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Filed Pursuant to Rule 424(b)(3)
File Number 333-82453
PROSPECTUS
2,753,787 SHARES
ROBERTS REALTY INVESTORS, INC.
COMMON STOCK
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Roberts Realty Investors, Inc. owns and operates multifamily
residential properties as a self-administered, self-managed equity real estate
investment trust, or REIT. We conduct our business through Roberts Properties
Residential, L.P., which we refer to as the operating partnership. Roberts
Realty owns a controlling interest in the operating partnership and is its sole
general partner.
The operating partnership issued units of partnership interest in our
formation and in acquiring various entities that owned multifamily residential
apartment communities and a property management company. Limited partners in the
operating partnership have the right to exchange their units for shares of our
common stock on a one-for-one basis. This prospectus covers the 2,753,787 shares
that we may issue from time to time to those limited partners. The registration
of the shares does not necessarily mean that the limited partners will decide to
exchange their units for shares.
We will not receive any consideration when we issue shares in exchange
for units. We will pay all expenses of registering the shares.
The common stock is listed on the American Stock Exchange under the
symbol "RPI." To ensure that we maintain our qualification as a REIT, no single
person may own more than 6% of our outstanding common stock, except for Charles
S. Roberts, our Chairman of the Board, Chief Executive Officer, and President,
who is limited to 25%.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 OF THIS PROSPECTUS FOR A
DESCRIPTION OF CERTAIN FACTORS THAT YOU SHOULD CONSIDER IN DECIDING WHETHER TO
EXCHANGE YOUR UNITS FOR SHARES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is August 2, 1999.
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SUMMARY
ROBERTS REALTY INVESTORS, INC.
Roberts Realty Investors, Inc. owns and operates multifamily
residential properties as a self-administered, self-managed equity real estate
investment trust, or REIT. We conduct our business through Roberts Properties
Residential, L.P., which we refer to as the operating partnership. The operating
partnership owns all our properties. Roberts Realty owns a controlling interest
in the operating partnership and is its sole general partner. This
organizational structure is sometimes called an "umbrella partnership" or
"UPREIT."
We are a Georgia corporation formed in July 1994. We expect to continue
to qualify as a REIT for federal income tax purposes. A REIT is a legal entity
that holds real estate interests and, through its payment of distributions, is
able to reduce or avoid incurring federal income tax at the corporate level.
This structure allows shareholders to participate in real estate investments
without the "double taxation" of income - i.e., at both the corporate and
shareholder levels - that generally results from an investment in shares of a
corporation. To maintain our qualification as a REIT, we must, among other
things, distribute annually to our shareholders at least 95% of our taxable
income.
We will not receive any proceeds from issuing these shares to the
limited partners of the operating partnership in exchange for their units, or
from their sale of the shares if they elect to do so.
Our executive offices are located at 8010 Roswell Road, Suite 120,
Atlanta, Georgia 30350, and our telephone number is (770) 394-6000.
PURPOSE OF THIS PROSPECTUS
We are offering shares under this prospectus to unitholders, who have
the right to exchange their units for shares of common stock on a one-for-one
basis. In this prospectus we sometimes refer to unitholders directly as "you."
This prospectus is the legal document that offers the shares to you and explains
how you can exchange your units for shares if you choose to do so. Once you have
exchanged your units for shares and receive a stock certificate, you can give
that certificate to your stockbroker to sell or hold in your account in "street
name" just like the shares of any other public company.
HOW TO EXCHANGE YOUR UNITS FOR SHARES
You may exchange your units for shares by submitting by certified mail
or overnight courier the following two items to our transfer agent, First Union
National Bank, Corporate Trust Client Services NC 1153, 1525 West W.T. Harris
Boulevard - 3C3, Charlotte, North Carolina 28288-1153 (for overnight courier
packages, the zip code is 28262):
(1) a fully executed Notice of Redemption, which is attached as Exhibit
A to this prospectus; and
(2) a unit certificate, or certificates, if you have more than one, for
the number of units you are submitting for redemption. You must sign the unit
certificate on the back and have your signature medallion guaranteed by a bank
or brokerage firm.
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First Union will send the new stock certificate back to you within five
days of receiving your redemption notice and signed unit certificate.
TAX CONSEQUENCES OF EXCHANGING YOUR UNITS FOR SHARES
Your exchange of units for shares will be a taxable transaction treated
as a sale. The gain or loss you realize will depend on the value of the shares
you receive, the amount of liabilities of the operating partnership associated
with the units you exchange, and your tax basis in those units. Because each
person's tax basis in his or her units may be different, you or your tax advisor
must calculate your individual tax basis in your units. Please note that we have
no way of keeping track of or calculating the tax basis of any individual's
units. The tax consequences of exchanging your units for shares could be
substantial, so please consult your tax advisor regarding the effects and
reporting of this transaction.
For a discussion of tax consequences of an exchange of units for
shares, see "Federal Income Tax Considerations - Tax Consequences of Exchange of
Units for Shares."
TAX CONSEQUENCES OF SELLING THE SHARES YOU RECEIVE IN EXCHANGE FOR YOUR UNITS
If you choose to sell the shares you receive in exchange for your
units, the transaction will be a taxable event treated as a sale. Your proceeds
will be equal to the amount of cash you receive. The gain or loss you realize
will depend on your tax basis in the shares you receive in exchange for your
units. Please consult with your tax advisor regarding the reporting of this
transaction. Also, please note that we have no way of keeping track of or
calculating the tax basis of any individual's shares.
TAX REPORTING FORMS YOU WILL RECEIVE IF YOU EXCHANGE YOUR UNITS FOR SHARES
You will receive a Schedule K-1 for the period of time during the tax
year in which you held your units. You will also receive a 1099-Div if you
receive any dividends while you hold the shares you received in exchange for
your units. If you sell your shares, you will receive a 1099-B reporting the
sale.
EXCHANGES OF UNITS BY UNITHOLDERS WHO LIVE OUTSIDE OF GEORGIA
Unitholders who no longer live in Georgia will receive shares for their
units like any other unitholder.
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RISK FACTORS
This prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act. Our
actual results may differ significantly from the results discussed in the
forward-looking statements. These forward-looking statements involve risks and
uncertainties that include, but are not limited to, those discussed below.
Prospective purchasers should carefully consider the following information along
with the other information contained in this prospectus before making an
investment decision regarding the shares.
FEDERAL INCOME TAX RISKS
A UNITHOLDER'S EXCHANGE OF UNITS FOR SHARES WILL BE TREATED AS A FULLY TAXABLE
SALE OF THE UNITS BY THE UNITHOLDER.
A unitholder's exchange of units for shares will be treated for tax
purposes as a sale of the units by the unitholder. The sale will be fully
taxable to the unitholder, and the unitholder will be treated as realizing for
tax purposes an amount equal to the value of the shares received in the exchange
plus the amount of any operating partnership liabilities allocable to the
exchanged units at the time of the redemption or exchange. The amount of gain
recognized or even the tax liability resulting from the gain could exceed the
value of the shares. See "Federal Income Tax Considerations - Tax Consequences
of Exchange of Units for Shares."
A UNITHOLDER WHO EXCHANGES UNITS FOR SHARES AND THEN SEEKS TO SELL SOME OF THOSE
SHARES TO PAY THE RESULTING TAXES MAY BE DELAYED IN DOING SO.
Because the number of shares of common stock sold on the AMEX on any
given day is relatively small, a unitholder may suffer delays in selling a
substantial number of shares for cash to pay tax liabilities or for any other
purpose. In addition, the price the unitholder receives for the shares may be
less than the value of the unitholder's units at the time of exchange.
OUR FAILURE TO QUALIFY AS A REIT WOULD CAUSE US TO BE TAXED AS A CORPORATION,
WHICH WOULD ELIMINATE OR SIGNIFICANTLY REDUCE THE AMOUNT OF FUNDS AVAILABLE FOR
DISTRIBUTIONS TO SHAREHOLDERS.
If we fail to qualify for taxation as a REIT in any taxable year and
the relief provisions do not apply,
- the requirement that REITs distribute most of their net income
to shareholders will not apply,
- we will be subject to the full system of federal income tax
generally applicable to corporations, with no deduction for
dividends, if any, paid to our shareholders,
- the additional tax liability imposed on us will reduce, and
may even eliminate, the amount of funds available for
distributions to our shareholders, and
- we may be disqualified from taxation as a REIT not only for
the year during which the qualification was lost, but also for
the four following years.
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Qualification as a REIT involves the application of highly technical
and complex provisions of the Internal Revenue Code and the determination of
various factual matters and circumstances not entirely within our control. For
more information regarding this issue, see "Federal Income Tax Considerations -
Failure to Qualify for Taxation as a REIT."
WE WILL BE SUBJECT TO SOME TAX EVEN IF WE QUALIFY FOR TAXATION AS A REIT.
Qualification for taxation as a REIT is not equivalent to exemption
from tax. For a discussion of the taxes to which we will be subject
notwithstanding our qualification as a REIT, see "Federal Income Tax
Considerations - Federal Income Taxation of Roberts Realty."
RISKS ASSOCIATED WITH THE OWNERSHIP OF OUR COMMON STOCK
WE BELIEVE THAT OUR COMMON STOCK IS TRADING AT PRICES THAT ARE LOWER THAN THE
NET ASSET VALUE PER SHARE, AND THIS DISCOUNT TO UNDERLYING VALUE MAY CONTINUE
INDEFINITELY.
Our common stock may continue to trade at prices that we believe are
less than shareholders would receive if we decided to sell all our properties
and liquidate the company. We cannot predict when, or if, this trend will
reverse itself.
A UNITHOLDER'S INVESTMENT WILL CHANGE WHEN UNITS ARE EXCHANGED FOR SHARES, AND
SOME CHANGES MAY BE ADVERSE FOR SOME INVESTORS.
When a unitholder receives shares in exchange for units, the unitholder
will become a shareholder of Roberts Realty rather than a unitholder in the
operating partnership. Although an investment in shares is substantially
equivalent to an investment in units, ownership of units and ownership of common
stock differ as to, among other things, form of organization, policies and
restrictions, management structure, investor rights and federal income taxation.
Some of these differences may be material and adverse for some investors. See
"Comparison of Ownership of Units and Shares" for a discussion of these
differences.
SUBSTANTIAL SALES OF OUR COMMON STOCK IN THE FUTURE AFTER THE OFFERING COULD
CAUSE THE MARKET PRICE OF OUR COMMON STOCK TO DECLINE.
In addition to the 4,685,679 shares of common stock presently
outstanding, 2,753,787 shares are reserved to issue to unitholders. If
unitholders exchange a substantial number of units for shares and then sell them
into the public market, the market price of the shares could fall. Those sales
also could make it harder for us to sell stock in the future at a time or price
that we believe is fair. This risk is particularly important for us because
relatively few shares are traded on the AMEX on any given day. We cannot predict
the effect that future sales of common stock will have on the market price of
the common stock.
WE HAVE ADOPTED ANTI-TAKEOVER PROVISIONS THAT MAY MAKE IT DIFFICULT FOR ANOTHER
COMPANY TO ACQUIRE US, EVEN IF MOST SHAREHOLDERS WERE IN FAVOR OF IT.
Our articles of incorporation, our bylaws and Georgia law could make it
more difficult for another company to acquire us, even if a change in control
would benefit our shareholders. For more information, see "Description of Common
Stock - Anti-Takeover Provisions."
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NO SHAREHOLDER OTHER THAN MR. ROBERTS MAY OWN MORE THAN 6% OF OUR COMMON STOCK.
To ensure that we continue to qualify as a REIT for federal income tax
purposes, our articles of incorporation limit the ownership of our shares. No
single person other than Mr. Roberts may own more than 6.0% of our common stock.
We refer to this limitation as the "ownership limit." Shares acquired or held in
violation of the ownership limit will be transferred to a trust for the benefit
of a designated charitable beneficiary. Any person who acquires shares in
violation of the ownership limit will not be entitled:
- to receive any distributions on the shares;
- to vote the shares; or
- to receive any proceeds from selling the shares in excess of
the lesser of the price paid for the shares or the amount
realized from the sale.
A transfer that violates these limits may be void.
WE COULD CHANGE OUR INVESTMENT AND FINANCING POLICIES WITHOUT A SHAREHOLDER
VOTE.
Our board of directors will determine our investment and financing
policies, our growth strategy, and our debt, capitalization, distribution and
operating policies. The board may revise or amend these strategies and policies
at any time without a vote of shareholders. Accordingly, shareholders will have
no control over changes in our strategies other than through the election of
directors. Furthermore, the changes may not serve the interests of all
shareholders and could adversely affect our financial condition or results of
operations, including our ability to distribute cash to shareholders.
For example, the board may decide to retain operating cash flow for
investment purposes, working capital reserves or other purposes rather than
using it to pay dividends. These retained funds, while increasing the value of
our underlying assets, may not correspondingly increase the market price of our
common stock. Our failure to meet the market's expectation with regard to future
earnings and cash distributions likely would adversely affect the market price
of our common stock.
IF WE ISSUE ADDITIONAL SECURITIES, THE INVESTMENT OF EXISTING SHAREHOLDERS WILL
BE DILUTED.
We have authority to issue shares of common stock or other equity or
debt securities in exchange for property or otherwise. Similarly, we may cause
the operating partnership to issue additional units in exchange for property or
otherwise. Existing shareholders will have no preemptive right to acquire any
additional securities issued by us or the operating partnership. Any issuance of
additional equity securities could result in dilution of an existing
shareholder's investment.
IF THE MARKET PRICES OF OTHER APARTMENT REITS DECLINE, THE PRICE OF OUR COMMON
STOCK MAY DECLINE.
The trading price of our common stock has tended to follow the trend of
the prices of other public apartment REITs. If the overall trading prices in
this sector decline, our stock price may drop as well.
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AN INCREASE IN MARKET INTEREST RATES COULD CAUSE THE PRICE OF OUR COMMON STOCK
TO DECLINE.
The distribution yield on our common stock as a percentage of the price
of our common stock relative to market interest rates may also influence the
price of our common stock. An increase in market interest rates might lead
prospective purchasers of our common stock to expect a higher distribution
yield, which would adversely affect the market price of our common stock.
UNITHOLDERS WHO EXCHANGE THEIR UNITS FOR SHARES WILL CONTINUE TO FACE VARIOUS
RISKS THEY ALREADY FACE AS UNITHOLDERS UNLESS AND UNTIL THEY SELL THEIR SHARES.
In addition to the risks faced by unitholders who elect to redeem their
units, unitholders who elect not to redeem their units, and unitholders who
retain the shares they receive in exchange for their units, will continue to
face the risks they currently face as investors in the operating partnership.
These risks include the following:
- Unfavorable changes in market and economic conditions in
Atlanta and Charlotte could hurt our occupancy and rental
rates.
- Increased competition in the Atlanta and Charlotte markets
could limit our ability to lease our apartments homes or
increase or maintain rents.
- Conflicts of interest inherent in business transactions
between or among Roberts Realty and/or the operating
partnership on one hand, and Mr. Roberts and/or his affiliates
on the other hand, could result in our paying more for
property or services than we would pay an independent seller
or provider.
- Construction and lease-up risks inherent in our development of
the Addison Place, Ballantyne and Old Norcross communities,
and the other communities we may develop in the future, could
adversely affect our financial performance.
- We might not be able to obtain replacement financing to make
balloon payments on our fixed-rate debt, or we might have to
refinance our debt on less favorable terms;
- Because our organizational documents do not limit the amount
of debt we may incur, we could increase the amount of our debt
as a percentage of the estimated value of our properties.
- Our operations could be adversely affected if we lost key
personnel, particularly Mr. Roberts.
- We could incur costs from environmental problems even though
we did not cause, contribute to or know about them.
- Compliance or failure to comply with the Americans with
Disabilities Act and other similar laws could result in
substantial costs.
DESCRIPTION OF UNITS AND REDEMPTION OF UNITS
GENERAL
Unitholders may, within limitations, require the operating partnership
to redeem all or a portion of their units. Unitholders may exercise this
redemption right by delivering a redemption notice to the transfer agent. The
form of the redemption notice is included as Exhibit A to this prospectus. When
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units are submitted for redemption, we have the right either to cause the
operating partnership to redeem those units for cash or to purchase those units
ourselves, either for cash or for a number of shares equal to the number of
units submitted for redemption. We have adopted a policy of satisfying
redemption notices by purchasing the units for shares. We will not receive any
cash from issuing shares in exchange for units.
After exchanging units for shares, a unitholder will be a shareholder
of Roberts Realty and will be entitled to receive dividends on the shares
instead of distributions on the redeemed units.
A unitholder must notify our transfer agent of his or her desire to
exchange his or her units for shares by using the form attached as Exhibit A to
this prospectus. No redemption can occur if the delivery of shares would be
prohibited under the provisions of our articles of incorporation that are
intended to protect our qualification as a REIT. The articles provide, among
other things, that no one holder other than Mr. Roberts may own more than 6% of
the outstanding shares of common stock.
We also have the right, at our election, to purchase all outstanding
units from unitholders in exchange for shares. The conditions that apply to the
unitholders' redemption right also apply to this purchase right.
HOW TO EXCHANGE UNITS FOR SHARES
A unitholder who wants to exchange his or her units must submit by
certified mail or overnight courier the following two items to our transfer
agent, First Union National Bank, Corporate Trust Client Services NC 1153, 1525
West W.T. Harris Boulevard - 3C3, Charlotte, North Carolina 28288-1153 (for
overnight courier packages, the zip code is 28262):
(1) a fully executed redemption notice - attached as Exhibit A to
this prospectus; and
(2) a unit certificate or certificates for the number of units
being submitted for redemption.
You must sign the back of the unit certificate and have your signature medallion
guaranteed by a bank or brokerage firm.
To simplify the redemption process, we will instruct First Union to
process exchanges of units as soon as practicable instead of following the
formal notice provisions of the partnership agreement of the operating
partnership. First Union will send the new stock certificate(s) to the person
who submitted the units for redemption. Accordingly, a unitholder who seeks to
exchange units and who does not ask us to follow the formal notice period
procedures may not revoke his or her redemption notice.
REGISTRATION RIGHTS
Under the partnership agreement, we are obligated, as a condition to
the unitholders' right to require redemption of their units, to list the common
stock on a national securities exchange and register the shares with the SEC
under the Securities Act. To fulfill that obligation, we have listed the shares
on the AMEX and registered the shares covered by this prospectus with the SEC.
We are obligated to use reasonable efforts to maintain this listing and the
Securities Act registration of the shares until all units are either redeemed by
unitholders or purchased by us.
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TAX CONSEQUENCES OF EXCHANGING UNITS FOR SHARES
For a discussion of the tax consequences of exchanging units for
shares, see "Federal Income Tax Considerations - Tax Consequences of Exchange of
Units for Shares."
DESCRIPTION OF COMMON STOCK
GENERAL
Our authorized capital stock consists of 100,000,000 shares of common
stock, $.01 par value per share, and 20,000,000 shares of preferred stock, $.01
par value per share. We have 4,685,679 common shares outstanding and no
preferred shares outstanding.
COMMON STOCK
At shareholders' meetings, each holder of shares is entitled to one
vote for each share held. Neither our articles of incorporation nor our bylaws
provide for cumulative voting for the election of directors. After we satisfy
the prior rights of any series of preferred stock that we may issue, holders of
shares are entitled to receive, pro rata, distributions declared by the board of
directors out of funds legally available for distribution, and any other
distributions to the shareholders. We depend upon distributions we receive from
the operating partnership to fund the distributions we make to shareholders.
There are no redemption or sinking fund provisions and no direct
limitations in any indenture or agreement on payment of distributions to
shareholders.
Shareholders do not have any preemptive rights or other rights to
subscribe for additional shares.
PREFERRED STOCK
Under our articles of incorporation, the board of directors may issue,
without shareholder approval or action, shares of preferred stock of one or more
series, including any preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption, as the board of directors may determine from time to
time.
CLASSIFICATION AND REMOVAL OF THE BOARD OF DIRECTORS
Our articles of incorporation provide for the board of directors to be
divided into three classes of directors, with each class to consist as nearly as
possible of an equal number of directors. At each annual meeting of
shareholders, the class of directors to be elected at that meeting is elected
for a three-year term, and the directors in the other two classes continue in
office. Because shareholders will have no right to cumulative voting for the
election of directors, the holders of a majority of the outstanding shares are
able to elect all of the successors to the class of directors whose term expires
at each annual meeting of shareholders.
Our articles of incorporation also provide that, except for any
directors who may be elected by holders of a class or series of stock other than
the common stock, directors may be removed only by the affirmative vote of
shareholders holding at least 75% of all of the votes entitled to be cast for
the election of directors. Vacancies on the board of directors may be filled by
the affirmative vote of the
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remaining directors and, in the case of a vacancy resulting from the removal of
a director, by the shareholders by a majority of the votes entitled to be cast
for the election of directors. A vote of shareholders holding at least 75% of
all the votes is required to amend, alter, change, repeal or adopt any
provisions inconsistent with those classified board and director removal
provisions. These provisions may make it more difficult and time-consuming to
change majority control of our board of directors, which may have the effect of
discouraging unsolicited proposals for a takeover of us or the removal of
incumbent management.
SPECIAL MEETINGS
Under our bylaws, special meetings of the shareholders may be called
only by shareholders holding outstanding shares representing more than 50% of
all votes entitled to be cast on any issue proposed to be considered at any
special meeting.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS
Our bylaws provide that with respect to an annual meeting of
shareholders, the proposal of business to be considered by shareholders may be
made only (a) by or at the direction of the board of directors, or (b) by a
shareholder who has complied with the advance notice procedures in the bylaws.
In addition, with respect to any meeting of shareholders, nominations of
directors may be made only (a) by or at the direction of the board of directors,
or (b) by any of our shareholders who are entitled to vote at the meeting and
who have complied with the advance notice provisions in the bylaws.
MANAGEMENT LIABILITY
The articles of incorporation limit the personal liability of a
director to us or our shareholders for monetary damage for breaches of the
director's duty of care or other duties as a director. See "Comparison of
Ownership of Units and Shares - Management Liability - Roberts Realty" for
additional information regarding limitations on management liability.
ANTI-TAKEOVER PROVISIONS
The articles of incorporation and bylaws contain a number of provisions
that might have the effect of entrenching current management and delaying or
discouraging a hostile takeover of us. These provisions include the following:
Issuance of Preferred Stock. The board of directors has the power to
issue up to 20,000,000 shares of preferred stock, in one or more classes or
series and with rights and preferences as the board may determine, all without
shareholder approval. Because the board has the power to establish the
preferences and rights of each class or series of preferred stock, it may give
preferences, powers and rights to any series or class of preferred stock that
are senior to the common stock. The board has no present plans to issue any
shares of preferred stock.
Restrictions on Transfer - Ownership Limits. The articles of
incorporation restrict the number of shares of common stock that individual
shareholders may own. For us to qualify as a REIT under the Internal Revenue
Code, as a general matter no more than 50% in value of our outstanding shares
may be owned, directly or indirectly, by five or fewer individuals. The common
stock must also be beneficially owned by 100 or more persons. Because we expect
to continue to qualify as a REIT, our
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articles contain restrictions on the acquisition of our common stock that are
intended to insure compliance with these requirements.
Except as specified in the articles, no holder other than Mr. Roberts
may own or be deemed to own more than 6% of the issued and outstanding shares.
Mr. Roberts cannot acquire more than 25% of the outstanding shares, nor can he
acquire any shares if doing so would cause five beneficial owners of shares to
beneficially own in the aggregate more than 50% in value of the outstanding
shares.
If any shareholder tries to transfer shares to a person and either the
transfer would result in our failure to qualify as a REIT, or the shareholder
knows that the transfer would cause the transferee to hold more than the
applicable ownership limit, the transfer will be void, and the shareholder will
be deemed not to have transferred the shares. In addition, if any person holds
shares in excess of the applicable limit, he or she:
- will be deemed to hold for us in trust the shares that caused
the limit to be exceeded;
- will not receive dividends or distributions on those shares;
- will not be entitled to vote those shares; and
- will be required to sell those shares to us.
Although those restrictions on transfer are intended only to insure
compliance with the REIT requirements under the Internal Revenue Code, they may
have the effect of discouraging a takeover of us.
Supermajority Voting Requirements. The articles of incorporation
provide that no transaction of a fundamental nature, including mergers in which
we are not the survivor, share exchanges, consolidations, or sale of all or
substantially all of our assets, may be effectuated without the affirmative vote
of at least three-quarters of the votes entitled to vote generally on the
matter. Similarly, the articles of incorporation may not be amended (except for
a few limited matters) without the affirmative vote of at least three-quarters
of the votes entitled to be voted generally in the election of directors. The
bylaws may be amended by either the affirmative vote of three-quarters of all
shares outstanding and entitled to vote generally in the election of the
directors, or the affirmative vote of a majority of our directors then holding
office, unless the shareholders prescribed that the bylaw may not be amended or
repealed by the board.
Georgia Anti-Takeover Statutes. The Georgia Business Corporation Code
generally restricts a company from entering into business combinations with an
interested shareholder or an affiliate of an interested shareholder for a period
of five years after the date the shareholder became an interested shareholder,
unless one of the conditions summarized below are met. An "interested
shareholder" is any person or entity that is the beneficial owner of at least
10% of the company's voting stock. The conditions are:
(1) before the shareholder became an interested shareholder, the
company's board of directors approved either the business
combination or transaction which resulted in the shareholder
becoming an interested shareholder;
(2) the interested shareholder acquires 90% of the company's
voting stock in the same transaction in which it exceeds 10%;
or
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(3) after becoming an interested shareholder, the shareholder
acquires 90% of the company's voting stock and the holders of
a majority of the voting stock approve the business
combination.
The Georgia Code states that the above restrictions will not apply unless the
company's bylaws specifically provide that these restrictions are applicable to
the company. We have not elected to be covered by this statute, but we could do
so by action of the board of directors at any time.
The Georgia Code also imposes fair price and other procedural
requirements on some business combinations with any person who owns 10% or more
of the common stock. These statutory requirements restrict business combinations
with, and accumulations of shares of voting stock of, some Georgia corporations.
The statute will apply to a company only if it elects to be covered by the
restrictions imposed by these statutes. We have not elected to be covered by
this statute, but we could do so by action of our board of directors at any
time.
Classified Board of Directors. Our board of directors is divided into
three classes of directors serving staggered three-year terms. Our classified
board may make it more difficult for shareholders to cause a change in control
of the board or to remove incumbent management, because the term of office of
only one-third of the directors expires in a given year. Further, directors
elected by the holders of common stock may be removed only by the affirmative
vote of shareholders holding at least 75% of all of the votes entitled to be
cast for the election of directors.
VOTING RIGHTS
Shareholders are entitled to elect our board of directors at each
annual meeting, although the board is separated into three separate classes as
noted above.
The articles of incorporation provide that the affirmative vote of
three-quarters of all of the votes entitled to be cast on the matter is
necessary to approve and authorize the following acts:
(a) amendment of the articles, except to amend the articles to
terminate our status as a REIT upon approval of a majority of
all of the votes entitled to be cast on the matter, to change
our name, to increase the number of authorized shares of
common stock or preferred stock or both, or to amend the
articles by the filing of articles of amendment designating
the terms of one or more series of the preferred stock, which
the board may do without a shareholder vote;
(b) consolidation of Roberts Realty with one or more companies to
form a new consolidated company;
(c) our merger into another company, with Roberts Realty not being
the survivor;
(d) a share exchange in which our shares will be acquired;
(e) sale, lease, exchange or other transfer of all, or
substantially all, of our property and assets, including our
goodwill and franchises; or
(f) our voluntary or involuntary liquidation, dissolution or
winding-up.
TRANSFER AGENT
Our transfer agent is First Union National Bank of North Carolina.
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THE OPERATING PARTNERSHIP AGREEMENT
General. Roberts Realty and the operating partnership are organized in
an "UPREIT" structure, with Roberts Realty owning a 63.0% interest in the
operating partnership as its sole general partner. This section explains some
material features of the agreement of limited partnership, as amended, of the
operating partnership, which we refer to as the operating partnership agreement.
See "Comparison of Ownership of Units and Shares" for additional information
regarding the operating partnership and the units.
Distributions and Allocations. The operating partnership makes
distributions to all unitholders in proportion to the respective numbers of
units held by them. The operating partnership makes these distributions only as
and when determined by Roberts Realty as general partner of the operating
partnership. Roberts Realty causes the operating partnership to make periodic
distributions to itself and to the other unitholders in the operating
partnership, in part because Roberts Realty must obtain funds to make the
distributions it has to make to qualify as a REIT. The operating partnership
generally allocates its items of income, gain, loss, deduction and credit among
all unitholders in proportion to the respective numbers of units held by them.
As noted below, the operating partnership has issued interests in
itself which are not units, and it may issue additional such interests.
Distributions and allocations to unitholders will be adjusted to reflect
distributions and allocations to the holders of such other interests.
Contributions. The operating partnership agreement does not require
contributions from the operating partnership's partners. However, under some
circumstances the operating partnership may be required to make payments to tax
authorities as, in effect, advance payments of tax for partners. In that event
the affected partners will be required to reimburse the operating partnership
for those payments, unless, as we believe will typically be the case, the
operating partnership withholds those amounts from distributions which would
otherwise be made to the affected partners.
Management. The operating partnership was organized as a Georgia
limited partnership and is governed by the operating partnership agreement.
Roberts Realty, as sole general partner of the operating partnership, has the
exclusive power and authority to conduct the business of the operating
partnership. Accordingly, the limited partners may not, by virtue of being
holders of units, take part in the operation, management or control of the
business of the operating partnership and, except as described below, they have
no right to approve or veto actions taken by the general partner. In particular,
Roberts Realty, as general partner of the operating partnership, is authorized
to cause the operating partnership to refinance and/or to sell or otherwise
dispose of any or all of the operating partnership's assets without obtaining
the consent or approval of any limited partner. The limited partners may not
remove Roberts Realty as general partner of the operating partnership. Roberts
Realty does not and will not receive any compensation for its services as
general partner of the operating partnership.
In its capacity as general partner of the operating partnership,
Roberts Realty is required to act as a fiduciary for the limited partners. At
the same time, Roberts Realty owes fiduciary duties to its shareholders. In some
circumstances, Roberts Realty's duties to its shareholders will conflict with
its duties to the limited partners. For example, Roberts Realty intends to
continue to qualify as a REIT, and its tax objectives may on occasion differ
from the tax objectives of limited partners in the operating partnership. In
general, potential conflicts are expected to be resolved in favor of Roberts
Realty's shareholders, and the operating partnership agreement includes
provisions authorizing that resolution.
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Although Roberts Realty must, as general partner of the operating
partnership, act in good faith in the best interest of the operating
partnership, Roberts Realty is not required to consider the limited partners'
separate interests, including those related to tax issues, in assessing whether
any of its actions meet that standard. The operating partnership agreement also
provides that any action will be considered to meet those standards if it is
taken by Roberts Realty in the good faith belief that it is necessary to protect
the ability of Roberts Realty to continue to qualify as a REIT or to avoid the
taxes that may be assessed on REITs in some circumstances.
Issuance of Additional Interests in the Operating Partnership. Roberts
Realty is authorized to cause the operating partnership from time to time to
issue additional units or other interests in the operating partnership,
including interests with economic and control rights different from and
preferential to corresponding rights associated with units. However, the
operating partnership cannot issue additional units or other interests in the
operating partnership to Roberts Realty unless either (a) the additional units
or other interests are issued to all partners in proportion to their respective
ownership percentages (i.e., at least initially, the respective percentages
which the number of units held by each partner bears to the total of all
outstanding units), or (b) the additional units or other interests are issued at
the same time as an issuance by Roberts Realty of shares of its own stock with
economic interests that are substantially similar to the rights of the
additional interests in the operating partnership, and the net proceeds of the
issuance of the shares are contributed to the operating partnership. As
explained below, the operating partnership has issued a partnership profits
interest to Roberts Properties, Inc., which is owned by Mr. Roberts. No
additional issuance of interests in the operating partnership other than units
is presently contemplated.
Partnership Profits Interest. Between 1994 and 1996, the operating
partnership acquired nine limited partnerships of which Mr. Roberts was the sole
general partner. As a part of each acquisition, the operating partnership
assumed an existing financial obligation to an affiliate of Mr. Roberts. That
financial obligation has been formalized as a profits interest in the operating
partnership, which we refer to as the "section 4A.3 interest" because its rights
are described in section 4A.3 of the operating partnership agreement.
As the holder of the section 4A.3 interest, Roberts Properties may
receive distributions in certain circumstances. Upon a sale of any of the
acquired properties, Roberts Properties will receive a distribution of a
specified percentage of the gross sales proceeds, or, in the case of the
Crestmark Phase II land, a specified amount. Upon a change in control of Roberts
Realty, or the operating partnership, Roberts Properties will receive a
distribution of the applicable percentages of the fair market values of all of
the properties and the specified amount with respect to the Crestmark Phase II
land. The amount to be distributed to Roberts Properties with respect to each
affected property will, however, be limited to the amount by which the gross
proceeds from the sale of that property, or, in connection with a change in
control, its fair market value, exceeds the sum of:
- the debt assumed, or taken subject to, by the operating
partnership in connection with its acquisition of the
property;
- the equity issued by the operating partnership in acquiring
the property; and
- all subsequent capital improvements to the property made by
the operating partnership.
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The percentages which apply to the sales prices, or fair market values,
of the affected properties are shown in the following table:
Bentley Place 3%
River Oaks 5%
Rosewood Plantation 5%
Preston Oaks Phase I 5%
Highland Park 5%
Ivey Brook 5%
Crestmark Phase I 5%
Plantation Trace Phase I 6%
In the case of the Crestmark Phase II land, the specified amount is $86,775.
For each year in which a distribution is made to the holder of the
section 4A.3 interest, it will be allocated capital gain of the operating
partnership equal to the amount of the distribution, and additional gross income
of the operating partnership if the operating partnership's capital gain for the
year is less than the amount of the distribution. If the operating partnership's
gross income, including capital gain, for the year is less than the amount of
the distribution, capital gain, and if necessary other gross income, for future
years will be allocated to the holder of the section 4A.3 interest.
If Roberts Realty exercises its option to acquire all of the
outstanding units for shares, it must simultaneously purchase the section 4A.3
interest for cash in the amount the holder of that interest would receive if a
change in control occurred at that time.
Except for units and the partnership profits interest related to the
original nine limited partnerships acquired between 1994 and 1996, no
partnership interests have been, or are presently expected to be, issued or
assumed by the operating partnership.
Roberts Realty's Right to Convert Interests in the Operating
Partnership. The operating partnership agreement provides that Roberts Realty is
entitled, at any time and from time to time, to convert portions of its interest
in the operating partnership from general partner interests to limited partner
interests, if, immediately thereafter, Roberts Realty continues to hold, as
general partner, either (a) interests in the operating partnership having
aggregate value at least equal to 25% of the aggregate value of all outstanding
interests in the operating partnership, or (b) at least 25% of all outstanding
units and of all other classes and series of interests in the operating
partnership.
Transferability of Interests in the Operating Partnership. The
operating partnership agreement provides that Roberts Realty may not transfer
any of its general partner interests in the operating partnership without the
consent of both (a) a majority in interest of the limited partners including
Roberts Realty, to the extent of its limited partner interest in the operating
partnership, and (b) a majority in interest of all limited partners other than
Roberts Realty and its affiliates. The operating partnership agreement also
provides that no limited partner will be entitled, without Roberts Realty's
consent, to assign or otherwise transfer all or any portion of his or her units,
or to substitute an assignee for himself or herself as partner in the operating
partnership. If an assignment of an interest in the operating partnership, but
not full substitution, is permitted, the assignee will be entitled to receive
only the distributions from the operating partnership which would otherwise be
made to the assignor.
Inability of Roberts Realty to Engage in Other Businesses;
Reimbursement of All Expenses. While the operating partnership is in existence,
Roberts Realty may not conduct any business other than the business of the
operating partnership, and may not own assets other than its
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interests in the operating partnership and bank accounts and similar assets
necessary for it to fulfill its responsibilities. As a corollary to this
restriction, the operating partnership pays all expenses incurred by Roberts
Realty, including, but not limited to, expenses relating to the ongoing
administration and operation of Roberts Realty and the operating partnership,
and any offering of additional units or shares or other interests in the
operating partnership and/or Roberts Realty. Other persons - including officers,
directors, employees, agents and other affiliates of Roberts Realty - are not
prohibited under the operating partnership agreement from engaging in other
business activities and are not required to present any business opportunities
to the operating partnership.
Borrowing by the Operating Partnership. The operating partnership
agreement authorizes Roberts Realty to cause the operating partnership to borrow
money and to issue and guarantee debt as Roberts Realty deems necessary for the
operating partnership to conduct its activities. Debt may be secured by
mortgages, deeds of trust, liens or encumbrances on the real estate assets of
the operating partnership or of organizations in which the operating partnership
has direct or indirect interests. Roberts Realty also may cause the operating
partnership to borrow money to enable the operating partnership to make
distributions in an amount sufficient to permit Roberts Realty to qualify as a
REIT and to avoid the payment of federal income tax.
No Withdrawal by Limited Partners. No limited partner has the right to
withdraw from the operating partnership or reduce his or her investment or
interest in the operating partnership except as a result of the redemption of
his or her units, as described above under "Description of Units and Redemption
of Units."
Dissolution, Winding Up and Termination. The operating partnership will
continue until December 31, 2093, unless sooner dissolved and terminated. The
operating partnership will be dissolved before the expiration of its term upon
the occurrence of the earliest of:
(a) any event following which all or substantially all of the
assets of the operating partnership consist of cash and other
assets which are readily marketable in an established active
market;
(b) any event or circumstances producing dissolution by operation
of law;
(c) the decision by Roberts Realty, with the concurrence of a
majority in interest of the limited partners, including
Roberts Realty, to the extent of its limited partner interest
in the operating partnership, that it would be in the best
interest of the operating partnership to dissolve; or
(d) the liquidation or bankruptcy of Roberts Realty, or of its
retirement or resignation which would itself constitute a
breach of the operating partnership agreement, or of any other
event of withdrawal as respects Roberts Realty (which we refer
to below in any case as a "disqualification"), other than a
permitted transfer by Roberts Realty of its interest as
general partner in the operating partnership, unless, within
90 days following the disqualification, (A) at least (x) a
majority in interest of the partners other than Roberts Realty
and its affiliates, and (y) a majority in interest of all
partners, agree in writing to continue the operating
partnership and (B) at least a majority in interest of the
partners other than Roberts Realty and its affiliates, and one
or more new general partners, all acting in good faith, agree
on the appointment of the new general partner(s) and the terms
on which the operating partnership is to be continued.
In the event of "disqualification" of Roberts Realty, it will retain its units
and become a limited partner in the operating partnership.
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Following dissolution, in the absence of reconstitution, the operating
partnership's "liquidating partners" will proceed with the orderly liquidation
of the operating partnership's assets and liabilities and, eventually,
termination of the operating partnership. The "liquidating partners" will be the
general partners - in particular, Roberts Realty acting alone, if it is then, as
now, the only general partner of the operating partnership - or, if there are
then no general partners, the operating partnership's limited partners, acting
by concurrence of a majority in interest, including, if applicable, Roberts
Realty to the extent of its interest as a limited partner in the operating
partnership.
Amendments. Generally, the operating partnership agreement can be
amended only with the consent of Roberts Realty and a majority in interest of
the limited partners including Roberts Realty to the extent of its limited
partner interest in the operating partnership. Any amendment which would
increase the obligation of a partner to contribute to the operating partnership
or the responsibility of a limited partner, in its capacity as a limited
partner, for liabilities of the operating partnership will also require the
written approval of all partners so affected. No requirement in the operating
partnership agreement for the concurrence of any partner or partners or
particularly-sized group of partners can be altered except with the written
concurrence of the affected partner, partners, or particularly-sized group.
Although approval of limited partners is generally required to amend
the operating partnership agreement, Roberts Realty can unilaterally amend the
operating partnership agreement to facilitate or implement any of the following:
- to add to Roberts Realty's obligations or surrender any right
or power granted to Roberts Realty or any of its affiliates
for the benefit of the limited partners, without producing a
material adverse impact on the limited partners;
- to state the designations, rights, powers, duties, and
preferences of the holders of additional interests in the
operating partnership, other than units;
- to reflect a change that is of an inconsequential nature, or
to cure any ambiguity, correct or supplement any provision in
the operating partnership agreement not inconsistent with law
or with other provisions, or to make other changes with
respect to matters arising under the operating partnership
agreement that will not be inconsistent with law or with the
provisions of the operating partnership agreement, in any case
without producing a material adverse impact on the limited
partners; or
- to satisfy any requirements, conditions, or guidelines
contained in any order, directive, opinion, ruling or
regulation of a federal or state agency or contained in
federal or state law, without producing a material adverse
impact on the limited partners.
COMPARISON OF OWNERSHIP OF UNITS AND SHARES
INTRODUCTION
The information below highlights a number of the significant
differences between the operating partnership and Roberts Realty relating to,
among other things, form of organization, investment objectives, policies and
restrictions, management structure, and investor rights. This section also
compares some of the legal rights associated with the ownership of units and
shares. These comparisons are intended to assist unitholders in understanding
how their investments will be changed if they elect to demand redemption of
their units and receive shares in exchange. This discussion is
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summary in nature and does not constitute a complete discussion of these
matters, and unitholders should carefully review the balance of this prospectus
for additional important information about Roberts Realty.
FORM OF ORGANIZATION
The Operating Partnership. The operating partnership is a limited
partnership organized under Georgia law for the purpose of holding a real estate
portfolio consisting primarily of multifamily apartment communities. The
termination date of the operating partnership is December 31, 2093. The
operating partnership is taxed as a partnership for federal income tax purposes.
Roberts Realty. Roberts Realty is a Georgia corporation formed for the
purpose of investing, through the operating partnership, in a real estate
portfolio consisting primarily of multifamily apartment communities. As a
corporation, Roberts Realty may remain in existence in perpetuity. Roberts
Realty qualifies and intends to continue to qualify as a REIT for federal income
tax purposes.
Summary. The operating partnership is a Georgia limited partnership,
while Roberts Realty is a Georgia corporation. Both of Roberts Realty and the
operating partnership are recognized as appropriate vehicles for holding real
estate investments and afford passive investors benefits, including limited
liability, a professionally managed portfolio and the avoidance of double-level
taxation on distributed income. Roberts Realty controls the operating
partnership as its general partner. In this capacity Roberts Realty is sometimes
referred to in this section as the "General Partner." Roberts Realty is governed
by its board of directors. Therefore, Roberts Realty's board of directors
manages the affairs of the operating partnership by directing the affairs of
Roberts Realty.
LENGTH OF INVESTMENT
The Operating Partnership. The operating partnership is the vehicle
through which Roberts Realty owns its real estate properties. The termination
date of the operating partnership is December 31, 2093, and the operating
partnership will dispose of its properties only as Roberts Realty deems
appropriate in carrying out its operations as a REIT. Unitholders should note,
however, that Roberts Realty has the right to purchase units for shares.
Roberts Realty. Roberts Realty intends to continue its operations for
an indefinite time and has no specific plans for disposition of its assets.
Roberts Realty intends to distribute at least 95% of its taxable income for REIT
purposes, but it expects to retain net sale, financing, or refinancing proceeds
for new investments, capital expenditures, working capital reserves or other
appropriate purposes.
Summary. Roberts Realty does not expect to dispose of its properties
within any prescribed periods and, in any event, plans to retain the net sale
proceeds for future investments. Roberts Realty may sell individual properties
from time to time. Shareholders are expected to achieve liquidity for their
investments by trading the shares on the AMEX, not through the liquidation of
the assets of Roberts Realty or the operating partnership.
MANAGEMENT CONTROL AND RESPONSIBILITY
The Operating Partnership and Roberts Realty. The board of directors
has exclusive control over the business and affairs of Roberts Realty, and,
through it, the operating partnership, subject only to the restrictions in the
articles of incorporation, the bylaws, and the partnership agreement, as
applicable. The partnership agreement, for example, authorizes the operating
partnership to sell any or
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all of its assets without obtaining consent from any of its limited partners.
Shareholders - but not unitholders unless and until they redeem their units for
shares or Roberts Realty purchases their units for shares - have the right to
elect members of the board of directors at each annual meeting of the
shareholders. The directors are accountable to Roberts Realty as fiduciaries and
are required to exercise good faith and integrity in conducting Roberts Realty's
affairs.
Summary. Because one third of Roberts Realty's directors are elected
each year by the shareholders at Roberts Realty's annual meeting, shareholders
have greater control over management of Roberts Realty than unitholders. As the
general partner, Roberts Realty does not need to seek reelection annually or at
any other time, and the partnership agreement does not provide the right to
remove Roberts Realty as the general partner.
MANAGEMENT LIABILITY
The Operating Partnership. The partnership agreement provides that the
general partner will not be liable to the operating partnership or to any other
partner for any actions taken in good faith and reasonably believed to be in the
best interest of the operating partnership, or for errors of judgment, but will
only be liable for willful misconduct or gross negligence.
Further, the partnership agreement provides that each partner in the
operating partnership and the operating partnership itself releases each
shareholder, director, officer, trustee, limited partner and other affiliates of
Roberts Realty from all duties of care and loyalty owed, as a result of the
existence of the operating partnership, by each shareholder, director, officer,
trustee, limited partner and other affiliates of Roberts Realty to the partner
or the operating partnership. This release may be unenforceable as against
public policy.
Roberts Realty. Roberts Realty's articles of incorporation eliminate
the personal liability of a director to Roberts Realty or its shareholders for
monetary damage for breaches of the director's duty of care or other duties as a
director. The articles do not provide for the elimination of or any limitation
on the personal liability of a director for
(a) any appropriation, in violation of the director's duties, of
any business opportunity of Roberts Realty,
(b) acts or omissions which involve intentional misconduct or a
knowing violation of law,
(c) unlawful corporate distributions, or
(d) any transactions from which the director derived an improper
personal benefit.
The articles further provide that if the Georgia Business Corporation Code is
amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of Roberts Realty's
directors shall be eliminated or limited to the fullest extent permitted by the
Georgia Code. These provisions of the articles of incorporation limit the
remedies available to a shareholder in the event of breaches of any director's
duties to the shareholder or Roberts Realty.
MANAGEMENT INDEMNIFICATION
The Operating Partnership. Under the partnership agreement, the
operating partnership is required to indemnify any person or entity made a party
to a proceeding by reason of his or its status as the general partner or as a
director or officer of the operating partnership or Roberts Realty, or by reason
of the person's liability for any indebtedness of the operating partnership. In
addition, Roberts
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Realty, as the general partner of the operating partnership, may designate
other persons from time to time whether before or after the event giving rise to
potential liability, in its sole and absolute discretion, to be indemnified
under the provisions of the partnership agreement. The operating partnership is
required to indemnify any person of that type from and against any and all
losses, including attorneys' fees and other legal fees and expenses, relating to
the operations of the operating partnership or Roberts Realty in which the
person may be or is threatened to be involved unless it is established that:
(a) the act or omission of that person was material to the matter
giving rise to the proceeding and either was committed in bad
faith or was the result of active and deliberate dishonesty;
(b) the person actually received an improper personal benefit in
money, property or services; or
(c) in the case of any criminal proceeding, the person had
reasonable cause to believe that the act or omission was
unlawful.
The operating partnership is required to pay or reimburse reasonable expenses
incurred by the person upon receiving:
(a) a written affirmation by the person of his or her good faith
belief that the standard of conduct necessary for
indemnification has been met; and
(b) a written undertaking by or on behalf of the person to repay
the amount if it shall ultimately be determined that the
standard of conduct has not been met.
The operating partnership may, but is not obligated to, purchase and maintain
insurance for any of these purposes.
Roberts Realty. Roberts Realty's officers and directors are and will be
indemnified against some liabilities under Georgia law, the bylaws, and the
partnership agreement, as described above.
Furthermore, under Roberts Realty's bylaws, Roberts Realty is required
to indemnify to the fullest extent permitted by the Georgia Code, any individual
made a party to a proceeding because he is or was a director or officer, against
liability incurred in the proceeding, if he acted in a manner he believed in
good faith to be in or not opposed to the best interests of Roberts Realty and,
in the case of any criminal proceeding, he had no reasonable cause to believe
his conduct was unlawful. Roberts Realty is required to pay for or reimburse the
reasonable expenses incurred by a director or officer who is a party to a
proceeding in advance of final disposition of the proceeding if:
(a) the person furnishes Roberts Realty a written affirmation of
his good faith belief that he has met the standard of conduct
described above; and
(b) the person furnishes Roberts Realty a written undertaking to
repay any advances if it is ultimately determined that he is
not entitled to indemnification.
The written undertaking required by clause (b) above must be an unlimited
general obligation of the person but need not be secured and may be accepted
without reference to financial ability to make repayment. A corporation may not
indemnify a director under this provision of the Georgia Code in a proceeding by
or in the right of the corporation in which the director was adjudged liable to
the
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corporation, or in any other proceeding in which he was adjudged liable on
the basis that he improperly received a personal benefit.
The rights to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in Roberts
Realty's bylaws are not exclusive of any other right which any person may have
under any statute, provision of Roberts Realty's articles of incorporation or
bylaws, agreement, vote of shareholders or disinterested directors, or
otherwise.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling Roberts
Realty and/or the operating partnership under the provisions described above,
Roberts Realty has been informed that in the opinion of the Securities and
Exchange Commission this indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
ANTI-TAKEOVER PROVISIONS
The Operating Partnership. The unitholders are expressly denied the
right to expel or remove Roberts Realty as the general partner of the operating
partnership, with or without cause. Under Georgia law limited partners have only
the voting rights as are granted in the partnership agreement, and the law does
not require that the limited partners be given any particular voting right,
including the right to vote to remove a general partner.
Roberts Realty. The articles of incorporation and bylaws of Roberts
Realty, as well as some consulting arrangements with Roberts Properties, contain
a number of provisions that might have the effect of entrenching current
management and delaying or discouraging a hostile takeover of Roberts Realty.
These provisions include, among others, the provisions summarized under
"Description of Common Stock - Anti-Takeover Provisions" under the headings
"Issuance of Preferred Stock," "Restrictions on Transfer - Ownership Limits,"
"Supermajority Voting Requirements," "Georgia Anti-Takeover Statutes," and
"Classified Board of Directors."
VOTING RIGHTS
The Operating Partnership. Roberts Realty may not transfer its general
partnership interest in the operating partnership without the consent of both
(a) a majority in interest of the limited partners in the operating partnership,
including Roberts Realty, to the extent of its limited partnership interest in
the operating partnership, and (b) a majority in interest of all limited
partners in the operating partnership other than Roberts Realty and its
affiliates. Roberts Realty, as general partner, may, however, convert a portion
or portions of its general partnership interest in the operating partnership to
limited partnership interests in the operating partnership, within limits
specified in the partnership agreement. Also, a majority in interest of the
limited partners in the operating partnership, other than Roberts Realty and its
affiliates, and a majority in interest of all partners in the operating
partnership, including Roberts Realty and its affiliates, may reconstitute the
operating partnership within 90 days after a dissolution arising out of a
liquidation or bankruptcy of Roberts Realty as general partner, or of its
retirement or resignation in breach of the partnership agreement, or of any
other event of withdrawal by Roberts Realty as general partner. If Roberts
Realty as the general partner decides that it would be in the best interest of
the operating partnership to dissolve, the dissolution may be effectuated only
with the concurrence of a majority in interest of the limited partners of the
operating partnership, including Roberts Realty to the extent of its limited
partnership interest in the operating partnership.
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Except for some technical amendments that may be made by Roberts Realty
as general partner without the consent or approval of the limited partners of
the operating partnership, amendments to the partnership agreement may be made
only with the approval of Roberts Realty as general partner and a majority in
interest of the limited partners, including Roberts Realty to the extent of its
limited partnership interest in the operating partnership, but any amendment to
the partnership agreement that increases the obligation of any partner to
contribute to the operating partnership or the responsibility of any limited
partner as a limited partner for liabilities of the operating partnership shall
also require the written approval of all partners so affected.
Roberts Realty. Roberts Realty's articles of incorporation and bylaws
contain a number of provisions regarding shareholder voting rights. See
"Description of Common Stock - Voting Rights" for a summary of those provisions.
Summary. Shareholders have much broader voting rights than unitholders.
Unitholders have no right to vote as shareholders of Roberts Realty until they
exercise their right to redeem units and receive shares, or their units are
purchased by Roberts Realty for shares.
LIMITED LIABILITY OF INVESTORS
Unitholders. Under the partnership agreement and applicable state law,
the limited partners in the operating partnership are not liable for its debts
and obligations. All outstanding units are fully paid and nonassessable.
Shareholders. Under Georgia law, shareholders are not liable for
Roberts Realty's debts or obligations. All outstanding shares of common stock
are, and the shares when issued will be, fully paid and nonassessable.
Summary. The limitation on personal liability of shareholders and
unitholders is substantially the same.
REVIEW OF INVESTOR LISTS
Unitholders. Under the partnership agreement and under applicable
provisions of Georgia law, the operating partnership is required to maintain a
current list of the full name and last known business address of each partner,
separately identifying in alphabetical order the general partner and the limited
partners. Within reasonable procedural standards that Roberts Realty may
establish as general partner, each partner in the operating partnership is
allowed access to the records on reasonable request for any purpose reasonably
related to the partner's interest as a partner in the operating partnership, at
any time during ordinary business hours. The partner may copy the partnership
records at his own expense.
Shareholders. Under Georgia law a shareholder of a corporation is
entitled to inspect and copy, during regular business hours at a reasonable
location specified by the corporation, the record of shareholders, among other
corporate records, if the shareholder gives the corporation written notice of
his demand at least five business days before the date on which he wishes to
inspect and copy and, in addition, only if:
- his demand is made in good faith and for a proper purpose that
is reasonably relevant to his legitimate interest as a
shareholder;
- he describes with reasonable particularity his purpose and the
records he desires to inspect;
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- the records are directly connected with his purpose; and
- the records are to be used only for the stated purpose.
NATURE OF INVESTMENT
Units. The units in the operating partnership constitute equity
interests entitling each unitholder to his or her pro rata share of cash
distributions made to the unitholders. Under the partnership agreement,
distributions are required from the operating partnership only as and when
determined by its general partner, Roberts Realty. Because Roberts Realty must
satisfy distribution requirements to qualify as a REIT, it causes the operating
partnership to make periodic distributions to its unitholders, including itself,
to obtain funds to satisfy those distribution requirements.
Shares. The shares constitute equity interests in Roberts Realty. Each
shareholder is entitled to his pro rata share of the distributions paid with
respect to the common stock. The distributions payable to the shareholders are
not fixed in amount and are only paid when declared by the board of directors.
Roberts Realty expects to continue to pay quarterly distributions. To qualify as
a REIT, Roberts Realty must distribute annually at least 95% of its taxable
income.
LIQUIDITY
Units. Units may not be transferred, nor may any transferee become a
substitute limited partner unless, among other things, the proposed transfer
and/or substitution is approved by the general partner, who may grant or
withhold its consent in its absolute discretion. Roberts Realty does not intend
for the units to be actively traded, and no secondary market for the units
exists or is expected to develop. Unitholders may require Roberts Realty to
deliver shares in exchange for units.
Shares. The shares are listed on the AMEX. Relatively few shares are
traded on any given day, however, and we cannot assure you that the trading
market will be sustained or that you can resell the shares at any given price.
With these caveats, shareholders can presently liquidate their investment by
selling them into the public market.
FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTION
The following is a general summary of the material federal income tax
considerations associated with exchanges of units for shares and, more
generally, investments in our shares. The following discussion is not exhaustive
of all possible tax considerations and is not tax advice. Moreover, this summary
does not deal with all tax aspects that might be relevant to a particular
investor in light of his or her personal circumstances. For example, this
summary does not deal with particular types of taxpayers that receive special
treatment under the Internal Revenue Code, such as tax-exempt organizations,
foreign persons, insurance companies, financial institutions and broker-dealers,
nor, because of our policy of satisfying redemption notices with shares, does it
address tax consequences of satisfaction of redemption notices with cash. The
Internal Revenue Code provisions governing the federal income tax treatment of
REITs and partnerships are highly technical and complex, and this summary is
qualified in its entirety by the applicable Internal Revenue Code provisions,
rules and regulations promulgated under them, and administrative and judicial
interpretations of them. The following discussion is based on current law.
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Holt Ney Zatcoff & Wasserman, LLP, which we refer to in this section as
Holt Ney, has acted as our tax counsel for this offering. Holt Ney reviewed the
following discussion and has made the following assumptions:
- current statutory, regulatory, administrative and judicial law
is applied;
- the anti-abuse regulation discussed below is not applicable to
us and the operating partnership;
- our activities and those of the operating partnership have
been, are and will be as described in this prospectus; and
- the operating partnership has not filed and will not file an
election to be classified as an association for federal income
tax purposes.
Based on these assumptions, Holt Ney is of the opinion that:
(a) the following discussion fairly summarizes the federal income
tax considerations that are likely to be material to a
unitholder who exchanges units for shares;
(b) Roberts Realty was organized and has operated in conformity
with the requirements for qualification and taxation as a REIT
within the meaning of the Internal Revenue Code, and our
current organization and method of operation should enable
Roberts Realty to continue to satisfy the requirements for
qualification and taxation as a REIT; and
(c) the operating partnership has properly been and will properly
be classified as a partnership for federal income tax
purposes.
Federal income tax law is essentially dynamic, changing continuously
and sometimes rapidly as a result of new legislation, new regulations, and new
administrative and judicial pronouncements. All tax matters affecting us, the
operating partnership, and/or the shareholders are and will be subject to
change. Because an investment in us or the operating partnership will likely be
a long-term investment, and because federal income tax considerations are of
particular importance in the case of investments in REITs and partnerships,
unitholders should consider carefully their exposure to the inherently
unpredictable character of tax law development before ultimately deciding to
exchange units for shares.
WE URGE EACH UNITHOLDER TO CONSULT HIS OR HER OWN TAX ADVISORS
REGARDING THE EXCHANGE OF UNITS FOR SHARES AND THE HOLDING AND SALE OF UNITS AND
SHARES.
TAX CONSEQUENCES OF EXCHANGE OF UNITS FOR SHARES
The following discussion summarizes some federal income tax
considerations that may be relevant to a limited partner who exchanges his or
her units for shares.
In General. An exchange of a limited partner's units for shares will be
treated as a sale of units by the limited partner to Roberts Realty. The sale
will be fully taxable to the limited partner. He or she will realize for tax
purposes an amount equal to the sum of the value of the shares received in
exchange for the units, plus the amount of any partnership liabilities allocable
to the exchanged units at the time of the exchange. He or she will owe tax on
the excess of the amount realized over his or her basis in the exchanged units.
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Except as described below, any gain recognized upon a sale or other
disposition of units will be treated as gain attributable to the sale or
disposition of a capital asset. However, the excess of (A) the amount realized
upon the sale of a unit that is attributable to a limited partner's share of the
operating partnership's "inventory" and "unrealized receivables" (as defined in
Section 751 of the Code) over (B) the basis attributable to those assets will be
ordinary income. Unrealized receivables include amounts that would be recaptured
as ordinary income if the operating partnership had sold its assets at their
fair market value at the time of the transfer of a unit.
In the case of units held for more than one year, gain recognized on
their sale or other disposition will constitute long-term capital gain. Although
long-term capital gains are generally taxed at rates which are lower than those
applicable to ordinary income, all or a portion of the gain recognized on a sale
or other disposition of units will be taxed at 25% rather than the normal rate
applicable to long-term capital gains.
Basis of Units. In general, a unitholder's initial basis in his or her
units received in connection with a merger of a predecessor of the operating
partnership into the operating partnership was his or her basis in his or her
interest in the predecessor partnership at the time of the merger. The
unitholder's initial basis generally is increased by (1) his or her share of the
operating partnership's income and (2) increases in his or her share of the
operating partnership's liabilities (including any increase in his or her share
of liabilities occurring in the transactions resulting in the issuance of the
units).
Generally, a unitholder's basis in his or her units is decreased, but
not below zero, by:
- his or her share of the operating partnership's distributions;
- decreases in his or her share of the operating partnership's
liabilities, including any decrease in his or her share of
liabilities occurring in the transactions resulting in the
issuance of the units;
- his or her share of the operating partnership's losses; and
- his or her share of the operating partnership's nondeductible
expenditures that are not chargeable to capital.
UPREIT STRUCTURE
In considering the federal income taxation of Roberts Realty and our
shareholders, please note at the outset that:
(a) we intend to continue to qualify as a REIT for tax purposes;
and
(b) we intend to conduct all of our business activities through
the operating partnership.
Qualification as a REIT involves satisfaction of a variety of conditions, and
special rules apply to any would-be REIT which owns an interest in a
partnership. The observations in this section relate to the special rules
applicable to organizations which own partnership interests. In general, unless
the context dictates otherwise, the observations under other sections relate to
the general rules applicable to REIT qualification and to REITs and their
shareholders, and references in those sections to our assets and/or income are
intended to be read, in appropriate circumstances, as references to our share of
the operating partnership's assets and/or income.
Tax Status of the Operating Partnership - In General. If the operating
partnership were to be classified for federal income tax purposes as an
association taxable as a corporation, rather than as a
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partnership, the operating partnership's income would be taxed, thereby reducing
amounts distributable to its partners, including us, and we would fail to
satisfy a number of conditions required for qualification as a REIT. We and Holt
Ney believe that the operating partnership has been, and we and Holt Ney
anticipate that it will continue to be, properly classified as a partnership for
federal income tax purposes, based upon the Internal Revenue Code and
regulations as currently in effect, and assuming that the anti-abuse regulation
discussed below is not applicable to us and the operating partnership.
Tax Status of the Operating Partnership - "Publicly-Traded"
Partnerships. Under section 7704 of the Internal Revenue Code, some
organizations which would otherwise be classified as partnerships for federal
income tax purposes will nevertheless be classified as corporations if interests
in them are publicly-traded. Although no public market has developed for
interests in the operating partnership, under applicable tax regulations the
operating partnership probably will be considered "publicly traded" for purposes
of section 7704. That result is not fatal to the operating partnership's
partnership tax classification, however, because section 7704 does not
reclassify a "publicly-traded" partnership as a corporation if at least 90% of
its annual gross income is "qualified." As described below under "Requirements
for Qualification - Income Tests," for us to qualify for REIT status at least
95% of our gross income (other than gross income from prohibited transactions)
must be of specific types, all of which are "qualified" for purposes of section
7704; moreover, even if we have gross income from prohibited transactions it is
likely that all or most of that gross income would itself be "qualified" under
section 7704. Consequently, if the operating partnership is operated as though
it were itself seeking to qualify as a REIT, it should escape corporate tax
classification under section 7704 even if it were held to be "publicly-traded"
for purposes of that section.
Tax Status of the Operating Partnership - "Anti-Abuse" Regulation. In
late 1994, the IRS published a regulation which purports to give itself an
additional weapon to combat what it perceives as tax abuses involving
partnerships. More particularly, the regulation provides that if a partnership
is formed or availed of to reduce or defer tax liabilities in a manner
inconsistent with the intent of subchapter K of chapter 1 of the Internal
Revenue Code, which contains the general tax rules applicable to partnerships,
the IRS may take whatever action it deems appropriate, including, but not
limited to, disregarding the partnership.
An UPREIT structure like ours arguably invites application of this
regulation because an UPREIT typically defers, and in some cases reduces, tax
liabilities. Of course, this is almost inevitable when taxpayers decide to
conduct activities collectively through a partnership rather than a corporation,
and the regulation is not designed to force taxpayers to select the corporate
form. In the case of an UPREIT, however, the possible application of the
regulation is more inviting because units of partnership interest in the
UPREIT's operating partnership are typically exchangeable, at least at some
times, for shares in the REIT.
The "anti-abuse" regulation contains an example expressly precluding
its application to an UPREIT structure in some circumstances, including where
some partners in the operating partnership have rights to exchange their
interests in the operating partnership for cash or shares of the REIT at a
future time. The regulatory example appears to base its favorable conclusion on
the assessment that the REIT and the operating partnership exist independently,
and that, despite the rights of some partners to exchange their interests for
shares of the REIT, the operating partnership is not a transitory stage in an
ultimate direct investment in the REIT.
The UPREIT arrangements considered in the example, however, differ in
potentially material respects from the arrangements applicable to us and the
operating partnership. First, our operating
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partnership's partnership agreement effectively precludes us from making real
estate investments or conducting activities other than through the operating
partnership. Second, not just some but all of our operating partnership's
unitholders have rights to exchange units for cash or shares. Third, we have the
right, under some circumstances, to purchase all outstanding equity interests in
the operating partnership and thereby effectively terminate the operating
partnership's existence. Consequently, insofar as the regulatory example's
favorable conclusion is founded on the degree of likelihood that the applicable
operating partnership will continue indefinitely, the situation with respect to
us and our operating partnership does not present as strong a case for
non-applicability of the regulation.
However, it is by no means clear that the operating partnership will be
terminated in the near future, or at any particular time. There are significant
conditions on the rights of the operating partnership's limited partners to
require redemption of their units, and on our ability to exercise our right to
purchase all outstanding units and other equity interests. Moreover, our
purchase right to exchange shares for units was included in the operating
partnership's partnership agreement simply to afford us an ability, under some
circumstances, to eliminate the operating partnership should its administration
become unduly burdensome. In fact, we currently have no plan to exercise that
option at any particular time, or at all for that matter. The simple fact is
that the operating partnership has existed for nearly five years, and there is
no reason to believe that it will not continue for the entire life of Roberts
Realty.
Consequently, although the UPREIT example in the anti-abuse regulation
does not by its terms apply to us and our operating partnership, its apparent
rationale affords us and our operating partnership a well-reasoned argument that
the regulation should not be applied to us and/or our operating partnership. We
cannot, however, assure you that the IRS will not try to apply the regulation to
us and/or our operating partnership, or that the courts would refuse to uphold
an attempt by the IRS.
The anti-abuse regulation, if applicable, permits the IRS wide latitude
in recharacterizing the subject organizations and/or transactions. Therefore,
the consequences of its application to us and/or our operating partnership
cannot be predicted with certainty. The IRS might choose to disregard the
operating partnership entirely, and consider the assets and operations of, and
the investors in, the operating partnership as direct assets and operations of,
and direct investors in, Roberts Realty. In that event we could fail to satisfy
some of the requirements for qualification as a REIT. See "Requirements for
Qualification - Organizational Requirements - In General" and "- Organizational
Requirements - Anti-Abuse Regulation," below. On the other hand, although the
"anti-abuse" regulation permits the IRS to act with considerable discretion,
that discretion is not unlimited. In particular, the IRS is authorized under the
regulation to take action "to achieve results that are consistent with the
intent of Subchapter K." Insofar as qualification as a REIT is generally
consistent with - indeed fundamentally independent of - subchapter K,
application of the anti-abuse regulation to cause an otherwise-qualifying
organization to fail to qualify as a REIT seems unlikely, particularly in view
of the generally favorable attitude of the regulation towards the UPREIT
structure.
The remarks that follow generally assume, as we anticipate, that the
operating partnership is and will remain properly classified, for federal income
tax purposes, as a separate organization from us, and as a partnership rather
than a corporation.
Tax Allocations. All or substantially all of our income and expenses
are anticipated to arise indirectly out of the operating partnership's
activities. For federal income tax purposes, we will be required to account for
our distributive share of the operating partnership's tax items, which in
general will consist of a fraction of each item allocated to all unitholders
collectively. The fraction would be
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the result of dividing the number of units we hold by the total number of
outstanding units, except as provided in the following paragraphs.
When property is contributed to a partnership in exchange for an
interest in the partnership, the partnership generally takes a carryover basis
in that property for tax purposes equal to the adjusted basis of the
contributing partner in the property, rather than a basis equal to the fair
market value of the property at the time of contribution. Under section 704(c)
of the Internal Revenue Code, income, gain, loss and deduction attributable to
the contributed property must be allocated so that the contributing partner
(rather than the other partners) bears the tax burden associated with the
unrealized gain, or reaps the tax benefits associated with the unrealized loss,
inherent in the property at the time of the contribution. The amount of the
unrealized gain or unrealized loss is generally equal to the difference between
the fair market value of the contributed property at the time of contribution
and the adjusted tax basis of the property at that time. These allocations are
solely for federal income tax purposes and do not affect the book capital
accounts or other economic or legal arrangements among the partners.
The operating partnership currently owns properties with value in
excess of tax basis. Consequently, the operating partnership's partnership
agreement requires tax allocations to be made in a manner consistent with
section 704(c).
Regulations under section 704(c) of the Internal Revenue Code provide
partnerships with a choice of several methods of accounting for the difference
between the fair market value of the contributed property at the time of
contribution and the adjusted tax basis of the property at the time of
contribution. The available methods include the "traditional method," which was
available under prior law, and alternative methods. We have caused the operating
partnership to elect the "traditional method," which is generally the least
favorable method from our perspective and the most favorable method for the
contributors. Under that method, the operating partnership's carryover basis in
its contributed properties could cause us:
(a) to be allocated lower amounts of depreciation deductions for
tax purposes than would be allocated to us if each property
had a tax basis equal to its fair market value at the time of
contribution, and
(b) to be allocated taxable gain in the event of a sale of a
contributed property in excess of the economic or book income
allocated to us as a result of the sale,
with a corresponding benefit to other partners in the operating partnership.
These allocations could, in some circumstances, cause us to recognize taxable
income in excess of cash proceeds, which might adversely affect our ability to
comply with the REIT distribution requirements described below under
"Requirements for Qualification Annual Distribution Requirements."
An additional set of special allocation rules mirrors the section
704(c) allocation rules and for that reason are sometimes referred to as the
"reverse section 704(c) rules." Section 704(c) requires that contributed
property be taken into account at fair market value in determining the
contributing partners' capital accounts, and thereafter special allocations with
respect to the contributing partners are required to account for the unrealized
gain or loss inherent in the contributed property. The reverse Section 704(c)
rules permit a partnership to adjust the non-contributing partners' capital
accounts upwards or downwards to reflect the then-current fair market value of
the partnership's assets other than those being contributed, and thereafter
special allocations with respect to the non-contributing partners are required
to account for the unrealized gain or loss inherent in the partnership's assets
other than those being contributed.
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The operating partnership's partnership agreement permits us, as
general partner, to elect application of the reverse section 704(c) rules.
Because the operating partnership's distributions to unitholders are in all
events to be apportioned among the unitholders by reference to the numbers of
units held by each of them, it is possible that the operating partnership's
allocations would not be valid for federal income tax purposes if there were a
difference between the capital account balances associated with different units;
consequently, it is important that all units carry the same capital account
balance. Because application of the reverse section 704(c) rules produces the
same capital account balance for each unit, we have elected to apply those
rules.
As a result of the differences between (a) the fair market values of
the contributed properties at the time of contribution and their adjusted tax
bases at the time of contribution, (b) the allocations required by section
704(c), and (c) the reverse section 704(c) rules, our distributive share of the
operating partnership's tax items, which is employed in calculating taxable
income generally, may differ from our proportionate share of the assets and
income of the operating partnership, which is employed in testing for REIT
qualification. We do not expect that any material adverse effect will be
produced by this difference.
FEDERAL INCOME TAXATION OF ROBERTS REALTY
The Internal Revenue Code's requirements for qualification as a REIT
are complex and depend on our actual operating results, as discussed below.
Although Holt Ney is of the opinion that, under certain assumptions, we have
qualified and will qualify as a REIT, Holt Ney has not reviewed and cannot
control our operating results. Although neither they nor we can assure you that
we have met and will continue to meet the Internal Revenue Code's REIT
qualification requirements, we believe that we have operated, and we intend to
continue to operate, so as to meet them.
If we qualify for taxation as a REIT, we generally will not be required
to pay federal corporate income tax on that portion of our ordinary income or
capital gain that is currently distributed to shareholders. The REIT provisions
of the Internal Revenue Code generally allow a REIT to deduct dividends paid to
its shareholders. This deduction for dividends paid to shareholders
substantially reduces the federal "double taxation" on earnings - once at the
corporate level when earned and once again at the shareholder level when
distributed - that usually results from investments in a corporation.
Even if we qualify for taxation as a REIT, however, we are required to
pay federal income tax in the following circumstances:
- First, we will be taxed at regular corporate rates on our
undistributed REIT taxable income, including undistributed net
capital gains.
- Second, we may be required to pay the "alternative minimum
tax" as a consequence of our items of tax preference.
- Third, if we have net income from the sale or other
disposition of "foreclosure property" that is held primarily
for sale to customers in the ordinary course of business or
other non-qualifying income from foreclosure property, we will
be required to pay tax at the highest corporate rate on that
income.
- Fourth, if we have net income from "prohibited transactions"
(which are, in general, sales or other dispositions of
property other than foreclosure property held primarily for
sale to
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customers in the ordinary course of business), we will be
required to pay a 100% tax on that income.
- Fifth, if we should fail to satisfy either the 75% or the 95%
gross income test discussed below, but have nonetheless
maintained our qualification as a REIT because other
requirements have been met, we will be required to pay a 100%
tax on the net income attributable to the greater of the
amount by which we fail the 75% or 95% test, multiplied by a
fraction intended to reflect our profitability.
- Sixth, if we fail to distribute during each year at least the
sum of
(a) 85% of our ordinary income for that year,
(b) 95% of our capital gain net income for that year, and
(c) any undistributed taxable income from prior periods,
we will be required to pay a 4% excise tax on the excess of
the required distribution over the amounts actually
distributed.
- Seventh, under guidelines issued by the IRS, if we acquire any
asset from a C corporation in a carryover basis transaction
and we later recognize gain on disposing of that asset during
the ten-year period beginning on the date we acquired the
asset, we will be taxed, at the highest regular corporate
rate, on the resulting gain, to the extent of the excess of
(a) the fair market value of the asset as of the date we
acquired it, over
(b) our adjusted basis in the asset as of the date we
acquired it.
REQUIREMENTS FOR QUALIFICATION
To qualify as a REIT, we must elect to be so treated and must meet the
requirements, discussed below, relating to our organization, sources of income,
nature of assets, and distributions of income to shareholders.
Organizational Requirements - In General. The Internal Revenue Code
defines a REIT as a corporation, trust or association:
(a) that is managed by one or more trustees or directors;
(b) the beneficial ownership of which is evidenced by transferable
shares or by transferable certificates of beneficial interest;
(c) that would be taxable as a domestic corporation were it not to
qualify as a REIT;
(d) that is neither a financial institution nor an insurance
company under provisions of the Internal Revenue Code;
(e) the beneficial ownership of which is held by 100 or more
persons; and
(f) during the last half of each taxable year not more than 50% in
value of the outstanding stock of which is owned, directly or
indirectly, through the application of attribution rules, by
five or fewer shareholders who are natural persons or, in some
cases legal entities.
The Internal Revenue Code provides that conditions (a) through (d) must
be met during the entire taxable year and that condition (e) must be met during
at least 335 days of a taxable year of 12
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months, or during a proportionate part of a taxable year of less than 12 months.
Conditions (e) and (f) do not apply to an organization until after the first
taxable year for which it elects to be taxed as a REIT. For purposes of
conditions (e) and (f), pension funds and some other tax-exempt entities are
treated as individuals, subject to a "look-through" exception, in the case of
condition (f), pursuant to which interests held by some qualified trusts are
considered held by the beneficiaries of the trust rather than by the trust
itself.
Before completion of the October 1994 consolidation, we did not satisfy
conditions (e) and (f) above. Our issuance of shares in the October 1994
consolidation allowed us to satisfy those requirements. In addition, our
organizational documents include restrictions regarding transfer of our shares
which are intended, among other things, to assist us in continuing to satisfy
those requirements. See, however, "Organizational Requirements - Anti-Abuse
Regulation" below.
A corporation may not elect to become a REIT unless its taxable year is
the calendar year. Our taxable year is the calendar year.
Organizational Requirements - Anti-Abuse Regulation. As noted above
under "UPREIT Structure - Tax Status of the Operating Partnership - `Anti-Abuse'
Regulation," if the partnership tax anti-abuse regulation were to be held
applicable to us and/or the operating partnership, and if the operating
partnership were to be ignored for federal income tax purposes, holders of units
in the operating partnership would be considered direct investors in us. Under
those circumstances we theoretically could fail either or both of conditions (b)
and (f) above for the following reasons.
- Condition (b) above requires that interests in a REIT be
"transferable." The units in the operating partnership are not
freely transferable, because they may only be transferred with
our consent, in our role as general partner of the operating
partnership. Therefore, if the operating partnership were to
be ignored and its units considered direct investments in us,
we might fail to meet the requirement of condition (b) because
some of our outstanding equity interests - the units - would
not be "transferable."
- Condition (f) above requires that during the last half of each
taxable year not more than 50% in value of our outstanding
stock be owned by five or fewer individuals. If the
partnership tax anti-abuse regulation were applied to ignore
the operating partnership and to consider the holders of units
and the section 4A.3 interest to be direct investors in us,
their holdings would apparently be required to be taken into
account in assessing the operating partnership's satisfaction
of condition (f). To date no violation of condition (f) would
have resulted from taking all units and the section 4A.3
interest into account as though they were direct interests in
us. However, the transfer restrictions included in our
organizational documents do not literally apply to units or
the section 4A.3 interest, so a violation of condition (f)
could occur in the future if units and the section 4A.3
interest were considered interests in us for tax purposes.
Although there exists a possibility that application of the partnership
tax anti-abuse regulation to us and/or our operating partnership could result in
our failure to qualify as a REIT, we have a well-reasoned argument that the
regulation should not be applied to us and/or the operating partnership, and
even if the regulation were applied to us and/or the operating partnership it
seems unlikely that it would cause us, or any otherwise-qualifying organization,
to fail to qualify as a REIT. See "UPREIT Structure - Tax Status of the
Operating Partnership - `Anti-Abuse' Regulation."
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Income and Asset Tests - In General; Proportionate Shares. In addition
to satisfying the organizational requirements described above, an organization
seeking to qualify as a REIT for federal income tax purposes must satisfy a
variety of conditions relating to its income and assets. In the case of an
organization which is a partner in a partnership, tax regulations provide that,
for purposes of testing for qualification as a REIT, the organization will be
deemed to own its proportionate share (determined by reference to its "capital
interest" in the partnership) of the assets of the partnership and will be
deemed to be entitled to the income of the partnership attributable to that
share. In addition, for these purposes the character of the assets and gross
income of the partnership are considered to retain the same character in the
hands of the organization as they have in the hands of the partnership.
Measurement of the "capital interest" - and therefore the
"proportionate share" - of a partner in a partnership for purposes of REIT
qualification is somewhat uncertain. This is particularly true where, as is the
case for us and the operating partnership, there are differences between the
fair market values of contributed properties at the time of contribution and
their adjusted tax bases at that time. As noted above under "UPREIT Structure -
Tax Allocations," however, we do not expect that any material adverse effect
will be produced by this uncertainty or by any resulting difference between our
distributive share of the tax items of the operating partnership, which is
employed in calculating taxable income generally, and our proportionate share of
the operating partnership's assets and income, which is employed in testing for
REIT qualification.
Income Tests. To maintain qualification as a REIT, two gross income
requirements must be satisfied annually.
- First, at least 75% of our gross income, excluding gross
income from prohibited transactions, for each taxable year
must be derived directly or indirectly from real property
investments (including "rents from real property," gain from
the sale or other disposition of real property not held for
sale to customers in the ordinary course of business, and, in
some circumstances, interest), or from some types of temporary
investments.
- Second, at least 95% of our gross income, excluding gross
income from prohibited transactions, for each taxable year
must be derived from real property investments, dividends,
interest and gain from the sale or other disposition of stock
or securities.
Our rents will qualify as "rents from real property" in satisfying the
gross income requirements for a REIT described above only if several conditions
are met.
- First, the amount of rent generally must not be based in whole
or in part on the income or profits of any person.
- Second, the Internal Revenue Code provides that rents received
from a resident will not qualify as "rents from real property"
in satisfying the gross income tests if the REIT, or an owner
of 10% or more of the REIT, directly or constructively owns
10% or more of that resident.
- Third, if rent attributable to personal property leased in
connection with a lease of real property is greater than 15%
of the total rent received under the lease, then the portion
of rent attributable to the personal property will not qualify
as "rents from real property."
- Fourth, for rents from property to qualify as "rents from real
property" the REIT generally must not operate or manage the
property or furnish or render services to residents, other
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than through an "independent contractor" who is adequately compensated
and from whom the REIT does not derive any income. However,
(a) a REIT may provide services with respect to a
property without disqualifying the rents therefrom if
the services are "usually or customarily rendered" in
connection with the rental of rooms or other space
for occupancy only and are not otherwise considered
"rendered to the occupant,"
(b) the independent contractor rule does not apply to
disqualify rents which, if received by a tax-exempt
organization, would not constitute "unrelated
business taxable income," and
(c) the presence of a de minimis amount of impermissible
activities with respect to a property will disqualify
only the income from those activities and not all
otherwise-qualifying income from the property.
We do not anticipate:
- charging rent that is based in whole or in part on the income
or profits of any person;
- deriving rent attributable to personal property leased in
connection with real property that exceeds 15% of the total
rents; or
- receiving rent from any resident in whom we, or an owner of
10% or more of us, directly or constructively owns 10% or
more.
We believe that
(a) our services with respect to our properties are usually or
customarily rendered in connection with the rental of space
for occupancy only and are not otherwise rendered to
particular residents,
(b) none of our activities has been or will be of a nature which
would cause rental income from our properties to constitute
"unrelated business taxable income" if received by a
tax-exempt organization,
and that therefore
(c) our activities and services will not cause our rents to fail
to qualify as "rents from real property."
We will engage independent contractors to provide services that we believe we
cannot provide directly without jeopardizing the qualification of our rents as
"rents from real property."
If we fail to satisfy one or both of the 75% or the 95% gross income
tests for any taxable year, we may nevertheless qualify as a REIT for that year
if we are eligible for relief under provisions of the Internal Revenue Code.
These relief provisions will generally be available if
(a) our failure to meet these tests was due to reasonable cause
and not due to willful neglect,
(b) we attach a schedule of the sources of our income to our
federal income tax return, and
(c) any incorrect information on the schedule is not due to fraud
with intent to evade tax.
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<PAGE> 34
We cannot predict whether or not, in all circumstances, we would be entitled to
the benefit of these relief provisions. As noted above under "Federal Income
Taxation of Roberts Realty," even if these relief provisions apply, we would
have to pay a tax on the excess net income. See "Failure to Qualify for Taxation
as a REIT" below.
Asset Tests. At the close of each quarter of our taxable year, we also
must satisfy three tests relating to the nature and diversification of our
assets.
- First, at least 75% of the value of our total assets must be
represented by real estate assets, cash, cash items and
government securities.
- Second, no more than 25% of our total assets may be
represented by securities other than those in the 75% asset
class.
- Third, of the investments included in the 25% asset class, the
value of any one issuer's securities owned by us may not
exceed 5% of the value of our total assets, and we may not own
more than 10% of any one issuer's outstanding voting
securities.
After initially meeting the asset tests at the close of any quarter, we
will not lose our status as a REIT for failure to satisfy the asset tests at the
end of a later quarter solely by reason of changes in asset values. If the
failure to satisfy the asset tests results from an acquisition of property
during a quarter, the failure can be cured by disposition of sufficient
nonqualifying assets within 30 days after the close of that quarter. We intend
to maintain adequate records of the value of our assets to ensure compliance
with the asset tests, and on a timely basis to take such actions as may be
required to cure any noncompliance.
Annual Distribution Requirements. To be taxed as a REIT, we are
required to distribute dividends (other than capital gain dividends) to our
shareholders in an amount at least equal to
(a) the sum of
(x) 95% of our "REIT taxable income," computed without
regard to the dividends-paid deduction and capital
gain; and
(y) 95% of the net income, if any, from foreclosure property in
excess of the special tax on income from foreclosure property,
minus
(b) the sum of some items of non-cash income.
We must pay those distributions in the taxable year to which they relate, or in
the following taxable year if we declare them before we timely file our federal
income tax return for that year and pay them when or before we make our first
regular dividend payment after they are declared. Even if we satisfy these
distribution requirements, to the extent that we do not distribute all of our
net capital gain or "REIT taxable income" (as adjusted), we will be taxed on the
undistributed amount at regular capital gains or ordinary corporate tax rates.
Furthermore, if we fail to distribute during each calendar year at least the sum
of
(a) 85% of our ordinary income for that year,
(b) 95% of our capital gain net income for that year, and
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<PAGE> 35
(c) any undistributed taxable income from prior periods,
we will be required to pay a 4% excise tax on the excess of the required
distribution over the amounts actually distributed.
In addition, under guidelines issued by the IRS, if we recognize gain
on the disposition of any asset which we acquired from a C corporation in a
carryover basis transaction during the ten-year period beginning on the date on
which we acquired the asset, we will be required to distribute at least 95% of
such gain, net of tax, to the extent attributable to the excess of
(a) the fair market value of the asset as of the date we acquired
it; over
(b) our adjusted basis in that asset as of the date we acquired
it.
We intend to make timely distributions sufficient to satisfy the annual
distribution requirements. We anticipate that we will generally have sufficient
cash or other liquid assets to enable us to satisfy the distribution
requirements, in part because we expect that our REIT taxable income will
generally be less than our cash flow due to the allowance of depreciation and
other non-cash charges in computing REIT taxable income. From time to time we
may not have sufficient cash or other liquid assets to meet the distribution
requirements or to distribute the greater amount which may be necessary to avoid
income and excise taxation, due to timing differences between
(a) the actual receipt of income and the actual payment of
deductible expenses, and
(b) the inclusion of that income and the deduction of those
expenses in arriving at our taxable income,
or as a result of nondeductible expenditures (such as principal payments of
indebtedness and capital expenditures) in excess of noncash deductions.
If those timing differences occur, we may find it necessary to borrow
funds or, if possible, to pay taxable stock dividends to meet the distribution
requirements.
We may be able to rectify a failure to meet the distribution
requirements for a year by paying "deficiency dividends" to shareholders in a
later year, which may be included in our deduction for dividends paid for the
earlier year. Even in those circumstances, however, we would be required to pay
interest based upon the amount of any deduction taken for deficiency dividends.
Earnings and Profits. The existence of undistributed earnings and
profits of a non-REIT predecessor corporation at the close of a taxable year
generally precludes a successor corporation from qualifying to be taxed as a
REIT. We do not anticipate having undistributed earnings and profits of the
prohibited type.
FAILURE TO QUALIFY FOR TAXATION AS A REIT
If we fail to qualify for taxation as a REIT in any taxable year and
the relief provisions do not apply, the requirement that REITs distribute most
of their net income to shareholders will not apply, and indeed we will be under
no requirement to make any distributions to our shareholders. Moreover, our
failure to qualify will make us subject to the full system of federal income tax
generally applicable to corporations, with no deduction for any dividends paid
to our shareholders, and the resulting
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<PAGE> 36
additional tax liability will reduce, and may even eliminate, the amount of
funds we have available from time to time for distributions to our shareholders.
In addition, unless we are entitled to relief under specific statutory
provisions, we will be disqualified from taxation as a REIT not only for the
year during which qualification was lost, but also for the four following years.
We cannot predict whether or not in all circumstances we would be entitled to
the statutory relief.
If we fail to qualify as a REIT, such distributions as we do make to
shareholders will, to the extent of our current or accumulated earnings and
profits, be dividends for federal income tax purposes, taxable as ordinary
income. Corporate distributees, however, may be eligible to apply a
dividends-received deduction to those dividends.
TAXATION OF SHAREHOLDERS
The following observations assume, as we anticipate, that each person
who or which exchanges units for shares will be a fully taxable
(a) citizen or resident of the United States,
(b) corporation, partnership or other entity created or organized
in or under the laws of the United States or of any political
subdivision of the United States, or
(c) estate or trust, the income of which is taxed as United States
income, regardless of its source.
In particular, it is assumed that no exchanging unitholder will be a tax-exempt
organization or a foreign individual or organization.
Distributions Generally. Distributions to shareholders, other than
capital gain dividends discussed below, will constitute dividends up to the
amount of our current or accumulated earnings and profits and will be taxable to
the shareholders as ordinary income. Distributions from us will not be eligible
for the dividends-received deduction for corporations. To the extent that we
make a distribution in excess of our current or accumulated earnings and
profits, the distribution to a shareholder will be treated first as a tax-free
return of capital, reducing the shareholder's tax basis in his or her shares,
and the distribution in excess of the shareholder's tax basis in his or her
shares will be taxable as gain realized from the sale of his or her shares.
Dividends declared by us in October, November or December of any year payable to
a shareholder of record on a specified date in any of those months will be
treated as both paid by us and received by the shareholder on December 3l of the
year, provided that the dividend is actually paid by us during January of the
following calendar year.
We will be considered to have sufficient earnings and profits to treat
as a dividend any distribution by us up to the amount required to be distributed
to avoid imposition of the 4% excise tax discussed above under "Federal Income
Taxation of Roberts Realty." Moreover, any "deficiency dividend" will be treated
as an ordinary or capital gain dividend, as the case may be, regardless of our
earnings and profits. As a result, shareholders may be required to treat as
taxable dividends some distributions that would otherwise be characterized as
tax-free returns of capital.
Capital Gain Dividends; Designations of Undistributed Capital Gain.
Dividends to shareholders that are properly designated by us as capital gain
dividends will be treated as long-term capital gains, to the extent they do not
exceed our actual net capital gain, for the taxable year without regard to the
period for which the shareholder has held his or her shares, except that
corporate
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<PAGE> 37
shareholders may be required to treat up to 20% of some capital gain dividends
as ordinary income. Capital gain dividends are not eligible for the dividends -
received deduction for corporations.
In addition, we are permitted to designate amounts of undistributed
capital gain for inclusion in our shareholders' taxable income despite their not
having been distributed. The amounts will also remain taxed at our level, but
our shareholders will be entitled to tax credits for the tax we pay.
Although long-term capital gains are generally taxed at rates which are
lower than those applicable to ordinary income, all or a portion of our capital
gain dividends will be taxed at 25% rather than the normal rate applicable to
long-term capital gains.
Passive Activity Loss and Investment Interest Limitations.
Distributions from us and gain from the disposition of our shares will not be
treated as passive activity income, and therefore shareholders will not be able
to apply any "passive losses" against the income. Our dividends, to the extent
they do not constitute a return of capital, will generally be treated as
investment income for purposes of the investment interest limitation, except
that capital gain dividends, and amounts of undistributed capital gain
designated by us for inclusion in our shareholders' taxable income, generally
will be excluded from investment income. Similarly, net capital gain from the
disposition of our shares generally will be excluded from investment income.
Losses on Dispositions of Shares. Losses incurred on the sale or
exchange of shares held for six months or less, after applying applicable
holding period rules, will be deemed long-term capital losses to the extent of
any capital gain dividends received by the selling shareholder from those
shares.
Losses of Roberts Realty. Our shareholders will not be entitled to
include any of our tax losses on their own federal income tax returns.
BACKUP WITHHOLDING
Shareholders will be subject to backup withholding at a rate of 31% on
payments made with respect to shares, and/or on proceeds of a sale or exchange
of shares, if the shareholder
(a) fails to furnish his or her taxpayer identification number,
which for a United States individual would be his or her
Social Security Number,
(b) furnishes an incorrect taxpayer identification number,
(c) is notified by the IRS that he or she has failed to report
properly payments of interest and dividends or is otherwise
required to pay backup withholding, or
(d) fails to certify, under penalties of perjury, that
(x) he or she has furnished a correct taxpayer
identification number, and
(y) he or she has not been notified by the IRS that he or
she is subject to backup withholding for failure to
report interest and dividend payments, or that he or
she has been notified by the IRS that he or she is no
longer subject to backup withholding.
Backup withholding does not apply to payments made to corporations.
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Shareholders should consult their own tax advisors regarding their
qualification for exemption from backup withholding and the procedure for
obtaining the exemption. Backup withholding is not an additional tax. Rather,
the amount of any backup withholding with respect to a payment to a shareholder
will be allowed as a credit against the shareholder's federal income tax
liability and may entitle the shareholder to a refund.
PLAN OF DISTRIBUTION
This prospectus relates to 2,753,787 shares of our common stock. We may
issue these shares from time to time to the limited partners of the operating
partnership in exchange for their units of partnership interest in the operating
partnership. The registration of the shares does not necessarily mean that the
limited partners will exchange their units and then offer or sell any of the
shares.
We will not receive any cash consideration when we issue the common
stock to the limited partners in exchange for their units. Also, we will neither
receive any of the proceeds when the limited partners sell those shares nor pay
any underwriting discount or selling commission. However, our ownership interest
in the operating partnership will increase when we issue common stock to the
limited partners in exchange for their units. We will pay all expenses incurred
to register the common stock offered by this prospectus.
LEGAL MATTERS
Nelson Mullins Riley & Scarborough, L.L.P., Atlanta, Georgia, has
passed upon the legality of the common stock offered by this prospectus. Holt
Ney Zatcoff & Wasserman, LLP, Atlanta, Georgia has passed upon certain legal
matters described under "Federal Income Tax Considerations."
EXPERTS
The audited financial statements and schedule as of and for the years
ended December 31, 1998 and 1997, included in Roberts Realty Investors, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1998, incorporated by
reference in this prospectus and elsewhere in the registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of that firm as experts in giving said report.
The audited financial statements and schedule as of and for the year
ended December 31, 1996, included in Roberts Realty Investors, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1998, incorporated by
reference in this prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated herein by
reference, and has been so incorporated in reliance upon the report of such firm
given up on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Roberts Realty Investors, Inc. must follow the informational
requirements of the Securities and Exchange Act of 1934. In complying with the
Exchange Act, we file reports, proxy statements and other information with the
SEC. For further information, you may read and copy any of these materials at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. You may obtain information on the operation of the Public Reference Room
by calling the SEC at
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1-800-SEC-0330. The SEC maintains an internet site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC through the
Electronic Data Gathering and Retrieval, or EDGAR system. Reports and other
information concerning Roberts Realty may also be inspected at the offices of
the American Stock Exchange, 86 Trinity Street, New York, New York 10006.
We have filed with the SEC, through the EDGAR system, a registration
statement on Form S-3 under the Securities Act for the securities offered by
this prospectus. This prospectus does not contain all of the information
provided in the registration statement, because we have omitted parts of the
registration statement under the applicable SEC rules. Statements about or
references to any contract or other document in this prospectus are not
necessarily complete, and in each instance we refer you to the copy of that
contract or other document filed as an exhibit to the registration statement.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents we previously filed with the SEC under the
Exchange Act are incorporated by reference into this prospectus:
- our Annual Report on Form 10-K for the year ended December 31,
1998;
- our Quarterly Report on Form 10-Q for the quarter ended March
31, 1999;
- our Proxy Statement on Form 14A filed June 16, 1999; and
- the description of our common stock included in our Form
10-SB/A No. 4 Registration Statement filed on July 26, 1996,
including any amendments or reports filed to update that
description.
The Commission File No. for our Exchange Act reports is 001-13183.
All documents we file under to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this prospectus and before the termination of
the offering of the shares under this prospectus shall be deemed to be
incorporated by reference into this prospectus and to be a part of it from the
date of the filing of those reports and documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference into this
prospectus shall be deemed to be modified or superseded for the purposes of this
prospectus to the extent that a statement contained in this prospectus or in any
other subsequently filed document which also is incorporated or is deemed to be
incorporated by reference into this prospectus modifies or supersedes the
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this prospectus.
We will provide a copy of any or all of the documents, exclusive of
exhibits unless those exhibits are specifically incorporated by reference into
the documents, without charge, to each person to whom this prospectus is
delivered, upon written or oral request to Roberts Realty Investors, Inc., 8010
Roswell Road, Suite 120, Atlanta, Georgia 30350, (770) 394-6000, Attention:
Charles R. Elliott, Chief Financial Officer.
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EXHIBIT A
NOTICE OF REDEMPTION
The undersigned Limited Partner hereby (i) demands that Roberts
Properties Residential, L.P. (the "Partnership") redeem _____________ Units in
the Partnership in accordance with the terms of section 6.7 of the Partnership's
partnership agreement ("Section 6.7") and the Redemption Right described
therein, (ii) surrenders such Units and all right, title and interest therein,
and (iii) directs (x) that the Cash Amount deliverable upon consummation of such
redemption of the subject Units be delivered to the address specified below, or
(y) if REIT Shares are to be delivered on consummation of the purchase of such
Units, that such REIT Shares be issued in the name(s) specified below and be
delivered to the address(es) specified below. The undersigned hereby represents,
warrants, and certifies that the undersigned (a) has marketable and unencumbered
title to such Units, free and clear of rights and interests of any other person
(other than pursuant to Section 6.7), (b) has the full right, power, and
authority to surrender such Units for redemption or purchase as contemplated by
Section 6.7 and to consummate such redemption or purchase, (c) has obtained the
consent or approval of all person or entities, if any, having the right to
consent to or approve such surrender or such consummation; and (d) resides at
the address specified below.
This the _____ day of ________________, ________.
Name of
Limited Partner:
----------------------------------------------------------------
(PLEASE PRINT)
- --------------------------------------------------------------------------------
(Signature of Limited Partner)
- --------------------------------------------------------------------------------
(Street Address)
- --------------------------------------------------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
- --------------------------------------------------------------------------------
If REIT Shares are to be issued, issue to:
Name and Address:
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Please insert social security or other
Taxpayer identification number:
-------------------------------------------------
<PAGE> 41
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PROSPECTIVE INVESTORS MAY RELY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS.
ROBERTS REALTY HAS NOT AUTHORIZED ANYONE TO PROVIDE PROSPECTIVE INVESTORS WITH
INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS
NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION CONTAINED IN
THIS PROSPECTUS IS CORRECT ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF
THE TIME OF THE DELIVERY OF THIS PROSPECTUS OR ANY SALE OF THESE SECURITIES.
-----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SUMMARY.............................................. 2
RISK FACTORS......................................... 4
DESCRIPTION OF UNITS AND REDEMPTION
OF UNITS......................................... 7
DESCRIPTION OF COMMON STOCK.......................... 9
THE OPERATING PARTNERSHIP AGREEMENT.................. 13
COMPARISON OF OWNERSHIP OF UNITS
AND SHARES....................................... 17
FEDERAL INCOME TAX CONSIDERATIONS.................... 23
PLAN OF DISTRIBUTION................................. 38
LEGAL MATTERS........................................ 38
EXPERTS.............................................. 38
WHERE YOU CAN FIND MORE
INFORMATION...................................... 38
INCORPORATION OF DOCUMENTS BY
REFERENCE........................................ 39
</TABLE>
- --------------------------------------------------------------------------------
ROBERTS REALTY
INVESTORS, INC.
2,753,787 SHARES OF COMMON STOCK
-----------------------------
PROSPECTUS
-----------------------------
August 2, 1999
- --------------------------------------------------------------------------------
