<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
_________ ________
(Commission File No. 001-13183)
ROBERTS REALTY INVESTORS, INC.
(Exact Name of Registrant as Specified in Its Charter)
GEORGIA 58-2122873
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
8010 ROSWELL ROAD, SUITE 120, ATLANTA, GEORGIA 30350
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, Including Area Code: (770) 394-6000
Indicate by check X whether the registrant: (1) has filed all
reports to be filed by Section 13 of 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
______ ________
The number of outstanding shares of the registrant's Common Stock on May 1,
1999 was 4,697,544.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I FINANCIAL INFORMATION........................................... 1
ITEM 1. FINANCIAL STATEMENTS.............................. 1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS..... 9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK................................. 17
PART II OTHER INFORMATION.............................................. 18
ITEM 1. LEGAL PROCEEDINGS................................. 18
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS......... 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................. 19
</TABLE>
-------------------
<PAGE> 3
PART I
ITEM 1. FINANCIAL STATEMENTS.
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
--------- ---------
(UNAUDITED)
<S> <C> <C>
ASSETS
REAL ESTATE ASSETS - At cost:
Land $ 20,239 $ 20,239
Buildings and improvements 91,663 91,407
Furniture, fixtures and equipment 11,186 11,184
--------- ---------
123,088 122,830
Less accumulated depreciation (18,194) (16,914)
--------- ---------
Operating real estate assets 104,894 105,916
Land held for future development 6,065 6,065
Construction in progress and real estate under development 9,718 7,035
--------- ---------
Net real estate assets 120,677 119,016
CASH AND CASH EQUIVALENTS 1,895 4,106
RESTRICTED CASH 500 470
DEFERRED FINANCING COSTS - Net of accumulated amortization of
$284 and $246 at March 31, 1999 and December 31, 1998, respectively 1,060 1,095
OTHER ASSETS - Net 337 403
--------- ---------
$ 124,469 $ 125,090
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Mortgage notes payable $ 79,752 $ 79,973
Accounts payable and accrued expenses 1,729 1,187
Dividends and distributions payable 1,132 1,092
Due to affiliates 1,085 398
Security deposits and prepaid rents 339 335
--------- ---------
Total liabilities 84,037 82,985
--------- ---------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST OF UNITHOLDERS IN THE OPERATING PARTNERSHIP 14,960 15,579
--------- ---------
SHAREHOLDERS' EQUITY:
Preferred shares, $.01 par value, 20,000,000 shares
authorized, no shares issued and outstanding -- --
Common shares, $.01 par value, 100,000,000 shares authorized,
4,790,944 and 4,764,037 shares issued and outstanding
at March 31, 1999 and December 31, 1998, respectively 47 47
Additional paid-in capital 28,813 29,335
Less treasury stock, at cost (93,400 and 19,300 shares at
March 31, 1999 and December 31, 1998, respectively) (695) (145)
Unamortized restricted stock compensation (83) (92)
Accumulated deficit (2,610) (2,619)
--------- ---------
Total shareholders' equity 25,472 26,526
--------- ---------
$ 124,469 $ 125,090
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements
1
<PAGE> 4
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1999 1998
---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
OPERATING REVENUES:
Rental operations $ 4,500 $ 3,784
Other operating income 256 156
----------- -----------
Total operating revenues 4,756 3,940
----------- -----------
OPERATING EXPENSES:
Personnel 432 372
Utilities 306 264
Repairs, maintenance and landscaping 297 243
Real estate taxes 422 344
Marketing, insurance and other 193 185
General and administrative expenses 508 404
Depreciation of real estate assets 1,317 1,131
----------- -----------
Total operating expenses 3,475 2,943
----------- -----------
INCOME FROM OPERATIONS 1,281 997
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 45 132
Interest expense (1,261) (986)
Loss on disposal of assets (9) (24)
Amortization of deferred financing costs (38) (33)
Other amortization expense (3) (2)
----------- -----------
Total other expense (1,266) (913)
----------- -----------
INCOME BEFORE MINORITY INTEREST, GAIN ON SALE OF
REAL ESTATE ASSET AND EXTRAORDINARY ITEM 15 84
MINORITY INTEREST OF UNITHOLDERS IN THE OPERATING PARTNERSHIP (6) (47)
----------- -----------
INCOME BEFORE GAIN ON SALE OF REAL ESTATE ASSET
AND EXTRAORDINARY ITEM 9 37
GAIN ON SALE OF REAL ESTATE ASSET, net of minority interest 0 918
of unitholders in the operating partnership ----------- -----------
INCOME BEFORE EXTRAORDINARY ITEM 9 955
EXTRAORDINARY ITEM - Gain on early extinguishment of debt, net of
minority interest of unitholders in the operating partnership 0 68
----------- -----------
NET INCOME $ 9 $ 1,023
=========== ===========
INCOME PER COMMON SHARE - BASIC AND DILUTED:
Income before extraordinary item $ 0.00 $ 0.21
Extraordinary item 0.00 0.02
----------- -----------
Net income $ 0.00 $ 0.23
=========== ===========
Weighted average common shares - basic 4,733,877 4,488,969
Weighted average common shares - diluted 7,493,100 7,549,928
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
2
<PAGE> 5
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1999 1998
-------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 9 $ 1,023
Adjustments to reconcile net income to net cash provided by operating activities:
Minority interest of unitholders in the operating partnership 6 47
Gain on sale of real estate assets 0 (918)
Loss on disposal of assets 9 24
Depreciation and amortization 1,358 1,166
Extraordinary items, net of minority interest of unitholders in the
operating partnership 0 (68)
Amortization of deferred compensation 9 0
Change in assets and liabilities:
Increase in restricted cash and cash equivalents (30) (43)
Decrease in other assets 66 12
Increase in accounts payable and accrued expenses relating to operations 623 452
Increase in due to affiliates relating to operations 0 4
Increase (decrease) in security deposits and prepaid rent 4 (47)
------- -------
Net cash provided by operating activities 2,054 1,652
------- -------
INVESTING ACTIVITIES:
Proceeds from sale of real estate assets 0 5,333
Construction of real estate assets (2,366) (4,394)
------- -------
Net cash provided by (used in) investing activities (2,366) 939
------- -------
FINANCING ACTIVITIES:
Principal repayments on mortgage notes payable (221) (194)
Payment of loan costs (8) 0
Repurchase of partnership units (28) 0
Repurchase of treasury stock (550) 0
Payment of dividends and distributions (1,092) (1,057)
------- -------
Net cash used in financing activities (1,899) (1,251)
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,211) 1,340
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,106 7,117
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,895 $ 8,457
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 1,396 $ 1,181
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 6
ROBERTS REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. BUSINESS AND ORGANIZATION OF ROBERTS REALTY
Roberts Realty Investors, Inc., a Georgia corporation, was formed July
22, 1994 to serve as a vehicle for investments in, and ownership of, a
professionally managed real estate portfolio of multifamily apartment
communities. Roberts Realty owns and operates multifamily residential
properties as a self-administered, self-managed equity real estate
investment trust, sometimes called a REIT. All of Roberts Realty's
completed apartment homes are located in the Atlanta metropolitan
area.
Roberts Realty conducts all of its operations and owns all of its
assets in and through Roberts Properties Residential, L.P., a Georgia
limited partnership, sometimes referred to as the operating
partnership. Given that Roberts Realty is the sole general partner of
the operating partnership and had a 63.0% ownership interest in it
both at March 31, 1999 and December 31, 1998, Roberts Realty controls
the operating partnership.
At March 31, 1999, Roberts Realty owned nine completed multifamily
apartment communities totaling 1,778 apartment homes. An additional
118 rental townhomes were under construction and 868 apartment homes
were in the development stage.
Roberts Realty elected to be taxed as a REIT under the Internal
Revenue Code of 1986, as amended, beginning with the taxable year
ended December 31, 1994. As a result, Roberts Realty generally will
not be subject to federal and state income taxation at the corporate
level to the extent it distributes annually at least 95% of its
taxable income, as defined in the Internal Revenue Code, to its
shareholders and satisfies certain other requirements. Accordingly,
the accompanying consolidated financial statements include no
provision for federal and state income taxes.
2. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the
consolidated accounts of Roberts Realty and the operating partnership.
All significant intercompany accounts and transactions have been
eliminated in consolidation. The financial statements of Roberts
Realty have been adjusted for the minority interest of the unitholders
in the operating partnership.
The minority interests of the unitholders in the operating partnership
on the accompanying balance sheets are calculated based on the
minority interest ownership percentage multiplied by the operating
partnership's net assets (total assets less total liabilities). The
minority interest percentage reflects the number of shares of Roberts
Realty's common stock and partnership units outstanding and will
change as additional shares and partnership units are issued. The
minority interest of the unitholders in the earnings or loss of the
operating partnership on the accompanying statements of operations is
calculated based on the weighted average number of partnership units
outstanding during the period, which was 36.8% and 40.5% for the three
months ended March 31, 1999 and 1998, respectively. The minority
interest of the unitholders in the operating partnership was
$14,960,000 and $15,579,000 at March 31, 1999 and December 31, 1998,
respectively.
Holders of partnership units generally have the right to require the
operating partnership to redeem their partnership units for shares.
Upon submittal of partnership units for redemption, the operating
partnership has the option either (a) to pay cash for those
partnership units at their fair market value,
4
<PAGE> 7
based upon the then current trading price of the shares, or (b) to
acquire those partnership units in exchange for shares, on a
one-for-one basis. Roberts Realty has adopted a policy that it will
issue shares in exchange for all partnership units submitted except as
otherwise required by applicable securities laws or as explained in
"Part II, Item II, Changes in Securities and Use of Proceeds."
Roberts Realty's management has prepared the accompanying interim
unaudited financial statements in accordance with generally accepted
accounting principles for interim financial information and in
conformity with the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, the interim
financial statements reflect all adjustments of a normal and recurring
nature which are necessary to fairly state the interim financial
statements. The results of operations for the interim periods do not
necessarily indicate the results that may be expected for the year
ending December 31, 1999. Certain prior period amounts have been
reclassified to conform to the 1999 presentation. These financial
statements should be read in conjunction with Roberts Realty's audited
financial statements and the notes thereto included in Roberts
Realty's Annual Report on Form 10-K for the year ended December 31,
1998.
3. NOTES PAYABLE
LINE OF CREDIT. Roberts Realty obtained a $1,000,000 revolving
unsecured line of credit in April 1998 to provide funds for short-term
working capital purposes. This line of credit has a one year term and
bears an interest rate of LIBOR + 150 basis points. At March 31, 1999,
no amount was drawn on the line. Roberts Realty is currently
renegotiating the line of credit, and no assurances can be given that
the line of credit will be renewed, or if renewed, on favorable terms.
MORTGAGE NOTES. Mortgage notes payable were secured by the following
apartment communities at March 31, 1999 and December 31, 1998, as
follows:
<TABLE>
<CAPTION>
FIXED INTEREST PRINCIPAL OUTSTANDING
RATE AS OF
MATURITY 03/31/99 03/31/99 12/31/98
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Bentley Place 08/15/06 7.10% $ 3,988,000 $ 4,000,000
Bradford Creek 06/15/08 7.15 8,338,000 8,359,000
Crestmark 10/01/08 6.57 15,913,000 15,957,000
Highland Park 02/15/03 7.30 7,917,000 7,940,000
Ivey Brook 02/15/07 7.14 6,282,000 6,300,000
Plantation Trace 10/15/08 7.09 11,852,000 11,881,000
Preston Oaks 10/15/02 7.21 8,394,000 8,420,000
River Oaks 11/15/03 7.15 9,026,000 9,052,000
Rosewood Plantation 07/15/08 6.62% 8,042,000 8,064,000
----------- -----------
$79,752,000 $79,973,000
=========== ===========
</TABLE>
Roberts Realty and Roberts Properties have a $35,000,000 advised
guidance line with NationsBank N.A. for the purpose of providing
financing for the acquisition or development of multifamily
communities. Financing under the guidance line is available on a
revolving basis and bears interest at LIBOR plus 1.80% or Prime plus
0%, at the option of the borrower, payable monthly. The guidance line
is not a commitment to lend, and each loan under the guidance line
will be made at NationsBank's discretion in accordance with normal
loan approval procedures. At March 31, 1999, there was no balance
outstanding under the guidance line.
5
<PAGE> 8
On March 5, 1999, Roberts Realty received an oral commitment for a
$9,500,000 loan secured by the first phase of the Abbotts Bridge
community. The loan commitment included a 10-year term with a fixed
interest rate of 6.95% payable in monthly installments of $62,885
based on a 30-year amortization schedule. The loan is scheduled to
close in August 1999 after completion and substantial lease-up of the
first phase of the Abbotts Bridge community. The loan in intended to
provide permanent financing to repay the construction indebtedness on
this property, as discussed below.
On March 9, 1999, Roberts Realty received a written commitment for a
$7,000,000 construction loan to complete phase one of Abbotts Bridge.
On March 30, 1999, Roberts Realty received a revised written
commitment for a $9,500,000 construction loan to complete phase one of
Abbotts Bridge. The loan commitment has a 9-month term and bears an
interest rate of LIBOR + 160 basis points. At March 31, 1999, no
amount was outstanding under the construction loan.
Interest capitalized was $136,000 and $82,000 for the three months
ended March 31, 1999 and 1998, respectively.
Real estate assets having a combined depreciated cost of approximately
$102,907,000 serve as collateral for the outstanding debt at March 31,
1999.
4. EXTRAORDINARY ITEM
The 1998 extraordinary item is comprised of the write-off of
unamortized debt premium associated with the January 9, 1998 repayment
of the mortgage note secured by the Windsong community upon sale of
the property. For the three month period ended March 31, 1998, the
extraordinary item is net of $42,000, which was allocated to the
minority interest of the unitholders in the operating partnership, and
calculated based on the weighted average number of partnership units
outstanding during the periods presented.
5. COMMITMENTS AND CONTINGENCIES
Roberts Realty and the operating partnership are subject to various
legal proceedings and claims that arise in the ordinary course of
business. While the resolution of these matters cannot be predicted
with certainty, management believes the final outcome of such matters
will not have a material adverse effect on Roberts Realty's financial
position or results of operations.
Roberts Realty enters into contractual commitments in the normal
course of business related to the construction of real estate assets
with Roberts Properties Construction, Inc., an affiliate of Roberts
Realty owned by Mr. Charles S. Roberts, the President, Chief Executive
Officer, and Chairman of the Board. Roberts Construction is currently
constructing the first phase of Abbotts Bridge, consisting of 118
townhomes, and completing the construction of the amenities and final
landscaping at the second phase of Plantation Trace. Each of these
projects is being completed pursuant to a cost plus 10% contract. At
March 31, 1999, the remaining commitments totaled $7,665,000 as
summarized in the following table:
6
<PAGE> 9
<TABLE>
<CAPTION>
TOTAL REMAINING
CONTRACT AMOUNT CONTRACTUAL
AMOUNT INCURRED COMMITMENT
------ -------- ----------
<S> <C> <C> <C>
Plantation Trace - phase II $ 4,726,000 $4,689,000 $ 37,000
Abbotts Bridge - phase I 9,611,000 1,983,000 7,628,000
----------- ---------- ----------
Total $14,337,000 $6,672,000 $7,665,000
=========== ========== ==========
</TABLE>
6. SHAREHOLDERS' EQUITY
EXCHANGES OF PARTNERSHIP UNITS FOR SHARES. During the three months
ended March 31, 1999 and 1998, a total of 26,907 and 133,904
partnership units, respectively, were exchanged for the same number of
shares. Each conversion was reflected in the accompanying consolidated
financial statements at book value.
REDEMPTIONS OF PARTNERSHIP UNITS FOR CASH. During the three months
ended March 31, 1999, a total of 3,917 partnership units were redeemed
for cash of $28,000. No partnership units were redeemed for cash
during the three months ended March 31, 1998.
TREASURY STOCK REPURCHASES. During the three months ended March 31,
1999, Roberts Realty repurchased 74,100 shares at a total cost of
$550,000. No shares were repurchased during the three months ended
March 31, 1998.
DIVIDENDS. On March 16, 1999, Roberts Realty's Board of Directors
declared a quarterly distribution in the amount of $0.15 per common
Share and Unit payable on April 15, 1999 to shareholders and
unitholders of record on March 31, 1999. The first quarter 1998
dividend was $0.1425 and was paid to shareholders and unitholders of
record as of March 31, 1998.
7
<PAGE> 10
EARNINGS PER SHARE. Reconciliations of income available to common
shareholders and weighted average shares and partnership units used in
Roberts Realty's basic and diluted earnings per share computations are
detailed below (dollars in thousands).
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
3/31/99 3/31/98
------- -------
<S> <C> <C>
Income (loss) before extraordinary item $ 9 $ 958
Minority interest in income (loss) before
extraordinary item of the
operating partnership 6 670
---------- ----------
Income (loss) before extraordinary item - diluted $ 15 $ 1,628
========== ==========
Net income (loss) - basic $ 9 $ 1,023
Minority interest in net income (loss) of the
operating partnership 6 715
---------- ----------
Net income (loss) - diluted $ 15 $ 1,738
========== ==========
Weighted average shares - basic 4,733,877 4,488,969
Dilutive securities - weighted average partnership units 2,759,223 3,060,959
---------- ----------
Weighted average shares - diluted 7,493,100 7,549,928
========== ==========
</TABLE>
7. ACQUISITIONS AND DISPOSITIONS
On January 9, 1998, Roberts Realty completed the sale of the Windsong
community for $9,750,000 in cash resulting in a gain, net of minority
interest, of $918,000 on the sale of real estate assets and an
extraordinary gain, net of minority interest, of $68,000 on the
buyer's assumption of related mortgage indebtedness. Net sales
proceeds were $5,194,000 after deduction for loan repayment of
$3,959,000 and closing costs and prorations totaling $597,000. Roberts
Realty reinvested the net sales proceeds in a replacement property in
connection with a Section 1031 tax-deferred exchange. The purchaser
was unaffiliated with Roberts Realty and the transaction was
negotiated at arms-length.
8
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These statements relate to future economic performance,
plans and objectives of management for future operations and projections of
revenues and other financial items that are based on the beliefs of our
management, as well as assumptions made by, and information currently available
to, our management. The words expect, estimate, anticipate, believe and similar
expressions identify forward-looking statements. Those statements involve
risks, uncertainties and assumptions, including industry and economic
conditions, competition and other factors discussed in this and our other
filings with the SEC, including the "Risk Factors" section of the prospectus
included in our registration statement on Form S-3, registration number
333-31117, as declared effective by the SEC on December 8, 1997. If one or more
of these risks or uncertainties materialize or underlying assumptions prove
incorrect, actual outcomes may vary materially from those indicated. See
"Disclosure Regarding Forward-Looking Statements" at the end of this Item for a
description of some of the important factors that may affect actual outcomes.
OVERVIEW
We own multifamily residential properties as a self-administered and
self-managed equity real estate investment trust. At March 31, 1999, we owned
nine completed and stabilized multifamily apartment communities consisting of
1,778 apartment homes. As part of our business plan and growth strategy, we
sold our 232-unit Windsong community in January 1998. We based our decision to
sell Windsong on its age and location in a market that is not included in our
long-term growth strategy. In July 1998, we sold our two small retail centers
because we decided to exit all businesses not related to the long-term
ownership of high quality apartment homes. In June 1998, we used the equity
from our property sales to purchase three separate parcels of land for $11.3
million on which we intend to develop and build three new multifamily
communities totaling 986 apartment homes. This development pipeline will
increase the size of our portfolio 55% from 1,778 to 2,764 apartment homes. One
of the three new communities under development is located in Charlotte and is
the first step in our diversification strategy. The other two communities are
located in north Atlanta. Of our 986 new apartment homes to be built, 118 are
rental townhomes that are under construction, and the remaining 868 apartment
homes are expected to be under construction by the third quarter of 1999.
RESULTS OF OPERATIONS
Comparison of Three Months Ended March 31, 1999 to Three Months Ended
March 31, 1998. For the three months ended March 31, 1999, we recorded net
income of $9,000 or $0.00 per share, compared to net income of $1,023,000 or
$0.23 per share for the three months ended March 31, 1998. The change in
operating results is due to the following:
(1) the sale of Windsong, which resulted in a gain, net of
minority interest, of $918,000; and
(2) the sale of two retail centers in the third quarter of 1998;
offset by
(3) the completion of the initial lease-up phases at Bradford
Creek in August 1998, and the second phases of Preston Oaks
in July 1998 and Plantation Trace in November 1998 - for
convenience we refer to these communities as the "Lease-Up
Communities"; and
(4) an increase in average stabilized occupancy from 94.0% to
95.3%.
9
<PAGE> 12
Our operating performance for all apartment communities is summarized in the
following table:
<TABLE>
<CAPTION>
PERCENTAGE THREE MONTHS ENDED MARCH 31,
CHANGE FROM ----------------------------
1998 TO 1999 1999 1998
------------ ---- ----
<S> <C> <C> <C>
Total operating revenues 20.7% $4,756,000 $3,940,000
Property operating expenses (1) 17.2% $1,650,000 $1,408,000
Net operating income (2) 22.7% $3,106,000 $2,532,000
General and administrative expenses 25.7% $ 508,000 $ 404,000
Depreciation of real estate assets 16.4% $1,317,000 $1,131,000
Average stabilized occupancy (3) 1.3% 95.3% 94.0%
Operating expense ratio (4) (1.0)% 34.7% 35.7%
</TABLE>
- ------------------------------
(1) Property operating expenses include personnel, utilities, real estate
taxes, insurance, maintenance, landscaping, marketing, and property
administration expenses.
(2) Net operating income is equal to total operating revenues minus
property operating expenses.
(3) Represents the average physical occupancy of our stabilized properties
calculated by dividing the total number of vacant days by the total
possible number of vacant days for each period and subtracting the
resulting number from 100%. The calculation includes the second phase
of Preston Oaks beginning August 1, 1998, Bradford Creek beginning
September 1, 1998, and the second phase of Plantation Trace beginning
December 1, 1998, which are the dates each community achieved
stabilized occupancy.
(4) Represents the total of property operating expenses divided by
property operating revenues expressed as a percentage.
Our same-property operating performance was highlighted by a 4.6%
increase in operating revenues, a 3.3% increase in net operating income, and a
1.4% increase in average occupancy to 95.3%. Our property management team
focused on implementing rent increases, achieving high occupancy levels, and
providing quality customer service to residents, which contributed to our lease
renewal rate of 57.0% during the first quarter of 1999. Eight of our
communities were fully stabilized during both the three-month periods ended
March 31, 1999 and 1998: Bentley Place, Crestmark, Highland Park, Ivey Brook,
River Oaks, Rosewood Plantation, and the first phases of Plantation Trace, and
Preston Oaks. Same-property operating results for these communities are
summarized in the following table:
<TABLE>
<CAPTION>
PERCENTAGE THREE MONTHS ENDED MARCH 31,
CHANGE FROM ----------------------------
1998 TO 1999 1999 1998
------------ ---- ----
<S> <C> <C> <C>
Rental income 2.8% $3,802,000 $3,697,000
Total operating revenues 4.6% $4,011,000 $3,836,000
Property operating expenses (1) 7.0% $1,414,000 $1,322,000
Net operating income (2) 3.3% $2,597,000 $2,514,000
Average stabilized occupancy (3) 1.4% 95.3% 93.9%
Operating expense ratio (4) 0.8% 35.3% 34.5%
Average monthly rent per apartment home 2.4% $ 895 $ 874
Lease renewal percentage (5) (1.9)% 57.0% 58.9%
</TABLE>
- ----------------------
(footnotes begin on following page)
10
<PAGE> 13
(1) Property operating expenses include personnel, utilities, real
estate taxes, insurance, maintenance, landscaping, marketing, and
property administration expenses.
(2) Net operating income is equal to total operating revenues minus
property operating expenses.
(3) Represents the average physical occupancy of the stabilized
properties calculated by dividing the total number of vacant days by
the total possible number of vacant days for each period and
subtracting the resulting number from 100%.
(4) Represents the total of property operating expenses divided by
property operating revenues expressed as a percentage.
(5) Represents the number of leases renewed divided by the number of
leases expired during the period presented, expressed as a
percentage.
The following discussion compares our statements of operations for the
three months ended March 31, 1999 and 1998.
Property operating revenue increased $816,000 or 20.7% from $3,940,000
for the three months ended March 31, 1998 to $4,756,000 for the three months
ended March 31, 1999. The increase in operating revenue is due to the
following:
(1) a $728,000 increase in revenue from the Lease-Up Communities;
and
(2) a $175,000 increase in same-property revenue, which is due to
an increase in occupancy from 93.9% to 95.3% along with a
2.4% increase in the average monthly rent per apartment home
from $874 to $895 per month;
offset by
(3) a decrease in revenue of approximately $87,000 due to the
sales of Windsong and two retail centers.
In the fourth quarter of 1998 we completed the installation of
water-metering equipment in each of our 1,778 existing apartment homes and
implemented a program to bill residents for their individual water consumption.
We expect that billing residents for their water usage will increase our
operating revenues by approximately $425,000 per year. Based on a total cost of
$380,000 to install the equipment, the payback period will be less than one
year. We expect that all new apartment communities we develop will have
water-metering equipment installed in each apartment home during construction.
Property operating expenses, excluding depreciation and general and
administrative expenses, increased $242,000 or 17.2% from $1,408,000 for the
three months ended March 31, 1998 to $1,650,000 for the three months ended
March 31, 1999. The increase in operating expenses is due to the following:
(1) a $150,000 increase in expenses from the Lease-Up
Communities; and
(2) a $92,000 increase in same-property expenses due to higher
personnel and maintenance costs.
Personnel costs represent $48,000 of the $242,000 increase in expenses
and are due to the hiring of additional staff for our property management team.
11
<PAGE> 14
General and administrative expenses increased $104,000 or 25.7% from
$404,000 for the three months ended March 31, 1998 to $508,000 for the three
months ended March 31, 1999. These expenses include legal, accounting and tax
fees, marketing and printing fees, salaries, director fees and other costs. The
increase is due primarily to higher personnel and associated costs totaling
$60,000. General and administrative expenses as a percentage of operating
revenues increased from 10.3% for the three months ended March 31, 1998 to
10.7% for the three months ended March 31, 1999. We expect that as we continue
to grow, those expenses will begin to decline as a percentage of operating
revenues, even though general and administrative expenses will increase in
absolute terms.
Depreciation expense increased $186,000 or 16.4% from $1,131,000 for
the three months ended March 31, 1998 to $1,317,000 for the three months ended
March 31, 1999. The increase is due to the depreciation expense from the
Lease-Up Communities, offset by a decrease due to the sales of Windsong and the
two retail centers. We record depreciation expense as apartment homes are
completed and available for occupancy.
Interest expense increased $275,000 or 27.9% from $986,000 for the
three months ended March 31, 1998 to $1,261,000 for the three months ended
March 31, 1999. The increase is due primarily to the financing of Bradford
Creek in June 1998, the refinancing of the mortgage loan secured by Rosewood
Plantation in June 1998 for a higher loan amount, the refinancing of the
mortgage loans secured by Crestmark in September 1998 for a higher loan amount,
and the refinancing of the mortgage loan secured by Plantation Trace in
September 1998 for a higher loan amount.
On January 9, 1998, we sold the Windsong community for $9,750,000 in
cash resulting in a gain, net of minority interest, of $918,000 on the sale of
real estate assets and an extraordinary gain, net of minority interest, of
$68,000 on the buyer's assumption of related mortgage indebtedness. Net sales
proceeds were $5,194,000 after deduction for loan repayment of $3,959,000,
closing costs of $458,000, and prorations of $139,000. The net cash proceeds
from the sale of Windsong were reinvested in undeveloped land in June 1998 as
part of a Section 1031 tax-deferred exchange.
LIQUIDITY AND CAPITAL RESOURCES
Comparison of Three Months Ended March 31, 1999 to Three Months Ended
March 31, 1998. Cash and cash equivalents decreased $2,211,000 during the three
months ended March 31, 1999 compared to an increase of $1,340,000 during the
three months ended March 31, 1998. The decrease is due to an increase in cash
used in investing and financing activities partially offset by an increase in
cash provided by operating activities.
A primary source of our liquidity is cash flow from operations.
Operating cash flows have historically been determined by the number of
apartment homes, rental rates and operating expenses for those apartment homes.
Net cash provided by operating activities increased $402,000 from $1,652,000
during the three months ended March 31, 1998 to $2,054,000 during the three
months ended March 31, 1999. The increase in cash flow from operations is due
primarily to the additional cash flow from the Lease-Up Communities and
stabilized communities, offset by the sales of Windsong and the two retail
centers. The effects of revenue and expense accruals are not material in
understanding our cash flow from operations. Generally, depreciation and
amortization expenses are the most significant adjustments to net income (loss)
in arriving at cash provided by operating activities.
Net cash used in investing activities increased $3,305,000 from net
cash provided of $939,000 during the three months ended March 31, 1998 compared
to net cash used of $2,366,000 during the three months ended March 31, 1999.
This increase is due primarily to the following:
12
<PAGE> 15
(1) construction costs at Bradford Creek and the second phases of
Preston Oaks and Plantation Trace of $4,394,000 during the
three months ended March 31, 1998 compared to construction
costs at phase one of Abbotts Bridge and the second phase of
Plantation Trace of $2,366,000 during the three months ended
March 31, 1999,
offset by
(2) net cash proceeds from the sale of Windsong totaling
$5,333,000 during the three months ended March 31, 1998.
We acquired no existing apartment communities during these periods.
Net cash used in financing activities increased $648,000 from
$1,251,000 during the three months ended March 31, 1998 to $1,899,000 during
the three months ended March 31, 1999. This increase is due primarily to the
following:
(1) the repurchase of 74,100 shares of treasury stock for
$550,000 during the three months ended March 31, 1999
compared to no treasury shares purchased during the three
months ended March 31, 1998;
(2) the purchase of 3,917 partnership units for $28,000 during
the three months ended March 31, 1999 compared to no
partnership units purchased during the three months ended
March 31, 1998;
(3) an increase of $27,000 in principal repayments on mortgage
notes payable due to the financing of Bradford Creek in June
1998, the refinancing of Rosewood Plantation for a higher
loan amount in June 1998, the refinancing of Crestmark for a
higher loan amount in September 1998, and the refinancing of
Plantation Trace for a higher loan amount in September 1998;
and
(4) an increase of $35,000 in quarterly distributions paid, from
$1,057,000 for the three months ended March 31, 1998 to
$1,092,000 for the three months ended March 31, 1999.
The following facts highlight our existing debt structure:
- Each of our nine communities is financed with
fixed-rate debt;
- The average interest rate for all nine communities
is 6.99% per annum;
- No debt is scheduled to mature before October 2002;
- The average term to maturity is eight years; and
- Debt principal will amortize at a rate of
approximately $880,000 per year.
13
<PAGE> 16
The following table summarizes the debt for each of our nine
communities:
<TABLE>
<CAPTION>
FIXED INTEREST PRINCIPAL
RATE AS OF OUTSTANDING
03/31/99 MATURITY 03/31/99
-------- -------- --------
<S> <C> <C> <C>
Bentley Place 7.10% 08/15/06 $ 3,988,000
Bradford Creek 7.15% 06/15/08 8,338,000
Crestmark 6.57% 10/01/08 15,913,000
Highland Park 7.30% 02/15/03 7,917,000
Ivey Brook 7.14% 02/15/07 6,282,000
Plantation Trace 7.09% 10/15/08 11,852,000
Preston Oaks 7.21% 10/15/02 8,394,000
River Oaks 7.15% 11/15/03 9,026,000
Rosewood Plantation 6.62% 07/15/08 8,042,000
-----------
$79,752,000
===========
</TABLE>
Each of our existing mortgage loans will require balloon payments (in
addition to monthly principal amortization) coming due over the years 2002 to
2008 as summarized below:
<TABLE>
<S> <C>
2002 $ 8,025,000
2003 16,057,000
2006 3,554,000
2007 5,570,000
2008 38,233,000
-----------
Total $71,439,000
===========
</TABLE>
Because we anticipate that we will repay only a small portion of the
principal of our indebtedness before its maturity and that we will not have
funds on hand sufficient to repay our indebtedness when it matures, we will
have to refinance our debt through
- debt financing collateralized by mortgages on individual
communities or groups of communities,
- uncollateralized private or public debt offerings, and/or
- equity offerings.
We and Roberts Properties have a $35,000,000 advised guidance line
with NationsBank N.A. to help us finance the acquisition or development of
multifamily communities. Financing under the guidance line is available on a
revolving basis and bears interest at LIBOR plus 1.80% or Prime plus 0%, at our
option, payable monthly. The guidance line is not a commitment to lend, and
each loan under the guidance line will be made at NationsBank's discretion in
accordance with normal loan approval procedures.
During the quarter ended September 30, 1998, we started construction
on the first phase of Abbotts Bridge, located in north Atlanta. Abbotts Bridge
will consist of 118 rental townhomes with occupancies expected to begin in the
second quarter of 1999. We are funding this first phase with the proceeds from
recent mortgage
14
<PAGE> 17
loan financings, operating cash, and a $9,500,000 construction loan that we
obtained on April 12, 1999. We expect to begin construction on an additional
868 apartment homes during the second and third quarters of 1999, which will
include a 287-unit second phase of Abbotts Bridge, a 332-unit community in
Charlotte and a 249-unit community also located in north Atlanta. We paid cash
for the land for these three new communities, and we expect to fund the cost of
construction with construction loans and cash flow from operations. We are in
the process of obtaining construction loans, and we do not expect to begin
substantial construction until we secure those construction loans.
We anticipate that each community's rental and other operating
revenues will be adequate to provide short-term (less than 12 months) liquidity
for the payment of direct rental operating expenses, interest and amortization
of principal on related mortgage notes payable and capital expenditures. We
expect to meet our other short-term liquidity requirements generally through
our net cash provided by operations, which we believe will be adequate to meet
our operating requirements in both the short-term and in the long-term greater
than 12 months. We also expect to fund improvements and renovations at existing
communities from property operations. We expect to meet our long-term liquidity
requirements, including future apartment development and debt maturities, by
issuing additional equity securities and obtaining construction loans and
permanent mortgages.
STOCK REPURCHASE PLAN
On September 3, 1998, we issued a press release announcing that our
board of directors had authorized the repurchase of up to 300,000 shares of our
outstanding common stock. We intend to repurchase our shares from time to time
by means of open market purchases depending on availability, our cash position
and price per share. We repurchased 74,100 treasury shares for $550,000 during
the three months ended March 31, 1999. We repurchased no treasury shares during
the quarter ended March 31, 1998. From September 3, 1998 through March 31,
1999, we have repurchased 93,400 shares for $695,000.
SUPPLEMENTAL DISCLOSURE OF FUNDS FROM OPERATIONS
Funds from operations, commonly referred to as FFO, is defined by the
National Association of Real Estate Investment Trusts as net income (loss),
computed in accordance with generally accepted accounting principles, excluding
gains (or losses) from debt restructuring and sales of property and
non-recurring items, plus real estate related depreciation and amortization. We
compute FFO in accordance with the current NAREIT definition, which may differ
from the methodology for calculating FFO used by other equity REITs, and
accordingly, may not be comparable to those other REITs. FFO does not represent
amounts available for management's discretionary use because of needed capital
replacement or expansion, debt service obligations, property acquisitions,
development and distributions, or other commitments and uncertainties. FFO
should not be considered as an alternative to net income determined in
accordance with GAAP as an indication of our financial performance or cash
flows from operating activities determined in accordance with GAAP as a measure
of our liquidity, nor is it indicative of funds available to fund our cash
needs, including our ability to make distributions. We consider FFO to be an
important measure of our operating performance. While FFO does not represent
cash flows from operating, investing or financing activities as defined by
GAAP, FFO does provide investors with additional information with which to
evaluate the ability of a REIT to pay dividends, meet required debt service
payments and fund capital expenditures. We believe that to gain a clear
understanding of our operating results, you should evaluate FFO along with net
income determined in accordance with GAAP. The following table reconciles net
income (loss) to FFO.
15
<PAGE> 18
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Net income (loss) $ 9 $ 1,023
Minority interest of holders of units 6 47
Extraordinary item 0 (68)
Amortization (real estate related) 3 2
Loss on disposal of assets 9 24
Gain on sale of real estate asset 0 (918)
Depreciation expense 1,317 1,131
----------- -----------
Funds From Operations $ 1,344 $ 1,241
=========== ===========
Weighted average shares and partnership units
outstanding during the period 7,493,100 7,549,928
</TABLE>
INFLATION
Substantially all apartment leases are for an initial term of not more
than 12 months and thus may enable us to seek increases in rents after the
expiration of each lease. We believe the short-term nature of these leases
reduces our risks of the adverse effects of inflation.
YEAR 2000 COMPUTER ISSUES
The "Year 2000 problem" is a general term used to identify those
computer programs or applications that are programmed to use a two-digit field,
instead of a four-digit field, for the year component of a date. Those programs
or applications which are programmed in this manner may, for example, recognize
the year 2000 as the year 1900, thereby causing potential system failures or
miscalculations, which could result in disruptions of normal business
operations. We have evaluated our state of readiness, the costs involved to
become compliant, the risks involved, and our contingency plans. Our primary
uses of software systems are our corporate accounting and property management
software.
We have completed an initial assessment of our core computer
information systems and are now undertaking the necessary steps to make our
systems Year 2000 compliant. Our property management software is Year 2000
compliant, and wet expect to upgrade our accounting software in the third
quarter of 1999 to make it Year 2000 compliant. We do not expect the cost to
upgrade our accounting software to be material. We are currently evaluating and
assessing those computer systems that do not relate to information systems,
such as telecommunications, HVAC, and fire and safety systems, which typically
include embedded technology such as microcontrollers that may be harder to
test, and may require repairs or complete replacement. We expect to complete
this assessment during the second quarter of 1999.
We have contacted all significant vendors, including banks, mortgage
loan service companies, and our third party payroll vendor, to verify that
those vendors are also addressing the problem. We have developed contingency
plans where necessary. Certain Year 2000 issues that are beyond our control,
such as the failure of a utility company to provide power to residents, may
adversely affect our operations. At this time, we cannot estimate the potential
adverse impact that may result from the failure of any of our vendors to become
Year 2000 compliant, although we continue to believe that there will be no
direct material effect on our operating performance or results of operations.
16
<PAGE> 19
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. These
statements appear in a number of places in this report and include all
statements that are not historical facts. Some of the forward-looking
statements relate to our intent, belief or expectations regarding our
strategies and plans for operations and growth, including development and
construction of new multifamily apartment communities in our existing markets
and elsewhere in the Southeast. Other forward-looking statements relate to
trends affecting our financial condition and results of operations, and our
anticipated capital needs and expenditures.
Our forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and actual results may differ
materially from those anticipated in the forward-looking statements, as a
result of:
- competition and overbuilding in our markets, currently
Atlanta and Charlotte;
- increasing operating costs that cannot be passed along to
residents through rental rate increases;
- construction risks for our development pipeline due to
factors that include unexpected weather problems, shortages
in materials and supplies, and labor strikes;
- risks related to the national and local economic climate;
- our dependence upon the Atlanta market;
- risks of entering new markets outside the Atlanta area;
- financing risks including risks of substantial indebtedness,
not being able to obtain debt or equity financing to fund our
growth strategy, or not being able to refinance our existing
mortgage debt beginning in 2002;
- tax risks including the possible effects of changes in tax
law and regulation;
- possible environmental liability; and
- costs of compliance with the Americans With Disabilities Act
and similar laws.
In addition, the market price of the common stock may from time to
time fluctuate widely as a result of, among other things:
- our operating results;
- the operating results of other REITs, particularly apartment
REITs; and
- changes in the performance of the stock market in general.
Investors should review the more detailed description of these and
other possible risks contained in the "Risk Factors" section of the prospectus
included in our registration statement on Form S-3, registration number
333-31117, as declared effective by the SEC on December 8, 1997.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to market risk from changes in interest rates, which
may adversely affect our financial position, results of operations and cash
flows. In seeking to minimize the risks from interest rate fluctuations, we
manage exposures through our regular operating and financing activities. We do
not use financial instruments for trading or other speculative purposes. We are
exposed to interest rate risk primarily through our borrowing activities, which
are described in Note 3 to our consolidated financial statements. All of our
long-term borrowings are under fixed rate instruments, and our line of credit
rate is 150 basis points over the three-month LIBOR. We have determined that
there is no material market risk exposure to our consolidated financial
position, results of operations or cash flows.
17
<PAGE> 20
PART II
ITEM 1. LEGAL PROCEEDINGS.
Neither Roberts Realty, the operating partnership, nor the communities
are presently subject to any material litigation nor, to our knowledge, is any
material litigation threatened against any of them. Routine litigation arising
in the ordinary course of business is not expected to result in any material
losses to us and the operating partnership.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
We did not modify, limit or qualify the rights of the holders of
common stock during the quarter ended March 31, 1999.
Except as described in the following paragraph, holders of partnership
units in the operating partnership generally have the right to require the
operating partnership to redeem their partnership units. Our articles of
incorporation limit ownership by any one holder to 6% of the outstanding shares
of our common stock, except for Mr. Roberts, who is limited to 25%. As a
result, unitholders cannot redeem their partnership units if doing so would
violate those ownership limits. A unitholder who submits partnership units for
redemption will receive, at our election, either an equal number of shares or
cash in the amount of the average of the daily market prices of the common
stock for the 10 consecutive trading days before the date of submission
multiplied by the number of partnership units submitted. We have adopted a
policy of acquiring partnership units in exchange for shares. We also have the
right, at our election, to issue shares in exchange for all outstanding
partnership units.
On February 1, 1999, we began a six-month period in which partnership
units cannot be redeemed. At the end of the six-month period, we will seek to
register new shares with the SEC that will simplify the process for holders of
partnership units who elect to exchange their units for shares. We expect to
complete the registration of these new shares with the SEC on approximately
August 1, 1999. Unlike the shares issued in exchange for partnership units
before February 1, 1999 in reliance upon the "intrastate" offering exemption,
shares issued under the new registration (a) will be freely tradeable, other
than by affiliates, and (b) can be issued both to persons who reside in Georgia
and in other states. Before February 1, 1999, we paid cash to redeeming
unitholders who resided outside the state of Georgia.
Whenever we issue shares, we are obligated to contribute the net
proceeds from that issuance to the operating partnership, and the operating
partnership is obligated to issue the same number of partnership units to us.
The partnership agreement of the operating partnership permits the operating
partnership, without the consent of the unitholders, to sell additional
partnership units and add limited partners.
During the three months ended March 31, 1999, we issued a total of
26,907 shares in exchange for partnership units submitted for redemption by
unitholders. We issued the shares in redemption of partnership units in
reliance upon the "intrastate" exemption from securities registration provided
under Section 3(a)(11) of the Securities Act and Rule 147 promulgated by the
SEC regarding intrastate offerings. We believe that we have satisfied the
conditions of Rule 147 for each of the issuances of shares to unitholders. We
have delivered a prospectus to all unitholders that is designed to satisfy the
conditions of Rule 147. Unitholders who reside outside of the state of Georgia
are offered and receive only cash instead of shares. All of the existing
communities are located in the state of Georgia. The certificates evidencing
the shares issued in exchange for partnership units have a Rule 147 legend
describing the applicable restrictions on transfer printed on them, and we have
issued stop
18
<PAGE> 21
transfer instructions to our transfer agent for those shares. Further, we
notified the offerees that the applicable restrictions on transfer and
procedures will apply to the issuance of new certificates for any of the shares
that are presented for transfer during the nine month period from the end of
the offering during which transfer of the shares is restricted to residents of
the state of Georgia.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The exhibits described in the following Index to Exhibits are
filed as part of this report on Form 10-Q.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule (for SEC use only).
(b) We filed no reports on Form 8-K during the quarter ended March
31, 1999.
</TABLE>
19
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 13, 1999 ROBERTS REALTY INVESTORS, INC.
By: /s/ Charles R. Elliott
---------------------------------------------------
Charles R. Elliott, Chief Financial Officer
(The Registrant's Principal Financial and Chief
Accounting Officer, who is duly authorized to sign
this report)
20
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule (for SEC use only).
</TABLE>
21
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 2,395,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,395,000
<PP&E> 138,871,000
<DEPRECIATION> 18,194,000
<TOTAL-ASSETS> 124,469,000
<CURRENT-LIABILITIES> 4,285,000
<BONDS> 79,752,000
0
0
<COMMON> 47,000
<OTHER-SE> 25,425,000
<TOTAL-LIABILITY-AND-EQUITY> 124,469,000
<SALES> 0
<TOTAL-REVENUES> 4,756,000
<CGS> 0
<TOTAL-COSTS> 3,475,000
<OTHER-EXPENSES> 5,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,261,000
<INCOME-PRETAX> 9,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 9,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,000
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
