing
differences between (i) the actual receipt of income and the actual payment of
deductible expenses and (ii) the inclusion of such income and the deduction of
such expenses in arriving at taxable income of the Company, or as a result of
nondeductible expenditures, such as principal payments of indebtedness and
capital expenditures, in excess of noncash deductions. In the event that such
timing differences occur, the Company may find it necessary to arrange for
borrowings or, if possible, to pay taxable stock dividends in order to meet the
distribution requirements.
Under certain circumstances, the Company may be able to rectify a
failure to meet the distribution requirement for a year by paying "deficiency
dividends" to shareholders in a later year, which may be included in the
Company's deduction for dividends paid for the earlier year. Even in such
circumstances, however, the Company would be required to pay interest based
upon the amount of any deduction taken for deficiency dividends.
EARNINGS AND PROFITS. Under recent final Treasury Regulations, the
existence of undistributed earnings and profits of a non-REIT predecessor
corporation at the close of the taxable year generally will preclude a
successor corporation from qualifying to be taxed as a REIT. The Company does
not anticipate having such undistributed earnings and profits.
FAILURE TO QUALIFY
If the Company fails to qualify for taxation as a REIT in any taxable
year and the relief provisions do not apply, the Company will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to shareholders in any year in which the
Company fails to qualify will not be deductible by the Company nor will they be
required to be made. In such event, to the extent of current or accumulated
earnings and profits, all distributions to shareholders will be dividends,
taxable as ordinary income, and, subject to certain limitations of the Code,
corporate distributees may be eligible for the dividends-received deduction.
Unless the Company is entitled to relief under specific statutory provisions,
the Company also will be disqualified from taxation as a REIT for the four
taxable years following the year during which qualification was lost. It is not
possible to state whether or not in all circumstances the Company would be
entitled to such statutory relief.
TAXATION OF SHAREHOLDERS
The following observations assume, as the Company anticipates, that
each person who or which exchanges Units for Shares will be a fully taxable (a)
citizen or resident of the United States, (b) corporation, partnership or other
entity created or organized in or under the laws of the United States or of any
political subdivision thereof or (c) estate or trust, the income of which is
subject to United States federal income taxation regardless of its source. In
particular, it is assumed that no such person will be a tax-exempt organization
or foreign individual or organization.
DISTRIBUTIONS GENERALLY. Distributions to shareholders, other than
capital gain dividends discussed below, will constitute dividends up to the
amount of the Company's current or accumulated earnings and profits and will be
taxable to the shareholders as ordinary income. Distributions from the Company
will not be eligible for the dividends-received deduction for corporations. To
the extent that the Company makes a distribution in excess of its current or
accumulated earnings and profits, the distribution to a shareholder will be
treated first as a tax-free return of capital, reducing the shareholder's tax
basis in his or her Shares, and the distribution in excess of the shareholder's
tax basis in his or her Shares will be taxable as gain realized from the sale
of his or her Shares. Dividends declared by the Company in October, November or
December of any year payable to a shareholder of record on a specified date in
any such month will be treated as both paid by the Company and received by the
shareholder on December 3l of the year, provided that the dividend is actually
paid by the Company during January of the following calendar year.
24
<PAGE> 27
The Company will be considered to have sufficient earnings and profits
to treat as a dividend any distribution by the Company up to the amount
required to be distributed in order to avoid imposition of the 4% excise tax
discussed above under "Federal Income Taxation of the Company - In General."
Moreover, any "deficiency dividend" will be treated as an ordinary or capital
gain dividend, as the case may be, regardless of the Company's earnings and
profits. As a result, shareholders may be required to treat as taxable
dividends certain distributions that would otherwise be characterized as
tax-free returns of capital.
CAPITAL GAIN DIVIDENDS. Dividends to shareholders that are properly
designated by the Company as capital gain dividends will be treated as
long-term capital gains (to the extent they do not exceed the Company's actual
net capital gain) for the taxable year without regard to the period for which
the shareholder has held his Shares, except that corporate shareholders may be
required to treat up to 20% of certain capital gain dividends as ordinary
income. Capital gain dividends are not eligible for the dividends received
deduction for corporations. (Beginning in 1998, REITs will be permitted to
designate amounts of undistributed capital gain which will be includible in
shareholders' taxable income. Such amounts will also remain subject to tax at
the level of the REIT, but the shareholders will be entitled to tax credits for
the tax paid by the REIT.)
PASSIVE ACTIVITY LOSS AND INVESTMENT INTEREST LIMITATIONS.
Distributions from the Company and gain from the disposition of Common Shares
will not be treated as passive activity income, and therefore shareholders may
not be able to apply any "passive losses" against such income. Dividends from
the Company (to the extent they do not constitute a return of capital) will
generally be treated as investment income for purposes of the investment income
limitation; however, net capital gain from the disposition of Common Shares or
capital gain dividends generally will be excluded from investment income.
CERTAIN DISPOSITIONS OF SHARES. Losses incurred on the sale or
exchange of Shares held for less than six months (after applying certain
holding period rules) will be deemed long-term capital losses to the extent of
any capital gain dividends received by the selling shareholder from those
Shares.
LOSSES OF THE COMPANY. Shareholders of the Company will not be
entitled to include on their own federal income tax returns any tax losses of
the Company.
BACKUP WITHHOLDING
Under certain circumstances, shareholders may be subject to backup
withholding at a rate of 31% on payments made with respect to Shares, and/or on
proceeds of a sale or exchange of Shares. Backup withholding will apply only if
the shareholder (i) fails to furnish his or her taxpayer identification number
("TIN") (which, for an individual, would be his or her Social Security Number),
(ii) furnishes an incorrect TIN, (iii) is notified by the IRS that he or she
has failed to report properly payments of interest and dividends or is
otherwise subject to backup withholding or (iv) under certain circumstances,
fails to certify, under penalties of perjury, that he or she has furnished a
correct TIN and (a) that he or she has not been notified by the IRS that he or
she is subject to backup withholding for failure to report interest and
dividend payments or (b) that he or she has been notified by the IRS that he or
she is no longer subject to backup withholding. Backup withholding does not
apply with respect to payments made to corporations.
Shareholders should consult their own tax advisors regarding their
qualification for exemption from backup withholding and the procedure for
obtaining such an exemption. Backup withholding is not an additional tax.
Rather, the amount of any backup withholding with respect to a payment to a
shareholder will be allowed as a credit against the shareholder's federal
income tax liability and may entitle the shareholder to a refund, provided that
the required information is furnished to the IRS.
25
<PAGE> 28
SELLING SHAREHOLDERS
The Shares offered by this Prospectus may be offered from time to time
by the Selling Shareholders named below. The following table sets forth the
names of and the number and percentage of shares of Common Stock beneficially
owned by each Selling Shareholder and the number and percentage of shares of
Common Stock beneficially owned by each Selling Shareholder upon completion of
the offering of the Shares. Because the Selling Shareholders may sell all,
some or none of their Shares, no estimate can be made of the actual aggregate
number of Shares that will be offered hereby. The number and percentage of
shares of Common Stock provided in the following table represent the number and
percentage of shares of Common Stock the Selling Shareholders hold plus the
number of shares of Common Stock into which Units held by the Selling
Shareholders may be exchanged. For the purpose of determining the percentage
of shares of Common Stock beneficially owned by each Selling Shareholder, Units
held by each Selling Shareholder are deemed to have been redeemed by or on
behalf of such Selling Shareholder, but shall not be deemed to have been
redeemed for the purpose of determining the percentage of shares of Common
Stock beneficially owned by any other Selling Shareholder. Only percentages of
one percent or greater are shown, and footnotes are provided at the end of the
table.
<TABLE>
<CAPTION>
Shares Shares
Beneficially Beneficially
Owned Before the Shares Owned After the
Offering Offered Offering
-------- ------- --------
Name Number Percent Number Percent
---- ------ ------- ------ -------
<S> <C> <C> <C>
Abbey, Arthur & Barbara 14,153 8,238 5,915
Acree, Edward & Angel F. 6,597 5,447 1,150
Victoria M. & Aaron I. Alembik, Co-Trustees, Michael D. Alembik Trust 2,405 2,405
Alexander, Wendy L. 2,279 2,279
Altfeder, Lynda U.(1) 2,950 2,950
Amick, Robert & Rowina M. 10,121 10,121
Anapolle, Victor I. & Miriam R. JTWROS 8,243 4,683 3,560
Andrews, Catherine S. & Michael W. 6,015 4,809 1,206
Armour, H. H. Jr. 2,917 2,917
Askew, James E. 7,233 5,833 1,400
Atkinson, Vicki R. 2,530 2,530
Bahrke, Robert J. & Mary A. 9,282 2,279 7,003
Baine, Louis & Taufec 25,423 16,802 8,621
Baker, George B. Jr. 5,833 5,833
Baker, George D., Estate / SunTrust Bank-Executor 16,454 16,454
Ball, Byrd M. & Alice H. 14,075 7,214 6,861
Banta, Terry Currie 8,950 8,950
Barr, Charles R. & Eleanor K, 2,405 2,405
Baugus, John R. & Darlene P., JTWROS 11,630 4,683 6,947
Beard, Donna S. 6,929 4,935 1,994
Bell, Albert F., Jr. 2,530 2,530
Berger, William H. & Rhea 20,024 4,809 15,215
Bernier, David G. & Pauline M., JTWROS 19,438 10,768 8,670
Bernier, Nicklas P. 2,405 2,405
Berto, Robert L. & Joan, Sr. 2,530 2,530
</TABLE>
26
<PAGE> 29
<TABLE>
<CAPTION>
Shares Shares
Beneficially Beneficially
Owned Before the Shares Owned After the
Offering Offered Offering
-------- ------- --------
Name Number Percent Number Percent
---- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Bitting, James P. & Shirley G. 5,235 2,278 2,957
Black, Julian 7,022 5,322 1,700
Blake, David E. & Janice P., JTWROS 10,036 2,279 7,757
Bloom, Evelyn S. 4,809 4,809
Bonanno, Nicholas S. & Jean 9,905 2,405 7,500
Borud, A. Gerald & Valda 8,279 5,322 2,957
Bowman, Kristine J.(2) 3,275 2,950 325
Boyer, Vernon E. 4,533 2,530 2,003
Brantley, Jack E. & Sylvia S. 2,405 2,405
Brent, Raymond A. 2,405 2,405
Brimer, Anthony P.(3) 2,950 2,950
Brinkman, Catherine T. 2,530 2,530
Brosio, Maurice 3,133 2,530 603
Brown, Evilinia A. 2,405 2,405
Brown, H. Austin & Nancy Jane, JTWROS 21,425 7,852 13,573
Brown, James W. 10,150 8,950 1,200
Brown, Leonard 7,942 2,530 5,412
Brown, Ralph E. 51,981 1.2% 14,805 37,176
Brown, Steven M. & Peggy D. 11,293 4,935 6,358
Brown, Wilbur L. 8,950 8,950
Bruce, Keeley(4) 3,375 2,950 425
Brundridge, Ronald G. & Anne M. 6,542 2,279 4,263
Bryant, Edwin T. 16,398 4,684 11,714
Burdine, Pauline S. 2,881 2,278 603
Burns, James Bricker & Ellen Jane 5,487 2,530 2,957
Campbell, Laura H. & James S. 7,793 5,196 2,597
Campbell, Smith & Lynn 2,405 2,405
Carothers, R. Bruce & Jody 2,405 2,405
Carroll, Scott 2,405 2,405
Carson, Ethel D. 6,880 2,530 4,350
Carson, John Davidson 4,917 2,917 2,000
Carter, Glenna G. 2,278 2,278
Cashin, Harry L., Jr. 2,530 2,530
Childs, Mike 2,917 2,917
Cleveland, Rebecca L.(5) 3,075 2,950 125
Cobb, Eldron D. & Christine J. 2,405 2,405
Cochran, James C. 2,917 2,917
Coley, Richard P. 22,629 19,614 3,015
Collins, H. L. & Jama, Jr. 14,584 14,584
Conn, Henry P. 53,052 1.3% 29,210 23,842
</TABLE>
27
<PAGE> 30
<TABLE>
<CAPTION>
Shares Shares
Beneficially Beneficially
Owned Before the Shares Owned After the
Offering Offered Offering
-------- ------- --------
Name Number Percent Number Percent
---- ------ ------- ------ -------
<S> <C> <C> <C>
Conway, Gene & Beverly 8,950 8,950
Coverdill, Lowell & Delores 10,613 2,405 8,208
Crudo, Joseph T. 16,540 5,322 11,218
Cunningham, Donald E. 11,412 7,600 3,812
Cunningham, Greg 5,322 5,322
Curley, Nancy B. 15,800 8,950 6,850
Currie, O. Anderson, Jr. 8,950 8,950
Currie, Overton A. 26,850 26,850
Cuttler, Sandra H. 6,653 5,447 1,206
Danchak, Walter 2,530 2,530
Dangerfield, Herbert M. 31,955 10,006 21,949
Darby, David F. 2,917 2,917
Davila, Joaquin R. & Marcela S. 10,470 4,809 5,661
Davis, Albert W. & Judith P., III 6,191 2,530 3,661
Davis, John P. 5,617 2,917 2,700
Davis, Steve J. 3,133 2,530 603
Day, Bryant L. & Mary Beth 16,856 4,684 12,172
Deacon, Susanne Petersen 2,405 2,405
Deaver, Frank M. & Jeanne H. 5,362 2,405 2,957
DECA Enterprises, By: James D. Purdy, General Partner 2,405 2,405
Del Bino, Urbano & Marie 11,092 4,935 6,157
Dempsey, David J. & Kathryn R. 9,938 2,530 7,408
Dennis, Wade H. 33,625 11,867 21,758
Dietrich, Wallace A. 6,015 4,809 1,206
Donnalley, Karen H. & Michael 2,278 2,278
Downs, Harry 14,933 2,530 12,403
Doyle, George & JoAnn 2,917 2,917
Drake, David W. & Tina D. 3,905 2,405 1,500
Dreiling, Gerard F. & Mary K. 2,278 2,278
Dunn, Robert L. & Sandra L. 17,419 9,492 7,927
Dvorscak, Bernard J. 13,969 4,809 9,160
Eckard, Hal & Margaret S. 7,726 7,726
Estate of Thomas E. Edwards 2,405 2,405
Ellington, Carol D. 3,805 2,405 1,400
Ellis, R. Park 6,979 2,530 4,449
Enzinger, Richard & Mary Jane, Tenants-in-Common 26,822 23,222 3,600
Evans, Coley L., Jr. 5,060 5,060
Fantauzza, Charles B. & Ruth 5,322 5,322
Farmer, Don & Chris Curle, JTWROS 8,687 2,530 6,157
Farrell, Francis W., JR. & Jean R. 2,405 2,405
</TABLE>
28
<PAGE> 31
<TABLE>
<CAPTION>
Shares Shares
Beneficially Beneficially
Owned Before the Shares Owned After the
Offering Offered Offering
-------- ------- --------
Name Number Percent Number Percent
---- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Fendrick, Robert J. 5,838 2,278 3,560
Fiedotin, Rosa Lia 9,618 9,618
Fife, Don Joseph 8,950 8,950
Fischer, Elliott R. 4,809 4,809
Fisher, Charles E. 5,479 2,279 3,200
Forness, Susan M. 5,235 2,278 2,957
Fowler, William E. & Emily F. 2,278 2,278
Fraser, Tevie D. 2,278 2,278
Freeauf, Ronald Peter 6,738 2,530 4,208
Freireich, Ronald & Bonnie S. 37,994 15,949 22,045
Gaddis, William E. & Joyce B., JTWROS 6,914 2,917 3,997
Gallagher, Mark & Phyllis M. JTWROS 5,002 2,405 2,597
Garrison, Charles P. 11,523 2,917 8,606
George, Emanuel J. & Irene E. JTWROS 9,711 5,447 4,264
Gilbert, Walter & Carolyn 4,167 2,917 1,250
Gill, Melinda K. 2,278 2,278
Gill, Newton G. 4,809 4,809
Gillespie, Thomas D. & Karen M. 3,736 2,530 1,206
Gilreath, Charles M. 5,362 2,405 2,957
Gimby, William R. 24,203 16,164 8,039
Glenn, Stephen A.(6) 3,800 2,950 850
Goldin, William J. & Carolyn M. JTWROS 12,083 11,480 603
Goldman, Norman A. 159,074 3.7% 93,831 65,243 1.5%
Goodrich, James M. & Penelope H.(7)(8) 301,896 6.9% 175,719 126,177 2.9%
Goodrich, Lawrence F. & Janice C., Jr., JTWROS 7,407 4,810 2,597
Gordon, Stephen & Maureen JTWROS 11,017 7,214 3,803
Gottlieb, Richard 11,210 5,447 5,763
Gramling, Mary C. 9,635 4,935 4,700
Green, John R. 8,950 8,950
Greene, James V. & Louise C. 35,108 19,644 15,464
Grefenstette, Joseph W. & Anne W. 2,405 2,405
Griffin, Albert , Jr. 3,133 2,530 603
Griffin, Edmond I. & Georgia C. JTWROS 22,101 2,279 19,822
Groff, William D. & Patricia A. JTWROS 5,286 4,683 603
Gumpert, Albert A. & Betty A. 9,855 7,852 2,003
Gunderson, James W. & Joyce A. 2,278 2,278
Gurley Family Partnership, L.P., By: Penelope A. & Barry R. Gurley 19,000 7,087 11,913
Gustavson, Mark & Carol JTWROS 7,466 5,060 2,406
Hardcastle, James Robert 2,530 2,530
Harden, Donald B. 3,805 2,405 1,400
</TABLE>
29
<PAGE> 32
<TABLE>
<CAPTION>
Shares Shares
Beneficially Beneficially
Owned Before the Shares Owned After the
Offering Offered Offering
-------- ------- --------
Name Number Percent Number Percent
---- ------ ------- ------ -------
<S> <C> <C> <C>
E. M. Harrell TTEE U/A E. M. Harrell Inter-Vivos Trust Dtd 7/24/91 2,530 2,530
Harrivel, Donald C. & Ruth M. 2,530 2,530
Harter, Thomas C. 10,464 4,809 5,655
Hawthorne, David E., III 2,278 2,278
Hayman, Hugh & JoAnn 5,833 5,833
Heller, Carl H. 3,133 2,530 603
Hendrix, Rosdon 7,959 2,405 5,554
Henselin, Robert & M. Yvonne 11,867 11,867
Hentschel, Ingo & Elaine 2,917 2,917
Hentschel, Marie E. 2,530 2,530
Herndon, Carl 6,266 5,060 1,206
Hewell, Gurvis J. & Hewell, David, III 2,405 2,405
Hewell, Gurvis J. 8,950 8,950
Higley, Susan J. 6,979 2,530 4,449
Hindes, Rosanne D. 5,730 2,530 3,200
Hogue, Elmer C., Jr. 2,405 2,405
Holihan, J. Raymond & Roberta D., JTWROS 9,117 2,917 6,200
Hollingsworth, LeRoy F. 11,050 8,950 2,100
Holman, Penn G. & Mary R., TEN COM 8,861 2,917 5,944
Hope, H. John 9,610 5,447 4,163
Hope, Nancy F. 6,684 4,684 2,000
Houseman, William B. 5,628 2,278 3,350
Huber, Thomas C. 20,213 7,852 12,361
Inwright, Robert & Sandra J. 2,278 2,278
Jackson, Bobby S. & Willene D. JTWROS 3,133 2,530 603
Jackson, Willis O., Sr. 2,278 2,278
Jackson, Willis O. & Frances H., Jr. 2,278 2,278
James, Dennis H. (9) 14,501 2,405 12,096
James, W. Scott & Christina W. 11,997 7,591 4,406
Johnson, George H. 7,214 7,214
Guy Johnson Estate By: Robert L. Johnson, Executor 18,827 12,661 6,166
Johnson, Kenneth E. 29,448 9,618 19,830
Johnson, Leesa H. 2,530 2,530
Johnson, Mark E. 6,191 2,530 3,661
Johnson, Perry E. 13,724 4,809 8,915
Johnson, Robert L. 4,809 4,809
Johnson, Ronald(10) 3,275 2,950 325
Joiner, Lloyd B. 2,405 2,405
Jones, David H. 4,809 4,809
Jones, David & Faye, III 2,917 2,917
</TABLE>
30
<PAGE> 33
<TABLE>
<CAPTION>
Shares Shares
Beneficially Beneficially
Owned Before the Shares Owned After the
Offering Offered Offering
-------- ------- --------
Name Number Percent Number Percent
---- ------ ------- ------ -------
<S> <C> <C> <C>
Jones, James M. & Gretchen S. 17,971 4,935 13,036
Jones, Langston L. & Joyce A. 12,951 2,530 10,421
Jones, Leon & Susan 2,917 2,917
Jones, Robert Dale 2,405 2,405
Kane, Daniel 25,858 5,833 20,025
Karatassos, I. Pano & Georgia T., JTWROS 26,383 22,395 3,988
Karempelis, D. Scott & Linda M. JTWROS 19,044 2,279 16,765
Kash, Jesse D. & Mary E., III, JTWROS 6,026 2,279 3,747
Kennedy, J. Paul & Janey L. 2,405 2,405
Kennedy, James C. 29,096 12,024 17,072
Kerr, Janice Lord, Custodian for Amanda Stephens Kerr, GTMA 2,917 2,917
Klekamp, William R. & Nancy L. 28,681 9,869 18,812
Knight, William S. 4,272 2,278 1,994
Kratzenberg, William M. 19,435 7,977 11,458
Kravitz, Lewis P. 12,777 2,405 10,372
Krussow, Charles W. 6,082 2,279 3,803
Lane, Robert O. 2,917 2,917
LaPorte, Anthony & Jane Greer, Sr. 31,035 15,199 15,836
Laskey, Gary M. & Corinne R. JTWROS 22,018 11,867 10,151
Latawiec, June B. Alexander 2,881 2,278 603
Lazaro, Marc & Lois H., Jr., JTWROS 32,925 12,410 20,515
Ledbetter, James Lee 13,863 5,060 8,803
Lee, Larry Kent 24,909 14,805 10,104
Lehman, Ronald J. 4,339 2,530 1,809
Levy, Arthur, M.D. 5,833 5,833
Lewis, William H. 40,772 14,929 25,843
Lindenbaum, David & Carol, JTWROS 11,355 11,355
Linder, John & Lynne 2,405 2,405
Lindskoog, Linda S. 2,881 2,278 603
Linster, Gale F. 9,618 9,618
Lloyd, Edward J. & Vallerie L. 6,050 5,447 603
Lotner, Gary Z. 5,605 2,405 3,200
Lumsden, J. Roger 8,369 4,809 3,560
Lunceford, D.W. & Virginia L., Jr. 24,566 16,802 7,764
Lynch, Donald M. 3,555 2,405 1,150
Lynch, Myra Stewart 8,455 7,852 603
MacGinnitie, W. James and Barbara M. 7,481 2,530 4,951
Madden, Ann B. 4,517 2,917 1,600
Mairose, Donald F. 12,278 5,060 7,218
Mann, E. Michele(11) 3,075 2,950 125
</TABLE>
31
<PAGE> 34
<TABLE>
<CAPTION>
Shares Shares
Beneficially Beneficially
Owned Before the Shares Owned After the
Offering Offered Offering
-------- ------- --------
Name Number Percent Number Percent
---- ------ ------- ------ -------
<S> <C> <C> <C>
Manning, J. Kenneth, Jr. 9,183 7,977 1,206
Martin, E. Jay, Jr. 11,936 2,530 9,406
Martin, Phillip L. 3,133 2,530 603
Mayson, Bobby F., Trustee, Will of John C. Mayson Deceased 8,950 8,950
McAllister, John 2,917 2,917
McCahan, W.H. 4,524 2,530 1,994
McClendon, Claude E. 8,950 8,950
McGowan, Toni B. & Don P. 5,487 2,530 2,957
McIntire, Elma O. & Robert Eugene 2,405 2,405
McKillips, Gary W. 2,405 2,405
McKnight, Ernest P. 3,133 2,530 603
McKnight, Louellen 3,484 2,278 1,206
McManus, John T. & Margaret M. 6,803 4,809 1,994
Melby, Jane L. 9,467 4,557 4,910
Melby, Kenneth 9,869 9,869
Meng, Donald F. & Denise S., JTWROS 11,236 2,279 8,957
Michael, Donald L. & Kathleen S. 3,485 2,279 1,206
Miller, Gary D. 4,117 2,917 1,200
Miller, John & Carolyn 7,117 2,917 4,200
Mingledorff, L. B. 7,130 2,530 4,600
Mintz, Stephen M., M.D. 3,133 2,530 603
Mitchell, Paul G. 7,845 2,530 5,315
Mittelstadt, Bonnie V. 7,691 2,279 5,412
Mittelstadt, Carl F. 5,235 2,278 2,957
Molitor, Arthur & Nancy, Jr. 2,917 2,917
Moore, G. Boake 2,917 2,917
Moore, James G. & Nancy B., III, JTWROS 21,046 13,634 7,412
Moran, Timothy A. 2,405 2,405
Morrison, Raymond M. 14,416 4,935 9,481
Morse, Clifford S. & Myra L. 8,203 7,600 603
Morton, William J. 11,591 2,530 9,061
Nance, Richard E. 2,405 2,405
Nelems, James Hardy 9,855 7,852 2,003
Norwood, Larry R. 2,405 2,405
Olive, R.T. & Darla K. 2,405 2,405
Olver, Jon G. 5,405 2,405 3,000
Ottinger, Judith Q. (12) 3,256 2,950 306
Owen, R. Stuart & Carol, Jr. 7,822 5,322 2,500
Painter, Bobby A. & Martha R. 2,405 2,405
Palmich, Ronald V. & Susan T. 2,278 2,278
</TABLE>
32
<PAGE> 35
<TABLE>
<CAPTION>
Shares Shares
Beneficially Beneficially
Owned Before the Shares Owned After the
Offering Offered Offering
-------- ------- --------
Name Number Percent Number Percent
---- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Parker, Catherine L. 3,484 2,278 1,206
Payne, Carey 8,950 8,950
Payne, Paul S. & Vicky W. JTWROS 5,538 4,935 603
Peake, Stephen 3,133 2,530 603
Peden, Marvin M. 5,538 4,935 603
Pepitone, John J. & Anne Marie 11,830 5,322 6,508
Perras, Leo W. & Marlene A., JTWROS 8,230 2,530 5,700
Perry, V.M., Jr. 25,713 15,702 10,011
Pestrue, Darell W. & Edith, JTWROS 50,630 1.2% 28,469 22,161
Petras, Jean M. 13,020 2,405 10,615
Phillips, M. Helen 7,339 7,339
Phillips, Roger Steve 2,405 2,405
Piehl, Dennis E. 4,917 2,917 2,000
Pitts, James C. & Wanda L. 4,281 2,278 2,003
Plaut, Roy & Olga Gomez, Jr. 11,604 5,447 6,157
Pohl, Richard T. 9,883 2,530 7,353
Pope, Donnell & Catherine Capehart 2,917 2,917
Powell, H. Russell & Maria D. 5,487 2,530 2,957
Poynter, Michael C. 5,487 2,530 2,957
Proud, William R. 8,413 2,405 6,008
Pulliam, Joe 6,762 2,405 4,357
R & N Properties 8,950 8,950
Rabin, Mark S. & Noreen, JTWROS 8,495 4,935 3,560
Rankin, Edward & Deborah 2,917 2,917
Ray, Larry M. 2,405 2,405
Redwine, Bob & Gertrud 2,917 2,917
Reed, Robert 10,643 10,643
Richeson, Dorothy Bradley & William E. 12,944 4,935 8,009
Richeson, George 9,023 7,214 1,809
Rieter, Robert 19,084 10,131 8,953
Rigot, Donald & Florence 6,472 5,322 1,150
Rissanen, Jouko J. 8,950 8,950
Roberts, Charles S. (13) 1,169,785 23.8% 726,500 443,285 9.0%
Robinson, Charles W. & Barbara B., JTWROS 30,298 12,283 18,015
Robirds, Virginia K. 10,117 2,917 7,200
Roe, Maurice C. 13,859 7,601 6,258
Roesel, Harold G. & Mary H. 2,405 2,405
Rogers, Charles G. & Laura P. 4,810 4,810
Rogers, O. Franklin 11,750 8,950 2,800
Rushin, Bennie G. 5,940 2,279 3,661
</TABLE>
33
<PAGE> 36
<TABLE>
<CAPTION>
Shares Shares
Beneficially Beneficially
Owned Before the Shares Owned After the
Offering Offered Offering
-------- ------- --------
Name Number Percent Number Percent
---- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Rynning, Joel E. & Ardath Cox 12,219 7,214 5,005
Rzepecki, F. J. 8,832 2,917 5,915
Salam, Atef A. 21,528 10,131 11,397
Sale, Oliver H. 2,405 2,405
Sauer, Judith K. 9,384 4,935 4,449
Sawicki & Sawicki Interests By: Michael Sawicki 2,917 2,917
Sawyer, Joan H. 6,260 2,405 3,855
Schafer, Sandra 2,278 2,278
Schneider, Claude C. 9,493 2,530 6,963
Schorr, Robert F. & Essie B. 5,705 2,405 3,300
Schwendler, Barbara D. 7,415 4,684 2,731
Schwendler, Wm. T., Jr. 12,563 4,935 7,628
Segouin, James E. 2,917 2,917
Seidband, Howard & Miriam 5,975 2,917 3,058
Seiferle Revocable Trust/Edwin J. Seiferle, William W. Griffin, Trustee 2,917 2,917
Sentell, Don W. 20,762 7,214 13,548
Sermersheim, Gail F. 9,945 2,530 7,415
Severin, Virgil E. 15,108 10,308 4,800
Sharkey, William J. 2,278 2,278
Shepard, Molly K. 2,405 2,405
Shore, Bonnie S. 15,980 10,131 5,849
Shure, Donald J. & Janice M. 5,061 5,061
Skae, Anne B. 12,333 2,278 10,055
Smith, Garnett A. 17,537 10,131 7,406
Smith, Harrington B. & Susan H. 30,990 9,617 21,373
Smith, Mary Ruth 6,722 5,322 1,400
Smith, J. Neil & Ellen W., JTWROS 11,887 2,405 9,482
Smith, Tia & Carey A. 2,405 2,405
Smith, Scott S. 32,592 10,642 21,950
Spalding, Ben & Phyllis(14) 52,494 1.2% 41,973 10,521
Spence, Allan D. 8,950 8,950
Staley, Irving T. 20,595 7,213 13,382
Stallings, T.J. 13,725 10,768 2,957
Stamey, B.F. 3,607 3,607
Steed, David P. & Rose B. 4,935 4,935
Stein, Bert Jay 9,679 5,322 4,357
Steinberg, Michael & Darla 5,322 5,322
Stevens, Charles P. 2,917 2,917
Stevens, James M. 7,933 2,278 5,655
Stewart, Evelyn M. 9,575 4,475 5,100
</TABLE>
34
<PAGE> 37
<TABLE>
<CAPTION>
Shares Shares
Beneficially Beneficially
Owned Before the Shares Owned After the
Offering Offered Offering
-------- ------- --------
Name Number Percent Number Percent
---- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
St. John, Richard J. 22,350 19,393 2,957
Stinson, Douglas L. & Deborah W. 2,405 2,405
Stoll, Robert & Delores, JTWROS 9,679 5,322 4,357
Surtees, Robert E. 2,405 2,405
Tavani, Filiberto & Elaine 5,002 2,405 2,597
Taylor, Barbara H. 2,405 2,405
Taylor, Janet W. 12,922 5,322 7,600
Taylor, Robert L. & Sharon L. 18,856 4,683 14,173
Tedstrom, Susan F. 8,266 2,405 5,861
Thomas, Betty R. 162,829 3.7% 91,872 70,957 1.6%
Thomas, W. Barry & Sharron M. 5,487 2,530 2,957
Thompson, Robert & Vivian 6,050 5,447 603
Thompson, Samuel H. 5,362 2,405 2,957
Tidwell, William R. 2,405 2,405
Tolleson, Donald Lee 2,917 2,917
Tracz, Ronald F. & Carolyn J. 4,935 4,935
Tucker, Robert J. 2,530 2,530
Tunno, Dean D. 2,917 2,917
Underwood, Frank O. 2,405 2,405
Unger, Ted H. & Joanne H. 18,468 10,256 8,212
U.S. Medical Supply Company 2,405 2,405
Valentino, John G., III 37,131 28,689 8,442
The Valentino Irrevocable Trust By: John S. Thombley, Trustee 15,566 7,590 7,976
Varga, Robert C. 4,809 4,809
Varitek, Inc., By: Charles Fisher, President 2,917 2,917
Velazco, Antenor & Hartney - Velazco, Kathleen J., JTWROS 17,092 2,530 14,562
Vivian, Gianni 2,881 2,278 603
Wakefield, John W. & Margaret H. 2,405 2,405
Wallace, Charles L. 7,138 4,683 2,455
Walsh, John & Georgiana 2,917 2,917
Warner, Joyce 4,417 2,917 1,500
Watson, Bruce W. 17,096 2,278 14,818
Watson, Jane D. 7,339 7,339
Weed, Jean S. 9,393 4,935 4,458
Weisman, Evan 8,972 4,809 4,163
Westmoreland, Allen G. 5,479 2,279 3,200
Wheeler, James H. 55,751 1.3% 14,174 41,577
White, Henry S. and Margaret R. 9,950 5,195 4,755
White, Larry C. 23,294 4,809 18,485
Wilde, Harold G. & Sara O. 7,963 4,557 3,406
</TABLE>
35
<PAGE> 38
<TABLE>
<CAPTION>
Shares Shares
Beneficially Beneficially
Owned Before the Shares Owned After the
Offering Offered Offering
-------- ------- --------
Name Number Percent Number Percent
---- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Wilks, Richard L. 16,879 2,279 14,600
Williams, James W. & Alice Carolyn 6,267 5,061 1,206
Wingo, Richard A. 8,612 4,809 3,803
Winn, Charles B., III 5,381 2,278 3,103
Woodward, Charles D. & Mary Beth 8,738 4,935 3,803
Woolridge, Ida R. 4,705 2,405 2,300
Wray, George W., Jr. & Anne C. (8)(15) 355,743 7.8% 186,813 168,930 3.7%
Wright, Paul A. 2,405 2,405
Wurster, Douglas R. 2,881 2,278 603
Young, Mark E. 7,490 2,530 4,960
Younts, Ronald L. & Judith W. 22,988 7,977 15,011
Zimmerman, John E. & Sharon C. 4,985 2,530 2,455
Zobel, Martin A., Jr. 9,605 7,852 1,753
Zuk, Linda 3,989 3,989
Zuk, Ronald A. 3,989 3,989
Selling Shareholders who collectively own 7,855 7,330 525
</TABLE>
_________________________
(1) Ms. Altfeder is a staff accountant for the Company.
(2) Ms. Bowman is a staff accountant for the Company.
(3) Mr. Brimer is a maintenance supervisor for the Company.
(4) Ms. Bruce is a property manager for the Company.
(5) Ms. Cleveland is a property manager for the Company.
(6) Mr. Glenn is a staff accountant for the Company.
(7) Includes: 14,787 shares owned directly by Mr. Goodrich; 57,571 Units
and 66,632 shares owned jointly by Mr. Goodrich and Mrs. Penelope
Goodrich, his wife; 104,478 Units owned by Goodrich Enterprises, Inc.,
all of the outstanding shares of which are owned by Mr. And Mrs.
Goodrich and their sons; 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. Mr. Goodrich disclaims beneficial
ownership of the Units and shares owned by such trusts, and Mrs.
Goodrich disclaims beneficial ownership of the shares owned directly
by Mr. Goodrich. Mr. Goodrich has served as a director of the Company
since October 1994.
(8) Ownership of shares of Common Stock is limited under the Company's
articles of incorporation to 6.0% of outstanding shares (other than by
Mr. Roberts, who is limited to 25%). Accordingly, Units may not be
redeemed if upon their redemption the holder thereof would at such
time hold in excess of 6.0% of the then outstanding shares. Such
limit may prevent Mr. Goodrich and Mr. Wray from redeeming Units
unless and until other Unitholders redeem a sufficient number of Units
to cause the number of outstanding shares of Common Stock to be
increased to a level sufficient to permit such redemption.
(9) Mr. James has served as a director of the Company since June 1995.
(10) Mr. Johnson is a vice president of the Company.
(11) Ms. Mann is a vice president of the Company.
(12) Ms. Ottinger is an executive assistant for the Company.
36
<PAGE> 39
(13) Includes: 697,000 Units and 440,841 shares owned directly by Mr.
Roberts; 29,500 Units owned by a trust for his minor daughter of which
is the sole trustee; and 2,444 shares owned by his minor daughter.
Mr. Roberts has served as the Company's Chairman of the Board, Chief
Executive Officer, and President since its inception in July 1994.
(14) Includes 2,917 Units owned by Mrs. Spalding, and 24,401 Units and
7,564 shares owned by partnerships of which Mrs. Spalding is the
managing partner -- Mr. Spalding disclaims beneficial ownership of all
such Units and shares. Mr. Spalding has served as a director of the
Company since October 1994.
(15) Includes: 20,781 Units owned directly by Mr. Wray; 154,618 Units and
153,252 shares owned by a partnership, over which Units and shares Mr.
Wray has voting and investment power as the managing partner of such
partnership; 2,917 Units owned jointly with his daughter, over which
Units he shares voting and investment power; 8,497 Units and 15,678
shares owned by Mrs. Wray and 5,058 shares owned by a trust of which
she is a co- trustee. Mr. Wray disclaims beneficial ownership of the
8,497 Units and 15,678 shares owned by Mrs. Wray and 5,058 shares
owned by a trust of which she is a co-trustee, and Mrs. Wray disclaims
beneficial ownership of all Units and shares other than the Units and
shares she owns and the shares owned by the trust of which she is co-
trustee. Mr. Wray has served as a director of the Company since
February 1995.
PLAN OF DISTRIBUTION
The Selling Shareholders may sell or transfer all or a portion of the
Shares offered hereby from time to time to third parties (including purchasers)
directly or by or through brokers, dealers, agents or underwriters, who may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Shareholders and/or from purchasers of the Shares
for whom they may act as agent. Such sales and transfers of the Shares may be
effected from time to time in one or more transactions on the AMEX, in
negotiated transactions or otherwise, at a fixed price or prices, which may be
changed, at market prices prevailing at the time of sale, at negotiated prices,
or without consideration, or by any other legally available means. Any or all
of the Shares may be sold or transferred from time to time by means of (a) a
block trade in which the broker or dealer so engaged will attempt to sell the
Shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction; (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this
Prospectus; (c) ordinary brokerage transactions and transactions in which the
broker solicits purchasers; (d) through the writing of options on the Shares;
(e) pledges as collateral to secure loans, credit or other financing
arrangements and any subsequent foreclosure, if any, thereunder; (f) gifts,
donations and contributions; and (g) otherwise. To the extent required, the
number of Shares to be sold or transferred, the purchase price, the name of any
such agent, broker, dealer or underwriter and any applicable discounts or
commissions and any other required information with respect to a particular
offer will be set forth in an accompanying Prospectus Supplement. The
aggregate net proceeds to the Selling Shareholders from the sale of the Shares
will be the purchase price of such Shares less any commissions. This
Prospectus also may be used, with the Company's prior written consent, by
donees and pledgees of the Selling Shareholders.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale
in the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
The Selling Shareholders and any brokers, dealers, agents or
underwriters that participate in the distribution of the Shares may be deemed
to be "underwriters" within the meaning of the Securities Act, in which event
any discounts, concessions and commissions received by such brokers, dealers,
agents or underwriters and any profit on the resale of the Shares purchased by
them may be deemed to be underwriting commissions or discounts under the
Securities Act.
No underwriter, broker, dealer or agent has been engaged by the
Company in connection with the distribution of the Shares.
Any Shares covered by this Prospectus which qualify for sale pursuant
to Rule 144 under the Securities Act may be sold under Rule 144 rather than
pursuant to this Prospectus. There is no assurance that the Selling
37
<PAGE> 40
Shareholders will sell any or all of the Shares. The Selling Shareholders may
transfer, devise or gift Shares by other means not described herein.
The Company will pay all of the expenses incident to the registration
of the Shares, other than underwriting discounts and selling commissions, if
any.
LEGAL MATTERS
The legality of the Common Stock offered hereby has been passed upon
for the Company by Nelson Mullins Riley & Scarborough, L.L.P., Atlanta,
Georgia, and certain legal matters described under "Federal Income Tax
Considerations" have been passed upon for the Company by Holt Ney Zatcoff &
Wasserman, LLP, Atlanta, Georgia.
EXPERTS
The financial statements incorporated in this Prospectus by reference
from the Company's Annual Report on Form 10-KSB for the year ended December 31,
1996 have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
38
<PAGE> 41
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY THE SHARES IN ANY JURISDICTION WHERE, OR
TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY
CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF.
-----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION................................ ii
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE....................................... ii
THE COMPANY.......................................... 3
USE OF PROCEEDS...................................... 3
RISK FACTORS......................................... 3
DESCRIPTION OF COMMON STOCK.......................... 11
FEDERAL INCOME TAX CONSIDERATIONS.................... 15
SELLING SHAREHOLDERS................................. 26
PLAN OF DISTRIBUTION................................. 37
LEGAL MATTERS........................................ 38
EXPERTS.............................................. 38
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ROBERTS REALTY
INVESTORS, INC.
3,363,430 SHARES OF COMMON STOCK
-----------------------------
PROSPECTUS
-----------------------------
SEPTEMBER ___, 1997
- -------------------------------------------------------------------------------
<PAGE> 42
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following sets forth the estimated fees and expenses in connection with the
issuance and distribution of the Registrant's securities being registered
hereby, other than underwriting discounts and commissions, all of which will be
borne by the Registrant:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,370
Printing and duplicating expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Accounting fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
Blue Sky fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Miscellaneous expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,630
--------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $46,000
</TABLE>
ITEM 15. 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 Partnership Agreement against
certain liabilities.
As permitted by the Georgia Business Corporation Code ("GBCC"), 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. The
GBCC does not permit a corporation to indemnify a director (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 statute, provision of the Articles of Incorporation, provision of the
By-Laws, agreement, vote of shareholders or disinterested directors, or
otherwise.
Under the 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
II-1
<PAGE> 43
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 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.
ITEM 16. EXHIBITS.
<TABLE>
<S> <C>
5.1 - Opinion of Nelson Mullins Riley & Scarborough, L.L.P. as to the legality of the Common Stock being registered.
8.1 - Opinion of Holt Ney Zatcoff & Wasserman, LLP as to tax matters.
23.1 - Consent of Nelson Mullins Riley & Scarborough, L.L.P. (included in Exhibit 5.1).
23.2 - Consent of Holt Ney Zatcoff & Wasserman, LLP (included in Exhibit 8.1).
23.3 - Consent of Deloitte & Touche LLP.
24.1 - Power of Attorney (included on the signature page to the original registration statement filed on July 11, 1997).
</TABLE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to the Registration Statement to;
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act.
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) shall not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(iii) Include any additional or changed material information on the
plan of distribution.
II-2
<PAGE> 44
(2) For determining any liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding ) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 45
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 1 to registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Atlanta, State of
Georgia, on the 3rd day of September, 1997.
ROBERTS REALTY INVESTORS, INC.
By: /s/ Charles S. Roberts*
-------------------------------------
Charles S. Roberts
Chairman of the Board,
Chief Executive Officer, and
President
In accordance with the Securities Act, this report has been
signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Charles S. Roberts* Chairman of the Board, Chief September3, 1997
- ---------------------------------------- Executive Officer, and President
Charles S. Roberts (Principal Executive Officer)
/s/ Charles R. Elliott* Secretary, Treasurer, and Chief September 3, 1997
- ---------------------------------------- Financial Officer (Principal Financial
Charles R. Elliott Officer and Principal Accounting Officer)
/s/ James M. Goodrich* Director September 3, 1997
- ----------------------------------------
James M. Goodrich
/s/ Dennis H. James* Director September 3, 1997
- ----------------------------------------
Dennis H. James
/s/ Wm. Jarell Jones* Director September 3, 1997
- ----------------------------------------
Wm. Jarell Jones
/s/ Ben A. Spalding* Director September 3, 1997
- ----------------------------------------
Ben A. Spalding
/s/ George W. Wray, Jr.* Director September 3, 1997
- ----------------------------------------
George W. Wray, Jr.
</TABLE>
II-4
<PAGE> 46
<TABLE>
<S> <C>
*By: /s/ Charles R. Elliott September 3, 1997
----------------------------------------
Charles R. Elliott, under Power
of Attorney included in original
registration statement filed on
July 11, 1997
</TABLE>
II-5
<PAGE> 1
EXHIBIT 5.1
[NELSON MULLINS RILEY & SCARBOROUGH, L.L.P. LETTERHEAD]
September 3, 1997
Board of Directors
Roberts Realty Investors, Inc.
8010 Roswell Road, Suite 120
Atlanta, Georgia 30350
Gentlemen:
We have acted as counsel to Roberts Realty Investors, Inc., a Georgia
corporation (the "Company"), in connection with its registration statement on
Form S-3, as amended (the "Registration Statement"), filed with the Securities
and Exchange Commission (the "SEC") relating to the proposed public offering of
up to 3,363,430 shares of the Company's Common Stock, par value $.01 per share
(the "Shares"), which are reserved for issuance in redemption of units of
limited partnership interest ("Units") in Roberts Properties Residential, L.P.
(the "Operating Partnership"). The Registration Statement covers the resale of
the Shares by former holders of Units who received their shares in redemption
of their Units. This opinion letter is furnished to you at your request to
enable you to fulfill the requirements of Item 601(b)(5) of Regulation S-B in
connection with the Registration Statement. We hereby consent to the filing of
this opinion with the SEC as an exhibit to the Registration Statement and the
reference to our firm under the heading "Legal Matters" in the prospectus
included within the Registration Statement.
As such counsel, we have examined and are familiar with the Articles of
Incorporation and Bylaws of the Company (each as amended to date), and the
minutes of the meetings of the shareholders and directors of the Company. In
addition, we have made such investigations of law and have examined such
certificates of public officials and officers of the Company and such other
documents and records as we have considered necessary for purposes of this
opinion.
This opinion letter is limited by, and is in accordance with, the
January 1, 1992 edition of the Interpretive Standards (the "Interpretive
Standards") Applicable to Legal Opinions to Third Parties in Corporate
Transactions adopted by the Legal Opinion Committee of the Corporate and Banking
Law Section of the State Bar of Georgia, which Interpretive Standards are
incorporated in this Opinion Letter by this reference.
We have assumed the genuineness of the signatures on and the
authenticity of all documents submitted to us as originals and the conformity to
original documents of all
<PAGE> 2
Board of Directors
Roberts Realty Investors, Inc.
September 3, 1997
Page 2
documents submitted to us as certified or photostatic copies. We also have
relied upon the accuracy of the aforementioned certificates of public officials
and, as to matters of fact, of officers of the Company. We have also relied on
records of the Company and the Operating Partnership, and we have assumed the
accuracy and completeness thereof.
This opinion letter is based as to matters of law solely on the Georgia
Business Corporation Code. We express no opinion herein as to any other laws,
statutes, regulations, or ordinances.
Based on the foregoing and subject to the Interpretive Standards, it is
our opinion that the Shares have been duly authorized and that upon issuance of
the Shares in redemption of Units in accordance with the provisions of the First
Amended and Restated Agreement of Limited Partnership of the Operating
Partnership effective as of October 1, 1994, as amended by Amendment #1 thereto
dated as of October 13, 1994, such Shares will be validly issued, fully paid
and nonassessable, with no personal liability attaching to the ownership
thereof.
This opinion letter has been prepared solely for your use in connection
with the filing of an amendment to the Registration Statement on the date of
this opinion letter.
Very truly yours,
Nelson Mullins Riley & Scarborough, L.L.P.
By: /s/ Charles D. Vaughn
----------------------------------
<PAGE> 1
[HOLT NEY ZATCOFF & WASSERMAN, LLP LETTERHEAD]
3 SEPTEMBER 1997
Roberts Realty Investors, Inc.
8010 Roswell Road, Suite 120
Atlanta, Georgia 30350
Ladies and Gentlemen:
As tax counsel to Roberts Realty Investors, Inc. (the "Company") and
Roberts Properties Residential, L.P. (the "Operating Partnership"), we are
writing to advise you regarding fundamental federal income tax aspects of the
Company and the Operating Partnership.
We have reviewed a copy of the Prospectus (with exhibits and
supplements and, if applicable, amendments thereto to the date hereof,
collectively referred to hereinafter as the "Prospectus") prepared in
connection with the Company's registration, on Form S-3 filed with the
Securities and Exchange Commission under the Securities Act of 1933 (as amended
through the date hereof, the "Registration Statement"), of up to 3,363,430
shares ("Shares") of common stock of the Company for potential resale by former
holders of units ("Units") of interest in the Operating Partnership, who will
have received such Shares from the Company in exchange for Units. We have also
reviewed copies of the Company's Articles of Incorporation (as they heretofore
may have been amended, the "Articles") and Bylaws (as they heretofore may have
been amended, the "Bylaws") and of the Operating Partnership's partnership
agreement (as it heretofore may have been amended, the "Partnership
Agreement"). We have discussed the subject matter of the Prospectus, Articles,
Bylaws and Partnership Agreement in detail with management of the Company, and
we are relying as to all relevant matters of fact upon management's statements
and representations to us.
In our examination of the foregoing, we have assumed that the copies we
have reviewed of the Prospectus and, if applicable, amendments thereto are
complete and
<PAGE> 2
HOLT NEY ZATCOFF & WASSERMAN, LLP
Roberts Realty Investors, Inc.
3 September 1997
Page Two
factually accurate, and we have assumed that the copies we have reviewed of the
Articles, Bylaws and Partnership Agreement (in each case including amendments
if applicable) are complete and factually accurate, are what they respectively
purport to be, have been, are and will be valid and binding on the parties
thereto, have been, are and will be in full force and effect, and have
represented, and do and will represent, the complete understanding of the
parties regarding their respective subject matters. We assume as well that
each of the Company and the Operating Partnership has been and will be operated
in conformity with applicable Georgia law and the provisions of the Articles,
Bylaws and Partnership Agreement, and as described in the Prospectus.
The legal sources we have consulted include the Internal Revenue Code
of 1986, as amended (the "Code"), regulations promulgated thereunder and under
its predecessor, proposed regulations, published Revenue Rulings and Procedures
of the Internal Revenue Service, existing judicial decisions, and such other
legal authorities as we have deemed appropriate.
We are of the following opinions, in each case assuming (a) that
current statutory, regulatory, administrative and judicial law is applied, (b)
that the anti-abuse regulation discussed in the section of the Prospectus
referred to below is not applicable to the Company and the Operating
Partnership, (c) that the activities of the Company and the Operating
Partnership have been, are and will be as described in the Prospectus, and (d)
that no election to be classified as an association (taxed as a corporation)
for federal income tax purposes has been or will be filed by or for the
Operating Partnership:
1. the discussion in the Prospectus under the heading "Federal
Income Tax Considerations" fairly summarizes the federal income
tax considerations that are likely to be material to a
shareholder of the Company;
2. the Company was organized and has operated in conformity with
the requirements for qualification and taxation as a real
estate investment trust within the meaning of the Code (a
"REIT"), and the Company's current
<PAGE> 3
HOLT NEY ZATCOFF & WASSERMAN, LLP
Roberts Realty Investors, Inc.
3 September 1997
Page Three
organization and method of operation should enable it to
continue to satisfy the requirements for qualification and
taxation as a REIT; and
3. the Operating Partnership has properly been and will
properly be classified as a partnership for federal income
tax purposes.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Prospectus.
Yours very truly,
Holt Ney Zatcoff & Wasserman, LLP
By: Michael G. Wasserman, P.C.
By: /s/ Michael G. Wasserman
-------------------------------
Michael G. Wasserman, President
MGW/mcm
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement No.
333-31117 of Roberts Realty Investors, Inc. on Form S-3/A No. 1 of our audit
report dated February 28, 1997 appearing in the Annual Report on Form 10-KSB of
Roberts Realty Investors, Inc. for the year ended December 31, 1996 as amended
by Amendment No. 1 thereto filed April 30, 1997 and Amendment No. 2 thereto
filed September 3, 1997.
We also consent to the reference to us under the heading "Experts" in the
Prospectus, which is a part of this Registration Statement.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
September 3, 1997
