<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
AMENDMENT NO. 1
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
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Commission file number 0-28048
ROBERTS REALTY INVESTORS, INC.
----------------------------------------------
(Name of small business issuer in its charter)
GEORGIA 58-2122973
- --------------------------------- ------------------------------------
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
8010 ROSWELL ROAD, SUITE 120
ATLANTA, GA 30350
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(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number: (770) 394-6000
Securities registered under Section 12(b) of the Act: NONE
Title of each class: Name of each exchange on which registered:
-------------------- ------------------------------------------
N/A N/A
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK
----------------
(Title of Class)
Check whether the issuer: (1) filed all reports required to filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [X] No
[ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $17,508,000
State the aggregate market value of the voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked prices of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.) $33,453,205
Note: If determining whether a person is an affiliate will involve
an unreasonable effort and expense, the issuer may calculate the
aggregate market value of the common equity held by non-affiliates on
the basis of reasonable assumptions, if the assumptions are stated.
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date. 4,554,412 shares of Common
Stock (as of March 31, 1998)
Transitional Small Business Disclosure Format (Check One): Yes [ ] No
[X]
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PART I
ITEM 2. DESCRIPTION OF PROPERTY.
The registrant hereby amends its annual report on Form 10-KSB by
deleting the text under Item 2 and replacing it with the following:
GENERAL
At April 24, 1998, the Company owned nine multifamily apartment
communities (the "Communities") containing a total of 1,778 apartment homes. The
eight existing Communities of River Oaks, Rosewood Plantation, Plantation Trace,
Preston Oaks, Highland Park, Bentley Place, Crestmark and Ivey Brook, containing
a total of 1,524 apartment units, are stabilized; and the 180-unit Bradford
Creek Community, a 24-unit second phase of Preston Oaks and a 50-unit second
phase of Plantation Trace are now under construction or development. (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.) As described above in "Item 1,
Description of Business - Growth Strategies - Development Strategy," three
additional multifamily apartment communities in north metropolitan Atlanta that
are anticipated to total 875 apartment homes are in the development stage. The
properties on which those communities are to be constructed are currently owned
by Roberts Properties or an entity formed by Mr. Roberts or his affiliates, and
the Company has not yet purchased those properties. As explained in "- Recent
Developments," the Company recently agreed to purchase two of these properties,
on which a total of 654 apartment homes are anticipated to be developed.
As of December 31, 1997, the Company owned nine stabilized Communities
containing a total of 1,756 apartment homes that had a physical occupancy rate
of 94.6%. The Company sold the 232-unit Windsong Community on January 9, 1998.
The Company believes that the demand for multifamily housing in Atlanta
will increase due to Atlanta's growing population. According to the Atlanta
Regional Commission (the "ARC"), both population and job growth in Atlanta are
projected to be above the national average for the foreseeable future. (The ARC
is the regional planning and governmental coordination agency for the 10-county
Atlanta Region.) Based upon information provided by the ARC and the U.S. Census
Bureau, the population of the Atlanta metropolitan area is projected to grow
40.9% for the period from 1990 to 2010. According to the Georgia Department of
Labor, as of January 1, 1998, the metropolitan Atlanta unemployment rate was
3.0%, which is below the Georgia unemployment rate of 3.7% and the U.S.
unemployment rate of 5.2%.
According to the ARC, the population of metropolitan Atlanta increased
by 50.14% from 1980 to 1995, and nine metropolitan Atlanta counties rank among
the nation's top 50 fastest growing counties. As reported by the ARC, the
Atlanta metropolitan area currently has a population of approximately 3,033,400,
making it one of the largest metropolitan areas in the country and the largest
in the Southeast.
Certain basic information regarding the Communities and the retail
centers is summarized in the table on following page.
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The Communities
<TABLE>
<CAPTION>
December 1997
Year Average Rental Rates Average Physical
Completed Number Approximate Average -------------------- Occupancy for the
or to be Of Rentable Area Unit Size Per Square 12 Months Ended
Community Location Completed Units (Square Feet) (Square Feet) Per Unit Foot Dec. 31, 1997
--------- -------- --------- ----- ------------- ------------- -------- ---- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Existing Communities:
Plantation Trace Atlanta, GA 1990 182 229,202 1,259 $861 $0.68 93.0%
River Oaks Atlanta, GA 1992 216 276,046 1,278 $899 $0.70 95.9%
Bentley Place Atlanta, GA 1993 117 108,328 926 $749 $0.81 96.9%
Crestmark Atlanta, GA 1993 334 360,284 1,079 $802 $0.74 N/A(1)
Rosewood Plantation Atlanta, GA 1994 152 192,352 1,265 $900 $0.71 97.3%
Preston Oaks Atlanta, GA 1995 189 235,532 1,246 $965 $0.77 97.5%
Highland Park Atlanta, GA 1995 188 231,634 1,232 $905 $0.73 95.7%
Ivey Brook Atlanta, GA 1997 146 197,067 1,350 $963 $0.71 N/A(2)
Communities Under Construction:
Second Phase of
Preston Oaks Atlanta, GA 1998 24 23,016 959 N/A N/A N/A
Second Phase of
Plantation Trace Atlanta, GA 1998 50 81,754 1,635 N/A N/A N/A
Bradford Creek Atlanta, GA 1998 180 244,889 1,360 N/A N/A N/A
--- --------- -----
Total/Average 1,778 2,180,104 1,226
===== ========= =====
</TABLE>
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<TABLE>
<CAPTION>
Retail Centers Average
Occupancy
Approximate December 1997 for the 12
Year Rentable Area Average Rental Rates Months Ended
Retail Center Location Completed (Square Feet) Per Square Foot Dec. 31, 1997
------------- -------- --------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Shoppes of
Plantation Atlanta, GA 1992 7,350 $16.61 78.7%
Shoppes of
River Oaks Atlanta, GA 1995 8,348 $16.00 76.3%
------
Total 15,698
======
</TABLE>
(1) The 86-unit second phase of Crestmark completed its lease-up phase in
September 1997, and its 12 month historical occupancy percentage is not
comparable. The physical occupancy rate for the entire Crestmark
Community as of December 31, 1997 was 86.5%.
(2) Ivey Brook completed its lease-up phase in August 1997, and its 12
month historical occupancy percentage is not comparable. Its physical
occupancy rate as of December 31, 1997 was 98.6%.
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Certain annual operating data regarding the Company's stabilized
Communities at December 31, 1997 are summarized in the following table (with the
second phase of Crestmark described separately for this purpose and Windsong
omitted due to its sale in January 1998). Except for those figures noted with an
asterisk, the occupancy rates shown represent the average physical occupancy of
the applicable Community calculated by dividing the total number of vacant days
by the total possible number of vacant days for each year and then subtracting
the resulting number from 100%. The figures noted with asterisks reflect the
applicable data on December 31 of the specified year and are not annualized,
because the applicable Community was under construction and in its initial
lease-up period during at least a portion of that year. During lease-up, units
are leased as they are constructed and made ready for occupancy building by
building, thus annualization of data is not possible during that period.
Throughout this table, "N/A" means "not applicable," i.e., no unit in the
Community was available to be occupied during the relevant year.
<TABLE>
<CAPTION>
Physical Occupancy Rate Average Effective Annual Rental Rates
----------------------- -------------------------------------
1993 1994 1995 1996 1997
Month ---- ---- ---- ---- ----
Completed Per
Initial --- Per Per Per Per Per Per Per Per Per
Community Leaseup 1993 1994 1995 1996 1997 Unit Sq. Ft. Unit Sq. Ft. Unit Sq. Ft. Unit Sq. Ft. Unit Sq. Ft.
- --------- -------- ---- ---- ---- ---- ---- ---- ------- ---- ------ ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Plantation 9/90 98% 98% 98% 99% 93% $750 $0.59 $775 $0.61 $786 $0.62 $821 $0.65 $850 $0.67
Trace
River 2/93 100%* 98% 99% 98% 96% $772* $0.61* $787* $0.62 $820 $0.64 $859 $0.67 $886 $0.69
Oaks
Rosewood 5/94 22% 100%* 99% 99% 97% N/A $0.62* $796* $0.63* $814 $0.64 $858 $0.68 $887 $0.70
Plantation
Preston 8/95 N/A N/A 100%* 99% 97% N/A N/A N/A N/A $885 $0.71* $892 $0.72 $945 $0.76
Oaks
Highland 3/96 N/A N/A 68% 96%* 96% N/A N/A N/A N/A $819* $0.67* $805 $0.65 $887 $0.72
Park
Bentley 9/93 N/A N/A 99% 99% 97% N/A N/A $684 $0.74* $675 $0.73 $709 $0.77 $740 $0.80
Place (1)
Crestmark(2) 4/94 75% 98%* 99% 98% 87% N/A N/A $688 $0.67* $688 $0.67 $736 $0.72 $782 $0.76
Ivey 8/97 N/A N/A N/A 27%* 98%* N/A N/A N/A N/A N/A N/A $925* $0.69* $955 $0.71
Brook(3)
Second
Phase of 9/97 N/A N/A N/A N/A 96%* N/A N/A N/A N/A N/A N/A N/A N/A $845* $0.69*
Crestmark(4)
</TABLE>
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(1) The Company acquired Bentley Place in March 1996 as described elsewhere
in this report.
(2) The Company acquired Crestmark in June 1996 as described elsewhere in
this report.
(3) Ivey Brook completed its lease-up phase in August 1997, and its
occupancy as of December 31, 1997 was 98%.
(4) Phase II of Crestmark completed its lease-up phase in September 1997,
and its occupancy as of December 31, 1997 was 96%.
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As described below, the Communities are located in five submarkets of
the Atlanta metropolitan area. Each heading identifies the Community or
Communities within the specified submarket. Population and employment data
provided for each submarket were in each case obtained from the ARC. Multiple
Communities are located in each of the Duluth, Peachtree Corners and Perimeter
Center/North Springs submarkets, thus those Communities compete not only with
unaffiliated apartment communities but also with each other. See "Summary of
Debt Secured by the Communities," which follows the description of the
individual Communities, for an explanation of the terms of the Company's secured
indebtedness.
DULUTH AREA - PLANTATION TRACE, RIVER OAKS, AND BRADFORD CREEK COMMUNITIES
Duluth. The City of Duluth is located in northwest Gwinnett County,
which from 1985 until 1990 ranked first in the nation in growth among counties
with a population of more than 100,000. Since 1980, Gwinnett's population has
increased 118% to a current level of 362,800. Gwinnett's strong employment base,
transportation networks, excellent public education system and affordable home
prices are factors that contribute to the county's remarkable growth. Home to
more than 247 international firms and over 700 manufacturing and high technology
firms that generate many of its 182,300 jobs, Gwinnett leads all metropolitan
Atlanta counties in percentage employment growth, increasing 181% since 1980.
Duluth has exceeded even Gwinnett County as a whole in percentage of population
growth; its population has increased 223% since 1980. Duluth is located near
I-85 and Gwinnett Place Mall, a 1,100,000 square foot regional mall.
Plantation Trace. Plantation Trace, which was completed in 1990,
consists of 20 two and three story Nantucket-style stone and wood sided
buildings located on a 16.9 acre site on Pleasant Hill Road approximately
one-half mile west of its intersection with Peachtree Industrial Boulevard. In
1990, this 182-unit garden apartment community received the Aurora Award from
the Southeast Builders' Conference for "Best Rental Apartment Community in the
Southeast."
The Plantation Trace Community, with its traditional award-winning
architecture and landscaped grounds, features a large clubhouse with a fitness
center, two lighted tennis courts, sand volleyball court, multi-station
playground, free-form swimming pool, small wading pool, stone paver pool deck
and a covered whirlpool spa. In addition to upscale amenities, Plantation Trace
offers such interior features as nine foot ceilings, crown molding, pickled wood
cabinetry in the kitchen and bath, marble vanity tops, fireplaces, vaulted
ceilings and Palladian windows in select units, designer wallcoverings and full
laundry rooms with washer and dryer connections.
Plantation Trace has a variety of floorplans, including 28 one bedroom
units ranging from 901 to 929 square feet, 48 two bedroom standard and 66 two
bedroom roommate units ranging from 1,228 to 1,298 square feet, and 40 three
bedroom units ranging from 1,471 to 1,494 square feet. The weighted average unit
size is 1,259 square feet. As of December 31, 1997, Plantation Trace was 94%
occupied and rental rates ranged from $690 to $1,010 per month, with a weighted
average monthly rent of $861 per unit and $0.68 per square foot.
Local real estate taxes were $161,000 in 1997.
50-Unit Second Phase of Plantation Trace. A second phase of 50
apartment units ("Phase II") now under construction on 12.33 acres adjacent to
Plantation Trace is expected to be completed in 1998. Phase II will contain 7
one bedroom units of approximately 966 square feet each, 6 two bedroom units of
approximately 1,433 square feet each, 18 two bedroom townhouses of approximately
1,490 square feet each, 12 three bedroom townhouses of approximately 1,948
square feet each, 7 four bedroom townhouses of approximately 2,314 square feet
each, and 33 garages of 200 square feet each. The anticipated monthly rental
rates are $775 for a one bedroom apartment, $950 for a two bedroom apartment,
$975 for a two bedroom townhouse, $1,250 for a three bedroom townhouse, and
$1,350 for a four bedroom townhouse, resulting in a weighted average monthly
rent of $1,063 per unit and $0.65 per square foot.
The architectural style, land planning, landscaping and amenities of
Phase II are expected to be similar to those of the Company's other Communities.
A modern fitness and exercise facility and a second free-form swimming pool will
be added to the existing amenities at Plantation Trace. The fitness facility to
be located on the Phase II property will be approximately 1,088 square feet in
size, with individual aerobics equipment and workout stations similar to the
exercise facilities at the Company's other Communities. Phase II will also
provide the Plantation Trace Community direct access
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to the Chattahoochee River, as well as to jogging trails and nature areas to be
developed around the existing lake and along the river.
The construction of Phase II will be completed pursuant to a cost-plus
10% construction contract with Roberts Construction providing for 5% profit and
5% overhead. The total cost of construction including the fee to Roberts
Construction is estimated to be approximately $4,770,000. The Company
anticipates that there will be approximately $217,000 in net profit to Roberts
Construction on the construction contract.
The land on which Phase II will be constructed is presently
unencumbered. The development and construction of Phase II will be funded from
the Company's working capital and from the proceeds of the $8,400,000 mortgage
loan to be secured by Bradford Creek that the Company expects to close in May
1998.
River Oaks. River Oaks, which was completed in 1992, consists of 22 two
and three story Charleston-style brick and wood sided buildings located on a
31.6 acre site on Pleasant Hill Road adjacent to the Chattahoochee River to the
west and the Plantation Trace Community to the east. The River Oaks Community,
with its traditional architecture and landscaped grounds, features a large
clubhouse with a fitness center, two lighted tennis courts, sand volleyball
court, multi-station playground, free-form swimming pool, stone paver pool deck,
and whirlpool spa. In addition to upscale amenities, River Oaks offers such
interior features as nine foot ceilings, crown molding, garden tubs, pickled
pine cabinetry in the kitchen and bath, marble vanity tops, fireplaces and
vaulted ceilings in select units, designer wallcoverings, and full laundry rooms
with washer and dryer connections.
River Oaks has a variety of floor plans, including 40 one bedroom units
at approximately 907 square feet, 32 two bedroom roommate, 24 two bedroom deluxe
and 48 two bedroom standard units ranging from 1,276 to 1,309 square feet, and
72 three bedroom units with approximately 1,457 square feet. The weighted
average unit size is 1,278 square feet. As of December 31, 1997, the Community
was 95% occupied and rental rates ranged from $720 to $1,030 per month, with a
weighted average monthly rent of $899 per unit and $0.70 per square foot. Local
real estate taxes were $193,000 in 1997.
Bradford Creek. The 180-unit Bradford Creek Community is located on an
approximately 22.5 acre property near the southeast corner of Peachtree
Industrial Boulevard and Howell Ferry Road in Duluth, approximately one mile
southeast of Plantation Trace and River Oaks. Bradford Creek is nearing
completion of construction and will contain 28 one bedroom units of
approximately 1,001 square feet each, 46 two bedroom standard units of
approximately 1,302 square feet each, 47 two bedroom roommate units of
approximately 1,344 square feet each, and 59 three bedroom units of
approximately 1,589 square feet each. Leasing started in January 1998, and the
Company anticipates that Bradford Creek will complete its lease-up phase in
August 1998. Anticipated monthly rental rates range from $765 to $1,040 per
month, resulting in a weighted average monthly rent of $898 per unit and $0.69
per square foot. The Company anticipates that local real estate taxes will be
approximately $173,000 in 1999, the first year the Community will be taxed as a
completed and stabilized property.
The Bradford Creek Community, with its unique mountain lodge
architecture and traditional landscaping, features a large clubhouse with a
fitness center, clubroom, laundry room, two lighted tennis courts, free-form
swimming pool, stone paver pool deck, a 12 acre nature area, and a gated
entrance. In addition to the upscale amenities, Bradford Creek offers such
interior features as nine foot ceilings and a computer room in select units,
crown moldings, garden tubs, white raised-panel cabinetry in the kitchen and
bath, marble vanity tops, breakfast bars, designer wallcoverings, and full
laundry rooms with washer and dryer connections. Each building was constructed
using cobblestone and vinyl siding and offers private patios or balconies along
with gables and varying paint colors.
The total estimated acquisition, development, and construction cost for
the Bradford Creek Community is $13,800,000. The Company acquired the site for
Bradford Creek on March 29, 1996 from Roberts Properties for $1,628,000. The
Company is paying the costs of developing and constructing Bradford Creek out of
its working capital.
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The construction of Bradford Creek will be completed pursuant to a
fixed price construction contract with Roberts Construction in the amount of
$10,529,000 (as amended by approved change orders to date). Assuming that
Bradford Creek is built to the initial contract specifications, any excess
construction costs not approved by the Operating Partnership as a change order
will be borne by Roberts Construction, and if Roberts Construction's costs are
lower than anticipated, its savings will constitute additional profit. If,
during the construction of Bradford Creek, the Operating Partnership upgrades
the contract plans and specifications from those agreed to initially, such
change orders may increase the amount paid to Roberts Construction. The Company
anticipates that there will be approximately $950,000, or approximately 9% of
the contract price, in net profit to Roberts Construction on the construction
contract.
PEACHTREE CORNERS AREA - ROSEWOOD PLANTATION AND IVEY BROOK COMMUNITIES
Peachtree Corners. Located in west Gwinnett County, Peachtree Corners
benefits from the existing and improving transportation networks, employment
resources and consumer conveniences in the area. Over 400 firms are located in
the Peachtree Corners area, occupying more than 4,500,000 square feet of office
and distribution space and providing Gwinnett County with approximately 35% of
its total jobs. Peachtree Corners' most prominent office/institutional
development is Technology Park/Atlanta, which has become the premier location in
Georgia for national and international high tech companies. With over 2,100,000
square feet of space occupied by more than 70 firms, approximately 4,500 people
are employed at Technology Park/Atlanta. Almost equidistant within eight miles
of three regional shopping malls, each containing over 1,000,000 square feet of
retail space, the area is conveniently accessible to major retail activity
centers.
Rosewood Plantation. This Community, which was completed in May 1994,
targets the upper tier of the apartment resident market. The 152-unit Community
is located on Spalding Drive just southwest of Holcomb Bridge Road on a 21 acre
site. Since 1989 each of the elementary, middle and high schools serving the
Community has been designated as the Gwinnett County School of Excellence by the
Gwinnett County Board of Education for at least one year, and the middle school
has been designated as a Georgia School of Excellence by the Georgia Department
of Education and a National Blue Ribbon School of Excellence by the U.S.
Department of Education. Due partly to the highly-regarded public school system
in the area, Rosewood Plantation is an attractive choice for white collar
professionals and families who choose the rental lifestyle. Rosewood Plantation
is composed of 7 two and three story buildings with brick accents and wood
siding.
Rosewood Plantation has 29 one bedroom units with 914 square feet, 45
two bedroom standard units with 1,247 to 1,276 square feet, 43 two bedroom
roommate units with 1,310 square feet, and 35 three bedroom units with 1,510
square feet. The weighted average unit size is 1,265 square feet. As of December
31, 1997, the Community was 95% occupied and rental rates ranged from $740 to
$1,055, resulting in a weighted average monthly rent of $900 per unit and $0.71
per square foot. Local real estate taxes were $117,000 in 1997.
Rosewood Plantation's amenities include a clubhouse offering an
exercise room with weight equipment, and a clubroom with a big screen television
and bar with kitchen facilities. The recreational area includes a free-form
swimming pool with stone paver deck, lighted tennis court, children's
playground, walking trails through the nature area, and a two acre lake.
Each building is patterned after the architecture of Charleston,
featuring columned porches, transom windows, and distinctive gables. The
interior of each apartment home offers high-end finishes such as crown molding,
garden tubs, marble vanity tops, bay windows, and large walk-in closets.
Ivey Brook. The Ivey Brook Community consists of 146 upscale apartment
units comprising approximately 197,067 square feet in a total of 12 buildings
located on an 11.8 acre site at the intersection of Holcomb Bridge Road and
Peachtree Corners Circle in the Peachtree Corners area. Ivey Brook benefits from
its excellent location at a major intersection amidst an established multifamily
market area in close proximity to Gwinnett County's largest employment base.
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Ivey Brook has 13 one bedroom units with approximately 956 square feet,
36 two bedroom standard units with approximately 1,231 square feet, 50 two
bedroom roommate units with approximately 1,321 square feet, and 47 three
bedroom units with approximately 1,546 square feet. The weighted average unit
size is approximately 1,350 square feet. As of December 31, 1997, Ivey Brook was
99% occupied and its rental rates ranged from $765 to $1,155, resulting in a
weighted average monthly rent of $963 per unit and $0.71 per square foot. Local
real estate taxes were $114,000 in 1997.
The buildings are of traditional design with either stacked stone or
brick accents and wood or vinyl siding with the facades varying from building to
building. Exterior features include gables, bay windows, varying paint colors
with white trim, and private patios or balconies. Extensive landscaping includes
mature trees, flowers, and shrubbery. The interior features include crown
molding in the living/dining rooms, designer wallcoverings, separate laundry
rooms, breakfast bars, garden tubs, and private balconies, and the three bedroom
units feature a computer room. Recreational amenities include a swimming pool
and fitness center.
PERIMETER CENTER/NORTH SPRINGS AREA - PRESTON OAKS AND HIGHLAND PARK COMMUNITIES
Perimeter Center/North Springs. The Perimeter Center/North Springs area
offers convenient proximity and access to both urban and suburban employment
bases and retail conveniences. Georgia 400 and I-285 provide direct access
within minutes to major regional malls such as North Point Mall and Perimeter
Center Mall. The Phipps Plaza/Lenox Mall/Buckhead area and downtown Atlanta's
Central Business District are readily accessible via the Georgia 400 extension,
which connects to I-85 South near downtown Atlanta.
Within this corridor is a large base of residential, commercial and
office developments. The south quadrant of the area includes medical facilities
such as Northside Hospital, St. Joseph's Hospital and Scottish Rite Children's
Hospital. Perimeter Center encompasses office developments that exceed
18,500,000 square feet of space, with such Class A facilities as Ravinia,
Northpark Town Center, Concourse and Perimeter Center Office Park. Several
prominent companies such as Holiday Inn, UPS and Hewlett-Packard have located
their worldwide or regional headquarters within the Perimeter Center area.
This area, which includes portions of Fulton and DeKalb Counties, has
an average household income of approximately $73,000, which is considerably
higher than the metropolitan Atlanta average of $44,913. The median value of a
single family home in this area exceeds $200,000.
Preston Oaks. This Community, which was completed in August 1995, is a
two and three story mid-density multifamily residential community consisting of
8 two and three story buildings located on Mt. Vernon Highway in the Perimeter
Center area. The traditional architecture consists of stacked stone and vinyl
siding incorporating details of gabled roofs, Palladian windows, columns, and
bay windows. The Community consists of 36 one bedroom units, 92 two bedroom
units, and 61 three bedroom units. The 189 units range in size from 902 to 1,440
square feet, with a weighted average unit size of 1,246 square feet.
Preston Oaks is conveniently located less than one mile from Perimeter
Mall, a 1,200,000 square foot regional mall, and in close proximity to the
area's numerous office developments. Several stand-alone restaurants and major
retail centers either exist or are being developed near the Community.
The Community is located on a 10.4 acre site and features extensive
landscaping. The amenities are similar to those of the other existing
Communities, with custom swimming pool, lighted tennis court, fitness center
with individual work-out stations, and a large clubhouse. Interior features
include garden tubs, oversized walk-in closets, pickled pine cabinetry in the
kitchen and bath, crown molding, mirrored walls, and chair-railing in the dining
rooms.
As of December 31, 1997, Preston Oaks was 99% occupied and its rental
rates ranged from $750 to $1,120 per month, resulting in a weighted average
monthly rent of $965 per unit and $0.77 per square foot. Local real estate taxes
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were $8,000 in 1997 because the Community was assessed as undeveloped property.
The Company anticipates that local real estate taxes will be approximately
$166,000 in 1998.
24-Unit Second Phase of Preston Oaks. A second phase of 24 apartment
units ("Phase II") now under construction on 1.1 acres next to Preston Oaks is
expected to be completed in 1998. Phase II will contain 24 one bedroom apartment
units with 959 square feet each. The anticipated monthly rental rate is $750.
The architectural style and landscaping of Phase II will be identical to Preston
Oaks.
The construction of Phase II will be completed pursuant to a fixed
price construction contract with a third party construction company in the
amount of $1,300,000. The land on which Phase II will be constructed is
presently unencumbered. The development and construction of Phase II will be
funded from the Company's working capital.
Highland Park. This Community consists of 188 upscale apartment units
in a total of eight buildings on a 10.9 acre site. Located on Dunwoody Place in
the North Springs area of north Fulton County, Highland Park benefits from its
close proximity to Georgia 400, which provides direct access within minutes to
major retail and employment areas to the north such as North Point Mall and
Windward, and to the south such as Perimeter Mall and Perimeter Center.
Highland Park has 42 one bedroom units with 902 square feet, 32 two
bedroom standard units with 1,225 square feet, 62 two bedroom roommate units
with 1,285 square feet, and 52 three bedroom units with 1,440 square feet. The
weighted average unit size is 1,232 square feet.
The buildings are of a traditional design with stacked stone accents
and vinyl siding with the facades varying from building to building. Exterior
features include gables, bay windows, various paint colors with white trim, and
private patios or balconies. Extensive landscaping includes mature trees,
flowers and shrubbery. The interiors feature crown molding in the living/dining
rooms, designer wallcoverings, separate laundry rooms, breakfast bars, garden
tubs and private balconies. Recreational amenities include a swimming pool,
tennis court, and fitness center.
As of December 31, 1997, Highland Park was 98% occupied and its monthly
rental rates ranged from $730 to $1,080 per month, resulting in a weighted
average monthly rent of $905 per unit and $0.73 per square foot. Local real
estate taxes were $18,000 in 1997 because the Community was assessed as
undeveloped property. The Company anticipates that local real estate taxes will
be approximately $166,000 in 1998.
PLEASANTDALE AREA - BENTLEY PLACE COMMUNITY
DeKalb County. As one of Atlanta's core counties at the heart of the 18
county metropolitan statistical area, DeKalb County benefits not only from its
location but also from its mature infrastructure. DeKalb boasts an excellent
transportation network composed of three interstate highways: I-285, I-85 and
I-20. An established network of state and local secondary roads, including the
Stone Mountain Freeway, crosses the county, providing convenient accessibility
to all parts of the metropolitan area.
As metropolitan Atlanta's population recently surpassed 2,800,000,
DeKalb County's population topped 585,400, increasing by more than 102,300 or
21% since 1990. An estimated 25% of the metropolitan Atlanta populace resides in
DeKalb County. The average household income in DeKalb County is $35,721. Home to
over 300 international companies and more than 240 Fortune 500 firms,
DeKalb-based businesses provide approximately 340,000 jobs.
Pleasantdale Area. The area in which Bentley Place is located is
referred to as Pleasantdale, which is a developed area convenient to I-85 and
I-285 in northwest DeKalb County and southeast Gwinnett County. Pleasantdale is
home to major employers such as UPS, Scientific-Atlanta, Kraft Foodservice,
Rockwell International and Westinghouse. The Pleasantdale area also includes the
Norfolk-Southern Industrial District, which contains more than 5,000,000 square
feet of warehouse/distribution space, including Lucent Technology's 1,300,000
square foot cable and fiber-optics manufacturing facility, which employs
approximately 3,500 people.
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Bentley Place. Bentley Place, a 117-unit garden apartment community
that was completed in 1993, consists of 5 three story stacked stone and
wood-sided buildings located on a 4.6 acre site at the intersection of
Pleasantdale Road and Tucker-Norcross Road, approximately 1.7 miles southeast of
the intersection of Pleasantdale Road and I-85. The Company acquired Bentley
Place in March 1996.
The Bentley Place Community, with its traditional award-winning
architecture and landscaped grounds, features a large clubroom with a fitness
center, free-form swimming pool, stone paver pool deck and a whirlpool spa. In
addition to upscale amenities, Bentley Place offers such interior features as
crown molding, pickled wood cabinetry in the kitchen and bath, marble vanity
tops, vaulted and trey ceilings in select units, Palladian windows, designer
wallcoverings, and full laundry room with washer and dryer connections.
Bentley Place has a variety of floor plans, including 41 one bedroom
units of approximately 700 square feet, 40 two bedroom standard units of
approximately 1,016 square feet, and 36 two bedroom roommate units of
approximately 1,083 square feet. The weighted average unit size is 926 square
feet. As of December 31, 1997, Bentley Place was 97% occupied and rental rates
ranged from $630 to $840 per month, with a weighted average monthly rent of $749
per unit and $0.81 per square foot. Local real estate taxes were $90,000 in
1997.
THORNTON ROAD/I-20 AREA - CRESTMARK COMMUNITY
Douglas County. Douglas County, one of the 18 counties in the Atlanta
metropolitan statistical area, is located west of Atlanta and encompasses 202
square miles. The county is surrounded by Fulton, Cobb, Carroll and Paulding
Counties, with the Chattahoochee River as its southeastern border. Its
population was estimated at 85,000 in 1995, an increase of 20% since 1990.
Douglas County's economic base is diversified, having generated approximately
28,000 jobs in 1995. Employment has been growing at an annual rate of nearly 12%
over the last 10 years. Douglas County benefits from its accessibility to
downtown Atlanta to the east via I-20 and to Hartsfield International Airport to
the southeast via Thornton Road/Camp Creek Parkway. Just across the county line
to the east lies the Fulton Industrial District, the Southeast's largest
contiguous industrial park. The Fulton Industrial District consists of
54,400,000 square feet of both manufacturing and warehouse space and stretches
six miles north and south along Fulton Industrial Boulevard. It represents 20%
of Atlanta's total inventory of warehouse/industrial space, and an additional
1,000,000 square feet is under construction. Numerous Fortune 500 companies are
represented in the Fulton Industrial District, employing more than 100,000
people.
Thornton Road/I-20 Area. Thornton Road is the third exit west of I-285
on I-20 and connects I-20 with Hartsfield International Airport to the southeast
and the significant residential base of West Cobb and Paulding counties to the
north and east. Several office and business parks that total more than 2,000,000
square feet of space and house corporations such as BellSouth, Mitsubishi,
Robert Bosch Corporation, TDK Electronics, and Saab-Scania contribute to a large
employment base of approximately 20,000 people within the Thornton Road area.
Restaurant, hospitality and retail conveniences support the existing employment
and residential base in the Thornton Road corridor. The area also benefits from
its close proximity to the Fulton Industrial District as well as the Six Flags
Over Georgia amusement park, both of which are less than three miles away. At
the northwest corner of the Thornton Road/I-20 interchange is the Columbia/HCA
Parkway Medical Center, a 320-bed acute care medical facility that employs
approximately 600 people.
Crestmark. Crestmark is a garden apartment community that was completed
in two phases: a 248-unit first phase in 1993 and an 86-unit second phase in
1997. Crestmark consists of 16 three and four story stacked stone and wood sided
buildings located on a 32.2 acre site on Thornton Road, approximately one-half
mile north of its intersection with I-20 in Douglas County. In 1993, Crestmark
received two Aurora Awards from the Southeast Builders' Conference, one for
"Best Landscape Design in the Southeast" and another for "Best Recreational
Facility in the Southeast."
The Crestmark Community, with its traditional award-winning
architecture and landscaped grounds, features a large 14,000 square foot
clubhouse with a club room, full kitchen, fitness center and aerobics room, a
business center and conference room, two lighted tennis courts, multi-station
playground, walking and jogging trail, free-form swimming
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pool, stone paver pool deck and a whirlpool spa. In addition to the upscale
amenities, Crestmark offers such interior features as nine foot ceilings, crown
and chair-rail molding, pickled wood cabinetry in the kitchen and baths, marble
vanity tops, fireplaces, vaulted and trey ceilings, Palladian and bay windows in
select units, designer wallcoverings and full laundry rooms with washer and
dryer connections. The second phase added a second free-form swimming pool, 17
garages and 24 storage units to Crestmark's amenities.
Crestmark has a variety of floorplans including 29 one bedroom standard
units with 704 square feet, 50 one bedroom deluxe units with 816 square feet, 19
one bedroom units of 901 square feet in the second phase, 33 two bedroom
standard units with 1,005 square feet, 86 two bedroom deluxe units with 1,110
square feet, 21 two bedroom standard units of 1,223 square feet in the second
phase, 22 two bedroom roommate units of 1,285 square feet in the second phase,
50 three bedroom units with 1,295 square feet and 24 three bedroom units of
1,437 square feet in the second phase. The weighted average unit size is 1,079
square feet. As of December 31, 1997, the Community was 87% occupied and rental
rates ranged from $610 to $1,000 per month, with a weighted average monthly rent
of $802 per unit and $0.74 per square foot. Local real estate taxes were
$188,000 in 1997.
The 8.8 acre tract of undeveloped land for the second phase of
Crestmark was encumbered by the following secured loans that the Company repaid
in full shortly after the acquisition of Crestmark in 1996: a first priority
secured loan owed to NationsBank, N.A. (South) in the amount of $324,778; and a
second priority secured loan owed to Mr. Roberts in the amount of $1,410,092.
The Company also repaid, shortly after the closing, $121,423 owed to Roberts
Construction for change orders from the original construction and $28,077 owed
to another company affiliated with Mr. Roberts for management start-up costs.
Construction of the second phase of Crestmark was completed pursuant to
a fixed price construction contract with Roberts Construction in the amount of
$4,816,764, as amended to include charge orders approved by the Company. Roberts
Construction received approximately $356,000, or approximately 8% of the
contract price, in net profit on the construction contract. The Company used its
working capital to fund the development and construction of the second phase.
The table on the following page summarizes the amenities of each of the
Communities.
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Summary of Amenities of the Communities
<TABLE>
<CAPTION>
Club-
Patio, Washer House
Porch & Dryer Garden Fire- Vaulted Swimming Fitness
Community Balcony Hook-ups Tubs places* Ceilings* Pool Center
--------- ------- -------- ---- ------ --------- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Existing Communities:
Plantation Yes Yes No Yes Yes Yes Yes
Trace
River Oaks Yes Yes Yes Yes Yes Yes Yes
Rosewood Yes Yes Yes No No Yes Yes
Plantation
Preston Oaks Yes Yes Yes No Yes Yes Yes
Highland Yes Yes Yes No Yes Yes Yes
Park
Bentley Place Yes Yes Yes No Yes Yes Yes
Crestmark Yes Yes Yes Yes Yes Yes Yes
Ivey Brook Yes Yes Yes No Yes Yes Yes
Communities Under Construction:
Second Phase Yes Yes Yes No Yes Yes Yes(1)
of Plantation
Trace
Bradford Creek Yes Yes Yes No Yes Yes Yes
- -------------------
<CAPTION>
Sand
Whirl- Car Tennis Volley- Play- Laundry
Community pool Wash Court(s) ball ground Room Other
--------- ---- ---- -------- ---- ------ ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Existing Communities:
Plantation Yes Yes Yes-2 Yes Yes Yes lake
Trace
River Oaks Yes Yes Yes-2 Yes Yes Yes riverfront,
nature preserve
Rosewood No Yes Yes-1 No Yes Yes Lake,
Plantation nature preserve
Preston Oaks No Yes Yes-1 No No Yes
Highland No Yes Yes-1 No Yes Yes
Park
Bentley Place Yes No No No No Yes
Crestmark Yes Yes Yes-2 No Yes Yes nature preserve,
jogging trail
Ivey Brook No Yes No No No Yes
Communities Under Construction:
Second Phase No No No No No No riverfront,
of Plantation lake,
Trace nature preserve
Bradford Creek No Yes Yes-2 No Yes Yes nature preserve
</TABLE>
- -------------------
* In select units
(1) Activity/fitness center only.
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SUMMARY OF DEBT SECURED BY THE COMMUNITIES
Certain information regarding the Company's indebtedness secured by the
Communities is as follows (excluding the Windsong Community because the property
was sold in January 1998 and the mortgage debt repaid):
<TABLE>
<CAPTION>
Monthly
Principal Principal Fixed Principal
Balance at Maturity Balance at Interest Amortization and Interest
Community Dec. 31, 1997 Date Maturity Rate Schedule Payment
--------- ------------- ---- -------- ---- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Plantation Trace $7,775,141 09-15-00 $7,481,501(1) 7.75% 28-year $59,860
River Oaks 9,150,816 11-15-03 8,513,092(2) 7.15 30-year 62,475
Rosewood Plantation 6,356,757 06-01-01 6,042,040(3) 7.38 28-year 46,849
Preston Oaks 8,518,869 10-15-02 8,024,627(2) 7.21 30-year 59,188
Highland Park 8,029,790 02-15-03 7,544,223(2) 7.30 30-year 56,066
Ivey Brook 6,367,420 02-15-07 5,570,481(2) 7.14 30-year 43,318
Bentley Place 4,044,875 08-15-06 3,554,094(2) 7.10 30-year 27,553
Crestmark - Phase I 9,652,145 05-01-01 9,195,508(4) 7.50 28-year 72,000
Crestmark - Phase II $3,985,413 05-01-01 $3,878,801(2) 7.65% 30-year $28,381
</TABLE>
- ------------------
(1) The loan secured by the Plantation Trace Community may be prepaid upon
payment of a premium equal to the greater of (a) 1% multiplied by a fraction
having as its numerator the number of months to maturity and its denominator the
number of months in the full term of the loan, or (b) the present value of the
loan less the amount of principal and accrued interest being repaid.
(2) Each of the loans secured by the River Oaks, Preston Oaks, Highland
Park, Bentley Place and Ivey Brook Communities and Phase II of the Crestmark
Community may be prepaid in full upon payment of a premium equal to the greater
of (a) 1% of the outstanding principal balance of the loan, or (b) the sum of
the present value of the scheduled monthly payments to the maturity date and the
present value of the balloon payment due on the maturity date, less the
outstanding principal balance of the loan on the date of prepayment. Each such
loan may be prepaid in full during the last 90 days prior to its maturity date
without any prepayment premium.
(3) The loan secured by the Rosewood Plantation Community may be prepaid
upon the payment of a premium of 4% of the amount prepaid in the loan year June
1, 1997 through May 31, 1998; such prepayment premium will be reduced by 1% each
loan year until March 2, 2001, after which date no prepayment premium will be
due.
(4) The loan secured by the first phase of the Crestmark Community may be
prepaid upon the payment of a premium of 4% of the amount prepaid in the loan
year May 1, 1997 through April 30, 1998; such prepayment premium will be reduced
by 1% each loan year until January 31, 2001, after which date no prepayment
premium will be due.
POSSIBLE ADDITIONAL COMMUNITIES TO BE DEVELOPED
From time to time Roberts Properties plans the development of other
apartment communities to be located on property owned by Roberts Properties or
other affiliates of Mr. Roberts, or on property that one of such entities is
interested in acquiring. Mr. Roberts may elect to raise the required equity for
any such community by syndicating a limited partnership. Alternatively, the
Company may seek to raise the equity required to purchase and develop the
community by selling Shares. If Mr. Roberts elects to raise equity through a
limited partnership, Mr. Roberts may seek to cause such partnership to be merged
into the Operating Partnership at a later date. Such a transaction would require
the consent of a majority in interest of the limited partners of such
partnership and of a majority of the disinterested members of the Company's
Board of Directors, and no assurances can be given regarding whether Mr. Roberts
will ultimately
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<PAGE> 14
determine to seek a merger in that manner, or whether such a merger would in
fact be approved by the requisite majority in interest of limited partners in
such partnership and by a majority of the disinterested members of the Board.
As described above in "Item 1, Description of Business - Growth
Strategies - Development Strategy," three other multifamily apartment
communities in north metropolitan Atlanta that are anticipated to total 875
apartment homes are in the development stage. The properties on which those
communities are to be constructed are currently owned by Roberts Properties or
an entity formed by Mr. Roberts or his affiliates, and the Company has not yet
purchased those properties. See, however, "- Recent Developments" below.
COMPETITION
All of the Communities are located in developed areas, and numerous
other apartment projects are located within the market area of each Community.
The number of competitive apartment communities in the area could have a
material adverse effect on the Company's ability to lease its apartments at the
rental rates anticipated, and no assurances can be given regarding the
development of additional competing multifamily communities in the future. The
remainder of this section summarizes the competition for each of the
Communities. The following information reflects the study by Roberts Properties
of apartment communities in each submarket that are believed by the Company to
be closely competitive with the Community or Communities within such submarket.
This section includes certain summary information obtained from various sources
- - including developers and real estate brokers, as well as on-site visits -
regarding those apartment communities. Although Roberts Properties has attempted
to verify such information and believes that it is substantially accurate on the
whole, information regarding a particular community may be incorrect due to the
sources relied upon or erroneous information supplied by competitors.
Plantation Trace, River Oaks, and Bradford Creek. The Duluth market
area, which the Company considers to be a two mile radius from these
Communities, currently consists of 17 multifamily communities (including River
Oaks and Plantation Trace) containing approximately 5,100 existing apartment
units. (Although the Bridgewater apartment community - which was previously
developed and sold by an affiliate of Mr. Roberts - is located more than two
miles from Plantation Trace, it is also included in the Duluth market area
described herein because it offers units with attached garages and its
architecture and amenities are similar to Plantation Trace and its Phase II.) Of
the 17 existing communities in the area, six were built between 1983 and 1988.
The remaining eleven communities - including Plantation Trace and River Oaks -
have been built since 1988. Due to the quality of construction, age of the
communities, type of amenities, resident profiles and rental rates, the Company
believes that only the other nine communities built since 1988 - Wesley
Plantation (both Highlands and Meadows), Tree Summit, Bridgewater, Bristol Park,
Aylesbury Farm, AMLI at Pleasant Hill, Summit on the River, and Jefferson on the
River - are in direct competition with Plantation Trace and River Oaks and will
be in direct competition with Bradford Creek.
In addition, two multifamily communities totaling approximately 650
units are either planned or currently under construction in the Duluth market
area. The Company believes that as these 650 new units are completed, they will
compete directly with Plantation Trace, River Oaks, and Bradford Creek, which
could adversely affect the operating results for those Communities.
Rosewood Plantation and Ivey Brook. The Peachtree Corners multifamily
market area, which is a three mile radius from these two Communities, currently
consists of 23 multifamily communities (including Rosewood Plantation and Ivey
Brook) totaling approximately 6,600 apartment units. Of the 23 existing
communities in the market area, only four - Rosewood Plantation, Wynfield Trace,
Ivey Brook, and AMLI at River Park - have been built since 1988. The remaining
communities range from approximately eight to 23 years old. The Company believes
that Rosewood Plantation and Ivey Brook draw residents from all of the other 21
communities located in the market area but that only six of the 21 communities
compete closely with Rosewood Plantation and Ivey Brook.
Preston Oaks. The Company believes that the north central Perimeter
multifamily market area is a two mile radius around this Community. It is
generally bounded by Roswell Road to the west, Ashford Dunwoody Road to the
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<PAGE> 15
east, Spalding Drive to the north and Glenridge Drive to the south, and it
currently consists of 24 multifamily communities (excluding Preston Oaks)
totaling approximately 6,500 apartment units. Of the 24 existing communities in
the market area, only four were built prior to 1983, totaling 756 apartment
units. The remaining 20 communities range from approximately two to six years of
age. The Company believes that Preston Oaks competes with all 24 existing
communities. In addition to the approximately 6,500 existing apartment units, a
200-unit apartment community that will compete with Preston Oaks is now under
development.
Highland Park. The North Springs multifamily market area is an
approximately two mile radius around this Community. It is generally bounded by
the Chattahoochee River to the north and west, Georgia 400 to the east and
Dalrymple Road to the south, and currently consists of 34 communities (excluding
Highland Park) totaling 10,550 apartment units. Of the 34 existing communities
in the market area, only five have been built since 1989. The remaining
communities range in age from six years to over 20 years. The Company believes
that Highland Park will draw residents from all of the 34 communities located in
the market area, but that only 11 of the 34 communities will compete closely
with Highland Park.
Bentley Place. The Pleasantdale multifamily market area, which is a two
mile radius around Bentley Place, currently consists of 27 multifamily
communities (including Bentley Place) totaling 7,097 apartment units. Of the 27
existing communities in the market area, only four (Bentley Place, Arbor Mill,
Shadow Lake, and Gwinnett Station) have been built since 1989, totaling 799
apartment units. The remaining properties range from approximately five to 21
years old. The Company believes that Bentley Place draws residents from all of
the other 26 properties located in the market area. However, based upon a
comparison of factors such as quality of features, architecture, number and type
of amenities, construction quality and age of community, the Company believes
that only eight of the 26 communities compete closely with Bentley Place. Each
of these eight properties was constructed between 1986 and 1995.
Crestmark. The Thornton Road multifamily market area is an
approximately two mile radius around the Crestmark Community. It is generally
bounded by I-20 to the south, Blairs Bridge Road to the east, and Georgia
Highway 78 to the north and west, and it currently consists of six communities
(including Crestmark) totaling 2,032 apartment units. Of the six existing
communities in the market area, only three have been built since 1990. The
remaining communities range in age from seven years to 10 years. The Company
believes that Crestmark will draw residents from all of the five other
communities located in the market area, but due to their amenities, quality of
construction and resident profile, only three of the five other communities will
compete closely with Crestmark.
RECENT DEVELOPMENTS
The following sections contain "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These statements relate
to future economic performance, plans and objectives of management for future
operations and projections of revenues and other financial items that are based
on the beliefs of the Company's management, as well as assumptions made by, and
information currently available to, the Company's management. Acquisitions that
are pursued by the Company may not be consummated for a variety of reasons,
including but not limited to the failure of either party to meet the required
closing conditions. See also "Item 12, Certain Relationships and Related
Transactions - Recent Developments," for an explanation of certain aspects of
the following recent developments that involve conflicts of interest.
Pending Acquisition - Charlotte. On April 17, 1998, the Company
entered into an agreement to acquire approximately 25 acres of undeveloped land
in the Ballantyne area of south Charlotte, North Carolina for $4,000,000 from a
local Charlotte investment group. The Company intends to construct a 380-unit
multifamily apartment community on the property. The Company anticipates that it
will pay $2,100,000 to Roberts Properties, an affiliate, for (a) finding the
property, negotiating the acquisition price and conducting due diligence; and
(b) managing the creation and development of the community. The Company is in
the process of determining the total cost to develop and construct the
community. This transaction represents the Company's first expansion outside of
Georgia and is a significant step in its diversification
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<PAGE> 16
strategy. The closing of the Charlotte transaction, which is anticipated to
occur in June 1998, will be subject to customary closing conditions. There can
be no assurance that the Charlotte transaction will close as contemplated, that
the required conditions to closing will be met, or that the agreement will not
be amended or terminated.
Pending Acquisitions - Atlanta. On April 21, 1998, the Company's Board
of Directors approved the acquisition of two tracts of land located in north
Atlanta. The first tract, containing approximately 49.1 acres, is located in
north Fulton County along Abbotts Bridge Road. The Company intends to construct
a 405-unit multifamily apartment community on the property. The Operating
Partnership anticipates that it will acquire the property from Robert Properties
for $5,000,000. The Operating Partnership anticipates that it will pay Roberts
Properties a total of $2,275,000 for (a) finding and acquiring the property and
conducting due diligence; and (b) managing the creation and development of the
community. The Company is in the process of determining the total cost to
develop and construct the community, and the closing of the acquisition is
anticipated to occur in July 1998.
The second tract of approximately 35.5 acres is located in Gwinnett
County on Old Norcross Road. The Operating Partnership will acquire the property
from Roberts Properties Old Norcross, Ltd. (a partnership of which Mr. Roberts
is the general partner) for $2,385,000. The Company intends to construct a
249-unit multifamily apartment community on the property. The Company
anticipates that it will pay $1,364,000 to Roberts Properties for (a)
negotiating the transaction and conducting due diligence; and (b) managing the
creation and development of the community. The Company is in the process of
determining the total cost to develop and construct the community, and the
closing of the acquisition is anticipated to occur in July 1998.
The closing of these transactions will be subject to customary closing
conditions. There can be no assurances that they will close as contemplated,
that the required conditions to closing will be met, or that the agreements will
not be amended or terminated.
OTHER REAL ESTATE ASSETS
In addition to the Communities, the Operating Partnership owns two
retail centers totaling 15,698 square feet. The Shoppes of Plantation is a 7,350
square foot retail center located on Pleasant Hill Road in front of Plantation
Trace on a .85 acre parcel. The Shoppes of River Oaks is a 8,348 square foot,
one story office/retail building located on a .86 acre parcel on Pleasant Hill
Road in front of River Oaks. The retail centers together compose less than 2% of
the Company's assets and generated less than 2% of its gross revenues for 1997.
ENVIRONMENTAL AND OTHER REGULATORY MATTERS
Under various federal, state and local laws and regulations, an owner
of real estate is liable for the costs of removal or remediation of certain
hazardous or toxic substances on such property. Such laws often impose such
liability without regard to whether the owner knew of, or was responsible for,
the presence of such hazardous or toxic substances. The costs of remediation or
removal of such substances may be substantial, and the presence of such
substances, or the failure to promptly remediate such substances, may adversely
affect the owner's ability to sell such real estate or to borrow using such real
estate as collateral. In connection with its ownership and operation of the
Communities and its other real estate assets, the Operating Partnership may be
potentially liable for (a) such remediation and removal costs, and (b) damages
to persons or property arising from the existence or maintenance of such
hazardous or toxic substances.
All of the Communities and the other real estate assets have been
subject to Phase I or similar environmental assessments that are intended to
discover information regarding, and to make a preliminary evaluation of the
environmental condition of, the surveyed properties and surrounding properties.
The Phase I 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,
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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. Although management of the Company believes that the
Communities are substantially in compliance with present requirements of the
ADA, final regulations under the ADA have not yet been promulgated and the
Company may incur additional costs of complying with the ADA. A number of
additional federal, state and local laws exist which also may require
modifications to the Communities, or restrict certain further renovations to
them, with respect to access by disabled persons. For example, the Fair Housing
Amendments Act of 1988 (the "FHAA") requires apartment communities first
occupied after March 13, 1990 to be accessible to the handicapped. Noncompliance
with the FHAA could result in the imposition of fines or an award of damages to
private litigants. The Company believes that the Communities that are subject to
the FHAA are in compliance with such law.
Additional legislation may impose further burdens or restrictions on
owners with respect to access by disabled persons. The ultimate amount of the
cost of compliance with the ADA or such legislation is not currently
ascertainable, and, while such costs are not expected to have a material adverse
effect on the Company, such costs could be substantial. Limitations or
restrictions on the completion of certain renovations may limit application of
the Company's investment strategy in certain instances or reduce overall returns
on the Company's investments.
INSURANCE
The Company carries comprehensive liability, fire, extended coverage
and rental loss insurance with respect to all of its existing Communities, with
policy specifications, insured limits and deductibles customarily carried for
similar properties. The Company carries similar insurance with respect to its
other properties, but with such exceptions as are appropriate given the
undeveloped nature of certain of these properties. In the opinion of management,
the Communities and the Company's other properties are adequately covered by
insurance. There are, however, certain types of losses (such as losses arising
from acts of war) that are not generally insured because they are either
uninsurable or not economically insurable. Should an uninsured loss or a loss in
excess of insured limits occur, the Company could lose its capital invested in a
property, as well as the anticipated future revenues from such property, and
would continue to be obligated on any mortgage indebtedness or other obligations
related to the property. Any such loss would adversely affect the Company.
17
<PAGE> 18
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES
The following is a discussion of investment policies, financing
policies, conflict of interest policies and policies with respect to certain
other activities of the Company and the Operating Partnership. The policies with
respect to these activities have been determined by the Company's Board of
Directors and may be amended or revised from time to time at the discretion of
the Board without a vote of the shareholders of the Company or any vote of the
partners of the Operating Partnership, except that (i) the Company cannot change
its policy of holding its assets and conducting its business exclusively through
the Operating Partnership without amending the Operating Partnership Agreement
(which will generally require the consent of the holders of a majority in
interest of the limited partners in the Operating Partnership including, if
applicable, the Company), and (ii) changes in certain policies with respect to
conflicts of interest must be approved by a majority of the independent
directors and otherwise be consistent with legal requirements.
INVESTMENT POLICIES
Investments in Real Estate or Interests in Real Estate. The Company
conducts all of its investment activities through the Operating Partnership and
will do so for so long as the Operating Partnership exists. (The Agreement of
Limited Partnership of the Operating Partnership provides that it is not
required to be dissolved until 2093.) The Company's investment objectives are to
achieve stable cash flow available for distributions and, over time, to increase
cash flow and portfolio value by (i) continuing to develop multifamily apartment
communities for long-term ownership; (ii) acquiring additional multifamily
apartment communities that will produce additional cash flow; and (iii) to a
significantly lesser degree, acquiring and/or developing retail centers and
other income-producing real estate. The Company's policy is to acquire or
develop assets where the Company believes that favorable investment
opportunities exist based on market conditions at the time of the investment.
The Company expects to pursue its investment objectives primarily
through the direct ownership of properties by the Operating Partnership,
although, as discussed below, the Company may also pursue indirect property
ownership opportunities. The Company intends to acquire or develop multifamily
apartment communities primarily in the Atlanta metropolitan area and the
Southeast. Future development or investment activities will not be limited by
the governing documents of the Company and the Operating Partnership to any
geographic area, product type or specified percentage of the Company's assets.
Possible Acquisition of Communities Developed by Mr. Roberts or His
Affiliates. Mr. Roberts and Roberts Properties have been engaged in the
development of residential and commercial real estate since the early 1970s, and
Mr. Roberts expects that he and Roberts Properties will continue to engage in
real estate development. Provided that any transaction or agreement must comply
with the policies discussed under "Conflict of Interest Policies," the Company
and/or the Operating Partnership may engage in transactions of various types
with Mr. Roberts, Roberts Properties and/or other affiliates of Mr. Roberts in
connection with the development or acquisition of real estate. Such transactions
may include: hiring Mr. Roberts or Roberts Properties to develop real estate
under a fee arrangement; acquiring undeveloped property from Mr. Roberts or his
affiliates for future development; or acquiring from Mr. Roberts or his
affiliates partially or completely constructed properties, whether in their
lease-up phase or already leased-up. See "Item 1, Description of Business -
Growth Strategies - Development Strategy" and "- Recent Developments" in this
Item 2.
Securities of or Interest in Persons Primarily Engaged in Real Estate
Activities and Other Issuers. Subject to the percentage of ownership limitations
and gross income tests necessary for REIT qualification under the Internal
Revenue Code, the Company and the Operating Partnership also may invest in
securities of other entities engaged in real estate activities or invest in
securities of other issuers, including investments by the Company and the
Operating Partnership for the purpose of exercising control over such entities.
No such investments will be made, however, unless the Board of Directors
determines that the proposed investment would not cause the Company or the
Operating Partnership to be an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. The Company or the Operating
Partnership may acquire all or substantially all of the securities or assets of
other REITs or similar entities where such investments would be consistent with
the Company's investment policies. The Company does not currently
18
<PAGE> 19
intend to invest in the securities of other issuers except in connection with
acquisitions of indirect interests in properties, such as the acquisition of
limited partnership interests in a single asset limited partnership.
No Investments in Mortgages. The Company does not own any mortgages and
does not currently intend to invest in mortgages or to engage in originating,
servicing, or warehousing mortgages.
FINANCING POLICIES
The organizational documents of the Company and the Operating
Partnership impose no limits on the amount of indebtedness they may incur. The
Company has an informal policy that the Company and the Operating Partnership
will not incur indebtedness in excess of 75% of what the Board of Directors
believes is the fair market value of the Operating Partnership's assets at any
given time. The Company may, however, from time to time re-evaluate its
borrowing policies in light of then current economic conditions, relative costs
of debt and equity capital, market value of the Operating Partnership's real
estate assets, growth and acquisition opportunities and other factors.
Modification of such policy may adversely affect the interests of the
shareholders of the Company.
To the extent that the Board of Directors determines to seek additional
capital, the Company may raise such capital through additional equity offerings,
debt financing or retention of cash flow (subject to provisions in the Internal
Revenue Code requiring the distribution by a REIT of a certain percentage of
taxable income and taking into account taxes that would be imposed on
undistributed taxable income), or a combination of these methods. As long as the
Operating Partnership is in existence, the net proceeds of all equity capital
raised by the Company will be contributed to the Operating Partnership in
exchange for Units or other interests in the Operating Partnership.
The Company has not established any limit on the number or amount of
mortgages that may be placed on any single property or on the Operating
Partnership's portfolio as a whole.
CONFLICT OF INTEREST POLICIES
The Board of Directors is subject to certain provisions of Georgia law
that are designed to eliminate or minimize certain potential conflicts of
interest. The Company cannot assure, however, that these policies will always be
successful in eliminating the influence of such conflicts. If these policies are
not successful, the Board could make decisions that might fail to reflect fully
the interests of all shareholders.
Pursuant to Georgia law, each director will be subject to restrictions
on misappropriation of corporate opportunities to himself or his affiliates
learned of solely as a result of his service as a member of the Board of
Directors. In addition, under Georgia law, a transaction effected by the Company
or any entity controlled by the Company (including the Operating Partnership) in
which a director or certain related persons and entities of the director has a
conflicting interest of such financial significance that it would reasonably be
expected to exert an influence on the director's judgment may not be enjoined,
set aside or give rise to damages on the grounds of such interest if (a) the
transaction is approved, after disclosure of the interest, by the affirmative
vote of a majority of the disinterested directors, or by the affirmative vote of
a majority of the votes cast by disinterested shareholders, or (b) the
transaction is established to have been fair to the Company. The Board of
Directors has adopted a policy that all such conflicting interest transactions
must be authorized by a majority of the disinterested directors, but only if
there are at least two directors who are disinterested with respect to the
matter at issue.
CERTAIN POLICIES WITH RESPECT TO OTHER ACTIVITIES
The Company and the Operating Partnership have authority to offer their
securities and to repurchase and otherwise reacquire their securities, and they
may engage in such activities in the future. The Company has adopted a policy
that it will issue Shares to holders of Units in the Operating Partnership upon
the exercise of the Unitholders' rights of redemption (except in instances in
which it is required to acquire Units for cash to comply with federal and state
securities laws). In the future, the Company and the Operating Partnership may
make loans to joint ventures in which
19
<PAGE> 20
they participate in order to meet working capital needs. The Company and the
Operating Partnership have not engaged in trading, underwriting, agency
distribution or sale of securities of other issuers and do not intend to do so.
The Company and the Operating Partnership intend to make investments in a manner
such that they will not be treated as an investment company under the Investment
Company Act of 1940, as amended.
At all times, the Company intends to make investments in a manner so as
to be consistent with the requirements of the Internal Revenue Code for the
Company to qualify as a REIT unless, because of changing circumstances or
changes in the Internal Revenue Code (or in Treasury Regulations), the Board of
Directors decides that it is no longer in the best interests of the Company to
qualify as a REIT.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16 (A) OF THE EXCHANGE ACT.
The registrant hereby amends its annual report on Form 10-KSB by
deleting the text under Item 9 and replacing it with the following:
Charles S. Roberts, age 51, is Chairman of the Board, Chief Executive
Officer and President of the Company. Mr. Roberts owns, directly or indirectly,
all of the outstanding stock of, and is the president and sole director of,
Roberts Properties, Inc. and Roberts Properties Construction, Inc. Mr. Roberts
also owned substantially all of the outstanding interests in Roberts Properties
Management, L.L.C. until its acquisition by Roberts Properties Residential, L.P.
on April 1, 1997, as explained below.
In October 1970 Mr. Roberts established Roberts Properties, Inc. to
develop, construct and manage real estate. Beginning in 1985, Mr. Roberts and
his affiliates began to focus on developing upscale multifamily residential
communities and have won numerous local, regional and national awards for the
development of these communities. Mr. Roberts is a frequent national speaker on
the topic of developing upscale multifamily housing and has been recognized as a
leader in this industry. In April 1995, Roberts Properties Management, Inc. was
recognized as the Property Management Company of the Year by the National
Association of Home Builders' National Council of the Multifamily Industry.
Through March 31, 1998, entities affiliated with Mr. Roberts sponsored 54
different programs, raising approximately $89,000,000 in equity and having an
aggregate total capitalization of approximately $230,000,000. These programs
consisted of multifamily residential communities with 2,918 units; approximately
277,307 square feet of other income producing real estate, principally shopping
centers and office buildings; and nine parcels of undeveloped land.
James M. Goodrich, age 57, a Director of the Company, is a consulting
engineer and private investor. In 1975 Dr. Goodrich founded Energy Management
Associates, which provides operations and financial planning software and
related consulting services to the electric and gas utility industries. Dr.
Goodrich was Executive Vice President of Energy Management Associates from 1975
until October 1993 and was a member of its board of directors until 1992, when
it was sold to Electronic Data Systems Corporation. Prior to his experience with
Energy Management Associates, Dr. Goodrich served in the United States Navy for
five years as an officer on the staff of Admiral Hyman Rickover; this position
involved technical support of the design and development of nuclear power plants
for the Navy. Dr. Goodrich holds a Ph.D. in Nuclear Engineering, a master's
degree in Engineering-Economic Systems, and a bachelor of arts degree, all from
Stanford University. He also holds a master's degree in Engineering Science from
George Washington University. Dr. Goodrich has appeared as an expert witness
before numerous state public utility commissions, the Federal Energy Regulatory
Commission, federal courts and arbitration panels.
Dennis H. James, age 51, a Director of the Company, is President and
Director of Shoptaw-James, Inc., one of the largest privately owned commercial
mortgage banking firms in the Southeast. Mr. James has over 25 years' experience
in the mortgage banking industry and has been involved in the production of
income property straight debt loans, participating mortgages, debt/equity joint
ventures and sales. As President of Shoptaw-James, Inc., he is responsible for
the overall production of the company and its investor relationships, while
sharing in its extended planning and management. He is a director of Main
America Capital, which specializes in financing small income property mortgages;
20
<PAGE> 21
he is a trustee on the Alexander Tharpe Board, the fund-raising organization of
the Georgia Tech Athletic Association that funds all scholarships for student
athletes at Georgia Tech; and he serves on the Allstate Life Insurance Company
Correspondent Advisory Council. Mr. James has a bachelor's degree in Industrial
Management from Georgia Tech, and his professional education includes attendance
at numerous real estate institutes.
Wm. Jarell Jones, age 49, a Director of the Company, is an attorney and
has practiced law with the firm of Wm. Jarell Jones, P.C., in Statesboro,
Georgia since November 1993. Mr. Jones is also a Certified Public Accountant,
and in 1976 he formed the public accounting firm of Jones & Kolb in Atlanta,
Georgia and served as Senior Tax Partner and Co-Managing Partner until December
1988. In January 1989, Mr. Jones became a general partner of Simpson Seacoast,
which along with its affiliates managed and developed real estate and operated a
real estate brokerage and an NASD-member securities firm. In 1990 Mr. Jones
moved to Statesboro and practiced law with the firm of Edenfield, Stone & Cox
until November 1992 and then with the firm of Jones & Rutledge from November
1992 until November 1993. Mr. Jones is the CEO of JQUAD, Inc., a family owned
holding company of timber, farming, and development interests. Mr. Jones is a
director and former Chairman of the Downtown Statesboro Development Authority.
Weldon R. Humphries, age 60, a Director of the Company, is a private
investor. Mr. Humphries recently retired from a distinguished twenty-year career
with Manor Care, Inc. (NYSE: MNR), where he was employed from January 1978 to
November 1997 as Senior Vice President responsible for asset management,
acquisitions and development, and with Choice Hotels International, Inc. (NYSE:
CHH), where he served as Senior Vice-President responsible for asset management,
acquisitions and development from November 1997 to January 1998. Mr. Humphries
began his career as a senior mortgage analyst with Connecticut General Life
Insurance Company and later worked for Arvida Corporation, where he was
responsible for all real estate financing, development and marketing.
Ben A. Spalding, age 63, a Director of the Company, is the sole
shareholder of Spalding & Company, an NASD member broker-dealer that has served
since its founding by Mr. Spalding in 1980 as the exclusive broker-dealer for
limited partnerships sponsored by Mr. Roberts. Mr. Spalding served as President
of Spalding & Company from 1980 until 1994; he is presently a registered
associate of Spalding & Company. For the 20 year period through 1983, Mr.
Spalding served in several positions with Johnson & Johnson in the health care
field, most recently as Healthcare Division Sales Manager for several states in
the Southeast. Mr. Spalding has a bachelor's degree in Business Administration
from Bellarmine College. He has served in numerous positions with civic and
charitable organizations, including serving as a National Trustee of the Cystic
Fibrosis Foundation and a member of the Board of Trustees of the Metro-Atlanta
Crime Commission. He received the Cystic Fibrosis Dick Goldschmidt Award in 1986
for his efforts on behalf of the Cystic Fibrosis Foundation.
George W. Wray, Jr., age 61, a Director of the Company, is a private
investor and Senior Partner of the Wray Partnership, a family investment group.
He was employed with International Silver Company from the early 1960s to July
1993, most recently as a Vice President engaged in sales management for the
eastern United States. From the July 1993 acquisition of International Silver
Company by World Crisa Corporation (a division of Vitro S.A.) through September
1997, Mr. Wray was an independent sales agent for the successor organization .
Mr. Wray also served as a Vice President of Spalding & Company, an NASD
registered broker-dealer, from 1991 to 1997 and was a registered associate of
Spalding & Company from 1983 to 1997. Mr. Wray holds a bachelor's degree in
Industrial Relations from the University of North Carolina at Chapel Hill and
serves as an elder of the Peachtree Presbyterian Church in Atlanta.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own beneficially more than 10% of the
Company's outstanding Common Stock to file with the SEC initial reports of
ownership and reports of changes in their ownership of the Company's Common
Stock. Directors, executive officers and greater than 10% shareholders are
required by SEC regulations to furnish the Company with copies of the forms they
file. To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company, during the fiscal year ended December 31,
1997, its directors, executive officers and greater than 10% shareholders
complied with all applicable Section 16(a) filing requirements.
21
<PAGE> 22
ITEM 10. EXECUTIVE COMPENSATION.
The registrant hereby amends its annual report on Form 10-KSB by
deleting the text under Item 10 and replacing it with the following:
COMPENSATION OF EXECUTIVE OFFICERS
The executive officers of the Company are Mr. Charles S. Roberts, the
Company's Chairman of the Board, Chief Executive Officer and President, and Mr.
Charles R. Elliott, the Company's Secretary and Treasurer since its inception
and its Chief Financial Officer since April 1995. Mr. Elliott, who is 44 years
old, served as a Director of the Company from October 1994 to February 1995. He
worked for Hunneman Real Estate Corporation in Boston, Massachusetts from 1979
to 1993, most recently as a Senior Vice-President of Accounting and Finance. Mr.
Elliott joined Roberts Properties in August 1993 as Chief Financial Officer and
served in that role until April 1995. He holds an undergraduate degree in
Accounting and a master's degree in Finance.
The following table sets forth certain information regarding
compensation.
<TABLE>
<CAPTION>
Annual Compensation
------------------------------------
Name and Principal Position Year Salary ($) Bonus ($)
--------------------------- ---- ---------- ---------
<S> <C> <C> <C>
Charles S. Roberts 1997 129,857 0
Chairman of the Board, Chief 1996 75,000 0
Executive Officer, and President 1995 75,000 0
Charles R. Elliott 1997 75,000 38,500
Secretary, Treasurer and 1996 75,000 16,250
Chief Financial Officer 1995(1) 45,000 25,000
</TABLE>
- ------------------------------
(1) Mr. Elliott's employment as Chief Financial Officer commenced on April 1,
1995, and the amount shown is for the period April 1, 1995 through December 31,
1995. He received no other compensation from the Company in 1995.
The Company is not a party to any employment agreements.
COMPENSATION OF DIRECTORS
The Company pays its Directors who are not officers of the Company
fees for their services as Directors. Mr. Roberts is the only Director who is an
officer. Non-officer Directors receive a fee of $750 for attendance (in person
or by telephone) at each meeting of the Board of Directors. Mr. Roberts is not
paid any Director fees. In addition, the Company reimburses its Directors for
reasonable travel expenses and out-of-pocket expenses incurred in connection
with their activities on behalf of the Company.
22
<PAGE> 23
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The registrant hereby amends its annual report on Form 10-KSB by
deleting the text under Item 11 and replacing it with the following:
The following table describes the beneficial ownership of units of
partnership interest ("Units") in Roberts Properties Residential, L.P. (the
"Operating Partnership") and shares of the Company's Common Stock ("Shares"), as
of March 31, 1998 for (i) each person who holds more than a 5% interest in the
Operating Partnership or the Company, (ii) Directors of the Company, (iii) the
executive officers of the Company, and (iv) the Directors and executive officers
of the Company as a group. Unless otherwise indicated in the footnotes, all of
such interests are owned directly, and the indicated person or entity has sole
voting and investment power. The Number of Shares Beneficially Owned represents
(a) the number of Shares the person beneficially owns plus (b) the number of
Shares into which Units beneficially owned by the person are redeemable. Each
Unit may be presented to the Operating Partnership for redemption at a cash
price equal to the market value of one Share, except that (i) the Company may
acquire any Unit so presented for such cash price or for one Share, and (ii) the
percentage of outstanding Shares that any one person may own is limited by the
Company's Articles of Incorporation as explained in greater detail in footnote
(2) below. The Company has publicly disclosed its intention to issue Shares in
exchange for Units presented for redemption except as required to comply with
federal and state securities laws. The extent to which the persons hold Shares
as opposed to Units is set forth in the footnotes. Each of the persons known by
the Company to beneficially own more than 5% of the Common Stock has an address
in care of the Company's principal office.
<TABLE>
<CAPTION>
Name of Number of Shares
Beneficial Owner Beneficially Owned(1) Percent of Shares(2)
---------------- --------------------- --------------------
<S> <C> <C>
Charles S. Roberts(3) 1,201,798 22.7%
George W. Wray, Jr.(2) (4) 362,301 7.7(2)
James M. Goodrich(2) (5) 310,396 6.7(2)
Ben A. Spalding(6) 17,612 *
Dennis H. James 14,501 *
Wm. Jarell Jones 2,917 *
Weldon R. Humphries(7) 19,400 *
*
Charles R. Elliott 5,017 *
All Directors and Executive
Officers as a Group: (8 persons)(8) 989,758 35.2%
</TABLE>
- ------------------------------
*Less than 1%.
(1) Assumes that all Units beneficially owned by the person are redeemed
for Shares. The total number of Shares outstanding used in calculating this
percentage (4,554,412 Shares outstanding as of March 31, 1998 plus the number of
Units, if any, beneficially owned by the person) assumes that none of the Units
beneficially owned by other persons is redeemed for Shares.
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<PAGE> 24
(2) Redemption of Units is subject to certain conditions. Among other
restrictions, 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.
(3) Includes: 702,313 Units and 467,541 Shares owned directly by
Mr. Roberts; 29,500 Units owned by a trust for his minor daughter of which he is
the sole trustee; and 2,444 Shares owned by his minor daughter.
(4) Includes: 20,781 Units and 1,500 Shares owned directly by Mr. Wray;
109,868 Units and 198,002 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; 24,175 Shares owned by his wife and 5,058
Shares owned by a trust of which she is a co-trustee. Mr. Wray disclaims
beneficial ownership of the 24,175 Shares owned by Mrs. Wray and 5,058 Shares
owned by a trust of which she is a co-trustee.
(5) Includes: 14,787 Shares owned directly by Dr. Goodrich; 48,075 Units
and 84,628 Shares owned jointly by Dr. Goodrich and his wife; 104,478 Shares
owned by Goodrich Enterprises, Inc., all of the outstanding Shares of which are
owned by Dr. and Mrs. Goodrich and their sons; 6,835 Units and 21,379 Shares
owned by a trust for the benefit of one son of Dr. 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 Dr. and Mrs. Goodrich and of which Mrs.
Goodrich is trustee. Dr. Goodrich disclaims beneficial ownership of the Units
and Shares owned by such trusts.
(6) Includes 2,917 Units owned by Mr. Spalding's wife, 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.
(7) Owned by a trust of which Mr. Humphries is a co-trustee along with his
spouse.
(8) Includes 48,075 Units and 194,467 Shares as to which directors share
voting and investment power with another family member; also includes an
aggregate of 40,988 Units and 81,555 Shares beneficially owned by three
directors' wives, as to which Units and Shares such directors disclaim
beneficial ownership.
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The registrant hereby amends its annual report on Form 10-KSB by
deleting the text under Item 12 and replacing it with the following:
GENERAL
The Company conducts its business through Roberts Properties
Residential, L.P., owns a 60.3% interest in it, and is its sole general partner.
Mr. Charles S. Roberts owns all or substantially all of the outstanding shares
of Roberts Properties, Inc. ("Roberts Properties") and Roberts Properties
Construction, Inc. ("Roberts Construction"), and he owned substantially all of
the outstanding equity interests in Roberts Properties Management, L.L.C.
("Roberts Management") prior to its acquisition by the Operating Partnership in
April 1997. (The three Roberts entities are sometimes hereinafter collectively
referred to as the "Roberts Companies.") Notes 1 and 5 to the consolidated
financial statements of the Company included in the Company's 1997 annual report
mailed along with this proxy statement provide further detail regarding certain
of the transactions described in this section.
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<PAGE> 25
GUARANTEES BY MR. CHARLES S. ROBERTS
Since January 1, 1996, Mr. Roberts has personally guaranteed mortgage
loans secured by certain of the Company's multifamily residential communities
(the "Communities," which are sometimes referred to herein by name). The
aggregate outstanding principal face amount of new loan guarantees by Mr.
Roberts was approximately $171,000 in 1996 and $0 in 1997. In the ordinary
course of acquiring, developing, constructing and refinancing Communities, the
loans personally guaranteed pursuant to these guarantees and other guarantees
previously extended remain subject to further modification, extension,
exculpation and repayment, with the result that the liability of Mr. Roberts
under certain of these guarantees has been and may be modified, extended,
reduced or eliminated. The aggregate principal face amount of loans secured by
the Communities and guaranteed by Mr. Roberts that were refinanced with
nonrecourse loans (thereby eliminating the guarantees of such loans) was
approximately $8,049,000 during 1996 and $0 in 1997. There are currently no
mortgage loans secured by any of the Company's Communities that are personally
guaranteed by Mr. Roberts.
PAYMENTS TO THE ROBERTS COMPANIES FOR SERVICES
Overview. The Operating Partnership has paid substantial fees to the
Roberts Companies for various types of services and will continue to do so in
the future. These various arrangements are summarized below.
Construction Contracts. From January 1, 1996 through March 31, 1998,
the Operating Partnership has paid and will be obligated to pay Roberts
Construction the following amounts:
<TABLE>
<CAPTION>
Remaining Contractual
Total Contract Amount Amount Incurred Commitment
--------------------- --------------- ----------
<S> <C> <C>
$17,394,000 $10,826,000 $6,568,000
</TABLE>
In addition, the Operating Partnership paid Roberts Construction for
purchases made on its behalf and for additional features added or built on the
Communities that were not part of the original construction contracts. These
amounts aggregated $2,250,000 during 1996 and $1,695,000 in 1997. In addition,
the Operating Partnership paid Roberts Construction for labor and materials to
perform repairs and maintenance for the Communities in the amounts of $2,174,000
in 1996 and $513,000 in 1997. (Roberts Construction typically estimates that it
will earn a profit ranging from 5% to 10% of the construction contract amount on
contracts with affiliates of Mr. Roberts.) Included in the remaining contractual
commitment amount are the following fixed price construction contracts that have
been or will be entered into between the Operating Partnership and Roberts
Construction that relate to construction work in process or to be completed:
<TABLE>
<CAPTION>
Fixed Estimated Profit to Percentage of
Construction Project Price Roberts Construction Contract Price
- -------------------- ----- -------------------- --------------
<S> <C> <C> <C>
Bradford Creek Community $8,829,000 $250,000 2.8%
Second Phase of Plantation Trace Community $4,770,000 $238,500 5.0%
</TABLE>
Development Fees. The Operating Partnership paid Roberts Properties
$430,000 in 1996 and $990,000 in 1997 for various development services,
including design, finish selection, interior design, and construction
administration services and the preparation of market studies and business
plans. The Operating Partnership will pay Roberts Properties: (a) $735,000 for
development services in connection with the development and construction of
Bradford Creek ($200,000 of which was paid in the first quarter of 1997); and
(b) $255,000 for development services in connection with the development and
construction of the second phase of Plantation Trace.
Property Management Fees. Prior to its acquisition by the Operating
Partnership in April 1997 as described below, Roberts Management provided
management services to the Operating Partnership for a fee of 5% of gross
income. Total management fees paid to Roberts Management by the Operating
Partnership were $760,000 during 1996 and
25
<PAGE> 26
$211,000 during 1997. Shortly after the merger of The Crestmark Club, L.P.
("Crestmark, L.P.") into the Operating Partnership in June 1996, the Operating
Partnership paid $28,000 to an affiliate of Mr. Roberts in reimbursement of
management-related costs previously incurred by Crestmark, L.P.
Consulting Fees. Under various consulting contracts, as amended, the
Roberts Companies have agreed to provide consulting services in the event of a
sale of any of the Communities presently owned by the Operating Partnership or
one retail center. The fee for such services will be 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). Pursuant to this
arrangement Roberts Properties received a fee of $288,000 (or 3% of gross sales
proceeds) upon the sale of the Windsong Community in January 1998. A payment
will also be triggered upon a "change in control" of the Company or the
Operating Partnership, which is defined as (i) any transaction, whether by
merger, consolidation, asset sale or otherwise which results in the acquisition
of beneficial ownership by any person or group of 50% or more of the outstanding
Shares or of the outstanding Units in the Operating Partnership, (ii) the 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. During 1996 and 1997, the
Operating Partnership paid Roberts Properties $226,000 and $283,000,
respectively, for fees and cost reimbursements for services related to (a)
leasing administration services at the Shoppes of River Oaks and Shoppes of
Plantation Trace ($31,000), (b) the merger of Roberts Properties Bentley Place,
L.P. ("Bentley Place, L.P.") into the Operating Partnership ($50,000), (c) the
merger of Crestmark, L.P. into the Operating Partnership ($65,000), (d) the
acquisition and rezoning of a 1.1 acre parcel of undeveloped land located
adjacent to the existing Preston Oaks Community ($46,000), (e) the sale of
Autumn Ridge in August 1997 ($150,000), and (f) miscellaneous fees and cost
reimbursements ($167,000).
RECENT DEVELOPMENTS
The following sections contain "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These statements relate
to future economic performance, plans and objectives of management for future
operations and projections of revenues and other financial items that are based
on the beliefs of the Company's management, as well as assumptions made by, and
information currently available to, the Company's management. Acquisitions that
are pursued by the Company may not be consummated for a variety of reasons,
including but not limited to the failure of either party to meet the required
closing conditions. See "Item 2, Description of Property - Recent Developments."
Pending Acquisition - Charlotte. On April 17, 1998, the Company
entered into an agreement to purchase approximately 25 acres of undeveloped land
in the Ballantyne area of south Charlotte, North Carolina for $4,000,000 from a
local Charlotte investment group. The Company intends to construct a 380-unit
multifamily apartment community on the property. The Company anticipates that it
will pay $2,100,000 to Roberts Properties for (a) finding the property,
negotiating the acquisition price and conducting due diligence; and (b) managing
the creation and development of the community. The Board of Directors approved
the foregoing arrangements with Roberts Properties. (Given his conflict of
interest, Mr. Roberts abstained from voting on such arrangements.)
Pending Acquisitions - Atlanta. On April 21, 1998, the Company's Board
of Directors approved the acquisition of two tracts of land located in north
Atlanta. The first tract, containing approximately 49.1 acres, is located in
north Fulton County along Abbotts Bridge Road. The Company intends to construct
a 405-unit multifamily apartment community on the property. The Operating
Partnership anticipates that it will acquire the property from Roberts
Properties for $5,000,000. The Operating Partnership anticipates that it will
pay Roberts Properties a total of $2,275,000 for (a) finding and acquiring the
property and conducting due diligence; and (b) managing the creation and
development of the community. The Board of Directors approved the acquisition of
the property from Roberts Properties after
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<PAGE> 27
reviewing two independent appraisals. After negotiating with Mr. Roberts, the
Board approved the acquisition price at an amount equal to the higher of the two
appraisals. The Board also approved the other arrangements with Roberts
Properties. (Given his conflict of interest, Mr. Roberts abstained from voting
on the acquisition and on such arrangements.) Roberts Properties acquired the
property from an unaffiliated third party for $4,343,000 on March 6, 1997.
The second tract of approximately 35.5 acres is located in Gwinnett
County on Old Norcross Road. The Operating Partnership will acquire the property
from Roberts Properties Old Norcross, Ltd. ("Old Norcross, Ltd.") for
$2,385,000. (Mr. Roberts will receive none of the sale proceeds as general
partner of Old Norcross, Ltd. or otherwise.) The Operating Partnership
anticipates that it will pay $1,364,000 to Roberts Properties for (a)
negotiating the transaction and conducting due diligence; and (b) managing the
creation and development of the community. The Board of Directors approved the
acquisition of the property from Old Norcross, Ltd. after reviewing two
independent appraisals. After negotiating with Mr. Roberts, the Board approved
the purchase price at an amount equal to the higher of the two appraisals. The
Board also approved the other arrangements with Roberts Properties. (Given his
conflict of interest, Mr. Roberts abstained from voting on the acquisition and
on such arrangements.)
The closing of these transactions will be subject to customary closing
conditions. There can be no assurances that they will close as contemplated,
that the required conditions to closing will be met, or that the agreements will
not be amended or terminated. Further, an appraisal is merely an opinion of the
appraiser regarding the fair market value of the property, and no assurances can
be given that either of the north Atlanta properties could be sold for the
appraised value used by the Board.
ACQUISITIONS OF SHARES AND UNITS BY MR. CHARLES S. ROBERTS
The following table describes how Mr. Roberts has acquired Shares and
Units from the Company and the Operating Partnership, respectively, since
January 1, 1996:
<TABLE>
<CAPTION>
Number Number
Type of Transaction of Shares of Units
------------------- --------- --------
<S> <C> <C>
Shares in the March 1996 Bentley Place, L.P. merger in lieu of
out-of-state residents, for $9.50 per Share in cash........................ 23,659 -
Shares in the March 1996 merger for his general partner interest.............. 17,465 -
Units in the June 1996 Crestmark, L.P. merger in lieu of
out-of-state residents, for $9.25 per Unit in cash......................... - 15,667
Units in the June 1996 merger for his limited partner interest acquired
in a private nonissuer transaction (valued at $9.75 per Unit)............ - 2,405
Units in the June 1996 merger for his general partner interest................ - 44,509
Shares received in exchange for Units in June 1996............................ 25,287 (25,287)
Units received in the April 1997 Roberts Management merger for
his member interest ....................................................... - 551,650
</TABLE>
Mr. Roberts paid a nominal amount for his general partner interests in
various limited partnerships that have been merged into the Operating
Partnership (the "Community Partnerships"). The values in the merger
transactions referenced above were determined by Mr. Roberts based upon his
evaluation of the equity in each limited partnership in light of its debt and
his opinion regarding the value of its assets. (For an explanation of the values
used in the Roberts Management merger, see "April 1997 Merger of Roberts
Properties Management, L.L.C. into the Operating Partnership" below.) In each
instance, the Company's Board of Directors approved the valuation proposed by
Mr. Roberts, who abstained from voting as a director on each merger. A number of
the acquisitions of Shares or Units by Mr. Roberts in connection with mergers of
various Community Partnerships into the Operating Partnership involved his
payment of cash into escrow pursuant to the terms of the applicable merger
agreement to provide the funds needed to allocate cash, rather than Shares or
Units, to limited partners in the Community Partnerships who were not residents
of Georgia when the merger occurred. The cash paid by Mr. Roberts equaled the
applicable value per Share or Unit used in the merger (except for the Crestmark,
L.P. merger, when a $.50 per Unit discount was applied), and Mr. Roberts was
allocated the Shares or
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<PAGE> 28
Units, as applicable, that would have been distributed to the out-of-state
residents had they resided in Georgia. This feature of each merger agreement was
necessitated by the reliance by the Company and the Operating Partnership upon
the "intrastate" exemption from securities registration provided under Section
3(a)(11) of the Securities Act of 1933 and Rule 147 promulgated by the SEC
regarding intrastate offerings. For an offering to be exempt as an intrastate
offering, securities may not be sold to persons who do not reside in the state
in which the offering is being conducted.
ACQUISITIONS OF SHARES AND UNITS BY OTHER DIRECTORS, OFFICER AND SIGNIFICANT
SECURITY HOLDERS
The following table summarizes the acquisitions of beneficial
ownership of Shares and Units from the Company and the Operating Partnership,
respectively, by directors other than Mr. Roberts and by Mr. Charles R. Elliott,
the other officer of the Company, since January 1, 1996. Each such person
acquired his or her Shares and/or Units in connection with (a) the March 1996
Bentley Place, L.P. merger, (b) the Company's offering of Shares for $9.50 per
Share in cash that was completed in May 1996 (the "Cash Offering"), (c) the June
1996 Crestmark, L.P. merger, and/or (d) as noted in the footnotes. Except for
acquisitions of limited partnership interests in private nonissuer transactions
as noted below, each director paid the same price for his limited partnership
interests as all other holders of limited partner interests in the Community
Partnerships, and accordingly each person received Shares and/or Units in the
mergers on the same basis as any other holder in such Community Partnerships.
(Exchanges of Units for Shares since such exchanges became available in December
1997 to all Unitholders other than non-Georgia residents are omitted from the
table.)
<TABLE>
<CAPTION>
(a) March 1996 (c) June 1996
Bentley Place, (b) Cash Crestmark,
Individual(1) L.P. Merger Offering L.P. Merger
------------- ----------- -------- -----------
Shares Shares Units
------ ------ -----
<S> <C> <C> <C>
George W. Wray, Jr.* 2,957(2) 60,300(3) 16,835
James M. Goodrich* 17,744(4) - 26,432(5)
Charles R. Elliott - 2,100(6) -
Ben A. Spalding* 2,957(3) - -
Dennis H. James*(7) 2,957(3) - -
</TABLE>
- ---------------------------------------
*Denotes individuals who are directors.
(1) For a description of the beneficial ownership of each person listed,
see "Item 11, Security Ownership of Certain Beneficial Owners and Management"
above.
(2) As a registered associate of Spalding & Company, Mr. Wray purchased
Shares net of the $.665 per Share broker-dealer commissions as permitted under
the terms of the Cash Offering. Mr. Elliott, as an employee of Roberts
Properties, similarly purchased Shares in the Cash Offering net of the $.665 per
Share brokerage commission.
(3) Each individual acquired his limited partnership interest(s) in the
applicable Community Partnerships in a private nonissuer transaction.
(4) Dr. Goodrich acquired two and one half limited partnership interests in
Bentley Place, L.P.'s original offering and in December 1995 acquired, jointly
with his spouse, an additional one half limited partnership interest in a
private nonissuer transaction.
(5) Dr. and Mrs. Goodrich received 4,810 Units for the two limited
partnership interests they jointly held in Crestmark, L.P., for which interests
they paid the same amount per interest as all other limited partners in
Crestmark, L.P. In addition, Dr. and Mrs. Goodrich acquired an additional 21,622
Units by paying $200,004 in cash ($9.25 per Unit). Such cash was allocated to
out-of-state limited partners in the merger, and Dr. and Mrs. Goodrich exchanged
the 21,622 Units for an equal number of Shares on June 28, 1996.
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<PAGE> 29
(6) In April 1996 Mr. Elliott exchanged his Units for an equal number of
Shares.
(7) In July 1996 Mr. James exchanged 2,917 Units for an equal number of
Shares.
COMPENSATION TO SPALDING & COMPANY
Ben A. Spalding, one of the Company's directors, owns all of the
outstanding stock of Spalding & Company, an NASD member broker-dealer that has
participated as the distributor or solicitation agent in numerous offerings by
affiliates of Mr. Roberts, including the Company and the Operating Partnership.
The Operating Partnership has paid the following compensation to Spalding &
Company since January 1, 1996:
<TABLE>
<CAPTION>
Amount of
Compensation to Date of Closing of
Offering/Solicitation Spalding & Company Offering/Solicitation
--------------------- ------------------ ---------------------
<S> <C> <C>
Solicitation for March 1996 Bentley Place, L.P. merger..... $ 25,000 3/21/96
1995-1996 cash offering of Shares......................... 411,870 3/29/96 and 5/7/96
Solicitation for June 1996 Crestmark, L.P. merger.......... 50,000 6/26/96
-------
Total $486,870
</TABLE>
COMPENSATION TO SHOPTAW-JAMES, INC.
Dennis H. James, a Director of the Company, is President and a Director
of Shoptaw-James, Inc., a commercial mortgage banking firm that has originated
loans for the Company and its predecessors. Specifically, Shoptaw-James, Inc.
received the following fees in the months noted: $46,780 for the refinancing of
Highland Park (January 1996); $37,500 for the loan secured by Autumn Ridge
(March 1996); $30,750 for the loan secured by Bentley Place (August 1996);
$69,375 for the refinancing of River Oaks (October 1996); and $48,150 for the
loan secured by Ivey Brook (January 1997).
MARCH 1996 MERGER OF ROBERTS PROPERTIES BENTLEY PLACE, L.P. INTO THE OPERATING
PARTNERSHIP
On March 21, 1996, Bentley Place, L.P. was merged into the Operating
Partnership in exchange for 744,940 Shares valued at $9.50 per Share or
$7,076,930 in the aggregate. The value used in the merger was determined by Mr.
Roberts based upon his evaluation of the equity of Bentley Place, L.P. in light
of its obligations and his opinion regarding the value of its assets. The
Company's Board of Directors approved the valuation proposed by Mr. Roberts, who
abstained from voting as a director on the merger. The transaction received the
consent of 87% of the limited partners of Bentley Place, L.P. Mr. Roberts
received 17,465 Shares for his general partner interest in Bentley Place, L.P.,
and certain other persons received Shares as described in "Acquisitions of
Shares and Units by Other Directors, Officer and Significant Security Holders."
JUNE 1996 MERGER OF THE CRESTMARK CLUB, L.P. INTO THE OPERATING PARTNERSHIP
On June 26, 1996, Crestmark, L.P. was merged into the Operating
Partnership in exchange for 746,715 Units valued at $9.75 per Unit or $7,280,471
in the aggregate. The Operating Partnership thereby acquired the 248-unit
Crestmark Community and 8.8 acres of adjacent undeveloped property on which the
Company has since built an 86-unit second phase of Crestmark. The 8.8 acre tract
was encumbered by a second priority secured loan owed to Mr. Roberts in the
amount of $1,410,092. Crestmark, L.P. also owed $121,423 to Roberts Construction
for change orders from the original construction of Crestmark and $28,077 to
another affiliate of Mr. Roberts for reimbursement of certain costs. The
Operating Partnership assumed these obligations in the merger and repaid them
upon the closing of the merger.
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<PAGE> 30
Mr. Roberts received 44,509 Units for his general partner interest in
Crestmark, L.P., for which he paid only a nominal amount, and he received
another 15,667 Units for which he paid $144,920 in cash ($9.25 per Unit); such
cash was allocated to out-of-state limited partners in the merger. Mr. Roberts
also received 2,405 Units in the merger for a limited partnership interest he
acquired in a private nonissuer transaction. Certain other persons received
Units as described in "Acquisitions of Shares and Units by Other Directors,
Officer and Significant Security Holders."
APRIL 1997 MERGER OF ROBERTS PROPERTIES MANAGEMENT, L.L.C. INTO THE OPERATING
PARTNERSHIP
On April 1, 1997, the Company acquired Roberts Management, the property
management company that has managed the Company's multifamily apartment
communities since the Company's inception. The Company's independent Directors
at that time (Dr. Goodrich and Messrs. Wray, Jones and James) determined that it
was in the best long-term interests of the Company to manage its own
communities. Because Roberts Management had provided high quality property
management services to the Company, the independent Directors negotiated with
Mr. Roberts to purchase Roberts Management. The Company now internally manages
its properties using Roberts Management's property management expertise and
systems, and the property management personnel formerly employed by Roberts
Management. The Company no longer pays 5% of gross property revenues to Roberts
Management for property management services.
The Operating Partnership issued a total of 590,000 Units valued at
$10.00 per Unit or $5,900,000 to purchase Roberts Management. The purchase price
was negotiated between Mr. Roberts (for Roberts Management) and the Company's
independent Directors. The independent Directors took into account, among other
factors:
the cash flow savings to the Company of approximately $140,000 per year,
which will increase over time as more Communities are added to the Company's
portfolio;
- - a valuation of Roberts Management by an independent valuation firm;
- - the high quality of management services historically provided by
Roberts Management;
- - the value of continuity in those services; and
- - advice from investment banking firms that the Company should become
internally managed before the Common Stock was listed on an exchange.
The $10.00 per Unit value was determined by the independent Directors.
The independent Directors considered the following factors, among others:
- - their belief that the Company's liquidation value was equal to $10.34
per Unit;
- - the Company's historical practice of issuing securities at a discount
to current liquidation value; and
- - the Company's historical practice of issuing securities at increasingly
higher prices as the liquidation value has increased.
The acquisition was structured as a merger of Roberts Management into
the Operating Partnership. Of the 590,000 Units issued in the merger, Mr.
Roberts received 551,650 Units, and twelve other employees of Roberts Management
received 38,350 Units, subject to certain repurchase options held by Mr. Roberts
which are exercisable upon the holder's cessation of employment by the Operating
Partnership (which has subordinate repurchase options that are exercisable if
Mr. Roberts fails to exercise his option in any instance). Mr. Roberts has
repurchased 15,940 of the 38,350 Units due to employees' leaving the employment
of the Operating Partnership. Generally, the number of Units subject to such
options gradually declines to zero over a seven year period from the date each
holder acquired his or her member interest in Roberts Management. No cash or
consideration other than Units was paid in connection with the merger.
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<PAGE> 31
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ROBERTS REALTY INVESTORS, INC.
By: /s/ Charles R. Elliott
---------------------------------------------------
Charles R. Elliott, Secretary, Treasurer, and Chief
Financial Officer (Principal Financial Officer and
Principal Accounting Officer)
Date: April 30, 1998
31
