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ROBERTS REALTY INVESTORS, INC.
NET ASSET VALUE
MAY 2000
Creating Communities for Superior Lifestyles(TM)
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Our business plan and growth strategy remain focused
on a simple, clear and conservative philosophy . . . create cash flow
and capital appreciation by building and managing
new apartment homes of the highest quality
and value in excellent high-growth neighborhoods.
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TO OUR SHAREHOLDERS:
Each year, we publish the Company's net asset value, which is the price we
believe our properties are worth if sold individually in the open market. We
last published our net asset value at June 30, 1999. We believe it is important
to give you an update on what we estimate our net asset value to be and how we
arrived at the current value of $11.51 per share. We have included with this
report a detailed analysis of our net asset value along with a summary of our
assumptions, as we have done for the last several years.
Our stock is currently trading at 35% below our net asset value of $11.51
per share. As a result, many of our shareholders believe the current low price
of our stock reflects the market value of our apartment portfolio. This is not
true and let me explain why. During the past three years, we sold four of our
apartment communities, each for more than net asset value. These include Autumn
Ridge in August 1997, Windsong in January 1998, Bentley Place in August 1999,
and Ivey Brook in June 2000. These four property sales at more than net asset
value clearly indicate we have been conservative with our estimate of net asset
value and, more important, confirm our belief that our stock is undervalued.
In 1999, we announced a strategy to maximize shareholder value, which
included selling some of our properties and distributing part of the cash
proceeds to our shareholders. We have implemented this strategy while
maintaining our net asset value and increasing the amount of distributions paid
to our shareholders. In August 1999, we sold Bentley Place and paid a
distribution of $0.50 per share from the sales proceeds, in addition to our
quarterly dividend. During July 2000, we will pay a distribution of $0.25 per
share from the sales proceeds of Ivey Brook along with our quarterly dividend of
$0.135 per share.
The following table shows that we have been able to increase the amount of
distributions paid to our shareholders while continuing to maintain our net
asset value.
<TABLE>
<CAPTION>
NET ASSET DISTRIBUTIONS
VALUE PER SHARE
---------- -------------
<S> <C> <C>
1996 $10.26 $0.48
1997 $10.52 $0.58
1998 $10.52 $0.58
1999 $11.46 $1.08
2000 $11.51
</TABLE>
We continue to develop and build new apartment communities, which replace
the properties we are selling. We currently have three new communities under
construction, which include a 285-unit second phase of Addison Place, a 319-unit
community in Charlotte, and a 250-unit community in north Atlanta. As we
complete the construction and leasing of these new communities over the next
eighteen months, they will replace the properties we sell as part of our
strategy to maximize shareholder value while continuing to maintain our net
asset value.
Sincerely,
/s/ CHARLES R. ELLIOTT
Charles R. Elliott
Chief Financial Officer
July 7, 2000
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ROBERTS REALTY INVESTORS, INC.
NET ASSET VALUE
MAY 31, 2000
<TABLE>
<CAPTION>
ADDISON ADDISON
PLACE PLACE OLD BRADFORD
TOWNHOMES FLATS CHARLOTTE NORCROSS CREEK
----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Gross Potential Income (current rents) $ 1,824,240 $ 2,119,398
Add: Water Sub-metering Income 35,400 42,416
Add: Cable Income 6,000 58,416
Add: Garage and Storage Income 0 0
Add: Other Income 29,500 80,828
Less: 5% Vacancy Loss (94,757) (115,053)
----------- ---------- ---------- ----------- -----------
Effective Gross Income 1,800,383 2,186,005
Salaries and benefits 144,000 163,514
Utilities 66,000 161,165
Maintenance and repairs 38,000 67,190
Landscaping 26,000 49,428
Advertising and promotion 28,000 55,900
Administrative 22,000 30,322
Property insurance 10,000 16,051
Property tax expense 137,000 185,000
Management fee 54,011 65,580
Capital Replacement Reserves 23,600 36,000
----------- ---------- ---------- ----------- -----------
Total Operating Expenses 548,611 830,150
Net Operating Income 1,251,772 1,355,855
----------- ---------- ---------- ----------- -----------
Capitalization Rate 8.50% 8.50%
ASSET VALUE $14,727,000 $15,951,000
Less: Mortgage Loan Outstanding (9,500,000) (2,000,000) (8,235,755)
Less: Line of credit and other liabilities
Add: Market Value of Undeveloped Land 4,132,500 3,987,500 2,739,000
Add: Development and Construction Costs 1,883,242 2,113,576 659,306
----------- ---------- ---------- ----------- -----------
Equity $ 5,227,000 $6,015,742 $6,101,076 $ 1,398,306 $ 7,715,245
Shares and Units Outstanding
NET ASSET VALUE PER SHARE AND UNIT
</TABLE>
The accompanying assumptions are an integral part of our Net Asset Value
schedule.
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<TABLE>
<CAPTION>
HIGHLAND IVEY PLANTATION PRESTON RIVER ROSEWOOD
CRESTMARK PARK BROOK TRACE OAKS OAKS PLANTATION TOTAL
----------- ----------- ----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 3,368,688 $ 2,210,536 $ 1,848,180 $ 2,751,048 $ 2,637,816 $ 2,458,092 $ 1,776,324 $ 20,994,322
72,549 60,065 63,782 78,185 61,116 86,021 43,001 542,535
119,710 8,118 53,810 0 9,202 0 7,308 262,564
19,133 0 0 12,074 0 0 0 31,207
114,256 51,127 58,339 62,196 68,604 59,215 48,288 572,353
(184,717) (116,492) (101,206) (145,175) (138,837) (130,166) (93,746) (1,120,149)
----------- ----------- ----------- ----------- ----------- ----------- ------------ ------------
3,509,619 2,213,354 1,922,905 2,758,328 2,637,901 2,473,162 1,781,175 21,282,832
340,327 152,582 169,104 257,496 181,188 224,273 150,307 1,782,791
291,062 102,185 140,429 168,763 89,105 128,386 78,204 1,225,299
141,694 67,106 69,341 160,992 83,482 90,866 43,330 762,001
68,414 42,660 45,715 70,474 47,237 48,984 34,051 432,963
63,473 35,100 30,607 39,281 35,381 43,927 27,936 359,605
51,146 34,210 33,149 28,241 38,794 22,685 16,224 276,771
25,810 15,905 13,140 20,654 17,878 18,698 13,092 151,228
208,000 203,000 131,000 240,000 238,000 211,000 132,000 1,685,000
105,289 66,401 57,687 82,750 79,137 74,195 53,435 638,485
66,800 37,600 29,200 46,400 42,600 43,200 30,400 355,800
----------- ----------- ----------- ----------- ----------- ----------- ------------ ------------
1,362,015 756,749 719,372 1,115,051 852,802 906,214 578,979 7,669,943
2,147,605 1,456,605 1,203,533 1,643,277 1,785,099 1,566,948 1,202,196 13,612,889
----------- ----------- ----------- ----------- ----------- ----------- ------------ ------------
8.75% 8.50% 8.50% 8.50% 8.50% 8.50% 8.50% 8.54%
$24,544,000 $17,137,000 $14,159,000 $19,333,000 $21,001,000 $18,435,000 $ 14,143,000 $159,430,000
(15,699,286) (7,801,622) (6,196,052) (11,707,921) (8,266,129) (8,899,914) (7,933,165) (86,239,844)
(3,482,782)
10,859,000
4,656,124
----------- ----------- ----------- ----------- ----------- ----------- ------------ ------------
$ 8,844,714 $ 9,335,378 $ 7,962,948 $ 7,625,079 $12,734,871 $ 9,535,086 $ 6,209,835 $ 85,222,498
7,405,909
$11.51
</TABLE>
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ASSUMPTIONS FOR NET ASSET VALUE TABLE
The following assumptions explain in detail our belief that the net asset value
of our real estate assets is $11.51 per share. The real estate industry is
dynamic and dependent on economic and financial cycles, and events and
circumstances frequently do not occur as expected. Consequently, there will
usually be differences between our key assumptions and the actual results, and
those differences may be material. The net asset value of $11.51 per share
includes the 46-unit Ivey Brook community, which we subsequently sold on June
23, 2000. The net asset value is based on our best estimates at this time and
has not been reviewed by an independent third party or by our independent
auditors.
GROSS POTENTIAL INCOME
For Bradford Creek, Crestmark, Highland Park, Ivey Brook, Plantation Trace,
Preston Oaks, River Oaks, and Rosewood Plantation, (the "existing communities"),
we derived these figures by using the existing contractual rents as of May 31,
2000. As of June 30, 2000, the 118 townhomes at Addison Place (the "townhomes")
completed their initial lease-up phase and are 97% leased and occupied. We
derived the gross potential income figure for the townhomes by using the current
lease-up rents as of May 31, 2000.
WATER SUB-METERING INCOME
For the existing communities, this figure is based on actual water sub-metering
income for the five months ended May 31, 2000, and then annualizing for twelve
months. For the townhomes, we derived this figure by assuming individual
resident water consumption averages $25 per month or $300 per year, which is
consistent with the usage at the existing communities.
CABLE INCOME
For Bradford Creek, Crestmark, Highland Park, Ivey Brook, Preston Oaks, and
Rosewood Plantation, this figure is based on actual cable income for the five
months ended May 31, 2000, and then annualizing for twelve months. For the
townhomes, this figure is based on our best estimate of annual cable income in
light of our experience at the existing communities. For Plantation Trace and
River Oaks, there is no cable income.
GARAGE AND STORAGE INCOME
For Crestmark and Plantation Trace, this figure is based on actual garage and
storage income for the five months ended May 31, 2000, and then annualizing for
twelve months. For Bradford Creek, Highland Park, Ivey Brook, Preston Oaks,
River Oaks, Rosewood Plantation, and the townhomes, there is no garage or
storage income.
OTHER INCOME
For the existing communities, this figure is based on actual other income for
the five months ended May 31, 2000, and then annualizing for twelve months. For
the townhomes, this figure assumes other income of $250 per unit, which we
believe is appropriate for this purpose based on our experience at the existing
communities.
5% VACANCY LOSS
For the existing communities and the townhomes, we derived this figure by
multiplying the sum of gross potential income, water sub-metering income, cable
income, garage and storage income, and other income by 5%, a standard vacancy
factor used in the real estate industry, which we believe is appropriate for
this purpose.
EFFECTIVE GROSS INCOME
We derived this figure by adding gross potential income, water sub-metering
income, cable income, garage and storage income, and other income and
subtracting the vacancy loss.
OPERATING EXPENSES
For the existing communities, these figures (except for property taxes,
management fees, and reserves) are based on actual operating expenses for the
five months ended May 31, 2000, and then annualizing for twelve months. For the
townhomes, these figures are based on our best estimate of annual operating
expenses. For the existing communities and the townhomes, property taxes for the
2000 tax year are based on our best estimate.
MANAGEMENT FEES
For the existing communities and the townhomes, we derived this figure by
multiplying effective gross income by 3%, a standard management fee factor,
which we believe is appropriate for this purpose. We manage our own communities
and do not pay any fees to a third party.
RESERVES
For the existing communities and the townhomes, we derived this figure by
multiplying the total number of apartment homes by $200, which is our best
estimate of the cost of capital improvements.
NET OPERATING INCOME
We derived this figure by subtracting operating expenses, management fees and
reserves from effective gross income.
CAPITALIZATION RATE
Capitalization is the process by which net operating income is converted to a
value. Capitalization rates reflect the relationship between net annual
operating income and the value of receiving that current and probable future
income stream during a certain projection period or remaining economic life. We
believe that sales of comparable properties support the capitalization rate of
8.5% used for Bradford Creek, Highland Park, Ivey Brook, Plantation Trace,
Preston Oaks, River Oaks, Rosewood Plantation, and the townhomes, and the
capitalization rate of 8.75% used for Crestmark.
ASSET VALUE
We derived this figure by dividing the net operating income by the
capitalization rate. This value does not include the costs of disposition and
the partnership profits interest, which we estimate to be $1.00 per share in
total.
MORTGAGE LOANS OUTSTANDING
For the existing communities and the townhomes, this figure represents the
actual indebtedness as of May 31, 2000.
LINE OF CREDIT AND OTHER LIABILITIES
This figure represents the cash required to pay our outstanding operating
expenses and line of credit at May 31, 2000.
MARKET VALUE OF UNDEVELOPED LAND
This figure represents our best estimate of the market value of the undeveloped
land on which we are constructing three new communities totaling 854 apartment
homes.
DEVELOPMENT AND CONSTRUCTION COSTS
This figure represents the amount of development and construction costs that
have been incurred, net of construction loans outstanding, as of May 31, 2000.
EQUITY
We derived this figure by subtracting the mortgage loans outstanding and the
line of credit and other liabilities from the asset value and adding the market
value of undeveloped land and development and construction costs.
NET ASSET VALUE PER SHARE
We derived this figure by dividing the equity by the 7,405,909 aggregate shares
and units outstanding as of May 31, 2000.
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SHAREHOLDER INFORMATION
CORPORATE HEADQUARTERS
Roberts Realty Investors, Inc.
8010 Roswell Road
Suite 120
Atlanta, Georgia 30350
Telephone: (770) 394-6000
OFFICERS
Charles S. Roberts
President and Chief Executive Officer
Charles R. Elliott
Secretary and Chief Financial Officer
BOARD OF DIRECTORS
Charles S. Roberts
President and Chief Executive Officer
James M. Goodrich
Consulting Engineer
Weldon R. Humphries
Private Investor
Dennis H. James
Executive Vice-President
L.J. Melody & Company
Wm. Jarell Jones
Attorney and Certified Public Accountant
Ben A. Spalding
Private Investor
George W. Wray
Private Investor
MEMBER
National Association of Real Estate Investment Trusts, Inc.
PRIMARY BANKING RELATIONSHIPS
First Union National Bank
999 Peachtree Street
Atlanta, Georgia 30374
Compass Bank
15 20th Street South
Birmingham, Alabama 35233
TRANSFER AGENT
First Union National Bank
Shareholder Services
1525 West W.T. Harris Boulevard
Charlotte, North Carolina 28288-1153
Telephone: (800) 829-8432
GENERAL COUNSEL
Holt Ney Zatcoff & Wasserman, L.L.P.
100 Galleria Parkway, Suite 600
Atlanta, Georgia 30339
SECURITIES COUNSEL
Nelson Mullins Riley & Scarborough, L.L.P.
999 Peachtree Street
Suite 1400
Atlanta, Georgia 30309
INDEPENDENT AUDITORS
Arthur Andersen LLP
133 Peachtree Street
Suite 2500
Atlanta, Georgia 30303
STOCK TRADING INFORMATION
The common shares of Roberts Realty Investors, Inc. trade on the American Stock
Exchange (AMEX) under the symbol "RPI."
This net asset value report to shareholders contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Although we believe the expectations
reflected in the forward-looking statements are based on reasonable assumptions,
our actual results could differ materially from those described in the
forward-looking statements. Certain factors that might cause such a difference
include, but are not limited to, the following: occupancy rates and rents may be
adversely affected by local economic and market conditions, overbuilding in our
markets; construction costs of a new community may exceed original estimates;
construction and lease-up of new communities in Atlanta and Charlotte may not be
completed on schedule; and, financing may not be available or, if available, not
on favorable terms.
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ROBERTS REALTY INVESTORS, INC.
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8010 Roswell Road
Suite 120
Atlanta, Georgia 30350
Telephone: (770) 394-6000
Creating Communities for Superior Lifestyles(TM)
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